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EXHIBIT 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 15, 1997, between
AFFILIATED COMMUNITY BANCORP, INC., a Massachusetts corporation (the "ISSUER")
and UST CORP., a Massachusetts corporation (the "GRANTEE").
WHEREAS, the Grantee and the Issuer have entered into an Affiliation
Agreement and Plan of Reorganization of even date herewith (as may be amended
and in effect from time to time, the "ACQUISITION AGREEMENT"), which agreement
is being executed by the parties thereto prior to the execution of this
Agreement; and
WHEREAS, as a condition to the Grantee's entry into the Acquisition
Agreement and in consideration for such entry, the Issuer has agreed to grant
the Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Acquisition Agreement, the
parties hereto agree as follows:
1. (a) The Issuer hereby grants to the Grantee an unconditional,
irrevocable option (the "OPTION") to purchase, subject to the terms hereof, up
to 1,300,078 fully paid and nonassessable shares (the "OPTION SHARES") of common
stock, par value $0.01 per share, of the Issuer ("COMMON STOCK") at a price of
$32.937 per share (the "OPTION PRICE"). The number of shares of Common Stock
that may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth provided that in no event shall the
number of shares for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock (without giving effect to
any shares of Common Stock issued pursuant to the Option) less the number of
shares previously issued pursuant to exercise of the Option.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to exercise of the Option pursuant to this Agreement or as
contemplated by Section 5(a) of this Agreement), including, without limitation,
pursuant to stock option or other employee plans or as a result of the exercise
of conversion rights, the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, it equals 19.9% of the number
of shares of Common Stock then issued and outstanding without giving effect to
any shares subject or issued pursuant
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to the Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize the Issuer or the Grantee to breach any
provision of the Acquisition Agreement.
2. (a) The Holder (as such term is defined in paragraph (c) below)
may exercise the Option, in whole or in part, if, but only if, both an Initial
Triggering Event (as defined in paragraph (e) below) and a Subsequent Triggering
Event (as defined in paragraph (f) below) shall have occurred prior to the
occurrence of an Exercise Termination Event (as defined in paragraph (b) below),
PROVIDED that the Holder shall have sent the written notice of such exercise (as
provided in paragraph (h) of this Section 2) within thirty (30) days following
such Subsequent Triggering Event and prior to the Exercise Termination Event.
(b) The term "EXERCISE TERMINATION EVENT" shall mean the earliest of
(i) the Effective Time, (ii) any termination of the Acquisition Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event, and (iii) in the event of any
termination of the Acquisition Agreement in accordance with the provisions
thereof after the occurrence of an Initial Triggering Event, the passage of
twelve (12) months after such termination. Notwithstanding the termination of
the Option, the Grantee shall be entitled to purchase those Option Shares with
respect to which it has exercised the Option in whole or in part prior to the
termination of the Option.
(c) The term "HOLDER" shall mean the holder or holders of the
Option.
(d) The term "SCHEDULE 13G INVESTOR" shall mean any person holding
voting securities of the Issuer eligible to report the beneficial ownership of
such securities on Schedule 13G pursuant to the provisions of Rule 13d-1 under
the Exchange Act.
(e) The term "INITIAL TRIGGERING EVENT" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The Issuer or any subsidiary of the Issuer, without
having received the Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction with any
Person (the term "PERSON" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act and the rules and regulations thereunder), other than the
Grantee or any subsidiary of the Grantee, or, without the consent of the
Grantee, the Board of
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Directors of the Issuer shall have approved an Acquisition Transaction
or recommended that the shareholders of the Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Acquisition
Agreement. For purposes of this Agreement, the term "ACQUISITION
TRANSACTION" shall mean (A) a merger or consolidation, or any similar
transaction, with the Issuer or any Significant Subsidiary of the
Issuer, or any subsidiary of the Issuer which, after such transaction,
would be a Significant Subsidiary of the Issuer, (B) a purchase, lease
or other acquisition of all or substantially all of the assets of the
Issuer or any Significant Subsidiary of the Issuer or (C) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing ten percent (10%) or
more of the voting power of the Issuer or any Significant Subsidiary of
the Issuer;
(ii) Any Person, other than the Grantee or any subsidiary of
the Grantee or the Issuer in a fiduciary capacity, and other than a
Schedule 13G Investor, shall have acquired beneficial ownership (as
hereinafter defined) or the right to acquire beneficial ownership of ten
percent (10%) or more of the outstanding shares of Common Stock if such
Person owned beneficially less than ten percent (10%) of the outstanding
shares of Common Stock on the date of this Agreement, or any Person
shall have acquired beneficial ownership of an additional three percent
(3%) of the outstanding shares of Common Stock if such Person owned
beneficially ten percent (10%) or more of the outstanding shares of
Common Stock on the date of this Agreement (the term "BENEFICIAL
OWNERSHIP" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and in the rules and
regulations thereunder);
(iii) The stockholders of the Issuer shall not have approved
the Acquisition Agreement at the meeting of such stockholders held for
the purpose of voting on the Acquisition Agreement, such meeting shall
not have been held or shall have been canceled prior to the termination
of the Acquisition Agreement, or the Issuer's Board of Directors shall
have withdrawn or modified in a manner adverse to the Grantee the
recommendation of the Issuer's Board of Directors with respect to the
Acquisition Agreement, in each case after: (A) any Person, other than
the Grantee or any subsidiary of the Grantee, shall have made a
bona-fide proposal to the Issuer or its shareholders to engage in an
Acquisition Transaction by public announcement or written communication
that shall be or become the subject of public disclosure; or (B) any
Person other than the
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Grantee or any subsidiary of the Grantee, other than in connection with
a transaction to which the Grantee has given its prior written consent,
shall have filed an application or notice with the Federal Reserve Board
or other federal or state bank regulatory authority, which application
or notice has been accepted for processing, for approval to engage in an
Acquisition Transaction;
(iv) After any Person other than the Grantee or any
subsidiary of the Grantee has made a proposal to the Issuer or its
shareholders to engage in an Acquisition Transaction, the Issuer shall
have breached any covenant or obligation contained in the Acquisition
Agreement and such breach (A) would entitle the Grantee to terminate the
Acquisition Agreement and (B) shall not have been remedied prior to the
Notice Date (as defined in paragraph (h) below); or
(v) Any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act) or shall have filed a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to, a tender offer or exchange offer to purchase any shares
of Issuer Common Stock such that, upon consummation of such offer, such
person would own or control 50% or more of the then outstanding shares
of Issuer Common Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer," respectively).
(f) The term "SUBSEQUENT TRIGGERING EVENT" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than a Schedule 13G
Investor) of beneficial ownership of twenty percent (20%) or more of the
then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in subparagraph (i) of paragraph (e) of this Section 2, except that the
percentage referenced in clause (C) thereof shall be twenty percent
(20%) in lieu of ten percent (10%).
(g) The Issuer shall notify the Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "TRIGGERING EVENT"), it being understood that the giving of such
notice by the Issuer shall not be a condition to the right of the Holder to
exercise the Option.
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(h) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to the Issuer a written notice (the date of which
being herein referred to as the "NOTICE DATE") specifying (i) the total number
of shares of Common Stock it will purchase pursuant to such exercise, and (ii) a
place and date not earlier than three (3) business days nor later than
forty-five (45) business days from the Notice Date for the closing of such
purchase (the "CLOSING"); PROVIDED that if prior notification to or approval of
the Federal Reserve Board or any other regulatory agency is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. The term "business day" for purposes of
this Agreement means any day, excluding Saturdays, Sundays and any other day
that is a legal holiday in The Commonwealth of Massachusetts or a day on which
banking institutions in The Commonwealth of Massachusetts are authorized by law
or executive order to close.
(i) At the Closing, the Holder shall pay to the Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the exercise
of the Option in immediately available funds by a wire transfer to a bank
account designated by the Issuer, PROVIDED that failure or refusal of the Issuer
to designate such a bank account shall not preclude the Holder from exercising
the Option.
(j) At such Closing, simultaneously with the delivery of immediately
available funds as provided in paragraph (i) above, the Issuer shall deliver to
the Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder, and the Holder shall deliver to
the Issuer a copy of this Agreement and a letter agreeing that the Holder will
not offer to sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Agreement.
(k) Certificates for the Common Stock delivered at a Closing
hereunder may (in the sole discretion of the Issuer) be endorsed with a
restrictive legend that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTION PURSUANT TO
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THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER 15, 1997, A
COPY OF WHICH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such legend. In addition,
such certificates shall bear any other legend as may be required by law.
(l) Upon the giving by the Holder to the Issuer of the written
notice of exercise of the Option provided for under paragraph (h) above, the
tender of the applicable purchase price in immediately available funds and the
tender of a copy of this Agreement to the Issuer, such Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Issuer shall then
be closed or that certificates representing such shares of Common Stock shall
not then be actually delivered to the Holder. The Issuer shall pay all expenses,
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. The Issuer agrees (a) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without requiring the Issuer's
stockholders to approve an increase in the number of authorized shares of Common
Stock after giving effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock, (b) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by the Issuer, (c) promptly to take all action
as may from time to time be required (including without limitation cooperating
fully with any Holders in preparing any applications or notices required under
the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control
Act of 1978, as amended, or any state banking law), in order to permit such
Holders to exercise the Option and the Issuer duly and effectively to issue
shares of Common Stock
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pursuant hereto, and (d) promptly to take all action provided herein to protect
the rights of any Holders against dilution.
4. This Agreement (and the Option granted hereby) is exchangeable,
without expense, at the option of each Holder, upon presentation and surrender
of this Agreement at the principal office of the Issuer, for other Agreements
providing for Options of different denominations entitling the Holder thereof to
purchase, on the same terms and subject to the same conditions as are set forth
herein, in the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "AGREEMENT" and "OPTION" as used herein include any Stock
Option Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by the Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, the Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute for all purposes and under all circumstances an additional
contractual obligation on the part of the Issuer, whether or not this Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
5. In addition to the adjustment in the number of Option Shares
pursuant to Section 1 of this Agreement, the number of Option Shares shall be
subject to adjustment from time to time as provided in this Section 5.
(a) (i) In the event of any change in the shares of Common Stock by
reason of stock dividend, split up, merger, recapitalization,
subdivision, conversion, combination, exchange of shares or similar
transaction, the type and number of Option Shares, and the Option Price
therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that the Grantee
shall receive upon exercise of the Option the number and class of shares
or other securities or property that the Grantee would have held
immediately after such event if the Option had been exercised
immediately prior to such event, or the record date therefor, as
applicable.
(ii) The Issuer may make such increases in the number of
Option Shares, in addition to those required under subparagraph (a)(i)
above, as shall be determined by its Board of Directors to be advisable
in order to avoid taxation, so far as practicable, of any
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dividend of stock or stock rights or any event treated as such for
federal income tax purposes to the recipients.
(b) Whenever the number of Option Shares (or other securities)
purchasable upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a fraction,
the numerator of which is equal to the number of Option Shares prior to the
adjustment and the denominator of which is equal to the number of Option Shares
(or other securities) purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within thirty (30) days of such Subsequent Triggering Event (whether
on the Grantor's own behalf or on the behalf of any subsequent Holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current, with respect to the Option and
the Option Shares, a "shelf" registration statement under Rule 415 of the
Securities Act or any successor provision, and Issuer shall use all reasonable
efforts to qualify such shares under any applicable state securities laws.
Issuer will use all reasonable efforts to cause such registration statement
first to become effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect sales or
other dispositions of Option Shares. Grantee shall have the right to demand two
such registrations. Any registration statement prepared and filed under this
Section 6, and any sales covered thereby, shall be at Issuer's expense, except
for underwriting discounts or commissions, broker's fees and expenses and the
fees and disbursements of Grantee's counsel related thereto. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, (i) Issuer is in registration
with respect to an underwritten public offering of shares of Common Stock, and
(ii) in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering, the inclusion of the Option or Option Shares would interfere with the
successful marketing of the shares represented by the Option, the number of
Option Shares otherwise to be covered in the registration statement contemplated
hereby may be reduced; PROVIDED, HOWEVER, that if such reduction occurs, the
Issuer shall file a registration statement for the balance as promptly as
practical and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any such
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Holder in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for the Issuer.
7. (a) Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, (i) at the request of any Holder,
delivered within thirty (30) days following such occurrence (or such later
period as provided in Section 10), the Issuer shall repurchase the Option from
the Holder at a price (the "OPTION REPURCHASE PRICE") equal to the amount by
which (A) the market/offer price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised, and (ii) at the request of any owner of Option Shares from time to
time (the "OWNER"), delivered within thirty (30) days following such occurrence
(or such later period as provided in Section 10), the Issuer shall repurchase
such number of the Option Shares from such Owner as the Owner shall designate at
a price per share ("OPTION SHARE REPURCHASE PRICE") equal to the greater of (A)
the market/offer price and (B) the average exercise price per share paid by the
Owner for the Option Shares so designated. The term "MARKET/OFFER PRICE" shall
mean the highest of (w) the price per share of the Common Stock at which a
tender offer or exchange offer therefor has been made, (x) the price per share
of the Common Stock to be paid by any Person, other than the Grantee or a
subsidiary of the Grantee, pursuant to an agreement with the Issuer, (y) the
highest sale price for shares of Common Stock within the six (6) month period
immediately preceding the required repurchase of Options or Option Shares, as
the case may be, or (z) in the event of a sale of all or substantially all of
the Issuer's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of the Issuer as determined by
a nationally recognized investment banking firm selected by a majority in the
interest of the Holders or the Owners, as the case may be, and reasonably
acceptable to the Issuer, divided by the number of shares of Common Stock of the
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by a majority in interest
of the Holders or the Owners, as the case may be, and reasonably acceptable to
the Issuer.
(b) Each Holder and Owner, as the case may be, may exercise its
right to require the Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to the Issuer, at
its principal office, a copy of this Agreement or certificates for
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Option Shares, as applicable, accompanied by a written notice or notices stating
that such Holder or Owner elects to require the Issuer to repurchase this Option
and/or Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within ten (10) business days (the
"PAYMENT DATE") after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto (the "SURRENDER DATE"), the Issuer shall deliver or cause to be
delivered to each Holder the Option Repurchase Price and/or to each Owner the
Option Share Repurchase Price therefor or the portion thereof that the Issuer is
not then prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or regulatory
body or agency, from repurchasing the Option and/or the Option Shares in full,
the Issuer shall immediately so notify each Holder and/or each Owner and
thereafter deliver or cause to be delivered, from time to time, to such Holder
and/or Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within ten (10) business days after the date on which the
Issuer is no longer so prohibited; PROVIDED, HOWEVER, that if the Issuer at any
time after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation, or as a consequence
of administrative policy, from delivering to any Holder and/or Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in part or in full (and the Issuer hereby undertakes to use all
reasonable efforts to obtain all required regulatory and legal approvals and to
file any required notices as promptly as practicable in order to accomplish such
repurchase), such Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon the Issuer shall promptly (i) deliver to such Holder and/or Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that the Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to such Holder, a new Stock Option Agreement
evidencing the right of such Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which
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is the Option Repurchase Price, or (B) to such Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination Event,
the Issuer shall enter into an agreement (i) to consolidate with or merge into
any Person, other than the Grantee or one of the Grantee's subsidiaries, and the
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than the Grantee or
one of its subsidiaries, to merge into the Issuer and the Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property, or
the then outstanding shares of Common Stock shall, after such merger, represent
less than fifty percent (50%) of the outstanding shares and share equivalents of
the merged company, or (iii) to sell or otherwise transfer all or substantially
all of its assets to any Person, other than the Grantee or one of the Grantee's
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "SUBSTITUTE
OPTION"), at the election of the Holder, of either (A) the Acquiring Corporation
(as defined in paragraph (b) below) or (B) any Person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) The term "ACQUIRING CORPORATION" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with
the Issuer (if other than the Issuer), (B) the Issuer in a merger in
which the Issuer is the continuing or surviving Person, and (C) the
transferee of all or substantially all of the Issuer's assets.
(ii) The term "SUBSTITUTE COMMON STOCK" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) The term "ASSIGNED VALUE" shall mean the "market/offer
price", as defined in paragraph (a) of Section 7 hereof.
(iv) The term "AVERAGE PRICE" shall mean the average closing
price of a share of the Substitute Common Stock for the one (1) year
period immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares of
the Substitute Common Stock on the day preceding such
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consolidation, merger or sale, PROVIDED that if the Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the Person merging into the
Issuer or by any company which controls such Person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the Option,
PROVIDED that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall, to the extent legally permissible,
be as similar as possible to, and in no event less advantageous to the Holder
than, the terms of the Option. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock as is equal to (i) the product of (A) the
Assigned Value and (B) the number of shares of Common Stock for which the Option
is then exercisable, divided by (ii) the Average Price. The exercise price of
the Substitute Option per share of the Substitute Common Stock shall then be
equal to the Option Price multiplied by a fraction in which the numerator is the
number of Option Shares and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option (without giving effect to any shares of Substitute Common
Stock issued pursuant to the Substitute Option) less the number of shares
previously issued pursuant to the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but for this paragraph
(e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION ISSUER") shall
make a cash payment to the Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this paragraph (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this paragraph (e). The difference in value shall be determined by
a nationally recognized investment banking firm selected by a majority in
interest of the Holders or the Owners, as the case may be.
(f) The Issuer shall not enter into any transaction described in
paragraph (a) of this Section 8 unless the Acquiring Corporation and any
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Person that controls the Acquiring Corporation shall have assumed in writing all
the obligations of the Issuer hereunder.
9. (a) At the written request of the holder of the Substitute
Option (the "SUBSTITUTE OPTION HOLDER"), the issuer of the Substitute Option
(the "SUBSTITUTE OPTION ISSUER") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "SUBSTITUTE OPTION REPURCHASE PRICE")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of the Substitute Common Stock for which the Substitute
Option may then be exercised, and at the request of each owner (the "SUBSTITUTE
SHARE OWNER") of shares of the Substitute Common Stock (the "SUBSTITUTE
SHARES"), the Substitute Option Issuer shall repurchase the Substitute Shares at
a price per share (the "SUBSTITUTE SHARE REPURCHASE PRICE") equal to the greater
of (A) the Highest Closing Price and (B) the average exercise price per share
paid by the Substitute Share Owner for the Substitute Shares so designated. The
term "HIGHEST CLOSING PRICE" shall mean the highest closing price for shares of
the Substitute Common Stock within the six (6) month period immediately
preceding the date the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner gives notice
of the required repurchase of the Substitute Shares, as applicable.
(b) Each Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that such Substitute Option Holder or Substitute Share Owner elects to
require the Substitute Option Issuer to repurchase the Substitute Option and/or
the Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five (5) business days after
the surrender of the Substitute Option and/or the certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor, or the
portion(s) thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
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(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, or as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in full, the Substitute Option Issuer shall
immediately so notify each Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the Substitute
Option Issuer is no longer so prohibited, PROVIDED, HOWEVER, that if the
Substitute Option Issuer is, at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price, respectively,
in part or in full (and the Substitute Option Issuer shall use its best efforts
to receive all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price LESS the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing.
10. The thirty (30) day period for exercise of certain rights under
Sections 2, 6, 7 and 12 hereof shall be extended in each such case: (i) to
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the extent necessary to obtain all regulatory approvals for the exercise of such
rights and for the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise, PROVIDED that notice of intent to exercise such rights
shall be given to the Issuer within the requisite thirty (30) day period and the
Grantee and the Holders shall use their best efforts to promptly obtain all
requisite approvals and cause the expiration of all requisite waiting periods.
11. The Issuer hereby represents and warrants to the Grantee as
follows:
(a) The Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Issuer and no other corporate proceedings on the part
of the Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by the Issuer. This Agreement is the valid and legally binding
obligation of the Issuer, enforceable against the Issuer in accordance with its
respective terms, except that enforcement thereof may be limited by the
receivership, conservatorship and supervisory powers of bank regulatory agencies
generally as well as bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors rights generally and except that
enforcement thereof may be subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law) and
the availability of equitable remedies.
(b) The Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder
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to any other Person, whether by operation of law or otherwise, without the
express written consent of the other party, except that (a) the Grantee shall,
at any time, be permitted to assign its rights under this Option Agreement or
the Option created hereunder to any Affiliate (as defined in the Acquisition
Agreement) of the Grantee and (b) in the event a Subsequent Triggering Event
shall have occurred prior to an Exercise Termination Event, the Grantee may,
subject to the right of first refusal set forth in Section 13, assign, transfer
or sell in whole or in part its rights and obligations hereunder within thirty
(30) days following such Subsequent Triggering Event (or such later period as
provided in Section 10); PROVIDED, HOWEVER, that in the event the Grantee sells,
assigns or transfers all or a portion of the Option to other Holders as
permitted by this Agreement, the Grantee may exercise its rights hereunder on
behalf of itself and such Holders.
13. If at any time after the occurrence of a Subsequent Triggering
Event and, with respect to shares of Common Stock or other securities acquired
by the Grantee pursuant to an exercise of the Option, prior to the expiration of
twenty-four (24) months after the expiration of the Option pursuant to Section
2(b), the Grantee shall desire to sell, assign, transfer or otherwise dispose of
the Option, in whole or in part, or all or any of the shares of Common Stock or
other securities acquired by the Grantee pursuant to the Option, the Grantee
shall give the Issuer written notice of the proposed transaction (an "OFFEROR'S
NOTICE"), identifying the proposed transferee, accompanied by a copy of a
binding offer to purchase the Option or such shares or other securities signed
by such transferee and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by the Grantee to the Issuer, which
may be accepted within ten (10) business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which the
Grantee is proposing to transfer the Option or such shares or other securities
to such transferee. The purchase of the Option or such shares or other
securities by the Issuer shall be settled within five (5) business days of the
date of the acceptance of the offer and the purchase price shall be paid to the
Grantee in immediately available funds, PROVIDED that, if prior notification to
or approval, consent or waiver of the Federal Reserve Board or any other
regulatory authority is required in connection with such purchase, the Issuer
shall promptly file the required notice or application for approval, consent or
waiver and shall expeditiously process the same (and the Grantee shall cooperate
with the Issuer in the filing of any such notice or application and the
obtaining of any such approval) and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which, as the case
may be, (a) the required notification period has expired or been terminated or
(b) such
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approval has been obtained and, in either event, any requisite waiting period
shall have passed. In the event of the failure or refusal of the Issuer to
purchase the Option or the shares or other securities, as the case may be,
covered by an Offeror's Notice or if the Federal Reserve Board or any other
regulatory authority disapproves the Issuer's proposed purchase of the Option or
such shares or other securities, the Grantee may, within sixty (60) days
following the date of the Offeror's Notice (subject to any necessary extension
for regulatory notification, approval, or waiting periods), sell all, but not
less than all, of the portion of the Option (which may be one hundred percent
(100%)) or such shares or other securities, as the case may be, proposed to be
transferred to the proposed transferee identified in the Offeror's Notice at no
less than the price specified and on terms no more favorable to the proposed
transferee than those set forth in the Offeror's Notice. The requirements of
this Section 13 shall not apply to (i) any disposition of the Option or any
shares of Common Stock or other securities by a Person to whom the Grantee has
assigned its rights under the Option with the prior written consent of the
Issuer, (ii) any sale by means of a public offering in which steps are taken to
reasonably ensure that no purchaser will acquire securities representing more
than five percent (5%) of the outstanding shares of Common Stock of the Issuer
or (iii) any transfer to a direct or indirect wholly-owned subsidiary of the
Grantee which agrees in writing to be bound by the terms hereof.
14. Each of the Grantee and the Issuer will use all reasonable
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended,
for approval to acquire the shares issuable hereunder.
15. Notwithstanding anything to the contrary herein, in the event
that the Holder or the Owner or any Related Person thereof (as hereinafter
defined) is a Person making an offer or proposal to engage in an Acquisition
Transaction (other than the transaction contemplated by the Acquisition
Agreement), then (a) in the case of a Holder or any Related Person thereof, the
Option held by it shall immediately terminate and be of no further force or
effect, and (b) in the case of an Owner or any Related Person thereof, the
Option Shares held by it shall be immediately repurchasable by the Issuer at the
Option Price. For purposes of this Agreement, a "RELATED PERSON" of a Holder or
Owner means any Affiliate (as defined in Rule 12b-2 of the rules and regulations
under the Exchange Act) of the Holder or the Owner and any Person that is
required to file a
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Schedule 13D with the Holder or the Owner with respect to shares of Common Stock
or options to acquire the Common Stock.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or the Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Sections 1(b) or 5(a)
hereof), it is the express intention of the Issuer to allow the Holder to
acquire or to require the Issuer to repurchase such lesser number of shares as
may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in Person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Acquisition Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
22. Except as otherwise expressly provided herein, this Agreement
contains the entire agreement between the parties with
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