THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of July 27, 1999, by and between KSB
Bancorp, Inc., a Delaware corporation ( Issuer ), and Camden National
Corporation, a Maine corporation ( Grantee ).
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger dated as of the date hereof (as amended from time to time, the Merger
Agreement ), which agreement has been executed by the parties hereto
immediately prior to the execution of this Stock Option Agreement (this
Agreement ); and
WHEREAS, as a condition to Grantee s entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant 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 Merger Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the Option ) to purchase, subject to the terms hereof, up to 262,932
fully-paid and nonassessable shares of Issuer s Common Stock, par value $.01
per share ( KSB Common Stock ), at a price per share equal to $13.50 (the
Option Price ); provided, however, that in no event shall the number of shares
of KSB Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of KSB Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The number
of shares of KSB Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of KSB Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement), or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
this Agreement, the number of shares of KSB Common Stock subject to the
Option shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.9% of the number of shares of KSB Common
Stock then issued and outstanding without giving effect to any shares subject
or issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event
(as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that Holder
shall have sent to Issuer written notice of such exercise (as provided in
subsection (e) of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an Exercise Termination
Event : (i) the Effective Time (as defined in the Merger Agreement) of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event, except a termination by Grantee pursuant to Section
10.1(d) or Section 10.1 (e) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is nonvolitional); or (iii)
the passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 10.1(d) or Section 10.1(e) of the
Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is nonvolitional). The term Holder shall mean the holder or
holders of the Option from time to time, and which is initially Grantee.
(b) The term Initial Triggering Event shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each, an Issuer
Subsidiary ), without having received Grantee s prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) 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 Securities Exchange Act of 1934, as amended (the 1934 Act ), and the
rules and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a Grantee Subsidiary ), or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement, Acquisition Transaction shall
mean (w) a merger, consolidation or similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the SEC )) of Issuer,
(x) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the consolidated assets or consolidated deposits of
Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer, or (z) any substantially similar transaction; provided, however, that
in no event shall (A) the transactions contemplated by the Merger Agreement
or the entering into of the Merger Agreement constitute an Acquisition
Transaction or (B) any merger, consolidation, purchase or similar transaction
involving only the Issuer and one or more of its Subsidiaries or involving
only any two or more of such Subsidiaries be deemed to be an Acquisition
Transaction, provided such transaction is not entered into in violation of
the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended, proposed,
or publicly announced its intention to authorize, recommend or propose, an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn
or modified, or publicly announced its intention to withdraw or modify, in
any manner adverse to Grantee, its recommendation that the stockholders of
Issuer approve the transactions contemplated by the Merger Agreement in
anticipation of engaging in an Acquisition Transaction with any person other
than Grantee or Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly announced its intention not to recommend that the stockholders
of Issuer approve the transactions contemplated by the Merger Agreement
because of or in connection with an actual or proposed Acquisition Transaction
involving any person other than Grantee or Grantee Subsidiary;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of its business shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of KSB
Common Stock (the term beneficial ownership for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by any person other than Grantee
or any Grantee Subsidiary to Issuer or its stockholders to engage in an
Acquisition Transaction, Issuer shall have breached any covenant or obligation
contained in the Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured prior to the
Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with [the
Board of Governors of the Federal Reserve System (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.
(c) 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 of beneficial ownership of
20% or more of the then outstanding KSB Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) thereof shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which Issuer has notice (together, a Triggering Event ), it being understood
and agreed that the giving of such notice by Issuer shall not be a condition
to the right of Holder to exercise the Option.
(e) In the event Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the Notice Date ) specifying (i) the total number of
shares of KSB Common Stock it will purchase pursuant to such exercise and
(ii) a place and date not earlier than five business days nor later than 60
business days from the Notice Date for the closing of such purchase (the
Closing Date ); provided that if prior notification to or approval of the
Federal Reserve Board or any other governmental authority or regulatory
agency is required in connection with such purchase, Holder and Issuer shall
promptly file the required notice, form 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. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
Holder shall pay to Issuer the aggregate purchase price for the shares of KSB
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of the
purchase price as provided in subsection (f) of this Section 2, Issuer shall
deliver to Holder a certificate or certificates representing the number of
shares of KSB Common Stock purchased by Holder and, if the Option shall have
been exercised in part only, a new Option evidencing the rights of Holder
thereof to purchase the balance of the shares of KSB Common Stock purchasable
hereunder, and Holder shall deliver to Issuer a copy of this Agreement. By
receipt of any shares of KSB Common Stock issuable hereunder Holder will
agree, and does hereby agree, not to offer to sell or otherwise dispose of
such shares in violation of the Securities Act of 1933, as amended (the
1933 Act ), other applicable law or the provisions of this Agreement.
(h) In addition to any other legend that may be required by
applicable law, certificates for shares of KSB Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor.
It is understood and agreed that (i) the reference to the resale restrictions
of the 1933 Act, in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Holder shall have delivered to Issuer
a copy of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer and its counsel, to the effect
that such legend is not required for purposes of the 1933 Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference 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 reference; and (iii) the legend shall be removed in its entirety if
the conditions in the preceding clauses (i) and (ii) are both satisfied.
(i) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price under subsection (f) of this
Section 2, Holder shall be deemed to be the holder of record of the shares of
KSB Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of KSB Common Stock shall not then be actually
delivered to Holder. 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 Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
KSB Common Stock so that the Option may be exercised without additional
authorization of KSB Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase KSB Common
Stock; (ii) 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 Issuer; (iii) that it shall promptly take all action as may
from time to time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in
15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the
event, under the Bank Holding Company Act of 1956, as amended (the BHCA ),
or the Change in Bank Control Act of 1978, as amended, or any state banking
law, prior approval of or notice to the Federal Reserve Board or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices
and providing such information to the Federal Reserve Board or such state
regulatory authority as they may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue shares of KSB
Common Stock pursuant hereto; and (iv) that it shall promptly take all
action provided herein to protect the rights of Holder against dilution and
otherwise hereunder.
4. This Agreement and the Option granted hereby are exchangeable,
without expense, at the option of Holder, upon presentation and surrender of
this Agreement at the principal office of 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 KSB 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
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, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the 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 shares of KSB Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of KSB Common Stock purchasable upon
the exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5. In the event of any change
in, or distributions in respect of, the KSB Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or in
respect of the KSB Common Stock that would be prohibited under the terms of
the Merger Agreement, or the like, the type and number of
securities purchasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for, and the inclusion
and validity of such provision shall be a condition to, the validity and
consummation of any such transaction, such proper adjustment and the full
satisfaction of the Issuer s obligations hereunder.
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 90 days of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of KSB Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering any shares issued and issuable pursuant
to this Option and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to
permit the sale or other disposition of any shares of KSB Common Stock issued
upon total or partial exercise of this Option ( Option Shares ) in accordance
with any plan of disposition requested by Grantee. Issuer will use its
reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for a period of 180 days from
the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration
of the Option or Option Shares as provided above, Issuer is in registration
with respect to an underwritten public offering of shares of KSB Common
Stock, and if 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 Holder s Option or Option Shares would interfere
with the successful marketing of the shares of KSB Common Stock offered by
Issuer, the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that after
any such required reduction the number of Option Shares to be included in
such offering for the account of Holder shall constitute at least 25% of the
total number of shares to be sold by Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then 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
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 secondary offering
underwriting agreements for the Issuer. Upon receiving any request under
this Section 6 from any Holder, Issuer agrees to send a copy thereof to any
other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as
a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from 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 the owner of Option Shares from
time to time (the Owner ), delivered within 90 days of such occurrence (or
such later period as provided in Section 11), Issuer shall repurchase such
number of Option Shares from the Owner as the Owner shall designate at a
price (the Option Share Repurchase Price ) equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term Market/Offer
Price shall mean the highest of (i) the price per share of KSB Common Stock
at which a tender offer or exchange offer therefor has been made, (ii) the
price per share of KSB Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (iii) the highest closing price for shares of
KSB Common Stock within the six-month period immediately preceding the date
Holder gives notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the case may be,
and (iv) in the event of a sale of all or a substantial portion of 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 Issuer as determined by a
nationally recognized investment banking firm selected by Holder or the Owner,
as the case may be, and reasonably acceptable to the Issuer, divided by the
number of shares of KSB Common Stock of 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 Holder or Owner, as the case may be, and reasonably
acceptable to the Issuer.
(b) Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Prior to the later to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and
the receipt of such notice or notices relating thereto and (y) the time that
is immediately prior to the occurrence of a Repurchase Event, Issuer shall
deliver or cause to be delivered to Holder the Option Repurchase Price and/or
to the Owner the Option Share Repurchase Price therefor or the portion thereof,
if any, that Issuer is not then prohibited under applicable law and regulations
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to Holder and/or the
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 five business days after the date on which Issuer is
no longer so prohibited; provided, however, that if 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 from delivering, to Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and
legal approvals and to file any required notices, in each case as promptly
as practicable in order to accomplish such repurchase), 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, in the latter case,
Issuer shall promptly (i) deliver to Holder and/or the Owner, as appropriate,
that portion of the Option Repurchase Price or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to Holder, a new Stock Option Agreement evidencing
the right of Holder to purchase that number of shares of KSB Common
Stock obtained by multiplying the number of shares of KSB Common Stock for
which the surrendered 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 Holder and
the denominator of which is the Option Repurchase Price, or (B) to the Owner,
a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred upon either (i) the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease
or other acquisition of all or a substantial portion of the assets of Issuer,
other than any such transaction which would not constitute an Acquisition
Transaction pursuant to the provisos to Section 2(b)(i), or (ii) the
acquisition by any person of beneficial ownership of 50% or more of the then
outstanding shares of KSB Common Stock, provided that no such event shall
constitute a Repurchase Event unless a Subsequent Triggering Event shall
have occurred prior to an Exercise Termination Event. The parties hereto
agree that Issuer s obligations to repurchase the Option or Option Shares under
this Section 7 shall not terminate upon the occurrence of an Exercise
Termination Event unless no Subsequent Triggering Event shall have occurred
prior to the occurrence of an Exercise Termination Event. Prior to the
occurrence of any Repurchase Event, the Issuer shall notify in writing the
Holder and each Owner of such Repurchase Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer
and Issuer shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of KSB 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 KSB Common
Stock shall after such merger represent less than 50% of the outstanding
voting shares and voting 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 Grantee or one of its Subsidiaries, then, and in each such
cases 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 Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) Acquiring Corporation shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer s assets.
(ii) Substitute KSB Common Stock shall mean the KSB Common
Stock issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) Assigned Value shall mean the Market/Offer Price, as
defined in Section 7.
(iv) Average Price shall mean the average closing price of a
share of the Substitute KSB Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute KSB Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of KSB Common Stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person, as 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 be as similar as possible to those
of the Option and in no event less advantageous to Holder 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 Substitute KSB Common Stock as is equal to the Assigned Value
multiplied by the number of shares of KSB Common Stock for which the Option
is then exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute KSB Common Stock shall be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of KSB Common Stock for which the Option is then exercisable
and the denominator of which shall be the number of shares of Substitute KSB
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 shares of
Substitute KSB Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute KSB Common Stock outstanding
prior to exercise but for this clause (e), the issuer of the Substitute Option
(the Substitute Option Issuer ) shall make a cash payment to Holder equal to
the excess of (i) the value of the Substitute Option without giving effect to
the limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by Holder or the Owner, as the case may be, and reasonably acceptable
to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
Substitute Option Holder ), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the
Substitute Option Repurchase Price ) equal to (x) 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
Substitute KSB Common Stock for which the Substitute Option may then be
exercised plus (y) Grantee s reasonable out-of-pocket expenses (to the extent
not previously reimbursed), and at the request of the owner (the Substitute
Share Owner ) of shares of Substitute KSB Common Stock (the Substitute Shares),
the Substitute Option Issuer shall repurchase the Substitute Shares at a
price (the Substitute Share Repurchase Price ) equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so designated
plus (y) Grantee s reasonable out-of-pocket expenses (to the extent not
previously reimbursed). The term Highest Closing Price shall mean the
highest closing price for shares of Substitute KSB Common Stock within the
six-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) The 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 the Substitute Option Holder or the Substitute Share
Owner, as the case may be, 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 business days after the surrender of the Substitute
Option and/or 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, in either case, the portion thereof which
the Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the 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 the Substitute Share Owner, as appropriate,
the portion of the Substitute Share Repurchase Price, respectively, which it
is no longer prohibited from delivering, within five 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 subsection (b) of this Section 9
prohibited under applicable law or regulation 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 full (and the Substitute Option Issuer shall use its best
efforts to obtain all required regulatory and legal approvals, in each case 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, in the latter case, 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 KSB Common Stock obtained
by multiplying the number of shares of the Substitute KSB 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 Common Shares it is then so prohibited from
repurchasing.
10. (a) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below) of more
than $1.4 million less the amount of any Expense Fee actually paid to Camden
pursuant to Section 10.2(c) of the Merger Agreement; provided that nothing in
this sentence shall restrict any exercise of the Option permitted hereby on
any subsequent date.
(b) As used herein, the term Notional Total Profit with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit (as defined below) determined as of the date of such
proposed exercise assuming that this Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price for the KSB Common Stock as of the close
of business on the preceding trading day (less customary brokerage
commissions).
(c) As used herein, the term Total Profit shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares (or any portion thereof) pursuant to Section 7,
less (y) the Grantee s purchase price for such Option Shares, (iii) the net
cash amounts received by Grantee pursuant to the sale of Option Shares (or
any other securities into which such Option Shares are converted or exchanged)
to any unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any amount equivalent
to the foregoing with respect to the Substitute Option.
11. The 90-day period for exercise of certain rights under Sections 2, 6,
7 and 14 shall be extended: (i) to the extent necessary to obtain all legal and
regulatory approvals for the exercise of such rights, for the expiration of all
statutory waiting periods; (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise, and
(iii) during any period in which Grantee is precluded from exercising such
rights due to an injunction or other legal restriction, plus in each case
such additional period as is reasonably necessary for the exercise of such
rights promptly following the obtaining of such approvals or the expiration
of such periods.
12. Issuer hereby represents and warrants to Grantee as follows:
(a) 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 Issuer and no other corporate proceedings on the
part of 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 Issuer.
(b) Issuer has taken all necessary corporate and other 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 KSB Common Stock equal to the maximum number of shares of
KSB 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, charges, encumbrance and security interests of any kind or
nature whatsoever and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby and compliance by Issuer with any of
the provisions hereof will not (i) conflict with or result in a breach of any
provision of its charter or bylaws or a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, debenture, mortgage, indenture, license,
material agreement or other material instrument or obligation to which Issuer
is a party, or by which it or any of its properties or assets may be bound, or
(ii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Issuer or any of its properties or assets.
13. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of KSB Common Stock or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
14. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to
an Exercise Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations under this
Agreement or the Option created hereunder within 90 days following such
Subsequent Triggering Event (or such later period as provided in Section 11);
provided, however, that until the date 15 days following the date on which
the Federal Reserve Board approves an application by Grantee under the BHCA
to acquire the shares of KSB Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires
the right to purchase in excess of 2% of the voting shares of Issuer,
(iii) an assignment to a single party (e.g., a broker or investment banker)
for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf or (iv) any other manner approved by the Federal Reserve
Board.
15. Each of Grantee and Issuer will use its best 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 making application to list
the shares of KSB Common Stock issuable hereunder on the NASDAQ National
Market system upon official notice of issuance and applying to the Federal
Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of KSB Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto, that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached, and
that the parties will be entitled to equitable relief hereunder, including,
without limitation, an injunction or injunctions to prevent and enjoin breaches
of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy at law or in equity to
which they may be entitled at law or in equity. Any requirements for the
securing or posting of any bond with respect to any such remedy are hereby
waived.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or other governmental authority 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 governmental
authority determines that Holder is not permitted to acquire, or Issuer or
Substitute Option Issuer, as the case may be, is not permitted to repurchase
pursuant to Section 7 or Section 9, as the case may be, the full number of
shares of KSB Common Stock provided in Section 1(a) (as adjusted pursuant to
Section 1(b) or 5), it is the express intention of Issuer (which shall be
binding on the Substitute Option Issuer) to allow Holder to acquire or to
require Issuer or Substitute Option Issuer, as the case may be, 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 Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, 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 or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the respective meanings assigned thereto in the Merger Agreement.
[Remainder of page left blank intentionally.]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CAMDEN NATIONAL CORPORATION
By: s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title:
KSB BANCORP, INC.
By: s/ Xxxx X. Xxxxxxxxxxx
Name: Xxxx X. Xxxxxxxxxxx
Title: President and
Cheif Executive Officer
