Exhibit 2.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of February 25, 1998 by and between MARYLAND FEDERAL BANCORP, INC., a
Maryland corporation ("Maryland Federal" or "Issuer"), and BB&T CORPORATION,
a North Carolina corporation ("Grantee").
WHEREAS, Grantee, BB&T Financial Corporation of Virginia, a wholly-owned
subsidiary of Grantee ("BB&T Financial") and Issuer have entered into that
certain Agreement and Plan of Reorganization, dated this date (the "Merger
Agreement"), providing for, among other things, the merger of Issuer with and
into BB&T Financial, with the result that Issuer will become a part of a
wholly owned subsidiary of Grantee; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has
agreed, to grant to Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option")
to purchase up to 1,290,000 shares (as adjusted as set forth herein the
"Option Shares," which shall include the Option Shares before and after any
transfer of such Option Shares), of the common stock of Issuer, par value
$.01 per share ("Issuer Common Stock"), at a purchase price per Option Share
(subject to adjustment as set forth herein, the "Purchase Price") equal to
$30.50.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined),
as applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary
or permanent injunction or other order against the delivery of shares covered
by the Option issued by any court of competent jurisdiction in the United
States shall be in effect, Holder may exercise the Option, in whole or in
part, at any time and from time to time following the occurrence of a
Purchase Event (as hereinafter defined); provided that the Option shall
terminate and be of no further force and effect upon the earliest to occur of
(A) the Effective Time, (B) subject to clause (E) below, termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence
of a Purchase Event or a Preliminary Purchase Event (as hereinafter defined)
(other than a termination of the Merger
Agreement by Grantee pursuant to Section 7.1(b) thereof (a "Default
Termination")), (C) 12 months after a Default Termination, (D) 12 months
after any termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event and (E) subject to clause (D) above, 12 months after
termination of the Merger Agreement pursuant to Section 7.1(e) thereof;
provided further, that any purchase of shares upon exercise of the Option
shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended (the "BHC Act").
Notwithstanding anything to the contrary contained herein, the Option may
not be exercised (nor may any of Grantee's rights under Sections 8 and 9
hereof be exercised) at any time when Grantee shall be in willful breach of
any of its covenants or agreements contained in the Merger Agreement under
circumstances that would entitle Issuer to terminate the Merger Agreement.
Subject to compliance with Section 12(h) hereof, the term "Holder" shall mean
the holder or holders of the Option from time to time, including initially
Grantee. The rights set forth in Section 8 hereof shall terminate when the
right to exercise the Option terminates (other than as a result of a complete
exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term "Acquisition Transaction" shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and other subsidiaries of Issuer), (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
Subsidiaries representing in either case 15% or more of the consolidated
assets of Issuer and its Subsidiaries (other than a sale of loan
receivables in a financing transaction in the normal course of business
consistent with past practices), or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 15% or more
of the voting power of Issuer or any of its Subsidiaries; or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined under the Exchange Act), other than a group of which Grantee
or any of the Subsidiaries of Grantee is a member, shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then-outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) 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
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filed a registration statement under 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 10% 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); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held
for the purpose of voting on the Merger Agreement, such meeting shall
not have been held or shall have been canceled prior to termination of
the Merger Agreement, or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the recommendation
of Issuer's Board of Directors with respect to the Merger Agreement, in
each case after any person (other than Grantee or any Subsidiary of
Grantee) shall have (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (B) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer, or (C) filed an application (or given a
notice), whether in draft or final form, under any federal or state
statute or regulation (including an application or notice filed under
the BHC Act, the Bank Merger Act, the Home Owners' Loan Act or the
Change in Bank Control Act of 1978) seeking the consent to an
Acquisition Transaction from any federal or state governmental or
regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Notwithstanding the foregoing, the obligation of Maryland
Federal to issue Option Shares upon exercise of the Option shall be deferred
(but shall not terminate): (i) until the receipt of all required governmental
or regulatory approvals or consents necessary for Maryland Federal to issue
the Option Shares or Holder to exercise the Option, or until the expiration
or termination of any waiting period required by law, or (ii) so long as any
injunction or other order, decree or ruling issued by any federal or state
court of competent jurisdiction is in effect which prohibits the sale or
delivery of the Option Shares.
(e) In the event Holder 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 Option Shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 15 business days from the
Notice Date for the closing (the "Closing") of such purchase (the "Closing
Date"). If prior consent of any governmental or regulatory agency or
authority is required in connection with such purchase, Issuer shall
cooperate with Holder in the filing of the required notice or application for
such consent and the obtaining of such consent at Holder's expense, and the
Closing shall occur not earlier than three business days nor later than 15
business days following receipt of such consents (and expiration of any
mandatory waiting periods).
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4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of
Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer
referenced in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a) hereof, (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no preemptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with
the same terms as this Agreement evidencing the right to purchase the balance
of the shares of Issuer Common Stock purchasable hereunder, and (ii) Holder
shall deliver to Issuer a letter evidencing Holder's agreement not to offer,
sell or otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK
OPTION AGREEMENT DATED AS OF FEBRUARY 25, 1998. A COPY OF
SUCH 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 Holder shall
have delivered to Issuer a copy of a letter from the staff of the Commission,
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 Securities Act.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
enter into this Agreement and, subject to its obtaining 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 Issuer. This Agreement has been
duly executed and delivered by Issuer.
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(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 until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Issuer Common Stock necessary
for Holder to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional shares
of Issuer Common Stock or other securities which may be issued pursuant to
Section 7 hereof upon exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option, including all additional
shares of Issuer Common Stock or other securities which may be issuable
pursuant to Section 7 hereof, upon issuance pursuant hereto, shall be duly
and validly issued, fully paid, and nonassessable, and shall be delivered
free and clear of all liens, claims, charges, and encumbrances of any kind or
nature whatsoever, including any preemptive rights of any shareholder of
Issuer.
6. Representations and Warranties of Grantee. 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 its obtaining 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) Grantee represents that it is acquiring the Option for
Grantee's own account and not with a view to, or for sale in connection with,
any distribution of the Option or the Option Shares. Grantee represents that
it is aware that neither the Option nor the Option Shares is the subject of a
registration statement filed with and declared effective by the Commission
pursuant to Section 5 of the Securities Act, but instead each is being
offered in reliance upon the exemption from the registration requirement
provided by Section 4(2) thereof and the representations and warranties made
by Grantee in connection therewith. Grantee represents that neither the
Option nor the Option Shares will be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Laws, and that with respect to any transfer or other disposition
proposed to be made in reliance upon an exemption from registration, such
transfer or other disposition shall not be made unless Maryland Federal first
receives an opinion of counsel in form and substance reasonably acceptable to
it regarding the availability of such exemption.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of
a stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option and the Purchase Price therefor shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Holder would have received
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in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable.
If any additional shares of Issuer Common Stock are issued after the date of
this Agreement (other than pursuant to an event described in the first
sentence of this Section 7(a)), the number of shares of Issuer Common Stock
subject to the Option shall be adjusted so that, after such issuance, it,
when added to the number of shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to
or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement (prior
to termination of the Option pursuant to Section 3(a) hereof): (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and Issuer 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 Issuer Common Stock shall be changed into or
exchanged for stock or other securities of Issuer or any other person or cash
or any other property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company;
(iii) to permit any person, other than Grantee or one of its Subsidiaries, to
acquire all of the outstanding shares of Issuer Common Stock pursuant to a
statutory share exchange; or (iv) 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 case, the agreement governing such
transaction shall make proper provisions 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 Grantee, deemed granted by either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause
(ii), the Issuer (in each case, such person being referred to as the
"Substitute Option Issuer").
(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 identical to those of the Option, such terms shall be as similar
as possible and in no event less advantageous to Grantee. The Substitute
Option Issuer 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 agreement 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 hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common
Stock (the "Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable
and the denominator is the number of shares for which the Substitute Option
is exercisable.
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(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), Issuer in a merger in which Issuer is the continuing or
surviving person, the corporation that shall acquire all of the
outstanding shares of Issuer Common Stock pursuant to a statutory share
exchange, or the transferee of all or substantially all of the Issuer's
assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the highest of (x) the
price per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person (other than
Grantee), (y) the price per share of the Issuer Common Stock to be paid
by any person (other than the Grantee) pursuant to an agreement with
Issuer, and (z) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market System within the
six-month period immediately preceding the agreement; provided, that in
the event of a sale of less than all of Issuer's assets, the Assigned
Value shall be 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 Grantee (or by a majority in interest of the Grantees if there shall
be more than one Grantee (a "Grantee Majority")), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such
sale. In the event that an exchange offer is made for the Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for the Issuer Common
Stock shall be determined by a nationally recognized investment banking
firm mutually selected by Grantee and Issuer (or if applicable,
Acquiring Corporation). (If there shall be more than one Grantee, any
such selection shall be made by a Grantee Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one-year period immediately
preceding effectiveness of the consolidation, merger, share exchange 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 the
effectiveness of such consolidation, merger, share exchange 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 common stock
issued by Issuer, the person merging into Issuer or by any company which
controls or is controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing sections 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. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make
a cash payment to Grantee equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (f)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (f).
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This difference in value shall be determined by a nationally recognized
investment banking firm selected by Grantee (or a Grantee Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so
that the shares of Substitute Common Stock are in no way distinguishable from
or have lesser economic value than other shares of common stock issued by the
Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 hereof shall apply,
with appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option," "Substitute Purchase Price" and "Substitute Common Stock,"
respectively.
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) hereof, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months
immediately thereafter, Issuer shall repurchase from Holder the Option and
all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price (the "Section
8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number
of shares of Issuer Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the
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Option and the certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
the consent or approval of any governmental or regulatory agency or authority
is required in connection with the payment of all or any portion of the
Section 8 Repurchase Consideration, Holder shall have the ongoing option to
revoke its request for repurchase pursuant to Section 8, in whole or in part,
or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other
in the filing of any such notice or application and the obtaining of any such
approval), in which case the ten business day period of time that would
otherwise run pursuant to the preceding sentence for the payment of the
portion of the Section 8 Repurchase Consideration shall run instead from the
date on which, as the case may be, any required notification period has
expired or been terminated or such approval has been obtained and, in either
event, any requisite waiting period shall have passed. If any governmental
or regulatory agency or authority disapproves of any part of Issuer's
proposed repurchase pursuant to this Section 8, Issuer shall promptly give
notice of such fact to Holder. If any governmental or regulatory agency or
authority prohibits the repurchase in part but not in whole, then Holder
shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent
to each, and Holder shall thereupon have the right to exercise the Option as
to the number of Option Shares for which the Option was exercisable at the
Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) hereof.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i)
hereof, (ii) the price per share of Issuer Common Stock received by holders
of Issuer Common Stock in connection with any merger or other business
combination transaction described in Sections 7(b)(i), 7(b)(ii), 7(b)(iii) or
7(b)(iv) hereof, or (iii) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market (or if Issuer Common Stock
is not quoted on the Nasdaq National Market, the highest bid price per share
as quoted on the principal trading market or securities exchange on which
such shares are traded as reported by a recognized source chosen by Holder)
during the 60 business days preceding the Request Date; provided, however,
that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be 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 an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the
number of shares of the Issuer Common Stock outstanding at the time of such
sale. If the consideration to be
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offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
actual ownership or control, or any "group" (as such term is defined under
the Exchange Act) shall have been formed which shall have acquired actual
ownership or control, of 50% or more of the then-outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
7(b)(ii), 7(b)(iii) or 7(b)(iv) shall be consummated.
9. Registration Rights.
(a) For a period of 24 months following termination of the Merger
Agreement, Issuer shall, subject to the conditions of subsection (c) below,
if requested by any Holder, including Grantee and any permitted transferee of
the Option Shares ("Selling Holder"), as expeditiously as possible prepare
and file a registration statement under the Securities Laws if necessary in
order to permit the sale or other disposition of any or all shares of Issuer
Common Stock or other securities that have been acquired by or are issuable
to Selling Holder upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by the Selling Holder in such
request, including, without limitation, a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and
Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities
Laws in connection with an underwritten public offering of such Issuer Common
Stock, Issuer will promptly give written notice to Holder of its intention to
do so and, upon the written request of Holder given within 30 days after
receipt of any such notice (which request shall specify the number of shares
of Issuer Common Stock intended to be included in such underwritten public
offering by Selling Holder), Issuer will cause all such shares, the holders
of which shall have requested participation in such registration, to be so
registered and included in such underwritten public offering; provided, that
Issuer may elect to cause any such shares not to be so registered (i) if the
underwriters in good faith object for a valid business reason, or (ii) in the
case of a registration solely to implement a dividend reinvestment or similar
plan, an employee benefit plan or a registration filed on Form S-4 or any
successor form, or a registration filed on a form which does not permit
registration of resales; provided, further, that such election pursuant to
clause (i) may be made only one time. If some but not all the shares of
Issuer Common Stock, with respect to which Issuer shall have received
requests for registration pursuant to this subsection (b), shall be excluded
from such registration, Issuer shall make appropriate allocation of shares to
be registered among Selling Holders and any other person (other than Issuer
or any person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale.
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(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subsection (a) above to become
effective and to obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement effective,
provided, that Issuer may delay any registration of Option Shares required
pursuant to subsection (a) above for a period not exceeding 90 days in the
event that Issuer shall in good faith determine that any such registration
would adversely affect an offering or contemplated offering of other
securities by Issuer, and Issuer shall not be required to register Option
Shares under the Securities Laws pursuant to subsection (a) above:
(i) prior to the occurrence of a Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subsection (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer by Selling Holders
holding at least 25% or more of the aggregate number of Option Shares
then outstanding.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration
of nine months from the effective date of such registration statement.
Issuer shall use all reasonable efforts to make any filings, and take all
steps, under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares,
provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), accounting expenses, legal expenses, including
reasonable fees and expenses of one counsel to the Selling Holders whose
Option Shares are being registered, printing expenses, reasonable expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subsection (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subsection (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any
other expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
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(e) In connection with any registration under subsection (a) or
(b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against
all expenses, losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party
are caused by any untrue statement or alleged untrue statement or omission or
alleged omission that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to Issuer by such indemnified party
expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Holder, or
by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue or alleged untrue
statement or omission or alleged omission that was included by Issuer in any
such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon,
and in conformity with, information furnished in writing to Issuer by such
holder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subsection (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be
sought against any indemnifying party under this subsection (e), such
indemnified party shall notify the indemnifying party in writing of the
commencement of such action, but the failure so to notify the indemnifying
party shall not relieve it of any liability which it may otherwise have to
any indemnified party under this subsection (e). In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in
and, to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense of such action at its own expense,
with counsel chosen by it and satisfactory to such indemnified party. The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by
the indemnified party unless (i) the indemnifying party agrees to pay them,
(ii) the indemnifying party fails to assume the defense of such action with
counsel satisfactory to the indemnified party, or (iii) the indemnified party
has been advised by counsel that one or more legal defenses may be available
to the indemnifying party that may be contrary to the interest of the
indemnified party, in which case the indemnifying party shall be entitled to
assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subsection (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party
to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is
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appropriate to reflect the relative benefits received by Issuer, all Selling
Holders and the underwriters from the offering of the securities and also the
relative fault of Issuer, all Selling Holders and the underwriters in
connection with the statements or omissions which resulted in such expenses,
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result
of the expenses, losses, claims, damages and liabilities referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim; provided, that in no case shall any Selling Holder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with
other holders.
In connection with any registration pursuant to subsection (a)
or (b) above, Issuer and each Selling Holder (other than Grantee) shall enter
into an agreement containing the indemnification provisions of this
subsection (e).
(f) Issuer shall comply with all reporting requirements and will
do all such other things as may be necessary to permit the expeditious sale
at any time of any Option Shares by the Selling Holders in accordance with
and to the extent permitted by any rule or regulation promulgated by the
Commission from time to time, including, without limitation, Rules 144 and
144A. Issuer shall at its expense provide the Selling Holders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Laws, or
required pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save Holder harmless, without limitation as
to time, against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation
or trading or listing on the Nasdaq National Market or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on the
Nasdaq National Market or any other securities exchange or any automated
quotations system maintained by a self-regulatory organization and will use
its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. Division of Option. This Agreement (and the Option granted hereby)
is 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 in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any other 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
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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.
12. Miscellaneous.
(a) Expenses. Except as otherwise 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.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
This Agreement, together with the Merger Agreement and the other documents
and instruments referred to herein and therein, between Grantee and Issuer
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the Option
Shares or any permitted transferee of this Agreement pursuant to Section
12(h) hereof) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state governmental or regulatory agency or
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of 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 Option
does not permit Holder to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3
and 8 hereof (as adjusted pursuant to Section 7 hereof), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina without regard to any applicable conflicts of law rules, except to
the extent that the federal laws of the United States shall govern.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered
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or certified mail (return receipt requested) to the parties at the addresses
set forth in the Merger Agreement (or at such other address for a party as
shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment; Transfer. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be
assigned or transferred by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other party,
except that Grantee may assign this Agreement to a wholly owned subsidiary of
Grantee and Grantee may assign or transfer its rights hereunder in whole or
in part after the occurrence of a Purchase Event. In the case of any
permitted assignment or transfer of the Option, Issuer shall do all things
necessary to facilitate the same, and the Holder to whom the Option is
assigned or transferred shall make the representations contained in Section 6
hereof (with Holder substituted for Grantee) and shall agree in writing to
the terms and conditions hereof. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
MARYLAND FEDERAL BANCORP, INC. BB&T CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxx, XX
----------------------- --------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxxx, XX
Title:President and Chief Title: Chairman and Chief
Executive Officer Executive Officer
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