EXHIBIT 99.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
THIS STOCK OPTION AGREEMENT (the "Agreement") is made, entered into and
effective as of the 17th day of June, 1998, between PMT SERVICES, INC., a
Tennessee corporation ("Issuer") and NOVA CORPORATION, a Georgia corporation
("Grantee").
W I T N E S S E T H:
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WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to 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
defined in Section 1(a));
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. GRANT OF OPTION; ADJUSTMENT.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
9,733,433 fully paid and nonassessable shares of Issuer's Common Stock, par
value $.01 per share ("Common Stock"), at a price of $25.16 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The
number of shares of Common Stock that may be received upon the exercise of
the Option and the Option Price are subject to adjustment as herein set
forth.
(b) In the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date hereof (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the
number of shares of 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 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. EXERCISE OF OPTION.
(a) The "Holder" (as defined in Section 2(a)) may exercise the Option,
in whole or part, and from time to time, if, but only if, both an "Initial
Triggering Event" (as defined in
Section 2(b)) and a "Subsequent Triggering Event" (as defined in Section
2(c)) shall have occurred prior to the occurrence of an "Exercise
Termination Event" (as defined in this Section 2(a)), provided that the
Holder shall have sent the written notice of such exercise (as provided in
Section 2(e)) prior to the occurrence of an Exercise Termination 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
7.1(b) or 7.1(c) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional); 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 7.1(b) or 7.1(c) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional). The term "Holder" shall mean the holder or
holders of the Option.
(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 defined in this Section 2(b)(i)) 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 shareholders of Issuer approve or
accept any Acquisition Transaction other than the Merger. For purposes
of this Agreement, "Acquisition Transaction" shall mean (w) a merger
or consolidation, or any 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 assets 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 15% or more of the voting power
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation or similar
transaction permitted by, and effected in accordance with, Sections
4.1(b)(ii)(B) or 4.1(b)(iv) of the Merger Agreement be deemed to be an
Acquisition Transaction;
(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, to engage in an Acquisition Transaction with any person
other than Grantee or a Grantee Subsidiary, or the Board of Directors
of Issuer shall have withdrawn or modified, or publicly announced its
interest to withdraw or modify, in any manner adverse to Grantee, its
recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, or the Board of Directors of
Issuer shall not have recommended that the shareholders of Issuer
approve the transactions contemplated
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by the Merger Agreement, or shall have abandoned the transactions
contemplated by the Merger Agreement in each case in anticipation of
engaging in an Acquisition Transaction;
(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 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 shareholders 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 a third party to Issuer or its
shareholders 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 in Section 2(e)); or
(vi) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the transactions contemplated thereby
at a meeting which has been held for that purpose or any adjournment
or postponement thereof, or such meeting shall not have been held in
violation of the Merger Agreement or shall have been cancelled prior
to the termination of the Merger Agreement if, prior to such meeting
(or, if such meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its
Subsidiaries) shall have made, or disclosed an intention to make, a
proposal 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 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 it
has notice (together, a "Triggering Event"), it being understood that the
giving of such notice by Issuer shall not be a condition to the right of
the Holder to exercise the Option.
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(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which notice
is herein referred to as the "Notice Date") specifying (i) the total number
of shares of Common Stock it will purchase pursuant to such exercise and
(ii) a place and date, not earlier than three business days nor later than
60 business days from the Notice Date, for the closing (the "Closing") of
such purchase (the "Closing Date"). Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the Closing, the Holder shall pay to Issuer the aggregate
purchase price for the shares of 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 the Holder from
exercising the Option.
(g) At the Closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f), Issuer shall deliver to the
Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option should be exercised
in part only, a new Option evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that
the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at Closing may be endorsed
with a restrictive legend that shall read substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT DATED AS OF JUNE 17, 1998, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the 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, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions to 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. In
addition, such certificates shall bear any other legend as may be required
by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under Section 2(e) and the tender of
the applicable purchase price in immediately available funds, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not
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then be actually delivered to the 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 the
Holder or its assignee, transferee or designee.
3. AGREEMENT BY ISSUER. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase 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 will promptly take all action as may from time to time be
required (including complying with all premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) that it will promptly take all action provided herein to protect the rights
of the Holder against dilution.
4. EXCHANGE. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the 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 Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used in this
Section 4 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. ADJUSTMENT. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of 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 Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of Common Stock 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 such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. REGISTRATION. 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
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Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration statement
under the 1933 Act covering this Option and any shares of Common Stock or other
securities 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 this
Option and any shares of Common Stock issued upon total or partial exercise of
this Option ("Option Shares") in accordance with any plan of disposition
reasonably requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect 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 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 the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
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 practicable 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. REPURCHASE.
(a) Immediately prior to the occurrence of a "Repurchase Event" (as
defined in Section 7(d)), (i) following a request of the Holder, delivered
prior to an Exercise Termination Event, Issuer (or any successor thereto)
shall repurchase the Option from the Holder at a price (the "Option
Repurchase Price") equal to the amount by which (A) the "Market/Offer
Price" (as defined in this Section 7(a)) 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 the occurrence of such
Repurchase Event (or such later period as provided in Section 10), Issuer
shall repurchase such number of the 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 Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per
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share of Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (iii) the highest closing price for shares of Common
Stock within the 90-day period immediately preceding the date the 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, or
(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 the Holder or the
Owner, as the case may be, and reasonably acceptable to the Issuer, divided
by the number of shares of 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 the Holder or Owner, as the
case may be, and reasonably acceptable to the Issuer.
(b) The 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 the 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. At the later to occur of (x) within 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 the 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 regulation from so
delivering.
(c) (i) To the extent that Issuer is prohibited under applicable law
or regulation (with the exception of TBCA (S) 00-000-000 et seq. (the
-- ---
"Greenmail Act"), in which event Section 7(c)(ii) shall govern) from
repurchasing the Option and/or the Option Shares in full, then the Holder
and/or Owner may in its sole discretion elect to proceed under this Section
7(c)(i). If the Holder and/or Owner elects to proceed under this Section
7(c)(i), Issuer shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the
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 to it of a notice of repurchase
pursuant to paragraph (b) of this Section 7 is prohibited under applicable
law or regulation from delivering to the 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), the 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 the 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 the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
for
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which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which
is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing.
(ii) In the event that the Greenmail Act is deemed to be
applicable to the repurchase of the Option and/or the Option Shares, and
the Holder and/or Owner elects to proceed under this Section 7(c)(ii) and
complies with the notice requirements set forth in Section 7(a), then
Issuer shall be required to repurchase the Option at the Option Repurchase
Price (as calculated in accordance with Section 7(c)(ii)(A)) and/or the
Option Shares at the Option Share Repurchase Price (as calculated in
accordance with Section 7(c)(ii)(B)).
(A) With respect to a repurchase of the Option, if the
Market/Offer Price is or must be reduced in order to comply or
allow compliance with the Greenmail Act (such reduced
Market/Offer Price being referred to herein as the "Reduced
Market/Offer Price"), then the Issuer shall repurchase the Option
from the Holder at a price equal to the Reduced Market/Offer
Price minus the Option Price, multiplied by the number of shares
for which the Option may then be exercised, provided, however,
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that if, after giving effect to such reduction, the Reduced
Market/Offer Price would be an amount less than the Option Price,
then, for purposes of this Section 7(c)(ii)(A), the Option Price
will automatically be decreased (such decreased Option Price
being referred to herein as the "Reduced Option Price") to the
extent necessary such that subtracting the Reduced Option Price
from the Reduced Market/Offer Price yields a difference of $.05
per share which amount shall be adjusted as appropriate to
reflect any stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, or distributions relating to the Common
Stock (the "Adjusted Option Price"), and in such event, the
Issuer shall repurchase the Option for $.05, or the Adjusted
Option Price, as the case may be, multiplied by the number of
shares for which the Option may then be exercised.
(B) With respect to the repurchase of the Option Shares, if
the Market/Offer Price is or must be reduced in order to comply
or allow compliance with the Greenmail Act (such reduced
Market/Offer Price being referred to herein as the "Reduced
Market/Offer Price"), then Issuer shall repurchase such number of
the Option Shares as the Owner shall designate at a price equal
to the Reduced Market/Offer Price multiplied by the number of
Option Shares so designated.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred (i) upon 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) hereof,
or (ii) upon the acquisition by any person of beneficial ownership of 50%
or more of the then outstanding shares of 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
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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.
8. SUBSTITUTE OPTION.
(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 Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger represent
less than 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 case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the
"Acquiring Corporation" (as defined in Section 8(b)) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "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.
(B) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(C) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(D) "Average Price" shall mean the average closing price of a
share of the Substitute 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 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 common
stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, have the same terms as the Option, such terms shall be as similar
as possible and in no event less advantageous to the Holder. The
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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 Common Stock as is equal to the Assigned Value
multiplied by the number of shares of 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 Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
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 shares of Substitute Common Stock outstanding prior
to exercise but for this Section 8(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 Section 8(e), over (ii) the value of the
Substitute Option, after giving effect to the limitation in this Section
8(e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by the 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 Section
8(a) unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. REPURCHASE OF SUBSTITUTE OPTION.
(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 the amount by which (i) the
"Highest Closing Price" (as defined in Section 9(a)) exceeds (ii) the
exercise price of the Substitute Option, multiplied by the number of shares
of Substitute Common Stock for which the Substitute Option may then be
exercised, and at the request of the owner (the "Substitute Share Owner")
of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the 90-day 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
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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) (i) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation (with the exception of the Greenmail
Act, in which event Section 9(c)(ii) shall govern) from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full, then the
Substitute Option Holder and/or Substitute Share Owner may in its sole
discretion elect to proceed under this Section 9(c)(i). If the Substitute
Option Holder (and/or the Substitute Share Owner) elects to proceed under
this Section 9(c)(i), 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, or 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 Section 9(b) 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 Common
Stock obtained by multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator
of which is the Substitute Option Repurchase Price, or (B) to the
Substitute Share Owner, a certificate for the Substitute Shares it is then
so prohibited from repurchasing.
(ii) In the event that the Greenmail Act is deemed to be
applicable to the repurchase of the Substitute Option and/or Substitute
Shares, and the Substitute Option Holder
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and/or Substitute Share Owner elects to proceed under this Section
9(c)(ii), and at the request of the Substitute Option Holder and/or the
Substitute Share Owner, then the Substitute Option Issuer shall be required
to repurchase the Substitute Option at the Substitute Option Repurchase
Price (as calculated in accordance with Section 9(c)(ii)(A)) and/or the
Substitute Shares at the Substitute Share Repurchase Price (as calculated
in accordance with Section 9(c)(ii)(B).
(A) With respect to the repurchase of the Substitute Option,
if the Highest Closing Price is or must be reduced in order to
comply or allow compliance with the Greenmail Act (such reduced
Highest Closing Price being referred to herein as the "Reduced
Highest Closing Price"), then the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option
Holder at a price equal to the Reduced Highest Closing Price
minus the exercise price of the Substitute Option, multiplied by
the number of Substitute Shares for which the Substitute Option
may then be exercised; provided, however, that if, after giving
-------- -------
effect to such reduction, the Reduced Highest Closing Price would
be an amount less than the exercise price of the Substitute
Option, then the exercise price of the Substitute Option will
automatically be decreased (such decreased exercise price being
referred to herein as the "Reduced Substitute Exercise Price") to
the extent necessary such that subtracting the Reduced Substitute
Exercise Price from the Reduced Highest Closing Price yields a
resulting Substitute Option Repurchase Price of $.05 per share
which amount shall be adjusted as appropriate to reflect any
stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares, or
distributions relating to the Common Stock (the "Adjusted
Substitute Option Price"), and in such event, the Substitute
Option Issuer shall repurchase the Substitute Option for $.05, or
the Adjusted Substitute Option Price, as the case may be,
multiplied by the number of shares for which the Substitute
Option may then be exercised.
(B) With respect to the repurchase of the Substitute Shares,
if the Highest Closing Price is or must be reduced in order to
comply or allow compliance with the Greenmail Act (such reduced
Highest Closing Price being referred to herein as the "Reduced
Highest Closing Price"), then the Substitute Option Issuer shall
repurchase such number of the Substitute Shares at a price equal
to the Reduced Highest Closing Price multiplied by the number of
Substitute Shares so designated.
10. EXTENSION. The periods for exercise of certain rights under Sections
2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and to permit the
expiration of all statutory waiting periods; and (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. REPRESENTATIONS AND WARRANTIES OF ISSUER. 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
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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 action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrances and security interests and not subject to
any preemptive rights.
12. REPRESENTATION AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer as follows:
(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 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.
13. ASSIGNMENT. Neither of the parties hereto may assign any of its
rights or obligations under this Option 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
hereunder within 90 days following such Subsequent Triggering Event (or such
later period as provided in Section 10).
14. BEST EFFORTS. 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 Common Stock issuable hereunder on the New York Stock
Exchange, Nasdaq National Market, or such other exchange or market on which the
shares of Issuer may be listed upon official notice of issuance.
15. INJUNCTIVE RELIEF. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
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16. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Sections
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. NOTICES. 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.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal law or the GBCC
apply).
19. COUNTERPARTS. 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.
20. FEES AND EXPENSES. 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.
21. ENTIRE AGREEMENT. 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 thereto, 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
(except as assigns) any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
22. DEFINED TERMS. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger Agreement.
(signatures on following page)
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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.
"ISSUER":
PMT SERVICES, INC.
By:_____________________________
Xxxxxxxxxx X. Xxxxxxx
Chief Executive Officer
"GRANTEE":
NOVA CORPORATION
By:_____________________________
Xxxxxx Xxxxxxxxxxx
Chief Executive Officer
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