EXHIBIT 2.2
EXECUTION COPY
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of March 9, 1998, by and between Xxxx Xxxxx Financial Corporation, a Delaware
corporation ("Issuer"), and Fortis, Inc., a Nevada corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of March 9, 1998 (the "Merger Agreement"), providing
for, among other things, the merger of JAFCO Acquisition Corp., a Delaware
corporation ("Merger Sub") with and into Issuer, with Issuer being the surviving
entity and becoming 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 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 four million eight hundred eighty thousand one hundred and eight
(4,880,108) 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 common stock, $.01 par value per share ("Issuer Common Stock"), of
Issuer at a purchase price per Option Share (subject to adjustment as set forth
herein, the "Purchase Price") equal to twenty two dollars and fifty cents
($22.50); provided, however, that in no event shall the number of shares of
Issuer Common Stock for which this Option is exercisable exceed the lesser of
(i) 19.9% of the Issuer's issued and outstanding shares of Issuer Common Stock
without giving effect to any shares subject to or issued pursuant to the Option
and (ii) that minimum number of shares of Issuer Common Stock which when
aggregated with any other shares of Issuer Common Stock beneficially owned by
Grantee or any Affiliate thereof would cause the provisions of any Takeover Laws
of the DGCL to be applicable to the Merger. Each Option Share to be issued upon
exercise of the Option shall be accompanied by and be deemed to represent a
Right under the Rights Agreement.
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 and
prior to the termination of the Option. The Option shall terminate and be of no
further force and effect upon the earliest to occur of (A) the Effective Time,
(B) termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Merger Agreement by Grantee pursuant to Section
9.4(c) thereof, but with respect to a termination for material breach of a
representation or warranty by Issuer, only if such termination was a result of a
willful breach by Issuer (a "Default Termination")), (C) 18 months after a
Default Termination, and (D) 18 months after any termination of the Merger
Agreement following the occurrence of a Purchase Event or a Preliminary Purchase
Event. Any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, all applicable
Insurance Laws. The term "Holder" shall mean the holder or holders of the Option
from time to time, and which initially is the Grantee. The rights set forth in
Section 8 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), (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, (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 (D) a Tender Offer or
an Exchange Offer (as such terms are defined below) (any of the foregoing,
an "Acquisition Transaction");
(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 Securities Exchange Act of 1934, as amended
(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 its Subsidiaries is a member,
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shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more of the then-outstanding shares of
Issuer Common Stock; or
(iii) the holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting called for such purpose, or such meeting
shall not have been held or shall have been canceled prior to termination
of the Merger Agreement following a Preliminary Purchase Event.
(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 filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to,
a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own or
control 15% 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) it shall have been publicly announced that any person (other
than Grantee or any Subsidiary of Grantee) shall have (A) made a bona fide
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 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) 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 30 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 and the Closing shall occur immediately following receipt of such
Consents (and expiration of any mandatory waiting periods).
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
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(ii) present and surrender this Agreement to the Issuer at the address of the
Issuer specified 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), (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 agreeing that Holder shall not offer to 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 MARCH 9,
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: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the references in the above legend to the provisions of this Agreement 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.
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 any approvals 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 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 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, 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 stockholder 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 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) This Option is not being, and any Option Shares 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
all applicable federal, state and local securities laws (the "Securities Laws").
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, if any, 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 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) or pursuant to this Option), the number of shares
of Issuer Common Stock subject to the Option shall be adjusted so that, after
such issuance, it, together with any shares of Issuer Common Stock previously
issued pursuant hereto, shall not exceed the lesser of (i) 19.9% of the number
of shares of Issuer Common Stock then
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issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option and (ii) that minimum number of shares of Issuer Common
Stock which when aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would cause the
provisions of any Takeover Laws of the DGCL to be applicable to the Merger.
(b) In the event that Issuer shall enter in 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 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; 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 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, of either (x) the Acquiring Corporation
(as defined below) or (y) any person that controls the Acquiring Corporation (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 the same as 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 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.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a
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merger in which Issuer is the continuing or surviving person, and (z) the
transferee of all or any substantial part 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 last
sale price per share of Issuer Common Stock quoted on the NYSE (or if
Issuer Common Stock is not quoted on the NYSE, the highest bid price per
share on any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Grantee) 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"))
and reasonably acceptable to Issuer, 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 selected by Grantee and
reasonably acceptable to 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 immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
last sale price of the shares of the 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 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 paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. 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). This
difference in value shall be determined by a
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nationally recognized investment banking firm selected by Grantee (or a Grantee
Majority) and reasonably acceptable to the Acquiring Corporation.
(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 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), at the request of
Holder at any time commencing upon the first occurrence of a Purchase Event (as
defined in Section 3(b)) and ending 18 months immediately thereafter, all
current and former Holders shall sell to Issuer and Issuer shall repurchase from
such Holders the Option and all, but not less than all, shares of Issuer Common
Stock purchased by such Holders pursuant hereto whether or not such Holders then
have beneficial ownership of such shares. 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 such Holders for any shares
of Issuer Common Stock acquired by such Holders pursuant to the Option;
(ii) $20 million; and
(iii) Up to, but not in excess of $2.5 million of Holder's
reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by the Merger Agreement (including, without
limitation, legal, accounting and investment banking fees and expenses).
(b) If Holder exercises its rights under this Section 8, Issuer shall,
on the business day following the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds by wire transfer to an
account designated by Holder, and contemporaneously with such payment Holder
shall surrender to Issuer the 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,
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charges and encumbrances of any kind whatsoever. Notwithstanding the foregoing,
to the extent that prior notification to or Consent 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
Consent 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 Consent). 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 on a
reasonable and proportionate basis whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each. 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).
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of subparagraph (c) below,
if requested by any Holder, including Grantee and any permitted transferee
("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 Holder in such request (it being understood and agreed
that any such sale or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall beneficially own more than 5% of the shares of Issuer Common Stock then
outstanding), 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. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the Option, but prior
to the termination 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 use all
reasonable efforts to cause all such shares, the
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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 not cause any such shares to be so registered (i) if the
underwriters in good faith determine that the inclusion of such shares would
interfere with the successful marketing of the shares of Issuer Common Stock for
the account of Issuer, 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 registrations of resales; provided, further, that
such election pursuant to clause (i) may only be made once. 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 subparagraph (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 (other than Issuer
or any person exercising demand registration rights in connection with such
registration).
(c) Issuer shall use all reasonable efforts to cause the registration
statement referred to in subparagraph (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 subparagraph (a) above
for a period not exceeding 90 days, provided Issuer shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer or would require disclosure
by Issuer of any information (including, without limitation, financial
information) which is not reasonably available to Issuer. Notwithstanding
anything to the contrary contained herein, Issuer shall not be required to
register Option Shares under the Securities Laws pursuant to subparagraph (a)
above:
(i) prior to the occurrence of a Purchase Event;
(ii) more than twice;
(iii) within 90 days after the effective date of a registration
referred to in subparagraph (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
(iv) unless a request therefor is made to Issuer by Selling Holders
holding at least 15% or more of the aggregate number of Option Shares then
outstanding or the right to acquire at least 15% of the Option Shares.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
120 days from the effective date
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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 Issuer's counsel), accounting expenses, printing expenses, 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 subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (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 (including expenses of Selling Holders' counsel) shall be borne by
such Selling Holders.
(e) In connection with any registration under subparagraph (a) or (b)
above Issuer hereby agrees to indemnify 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
(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, in light of the
circumstances under which they were made, 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 any omission or
alleged omission made 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 made 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
subparagraph (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 subparagraph (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
subparagraph (e), except to the extent such failure to notify materially
prejudices the indemnifying party. In case notice of commencement of any such
action shall be given to the
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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 reasonably 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 either
agrees to pay the same, (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; provided, however, that the indemnifying party
shall not be liable for the expenses of more than one firm of counsel for all
indemnified parties in any jurisdiction. 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 subparagraph (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 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 subparagraph (a)
or (b) above, Issuer and each Selling Holder (other than Grantee) shall enter
into an agreement containing the indemnification provisions of this subparagraph
(e).
(f) Issuer shall use its best efforts to 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 Holder in accordance with
and to the extent permitted by any rule or regulation promulgated by the SEC
from time to time, including, without limitation, Rules 144 and 144A.
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(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 NYSE or any other securities exchange or any automated
quotations system maintained by a self-regulatory organization, Issuer, upon the
request of Holder, 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 NYSE 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) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase 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 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 in Section 9, 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
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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) and other than as provided in the Merger Agreement) 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 (as adjusted pursuant to Section 7), 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 and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(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 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. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned 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 its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
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.
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(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.
(K) CONFIDENTIALITY AGREEMENTS. The parties hereto agree that this
Agreement supersedes any provision of the Confidentiality Agreement that could
be interpreted to preclude the exercise of any rights or the fulfillment of any
obligations under this Agreement, and that none of the provisions included in
the Confidentiality Agreement will act to preclude Holder from exercising the
Option or exercising any other rights under this Agreement or act to preclude
Issuer from fulfilling any of its obligations under this Agreement.
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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.
XXXX XXXXX FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer
FORTIS, INC.
By: /s/ X. Xxxxx Xxxxxxx
X. Xxxxx Xxxxxxx
Executive Vice President
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