Exhibit 2.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of July 27, 1999, by and between KSB
Bancorp, Inc., a Delaware corporation ("Issuer"), and Camden National
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Corporation, a Maine corporation ("Grantee").
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WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger dated as of the date hereof (as amended from time to time, the "Merger
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Agreement"), which agreement has been executed by the parties hereto immediately
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prior to the execution of this Stock Option Agreement (this "Agreement"); and
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WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 262,932
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fully-paid and nonassessable shares of Issuer's Common Stock, par value $.01 per
share ("KSB Common Stock"), at a price per share equal to $13.50 (the "Option
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Price"); provided, however, that in no event shall the number of shares of KSB
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Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's
issued and outstanding shares of KSB Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number of shares of KSB
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of KSB Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement), or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of this
Agreement, the number of shares of KSB Common Stock subject to the Option shall
be increased or decreased, as appropriate, so that, after such issuance, such
number equals 19.9% of the number of shares of KSB Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) Holder (as hereinafter defined) may exercise the Option, in whole
or part, and from time to time, if, but only if, both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined), provided that Holder shall have sent to Issuer
written notice of such exercise (as provided in subsection (e) of this Section
2) within 90 days following such Subsequent Triggering Event. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time (as
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defined in the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event, except a termination by
Grantee pursuant to Section 10.1(d) or Section 10.1 (e) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
nonvolitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 10.1(d) or
Section 10.1(e) of the Merger Agreement (unless the breach by Issuer giving rise
to such right of termination is nonvolitional). The term "Holder" shall mean
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the holder or holders of the Option from time to time, and which is initially
Grantee.
(b) The term "Initial Triggering Event" shall mean any of the
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following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each, an "Issuer
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Subsidiary"), without having received Grantee's prior written consent, shall
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have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
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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
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recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement, "Acquisition Transaction" shall
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mean (w) a merger, consolidation or similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a purchase,
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lease or other acquisition or assumption of all or a substantial portion of the
consolidated assets or consolidated deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Issuer, or (z) any substantially similar
transaction; provided, however, that in no event shall (A) the transactions
contemplated by the Merger Agreement or the entering into of the Merger
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Agreement constitute an Acquisition Transaction or (B) any merger,
consolidation, purchase or similar transaction involving only the Issuer and one
or more of its Subsidiaries or involving only any two or more of such
Subsidiaries be deemed to be an Acquisition Transaction, provided such
transaction is not entered into in violation of the terms of the Merger
Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended, proposed,
or publicly announced its intention to authorize, recommend or propose, an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or
modified, or publicly announced its intention to withdraw or modify, in any
manner adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction with any person other than Grantee or
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
announced its intention not to recommend that the stockholders of Issuer approve
the transactions contemplated by the Merger Agreement because of or in
connection with an actual or proposed Acquisition Transaction involving any
person other than Grantee or Grantee Subsidiary;
(iii) Any person other than Grantee, any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of KSB Common
Stock (the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by any person other than Grantee
or any Grantee Subsidiary to Issuer or its stockholders to engage in an
Acquisition Transaction, Issuer shall have breached any covenant or obligation
contained in the Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured prior to the
Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with [the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board")], or other
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federal or state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an
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Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
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following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20%
or more of the then outstanding KSB Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) thereof shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which Issuer
has notice (together, a "Triggering Event"), it being understood and agreed that
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the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares of
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KSB Common Stock it will purchase pursuant to such exercise and (ii) a place and
date not earlier than five business days nor later than 60 business days from
the Notice Date for the closing of such purchase (the "Closing Date"); provided
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that if prior notification to or approval of the Federal Reserve Board or any
other governmental authority or regulatory agency is required in connection with
such purchase, Holder and Issuer shall promptly file the required notice, form
or application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
Holder shall pay to Issuer the aggregate purchase price for the shares of KSB
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
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shall not preclude Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of the purchase
price as provided in subsection (f) of this Section 2, Issuer shall deliver to
Holder a certificate or certificates representing the number of shares of KSB
Common Stock purchased by Holder and, if the Option shall have been exercised in
part only, a new Option evidencing the rights of Holder thereof to purchase the
balance of the shares of KSB Common Stock purchasable
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hereunder, and Holder shall deliver to Issuer a copy of this Agreement. By
receipt of any shares of KSB Common Stock issuable hereunder Holder will agree,
and does hereby agree, not to offer to sell or otherwise dispose of such shares
in violation of the Securities Act of 1933, as amended (the "1933 Act"), other
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applicable law or the provisions of this Agreement.
(h) In addition to any other legend that may be required by
applicable law, certificates for shares of KSB Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor. "
It is understood and agreed that (i) the reference to the resale restrictions of
the 1933 Act, in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer and its counsel, to the effect
that such legend is not required for purposes of the 1933 Act;1 (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
(i) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price under subsection (f) of this Section
2, Holder shall be deemed to be the holder of record of the shares of KSB Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such shares of
KSB Common Stock shall not then be actually delivered to Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of KSB
Common Stock so that the Option may be exercised without additional
authorization of KSB Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase KSB Common
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Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) that it shall promptly take all action as may from time to time be
required (including (x) complying with all premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. (S)18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
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amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
KSB Common Stock pursuant hereto; and (iv) that it shall promptly take all
action provided herein to protect the rights of Holder against dilution and
otherwise hereunder.
4. This Agreement and the Option granted hereby are exchangeable, without
expense, at the option of Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of KSB Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any Stock
Option Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of KSB Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of KSB Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the KSB Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the KSB Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of securities purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide
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for, and the inclusion and validity of such provision shall be a condition to,
the validity and consummation of any such transaction, such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of KSB Common Stock issued pursuant hereto), promptly prepare,
file and keep current a "shelf" registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
any shares of KSB Common Stock issued upon total or partial exercise of this
Option ("Option Shares") in accordance with any plan of disposition requested by
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Grantee. Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effective for a period
of 180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations.
The foregoing notwithstanding, if, at the time of any request by Grantee for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of KSB
Common Stock, and if in the good faith judgment of the managing underwriter or
managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the inclusion of Holder's Option or Option Shares would interfere
with the successful marketing of the shares of KSB Common Stock offered by
Issuer, the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that after any
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such required reduction the number of Option Shares to be included in such
offering for the account of Holder shall constitute at least 25% of the total
number of shares to be sold by Holder and Issuer in the aggregate; and provided
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further, however, that if such reduction occurs, then the Issuer shall file a
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registration statement for the balance as promptly as practical and no reduction
shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
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7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from Holder at a price (the "Option Repurchase Price") equal to the
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amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may then
be exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days of such occurrence (or such later
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period as provided in Section 11), Issuer shall repurchase such number of Option
Shares from the Owner as the Owner shall designate at a price (the "Option Share
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Repurchase Price") equal to the Market/Offer Price multiplied by the number of
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Option Shares so designated. The term "Market/Offer Price" shall mean the
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highest of (i) the price per share of KSB Common Stock at which a tender offer
or exchange offer therefor has been made, (ii) the price per share of KSB Common
Stock to be paid by any third party pursuant to an agreement with Issuer, (iii)
the highest closing price for shares of KSB Common Stock within the six-month
period immediately preceding the date Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, and (iv) in the event of a sale of all or
a substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of KSB Common Stock of Issuer
outstanding at the time of such sale. In determining the Market/Offer Price,
the value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by Holder or Owner, as the case may
be, and reasonably acceptable to the Issuer.
(b) Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Holder or
the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Prior to the later to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof, if any,
that Issuer is not then prohibited under applicable law and regulations from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to Holder and/or the Owner, as
appropriate, the portion of the Option Xxxxxxxxxx
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Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering, to
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices, in each case as promptly as
practicable in order to accomplish such repurchase), Holder or Owner may revoke
its notice of repurchase of the Option or the Option Shares either in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to Holder and/or the Owner, as appropriate, that portion of
the Option Repurchase Price or the Option Share Repurchase Price that Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
Holder, a new Stock Option Agreement evidencing the right of Holder to purchase
that number of shares of KSB Common Stock obtained by multiplying the number of
shares of KSB Common Stock for which the surrendered Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof theretofore
delivered to Holder and the denominator of which is the Option Repurchase Price,
or (B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
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deemed to have occurred upon either (i) the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition Transaction
pursuant to the provisos to Section 2(b)(i), or (ii) the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
KSB Common Stock, provided that no such event shall constitute a Repurchase
Event unless a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event. The parties hereto agree that Issuer's obligations
to repurchase the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event. Prior to the occurrence of any Repurchase Event,
the Issuer shall notify in writing the Holder and each Owner of such Repurchase
Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of KSB Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property or the then outstanding shares of KSB Common Stock shall
after such merger
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represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such cases the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
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Option"), at the election of Holder, of either (x) th e Acquiring Corporation
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(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
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surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer's assets.
(ii) "Substitute KSB Common Stock" shall mean the KSB Common
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Stock issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as
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defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
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share of the Substitute KSB Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute KSB Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of KSB Common Stock issued by the person merging into Issuer or by any company
which controls or is controlled by such person, as Holder may elect.
(c) The Substitute Option shall have the same terms as the Option;
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible to those
of the Option and in no event less advantageous to Holder of the Option. The
issuer of the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form as
this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute KSB Common Stock as is equal to the Assigned Value
multiplied by the number of shares of KSB Common Stock for which the Option is
then exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute KSB Common Stock shall be equal to the
Option Price multiplied by a fraction, the numerator of
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which shall be the number of shares of KSB Common Stock for which the Option is
then exercisable and the denominator of which shall be the number of shares of
Substitute KSB Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute KSB Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute KSB Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
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excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
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Substitute Option from the Substitute Option Holder at a price (the "Substitute
----------
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
-----------------------
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute KSB Common
Stock for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
----------------------
Substitute KSB Common Stock (the "Substitute Shares"), the Substitute Option
-----------------
Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share
----------------
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
----------------
number of Substitute Shares so designated plus (y) Grantee's reasonable out-of-
pocket expenses (to the extent not previously reimbursed). The term "Highest
-------
Closing Price" shall mean the highest closing price for shares of Substitute KSB
-------------
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this
11
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering .
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute KSB
Common Stock obtained by multiplying the number of shares of the Substitute KSB
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
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10. (a) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than $1.4
million less the amount of any Expense Fee actually paid to Camden pursuant to
Section 10.2(c) of the Merger Agreement; provided that nothing in this sentence
shall restrict any exercise of the Option permitted hereby on any subsequent
date.
(b) As used herein, the term "Notional Total Profit" with respect to
---------------------
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit (as defined below) determined as of the date of such
proposed exercise assuming that this Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Grantee and its affiliates as of such date, were sold for cash
at the closing market price for the KSB Common Stock as of the close of business
on the preceding trading day (less customary brokerage commissions).
(c) As used herein, the term "Total Profit" shall mean the aggregate
------------
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares (or any portion thereof) pursuant to Section 7, less
(y) the Grantee's purchase price for such Option Shares, (iii) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price of such Option Shares,
(iv) any amounts received by Grantee on the transfer of the Option (or any
portion thereof) to any unaffiliated party, and (v) any amount equivalent to the
foregoing with respect to the Substitute Option.
11. The 90-day period for exercise of certain rights under Sections 2, 6,
7 and 14 shall be extended: (i) to the extent necessary to obtain all legal and
regulatory approvals for the exercise of such rights, for the expiration of all
statutory waiting periods; (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise, and (iii) during any
period in which Grantee is precluded from exercising such rights due to an
injunction or other legal restriction, plus in each case such additional period
as is reasonably necessary for the exercise of such rights promptly following
the obtaining of such approvals or the expiration of such periods.
12. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and
13
delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of KSB Common Stock equal to the maximum number of shares of KSB Common
Stock at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims, liens,
charges, encumbrance and security interests of any kind or nature whatsoever and
not subject to any preemptive rights.
(c) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and compliance by Issuer with any of the
provisions hereof will not (i) conflict with or result in a breach of any
provision of its charter or bylaws or a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, debenture, mortgage, indenture, license, material
agreement or other material instrument or obligation to which Issuer is a party,
or by which it or any of its properties or assets may be bound, or (ii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Issuer or any of its properties or assets.
13. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of KSB Common Stock or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
14. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations under this Agreement or the
Option created hereunder within 90 days following such Subsequent
14
Triggering Event (or such later period as provided in Section 11); provided,
however, that until the date 15 days following the date on which the Federal
Reserve Board approves an application by Grantee under the BHCA to acquire the
shares of KSB Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Grantee's behalf or (iv) any other
manner approved by the Federal Reserve Board.
15. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of KSB Common Stock issuable hereunder on the NASDAQ National Market
system upon official notice of issuance and applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of KSB Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto, that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached, and
that the parties will be entitled to equitable relief hereunder, including,
without limitation, an injunction or injunctions to prevent and enjoin breaches
of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy at law or in equity to which
they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to any such remedy are hereby waived.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or other governmental authority of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions and covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or governmental authority determines
that Holder is not permitted to acquire, or Issuer or Substitute Option Issuer,
as the case may be, is not permitted to repurchase pursuant to Section 7 or
Section 9, as the case may be, the full number of shares of KSB Common Stock
provided in Section 1(a) (as adjusted pursuant to Section 1(b) or 5), it is the
express intention of Issuer (which shall be binding on the Substitute Option
Issuer) to allow Holder to acquire or to require Issuer or Substitute Option
Issuer, as the case may be, to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
15
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the respective meanings assigned thereto in the Merger Agreement.
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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.
CAMDEN NATIONAL CORPORATION
/s/ Xxxxxx X. Xxxxxx
By:___________________________
Name: Xxxxxx X. Xxxxxx
Title:
KSB BANCORP, INC.
/s/ Xxxx X. Xxxxxxxxxxx
By:__________________________
Name: Xxxx X. Xxxxxxxxxxx
Title:
