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EXHIBIT E
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.
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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, shall have
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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 issued and
outstanding,
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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 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).
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(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 nationally
recognized investment banking firm selected by Grantee (or a Grantee Majority)
and reasonably acceptable to the Acquiring Corporation.
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(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, 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
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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 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
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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 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
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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 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.
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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 falls 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.
(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.
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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 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
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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.
(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
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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 of the Board and Chief
---------------------------------------------
Executive Officer
---------------------------------------------
FORTIS, INC.
By: /s/ J. Xxxxx Xxxxxxx
---------------------------------------------
J. Xxxxx Xxxxxxx
Executive Vice President
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