EXHIBIT 4
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 May 10, 0000 xxxxxxx Xxxxxxxx
Xxx Xxxx Corporation, a Maryland corporation ("Issuer"), and HSBC Holdings plc,
a public limited company organized and existing under the laws of England
("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into a Transaction
Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
which agreement has been executed by the parties hereto concurrently with this
Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. THE OPTION. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "OPTION") to purchase, subject to the
terms hereof, up to 20,929,000 fully paid and nonassessable shares of Issuer's
common stock, par value $5.00 per share (the "Common Stock"), at a price of
$72.00 per share (the "Option Price"); provided, however, that in the event
Issuer issues or agrees to issue any shares of Common Stock (other than as
permitted under the Merger Agreement) at a price less than the Option Price (as
adjusted pursuant to Section 5), the Option Price shall be equal to such lesser
price; provided, further, that in no event shall the number of shares of Common
Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued
and outstanding shares of Common Stock at the time of exercise. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price is subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number (including the number of shares theretofor issued pursuant to this
Option) equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer to breach any provision of the
Merger Agreement.
2. EXERCISE; CLOSING. (a) The Holder (as defined below) may
exercise the Option, in whole or part, and from time to time, if, but only if,
both an Initial Triggering Event (as defined below) and a Subsequent Triggering
Event (as defined below) shall have occurred prior to the occurrence of an
Exercise Termination Event (as defined below), provided that the
Holder shall have sent written notice of such exercise (as provided in
subsection (f) of this Section 2) within 180 days following such Subsequent
Triggering Event (or such later period as provided in Section 10).
(b) Each of the following shall be an "Exercise Termination
Event":
(i) the Effective Time (as defined in the Merger
Agreement) of the Merger;
(ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior
to the occurrence of an Initial Triggering Event, except a termination
by Grantee pursuant to Section 9.1(d) of the Merger Agreement as a
result of a breach of a covenant by Issuer or a willful breach of a
representation by Issuer; or
(iii) the passage of 18 months after termination of
the Merger Agreement (or such later period as provided in Section 10)
if such termination (A) follows or is concurrent with the occurrence of
an Initial Triggering Event or (B) is a termination by Grantee pursuant
to Section 9.1(d) of the Merger Agreement as a result of a breach of a
covenant by Issuer or a willful breach of a representation by Issuer;
provided that if an Initial Triggering Event continues or occurs beyond
such termination and prior to the passage of such 18- month period, the
Exercise Termination Event shall be 12 months from the expiration of
the Last Triggering Event (as defined below) but in no event more than
18 months after such termination.
The "LAST TRIGGERING EVENT" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean Grantee and any other
person that shall become a holder of the Option in accordance with the terms of
this Agreement.
(c) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC"), including Safra Republic Holdings S.A. and its
subsidiaries) (each an "Issuer Subsidiary"), without having received
Grantee's prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction (as defined below) 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 "Exchnage Act"), and
the rules and regulations thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the stockholders of Issuer approve
or accept any Acquisition Transaction (other than the Merger referred
to in the Merger Agreement). For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any Significant Subsidiary
(as defined in
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Rule 1-02 of Regulation S-X) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets
or deposits of Issuer or all or substantially all of the assets or
deposits of any Significant Subsidiary of Issuer, (y) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of beneficial ownership (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder) of securities representing 10% or more of the
voting power of Issuer or more than 25% of any Significant Subsidiary
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
wholly-owned Subsidiaries or involving only any two or more of such
wholly-owned Subsidiaries, be deemed to be an Acquisition Transaction,
if 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, to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary or shall have
authorized or engaged in, or announced its intention to authorize or
engage in, any negotiations regarding an Acquisition Transaction with
any person other than the Grantee or a Grantee Subsidiary (it being
understood that the provision, request or receipt of information
referred to in the parenthetical in Section 9.1(f)(ii) of the Merger
Agreement shall not be deemed to constitute negotiations), or the Board
of Directors of Issuer shall have failed to recommend or shall have
publicly withdrawn or modified, or publicly disclosed that, in the
absence of the Option it would withdraw or modify, or publicly
announced its intention to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the stockholders of Issuer approve the
Merger;
(iii) The shareholders of Issuer shall have voted and
failed to approve the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall
have been canceled prior to termination of the Merger Agreement if,
prior to such meeting (or if such meeting shall not have been held or
shall have been canceled, prior to such termination), any person (other
than the Grantee or a Grantee Subsidiary) shall have made a 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;
(iv) (a) Any person other than Grantee, any Grantee
Subsidiary, Mr. S or his affiliates or any Issuer Subsidiary acting in
a fiduciary or similar 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 then outstanding shares of
Common Stock or (b) any group (the term "group" having the meaning
assigned in Section 13(d)(3) of the Exchange Act), other than a group
of which the Grantee or any Grantee
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Subsidiary is a member, shall have been formed that beneficially owns
10% or more of the shares of Common Stock then outstanding;
(v) Any person other than Grantee or any Grantee
Subsidiary shall have made a proposal to Issuer or its stockholders to
engage in an Acquisition Transaction;
(vi) Issuer shall have breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction 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
(vii) 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 with any
federal or state regulatory or governmental authority an application
for approval or notice of intention to engage in an Acquisition
Transaction.
(d) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person or by a group other
than Grantee or any Grantee Subsidiary of beneficial ownership of 25%
or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (c) of this Section 2, except
that the percentage referred to in clause (y) shall be 25% and that the
percentage referred in the definition of a Significant Subsidiary shall
be changed from 10% to 25%.
(e) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
(f) In the event the Holder is entitled to and wishes to
exercise the Option (or any portion thereof), 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 it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase (the "Closing Date"); provided that if prior notification to or
approval of the Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly file the required
notice 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.
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(g) At the closing referred to in subsection (f) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer; provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(h) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (g) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares of Common Stock purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable law or the provisions of this Agreement.
(i) Certificates for 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 Securities Act of 1933, as amended (the "Securities
Act"), in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the Securities Act; (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 of
Common Stock delivered pursuant hereto have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(j) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (f) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. Issuer shall pay all expenses,
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and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. COVENANTS OF ISSUER. In addition to its other agreements
and covenants herein, Issuer agrees: (i) that it shall at all times maintain,
free from subscriptive or preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to 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. Section 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
amended, or any state or other federal banking law, prior approval of or notice
to the Federal Reserve Board or to any state or other federal 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 or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer to duly and effectively issue shares of Common
Stock pursuant hereto; (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution; and (v) not to enter or agree
to enter into any Acquisition Transaction unless the other party or parties
thereto agree to assume in writing all of Issuer's obligations hereunder;
provided that nothing in this Section 3 or elsewhere in this Agreement shall be
deemed to authorize Issuer to breach any provision of the Merger Agreement.
Notwithstanding any notice of revocation delivered pursuant to the proviso to
Section 7(c), a Holder may require such other party or parties to perform
Issuer's obligations under Section 7(a) unless such other party or parties are
prohibited by law or regulation from such performance.
4. EXCHANGE; REPLACEMENT. This Agreement (and the Option
granted hereby) is exchangeable, without expense, at the option of the Holder,
upon presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms and subject to the
same conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any 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.
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5. ADJUSTMENTS. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option pursuant
to Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof and the Option Price shall be appropriately adjusted in
such manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such transaction
to provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. REGISTRATION. Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within twelve (12) months (or such
later period as provided in Section 10) 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 Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement under the
1933 Act covering this Option and any shares issued and issuable pursuant to
this Option and shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to permit the sale or
other disposition of this Option and any shares of Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in accordance with
any plan of disposition requested by 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 not in excess of 180 days from the day
such registration statement first becomes effective or such shorter time as may
be reasonably necessary, in the judgment of the Grantee or the Holder, to effect
such sales or other dispositions. Grantee shall have the right to demand two
such registrations. The Issuer shall bear the costs of such registrations
(including, but not limited to, Issuer's attorneys' fees, printing costs and
filing fees, except for underwriting discounts or commissions, brokers' fees and
the fees and disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance of such shares of Common Stock issuable
pursuant to this Option as promptly as practical following such reduction and no
reduction in the number of shares of
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Common Stock to be sold by the Holder 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 the number of registrations
that Issuer is obligated to effect pursuant to this Section 6 be increased by
reason of the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. REPURCHASE OF OPTION AND/OR OPTION SHARES. (a) At any time
after the occurrence of a Repurchase Event (as defined below), (i) at the
request of the Holder, delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to (x) the 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 plus (y) Grantee's reasonable out-of-pocket
expenses (to the extent not previously reimbursed) and (ii) at the request of
the owner of Option Shares from time to time (the "Owner"), delivered prior to
an Exercise Termination Event (or such later period as provided in Section 10),
Issuer shall repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase Price") equal to
(x) the Market/Offer Price multiplied by the number of Option Shares so
designated plus (y) Grantee's reasonable out-of-pocket expenses (to the extent
not previously reimbursed). The term "Market/Offer Price" shall mean the highest
of (i) the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price per share of Common Stock within the six-month period immediately
preceding the date on which the Holder gives notice of the required repurchase
of this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm mutually selected by the Holder or Owner, as the case
may be, and reasonably acceptable to the Issuer.
(b) The Holder or 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
8
Option Shares, as applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares, as the case may be, in
accordance with the provisions of this Section 7. Prior to the later of (x) the
date that is 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 day on which a Repurchase Event occurs,
Issuer shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase Price or the
portion thereof that Issuer is not then prohibited under applicable law and
regulation 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 the Holder and/or the Owner and thereafter
shall deliver or cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, that portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, in each case 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
the Holder and/or the Owner, as the case may be, the Option Repurchase Price or
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 as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option and/or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price and/or the Option Share Repurchase Price that Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for 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
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by Issuer described in the first sentence of this subsection
(c), or shall be scheduled to occur at any time before the expiration of a
period ending on the thirtieth day after such date, the Holder shall nonetheless
have the right to exercise the Option until the expiration of such 30-day
period.
(d) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition Transaction
pursuant to the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then outstanding
shares of Common Stock; provided that no such event shall constitute a
Repurchase Event unless a Subsequent Triggering
9
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.
8. SUBSTITUTE OPTION. (a) In the event that prior to an
Exercise Termination Event, Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, or engage in a plan of exchange with any person other than Grantee
or one of its Subsidiaries, and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger or the acquiror in such plan of
exchange, (ii) to permit any person, other than Grantee or one of its
Subsidiaries, to merge into Issuer or be acquired by Issuer in a plan of
exchange and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger or plan of exchange, the then outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger or plan of exchange represent less than 50%
of the outstanding voting shares and voting share equivalents of the merged or
acquiring company, or (iii) to sell or otherwise transfer all or substantially
all of its or any Significant Subsidiary's assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option shall,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving person of a consolidation or merger with Issuer
(if other than Issuer), (ii) the acquiring person in a plan of exchange
in which Issuer is acquired, (iii) Issuer in a merger or plan of
exchange in which Issuer is the continuing, surviving or acquiring
person, and (iv) the transferee of all or substantially all of Issuer's
assets.
(2) "Substitute Common Stock" shall mean the common
stock (or similar equity interest) issued by the issuer of the
Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the six-month
period immediately preceding the consolidation, merger or sale in
question but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger
or sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price
10
shall be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option; provided, that if the terms of the Substitute Option may not, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
to the terms of the Option and in no event less advantageous to the Holder. 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 Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option was exercisable immediately prior to
the event described in the first sentence of Section 8(a), and the denominator
of which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
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 the Holder or the
Owner, as the case may be.
(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. REPURCHASE OF SUBSTITUTE OPTION AND/OR OPTION SHARES. (a)
At the request of the holder of the Substitute Option (the "Substitute Option
Holder"), the Substitute Option Issuer shall repurchase the Substitute Option
from the Substitute Option Holder at a price (the "Substitute Option Repurchase
Price") equal to the sum of (x) the amount by which (i) the Highest Closing
Price (as defined below) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised (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
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
11
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 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 their respective right to require the
Substitute Option Issuer to repurchase the Substitute Option or the Substitute
Shares, as the case may be, pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal executive office, the
agreement for such Substitute Option (or, in the absence of such an agreement, a
copy of this Agreement) and certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as case may be, elects to require the Substitute Option
Issuer to repurchase the Substitute Option and/or the Substitute Shares, as the
case may be, 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 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 shall thereafter deliver or cause to be delivered, from time to time,
to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, in each case, 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 at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 is 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 receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/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
12
Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute Option evidencing
the right of the Substitute Option Holder to purchase that number of shares of
the Substitute Common Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Substitute Option Repurchase Price less the
portion thereof theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, or (B) to the
Substitute Share Owner, a certificate for the Substitute Common Shares it is
then so prohibited from repurchasing. If an Exercise Termination Event shall
have occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Substitute Option Holder shall nevertheless have the right
to exercise the Substitute Option until the expiration of such 30-day period.
10. EXTENSION. The period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights, and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(c) The execution, delivery and performance of this Agreement
does not or will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of or a default under, its charter, or the comparable governing instruments of
any of its subsidiaries, or (ii) a breach or violation of or a default under,
13
any agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which it or any of its subsidiaries is subject that,
individually or in the aggregate, would have a material adverse effect on the
ability of Issuer to perform its obligations hereunder.
(d) To the best of Issuer's knowledge neither Section 3-601 to
3-604 or 3-701 to 3-709 of the Maryland General Corporation Law nor any other
"fair price", "moratorium", "control share acquisition" or other similar
anti-takeover statute or regulation enacted under state or federal laws in the
United States applicable to the Issuer or any of its Subsidiaries is applicable
to this Agreement or any of the transactions contemplated hereby.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTEE.
(a) Grantee hereby represents and warrants to Issuer that
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) Grantee hereby represents and warrants to Issuer that the
Option is not being, and any shares of Common Stock or other securities acquired
by Grantee upon exercise of the Option will not be, acquired with a view to the
public distribution thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Act.
(c) In the event that Grantee or any of its affiliates
exercises the Option, then until one year from the date of exercise, in
connection with any Issuer stockholder meeting at which a vote is taken with
respect to an Acquisition Proposal (as defined in the Merger Agreement), Grantee
and its affiliates shall vote all Option Shares then beneficially owned by them
in the same proportion as all other outstanding shares of Common Stock are voted
with respect thereto.
13. ASSIGNMENT. 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
hereunder within 12 months following such Subsequent Triggering Event (or such
later period as provided in Section 10); 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 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
14
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.
14. NOTIONAL TOTAL PROFIT. (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 $425 million; 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 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 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 pursuant to Section 7, less (y) the
Grantee's purchase price for such Option Shares, (iii) (x) the net price
received by Grantee (or any of its affiliates) 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 (or any of its
affiliates) 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.
15. SURRENDER. (a) Grantee may, at any time following a
Repurchase Event and prior to the occurrence of an Exercise Termination Event
(or such later period as provided in Section 10), relinquish the Option
(together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); PROVIDED, however, that Grantee may not exercise its rights pursuant
to this Section 15 if Issuer has repurchased the Option (or any portion
thereof) or any Option Shares pursuant to Section 7. The "Surrender Price"
shall be equal to $325 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii) minus, if applicable, the
excess of (B) the net price, if any, received by Grantee (or any of its
affiliates) pursuant to the sale of Option Shares (or any other securities
into which such Option Shares were converted or exchanged) to any unaffiliated
party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option
and any Option Shares pursuant to this Section 15 by surrendering to Issuer, at
its principal office, a copy of this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice
15
stating (i) that Grantee elects to relinquish the Option and Option Shares, if
any, in accordance with the provisions of this Section 15 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds on or
before the second business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from paying the Surrender Price to Grantee in full, Issuer
shall immediately so notify Grantee and thereafter deliver or cause to be
delivered, from time to time, to Grantee, the portion of the Surrender Price
that it is no longer prohibited from paying, 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 surrender pursuant to paragraph
(b) of this Section 15 is prohibited under applicable law or regulation from
paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to make
such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
15).
16. BEST EFFORTS. Each of Grantee and Issuer will use its
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary for the consummation of the
transactions contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the New
York Stock Exchange 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 Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
17. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by either
party hereto and that the obligations of the parties hereto shall be enforceable
by either party hereto through injunctive or other equitable relief.
18. SEVERABILITY. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase
16
pursuant to Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is
the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
19. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement or such other address as shall be
provided in writing.
20. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such state.
21. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
22. EXPENSES. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
23. ENTIRE AGREEMENT. Except as otherwise expressly provided
herein or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect 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 assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
24. CAPTIONS; CAPITALIZED TERMS. The section and paragraph
captions herein are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
17
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.
REPUBLIC NEW YORK CORPORATION
By: /s/ XXX X. XXXXXXX
-----------------------------------
Name: Xxx X. Xxxxxxx
Title: Chairman and
Chief Executive Officer
HSBC HOLDINGS PLC
By: /S/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
Title: Authorized Signatory
