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STOCK OPTION AGREEMENT, dated as of June 15, 1998, between
XxXxxxxx & Company Investments, Inc., a Delaware corporation ("Issuer"), and
KeyCorp, an Ohio corporation ("Grantee").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan
of Merger, dated as of June 15, 1998 (as amended, supplemented or replaced from
time to time, the "Merger Agreement") contemplating a business combination
between Issuer and Grantee (the "Merger");
B. As a condition and inducement to the willingness of Grantee
to execute (and pursue the transactions contemplated by) the Merger Agreement,
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below); and
C. The Board of Directors of Issuer has approved the Merger
Agreement and the transactions contemplated thereby (including the Merger and
the grant of the Option (as defined below)) prior to the date hereof;
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. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 3,669,088 fully paid and nonassessable shares of the common
stock, par value $1.00 per share, of Issuer ("Common Stock") at a price per
share equal to $30.8125 (such price, as adjusted if applicable, the "Option
Price"); provided that in no event shall the number of shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as set
forth below.
2. (a) The Holder (as defined below) may exercise the Option,
in whole or part, if, but only if, both an Initial Triggering Event (as defined
below) and a Subsequent Triggering Event (as defined below) occur before the
occurrence of an Exercise Termination Event (as defined below), provided that
the Holder shall have sent the written notice of such exercise (as provided in
Section 2(e)) within 90 days following the first Subsequent Triggering Event to
occur (or such later period as provided in Section 10). Each of the following
shall be an "Exercise Termination Event": (1) the Effective Time of the Merger;
(2) the termination of the Merger Agreement in accordance with the provisions
thereof, if such termination occurs prior to the occurrence of an Initial
Triggering Event and is not a termination by Grantee pursuant to Section 8.01(b)
or (e); or (3) the passage of eighteen months (or such longer period as provided
in Section 10) after termination of the Merger Agreement, if such termination is
concurrent with or follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 8.01(b) or (e). The term "Holder"
shall mean the holder or holders of the Option. Notwithstanding anything to the
contrary contained herein, (1) the Option may not be exercised at any time when
Grantee shall be in material breach of any of its
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representations, warranties, covenants or agreements contained in the Merger
Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section 8.01(b) thereof and (2) this Agreement shall automatically
terminate upon the termination of the Merger Agreement by Issuer pursuant to
Section 8.01(b) thereof as a result of the material breach by Grantee of its
representations, warranties, covenants or agreements contained in the Merger
Agreement.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(1) Issuer or any Issuer Subsidiary (as defined below),
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, and the rules and
regulations thereunder (collectively, the "1934 Act")) other
than Grantee or any Grantee Subsidiary (as defined below) or
the Board of Directors of Issuer (the "Issuer Board") shall
have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than the Merger. For
purposes of this Agreement:
(A) "Acquisition Transaction" shall mean (x)
a merger or consolidation, or any similar
transaction, involving Issuer or an Issuer Subsidiary
(other than mergers, consolidations or similar
transactions (1) involving solely Issuer and/or one
or more wholly owned Subsidiaries of the Issuer or
(2) in which the voting securities of Issuer
outstanding immediately prior thereto continue to
represent (by either remaining outstanding or being
converted into the voting securities of the surviving
entity of any such transaction) at least 50% of the
combined voting power of the voting securities of the
Issuer or the surviving entity outstanding
immediately after the consummation of such merger,
consolidation, or similar transaction, provided that
any such transaction is not entered into in violation
of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of 25% or more
of the assets of Issuer or an Issuer Subsidiary, or
(z) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or
otherwise) of securities representing 15% or more of
the voting power of Issuer or an Issuer Subsidiary;
(B) "Subsidiary" shall have the meaning set
forth in Rule 12b-2 under the 1934 Act;
(C) "Significant Subsidiary" shall have the
meaning set forth in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission
(the "SEC");
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(D) "Issuer Subsidiary" shall mean any
Significant Subsidiary of Issuer; and
(E) "Grantee Subsidiary" shall mean any
Subsidiary of Grantee.
(2) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act);
(3) The shareholders of Issuer shall have voted and
failed to approve the Merger Agreement or 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 cancelled 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 cancelled, prior to such
termination), it shall have been publicly announced that any
person (other than Grantee or any Grantee Subsidiary) shall
have made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction;
(4) The Issuer Board shall have withdrawn or modified
(or publicly announced its intention to withdraw or modify) in
any manner adverse to Grantee its recommendation that the
shareholders of Issuer approve the transactions contemplated
by the Merger Agreement, or Issuer or an Issuer Subsidiary
shall have authorized, recommended or proposed (or publicly
announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary;
(5) Any person other than Grantee or any Grantee
Subsidiary shall have made a proposal to Issuer or its
shareholders to engage in an Acquisition Transaction and such
proposal shall have been publicly announced;
(6) Any person other than Grantee or any Grantee
Subsidiary shall have filed with the SEC a registration
statement or tender offer materials with respect to a
potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy
statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered
in such an exchange or tender offer); or
(7) Issuer shall have willfully breached any covenant
or obligation contained in the Merger Agreement after any
person other than Grantee or a Grantee Subsidiary shall have
made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction, and following such breach Grantee
would be entitled to
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terminate the Merger Agreement (whether immediately or after
the giving of notice or both).
(c) The term "Subsequent Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
(1) The acquisition by any person (other than Grantee
or any Grantee Subsidiary) of beneficial ownership of 25% or
more of the then outstanding Common Stock; or
(2) The occurrence of the Initial Triggering Event
described in Section 2(b)(1), except that the percentage
referred to in clause (z) of Section 2(b)(1)(A) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event") promptly after becoming aware of the occurrence
thereof, 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.
(e) 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 (1) the total number of shares it will purchase pursuant to such
exercise and (2) 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 or antitrust agency is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify Issuer of such filing,
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(f) At the closing referred to in Section 2(e), the Holder
shall (1) 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 and (2) present
and surrender this Agreement to Issuer at its principal executive offices;
provided that the failure or refusal of the Issuer to designate such a bank
account or accept surrender of this Agreement shall not preclude the Holder from
exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f), Issuer shall deliver to
the Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option shall have been
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
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(h) 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, dated as of June 15, 1998,
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: (1) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference, if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act, (2) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference, if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances that do
not require the retention of such reference in the reasonable opinion of counsel
to the Holder and (3) the legend shall be removed in its entirety if the
conditions in the preceding clauses (1) and (2) are both satisfied. In addition,
such certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under Section 2(e) and the tender
of the applicable purchase price in immediately available funds, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the initial
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
(j) In the event Issuer does not have sufficient authorized
but unissued shares of Common Stock to permit exercise of the Option, upon the
occurrence of a Subsequent Triggering Event, for the full number of shares of
Common Stock for which the Holder elects to exercise the Option, the Issuer
shall make a cash payment to the Holder, at the Closing Date specified in, and
in accordance with the other provisions of, this Section 2, in an amount equal
to the product of (1) the difference between the Fair Market Value (as defined
below) and the Option Price and (2) the number of shares of Common Stock subject
to the Option for which the Holder provides notice to Issuer, pursuant to
Section 2(e) of this Agreement, of its election to exercise that the Issuer is
unable to deliver due to insufficient authorized shares. For purposes of this
Section 2(j), Fair Market Value shall mean the average of the last reported sale
prices per share of Common Stock on the NYSE Composite Transactions reporting
system (as published in The Wall Street Journal or, if not published therein,
another authoritative source) for the ten trading days immediately preceding the
Closing Date. Upon the payment of the cash amount calculated pursuant to this
Section 2(j), the number of Option
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Shares subject to the Option shall be reduced by the number of shares of Common
Stock for which each cash payment is made.
3. Issuer agrees: (1) 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, (2) promptly to take all action as may from
time to time be required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the event that,
under the Bank Holding Company Act of 1956, as amended (the "BHCA"), 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 duly and effectively to issue shares of Common Stock pursuant hereto and
(3) promptly to take all action provided in Sections 5 and 8 as and when
required pursuant to such Sections.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the Holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used 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 in substitution for the lost, stolen, destroyed or mutilated
Agreement.
5. In addition to the adjustment provided for in Section 1,
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
follows:
(a) 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 or the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately adjusted and
proper provision shall be made so that, in the event that any
additional shares of Common Stock are to be issued or otherwise become
outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Common Stock that
remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any
of the foregoing changes in the Common Stock), it equals 19.9% of the
number of shares of Common Stock then issued and outstanding; and
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(b) Whenever the number of shares of Common Stock purchasable
upon exercise hereof is adjusted as provided in Section 5(a), the
Option Price shall be adjusted by multiplying the Option Price
immediately prior to the adjustment by a fraction, the numerator of
which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of Common
Stock purchasable after the adjustment.
6. Upon the occurrence of the first Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within twelve 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 registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of 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 such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand no more than 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
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer 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 offer and sale
of the 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 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, that, if such reduction occurs, then
Issuer shall file a registration statement for the balance as promptly as
practicable thereafter as to which no reduction pursuant to this Section 6 shall
be permitted or occur and the Holder shall thereafter be entitled to one
additional registration and the twelve month period referred to in the first
sentence of this section shall be increased to twenty-four months. 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 such
underwriting agreements for 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
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registrations that Issuer is obligated to effect 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. (a) At any time after the occurrence of a Repurchase Event
(as defined below) (1) 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 (A) the amount by which the
market/offer price (as defined below) exceeds the Option Price (B) multiplied by
the number of shares for which this Option may then be exercised and (2) 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 (or any successor thereto) shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated. The term "market/offer price" shall
mean the highest of (1) the highest price per share of Common Stock paid by any
person that acquires beneficial ownership of 50% or more of the then outstanding
Common Stock, (2) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer entered into after the date hereof
and prior to the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, (3) the highest last sale price for shares of Common Stock
within the six-month period immediately preceding the date the Holder gives
notice of the required repurchase of this Option or the Owner gives notice of
the required repurchase of Option Shares, as the case may be, or (4) in the
event of a sale of all or any substantial part of Issuer's or Issuer's
Subsidiary's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net assets
of Issuer or Issuer Subsidiary 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 Issuer, divided by the number of shares of Common
Stock of Issuer outstanding at the time of such sale on a fully-diluted basis.
In determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably acceptable
to Issuer. Notwithstanding anything to the contrary herein, neither the Option
Repurchase Price nor the Option Share Repurchase Price in the aggregate shall be
less than the Surrender Price (as defined in Section 11).
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
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(c) To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided that, if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable 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 whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (1) 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 (2) 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, and/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 Section 7(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 upon the occurrence of any of the following events or
transactions after the date hereof:
(1) The acquisition by any person (other than Grantee
or any Grantee Subsidiary) of beneficial ownership of 50% or
more of the then outstanding Common Stock; or
(2) The consummation of any Acquisition Transaction
described in Section 2(b) (1) hereof, except that the
percentage referred to in clause (z) of the definition of
Acquisition Transaction shall be 50%.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (1) to consolidate with or merge
into any person, other than Grantee or a Grantee Subsidiary, or engage in a plan
of exchange with any person, other than Grantee or a Grantee Subsidiary and
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquirer in such plan of exchange, (2) to permit
any person, other than Grantee or a Grantee Subsidiary, to merge into Issuer or
be acquired by Issuer in a plan of exchange and Issuer shall be the continuing
or surviving or acquiring corporation, but, in connection with such merger or
plan of exchange, the then outstanding shares of Common Stock shall be changed
into or exchanged
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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 shares and share
equivalents of the merged or acquiring company, or (3) to sell or otherwise
transfer all or substantially all of its or any Issuer Subsidiary's assets to
any person, other than Grantee or a Grantee Subsidiary, 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
(A) the Acquiring Corporation (as defined below) or (B) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (A) the
continuing or surviving person of a consolidation or merger
with Issuer (if other than Issuer), (B) the acquiring person
in a plan of exchange in which Issuer is acquired, (C) the
Issuer in a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person and (D) the
transferee of all or substantially all of Issuer's assets (or
the assets of an Issuer Subsidiary).
(2) "Substitute Common Stock" shall mean the common
stock 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(a).
(4) "Average Price" shall mean the average closing or
last sale price (as the case may be) of a share of the
Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger
or sale; provided that, if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person
merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option; provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
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 (after giving
effect for such purpose to the provisions of Section 9), which agreement 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
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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 Section 8(e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (1) the
value of the Substitute Option without giving effect to the limitation in this
Section 8(e) over (2) the value of the Substitute Option after giving effect to
the limitation in this Section 8(e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder and reasonably acceptable to Issuer.
(f) Issuer shall not enter into any transaction described in
Section 8(a) unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder.
9. (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 (x) the amount by which the
Highest Closing Price (as defined below) exceeds the exercise price of the
Substitute Option (y) multiplied by the number of shares of Substitute Common
Stock for which the Substitute Option may then be exercised, and at the request
of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing or
last sale price (as the case may be) 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 its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and/or certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute
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Option Issuer is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and/or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided that, if the Substitute
Option Issuer is at any time after delivery of a notice of repurchase pursuant
to Section 9(b) prohibited under applicable law or regulation, or as a
consequence of administrative policy, 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 reasonable 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 prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (1)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering and (2) 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, and/or (B) to the Substitute
Share Owner, a certificate for the Substitute 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 the Substitute Option Issuer
described in the first sentence of this Section 9(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. The 30-day, 6-month, 12-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7 and 9 shall be extended: (a)
to the extent necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Share Owner, as the case may be, is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods, (b) during the pendency of any temporary restraining
order, injunction or other legal bar to exercise of such rights and (c) to the
extent necessary to avoid liability under Section 16(b) of the 1934 Act by
reason of such exercise.
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11. (a) Grantee in its sole discretion may, at any time during
which Issuer would be required to repurchase the Option or any Option Shares
pursuant to Section 7, surrender the Option (together with any Option Shares
issued to and then owned by the Grantee or any affiliate thereof) to Issuer in
exchange for a cash payment equal to the Surrender Price (as defined herein);
provided, however, that Grantee may not exercise its rights pursuant to this
Section 11 if Issuer has previously repurchased the Option (or any portion
thereof) or any Option Shares pursuant to Section 7. The "Surrender Price" shall
be equal to the sum of (i) 25,000,000 and (ii) if applicable, the aggregate
purchase price previously paid pursuant hereto by Grantee with respect to any
Option Shares, minus the sum of (iii) if applicable, the amount of the net cash
profit, if any, received by Grantee pursuant to the arm's-length sale of Option
Shares (or any other securities into which such Option Shares were converted or
exchanged) to any party not affiliated with Grantee, and (iv) the amount of any
Termination Fee paid pursuant to the Merger Agreement.
(b) Grantee may exercise its right to surrender the Option and
any Option Shares pursuant to this Section 11 by surrendering for such purchase
to Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 11 and (ii) the Surrender Price.
Within two business days after the surrender of the Option and the Option
Shares, if applicable, Issuer shall deliver or cause to be delivered to Grantee
the Surrender Price.
(c) To the extent that the 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, that portion of the Surrender Price
that Issuer is not or no longer prohibited from paying, within two 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
Section 11(b) is prohibited under applicable law or regulation from paying to
Grantee the Surrender Price in full, (i) Issuer shall (A) 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 make such payments, (B) within
two business 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 and 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, the Exercise
Termination Event shall be extended to a date six months from the date on which
the Exercise Termination Event would have occurred if not for the provisions of
this Section 11(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 11).
(d) Grantee shall have rights substantially identical to those
set forth in paragraphs (a), (b) and (c) of this Section 11 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
12. Issuer hereby represents and warrants to Grantee as
follows:
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(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 Merger Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by the Issuer Board prior to the date hereof 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 to permit it to issue, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock issuable
hereunder, and all such shares, upon issuance pursuant thereto, 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.
13. 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 following the date of
such Subsequent Triggering Event; provided that until the date 15 days following
the date on which the Federal Reserve Board has approved an application by
Grantee to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (a) a widely dispersed public
distribution, (b) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (c) an assignment to
a single party (e.g., a broker or investment banker) for the sole purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (d)
any other manner approved by the Federal Reserve Board.
14. 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 to the consummation of the transactions
contemplated by this Agreement, including, without limitation, 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.
15. 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. In connection therewith
both parties waive the posting of any bond or similar requirement.
16. 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
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permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in Section 1
hereof (as adjusted pursuant to Section 5 hereof), it is the express intention
of Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by facsimile transmission, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses or
numbers of the parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without regard to the conflict of
law principles thereof.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
21. 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 in 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
assignees. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors and assignees, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the first date written above.
XXXXXXXX & COMPANY INVESTMENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: President and Chief Executive Officer
KEYCORP
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Executive Vice President
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