EXHIBIT 2.3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of the seventh day
of December, 1999 between NBT Bancorp Inc., a Delaware corporation ("Grantee"),
and Pioneer American Holding Company Corp., a Pennsylvania corporation
("Issuer").
RECITALS
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Grantee and Issuer have entered into an Agreement and Plan of Merger
dated as of December 7, 1999 (the "Merger Agreement"); and
WHEREAS, as an inducement to the willingness of Grantee to enter into
the Merger Agreement, Grantee has requested that Issuer grant and Issuer has
agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, intending
to be legally bound, the parties hereto agree as follows:
1. Grant of Option.
(a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 569,997 fully paid and nonassessable shares of common stock,
par value $1.00 per share, of Issuer ("Common Stock") at a price per share equal
to $24.00 (such price, as adjusted in the manner set forth herein, the "Option
Price"); provided, however, that in no event shall the number of shares for
which this Option is exercisable exceed 19.9 percent 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 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 and other than pursuant to an event
described in section 5(a) hereof), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, such number,
together with any shares of Common Stock previously issued pursuant hereto,
equals 19.9 percent of the number of 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 issue shares in breach of any provision
of the Merger Agreement.
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2. Exercise of Option.
(a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, at any time after the occurrence of a Triggering Event
(as hereinafter defined), provided that such Triggering Event shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), and provided further that the date of the Holder's
exercise of the Option precedes the occurrence of an Exercise Termination Event.
Each of the following shall be an "Exercise Termination Event": (i) occurrence
of the Effective Time (as such term is defined in the Merger Agreement); (ii)
termination of the Merger Agreement in accordance with the provisions thereof
except (each of the following exceptions being hereinafter collectively referred
to as an "Excepted Termination") a termination by Grantee pursuant to section
11.2(b) of the Merger Agreement as a result of a breach by Issuer of the type
described in such provision, or a termination by Issuer pursuant to section
11.2(c)(iii) of the Merger Agreement; or (iii) the passage of 18 months (or such
longer period as provided in section 10) after an Excepted Termination. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or Pioneer American Bank, National
Association (the "Bank 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
"Exchange Act"), and the rules and regulations thereunder) other than Grantee or
any of its subsidiaries (each a "Grantee Subsidiary");
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10 percent 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 Exchange Act and the rules and
regulations thereunder), or, to the extent any such person has currently
acquired beneficial ownership or the right to acquire beneficial ownership of 10
percent or more of the outstanding shares of Common Stock, such person shall
have acquired beneficial ownership or the right to acquire beneficial ownership
of any additional shares of Common Stock;
(iii) The shareholders of Issuer shall have voted on
and failed to approve the Merger Agreement 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), it shall have been publicly announced that any person
(other than Grantee or any Grantee Subsidiary) shall have made a bona fide
proposal to engage in an Acquisition Transaction;
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(iv) The Board of Directors of the Issuer (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 the Issuer Board or the Bank
Subsidiary or the Board of Directors of the Bank 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 any Grantee Subsidiary, or
that the shareholders of Issuer approve or accept any Acquisition Transaction
other than as contemplated by the Merger Agreement;
(v) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee
Subsidiary shall have filed with the Securities and Exchange Commission ("SEC")
a registration statement or tender offer materials with respect to a potential
exchange or tender offer that would constitute an Acquisition Transaction;
(vii) Issuer shall have breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, and following such breach, Grantee would be entitled to terminate
the Merger Agreement pursuant to section 11.2(b) of the Merger Agreement; or
(viii) any person other than Grantee or any Grantee
Subsidiary shall have filed an application or notice with the Board of Governors
of the Federal Reserve System (the "Board of Governors") or other federal or
state bank regulatory or antitrust authority, which application or notice has
been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Acquisition Transaction" shall mean any
transaction under which a person proposes to or will acquire a majority of the
stock of, merge or consolidate with, or acquire all or substantially all of the
assets of the Issuer or the Bank Subsidiary, or otherwise engage in any
substantially similar transaction with the Issuer or the Bank Subsidiary.
(d) Issuer shall notify Grantee in writing of the occurrence
of any 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 that 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"); provided, that
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if prior notification to or approval of the Board of Governors or any other
federal or state regulatory or antitrust authority 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 approval shall 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, the Holder shall (i) pay the 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 (ii) 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 any Closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) 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
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.
Certificates for shares of Common Stock purchased by the Holder hereunder shall
be delivered by Issuer free and clear of all liens, claims, charges and
encumbrances of any kind, and shall be in such denominations and in such names
designated by the Holder.
(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 December 7, 1999, 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 or any Owner (as defined below), as the case may be,
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 have been sold or transferred in compliance with the provisions of
this
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Agreement and under circumstances that do not require the retention of such
references in the reasonable opinion of counsel to the Holder or any Owner (as
defined below), as the case may be; 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.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
section 2 and the tender of the applicable purchase price 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 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.
3. Covenants of Issuer.
Issuer agrees: (i) that it shall at all times maintain, free from
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 of performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer (it
being agreed that this clause (ii) shall not be deemed to prohibit or restrict
Issuer from engaging in one or more transactions contemplated by section 8(a)
hereof if the provisions of section 8 hereof shall be complied with in
connection with each such transaction); (iii) 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, or any other
applicable federal or state banking law, prior notice to or approval of the
Board of Governors or any other federal or state regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
Board of Governors or such other federal or state 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 (iv)
promptly to take all action provided in sections 5 and 8 as and when required
pursuant to such sections.
4. Exchangeability.
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
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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. Adjustment.
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 exercise of the
Option and the Option Price shall be subject to adjustment from time to time as
provided in this section 5.
(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, reclassifications, combinations, subdivisions, 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 the number of shares of Common Stock that are
issued or issuable is to be increased or decreased (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 or decreased, as the case may be, 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), such number is equal to 19.9 percent
of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this section 5, 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. Registration of Option Shares.
Upon the occurrence of the first Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered from time to time (but not more frequently than once every six months)
after such Triggering Event (whether on its own behalf or on behalf of any
subsequent Holder of this Option (or part thereof) or any Owner (as defined
below) of any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a registration statement under the Securities Act
covering any shares issued and issuable
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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. Issuer shall bear
the cost 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, 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 percent of
the total number of shares to be sold by Holder and Issuer in the aggregate; and
provided further, however, 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. 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 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. Option Repurchase.
(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 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 and (ii) at
the request of the owner of Option
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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
(i) the highest price per share of Common Stock paid by any person that acquires
beneficial ownership of 50 percent or more of the then outstanding Common Stock,
(ii) 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, (iii) the highest closing 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 (iv) in the event of a sale
of all or any substantial part of the Issuer's or Bank Subsidiary's assets or
deposits, the sum of the net price paid in such sale of 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.
(b) The Holder or any Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option or 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.
(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, 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, 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,
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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 each such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option and/or Option Shares, either in whole or to the extent of the
prohibition. If the Holder or Owner revokes its notice of repurchase of the
Option and/or the Option Shares in its entirety, Issuer shall promptly deliver
to the Holder and/or the Owner, as appropriate, all documents delivered to the
Issuer by the Holder and/or Owner under paragraph (b) of this section 7. If the
Holder or Owner revokes its notice of repurchase of the Option and/or Option
Shares to the extent of the prohibition to which the Issuer is subject, 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 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 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 upon the occurrence of any of the following
events or transactions after the date hereof:
(i) the acquisition by any person (other than Grantee
or any Grantee Subsidiary) of beneficial ownership of 50 percent or more of the
then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction by
any person other than Grantee or any Grantee Subsidiary.
8. Conversion or Exchange of Option.
(a) In the event that, prior to an Exercise Termination
Event, Issuer or Bank Subsidiary shall enter into an agreement (i) 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 or the Bank Subsidiary shall not be the
continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or the Bank Subsidiary or be
acquired by Issuer or the Bank Subsidiary in a plan of exchange and Issuer or
the Bank Subsidiary 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
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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 percent of the
outstanding shares and share equivalents of the merged or acquiring company, or
(iii) to sell or otherwise transfer all or substantially all of the Issuer's or
the Bank Subsidiary's assets or deposits 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 (x) the Acquiring Corporation
(as hereinafter defined), or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving person of a consolidation or merger with Issuer or the
Bank Subsidiary (if other than Issuer or the Bank Subsidiary), (ii) the
acquiring person in a plan of exchange in which Issuer or Bank Subsidiary is
acquired, (iii) the Issuer or the Bank Subsidiary in a merger or plan of
exchange in which Issuer or the Bank Subsidiary is the continuing or surviving
or acquiring person, and (iv) the transferee of all or substantially all of
Issuer's or the Bank Subsidiary's assets or deposits.
(ii) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer
Price, as defined in section 7.
(iv) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question; 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
the Bank Subsidiary 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
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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
percent 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 the maximum number of the shares of Substitute Common
Stock permitted by the preceding sentence 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 and reasonably acceptable to the Issuer.
(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. Substitute Option Repurchase.
(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 amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
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 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 Substitute Shares, as
applicable.
(b) The Substitute Option Holder or any Substitute Share
Owner, as the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option or any 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
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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 of 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 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 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, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this section 9 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 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 Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or
Substitute Shares, either in whole or to the extent of the prohibition. If the
Substitute Option Holder or Substitute Share Owner revokes its notice of
repurchase of the Substitute Option and/or Substitute Shares in its entirety,
the Substitute Option Issuer shall promptly deliver to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, all documents
delivered to the Substitute Option Issuer by the Substitute Option Holder or the
Substitute Share Owner under paragraph (b) of this Paragraph 9. If the
Substitute Option Holder or the Substitute Share Owner revokes its notice of
repurchase of the Substitute Option and/or the Substitute Shares to the extent
of the prohibition to which the Substitute Option Issuer is subject, the
Substitute Option Issuer shall promptly (i) deliver to the Substitute Option
Holder or the Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering, and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of 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
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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 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 of Time Periods.
The periods of exercise of those rights of any party other than the
Issuer and the Bank Subsidiary set forth in sections 2, 6, 7, and 9 shall be
extended: (i) 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; (ii) during the pendency of any temporary
restraining order, injunction or other legal bar to exercise of such rights; and
(iii) to the extent necessary to avoid liability under section 16(b) of the
Exchange 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
Issuer Board on 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 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 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.
12. 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 Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole
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or in part its rights and obligations hereunder following the date of such
Triggering Event; provided, however, that until the date 15 days following the
date on which the Board of Governors 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 (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2 percent of the voting shares of Issuer, (iii) 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 (iv) any other manner approved by the Board of Governors.
13. Further Assurances.
Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties (including
but not limited to their respective stockholders) and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
14. Remedies.
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 through
injunctive or other equitable relief. In connection therewith, both parties
waive the posting of any bond or similar requirement.
15. Validity.
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 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 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.
16. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in the manner
and at the respective addresses of the parties set forth in section 12.13 of the
Merger Agreement.
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17. Governing Law.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of Delaware, without regard to the conflict of law
principles thereof.
18. Execution.
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.
19. 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.
20. 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 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 except as
assignees, any rights, remedies obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
21. Meaning of Terms.
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, each of the parties had caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
NBT BANCORP INC.
By: XXXXX X. XXXXXXXX
------------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
By: XXXX X. XXXXXXX
------------------------------------------
Xxxx X. Xxxxxxx
Senior Vice President and Secretary
PIONEER AMERICAN HOLDING
COMPANY CORP.
By: XXXX X. XXXXXXX
------------------------------------------
Xxxx X. Xxxxxxx
President and Chief Executive Officer
By: XXXXXXXXXX STICKER
------------------------------------------
Xxxxxxxxxx Sticker
Secretary
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