Exhibit 99.1
[conformed copy]
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 3, 1997 (the
"Agreement"), by and between Norwich Financial Corp., a Delaware
corporation ("Issuer"), and People's Bank, a Connecticut stock
savings bank ("Grantee").
RECITALS
(A) Merger Agreement. Grantee, Issuer and Target Bank, a
Connecticut stock savings bank and a wholly-owned subsidiary of
Issuer ("Target Bank") have, as of the date hereof, entered into
an Agreement and Plan of Merger (the "Merger Agreement"),
providing for, among other things, the merger of Issuer and
Target Bank with and into Grantee, with Grantee being the
survivor of each merger.
(B) Condition to Merger Agreement. As a condition and
inducement to Grantee's pursuit of the transactions contemplated
by the Merger Agreement, and in consideration therefor, Issuer
has agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein and in the Merger Agreement, and intending to be
legally bound hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in
the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase a number of shares of common
stock, par value $.01 per share ("Issuer Common"), of Issuer up
to 1,081,036 of such shares (as adjusted as set forth herein, the
"Option Shares", which shall include the Option Shares before and
after any transfer of such Option Shares, but in no event shall
the number of Option Shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer
Common) at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") equal to $25.00.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the
agreements or covenants contained in this Agreement or the
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Merger Agreement, and (ii) no preliminary or permanent injunction
or other order against the delivery of shares covered by the
Option issued by any court of competent jurisdiction in the
United States shall be in effect, the Holder may exercise the
Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no
further force or effect upon the earliest to occur of (A) the
Effective Time, (B) termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event (as hereinafter
defined) other than a termination thereof by Grantee pursuant to
Section 9.01(e)(ii) of the Merger Agreement (but only if the
breach of Issuer giving rise to such termination was willful) (a
termination of the Merger Agreement by Grantee pursuant to
Section 9.01(e)(ii) thereof as a result of a willful breach by
Issuer being referred to herein as a "Default Termination"), (C)
fifteen (15) months after a Default Termination, (D) fifteen (15)
months after termination of the Merger Agreement (other than by
reason of a Default Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event, (E) the date on
which the shareholders of the Grantee shall have voted and failed
to adopt and approve the Merger Agreement at the meeting of the
Grantee's shareholders called for such purpose (unless (1) Issuer
shall then be in material breach of its covenants or agreements
contained in the Merger Agreement or (2) on or prior to such
date, the shareholders of Issuer shall have also voted and failed
to approve the Merger Agreement), (F) termination of the Merger
Agreement by Issuer pursuant to Section 9.01(d)(iii) thereof, or
(G) termination of the Merger Agreement by Grantee pursuant to
Section 9.01(f) thereof; provided, that any purchase of shares
upon exercise of the Option shall be subject to compliance with
applicable law. The term "Holder" shall mean the holder or
holders of the Option from time to time, and which initially is
Grantee. The rights set forth in Section 8 hereof shall terminate
when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent,
Issuer shall have recommended, publicly proposed or
publicly announced an intention to authorize, recommend or
propose, or entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction
involving Issuer or any of its significant subsidiaries
(other than transactions solely between Issuer's
subsidiaries that are not violative of the Merger
Agreement), (B) the disposition, by sale, lease, exchange
or otherwise, of assets or deposits of Issuer or any of its
significant subsidiaries representing in either case 25% or
more of the consolidated assets or deposits of Issuer and
its subsidiaries, or (C) the issuance, sale or other
disposition by Issuer of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 25% or more of the voting power of
Issuer or any of its significant subsidiaries, other than,
in each case of (A), (B), or (C), any merger, consolidation
or similar transaction involving Issuer or any of its
significant subsidiaries in which the voting securities of
Issuer outstanding immediately prior thereto
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continue to represent (by either remaining outstanding or
being converted into the voting securities of the surviving
entity of any such transaction) at least 65% 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 any such transaction is not
violative of the Merger Agreement)(each of (A), (B), or
(C), an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule l3d-3
promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined in Section 13(d)(3) of the Exchange Act),
other than a group of which Grantee or any subsidiary of
Grantee is a member, shall have been formed which
beneficially owns, or has the right to acquire beneficial
ownership of, 25% or more of the voting power of Issuer or
any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term
is defined in Rule 14d-2 under the Exchange Act), or shall
have filed a registration statement under the Securities
Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common such that, upon
consummation of such offer, such person would own or
control 15% or more of the then outstanding shares of
Issuer Common (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer," respectively); or
(ii) the shareholders shall not have approved the
Merger Agreement by the requisite vote at the meeting of
the Issuer's shareholders called for that purpose (the
"Issuer Meeting"), the Issuer Meeting shall not have been
held or shall have been canceled prior to termination of
the Merger Agreement, or Issuer's Board of Directors shall
have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with
respect to the Merger Agreement, in each case after it
shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (A)
made, or disclosed an intention to make, a bona fide
proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer,
or (C) filed an application (or given a notice), whether in
draft or final form, under the Home Owners' Loan Act, as
amended, the Bank Holding Company Act of 1956, as amended,
the Bank Merger Act, as amended, or the Change in Bank
Control Act of 1978, as amended, for approval to engage in
an Acquisition Transaction; or
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(iii) any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal
to Issuer or its shareholders by public announcement, or
written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction;
or
(iv) after a proposal is made by a third party to
Issuer or its shareholders to engage in an Acquisition
Transaction, or such third party states its intention to
the Issuer to make such a proposal if the Merger Agreement
terminates, Issuer shall have breached any representation,
warranty, covenant or agreement contained in the Merger
Agreement and such breach would entitle Grantee to
terminate the Merger Agreement under Article IX thereof
(without regard to the cure period provided for therein
unless such cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of the
Merger Agreement); or
(v) any person (other than Grantee or any
subsidiary of Grantee), other than in connection with a
transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with any
federal or state governmental authority (a "Regulatory
Authority") for approval to engage in an Acquisition
Transaction; or
(vi) Issuer or any of its directors, officers or
agents takes any material direct or indirect action with
the intention of inviting, encouraging or soliciting a
Tender Offer, an Exchange Offer or an Acquisition Proposal.
As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase
Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to
exercise the Option.
(e) In the event Holder wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such
exercise and (ii) a place and date not earlier than three (3)
business days nor later than fifteen (15) business days from the
Notice Date for the closing (the "Closing") of such purchase (the
"Closing Date"); provided that the first notice of exercise shall
be sent to Issuer within one hundred eighty (180) days after the
first Purchase Event of which Grantee has been notified. If prior
notification to or approval of any Regulatory Authority is
required in connection with such purchase, Issuer shall cooperate
with Holder in the filing of the required notice or application
for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and
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any mandatory waiting periods). Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased
on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in
Section 13(f).
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as
provided in Section 4(a), (i) Issuer shall deliver to Holder (A)
a certificate or certificates representing the Option Shares to
be purchased at such Closing, which Option Shares shall be free
and clear of all liens and subject to no preemptive rights, and
(B), if the Option is exercised in part only, an executed new
agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common
purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable federal
and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at
each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK
OPTION AGREEMENT DATED SEPTEMBER 3, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the portion of the above legend
relating to the Securities Act shall be removed by delivery of
substitute certificate(s) without such legend if Holder shall
have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably
satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written
notice of exercise of the Option provided for under Section 3(e),
the tender of the applicable purchase price in immediately
available funds and the tender of this Agreement to Issuer,
Holder shall be deemed
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to be the holder of record of the shares of Issuer Common
issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that
certificates representing such shares of Issuer Common shall not
then be actually delivered to Holder. Issuer shall pay all
expenses, and any and all United States federal, state, and local
taxes and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates
under this Section in the name of Holder or its assignee,
transferee, or designee.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Issuer Common so that the Option
may be exercised without additional authorization of Issuer
Common after giving effect to all other options, warrants,
convertible securities and other rights to purchase Issuer
Common, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer,
(iii) promptly to take all action as may from time to time be
required (including (A) complying with all premerger
notification, reporting and waiting period requirements, and (B)
in the event prior approval of or notice to any Regulatory
Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or
notices and providing such information to such Regulatory
Authority as it may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue
shares of the Issuer Common pursuant hereto, and (iv) promptly to
take all action provided herein to protect the rights of Holder
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee (and Holder, if different than
Grantee) as follows:
(a) Corporate Authority. Issuer has full corporate power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby; the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer, and no other
corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so
contemplated; this Agreement has been duly and validly executed
and delivered by Issuer.
(b) Beneficial Ownership. To the best knowledge of
Issuer, as of the date of this Agreement, no person or group has
beneficial ownership of more than 10% of the issued and
outstanding shares of Issuer Common.
(c) Shares Reserved for Issuance; Capital Stock. Issuer
has taken all necessary corporate action to authorize and reserve
and 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
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Option, that number of shares of Issuer Common equal to the
maximum number of shares of Issuer Common at any time and from
time to time purchasable upon exercise of the Option, and all
such shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and
will be delivered free and clear of all claims, liens,
encumbrances, and security interests (other than those created by
this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and
performance of this Agreement does not or will not, and the
consummation by Issuer of any of the transactions contemplated
hereby will not, constitute or result in (A) a breach or
violation of, or a default under, its certificate of
incorporation or by-laws, or the comparable governing instruments
of any of its subsidiaries, or (B) a breach or violation of, or a
default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of
time or both) or under any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its
subsidiaries is subject, that would in any case give any other
person the ability to prevent or enjoin Issuer's performance
under this Agreement in any material respect.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate
power and authority to enter into this Agreement and, subject to
obtaining the approvals referred to in this Agreement, to
consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Grantee; and this
Agreement has been duly executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common by
reason of a stock dividend, stock split, split-up,
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject
to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the
agreements governing such transaction so that Holder shall
receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have
received in respect of Issuer Common if the Option had been
exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Issuer
Common are issued after the date of this Agreement (other than
pursuant to an event described in the first sentence of this
Section 7(a), upon exercise of any option to purchase Issuer
Common outstanding on the date hereof or upon conversion into
Issuer Common of any convertible security of Issuer outstanding
on the date hereof), the number of shares of Issuer Common
subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common
previously issued pursuant hereto, equals 19.9% of the number of
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shares of Issuer Common then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the
Option. No provision of this Section 7 shall be deemed to affect
or change, or constitute authorization for any violation of, any
of the covenants or representations in the Merger Agreement.
(b) In the event that Issuer shall enter into an
agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Issuer Common shall be
changed into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property or the
outstanding shares of Issuer Common immediately prior to such
merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company,
or (iii) to sell or otherwise transfer all or substantially all
of its assets or deposits to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions
so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of either (x) the Acquiring
Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a
merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided, that, if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to Holder. Substitute Option Issuer shall also enter into an
agreement with Holder in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common (as hereinafter defined) as
is equal to the Assigned Value (as hereinafter defined)
multiplied by the number of shares of Issuer Common for which the
Option was theretofore exercisable, but not exercised as of the
date of the transaction giving rise to the Substitute Option,
divided by the Average Price (as hereinafter defined). The
exercise price of the Substitute Option per share of Substitute
Common (the "Substitute Option Price") shall then be equal to the
Purchase Price multiplied by a fraction in which the numerator is
the number of shares of Issuer Common for which the Option was
theretofore exercisable and the denominator is the number of
shares of the Substitute Common for which the Substitute Option
is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
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merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially all
of Issuer's assets (or a substantial part of the assets of
its subsidiaries taken as a whole).
(2) "Substitute Common" shall mean the shares of
capital stock (or similar equity interest) with the
greatest voting power in respect of the election of
directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute
Option Issuer.
(3) "Assigned Value" shall mean the highest of
(w) the price per share of Issuer Common at which a Tender
Offer or an Exchange Offer therefor has been made, (x) the
price per share of Issuer Common to be paid by any third
party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common within the six
(6) month period immediately preceding the consolidation,
merger, or sale in question and (z) in the event of a sale
of all or substantially all of Issuer's assets or deposits
an amount equal to (i) the sum of the price paid in such
sale for such assets (and/or deposits) and the current
market value of the remaining assets of Issuer, as
determined by a nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer
divided by (ii) the number of shares of Issuer Common
outstanding at such time. In the event that a Tender Offer
or an Exchange Offer is made for Issuer Common or an
agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the
securities or other property issuable or deliverable in
exchange for Issuer Common shall be determined by a
nationally recognized investment banking firm selected by
Holder and reasonably acceptable to Issuer.
(4) "Average Price" shall mean the average
closing price of a share of Substitute Common for the one
year immediately preceding the consolidation, merger, or
sale in question, but in no event higher than the closing
price of the shares of Substitute Common on the day
preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into
Issuer or by any company which controls such person, as
Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
but for the limitation in the first sentence of this Section
7(f), 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 the first
sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the
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first sentence of this Section 7(f). This difference in
value shall be determined by a nationally recognized investment
banking firm selected by Holder and reasonably acceptable to
Substitute Option Issuer.
(g) Issuer shall not enter into any transaction
described in Section 7(b) unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder and take all
other actions that may be necessary so that the provisions of
this Section 7 are given full force and effect (including,
without limitation, any action that may be necessary so that the
holders of the other shares of common stock issued by Substitute
Option Issuer are not entitled to exercise any rights by reason
of the issuance or exercise of the Substitute Option and the
shares of Substitute Common are otherwise in no way
distinguishable from or have lesser economic value (other than
any diminution in value resulting from the fact that the
Substitute Common are restricted securities, as defined in Rule
144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) and
receipt of any required regulatory approvals as hereinafter set
forth, at the request of Holder at any time commencing upon the
first occurrence of a Repurchase Event (as defined in Section
8(d)) and ending twelve (12) months immediately thereafter,
Issuer shall repurchase from Holder (i) the Option, and (ii) all
shares of Issuer Common purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date
on which Holder exercises its rights under this Section 8 is
referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal
to the sum of:
(i) the aggregate Purchase Price paid by Holder
for any shares of Issuer Common acquired pursuant to the
Option with respect to which Holder then has beneficial
ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer Common
over (y) the Purchase Price (subject to adjustment pursuant
to Section 7), multiplied by the number of shares of Issuer
Common with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to
Section 7) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each
share of Issuer Common with respect to which the Option has
been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such
shares.
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(b) If Holder exercises its rights under this Section
8, Issuer shall, within ten (10) business days after the Request
Date, pay the Section 8 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such
payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common purchased
thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then
free and clear of all liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any
Regulatory Authority is required in connection with the payment
of all or any portion of the Section 8 Repurchase Consideration,
Holder shall have the ongoing option to revoke its request for
repurchase pursuant to Section 8, in whole or in part, or to
require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and
each party shall cooperate with the other in the filing of any
such notice or application and the obtaining of any such
approval). If any Regulatory Authority disapproves of any part of
Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any
Regulatory Authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the
repurchase request, or (ii) to the extent permitted by such
Regulatory Authority, to determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of
shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination
under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all
of Holder's rights under this Section 8 shall terminate on the
date of termination of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Issuer Common paid for any such share by the person or groups
described in Section 8(d)(i), (ii) the price per share of Issuer
Common received by holders of Issuer Common in connection with
any merger or other business combination transaction described in
Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common on NASDAQ (or if
Issuer Common is not traded on NASDAQ, the highest bid price per
share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the forty (40)
business days preceding the Request Date; provided, however, that
in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm selected by Holder and reasonably
acceptable to Issuer, divided by the number of shares of the
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Issuer Common outstanding at the time of such sale. If the
consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash,
the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or the
right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of
Issuer Common, or (ii) any of the transactions described in
Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. From and after the
occurrence of a Purchase Event, Issuer shall, subject to the
conditions of Section 9(c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling
Shareholder"), as expeditiously as possible prepare and file a
registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other
disposition of any or all shares of Issuer Common or other
securities that have been acquired by or are issuable to the
Selling Shareholder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by
the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415 under
the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any
time after the exercise of the Option proposes to register any
shares of Issuer Common under the Securities Act in connection
with an underwritten public offering of such Issuer Common,
Issuer will promptly give written notice to the Selling
Shareholders of its intention to do so and, upon the written
request of any Selling Shareholder given within fifteen (15) days
after receipt of any such notice (which request shall specify the
number of shares of Issuer Common intended to be included in such
underwritten public offering by the Selling Shareholder), Issuer
will cause all such shares for which a Selling Shareholder
requests participation in such registration to be so registered
and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be
so registered (i) if the underwriters in good faith object for
valid business reasons, or (ii) in the case of a registration
solely to implement an employee benefit plan or a registration
filed on Form S-4 of the Securities Act or any successor Form;
provided, further, however, that such election pursuant to (i)
may only be made two times. If some but not all the shares of
Issuer Common, with respect to which Issuer shall have received
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requests for registration pursuant to this Section 9(b),
shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among the
Selling Shareholders desiring to register their shares pro rata
in the proportion that the number of shares requested to be
registered by each such Selling Shareholder bears to the total
number of shares requested to be registered by all such Selling
Shareholders then desiring to have Issuer Common registered for
sale.
(c) Conditions to Required Registration. Issuer shall
use all reasonable efforts to cause each registration statement
referred to in Section 9(a) above to become effective and to
obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement
effective; provided, however, that Issuer may delay any
registration of Option Shares required pursuant to Section 9(a)
above for a period not exceeding ninety (90) days provided Issuer
shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of other
securities by Issuer, and Issuer shall not be required to
register Option Shares under the Securities Act pursuant to
Section 9(a) above:
(i) on more than one occasion during any calendar year;
(ii) within ninety (90) days after the effective
date of a registration referred to in Section 9(b) above
pursuant to which the Selling Shareholder or Selling
Shareholders concerned were afforded the opportunity to
register such shares under the Securities Act and such
shares were registered as requested; and
(iii) unless a request therefor is made to Issuer
by Selling Shareholders that hold at least 25% or more of
the aggregate number of Option Shares (including shares of
Issuer Common issuable upon exercise of the Option) then
outstanding.
In addition to the foregoing, Issuer shall not be
required to maintain the effectiveness of any registration
statement after the expiration of nine (9) months from the
effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps,
under all applicable state securities laws to the extent
necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of
distribution for such shares; provided, however, that Issuer
shall not be required to consent to general jurisdiction or
qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to
do business.
(d) Expenses. Except where applicable state law
prohibits such payments, Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue
sky fees and expenses (including the fees and expenses of
counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are
being registered, printing expenses and the costs of special
audits or "cold comfort" letters, expenses of underwriters,
excluding discounts and commissions but including liability
insurance if Issuer so
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desires or the underwriters so require, and the reasonable fees
and expenses of any necessary special experts) in connection with
each registration pursuant to Section 9(a) or 9(b) above
(including the related offerings and sales by holders of Option
Shares) and all other qualifications, notifications or exemptions
pursuant to Section 9(a) or 9(b) above.
(e) Indemnification. In connection with any registration
under Section 9(a) or 9(b) above, Issuer hereby indemnifies the
Selling Shareholders, and each underwriter thereof, including
each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against
all expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement of a material fact
contained in any registration statement or prospectus or
notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged
untrue statement that was included by Issuer in any such
registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in
reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling
person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such
underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under
this Section 9(e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party under
this Section 9(e), such indemnified party shall notify the
indemnifying party in writing of the commencement of such action,
but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any
indemnified party under this Section 9(e). In case notice of
commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party
shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own
expense, with counsel chosen by it and reasonably satisfactory to
such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall
be paid by the indemnified party unless (i) the indemnifying
party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more
14
legal defenses may be available to the indemnifying party
that may be contrary to the interest of the indemnified party, in
which case the indemnifying party shall not be entitled to assume
the defense of such action notwithstanding its obligation to bear
fees and expenses of such counsel. No indemnifying party shall be
liable for any settlement entered into without its consent, which
consent may not be unreasonably withheld.
If the indemnification provided for in this Section
9(e) is unavailable to a party otherwise entitled to be
indemnified in respect of any expenses, losses, claims, damages
or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by
such party to be indemnified as a result of such expenses,
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by Issuer,
the Selling Shareholders and the underwriters from the offering
of the securities and also the relative fault of Issuer, the
Selling Shareholders and the underwriters in connection with the
statements or omissions which resulted in such expenses, losses,
claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party
as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or
claim; provided, however, that in no case shall any Selling
Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Any
obligation by any Holder to indemnify shall be several and not
joint with other Holders.
In connection with any registration pursuant to
Section 9(a) or 9(b) above, Issuer and each Selling Shareholder
(other than Grantee) shall enter into an agreement containing the
indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with
all reporting requirements and will do all such other things as
may be necessary to permit the expeditious sale at any time of
any Option Shares by the Selling Shareholders thereof in
accordance with and to the extent permitted by any rule or
regulation promulgated by the SEC from time to time, including,
without limitation, Rule 144A. Issuer shall at its expense
provide the Selling Shareholders with any information necessary
in connection with the completion and filing of any reports or
forms required to be filed by them under the Securities Act or
the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares
and in connection with the exercise of the Option, and will
15
save the Selling Shareholders harmless, without limitation as to
time, against any and all liabilities with respect to all such
taxes.
10. Quotation Listing. If Issuer Common or any other
securities to be acquired in connection with the exercise of the
Option are then authorized for quotation or trading or listing on
any securities exchange, Issuer, upon the request of Holder, will
promptly file an application, if required, to authorize for
quotation or trading or listing the shares of Issuer Common or
other securities to be acquired upon exercise of the Option on
such securities exchange and will use its best efforts to obtain
approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option
of Holder, upon presentation and surrender of this Agreement at
the principal office of Issuer for other Agreements providing for
Options of different denominations entitling the holder thereof
to purchase in the aggregate the same number of shares of Issuer
Common purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
12. Limitation on Total Profit and Notional Total
Profit.
(a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined
below in Section 12(c) hereof) exceed $3 million and, if it
otherwise would exceed such amount, Grantee, at its sole
election, shall either (i) reduce the number of shares of Issuer
Common subject to the Option, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee, (iii)
pay cash to Issuer, or (iv) any combination thereof, so that
Grantee's actually realized Total Profit shall not exceed $3
million after taking into account the foregoing actions.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total
Profit (as defined below in Section 14(d) hereof) of more than $3
million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent
date.
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(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) pursuant to Section 8 hereof, (ii)(x)
the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 8 hereof, less (y) Grantee's
purchase price for such Option Shares, (iii)(x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares shall be
converted or exchanged) to any unaffiliated party, less (y)
Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose
to exercise the Option shall be the Total Profit determined as of
the date of such proposed exercise assuming that the Option were
exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at
the closing market price for the Issuer Common as of the close of
business on the preceding trading day (less customary brokerage
commissions).
(e) Grantee agrees, promptly following any exercise of all or
any portion of the Option, and subject to its rights under
Section 8 hereof, to use commercially reasonable efforts promptly
to maximize the value of Option Shares purchased taking into
account market conditions, the number of Option Shares, the
potential negative impact of substantial sales on the market
price for Issuer Common, and the availability of an effective
registration statement to permit public sale of Option Shares.
13. Miscellaneous.
(a) Expenses. Each of the parties hereto shall bear and
pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is entitled
to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiaries;
Severability. This Agreement, together with the Merger Agreement
and the other documents and instruments referred to herein and
therein, between Grantee and Issuer (i) constitutes the entire
agreement and supersedes all prior agreements and understandings,
17
both written and oral, between the parties with respect to
the subject matter hereof, and (ii) is not intended to confer
upon any person other than the parties hereto (other than the
indemnified parties under Section 9(e) and any transferees of the
Option Shares or any permitted transferee of this Agreement
pursuant to Section 13(h)) any rights or remedies hereunder. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or Regulatory Authority
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated. If for any reason such court or
Regulatory Authority determines that the Option does not permit
Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common as provided in Section 3
(as may be adjusted herein), it is the express intention of
Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the
parties at the addresses set forth in the Merger Agreement (or at
such other address for a party as shall be specified by like
notice).
(g) Counterparts. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed and delivered,
it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a
Purchase Event. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all
18
other documents and instruments and take all other action
that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that
this Agreement may be enforced by either party through specific
performance, injunctive relief and other equitable relief. Both
parties further agree to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have
for any failure to perform this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers
thereunto duty authorized, all as of the day and year first
written above.
NORWICH FINANCIAL CORP.
By /s/ Xxxxxx X. Xxxxxx, Xx.
-------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: President and Chief Executive
Officer
PEOPLE'S BANK
By /s/ Xxxxx X.X. Xxxxxx
---------------------
Name: Xxxxx X.X. Xxxxxx
Title: President and Chief Executive
Officer
20
