Exhibit 10(b)
CORESTATES STOCK OPTION AGREEMENT
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STOCK OPTION AGREEMENT, dated as of October 10, 1995 (the
"Agreement"), by and between CORESTATES FINANCIAL CORP, a Pennsylvania
corporation ("Issuer"), and MERIDIAN BANCORP, INC., a Pennsylvania corporation
("Grantee").
RECITALS
A. The Plan. Grantee and Issuer are concurrently herewith entering
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an Agreement and Plan of Merger, dated as of the date hereof (the "Plan"),
providing for, among other things, the merger of Grantee with and into Issuer,
with Issuer being the surviving corporation.
B. Condition to Plan. As a condition and inducement to Grantee's
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execution of the Plan and Grantee's agreement referred to in the next sentence,
Grantee has required that Issuer agree, and Issuer has agreed, to grant Grantee
the Option (as hereinafter defined). As a condition and inducement to Issuer's
execution of the Plan and this Agreement, Grantee and Issuer have concurrently
herewith entered into an agreement (the "Meridian" Stock Option Agreement") to
grant an option to Issuer on terms and conditions substantially identical to
those of the Option and this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan and the Meridian Stock Option 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
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herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
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herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase a number of shares of common stock, par value $1.00 per share ("Issuer
Common Stock"), of Issuer up to 27,643,009 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 Stock) at a purchase price per Option
Share (as adjusted as set forth herein, the "Purchase Price") equal to $38.50.
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3. Exercise of Option.
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(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, in the case of Grantee, the Plan or the Meridian
Stock Option 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 Plan in
accordance with the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event (as hereinafter defined) or (C) 18 months after
termination of the Plan following the occurrence of a Purchase Event or a
Preliminary Purchase Event; provided, however, that any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law.
Notwithstanding the termination of the Option, Grantee or Holder as the case may
be, shall be entitled to purchase those Option Shares with respect to which it
has exercised the Option in accordance herewith prior to the termination of the
Option. The term "Holder" shall mean the holder or holders of the Option from
time to time, and which initially is Grantee. The termination of the Option
shall not affect any rights hereunder which by their terms extend beyond the
date of such termination.
(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 Plan), (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 15% 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 15% 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, share exchange or similar transaction involving
Issuer or any of its significant subsidiaries in which the voting
securities of Issuer
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outstanding immediately prior thereto continue to represent (by either
remaining outstanding or being converted into the voting securities of the
surviving entity of any such transaction) at least 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 Plan) (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 13d-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 15%
or more of the voting power of Issuer or any of its significant
subsidiaries; or
(iii) 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 Stock such that, upon consummation of
such offer, such person would own or control 15% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" or an "Exchange Offer," respectively); or
(iv) the shareholders shall not have approved the matters
relating to the Plan requiring approval by the requisite vote at the
CoreStates Meeting, the CoreStates Meeting shall not have been held or
shall have been canceled prior to termination of the Plan, 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 matters relating to the Plan requiring approval, 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 ("HOLA"), the BHC Act, the Bank Merger
Act, as amended (the "BMA") or the Change in Bank Control Act of 1978, as
amended (the "CBCA"), for approval to engage in an Acquisition Transaction.
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(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 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
(ii) 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
Plan terminates, Issuer shall have breached any representation, warranty,
covenant or agreement contained in the Plan; or
(iii) 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 Regulatory Authority for approval to engage in an Acquisition
Transaction; or
(iv) any event entitling Grantee to terminate the Plan
pursuant to Section 7.01(E) thereof.
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 business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"); provided that if
the Closing cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided, further, without
limiting the foregoing, that if prior notification to or approval of any
Regulatory Authority is required in connection with such purchase, Issuer shall
cooperate with the Holder in the filing of the required notice of application
for approval and the obtaining of such approval and the Closing shall occur
immediately
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following such regulatory approvals (and any mandatory waiting periods). Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) Notwithstanding Section 3(e), in no event shall any Closing
Date be more than 18 months after the related Notice Date, and if the Closing
Date shall not have occurred within 18 months after the related Notice Date due
to the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired. In the event (i)
Holder receives official notice that an approval of any other Regulatory
Authority required for the purchase of Option Shares will not be issued or
granted or (ii) a Closing Date shall not have occurred within 18 months after
the related Notice Date due to the failure to obtain any such required approval,
Grantee shall be entitled to exercise its right as set forth in Section 8 to
exercise the Option in connection with the resale of Issuer Common Stock or
other securities pursuant to a registration statement as provided in Section 9.
The provisions of this Section 3 and Section 4 shall apply with appropriate
adjustments to any such exercise.
4. Payment and Delivery of Certificates.
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(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 12(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 Stock purchasable hereunder,
and (ii) Holder shall deliver to Issuer a letter agreeing that Holder shall not
offer to sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
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1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF OCTOBER 10, 1995. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN
REQUEST THEREFOR.
It is understood and agreed that (i) the 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 and (ii) the reference
to restrictions pursuant to this Agreement in the above legend shall be removed
by delivery of substitute certificate(s) without such reference if the Option
Shares evidenced by certificate(s) containing such reference have been sold or
transferred in compliance with provisions of this Agreement under circumstances
that do not require the retention of such reference.
(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 to be the holder of record of the
shares of Issuer 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 Issuer Common Stock 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 4(d) 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 Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (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
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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 Stock
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
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represents and warrants to Grantee (and Holder, if different than Grantee) as
follows:
(a) Corporate Authority. Issuer has full corporate power and
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authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this Agreement
and, subject to receiving any necessary Regulatory Approval, 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
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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 Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has
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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 Option, that number of shares of Issuer Common Stock equal to
the maximum number of shares of Issuer Common Stock 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 Liens (other than
those created by this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and performance of
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this Agreement does not and 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 articles 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
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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.
(e) Board Action. The Board of Directors of Issuer having
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approved this Agreement and the consummation of the transactions contemplated
hereby by the vote of greater than 66 2/3% of the members of the Meridian
Board of Directors, the provisions of Chapter 25 of the BCL do not and will not
apply to this Agreement or the purchase of shares of Issuer Common Stock
pursuant to this Agreement.
6. Representations and Warranties of Grantee. Grantee hereby
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represents and warrants to Issuer as follows:
(a) Corporate Authority. Grantee has full corporate power and
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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.
(b) Purchase Not for Distribution. Any Option Shares or other
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securities acquired by Grantee or Holder upon exercise of the Option will not be
taken with a view to the public distribution thereof and will not be transferred
or otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
7. Adjustment upon Changes in Issuer Capitalization, etc.
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(a) In the event of any change in Issuer Common Stock by reason
of a stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares, exercise of the CoreStates Rights 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 Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable. If any additional shares of Issuer
Common Stock are issued after the date of this Agreement (other than pursuant to
an event described in the first sentence of this Section 7(a)), upon exercise of
any option to purchase Issuer Common Stock outstanding on the date hereof, the
number of shares of Issuer Common Stock subject to the Option shall be adjusted
so that, after such issuance, it, together with any shares of Issuer Common
Stock previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer
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Common Stock 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 Plan.
(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 Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets 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 Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of Substitute
Option per share of Substitute Common Stock (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 Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
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(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving person, or (z) 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).
(ii) "Substitute Common Stock" 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.
(iii) "Assigned Value" shall mean the highest of (w) the
price per share of Issuer Common Stock at which a Tender Offer or an
Exchange Offer therefor has been made, (x) the price per share of Issuer
Common Stock to be paid by any third party pursuant to an agreement with
Issuer, (y) the highest closing price for shares of Issuer Common Stock
within the six-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
divided by (II) the number of shares of Issuer Common Stock outstanding at
such time. In the event that a Tender Offer or an Exchange Offer is made
for Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for Issuer
Common Stock shall be determined by a nationally recognized investment
banking firm selected by Holder.
(iv) "Average Price" shall mean the average closing price of
a share of Substitute Common Stock 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 Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls such person, as Holder
may elect.
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(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 Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for 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 first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(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 Stock 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 Stock 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.
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(a) At the request of Holder at any time (i) commencing upon the
first occurrence of a Repurchase Event (as defined in Section 8(d)) and ending
18 months immediately thereafter and (ii) for 30 business days following the
occurrence of either of the events set forth in clauses (i) and (ii) of Section
3(f) (but solely as to shares of Issuer Common Stock with respect to which the
required approval was not received) Issuer (or any successor) shall repurchase
from Holder (x) the Option and (y) all shares of Issuer Common Stock 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 Stock acquired
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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 Stock over (y) the Purchase
Price (subject to adjustment pursuant to Section 7), multiplied by the
number of shares of Issuer Common Stock 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 Stock 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.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within 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 Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens. 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) and the period of time that would otherwise run pursuant to the
preceding sentence for the payment of the portion of the Section 8 Repurchase
Consideration shall run instead from the date on which, as the case may be, (i)
any required notification period has expired or been terminated or (ii) such
approval has been obtained and, in either event, any requisite waiting period
shall have passed. 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, determine whether the repurchase
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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; provided that if
the Option shall have terminated prior to the date of such notice or shall be
scheduled to terminate at any time before the expiration of a period ending on
the thirtieth business day after such date, Grantee shall nonetheless have the
right so to exercise the Option or exercise its rights under Section 9 until the
expiration of such period of 30 business days. 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.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock 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 Stock quoted on the NYSE (or if
Issuer Common Stock is not quoted on the NYSE, 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 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, divided by the number of shares of
the Issuer Common Stock 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, 25%
or more of the then
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outstanding shares of Issuer Common Stock, or (ii) Issuer has entered into an
agreement pursuant to which any of the transactions described in Section
7(b)(i), 7(b)(ii) or 7(b)(iii) could or will be consummated.
9. Registration Rights.
-------------------
(a) Demand Registration Rights. 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 Stock 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
Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock, 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 30 days after receipt of any
such notice (which request shall specify the number of shares of Issuer Common
Stock intended to be included in such underwritten public offering by 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 Stock with respect to
which Issuer shall have received 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 Stock registered for sale.
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(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 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) prior to the earliest of (a) termination of the Plan
pursuant to Article VII thereof, (b) failure to obtain the requisite
shareholder approval pursuant to Section 6.01 of the Plan, and (c) a
Purchase Event or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year;
(iii) within 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
(iv) 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 Stock 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 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
B-15
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 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) unless the failure so to notify the indemnified party results in
substantial prejudice thereto. In case notice of commencement of any such action
shall be given to the indemnifying party as above provided, the
B-16
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
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 satisfactory to
the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnifying
party that may be contrary to the interest of the indemnified party, in which
case the indemnifying party shall be entitled to assume the defense of such
action notwithstanding its obligation to bear fees and expenses of such counsel.
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).
B-17
(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 144. 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 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 Stock 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 the NYSE or 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 Stock or other securities to be acquired upon exercise of the
Option on the NYSE or such other 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 Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
B-18
12. 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 Plan 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, 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 12(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 Stock as provided in Section 2 (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 Commonwealth of Pennsylvania
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)
B-19
to the parties at the addresses set forth in the Plan (or at such other address
for a party as shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may
------------
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by, operation of law or otherwise) without the
prior written consent of the other party, except that 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 the Holder, Issuer and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
--------------------
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
B-20
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
CORESTATES FINANCIAL CORP
By /s/ Xxxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxxx X. Xxxxxx,
Chairman and Chief Executive
Officer
MERIDIAN BANCORP, INC.
By /s/ Xxxxxx X. XxXxxxxxxx
---------------------------------
Xxxxxx X. XxXxxxxxxx,
Chairman, President and Chief
Executive Officer
