EXHIBIT 10.2
EXECUTION COPY
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN
RESTRICTIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 12, 2000 (this
"Agreement"), by and between J.P. MORGAN & CO. INCORPORATED, a Delaware
corporation ("Issuer"), and THE CHASE MANHATTAN CORPORATION, a Delaware
corporation ("Grantee").
WHEREAS, Grantee and Issuer are concurrently herewith entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which Issuer will be merged with and into Grantee, with
Grantee being the surviving corporation (the "Merger"); and
WHEREAS, as a condition and inducement to Grantee's execution
of the Merger Agreement and the Chase Stock Option Agreement (as defined in the
Merger Agreement), Grantee has required that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined in Section 2).
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 up to 31,596,653 shares (as adjusted as set forth herein,
the "Option Shares") of common stock, par value $2.50 per share, of Issuer (the
"Issuer Common Stock") at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") of $208.13; provided, that 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 on the date hereof.
Issuer shall make proper provision so that each Option Share issued upon
exercise of the Option shall be accompanied by the applicable number of rights
or other benefits as may be provided in any Issuer rights agreement or similar
agreement that may be adopted after the date hereof.
3. Exercise of Option.
(a) Grantee 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 defined in Section 3(b)); 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 so long as, in the case of this clause (B), a
Purchase Event has not occurred and could not occur in the future, (C) the date
that Grantee's Total Profit equals $1.25 billion, and (D) the date which is 90
days after the occurrence of a Purchase Event; and provided, further, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable law; and provided, further, that Grantee shall have sent the
written notice of such exercise (as provided in Section 3(d)) within 90 days
following such Purchase Event. Notwithstanding the termination of the Option,
Grantee 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 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) prior to the termination of the Merger
Agreement, without Grantee's prior written consent, Issuer or any of its
Subsidiaries shall have entered into one or more agreements with any person
(other than Grantee or any Subsidiary of Grantee) to effect, or effected, in a
single transaction or a series of related transactions, any Acquisition
Proposal;
(ii) prior to the termination of the Merger
Agreement, 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, shares of Issuer Common Stock or other voting
securities representing 20% or more of the voting power of Issuer or any of its
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC);
or
(iii) the occurrence of an event the result
of which is that the aggregate fee or fees required to be paid by Issuer
pursuant to Section 7.2(c) of the Merger Agreement equals $1.25 billion.
As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) Issuer shall notify Grantee promptly in writing
of the occurrence of any Purchase Event, it being understood that the giving of
such notice by Issuer shall not be a condition to the right of Grantee to
exercise the Option.
(d) In the event Grantee wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is 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 60 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 law, rule, regulation or order or the
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need to obtain any necessary approvals or consents of applicable Governmental
Entities, 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 or application to, approval of or
authorization by any Governmental Entity is required in connection with such
purchase, Issuer shall use its reasonable best efforts to cooperate with Grantee
in the prompt filing of the required notice or application for approval or
authorization, and the Closing shall occur immediately following the date on
which such approvals have been obtained and any required notification or waiting
periods have expired.
(e) Notwithstanding Section 3(d), in no event shall
any Closing Date be more than six months after the related Notice Date, and if
the Closing Date shall not have occurred within six months after the related
Notice Date due to the failure to obtain any such required approval or consent,
the exercise of the Option effected on the Notice Date shall be deemed to have
expired. In the event (i) Grantee receives official notice that an approval or
consent of any Governmental Entity required for the purchase of Option Shares
will not be issued or granted or (ii) a Closing Date shall not have occurred
within six months after the related Notice Date due to the failure to obtain any
such required approval or consent, Grantee shall be entitled to exercise the
Option (whether or not the Option would have otherwise terminated) in connection
with the resale of Issuer Common Stock or other securities pursuant to a
registration statement as provided in Section 10. The provisions of this Section
3 and Section 4 shall apply with appropriate adjustments to any such exercise.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Grantee shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank account
designated by Issuer (provided that the failure or refusal of Issuer to
designate a bank account shall not preclude Grantee from exercising the Option),
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 Issuer at the address of Issuer specified in Section 14(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 Grantee (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be fully paid, validly issued and non-assessable, free
and clear of all liens, claims, charges, security interests or other
encumbrances ("Liens") other than those created by the express terms of this
Agreement, and subject to no preemptive or other similar 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) Grantee shall deliver to
Issuer a letter agreeing that Grantee shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable federal and state
securities laws 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:
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THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Grantee
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 Grantee to Issuer of the
written notice of exercise of the Option provided for under Section 3(d), the
tender of the applicable Purchase Price in immediately available funds and the
tender of this Agreement to Issuer, Grantee shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
regardless of whether the stock transfer books of Issuer are then closed or
certificates representing such shares of Issuer Common Stock are then actually
delivered to Grantee. Issuer shall pay all expenses, and any and all federal,
foreign, 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 Grantee or its assignee, transferee, or
designee.
(e) Issuer agrees (i) that it shall at all times
maintain, free from Liens and preemptive or similar 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 then outstanding, (ii) that it will
not, by charter amendment or through reorganization, recapitalization,
consolidation, merger, dissolution, liquidation, spin-off, sale of assets or
similar transaction, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, agreements, stipulations or
conditions to be observed or performed hereunder by Issuer and (iii) that it
will promptly 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 or authorization of or notice
or application to any Governmental Entity is necessary before the Option may be
exercised, cooperating fully with Grantee in preparing such applications or
notices and providing such information to such Governmental Entities as may be
required) in order to permit Grantee to exercise the Option and Issuer to duly
and effectively issue shares of Issuer Common Stock pursuant hereto on a timely
basis.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to 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, subject to receiving any necessary approvals or consents from Governmental
Entities, 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
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consummate the transactions so contemplated; this Agreement has been duly and
validly executed and delivered by Issuer and (assuming due authorization,
execution and delivery by Grantee) constitutes a valid and binding obligation of
Issuer, enforceable against Issuer in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency, fraudulent
conveyance, moratorium or other similar laws, now or hereinafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) 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 Option, that number of shares of Issuer
Common Stock equal to the maximum number of shares of Issuer Common Stock and
other shares and securities which are at any time and from time to time
purchasable upon exercise of the Option, and all such shares and other
securities, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and non-assessable, and will be delivered free and
clear of all Liens (other than those created by the express terms of this
Agreement) and not subject to any preemptive or other similar rights.
(c) No Violations. The execution, delivery and
performance of 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 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, regulation or order
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.
(d) Board Action. The Board of Directors of Issuer
has approved this Agreement and the consummation of the transactions
contemplated hereby as required under Section 203 of the DGCL and, to its
knowledge, any other applicable state takeover laws so that any such state
takeover laws do not and will not apply to this Agreement or any of the
transactions contemplated hereby (including the purchase of shares of Issuer
Common Stock pursuant to the Option).
(e) No Restrictions. No Delaware law applicable
generally to corporations or, to Issuer's knowledge, other takeover statute
applicable generally to corporations or similar corporate law and no provision
of the certificate of incorporation or by-laws of Issuer or any agreement to
which Issuer is a party (i) would or would purport to impose restrictions which
might adversely affect or delay the consummation of the transactions
contemplated by this Agreement, or (ii) as a result of the consummation of the
transactions contemplated by this Agreement, (A) would or would purport to
restrict or impair the ability of Grantee to vote or otherwise exercise the
rights of a shareholder with respect to securities of
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Issuer or any of its Subsidiaries that may be acquired or controlled by Grantee
or (B) would or would purport to entitle any person to acquire securities of
Issuer.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer as follows:
(a) Corporate Authority. Grantee has full corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement; the execution and delivery of this
Agreement and, subject to obtaining any necessary approvals or consents from
Governmental Entities, 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 and
(assuming due authorization, execution and delivery by Issuer) constitutes a
valid and binding obligation of Grantee, enforceable against Grantee in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance, moratorium or other
similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) Purchase Not for Distribution. Any Option Shares
or other securities acquired by Grantee upon exercise of the Option will not be
acquired with a view to the public distribution thereof in violation of any
federal or state securities laws and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Act and any applicable state securities laws.
7. Adjustment upon Changes in Issuer Capitalization, Etc.
(a) In the event of any change from time to time in
Issuer Common Stock or any other shares or securities subject to the Option by
reason of a stock dividend, subdivision, spinoff, stock split, split-up, merger,
consolidation, recapitalization, combination, exchange of shares, or dividend or
distribution, other than regular cash dividends, on or in respect of the Issuer
Common Stock, 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
Grantee shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Grantee 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 or otherwise become
outstanding after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a) or upon exercise of the
Option), the number of shares of Issuer Common Stock subject to the Option shall
be increased 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 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, agreements,
representations or warranties in the Merger Agreement.
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(b) Without limiting the parties' relative rights,
remedies, liabilities and obligations under the Merger Agreement or this
Agreement, in the event that, prior to the termination of the Option, Issuer
shall enter into an agreement (other than the Merger 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 another
class or series of 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 having general voting power
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets (or those of its Subsidiaries taken as a whole)
in one transaction or a series of related transactions, 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 Grantee, 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 the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms
as the Option; provided, that the exercise price therefor and number of shares
subject thereto shall be as set forth in this Section 7 and the repurchase
rights relating thereto shall be as set forth in Section 9; provided, further,
that if a Purchase Event shall have occurred prior to or in connection with the
issuance of such Substitute Option, the Substitute Option shall be exercisable
immediately upon issuance without the occurrence of a further Purchase Event;
and provided, further, 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 Grantee. Substitute Option Issuer
shall also enter into an agreement with Grantee 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 Market/Offer Price (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 the 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 Substitute Common Stock for which the Substitute Option
is exercisable.
(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), or at
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Grantee's election, any person that controls such surviving corporation, (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 of the assets
of its Subsidiaries taken as a whole).
(ii) "Market/Offer Price" shall mean the
highest of (v) the highest price per share of Issuer Common Stock at which a
Tender Offer or an Exchange Offer therefor has been made, (w) the highest price
per share of Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (x) 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), (y) the highest closing price for shares of Issuer Common Stock
within the 12-month period immediately preceding the date on which the merger,
consolidation, asset sale or other transaction in question is consummated, and
(z) in the event of a sale of all or substantially all of Issuer's assets (or
those of its Subsidiaries taken as a whole) an amount equal to (I) 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 independent
investment banking firm selected by Grantee, divided by (II) the number of
shares of Issuer Common Stock outstanding at such time. In calculating the
Market/Offer Price, in the event that a Tender Offer or an Exchange Offer is
made for Issuer Common Stock or an agreement is entered into 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 independent investment banking firm selected by
Grantee.
(iii) "Average Price" shall mean the average
closing sales price per share of a share of Substitute Common Stock quoted on
the NYSE (or if Substitute Common Stock is not quoted on the NYSE, the average
closing sales price per share as quoted on the Nasdaq National Market System or,
if the shares of Substitute Common Stock are not quoted thereon, the highest bid
price per share as quoted on the principal trading market on which such shares
are traded as reported by a recognized source) for the 12-month period
immediately preceding the date of consummation of the consolidation, merger or
sale in question; provided, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of common
stock issued by Issuer, by the person merging into Issuer or by any company
which controls such person, as Grantee may elect.
(iv) "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.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the shares of Substitute Common Stock but for the
limitation in the first sentence of this Section 7(f), Substitute Option Issuer
shall make a cash payment to Grantee 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
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difference in value shall be determined by a nationally-recognized independent
investment banking firm selected by Grantee.
(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 shares of 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 Grantee.
(a) At the request of Grantee at any time commencing
upon the first occurrence of a Repurchase Event (as defined in Section 8(c)) and
prior to the termination of the Option pursuant to Section 3(a), Issuer (or any
successor) shall repurchase from Grantee (x) the Option and (y) all shares of
Issuer Common Stock purchased by Grantee pursuant hereto with respect to which
Grantee then has beneficial ownership. The date on which Grantee 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
Grantee for any shares of Issuer Common Stock acquired pursuant to the Option
with respect to which Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the
Market/Offer Price for each share of Issuer Common Stock over (y) the Purchase
Price (as adjusted 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
Market/Offer Price over the Purchase Price 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, as adjusted pursuant to Section 7) by Grantee for
each share of Issuer Common Stock with respect to which the Option has been
exercised and with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this
Section 8, Issuer shall, within 5 business days after the Request Date, pay the
Section 8 Repurchase Consideration to Grantee in immediately available funds,
and contemporaneously with such payment, Grantee shall surrender to Issuer the
Option and the certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Grantee then has beneficial
ownership, and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the
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same are then free and clear of all Liens. Notwithstanding the foregoing, to the
extent that prior notification to or approval of any Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Grantee 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
Governmental Entity disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Grantee. If any Governmental Entity prohibits the repurchase (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required approvals
from Governmental Entities to accomplish such repurchase) in part but not in
whole, then Grantee shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Grantee 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;
whereupon, in the case of clause (ii), Issuer shall promptly (x) deliver to
Grantee that portion of the Section 8 Repurchase Consideration that Issuer is
not prohibited from delivering and (y) deliver to Grantee, as appropriate,
either (A) a new Stock Option Agreement evidencing the right of Grantee to
purchase that number of shares of Issuer Common Stock obtained by multiplying
the number of shares of Issuer Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Section 8 Repurchase
Consideration less the portion thereof theretofore delivered to Grantee and the
denominator of which is the Section 8 Repurchase Consideration, or (B) a
certificate for the Option Shares it is then so prohibited from repurchasing;
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 this Section 8 until the expiration of such period of 30 business days.
Grantee shall notify Issuer of its determination under the preceding sentence
within 10 business days of receipt of notice of disapproval of the repurchase.
(c) As used herein, a "Repurchase Event" shall occur
if (A) (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 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 Stock or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) has been consummated and (B)
a Purchase Event shall have occurred prior to the termination of the Option.
10
9. Repurchase of Substitute Option.
(a) At the request of Grantee at any time, Substitute
Option Issuer (or any successor) shall repurchase from Grantee (x) the
Substitute Option and (y) all shares of Substitute Common Stock purchased by
Grantee pursuant hereto with respect to which Grantee then has beneficial
ownership. The date on which Grantee exercises its rights under this Section 9
is referred to as the "Section 9 Request Date". Such repurchase shall be at an
aggregate price (the "Section 9 Repurchase Consideration") equal to the sum of:
(i) the aggregate purchase price paid by
Grantee for any shares of Substitute Common Stock acquired pursuant to the
Option or Substitute Option with respect to which Grantee then has beneficial
ownership;
(ii) the excess, if any, of (x) the
Substitute Applicable Price (as hereinafter defined) for each share of
Substitute Common Stock over (y) the Substitute Option Price (as adjusted
pursuant to Section 7) multiplied by the number of shares of Substitute Common
Stock with respect to which the Substitute Option has not been exercised; and
(iii) the excess, if any, of the Substitute
Applicable Price over the purchase price paid (or in the case of shares with
respect to which the Option or Substitute Option has been exercised but the
Closing Date has not occurred, payable) by Grantee for each share of Substitute
Common Stock with respect to which the Option or Substitute Option has been
exercised and with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this
Section 9, Substitute Option Issuer shall, within 5 business days after the
Section 9 Request Date, pay the Section 9 Repurchase Consideration to Grantee in
immediately available funds, and contemporaneously with such payment, Grantee
shall surrender to Substitute Option Issuer the Substitute Option and the
certificates evidencing the shares of Substitute Common Stock purchased
thereunder with respect to which Grantee then has beneficial ownership, and
Grantee 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
Governmental Entity is required in connection with the payment of all or any
portion of the Section 9 Repurchase Consideration, Grantee shall have the
ongoing option to revoke its request for repurchase pursuant to Section 9, in
whole or in part, or to require that Substitute Option Issuer deliver from time
to time that portion of the Section 9 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 9 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 Governmental Entity
disapproves of any part of Substitute Option Issuer's proposed repurchase
pursuant to this Section 9, Substitute Option Issuer shall promptly give notice
of such fact to Grantee. If any Governmental Entity prohibits the repurchase
(and Substitute Option Issuer
11
hereby undertakes to use its reasonable best efforts to obtain all required
approvals from Governmental Entities to accomplish such repurchase) in part but
not in whole, then Grantee shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such Governmental Entity, determine
whether the repurchase should apply to the Substitute Option and/or Option
Shares and to what extent to each, and Grantee shall thereupon have the right to
exercise the Substitute Option as to the number of Option Shares for which the
Substitute Option was exercisable at the Section 9 Request Date less the sum of
the number of shares covered by the Substitute Option in respect of which
payment has been made pursuant to Section 9(a)(ii) and the number of shares
covered by the portion of the Substitute Option (if any) that has been
repurchased; whereupon, in the case of clause (ii), Substitute Option Issuer
shall promptly (x) deliver to Grantee that portion of the Section 9 Repurchase
Consideration that Substitute Option Issuer is not prohibited from delivering
and (y) deliver to Grantee, as appropriate, either (A) a new Stock Option
Agreement evidencing the right of Grantee to purchase that number of shares of
Substitute Common Stock obtained by multiplying the number of shares of
Substitute Common Stock for which the surrendered Stock Option Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Section 9 Repurchase Consideration less the
portion thereof theretofore delivered to Grantee and the denominator of which is
the Section 9 Repurchase Consideration or (B) a certificate for the Option
Shares it is then so prohibited from repurchasing; provided, that if the
Substitute 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 Substitute Option or exercise its rights under
Section 9 until the expiration of such period of 30 business days. Grantee shall
notify Substitute Option Issuer of its determination under the preceding
sentence within ten (10) business days of receipt of notice of disapproval of
the repurchase.
(c) For purposes of this Agreement, the "Substitute
Applicable Price" means the highest closing sales price per share of Substitute
Common Stock during the six months preceding the Section 9 Request Date.
(d) Following the conversion of the Option into a
Substitute Option, all references to "Issuer", "Issuer Common Stock" and
"Section 8" contained herein shall also be deemed to be references to
"Substitute Option Issuer", "Substitute Common Stock" and "Section 9",
respectively.
10. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject
to the conditions of Section 10(c) below, if requested by any Grantee following
a Purchase Event that occurs prior to the termination of the Option, including
Grantee and any permitted transferee ("Selling Stockholder"), as expeditiously
as possible prepare, file and keep current 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 Stockholder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by the Selling Stockholder in such request, including,
without limitation, a "shelf" registration statement under Rule 415 under the
12
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 Grantee of its intention to do so and, upon the written request of any
Selling Stockholder 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 Stockholder),
Issuer will cause all such shares for which a Selling Stockholder 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 in the reasonable good faith
opinion of the underwriters for such offering, the inclusion of all such shares
by the Selling Stockholder would materially interfere with the marketing of such
offering (in which case Issuer shall register as many shares as possible without
materially interfering with the marketing of the offering), 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. 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 10(b) shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among the Selling Stockholders desiring to register
their shares pro rata in the proportion that the number of shares requested to
be registered by each such Selling Stockholder bears to the total number of
shares requested to be registered by all such Selling Stockholders then desiring
to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall
use its reasonable best efforts to cause each registration statement referred to
in Section 10(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 as may be reasonably necessary to effect such sale or other
disposition; provided, however, that Issuer may delay any registration of Option
Shares required pursuant to Section 10(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 or would require disclosure of nonpublic information that would
materially and adversely affect Issuer, and Issuer shall not be required to
register Option Shares under the Securities Act pursuant to Section 10(a) above:
(i) prior to the earlier of (a) termination
of the Merger Agreement pursuant to Article VII thereof and (b) a Purchase
Event;
(ii) on more than three occasions;
(iii) within 90 days after the effective
date of a registration referred to in Section 10(b) above pursuant to which the
Selling Stockholder or Selling Stockholders concerned were afforded the
opportunity to register all such shares under the Securities Act and shares were
registered to the extent requested; and
13
(iv) unless a request therefor is made to
register at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock and other securities 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 three months from the effective date of such registration statement. Issuer
shall use its reasonable best 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. If requested by any such Grantee
in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements. Upon receiving any request under this Section 10 from
any Grantee, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 10, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
Notwithstanding anything else in this Section 10, in lieu of
complying with its obligations pursuant to a request made by any Grantee under
this Section 10, Issuer may, at its election, repurchase the Option Shares
requested to be registered by such Grantee at a purchase price per share equal
to the average closing price of such Option Shares during the ten business days
preceding the date on which Issuer gives notice to Grantee of its intention to
repurchase such Option Shares (which notice shall be given no later than fifteen
days after Grantee has given notice to Issuer of its election to exercise its
registration rights under Section 10(a) or 10(b)).
(d) Expenses. Except where applicable state law
prohibits such payments and except for underwriting discounts or commissions and
brokers' fees, 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 fees and 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 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 10(a) or 10(b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 10(a) or
10(b) above.
(e) Indemnification. In connection with any
registration under Section 10(a) or 10(b) above, Issuer hereby indemnifies the
Selling Stockholders, and each underwriter thereof, including each person, if
any, who controls such Selling Stockholders or underwriter within the meaning of
Section 15 of the Securities Act, and including each director, officer,
stockholder, partner, member, employee, representative and agent of any thereof,
against all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue,
14
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 person, if any, who controls Issuer within the meaning of
Section 15 of the Securities Act, and each director, officer, stockholder,
partner, member, employee, representative and agent of Issuer shall be
indemnified by such Selling Stockholders, 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 Selling
Stockholders or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
Section 10(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 10(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 10(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 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 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 10(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
15
Stockholders and the underwriters from the offering of the securities and also
the relative fault of Issuer, the Selling Stockholders 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 Stockholder 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 Selling
Stockholder to indemnify shall be several and not joint with other Selling
Stockholders.
In connection with any registration pursuant to Section 10(a)
or 10(b) above, Issuer and each Selling Stockholder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
Section 10(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
Stockholders 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
Stockholders 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 the NASD or 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 Stockholders
harmless, without limitation as to time, against any and all liabilities with
respect to all such taxes.
11. Quotation or 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, the Nasdaq National
Market System or any other securities exchange or securities quotation system,
Issuer, upon the request of Grantee, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of Issuer
Common Stock or any other securities to be acquired upon exercise of the Option
on such securities exchange or securities quotation system and will use its
reasonable best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
12. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, 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 Stock Option Agreement and related Options for
16
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 to protect Issuer from
any loss which it may suffer if this Agreement is replaced, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date.
13. Limitation of Grantee Profit. (a) Notwithstanding any
other provision herein or in the Merger Agreement, in no event shall Grantee's
Total Profit (as defined below) exceed $1.25 billion (the "Maximum Profit"),
and, if it otherwise would exceed such amount, Grantee, at its sole discretion,
shall either (i) reduce the number of shares subject to the Option (and any
Substitute Option), (ii) deliver to Issuer, or the Substitute Issuer, as the
case may be, for cancellation shares of Issuer Common Stock or Substitute Common
Stock, as the case may be (or other securities into which such Option Shares are
converted or exchanged), (iii) pay cash to Issuer, or the Substitute Issuer, as
the case may be, (iv) reduce the amount of the Section 8 Repurchase
Consideration or Section 9 Repurchase Consideration or (v) any combination of
the foregoing, so that Grantee's actually realized Total Profit shall not exceed
the Maximum Profit after taking into account the foregoing actions.
Notwithstanding any other provision of this Agreement, 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) of more than the Maximum Profit and,
if exercise of the Option would otherwise result in the Notional Total Profit
exceeding such amount, Grantee, in its discretion, may take any of the actions
specified in this Section 13(a) so that the Notional Total Profit shall not
exceed the Maximum Profit; provided, that nothing in this sentence shall
restrict any subsequent exercise of the Option which at such time complies with
this sentence.
(b) For purposes of this Agreement, "Total Profit"
shall mean: (i) the aggregate amount (before taxes) of (A) the excess of (x) the
net cash amounts or fair market value of any property received by Grantee
pursuant to a sale of Option Shares (or securities into which such shares are
converted or exchanged), other than to a wholly-owned subsidiary of Grantee, or
a repurchase of Option Shares by Issuer pursuant to Section 8 hereof, after
payment of applicable brokerage or sales commissions and discounts, over (y)
Grantee's aggregate purchase price for such Option Shares (or other securities),
plus (B) all amounts received by Grantee upon the repurchase of the Option by
Issuer pursuant to Section 8 hereof, plus (C) all equivalent net amounts with
respect to the Substitute Option and any amounts paid pursuant to Section 7(f)
hereof, plus (D) all amounts theretofore received by Grantee pursuant to Section
7.2(c) of the Merger Agreement, minus (ii) all amounts of cash previously paid
to Issuer pursuant to Section 13(a) plus the value of the Option Shares (or
other securities) previously delivered to Issuer for cancellation pursuant to
Section 13(a), which value shall be deemed to be the aggregate Purchase Price
paid for such Option Shares (or other securities). For purposes of this
Agreement, "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 Stock as of the close of business on the preceding trading day (less
customary brokerage commissions). For purposes of this Section 13, transactions
by a wholly-owned
17
subsidiary transferee of Grantee in respect of the Option or Option Shares
transferred to it shall be treated as if made by Grantee.
(c) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall affect the ability of Grantee to receive, nor
relieve Issuer's obligation to pay, any payment provided for in Section 7.2(c)
of the Merger Agreement; provided, that if and to the extent the Total Profit
received by Grantee would exceed the Maximum Profit following receipt of such
payment, Grantee shall be obligated to comply with the terms of Section 13(a)
within 15 days of the date on which Grantee has realized cash and/or property
representing Total Profit in excess of Maximum Profit.
14. Miscellaneous.
(a) Expenses. Except as otherwise provided herein or
in the Merger Agreement, 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, without limitation, 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. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights. No single or partial exercise of any right, remedy,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. Any
waiver shall be effective only in the specific instance and for the specific
purpose for which given and shall not constitute a waiver to any subsequent or
other exercise of any right, remedy, power or privilege hereunder.
(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 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. This Agreement is not intended to confer upon any person
other than the parties hereto (or their respective successors and assigns)
(other than any transferees of the Option Shares or any permitted transferee of
this Agreement pursuant to Section 14(h)) any rights, remedies, obligations or
liabilities hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or Governmental Entity 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 Governmental Entity determines that the Option does not
permit Grantee 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 Grantee to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
18
(d) Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware (without
giving effect to choice of law principles thereof).
(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, 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 Grantee may assign
this Agreement to a wholly-owned Subsidiary of Grantee (in which event the term
"Grantee" as used herein shall be deemed to refer to such Subsidiary). 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
permitted assigns. For the avoidance of doubt, nothing in this paragraph (h)
shall prohibit Issuer from engaging in a transaction contemplated by Section
7(b) in accordance with the provisions of Section 7(b), provided that the terms
of this Agreement and the Merger Agreement shall remain applicable with respect
to any such transaction.
(i) Further Assurances. In the event of any exercise
of the Option by Grantee, Issuer and Grantee 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) Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court or
New York State court sitting in the Borough of Manhattan, City of New York, this
being in addition to any other remedy to which they are entitled at law or in
equity.
19
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.
J.P. MORGAN & CO. INCORPORATED
By: /s/ Douglas A. Warner III
--------------------------
Name: Douglas A. Warner III
Title: Chairman and CEO
THE CHASE MANHATTAN CORPORATION
By: /s/ William B. Harrison
--------------------------
Name: William B. Harrison
Title: Chairman and CEO