MC STOCK OPTION AGREEMENT
This MC STOCK OPTION AGREEMENT ("Option
Agreement") dated as of July 10, 1995, between
MIDLANTIC CORPORATION ("MC"), a New Jersey corporation
registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended ("Bank Holding
Company Act"), and PNC BANK CORP. ("PNC"), a
Pennsylvania corporation registered as a bank holding
company under the Bank Holding Company Act.
WITNESSETH
WHEREAS, the Boards of Directors of MC and PNC,
together with the Board of Directors of PNC Bancorp,
Inc., have approved an Agreement and Plan of
Reorganization ("Reorganization Agreement") and have
adopted a related Agreement and Plan of Merger dated as
of the date hereof (together referred to herein as the
"Merger Agreements"), providing for certain
transactions pursuant to which MC would be merged with
and into PNC Bancorp, Inc., a subsidiary of PNC;
WHEREAS, as a condition to PNC's entry into the
Merger Agreements and to induce such entry, MC has
agreed to grant to PNC the option set forth herein to
purchase authorized but unissued shares of MC Common
Stock;
NOW, THEREFORE, in consideration of the premises
herein contained, the parties agree as follows:
1. Definitions.
Capitalized terms defined in the Merger
Agreements and used herein shall have the same meanings
as in the Merger Agreements.
2. Grant of Option.
Subject to the terms and conditions set forth
herein, MC hereby grants to PNC an option ("Option") to
purchase up to 10,425,000 shares of MC Common Stock, at
a price of $48 per share payable in cash as provided in
Section 4 hereof; provided, however, that in the event
MC issues or agrees to issue any shares of MC Common
Stock in breach of its obligations under the Merger
Agreements at a price less than $48 per share (as
adjusted pursuant to Section 6 hereof), the exercise
price shall be equal to such lesser price.
Notwithstanding anything else in this Agreement to the
contrary, the number of shares of MC Common Stock
subject to the Option shall be reduced to such lesser
number, if any, as may from time-to-time be necessary,
but only for so long as may be necessary, to cause PNC
not to (a) become an interested stockholder for
purposes of the New Jersey Shareholders Protection Act,
(b) become an Acquiring Person as such term is defined
in the MC Rights Agreement or (c) become an "Interested
Shareholder" or an "Affiliate" or "Associate" thereof
for purposes of Article EIGHTH of the Restated
Certificate of Incorporation of MC.
3. Exercise of Option.
(a) PNC may exercise the Option, in whole
or part, at any time or from time to time if a Purchase
Event (as defined below) shall have occurred and be
continuing; provided that to the extent the Option
shall not have been exercised, it shall terminate and
be of no further force and effect upon the earliest to
occur of (i) the Effective Date of the Merger or
(ii) termination of the Merger Agreements in accordance
with the provisions thereof prior to the occurrence of
a Purchase Event (other than a termination resulting
from a willful breach by MC of any covenant contained
therein) or (iii) six months after termination of the
Merger Agreements if such termination follows the
occurrence of a Purchase Event or is due to a willful
breach by MC of any covenant contained therein; and
provided further that any such exercise shall be
subject to compliance with applicable provisions of
law.
(b) As used herein, a "Purchase Event"
shall mean any of the following events or transactions
occurring after the date hereof:
(i) MC or any MC Subsidiary, without having
received PNC's prior written consent,
shall have entered into an agreement with
any person (other than PNC or any PNC
Subsidiary) to (x) merge or consolidate,
or enter into any similar transaction,
with MC or any MC Subsidiary,
(y) purchase, lease or otherwise acquire
all or substantially all of the assets of
MC or any MC Subsidiary or (z) purchase
or otherwise acquire (including by way of
merger, consolidation, share exchange or
any similar transaction) securities
representing 20% or more of the voting
power of MC or any MC Subsidiary;
provided, however, that in no event shall
any merger, consolidation, purchase or
similar transaction involving only MC and
one or more of its Subsidiaries or
involving only any two or more of such
Subsidiaries, be deemed to be a Purchase
Event, provided any such transaction is
not entered into in violation of the
terms of the Merger Agreements;
(ii) any person (other than MC, any MC
Subsidiary, the MC Subsidiaries in a
fiduciary capacity, PNC, affiliates of
PNC or subsidiaries of PNC in a fiduciary
capacity) shall have acquired beneficial
ownership or the right to acquire
beneficial ownership of 20% or more of
the outstanding shares of MC Common Stock
(the term "beneficial ownership" for
purposes of this Option Agreement having
the meaning assigned thereto in
Section 13(d) of the Exchange Act and the
regulations promulgated thereunder); or
(iii) any person (other than MC, any MC
Subsidiary, PNC or any PNC affiliate)
(x) shall have made a bona fide proposal
to MC by public announcement or written
communication that is or becomes the
subject of public disclosure to acquire
MC or any MC Subsidiary by merger,
consolidation, purchase of all or
substantially all of its assets or any
other similar transaction, (y) shall have
commenced a bona fide tender or exchange
offer to purchase shares of MC Common
Stock such that upon consummation of such
offer such person would own or control
20% or more of the outstanding shares of
MC Common Stock, or (z) shall have filed
an application or notice with the Federal
Reserve Board or any other federal or
state regulatory agency for clearance or
approval to engage in any transaction
described in clause (i) or (ii) above,
and thereafter the holders of MC Common
Stock shall have not approved the Merger
Agreements and the transactions
contemplated thereby at the meeting of
such stockholders held for such purpose
or such meeting shall not have been held
or shall have been cancelled prior to
termination of the Merger Agreements.
If more than one of the transactions giving rise to a
Purchase Event under this Section 3(b) is undertaken or
effected, then all such transactions shall give rise
only to one Purchase Event, which Purchase Event shall
be deemed continuing for all purposes hereunder until
all such transactions are abandoned. As used in this
Option Agreement, "person" shall have the meanings
specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
(c) In the event PNC wishes to exercise
the Option, it shall send to MC a written notice (the
date of which being herein referred to as "Notice
Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a
place and date not earlier than three business days nor
later than 60 business days from the Notice Date for
the closing of such purchase ("Closing Date"); provided
that if prior notification to or approval of any
federal or state regulatory agency is required in
connection with such purchase, PNC shall promptly file
the required notice or application for approval and
shall expeditiously process the same and the period of
time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required
notification period has expired or been terminated or
such approval has been obtained and any requisite
waiting period shall have passed.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in
Section 3 hereof, PNC shall pay to MC the aggregate
purchase price for the shares of MC Common Stock
purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a
bank account designated by MC.
(b) At such closing, simultaneously with
the delivery of cash as provided in subsection (a), MC
shall deliver to PNC a certificate or certificates
representing the number of shares of MC Common Stock
purchased by PNC, and PNC shall deliver to MC a letter
agreeing that PNC will not offer to sell or otherwise
dispose of such shares in violation of applicable law
or the provisions of this Option Agreement.
(c) Certificates for MC Common Stock
delivered at a closing hereunder may be endorsed with a
restrictive legend which shall read substantially as
follows:
"The transfer of the shares
represented by this certificate is
subject to certain provisions of an
agreement between the registered
holder hereof and Midlantic
Corporation and to resale restrictions
arising under the Securities Act of
1933, as amended, a copy of which
agreement is on file at the principal
office of Midlantic Corporation. A
copy of such agreement will be
provided to the holder hereof without
charge upon receipt by Midlantic
Corporation of a written request."
It is understood and agreed that the above legend shall
be removed by delivery of substitute certificate(s)
without such legend if PNC shall have delivered to MC a
copy of a letter from the staff of the Commission, or
an opinion of counsel, in form and substance
satisfactory to MC, to the effect that such legend is
not required for purposes of the Securities Act.
5. Representations.
MC hereby represents, warrants and covenants to
PNC as follows:
(a) MC shall at all times maintain
sufficient authorized but unissued shares of MC Common
Stock so that the Option may be exercised without
authorization of additional shares of MC Common Stock.
(b) The shares to be issued upon due
exercise, in whole or in part, of the Option, when paid
for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in MC Common Stock by
reason of stock dividends, split-ups,
recapitalizations, combinations, exchanges of shares or
the like, the type and number of shares subject to the
Option, and the purchase price per share, as the case
may be, shall be adjusted appropriately. In the event
that any additional shares of MC Common Stock are
issued or otherwise become outstanding after the date
of this Option Agreement (other than pursuant to this
Option Agreement), the number of shares of MC Common
Stock subject to the Option shall be adjusted so that,
after such issuance, it equals 19.99% of the number of
shares of MC Common Stock then issued and outstanding
without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this
Section 6 shall be deemed to authorize MC to breach any
provision of the Merger Agreements.
7. Registration Rights.
MC shall, if requested by PNC, as expeditiously
as possible following the occurrence of a Purchase
Event and prior to the second anniversary thereof, file
a registration statement on a form of general use under
the Securities Act if necessary in order to permit the
sale or other disposition of the shares of MC Common
Stock that have been acquired upon exercise of the
Option in accordance with the intended method of sale
or other disposition requested by PNC. PNC shall
provide all information reasonably requested by MC for
inclusion in any registration statement to be filed
hereunder. MC will use its best efforts to cause such
registration statement first to become effective and
then to remain effective for such period not in excess
of 180 days from the day such registration statement
first becomes effective as may be reasonably necessary
to effect such sales or other dispositions. The
obligations of MC hereunder to file a registration
statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding
60 days in the aggregate if the Board of Directors of
MC shall have determined that the filing of such
registration statement or the maintenance of its
effectiveness would require disclosure of nonpublic
information that would materially and adversely affect
MC. The first registration effected under this
Section 7 shall be at MC's expense except for
underwriting commissions and the fees and disbursements
of PNC's counsel attributable to the registration of
such MC Common Stock. A second registration may be
requested hereunder at PNC's expense. In no event
shall MC be required to effect more than two
registrations hereunder. The filing of any
registration statement hereunder may be delayed for
such period of time as may reasonably be required to
facilitate any public distribution by MC of MC Common
Stock. If requested by PNC, in connection with any
such registration, MC will become a party to any
underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and
other agreements customarily included in such
underwriting agreements. Upon receiving any request
from PNC or assignee thereof under this Section 7, MC
agrees to send a copy thereof to PNC and to any
assignee thereof known to MC, in each case by promptly
mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
8. Severability.
If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court
or a federal or state regulatory agency of competent
jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall
remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the
Option will not permit the holder to acquire the full
number of shares of MC Common Stock provided in
Section 2 hereof (as adjusted pursuant to Section 6
hereof), it is the express intention of MC to allow the
holder to acquire or to require MC to repurchase such
lesser number of shares as may be permissible, without
any amendment or modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise
provided herein, each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants
and counsel.
(b) Entire Agreement. Except as otherwise
expressly provided herein, this Option Agreement
contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings
with respect thereto, written or oral. Notwithstanding
anything to the contrary contained in this Agreement or
the Merger Agreements, this Agreement shall be deemed
to amend the Confidentiality Agreement so as to permit
PNC to enter into this Agreement and exercise all of
its rights hereunder, including its right to acquire MC
Common Stock upon exercise of the Option. The terms
and conditions of this Option Agreement shall inure to
the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing
in this Option Agreement, expressed or implied, is
intended to confer upon any party, other than the
parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or
liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties
hereto may assign any of its rights or obligations
under this Option Agreement or the Option created
hereunder to any other person, without the express
written consent of the other party, except that in the
event a Purchase Event shall have occurred and be
continuing PNC may assign in whole or in part its
rights and obligations hereunder; provided, however,
that until the date 30 days following the date on which
the Federal Reserve Board approves an application by
PNC under the Bank Holding Company Act to acquire the
shares of MC Common Stock subject to the Option, PNC
may not assign its rights under the Option except in
(i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares
of MC, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on
PNC's behalf, or (iv) any other manner approved by the
Federal Reserve Board.
(d) Notices. All notices or other
communications which are required or permitted
hereunder shall be in writing and sufficient if
delivered personally or sent by overnight express or by
registered or certified mail, postage prepaid,
addressed as provided in the Reorganization Agreement.
A party may change its address for notice purposes by
written notice to the other party hereto.
(e) Counterparts. This Option Agreement
may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall
constitute but one agreement.
(f) Specific Performance. The parties
agree that damages would be an inadequate remedy for a
breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may
be enforced by either party hereto through injunctive
or other equitable relief.
(g) Governing Law. This Option Agreement
shall be governed by and construed in accordance with
the laws of New Jersey applicable to agreements made
and entirely to be performed within such state and such
federal laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto
has executed this Option Agreement as of the day and
year first written above.
PNC BANK CORP.
By /s/ Thomas H. O'Brien
_______________________
Thomas H. O'Brien
Chairman and Chief
Executive Officer
MIDLANTIC CORPORATION
By /s/ Garry J. Scheuring
_______________________
Garry J. Scheuring
Chairman, President and
Chief Executive Officer