THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated March 14, 1999, between
BankBoston Corporation, a Massachusetts corporation ("Issuer"), and Fleet
Financial Group, Inc., a Rhode Island corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 59,005,179
fully paid and non-assessable shares of Issuer's Common Stock, par value $1.00
per share ("Common Stock"), at a price of $46.938 per share (the "Option
Price"); provided, however, that in no event shall the number of shares of
Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's
issued and outstanding shares of Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or
(ii) redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of this Agreement, the number of shares of
Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9% of
the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the
Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined),
PROVIDED that the Holder shall have sent the written notice of such exercise (as
provided in subsection (e) of this Section 2) within 90 days following such
Subsequent Triggering Event. Each of the following shall be an "Exercise
Termination Event": (i) the Effective Time (as defined in the Merger Agreement)
of the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); or (iii) the passage of 12 months after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a termination by Grantee pursuant to
Section 8.1(d) of the Merger Agreement (unless the breach by Issuer giving rise
to such right of termination is non-volitional). The "Last Triggering Event"
shall mean the last Initial Triggering Event to expire. The term "Holder" shall
mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or a subsidiary
of Grantee. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any
similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission
(the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of
the assets or deposits of Issuer or any Significant Subsidiary
of Issuer, (y) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of
Issuer, or (z) any substantially similar transaction;
provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only
the Issuer and one or more of its Subsidiaries or involving
only any two or more of such Subsidiaries, be deemed to be an
Acquisition Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger
Agreement;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose, to engage in an
Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary, or the Board of Directors of Issuer
shall have publicly withdrawn or
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modified, or publicly announced its intention to withdraw or
modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions
contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary
capacity in the ordinary course of its business shall have
acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes
of this Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a BONA FIDE proposal to Issuer or
its stockholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to
Issuer or its stockholders to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach
(x) would entitle Grantee to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall have
filed an application or notice with the Federal Reserve Board,
or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for
approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date
hereof:
(i) The acquisition by any person of beneficial
ownership of 20% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this Section
2, except that the percentage referred to in clause (y) shall
be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering
Event of which it has notice (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
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(e) In the event the Holder is entitled to and 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 shares it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business days
nor later than 60 business days from the Notice Date for the closing of
such purchase (the "Closing Date"); PROVIDED that if prior notification
to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder 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 periods have expired or been terminated
or such approvals have been obtained and any requisite waiting period
or periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price
for the shares of Common Stock purchased pursuant to the exercise of
the Option in immediately available funds by wire transfer to a bank
account designated by Issuer, PROVIDED that failure or refusal of
Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in part
only, a new Option evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer this Agreement and a letter agreeing
that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this
Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of
Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the 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, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by
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delivery of substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under this
Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance 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 (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. 18a and
regulations promulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), or the Change in Bank
Control Act of 1978, as amended, or any state banking law, prior approval of
or notice to the Federal Reserve Board or to any state regulatory authority
is necessary before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state regulatory authority
as they may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto;
and (iv) promptly to take all action provided herein to protect the rights of
the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
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
5
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.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement 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 or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
PROVIDED, HOWEVER, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and PROVIDED FURTHER, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any
6
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 for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the Market/Offer Price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or such
later period as provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, 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 the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose to
Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or
notices stating that the Holder or the Owner, as the case may be,
elects to require Issuer to repurchase this Option and/or the Option
Shares in accordance with the provisions of this Section 7. Within the
latter to occur of (x) five business days after the surrender of the
Option and/or certificates representing Option Shares and the receipt
of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase
Price and/or to the Owner the Option Share Repurchase
7
Price therefor or the portion thereof, if any, that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from repurchasing the Option and/or the Option Shares
in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to
the Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is
prohibited under applicable law or regulation from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price
and the Option Share Repurchase Price, respectively, in full (and
Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices, in
each case as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of
the Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Stock Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the
numerator of which is the Option Repurchase Price less the portion
thereof theretofore delivered to the Holder and the denominator of
which is the Option Repurchase Price, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase,
lease or other acquisition of all or a substantial portion of the
assets of Issuer, other than any such transaction which would not
constitute an Acquisition Transaction pursuant to the provisos to
Section 2(b)(i) hereof or (ii) upon the acquisition by any person of
beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase
Event unless a Subsequent Triggering Event shall have occurred prior to
an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this
Section 7 shall not terminate upon the occurrence of an Exercise
Termination Event unless no Subsequent Triggering Event shall have
occurred prior to the occurrence of an Exercise Termination Event.
8. In the event that prior to an Exercise Termination Event, 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
8
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets 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 provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the 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
the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the
Option, PROVIDED, that if the terms of the Substitute Option cannot,
for legal reasons, be the same as the Option, such terms shall be as
similar as possible and in no event less advantageous to the Holder.
The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement, 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 is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option
is then exercisable, divided by the Average Price. The exercise price
of the Substitute Option per share of Substitute
9
Common Stock shall then be equal to the Option Price multiplied by a
fraction, the numerator of which shall be the number of shares of
Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% 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 outstanding prior to exercise but for this clause (e), the issuer
of the Substitute Option (the "Substitute Option Issuer") shall make a
cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in writing
all the obligations of Issuer hereunder.
9. At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated plus. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require
the Substitute Option Issuer to repurchase the Substitute Option and
the Substitute Shares pursuant to this Section 9 by surrendering for
such purpose to the Substitute Option Issuer, at its principal office,
the agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute
Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may
be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender
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of the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or
to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant to
this Section 9 shall immediately so notify the Substitute Option Holder
and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if the Substitute Option Issuer is at any time
after delivery of a notice of repurchase pursuant to subsection (b) of
this Section 9 prohibited under applicable law or regulation from
delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute
Option Holder or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either in
whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate,
that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute Option
evidencing the right of the Substitute Option Holder to purchase that
number of shares of the Substitute Common Stock obtained by multiplying
the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, or
(B) to the Substitute Share Owner, a certificate for the Substitute
Common Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2,
6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
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(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the 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) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, non-assessable,
and will be delivered free and clear of all claims, liens, encumbrance
and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights
Agreement) so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the
grant of any rights to any person under the Rights Agreement or enable
or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
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. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will
not be, acquired 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 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 90 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); PROVIDED, HOWEVER, that until the date 15 days following the date
on which the Federal Reserve
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Board approves an application by Grantee under the BHCA to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (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 Grantee's behalf, or (iv) any other manner approved by
the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
15. (a) Grantee may, at any time during which Issuer would be required
to repurchase the Option or any Option Shares pursuant to Section 7, surrender
the Option (together with any Option Shares issued to and then owned by Grantee)
to Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); PROVIDED, HOWEVER, that Grantee may not exercise its rights pursuant to
this Section 15 if Issuer has repurchased the Option (or any portion thereof) or
any Option Shares pursuant to Section 7. The "Surrender Price" shall be equal to
(i) $560 million, plus (ii) if applicable, the aggregate purchase price
previously paid pursuant hereto by Grantee with respect to any Option Shares,
minus (iii) if applicable, the sum of (A) the excess of (1) the net cash
amounts, if any, received by Grantee pursuant to the arms' length sale of Option
Shares (or any other securities into which such Option Shares were converted or
exchanged) to any party not affiliated with Grantee, over (2) the aggregate
purchase price previously paid pursuant hereto by Grantee with respect to such
Option Shares and (B) the net cash amounts, if any, received by Grantee pursuant
to an arms' length sale of a portion of the Option to any party not affiliated
with Grantee.
(b) Grantee may exercise its right to surrender the Option and
any Option Shares pursuant to this Section 15 by surrendering to
Issuer, at its principal office, this Agreement together with
certificates for Option Shares, if any, accompanied by a written notice
stating (i) that Grantee elects to surrender the Option and Option
Shares, if any, in accordance with the provisions of this Section 15
and (ii) the Surrender Price. The Surrender Price shall be payable in
immediately available funds on or before the second business day
following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from paying the Surrender Price to Grantee in full,
Issuer shall immediately so notify Grantee and thereafter deliver or
cause to be delivered, from time to time, to Grantee, the portion of
the Surrender Price that Issuer is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer
so prohibited, PROVIDED, HOWEVER, that if Issuer at any time after
delivery of a notice of surrender pursuant to paragraph (b) of this
Section 15 is prohibited
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under applicable law or regulation from paying to Grantee the Surrender
Price in full (i) Issuer shall (A) use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to make such
payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same, and (C) keep Grantee advised of both
the status of any such request for regulatory and legal approvals, as
well as any discussions with any relevant regulatory or other third
party reasonably related to the same and (ii) Grantee may revoke such
notice of surrender by delivery of a notice of revocation to Issuer
and, upon delivery of such notice of revocation, the Exercise
Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for
the provisions of this Section 15(c) (during which period Grantee may
exercise any of its rights hereunder, including any and all rights
pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those
set forth in paragraphs (a),(b) and (c) of this Section 15 with respect
to the Substitute Option and the Substitute Option Issuer during any
period in which the Substitute Option Issuer would be required to
repurchase the Substitute Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal or state law apply).
20. This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
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21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
BANKBOSTON CORPORATION
By: /s/ Peter J. Manning
--------------------------------------
Name: Peter J. Manning
Title: Executive Vice President
FLEET FINANCIAL GROUP, INC.
By: /s/ H. Jay Sarles
--------------------------------------
Name: H. Jay Sarles
Title: Vice Chairman and Chief
Administrative Officer
[BankBoston Option Agreement]