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EXHIBIT 10.1
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of June 11, 2001, between Banknorth
Group, Inc., a Maine corporation ("Grantee"), and Andover Bancorp, Inc., a
Delaware corporation ("Issuer").
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"), providing for, among
other things, the merger of Issuer with and into Grantee (the "Merger"); and
WHEREAS, as a condition and an inducement to Grantee to enter into
the Merger Agreement, 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 an aggregate of 1,340,478 fully paid and nonassessable shares (the "Option
Shares") of common stock, par value $0.10 per share, of Issuer (the "Common
Stock") at a price per share equal to $37.65 (the "Option Price"); provided,
however, that in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of Common Stock.
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 and other than pursuant
to an event described in Section 5 hereof), including, without limitation,
pursuant to stock option or other employee plans or as a result of the
exercise of conversion rights, 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 event, such number equals 19.9%
of the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject to or issued pursuant to the Option.
Nothing contained in this Section l(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 Exercise Notice (as hereinafter defined) within
ninety (90) days
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following such Subsequent Triggering Event (or such later period as provided
in Section 10). Each of the following shall be an Exercise Termination Event:
(i) the Effective Time (as defined in the Merger Agreement); (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 8.01(b) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of
termination was non-volitional ( a "Listed Termination")); or (iii) the
passage of 12 months (or such longer period as provided in Section 10) after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a Listed Termination, provided that if an
Initial Triggering Event continues or occurs beyond such termination and prior
to the passage of such 12-month-period, the Exercise Termination Event shall
be 12 months from the expiration of the Last Triggering Event but in no event
more than 18 months after such termination. The term "Last Triggering Event"
shall mean the last Initial Triggering Event to be in effect, and the term
"Holder" shall mean the holder or holders of the Option pursuant to this
Agreement. Notwithstanding anything to the contrary contained herein, the
Option may not be exercised at any time when Grantee shall be in willful
material breach of any of its covenants or agreements contained in the Merger
Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section 8.01(b) thereof as a result of such a willful material
breach.
(b) The term "Initial Triggering Event" shall mean any
of the following events or transactions occurring on or after the date hereof:
(i) Issuer or any Subsidiary (as hereinafter
defined) of Issuer (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
Subsidiary of Grantee (a "Grantee Subsidiary") or the Board
of Directors of Issuer (the "Issuer Board") shall have
recommended that the stockholders of Issuer approve or
accept any Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (w) a
merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary, (x) a purchase,
lease or other acquisition or assumption of all or any
substantial part of the consolidated assets or consolidated
deposits of Issuer or any Issuer Subsidiary, (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
any Issuer Subsidiary or (z) any substantially similar
transaction, provided that in no event shall (i) any merger,
consolidation, purchase or similar transaction involving
only 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, or (ii) the transactions
contemplated by the Merger Agreement or the entering into
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of the Merger Agreement be deemed to be an Acquisition
Transaction; and (b) "Subsidiary" shall have the meaning set
forth in Rule 12b-2 under the 1934 Act;
(ii) Any person, other than Grantee or a
Grantee Subsidiary, 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);
(iii) The stockholders of Issuer shall have
voted and failed to approve the Merger Agreement at a
meeting which has been held for that purpose or any
adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or
shall have been cancelled prior to termination of the Merger
Agreement if, in each case prior to such meeting (or if such
meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been
publicly announced that any person (other than Grantee or a
Grantee Subsidiary) shall have made, or publicly disclosed
an intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) The Issuer Board, without having received
Grantee's prior written consent, shall have withdrawn or
modified, or publicly announced its intention to withdraw or
modify in any manner adverse in any respect 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, or
Issuer or any Issuer Subsidiary shall have authorized,
recommended or proposed, or publicly announced its intention
to authorize, recommend or propose, an agreement to engage
in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or a Grantee
Subsidiary shall have filed with the Securities and Exchange
Commission ("SEC") a registration statement or tender offer
materials with respect to a potential exchange offer or
tender offer that would constitute an Acquisition
Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its stockholders to
approve the issuance of shares to be offered in such an
exchange offer);
(vi) Issuer shall have breached any covenant or
obligation contained in the Merger Agreement after a
proposal is made by any third party, other than Grantee or a
Grantee Subsidiary, to engage in an Acquisition Transaction
and following such breach (x) Grantee would be entitled to
terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both) and (y)
such breach shall not have been cured prior to the Notice
Date (as defined below); or
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(vii) Any person other than Grantee or a Grantee
Subsidiary, without Grantee's prior written consent, shall
have filed an application or notice with the Board of
Governors of the Federal Reserve System (the "Federal
Reserve Board") or other federal or state bank regulatory or
antitrust 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
any of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than
Grantee or any Grantee Subsidiary) of beneficial ownership
of 25% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering
Event described in clause (i) of subsection (b) of this
Section 2, except that the percentage referred to in clause
(y) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event") of which it has notice, 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.
(e) In the event the Holder is entitled to and wishes
to exercise the Option (or any portion thereof), it shall send to Issuer a
written notice (an "Exercise Notice," the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of shares of Common
Stock 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," the date of which
being herein referred to as the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other
regulatory or antitrust agency is required in connection with such purchase,
the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing 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. The term "business day" for purposes of this Agreement means
any day, excluding Saturdays, Sundays and any other day that is a legal
holiday in the Commonwealth of Massachusetts or a day on which banking
institutions in the Commonwealth of Massachusetts are authorized by law or
executive order to close.
(f) At a Closing, the Holder shall (i) pay to Issuer
the aggregate purchase price for the Option Shares purchased pursuant to the
exercise of the Option in immediately available funds by wire transfer to a
bank account designated by Issuer and (ii) present and
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surrender this Agreement to Issuer at its principal executive offices,
provided that the failure or refusal of the Issuer to designate such a bank
account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At a 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 Option Shares 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 Option Shares purchasable hereunder,
and the Holder shall deliver to Issuer a copy of 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 Option Shares delivered at a
Closing hereunder may be endorsed (in the sole discretion of Issuer) 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 of
this Agreement in the above legend shall be removed by 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 in the
opinion of counsel to the Holder, which shall be set forth in a written
opinion in form and substance reasonably satisfactory to Issuer; 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 paragraph (e) of
this Section 2, the tender of the applicable purchase price in immediately
available funds and the tender of a copy of this Agreement to Issuer, the
Holder shall be deemed, subject to the receipt of any necessary regulatory
approvals, 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
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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 without limitation (x) complying with all
applicable premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. Section 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
or other federal banking law, prior approval of or notice to the Federal
Reserve Board or to any state or other federal regulatory authority is
necessary before the Option may be exercised, cooperating fully with the
Holder in connection with the preparation of such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal 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 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, subject to the aforementioned indemnification, if
applicable, 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 Option Shares 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
dividend, stock split, split-up, merger, recapitalization, stock combination,
subdivision, conversion, exchange of shares, distribution on or in respect of
the Common Stock or similar transaction, the type and number of
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Option Shares subject to the Option, and the Option 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 Option Shares or other securities or property
that Grantee would have received in respect of Option Shares if the Option had
been exercised immediately prior to such event, or the record date therefor,
as applicable.
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 six (6) months (or such later period as provided in
Section 10) following 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 Option Shares issued pursuant hereto), promptly prepare, file
and keep current, with respect to the Option and the Option Shares, a
registration statement under the 1933 Act, and qualify such Option and Option
Shares for resale or other disposition under applicable state securities laws,
in each case in accordance with any plan of disposition requested by Grantee.
Issuer will use all reasonable efforts to cause such registration statement
promptly 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. Issuer shall bear the costs of such registrations (including,
but not limited to, Issuer's attorneys' fees, printing costs and filing fees,
except for underwriting discounts or commissions, brokers' fees and the fees
and disbursements of Grantee's counsel related thereto). 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 by Issuer 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 Option and/or Option Shares would
interfere with the successful marketing of the shares of Common Stock offered
by Issuer, the number of shares represented by the Option and/or 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 shares represented by the Option and/or 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 Issuer shall file a registration statement for
the balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and Holder shall
thereafter be entitled to one additional registration and the twelve (12)
month period referred to in the first sentence of this section shall be
increased to twenty four (24) months. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any such
registration statement to be filed hereunder. If requested by any such Holder
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 such underwriting
agreements for 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
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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
the number of registrations that Issuer is obligated to effect be increased by
reason of the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. (a) Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, (i) at the request
of any Holder delivered prior to an Exercise Termination Event (or such later
period as provided in Section 10), 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 the 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
following such occurrence (or such later period as provided in Section 10),
Issuer (or any successor thereto) 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 greater of (A) the Market/Offer Price
and (B) the average exercise price per share paid by the Owner for the 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 person, other than Grantee or a Grantee Subsidiary, pursuant to an
agreement with Issuer of the kind described in Section 2(b)(i), (iii) the
highest closing price for shares of Common Stock within the six-month period
immediately preceding the date of such required repurchase of the Option or
Option Shares, as the case may be, or (iv) in the event of a sale of all or
any substantial part of Issuer's assets or deposits, the sum of the price paid
in such sale for such consolidated assets or consolidated deposits and the
current market value of the remaining assets of Issuer as determined by a
nationally-recognized investment banking firm selected by a majority in
interest of the Holders or the Owners, as the case may be, and reasonably
acceptable to 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 Issuer.
(b) Each Holder and 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, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating that
such Holder or Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or Option Shares in accordance with the provisions
of this Section 7. As promptly as practicable, and in any event within 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, Issuer shall deliver or cause to be delivered to the Holder the
Option Repurchase Price and/or to the Owner the Option Share Repurchase Price
therefor or the portion thereof that Issuer is not then prohibited under
applicable law and regulation from so delivering.
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(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Option and/or
the Option Shares in full, Issuer shall immediately so notify each Holder
and/or each Owner and thereafter deliver or cause to be delivered, from time
to time, to such Holder and/or such 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 two 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, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or
regulatory body or agency, from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in part or in full (and Issuer hereby undertakes to use
all reasonable efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to
accomplish such repurchase), such Holder or Owner may revoke its notice of
repurchase of the Option and/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 and/or the Option Share Repurchase
Price that Issuer is not prohibited from delivering with respect to Options or
Option Shares as to which the Holder or the Owner, as the case may be, has not
revoked its repurchase demand; and (ii) deliver, as appropriate, either (A) to
the Holder, a new 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 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, and/or (B) to such Owner, a certificate for the Option Shares it is
then so prohibited from repurchasing.
8. (a) 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 a Grantee Subsidiary, or engage in a
plan of exchange with any person, other than Grantee or a Grantee Subsidiary,
and Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquiror in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, 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 or plan of exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company,
or (iii) to sell or otherwise transfer all or a substantial part of its or any
Issuer Subsidiary's consolidated assets or consolidated deposits to any
person, other than Grantee or a Grantee Subsidiary, 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
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exchanged for, an option (the "Substitute Option"), at the election of any
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:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving person of a consolidation or merger
with Issuer (if other than Issuer), (ii) the acquiring
person in a plan of exchange in which Issuer is acquired,
(iii) Issuer in a merger or plan of exchange in which Issuer
is the continuing or surviving or acquiring person, and (iv)
the transferee of all or a substantial part of Issuer's
consolidated assets or consolidated deposits (or the assets
or deposits of an Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Option
upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the
Market/Offer Price, as defined in Section 7.
(iv) "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, share exchange 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, share exchange 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, to the extent
legally permissible, be as similar as possible to, and in no event less
advantageous to the Holder than, the terms of the Option. The issuer of the
Substitute Option also shall enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section
9), which agreement 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 was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute 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 was exercisable
immediately prior to the event described in the first
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sentence of Section 8(a) 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 paragraph (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 paragraph (e) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
paragraph (e). This difference in value shall be determined by a
nationally-recognized investment banking firm selected by a majority in
interest of the Holders and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction
described in paragraph (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. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder") delivered to the Substitute Option
Issuer, 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 each
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 greater of (A) the Highest Closing Price and (B) the average exercise
price per share paid by the Substitute Share Owner for the Substitute Shares
so designated, multiplied by the number of Substitute Shares so designated.
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) Each Substitute Option Holder and 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/or 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 two business
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days after the surrender 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 the portion(s) 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, or as a consequence of
administrative policy, or as a result of a written agreement or other binding
obligation with a governmental or regulatory body or agency, 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 Option Repurchase Price
and/or the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within two 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, or as a consequence of administrative
policy, or as a result of a written agreement or other binding obligation with
a governmental or regulatory body or agency, 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 all
reasonable efforts to obtain all required regulatory and legal approvals as
promptly as practicable in order to accomplish such repurchase), the
Substitute Option Holder and/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, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing.
10. The 90-day or six-month periods for exercise of certain
rights under Sections 2, 6, 7 and 9 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights
(for so long as the Holder, Owner, Substitute Option Holder or Substitute
Share Owner, as the case may be, is using its reasonable best efforts to
obtain such regulatory
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approvals), and for the expiration of all statutory waiting periods; (ii)
during the pendency of any order, injunction or judgment that prohibits or
delays exercise of such rights; and (iii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. (a) Issuer hereby represents and warrants to Grantee as
follows:
(i) 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 Issuer Board 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.
(ii) The execution and delivery of this
Agreement, the consummation of the transactions contemplated
hereby and compliance by Issuer with any of the provisions
hereof will not (i) conflict with or result in a breach of
any provision of its Charter or Bylaws or a default (or give
rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or
provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
instrument or obligation to which Issuer is a party, or by
which it or any of its properties or assets may be bound, or
(ii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Issuer or any of its
properties or assets.
(iii) 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 thereto, will be duly authorized,
validly issued, fully paid and nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances
and security interests and not subject to any preemptive
rights.
(b) Grantee hereby represents and warrants to Issuer
that:
(i) Grantee has full corporate power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and
delivery of this Agreement by Grantee and the performance of
its obligations hereunder by Grantee have been duly and
validly authorized by all necessary corporate action on the
part of Grantee and no other corporate proceedings on the
part of Grantee are necessary to authorize this Agreement
for Grantee to perform
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its obligations hereunder. This Agreement has been duly and
validly executed and delivered by Grantee.
(ii) 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 and any
applicable securities offering rules of a federal or state
banking authority.
12. Neither of the parties hereto may assign or otherwise
transfer 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, provided, however, that until the date 15 days
following the date on which the Federal Reserve 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 sole purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use all reasonable 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, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares
issuable hereunder and applying for listing or quotation of such shares on any
exchange or quotation system on which the Common Stock is then listed or
quoted.
14. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter
defined) exceed $19,700,000 (the "Maximum Profit") and, if it otherwise would
exceed such amount, the Grantee, at its sole election, shall either (i) reduce
the number of shares of Common Stock subject to this Option, (ii) deliver to
the Issuer for cancellation Option Shares previously purchased by Grantee,
(iii) pay cash to the Issuer or (iv) any combination thereof, so that
Grantee's actually realized Total Profit shall not exceed the Maximum Profit
after taking into account the foregoing actions. As used herein, the term
"Total Profit" shall mean the aggregate amount (before taxes) of the
following: (i) the amount received by Grantee pursuant to Issuer's repurchase
of the Option (or any portion thereof) pursuant to Section 7 hereof, (ii) (x)
the amount received by Grantee pursuant to Issuer's repurchase of the Option
Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for
such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less (y)
the Grantee's purchase price of such Option Shares, (iv) any amounts
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received by Grantee on the transfer of the Option (or any portion thereof) to
any unaffiliated party and (v) any equivalent amount with respect to the
Substitute Option.
(b) Notwithstanding any other provision of this
Agreement, this 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 hereinafter
defined) of more than the Maximum Profit, provided that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date. As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that this 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 Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
15. 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. In connection
therewith, both parties waive the posting of any bond or similar requirement.
16. 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 or
Substitute Option Issuer, as the case may be, is not permitted to repurchase
pursuant to Section 7 or Section 9, as the case may be, the full number of
shares of Common Stock provided in Section l(a) hereof (as adjusted pursuant
to Section l(b) or Section 5 hereof), it is the express intention of Issuer
(which shall be binding on the Substitute Option Issuer) to allow the Holder
to acquire or to require Issuer or Substitute Option Issuer, as the case may
be, to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by fax, telecopy or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maine, without regard to the conflict
of law principles thereof.
19. This Agreement may be executed in two or more 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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20. 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.
21. 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, express 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.
22. 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.
ANDOVER BANCORP, INC.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
BANKNORTH GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President, Chief
Operating Officer and Chief Executive Officer
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