<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
BANK OF BOSTON CORPORATION
(Name of Issuer)
Common Stock, $2.25 par value
(Title of Class of Securities)
060716 10 7
(CUSIP Number)
Michael W. Vasily
Executive Vice President
BayBanks, Inc.
175 Federal Street
Boston, Massachusetts 02211
(617) 482-1040
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
<TABLE>
Copies to:
<S> <C>
Jerry V. Klima, Esq. Edward D. Herlihy, Esq.
Palmer & Dodge Wachtell, Lipton, Rosen & Katz
One Beacon Street 51 West 52nd Street
Boston, Massachusetts 02110 New York, New York 10019
(617) 573-0100 (212) 403-1000
</TABLE>
December 12, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this Schedule because of Rule 13d-1(b)(3) or (4), check the
following box: [ ]
Check the following box if a fee is being paid with this statement: [ x ]
<PAGE> 2
===============================================================================
CUSIP No. 060716 10 7 13D Page 2 of 28
Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BayBanks, Inc. IRS Identification No. 04-2008039
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)
(b)
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e):
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 22,404,721
ENEFICIALLY -----------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH - 0 -
REPORTING -----------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
22,402,266
-----------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,455
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
22,404,721
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
===============================================================================
<PAGE> 3
CUSIP No. 060716 10 7 Page 3 of 28 Pages
ITEM 1 SECURITY AND ISSUER
This statement relates to the common stock, $0.01 par value per share
("Common Stock"), of Bank of Boston Corporation ("Bank of Boston"), a
Massachusetts corporation. The principal executive offices of Bank of Boston
are located at 100 Federal Street, Boston, Massachusetts 02110.
ITEM 2 IDENTITY AND BACKGROUND
(a) - (c) and (f) This statement is being filed by BayBanks, Inc.
("BayBanks"), a Massachusetts corporation. The principal executive offices of
BayBanks are located at 175 Federal Street, Boston, Massachusetts 02110.
BayBanks is a commercial banking company that provides a full range of
financial services to individuals, businesses, governmental units, and other
banks in the New England region. The name, principal occupation, business
address and citizenship of each of the executive officers and directors of
BayBanks is set forth on Schedule I hereto.
(d) and (e) During the last five years, neither BayBanks nor, to the best
of BayBanks' knowledge, any of the individuals named in Schedule I hereto, has
been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
As more fully described in Item 4 below, pursuant to the terms of the
BayBanks Option Agreement (as defined below), BayBanks has acquired the right,
upon the occurrence of specified events, to purchase up to 22,400,761 shares of
Common Stock from Bank of Boston at a price of $47.50 per share. Should
BayBanks purchase Common Stock pursuant to the BayBanks Option Agreement,
BayBanks expects that it would finance such purchase from one or more of the
following sources: cash on hand; the liquidation of securities held by
BayBanks; dividends from BayBanks subsidiaries; or the issuance of debt
securities.
With respect to other transactions being reported pursuant to this
Schedule 13D, this item is not applicable.
ITEM 4. PURPOSE OF TRANSACTION
On December 12, 1995, BayBanks and Bank of Boston entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, among
other things, a wholly-owned subsidiary of Bank of Boston will be merged with
and into BayBanks (the
<PAGE> 4
CUSIP No. 060716 10 7 Page 4 of 28 Pages
"Merger"). A copy of the Merger Agreement is filed as Exhibit A hereto and
incorporated herein by reference.
William M. Crozier, Jr., Chairman and President of BayBanks, will become
Chairman of the Board of Directors of Bank of Boston. Three other directors of
BayBanks also will join Bank of Boston's Board. Charles K. Gifford, Chairman
and Chief Executive Officer of Bank of Boston, will be President and Chief
Executive Officer of Bank of Boston.
On the closing date of the Merger, each issued and outstanding share of
common stock, $2.00 par value, of BayBanks (other than shares as to which
dissenters' appraisal rights have been exercised and shares held by BayBanks as
treasury stock or shares held by BayBanks or Bank of Boston or any of their
respective subsidiaries, but including shares (i) held directly or indirectly
by Bank of Boston or BayBanks or any of their respective subsidiaries in trust
accounts, managed accounts and the like or otherwise held in a fiduciary
capacity that are beneficially owned by third parties and (ii) shares held by
Bank of Boston or BayBanks or any of their respective subsidiaries in respect
of a debt previously contracted) will automatically be converted into the right
to receive 2.2 shares of Common Stock. Employee options to purchase shares of
BayBanks common stock will be converted to Bank of Boston options at the same
exchange ratio. The Merger is intended to be a tax-free reorganization and to
be accounted for as a pooling of interests.
The shares of Common Stock issued in the Merger will include the
corresponding number of rights attached to such shares pursuant to Bank of
Boston's shareholder rights plan. No fractional shares of Common Stock will be
issued in the Merger, and BayBanks stockholders who otherwise would be entitled
to receive a fractional share of Common Stock will receive a cash payment in
lieu thereof.
Completion of the Acquisition is subject to certain conditions, including
approval of the holders of two-thirds of the shares of BayBanks common stock
and of the holders of a majority of the shares of Common Stock, the approval of
regulatory authorities, and other closing conditions customary in a transaction
of this type. The Merger Agreement is subject to termination in certain
circumstances, including if the Acquisition is not consummated by December 31,
1996. In addition, BayBanks may terminate the Merger Agreement if the average
closing market price (the "Average Closing Price") of the Common Stock over the
twenty trading day period ending on the date of the final federal regulatory
action with respect to the Acquisition (the "Final Calculation Period") (a) is
less than 75% of the closing market price of the Common Stock on December 8,
1995, which was $47.50 (the "Conversion Price") and (b) the number obtained by
dividing the Average Closing Price by the Conversion Price is less than the
number obtained by dividing the average of the closing prices of the Morgan
Stanley 35-Bank Regional Peer Group during the Final Calculation Period by the
average of the closing prices of that Peer Group for the 20 trading day period
ending on December 8, 1995 and subtracting .25 from the quotient.
<PAGE> 5
CUSIP No. 060716 10 7 Page 5 of 28 Pages
Following execution of the Merger Agreement, BayBanks and Bank of Boston
entered into reciprocal stock option agreements pursuant to which Bank of
Boston granted BayBanks an option (the "BayBanks Option") to purchase up to
22,400,761 shares of newly issued Common Stock (the "Option Shares") at a price
of $47.50 per share, and BayBanks granted Bank of Boston an option to purchase
up to 3,907,120 shares of newly issued BayBanks common stock at a price of
$83.75 per share, in each case equalling 19.9% of the outstanding shares of the
respective granting company's stock. A copy of the agreement granting the
BayBanks Option (the "BayBanks Option Agreement") is filed as Exhibit B hereto
and incorporated herein by reference.
The BayBanks Option will become exercisable in whole or in part at any
time before its expiration in specified circumstances, including if (i) Bank of
Boston, without the prior written consent of BayBanks, enters or announces its
intention to enter into an agreement with any person other than BayBanks to
effect any of the following transactions (each an "Acquisition Transaction"):
(a) a merger, consolidation or similar transaction involving Bank of Boston or
any of its Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission) (other than mergers,
consolidations or similar transactions involving (x) Bank of Boston or any of
its Significant Subsidiaries in which the voting securities of Bank of Boston
immediately before such transaction continue to represent at least 65% of the
combined voting power of the voting securities of Bank of Boston or the
surviving entity outstanding immediately after such transaction or (y) only
Bank of Boston and its subsidiaries), (b) the purchase, lease or other
acquisition of all or a substantial portion of the assets of Bank of Boston or
any of its Significant Subsidiaries, (c) 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 Bank of Boston or
any of its Significant Subsidiaries or (d) any substantially similar
transaction, (ii) the Board of Directors of Bank of Boston recommends that the
stockholders of the company approve or accept any Acquisition Transaction, or
(iii) any person (other than BayBanks) acquires beneficial ownership of 10% or
more of the then outstanding shares of Common Stock.
As more fully set forth in the BayBanks Option Agreement, BayBanks (or a
subsequent holder of the Option or Option Shares) has the right in specified
circumstances to require Bank of Boston to repurchase the Option or Option
Shares. Bank of Boston's ability to engage in a subsequent pooling of
interests transaction might be adversely affected if BayBanks exercised this
right.
The foregoing summary of the contents of the Merger Agreement and BayBanks
Option Agreement is qualified in its entirety by reference to the exhibits
hereto.
Except as set forth in this Item 4, the Agreement, the Option Agreement or
the Affiliate Letter (as defined below), neither BayBanks nor, to the best of
BayBanks' knowledge, any of the individuals named in Schedule I hereto, has any
plans or proposals
<PAGE> 6
CUSIP No. 060716 10 7 Page 6 of 28 Pages
that relate to or that would result in any of the actions specified in clauses
(a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) and (b) BayBanks has sole investment and voting power with respect
to 105 shares of Common Stock. As trustee under trusts established by its
customers, BayBank, N.A., a wholly-owned subsidiary of BayBanks, has (i) sole
investment power over 1,400 shares of Common Stock (ii) shared investment power
over 2,455 shares, and (iii) sole voting power over 3,855 shares. In addition,
pursuant to Rule 13d-3(d)(1)(i) promulgated under the Securities Exchange Act
of 1934, BayBanks may be deemed to own beneficially 22,400,761 shares of Common
Stock issuable upon exercise of the BayBanks Option. In the aggregate, assuming
exercise of the BayBanks Option, BayBanks may thus be deemed the beneficial
owner of 16.6% of the 112,566,642 shares of Common Stock outstanding at
November 30, 1995. However, BayBanks expressly disclaims any beneficial
ownership of the shares subject to the BayBanks Option because the BayBanks
Option is exercisable only in the circumstances set forth in Item 4, none of
which has occurred as of the date hereof.
Arlene A. McNamee, a director of BayBanks, has sole voting and investment
power over a total of 462 shares of Common Stock held in custodial accounts for
minor relatives.
Except as set forth above, neither BayBanks nor, to the best of BayBanks'
knowledge, any of the individuals named in Schedule I hereto, is the beneficial
owner of Common Stock.
(c) Other than transactions in the ordinary course by BayBank, N.A. as
trustee for any of the trust accounts described above that may have occurred
during the past 60 days, neither BayBanks nor, to the best of BayBanks'
knowledge, any of the individuals named in Schedule I hereto, has effected any
transaction in the Common Stock during the past 60 days.
(d) Other than as may be provided in the applicable instrument with
respect to each of the trusts described above, and so long as BayBanks has not
purchased the Common Stock subject to the Option, BayBanks does not have the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, any of the Common Stock. Ms. McNamee has the power
to receive and the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of Common Stock held in the custodial
accounts described above, subject to their terms.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The Merger Agreement contains certain customary restrictions on the
conduct of the business of BayBanks and of Bank of Boston pending the Merger,
including certain
<PAGE> 7
CUSIP No. 060716 10 7 Page 7 of 28 Pages
customary restrictions relating to the Common Stock. The Merger Agreement
provides that Bank of Boston will recommend that its stockholders approve the
Merger Agreement, including the Merger. Bank of Boston also has agreed to use
its best efforts to cause each director, executive officer and affiliate of
Bank of Boston to execute, as soon as possible after the execution of the
Merger Agreement and before the date of the stockholders meeting at which
approval of the Merger Agreement and the Merger will be sought, an agreement in
customary form with respect to restrictions on sale of Common Stock pertaining
to pooling- of-interest accounting ("Affiliate Letter"). Except as provided in
the Merger Agreement, the BayBanks Option Agreement or the Affiliate Letter, or
as set forth herein, neither BayBanks nor, to the best of BayBanks' knowledge,
any of the individuals named in Schedule I hereto, has any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
person with respect to any securities of Bank of Boston, including, but not
limited to, transfer or voting of any securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or losses, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A - Agreement and Plan of Merger dated as of December 12, 1995
among Bank of Boston Corporation, Boston Merger Corporation and
BayBanks, Inc.
Exhibit B - Option Agreement dated as of December 12, 1995 between Bank of
Boston Corporation and BayBanks, Inc.
<PAGE> 8
CUSIP No. 060716 10 7 Page 8 of 28 Pages
SIGNATURE
---------
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: December 22, 1995 BAYBANKS, INC.
By: /s/ Michael W. Vasily
-----------------------------------
Michael W. Vasily
Executive Vice President
<PAGE> 9
CUSIP No. 060716 10 7 Page 9 of 28 Pages
<TABLE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF BAYBANKS, INC.
--------------------------------------------------
The name, present principal occupation or employment, and business address
of each of the directors and executive officers of BayBanks, Inc. ("BayBanks")
is set forth below. Unless otherwise indicated, each individual listed below
is a citizen of the United States.
<S> <C>
*John A. Cervieri Jr. *Samuel J. Gerson
Chairman and President Chairman of the Board
Property Capital Associates, Inc. and Chief Executive Officer
580 Ocean Road Filene's Basement
Narragansett, RI 02882 40 Walnut Street
Wellesley, MA 02181
*#William M. Crozier, Jr.
Chairman, President and Chief *#Donald L. Isaacs
Executive Officer Vice Chairman
BayBanks, Inc. BayBanks, Inc.
175 Federal Street 175 Federal Street
Boston, MA 02110 Boston, MA 02110
*Robert L. Gable *Norman E. MacNeil
Chairman, President Chairman of the Board
and Chief Executive Officer Ark-Les Corporation
Unitrode Corporation 51 Water Street
7 Continental Boulevard Watertown, MA 02172
Merrimack, NH 03054
*Arlene A. McNamee
*#Richard F. Pollard Executive Director
Vice Chairman Catholic Social Services
BayBanks, Inc. Diocese of Fall River
175 Federal Street 783 Slade Street
Boston, MA 02110 Fall River, MA 02724
*Prof. Thomas R. Piper
Harvard Business School
Morgan Hall - 469
Soldiers Field Road
Boston, MA 02163
</TABLE>
<PAGE> 10
CUSIP No. 060716 10 7 Page 10 of 28 Pages
*Glenn P. Strehle
Vice President & Treasurer
Massachusetts Institute of Technology
Building 4 - Room 204
77 Massachusetts Avenue
Cambridge, MA 02139
*Joseph H. Torras
President and
Chairman of the Board
Preco Corporation
100 University Drive
Amherst, MA 01002
#Ilene Beal
Executive Vice President
BayBanks, Inc.
175 Federal Street
Boston, MA 02110
#Joan E. Tonra
Senior Vice President
BayBanks, Inc.
175 Federal Street
Boston, MA 02110
#Michael W. Vasily
Executive Vice President
BayBanks, Inc.
175 Federal Street
Boston, MA 02110
* Director
# Executive Officer
<PAGE> 11
CUSIP No. 060716 10 7 Page 11 of 28 Pages
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Description
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<S> <C>
A Agreement filed and Plan of Merger dated as of December 12, 1995
among Bank of Boston Corporation, Boston Merger Corporation and
BayBanks, Inc. (Incorporated by reference to Exhibit 2.1 to the
Registrant's Form 8-K filed December 22, 1995).
B Option Agreement dated as of December 12, 1995 between Bank of Boston
Corporation and BayBanks, Inc. (Filed herewith)
</TABLE>
<PAGE> 1
EXHIBIT B
---------
STOCK OPTION AGREEMENT
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 December 12, 1995, between Bank of
Boston Corporation, a Massachusetts corporation ("Issuer"), and BayBanks, Inc.,
a Massachusetts 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 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 22,400,761 fully paid and nonassessable shares of Issuer's Common Stock, par
value $2.25 per share ("Common Stock"), at a price of $47.50 per share (the
"Option Price"); provided further 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. 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
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, it 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.
- 1 -
<PAGE> 2
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 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 twelve 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) (provided that if an Initial Triggering Event continues or occurs
beyond such termination and prior to the passage of such twelve-month period,
the Exercise Termination Event shall be twelve months from the expiration of
the Last Triggering Event but in no event more than 18 months after such
termination). 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 or shall have failed to publicly
oppose an Acquisition Transaction. 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
- 2 -
<PAGE> 3
Securities and Exchange Commission (the "SEC")) of Issuer, (x) a
purchase, lease or other acquisition of all or a substantial portion
of the assets 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 any
Significant Subsidiary of Issuer, or (z) any substantially similar
transaction; provided, however, that in no event shall any (i)
merger, consolidation or similar transaction involving Issuer or any
Significant Subsidiary in which the voting securities of Issuer
outstanding immediately prior thereto continue to represent (by
either remaining outstanding or being converted into the voting
securities of the surviving entity of any such transaction) at least
65% of the combined voting power of the voting securities of the
Issuer or the surviving entity outstanding immediately after the
consummation of such merger, consolidation, or similar transaction,
or (ii) 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 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 modified, or publicly
announced its interest 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;
(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 Option Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
- 3 -
<PAGE> 4
(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, whether in draft or final form, 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 clause (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
(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.
(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
- 4 -
<PAGE> 5
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 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 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 delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in
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<PAGE> 6
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. [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 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
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<PAGE> 7
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, 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 the resale of this Option and any shares issued pursuant to this
Option and the issuance of any shares issuable pursuant to this Option to the
extent then permitted under the rules, regulations or policies of the SEC and,
to the extent not so permitted, the resale of such shares issuable pursuant to
this Option. The Issuer 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
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<PAGE> 8
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; and 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 practical 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
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 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
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<PAGE> 9
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, 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, a copy of 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 Price therefor or the portion thereof
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
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<PAGE> 10
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 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 pro-
hibition, 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 proviso 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. (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 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,
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<PAGE> 11
to merge into 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:
(1) "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.
(2) "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
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<PAGE> 12
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 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. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) 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 plus (y) Grantee's Out-of-Pocket Expenses (to the
extent not previously reimbursed), 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 (x) the Highest
Closing Price multiplied by the number of Substitute Shares so
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<PAGE> 13
designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not
previously reimbursed). 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 Sub-
stitute 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 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 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
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 receive all required regulatory and legal approvals as
promptly as practicable in
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<PAGE> 14
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 Option 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:
(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
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<PAGE> 15
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, nonassessable, 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
Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a 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 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
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<PAGE> 16
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. 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.
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 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.
17. 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.
18. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
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<PAGE> 17
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.
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, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as 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.
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.
BANK OF BOSTON CORPORATION
By: /s/ Peter J. Manning
----------------------
BAYBANKS, INC.
By: /s/ William M. Crozier, Jr.
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