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Exhibit 99.2
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated November 29, 2000 (this "Agreement"),
is by and between FIRST LIBERTY BANK CORP., a Pennsylvania corporation
("Issuer"), and COMMUNITY BANK SYSTEM, INC., a Delaware 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, dated as of the date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto; 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. Grant of Option; Shares Underlying Option.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, a total of 1,267,359
fully paid and nonassessable shares of Issuer's common stock, par value $0.31
per share ("Common Stock"), at a price of $13.25 per share (the "Option Price");
provided, however, that in no event shall the number of shares of Common Stock
for which the Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement or as permitted under the terms of the Merger
Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such issuance, such number equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section 1(b)
or elsewhere in this Agreement shall be deemed to authorize Issuer to breach any
provision of the Merger Agreement.
(c) Notwithstanding anything to the contrary herein, (i) in the event that
Issuer issues or agrees to issue any shares of Common Stock at a price less than
the Option Price then in effect (as adjusted pursuant to this Agreement) other
than upon exercise of any employee stock options outstanding on the date hereof,
the Option Price shall be adjusted to equal such lesser price; and (ii) the
number of shares of Common Stock subject to the Option shall be reduced to such
lesser
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number, if any, equal to the maximum number of shares which would not cause
Grantee to become an "interested shareholder," as such term is defined in
Subchapter F of Chapter 25 of the Business Corporation Law of the Commonwealth
of Pennsylvania, after giving effect to the authorization by the Board of
Directors of the Issuer of the execution and delivery of this Agreement and the
transactions contemplated hereby (which authorization the Issuer hereby
represents to the Grantee to have been granted prior to the execution and
delivery of this Agreement).
2. Exercise of Option.
(a) The holder(s) of the Option (collectively, the "Holder") 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, however, that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within six months following such Subsequent
Triggering Event; provided, further, however, that if the Option cannot be
exercised on any day because of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the period during which the Option
may be exercised shall be extended so that the Option shall expire no earlier
than on the 10th business day after such injunction, order or restraint shall
have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be.
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 7.1(b)(i) 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 7.1(b)(i) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional).
(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 (as defined in the Merger
Agreement; each an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into a letter of intent or a definitive
agreement to engage in an Acquisition Transaction (as hereinafter defined) with
any Person (as defined in the Merger Agreement) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary"). For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or any
similar transaction, involving Issuer or any "significant subsidiary" (as
defined in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of Issuer or any significant subsidiary of Issuer, (y) a purchase or
other acquisition (including by
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way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the outstanding voting power of Issuer or any
significant subsidiary thereof, or (z) any substantially similar transaction;
(ii) Issuer or any Issuer Subsidiaries, 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;
(iii) Any Person (other than Grantee, any Grantee Subsidiary
or any existing shareholder of the Issuer who has beneficial ownership of 10% or
more of the outstanding shares of Common Stock provided that such shareholder
does not acquire beneficial ownership of 15% or more of such shares) 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 Exchange Act, and the rules and regulations thereunder) or
any Person other than Grantee or any Grantee Subsidiary shall have commenced (as
such term is defined under the rules and regulations of the SEC), or shall have
filed or publicly disseminated a registration statement, tender offer statement,
proxy statement or similar disclosure statement with respect to or in connection
with, a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such Person would beneficially
own, directly or indirectly, 10% or more of the then outstanding shares of
Common Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively);
(iv) (A) the holders of Common Stock shall fail to approve the
Merger Agreement and the transactions contemplated thereby at the special
meeting of stockholders held for the purpose of voting on such approval, (B)
such meeting shall not have been held or shall have been cancelled prior to
termination of the Merger Agreement, or (C) the Board of Directors of Issuer
shall have withdrawn or modified, or publicly announced its intent 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, or fail to publicly oppose any Acquisition Transaction made by a
third party, in each case after (1) there has been a public disclosure
(including any written or oral communication that is or becomes the subject of a
public disclosure) that any Person other than Grantee or any Grantee Subsidiary
has (x) made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, (y) commenced, or filed or publicly disseminated a
registration statement, tender offer statement, proxy statement or similar
disclosure statement with respect to or in connection with, a Tender Offer or an
Exchange Offer, or (z) filed an application (or given a notice), whether in
draft or final form, under any federal or state banking laws seeking regulatory
approval to engage in an Acquisition Transaction, and (2) such Acquisition
Transaction, Tender Offer or Exchange Offer, as the case may be, is not
subsequently Publicly Withdrawn (as defined below) at least 30 days prior to the
date of the special meeting of shareholders of Issuer to be held for the purpose
of considering whether to approve the Merger Agreement; or
(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 agreement
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contained in the Merger Agreement and such breach would entitle Grantee to
terminate the Merger Agreement (whether immediately, upon the giving of notice
or passage of time, or both).
"Publicly Withdrawn" for purposes of this Section 2(b) shall mean an
unconditional and bona fide withdrawal of a proposal to engage in an Acquisition
Transaction, coupled with a public announcement of no further interest in
pursuing such proposal or in acquiring any controlling interest over Issuer or
in soliciting or inducing any other Person (other than the Grantee or any of its
affiliates) to do so.
(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 shares of Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer; provided, that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option so long as the Holder makes such payment
by a bank or certified check.
(g) At such closing, simultaneously with the delivery of the aggregate
purchase price as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or
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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 pursuant to
subsection (g) of this Section 2 may contain 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 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 "Securities 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 the original certificate
containing such legend, together with 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
Securities 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 upon the surrender of the original certificate if the shares have
been sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in accordance with subsection (f) of
this Section 2, 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. Covenant of Issuer. 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,
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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; and
(iii) promptly to take all action as may from time to time be required
(including, if prior approval of or notice to the Federal Reserve Board or any
other federal or state regulatory authority is required under federal or state
law 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 other federal or 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.
4. Exchange. 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, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. Adjustments. 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, splits, 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 of securities 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. Registration Rights. 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 months of such Subsequent Triggering
Event (whether on its own behalf or on behalf of any subsequent Holder of the
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a registration statement under
the Securities Act covering the Option and any shares issued and issuable
pursuant to this Option and shall use all reasonable efforts to cause such
registration statement to become effective as soon as practicable and remain
current in order to permit the sale or other disposition of the
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Option and any shares of Common Stock issued or issuable upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use all reasonable 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. Any
registration effected under this Section 6 shall be at the sole expense of
Issuer, except for underwriting discounts and commissions. Grantee shall have
the right to demand three such registrations. Each 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 any underwritten registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for the issuer. Upon receiving any request under this
Section 6 from Grantee, 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 three registrations pursuant to this Section 6 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. Tolling. The periods for exercise of rights under Sections 2, 6, 10 and
12 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 Exchange Act by reason of such exercise.
8. Representations of Issuer. 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, and constitutes a binding obligation of Issuer,
enforceable against Issuer in accordance with its terms except that such
enforceability may be subject to supervisory powers of bank regulatory agencies,
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered
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free and clear of all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
9. Representations of Grantee. Grantee hereby represents and warrants to
Issuer that the Option is not being acquired, and any shares of Common Stock or
other securities issuable 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.
10. Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement or the Option created hereunder to any other
Person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within six months
following such Subsequent Triggering Event (or such later period as provided in
Section 7); provided, however, that until the date 15 days following the date on
which the Federal Reserve Board approves an application by Grantee to acquire
the shares of Common Stock subject to the Option (proof of which approval shall
be furnished promptly to Issuer), Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf, or (iv) any other manner approved by
the Federal Reserve Board.
11. Further Assurance. 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, (i) to the extent
that shares of Issuer's Common Stock are then listed on a national securities
exchange or the Nasdaq Stock Market, making application to list the shares of
Common Stock issuable hereunder on such national securities exchange or the
Nasdaq Stock Market, as applicable, upon official notice of issuance and (ii)
applying to the Federal Reserve Board, 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.
12. Repurchase.
(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
within 30 days following such occurrence (or such later period as provided in
Section 7) but in any event prior to an Exercise Termination Event, Issuer shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the Market/Offer Price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised, plus, to the extent not previously reimbursed,
Grantee's reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by, and the enforcement of Grantee's rights under, the
Merger Agreement, including without
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limitation, legal, accounting and investment banking fees (the "Grantee's
Out-of-Pocket Expenses"), and (ii) at the request of any owner of Option Shares
from time to time (the "Owner"), delivered within 30 days following such
occurrence (or such later period as provided in Section 7), Issuer shall
repurchase such number of the Option Shares from such Owner as the Owner shall
designate at a price per share ("Option Share Repurchase Price") equal to the
greater of (A) the Market/Offer Price and (B) the average price per share paid
by the Owner for the Option Shares so designated, plus, to the extent not
previously reimbursed, Grantee's Out-of-Pocket Expenses. The term "Market/Offer
Price" shall mean the highest of (w) the price per share of the Common Stock at
which a tender offer or exchange offer therefor has been made, (x) the price per
share of the Common Stock to be paid by any Person, other than Grantee or a
Grantee Subsidiary, pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Common Stock within the six month period immediately
preceding the required repurchase of Options or Option Shares, as the case may
be, or (z) in the event of a sale of all or substantially all of Issuer's or any
of its significant subsidiary'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,
on a consolidated basis, 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
(including, for the purposes of such calculation, the number of shares, if any,
then issuable upon exercise of the Option). 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 a majority in interest
of the Holders or the Owners, 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 12 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
elects to require Issuer to repurchase the Option and/or Option Shares in
accordance with the provisions of this Section 12. As promptly as practicable,
and in any event within ten 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 each
Holder the Option Repurchase Price and/or to each 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, 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
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 ten 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 12 is prohibited
under applicable law or regulation, or as a consequence of
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administrative policy, from delivering to any Holder and/or 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 its best
efforts to receive any 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 or the Option Shares either in whole or to the extent of the prohibition,
whereupon Issuer shall promptly (i) deliver to such Holder and/or Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to such Holder, a new Stock Option Agreement
evidencing the right of such 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 such
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
13. Remedy. 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.
14. Severability. 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 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 such lesser number of shares as may be permissible, without
any amendment or modification hereof.
15. Notice. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
given in accordance with Section 8.5 of the Merger Agreement.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
irrespective of the principles of conflict of laws thereof.
17. Counterparts. 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.
18. Expenses. 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
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the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
19. Entire Agreement; Etc. Except as otherwise expressly provided herein
or in the Merger Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
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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.
FIRST LIBERTY BANK CORP.
By: /s/ William M. Davis
---------------------------------
Name: William M. Davis
Title: President
COMMUNITY BANK SYSTEM, INC.
By: /s/ Sanford A. Belden
---------------------
Name: Sanford A. Belden
Title: President and Chief
Executive Officer
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