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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 27, 1998 (this "Agreement"),
by and among Snap-on Incorporated, a Delaware corporation ("Parent"), Snap-on
Pace Company, a Wisconsin corporation and a wholly-owned subsidiary of Parent
(the "Purchaser"), and Xxxx-Xxxxxx Corporation, a Wisconsin corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and the Company are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined in this
Agreement shall have the meanings ascribed to them in the Merger Agreement),
which provides, upon the terms and subject to the conditions thereof, for (i)
the commencement by the Purchaser of a tender offer (the "Offer") to purchase,
among other things, all of the issued and outstanding shares of the common
stock, $1.00 par value, of the Company ("Common Stock") at a price per share
equal to the Offer Price and (ii) the subsequent merger of the Purchaser and
the Company (the "Merger"), whereby each share of Common Stock, other than
shares owned directly or indirectly by Parent, the Purchaser or the Company and
other than Dissenting Shares, will be converted into the right to receive in
cash the Offer Price applicable thereto; and
WHEREAS, as a condition to the willingness of the parties to enter
into the Merger Agreement, Parent and the Purchaser have required that the
Company agree, and in order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Company has agreed, to grant the Purchaser an option
to purchase shares of Common Stock, upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE STOCK OPTION
SECTION 1.1. Grant of Stock Option. Subject to the terms and
conditions set forth herein, the Company hereby grants to the Purchaser an
irrevocable option (the "Stock Option") to purchase that number of newly issued
shares of Common Stock (the "Option Shares") equal to the number of shares of
Common Stock that, when added to the number of shares of Common Stock owned by
the Purchaser and its affiliates immediately following consummation of the
Offer, shall constitute 90%
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of the shares of Common Stock then outstanding on a fully diluted basis (giving
effect to the issuance of the Option Shares) at a purchase price per Option
Share equal to the Offer Price.
SECTION 1.2. Exercise of Stock Option. (a) Subject to the conditions
set forth in Section 2.1, the Stock Option may be exercised by the Purchaser,
in whole but not in part, at any one time after the occurrence of the Exercise
Event (as defined below) and prior to the Termination Date (as defined below).
(b) The "Exercise Event" shall occur for purposes of this Agreement
upon the Purchaser's acceptance for payment pursuant to the Offer of shares of
Common Stock constituting at least 66-2/3% but less than 90% of the shares of
Common Stock then outstanding on a fully diluted basis.
(c) Except as provided in the last sentence of this Section 1.2.(c),
the "Termination Date" shall occur for purposes of this Agreement upon the
earliest to occur of:
(i) the Effective Time; and
(ii) the termination of the Merger Agreement in accordance
with the terms and conditions thereof.
Notwithstanding the occurrence of the Termination Date, the Purchaser shall be
entitled to purchase the Option Shares if it has exercised the Stock Option in
accordance with the terms hereof prior to such occurrence, and the occurrence
of the Termination Date shall not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such date.
(d) In the event the Purchaser wishes to exercise the Stock Option,
the Purchaser shall send to the Company a written notice (an "Exercise Notice",
the date of which notice is referred to herein as the "Notice Date") specifying
the denominations of the certificate or certificates evidencing the Option
Shares which the Purchaser wishes to receive, the place for the closing of the
purchase and sale pursuant to the Stock Option (the "Closing") and a date not
earlier then three (3) business days nor later then ten (10) business days from
the Notice Date for the Closing (the "Closing Date"); provided, however, that
(i) if the Closing cannot be consummated by reason of any applicable Laws or
Orders, the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which such restriction on consummation has
expired or been terminated and (ii) without limiting the foregoing, if prior
notification to or approval of any Governmental Entity is required in
connection with such purchase, the Purchaser and the Company shall promptly
file the required notice or application for approval and shall cooperate in the
expeditious filing of such notice or application, and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which, as the case may be, (A) any required notification period has expired
or been terminated or (B) any required approval has been obtained, and in
either event, any requisite waiting period has expired or been terminated. The
Company shall, within two (2) business days after receipt of the Exercise
Notice, deliver written notice to the Purchaser specifying the number of Option
Shares and the aggregate purchase price therefor.
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ARTICLE II
CLOSING
SECTION 2.1. Conditions to Closing. The obligation of the Company to
deliver Option Shares upon the exercise of the Stock Option is subject to the
following conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance and delivery of the Option Shares hereunder shall have expired or have
been terminated; and
(b) There shall be no preliminary or permanent injunction or other
final, non-appealable judgment by a court of competent jurisdiction preventing
or prohibiting the exercise of the Stock Option or the issuance and delivery of
the Option Shares in respect of such exercise.
SECTION 2.2. Closing. (a) At the Closing, (i) the Company shall
deliver to the Purchaser a certificate or certificates evidencing the
applicable number of Option Shares (in the denominations specified in the
Exercise Notice), each such certificate or certificates being duly executed by
the Company and registered in the name of the Purchaser, and (ii) the Purchaser
shall purchase each such Option Share from the Company at the Offer Price.
Payment by the Purchaser of the Offer Price for each of the Option Shares shall
be made by wire transfer of immediately available funds to an account
designated by the Company, in an amount equal to the sum of the product of (i)
the Offer Price and (ii) the total number of Option Shares delivered at the
Closing.
(b) The Company shall pay all expenses, and any and all Federal,
state and local taxes and other charges, that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2.2.
(c) Certificates evidencing Option Shares delivered hereunder may
include legends legally required including the legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Option Shares pursuant to a registered public offering or Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), or any other sale as
a result of which such legend is no longer required.
SECTION 2.3. Adjustments Upon Changes in Capitalization. In the
event of any change in the number of issued and outstanding shares of Common
Stock by reason of any stock dividend, subdivision, merger, recapitalization,
combination, conversion or exchange of shares, or any other change in the
corporate or capital structure of the Company (including, without limitation,
the declaration or payment of an extraordinary dividend of cash or securities)
which would have the
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effect of diluting or otherwise adversely affecting the Purchaser's rights and
privileges under this Agreement, the number and kind of the Option Shares and
the consideration payable in respect of the Option Shares shall be
appropriately and equitably adjusted to restore to the Purchaser its rights and
privileges under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
(except as otherwise disclosed in writing on the date hereof) as follows:
SECTION 3.1. Organization; Authority Relative to this Agreement. The
Company is a corporation duly organized and validly existing under the laws of
the State of Wisconsin. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due and valid authorization, execution and delivery by Parent and
the Purchaser, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and by general equitable principles.
SECTION 3.2. Authority to Issue Shares. The Company has taken all
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Termination Date shall have
reserved, all the Option Shares issuable pursuant to this Agreement. All of the
shares of Common Stock issuable under the Stock Option, upon their issuance and
delivery in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable (except as otherwise
provided in Section 180.0622(2)(b) of the WBCL), will be delivered free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Purchaser's voting rights,
charges, adverse rights and other encumbrances of any nature whatsoever (other
than this Agreement) and will not be subject to any preemptive rights. Upon
the delivery to the Purchaser by the Company of a certificate or certificates
evidencing the Option Shares, the Purchaser will receive good, valid and
marketable title to the Option Shares.
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.1. Further Action. The Company shall use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the
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transactions contemplated hereunder, including, without limitation, using all
reasonable efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby represent and warrant to the Company
as follows:
SECTION 5.1. Organization; Authority Relative to this Agreement.
Each of Parent and the Purchaser is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation. Each of
Parent and the Purchaser has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and the Purchaser and the consummation by Parent and
the Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
the Purchaser. This Agreement has been duly and validly executed and delivered
by Parent and the Purchaser and, assuming the due and valid authorization,
execution and delivery by the Company, constitutes a valid and binding
obligation of Parent and the Purchaser, enforceable against each of Parent and
the Purchaser in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, and by general
equitable principles.
SECTION 5.2. Distribution. Any Option Shares the Purchaser purchases
pursuant to this Agreement are being purchased for investment purposes only and
not with a view to any public distribution thereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 6.2. Waiver. Any party hereto may (a) extend the time for or
waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.3. Fees and Expenses. Except as otherwise provided herein
or in Section 8.03 of the Merger Agreement, all costs, fees and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such expenses.
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SECTION 6.4. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 9.04 of the Merger Agreement.
SECTION 6.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner to the fullest extent permitted by applicable Law in order
that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise, by any of the
parties hereto without the prior written consent of the other parties. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, express or implied, is intended to confer on any person
other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
SECTION 6.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of laws thereof.
SECTION 6.8. ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT
PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.
IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF THE UNITED STATES OR
ANY STATE HAVING JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
SECTION 6.9. Headings. The descriptive headings contained in this
Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each
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of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 6.11. Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
SNAP-ON INCORPORATED
("Parent")
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Chairman, President and
Chief Executive Officer
SNAP-ON PACE COMPANY
(the "Purchaser")
By: /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Vice President and
Secretary
XXXX-XXXXXX CORPORATION
(the "Company")
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: President and Chief
Excecutive Officer
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