THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN
RESTRICTIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
OPTION AGREEMENT
OPTION AGREEMENT, dated as of November 14, 1999 (the "Agreement"), among
XXXXXXXXX P.P.S. NORTH AMERICA, INC., a Delaware corporation ("Parent"), SHIELD
ACQUISITION CORP., a Texas corporation and a direct wholly owned subsidiary of
Parent ("Purchaser"), and VALLEN CORPORATION, a Texas corporation (the
"Company"). Capitalized terms used and not defined in this Agreement shall have
the meaning ascribed to them in the Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), by and among Parent, Purchaser and the
Company.
WHEREAS, concurrently with the execution of this Agreement, Parent,
Purchaser and the Company are entering into the Merger Agreement, providing for
the making of a tender offer (as defined in the Merger Agreement, the "Offer")
to purchase all of the issued and outstanding shares of the common stock, par
value $.50 per share, of the Company (as defined in the Merger Agreement, the
"Company Common Stock") at a price per share equal to the Offer Consideration
(as defined in the Merger Agreement) and, following the completion of the Offer,
the merger (as defined in the Merger Agreement, the "Merger") of Purchaser and
the Company, whereby each share of Company Common Stock not purchased pursuant
to the Offer (other than shares owned by Parent, Purchaser or any other wholly
owned subsidiary of Parent, shares held in the treasury of the Company and
Dissenting Shares (as defined in the Merger Agreement)) will be converted into
the right to receive in cash an amount equal to the Offer Consideration in
accordance with the terms of the Merger Agreement; and
WHEREAS, the Company desires to induce Parent and Purchaser to enter into
the Merger Agreement and, therefore, has agreed to grant to Purchaser the Short
Form Merger Option (as defined in Section 1).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto hereby agree as follows:
1. Grant of Short Form Merger Option. The Company hereby grants to
Purchaser an irrevocable option (the "Short Form Merger Option") to purchase up
to that number of newly issued shares of Common Stock (the "Short Form Merger
Option Shares") equal to the number of shares that, when added to the number of
shares owned by Purchaser and its affiliates immediately following Purchaser's
purchase of all shares of Company Common Stock purchasable pursuant to the Offer
(including under any extension of the Offer), shall constitute 90% of the shares
of Common Stock then outstanding on a fully diluted basis (giving effect to the
issuance of the Short Form Merger Option Shares) for a cash consideration per
Short Form Merger Option Share equal to the Offer Consideration; provided,
however, that in no event shall the number of Short Form Merger Option Shares
for which the Short Form Merger Option is exercisable exceed 10% of the issued
and outstanding shares of Company Common Stock.
2. Exercise of the Short Form Merger Option.
(a) Exercise. The Short Form Merger Option may be exercised by
Purchaser at any time during the two business days following, and will
become exercisable upon, the date of acceptance for payment by Purchaser of
all shares of Common Stock purchasable pursuant to the Offer (including
under any extension of the Offer) in accordance with the terms of the
Merger Agreement. In the event Purchaser wishes to exercise the Option,
Purchaser shall give written notice of its exercise of the Short Form
Merger Option, specifying the number of shares of Common Stock owned by
Purchaser and its affiliates immediately following completion of the Offer
and a place and a time (which shall not be less than three business days
from the date of such notice) for the closing of such purchase. The
Company shall, within two business days after receipt of such notice,
deliver written notice to Purchaser specifying the number of Short Form
Merger Option Shares.
(b) Payment and Delivery of Certificates Upon Exercise. At the
closing under this Section 2: (i) the Company will deliver to Purchaser a
certificate or certificates representing the number of Short Form Merger
Option Shares so purchased and (ii) Purchaser will make payment to the
Company of the aggregate price for the Short Form Merger Option Shares
being purchased by wire transfer in an amount equal to the product of (x)
the Offer Consideration and (y) the total number of Short Form Merger
Option Shares delivered at such closing. The Company shall pay all Company
expenses, and any and all United States Federal, state and local taxes and
other charges, that may be payable by the Company in connection with the
preparation, issuance and delivery of stock certificates under this
Section 2.
3. Termination. This Agreement shall terminate upon the first to occur of
(i) the termination of the Merger Agreement, (ii) the Effective Time of the
Merger (as defined in the Merger Agreement) and (iii) the failure of Purchaser
to exercise the Short Form Merger Agreement during the period in which it is
exercisable as set forth in Section 2(a).
4. Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
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 such rights. No
single or partial exercise of any right, remedy, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. Any waiver shall be effective only in
the specific instance and for the specific purpose for which given and shall not
constitute a waiver to any subsequent or other exercise of any right, remedy,
power or privilege hereunder.
5. Entire Agreement; No Third-Party Beneficiaries; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Parent, Purchaser and the
Company (i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any person
other
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than the parties hereto (or their respective successors and assigns) any rights,
remedies, obligations or liabilities hereunder. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of 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 determines that the Option does not permit Purchaser to
acquire the full number of shares of Common Stock as provided in Section 2 (as
may be adjusted herein), it is the express intention of the Company to allow
Purchaser to acquire or to acquire such lesser number of shares as may be
permissible without any amendment or modification hereof.
6. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Purchaser may assign, in its sole discretion, any or all of
its rights, interests and obligations hereunder to Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and permitted
assigns.
7. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (and shall be deemed to have
been duly received if so given) if personally delivered or sent by registered or
certified mail, postage prepaid, or telecopy addressed to the respective parties
at their addresses specified in the Merger Agreement.
8. Specific Performance. Each of the parties hereto acknowledges and
agrees that in the event of any breach by the Company of this Agreement, Parent
and Purchaser would be irreparably and immediately harmed and could not be made
whole by monetary damages. It is accordingly agreed that the Company will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law, and Parent and Purchaser shall be entitled, in addition to any
other remedy to which they may be entitled at law or in equity, to compel
specific performance of this Agreement in any action instituted in a court of
competent jurisdiction.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the conflict
of laws provisions thereof.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
officers of each of the parties hereto all as of the date first above written.
XXXXXXXXX P.P.S. NORTH AMERICA, INC.
By:
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Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
SHIELD ACQUISITION CORP.
By:
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Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
VALLEN CORPORATION
By:
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Xxxxxxx X. Xxxxx
Chairman of the Board
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