Exhibit 12
Execution Copy
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement") is made as of October
27, 2005, by and among Goody's Family Clothing, Inc., a Tennessee corporation
(the "Company"), GF Goods Inc., a Delaware corporation ("Parent"), and GF
Acquisition Corp., a Tennessee corporation ("Acquisition Corp."). Capitalized
terms used but not otherwise defined in this Agreement shall have the meanings
ascribed thereto in the Merger Agreement.
WHEREAS, concurrently herewith, Acquisition Corp., Parent and the
Company are entering into an Acquisition Agreement and Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, the Company agrees to grant Acquisition Corp. an option to
purchase Common Stock (as hereinafter defined), upon the terms and subject to
the conditions of this Agreement; and
WHEREAS, the Special Committee of the Board of Directors of the
Company has recommended the grant of such option and the Merger Agreement be
approved by the Board of Directors of the Company and the Board of Directors
of the Company has approved the grant of such option and the Merger Agreement
prior to the execution hereof.
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. The Top-Up Option. The Company hereby grants to Acquisition Corp.
an irrevocable option (the "Top-Up Option") to purchase, subject to the terms
hereof, up to that number of shares of common stock, no par value per share
("Common Stock"), of the Company (the "Top-Up Option Shares") equal to the
lowest number of shares of Common Stock that, when added to the number of
shares of Common Stock owned by Acquisition Corp. at the time of such
exercise, shall constitute one share more than 90% of the shares of Common
Stock on a Fully-Diluted Basis (assuming the issuance of the Top-Up Option
Shares) at a purchase price per Top-Up Option Share equal to the Offer Price;
provided, however, that the Top-Up Option shall not be exercisable unless
immediately after such exercise Acquisition Corp. would own more than 90% of
the shares of Common Stock then outstanding and in no event shall Acquisition
Corp. have the right hereunder to purchase shares of Common Stock to the
extent (but only to the extent) that the exercise of Acquisition Corp.'s right
to purchase shares of Common Stock hereunder would violate the rules or
regulations of the Nasdaq National Market, Inc. The Company agrees to provide
Acquisition Corp. with information regarding the number of authorized shares
of Common Stock available for issuance on an ongoing basis.
2. Exercise of Top-Up Option.
(a) Acquisition Corp. may exercise the Top-Up Option, in whole or in
part, at any one time after the occurrence of a Top-Up Exercise Event (as
defined below) and prior to the occurrence of a Top-Up Termination Event (as
defined below).
(b) A "Top-Up Exercise Event" shall occur for purposes of this
Agreement upon Acquisition Corp.'s payment for shares of Common Stock
constituting at least 80% of the shares of Common Stock then outstanding but
less than 90% of the shares of Common Stock on a Fully-Diluted Basis.
(c) Each of the following shall be a "Top-Up Termination Event":
(i) the Effective Time;
(ii) the date which is thirty-five days after the occurrence
of the Top-Up Exercise Event (or such later date on which the
closing of a purchase may be consummated, as set forth in Section
3(a) below); and
(iii) the termination of the Merger Agreement.
3. Closing.
(a) In the event Acquisition Corp. wishes to exercise the Top-Up
Option, Acquisition Corp. shall send to the Company a written notice (a
"Top-Up Exercise Notice," the date of which notice is referred to herein as
the "Notice Date") specifying the number of shares of Common Stock to be
acquired by Acquisition Corp. pursuant to the Top-Up Option, the denominations
of the certificate or certificates evidencing the Top-Up Option Shares that
Acquisition Corp. wishes to receive, the place for the closing of the purchase
and sale pursuant to the Top-Up Option (the "Top-Up Closing") and a date not
earlier than one business day nor later than 10 business days after the Top-Up
Notice Date for the Top-Up Closing (the "Closing Date"); provided, however,
that (i) if the Top-Up Closing cannot be consummated by reason of any
applicable law or order, 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, Acquisition Corp. 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, promptly after receipt of
the Top-Up Exercise Notice, deliver a written notice to Acquisition Corp.
confirming the number of Top-Up Option Shares and the aggregate purchase price
therefor.
(b) At the closing referred to in subsection (a) of this Section 3,
Acquisition Corp. shall (i) pay to the Company the aggregate purchase price
for the shares of Common Stock purchased pursuant to the exercise of the
Top-Up Option in immediately available funds by wire transfer to a bank
account designated by the Company and (ii) present and surrender this
Agreement to the Company.
(c) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (b) of this Section 3, the Company
shall deliver to Acquisition Corp. a certificate or certificates representing
the number of shares of Common Stock purchased by Acquisition Corp.
(d) Certificates evidencing the Common Stock to be 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, OR
ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED
OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT
TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
STOCK OPTION AGREEMENT, DATED AS OF OCTOBER 27, 2005, A COPY
OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that (i) the reference to the resale
restrictions of the Securities Act and state securities or blue sky laws in
the foregoing legend shall be removed by delivery of substitute certificate(s)
without such reference if the Company or Acquisition Corp., as the case may
be, shall have delivered to the other an opinion of counsel, in form and
substance reasonably satisfactory to the other, to the effect that such legend
is not required for purposes of the Securities Act or such laws; (ii) the
reference to the provisions of this Agreement in the foregoing legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; 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.
(e) Upon the giving by Acquisition Corp. to the Company of the
written notice of exercise of the Top-Up Option provided for under subsection
(a) of this Section 3 and the tender of the applicable purchase price in
immediately available funds, Acquisition Corp. shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
subject to the terms and conditions of this Agreement, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to Acquisition Corp. The Company 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 3 in the name of Acquisition Corp. or
its assignee, transferee or designee.
4. Covenants of the Company. In addition to its other agreements and
covenants herein, the Company agrees:
(a) 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 the Company; and
(b) promptly to take all action as may from time to time be required
(including complying with all applicable notification, filing reporting and
waiting period requirements under the HSR Act, making all other filings with,
and to obtain consents of, all third parties and regulatory and governmental
authorities necessary for the consummation of the transactions contemplated by
this Agreement, and cooperating fully with Acquisition Corp. in preparing any
applications or notices and providing such information to any regulatory
authority as it may require) in order to permit Acquisition Corp. to exercise
the Top-Up Option and the Company duly and effectively to issue shares of
Common Stock pursuant hereto.
5. Representations and Warranties.
(a) The Company hereby represents and warrants to Parent and
Acquisition Corp. as follows:
(i) All corporate action on the part of the Company and its
officers, directors and shareholders that is necessary for (i) the
authorization, execution and delivery of this Agreement, (ii) the
performance of all the Company's obligations under this Agreement
and (iii) the authorization, issuance (or reservation for
issuance) and delivery of the Top-Up Option and the Top-Up Option
Shares to be acquired upon exercise of the Top-Up Option has been
taken or will be taken prior to the Closing Date. As of the
Closing Date, the Company's authorized capital stock shall consist
of at least that amount of Common Stock required for the Company
to issue the Top-Up Option Shares (to the extent not prohibited by
the rules or regulations of Nasdaq). This Agreement has been duly
executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in
accordance with its terms. When issued in compliance with the
provisions of this Agreement and the Company's Articles of
Incorporation, the Top-Up Option and, upon exercise of the Top-Up
Option, the Top-Up Option Shares, (x) will be duly and validly
issued and outstanding, fully paid and nonassessable and free and
clear of any Liens whatsoever, (y) shall not be subject to
preemptive rights, rights of first offer or refusal or similar
rights, and shall not be restricted in any way with respect to
voting rights thereof or other incidents of record or beneficial
ownership pertaining thereto and (z) shall not give rise to or
trigger any conversion, antidilution or similar rights pertaining
to any of the Company's securities outstanding or authorized on or
before the Closing Date.
(ii) The execution, delivery and performance of this
Agreement does not and will not, and the consummation by the
Company of any of the transactions contemplated hereby will not,
constitute or result in (i) a breach or violation of or a default
under, its articles or certificate of incorporation or by-laws, or
the comparable governing instruments of any of its subsidiaries,
or (ii) a breach or violation of or a default under, any material
agreement, lease, contract, note, mortgage, indenture, arrangement
or other obligation of it or any of its subsidiaries (with or
without the giving of notice, the lapse of time or both) or under
any material law, rule, ordinance or regulation or material
judgment, decree, order, award or governmental or non-governmental
permit or license to which it or any of its subsidiaries is
subject.
(b) Parent and Acquisition Corp. hereby represent and warrant to the
Company as follows:
(i) that Parent and Acquisition Corp. have full corporate
power and authority to enter into this Agreement and, subject to
obtaining the approvals referred to in this Agreement, to
consummate the transactions contemplated by this Agreement; 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 Parent and
Acquisition Corp.; and this Agreement has been duly executed and
delivered by Parent and Acquisition Corp. and constitutes a valid
and legally binding obligation of Parent and Acquisition Corp.
enforceable in accordance with its terms.
(ii) The execution, delivery and performance of this
Agreement does not and will not, and the consummation by Parent
and Acquisition Corp. of any of the transactions contemplated
hereby will not, constitute or result in (i) a breach or violation
of or a default under, their articles or certificate of
incorporation or by-laws, or the comparable governing instruments
of any of their respective subsidiaries, or (ii) a breach or
violation of or a default under, any material agreement, lease,
contract, note, mortgage, indenture, arrangement or other
obligation of Parent or Acquisition Corp. or any of their
respective subsidiaries (with or without the giving of notice, the
lapse of time or both) or under any material law, rule, ordinance
or regulation or material judgment, decree, order, award or
governmental or non-governmental permit or license to which Parent
or Acquisition Corp. or any of their respective subsidiaries is
subject, in each case in a manner which would create a Company
Material Adverse Effect.
6. Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties, which approval shall not be unreasonably
withheld; provided, however, that each of Parent and Acquisition Corp. may
freely assign its rights to another direct or indirect wholly owned subsidiary
of Parent or Acquisition Corp. without such prior written approval. Any
purported assignment without such consent shall be void.
7. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by any party
hereto and that the obligations of the parties hereto shall be specifically
enforceable by any party hereto through injunctive or other equitable relief.
8. 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.
9. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and
shall be given as specified in Section 9.06 of the Merger Agreement.
10. Governing Law.
(a) This Agreement shall be construed in accordance with and governed
in all respects, including validity, interpretation and effect, by the law of
the State of Tennessee without giving effect to the principles of conflicts of
laws thereof.
11. Submission to Jurisdiction. Each of the parties hereto submits to
the exclusive jurisdiction of the United States district court for the Eastern
District of Tennessee, Knoxville Division in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in respect of
the action or proceeding may be heard and determined in any such court. Each
of the parties hereto also agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
parties hereto waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other party with respect thereto. Any
party hereto may make service on any other party by sending or delivering a
copy of the process to the party to be served at the address and in the manner
provided for the giving of notices in Section 9.06 of the Merger Agreement.
Nothing in this Section 11, however, shall affect the right of any party to
serve legal process in any other manner permitted by law or at equity. Each
party hereto agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment or in
any other manner provided by law or at equity. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER
PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS, HIS OR HER
OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by the other party hereto. This Agreement
may be executed by facsimile signature.
13. 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 the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
14. Entire Agreement. 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 assignees. 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 assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
15. Captions. The Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
* * * *
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.
GOODY'S FAMILY CLOTHING, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxxxx
Its: Chairman of the Board and Chief
Executive Officer
GF GOODS INC.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
Its: Chief Executive Officer
GF ACQUISITION CORP.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Its: Chief Executive Officer
