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Exhibit 4.2
AGREEMENT
This is an agreement dated June 30, 1999 between The Monarch Machine
Tool Company (the "Buyer"), an Ohio corporation, and the persons (the "Selling
Stockholders") listed on Exhibit A to the Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated May 13, 1999, among the Buyer and those persons.
1. PURCHASE OF NOTE AND WARRANTS. The Selling Stockholders agree to purchase
from Buyer, and Buyer agrees to sell to the Selling Stockholders, at the Closing
(as defined below) (i) a promissory note in the principal amount of $15,000,000
(the "Note"), in the form attached to this Agreement as Exhibit A and (ii)
Warrants, in the form attached to this Agreement as Exhibit B, as follows:
(a) At the Closing, warrants to purchase 100,000 shares of the
Buyer's common stock, no par value ("Buyer Common Stock"), at a purchase price
of $7.75 per share, subject to adjustment as provided in the Warrants;
(b) on June 30, 2000, unless the principal and interest on the
Note has been paid in full by that date, warrants to purchase 150,000 shares of
Buyer Common Stock at a purchase price equal to the lower of (i) $7.75 per share
and (ii) the market price of the Buyer Common Stock at June 30, 2000, subject to
adjustment as provided in the Warrants;
(c) on each of October 2, 2000, and January 2, April 2, July 2 and
October 1, 2001 (or such of these dates as fall before the principal and
interest of the Note has been paid in full) warrants to purchase 50,000 shares
of Buyer Common Stock at a purchase price equal to the lower of (x) $7.75 per
share and (y) the market price of the Buyer Common Stock at the date of
purchase, subject to adjustment as provided in the Warrants.
(d) For the purpose of determining the exercise price of the
warrants, the "market price" of the Buyer Common Stock will be the arithmetic
mean of the last reported sale prices of Buyer Common Stock reported on the New
York Stock Exchange (or in such other market as is the principal market for
Buyer Common Stock) on each of the five trading days before the date as of which
the market price is determined.
(e) If when the Buyer is required by subparagraph (c) to issue
Warrants, the rules of the New York Stock Exchange require that the Company's
stockholders approve the Company's issuance of Common Stock on exercise of those
Warrants, but the Company's stockholders have not approved that issuance of
Common Stock, on the day when the Company was required to issue those Warrants,
the Company will, instead of issuing the Warrants, issue to the Selling
Stockholders a number of stock appreciation rights ("SARs") equal to the number
of Warrants the Company was required to issue on that day, which SARs will have
the following principal terms:
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(i) The exercise price of the SARs will be the same as the exercise
price of the warrants would have been, as provided in subparagraph (c above.
(ii) The expiration date of the SARs will be June 30, 2009.
(iii) The SARs will include provisions which are substantially
identical with Article III of the Warrants regarding adjustment to the exercise
price and to the number of shares of Common Stock or other securities or assets
which the holders will receive upon exercise.
(iv) When an SAR is exercised (x) the holder will not have to pay
the exercise price or any other sum to the Company and (y) the holder will
receive cash per share as to which the SAR is exercised equal to (A) the fair
value on the day the SAR is exercised of Common Stock or other securities or
assets as to which the SAR is exercised (which, as to Common Stock, will be the
average of the last sale price of the Common Stock reported on the New York
Stock Exchange composite tape (or in such other market as is the principal
market for the Common Stock) on each of the ten trading days next preceding the
day for which the fair value is being determined, and as to any other securities
or assets will be their fair value as determined in good faith by the Board of
Directors of the Company), minus (B) the per share exercise price of the SAR.
The SARs will also have other customary terms which will be nearly as possible
the same as the comparable terms of the Warrants.
2. PURCHASE PRICE. The price to be paid by the Selling Stockholders for
the Note and the Warrants (or SARs) described in Section 2 will be $15,000,000,
which will be paid by wire transfer of immediately available funds on the date
of the Closing to an account with a bank in the United States of America which
Buyer specifies at least 48 hours before the Closing to the Three Cities
Research, Inc., as Stockholders Representative for the Selling Stockholders.
3. BOARD OF DIRECTORS. The Stockholders' Representative will have the
right, which the Stockholders Representative may exercise at any time beginning
90 days after the day of the Closing, to nominate two individuals to serve on
the Board of Directors of Buyer, and Buyer agrees to take all actions in its
power to cause the election of the individuals designated by the Stockholders
Representative to its Board of Directors as promptly as practicable. Buyer
further agrees to take all actions in its power to maintain two individuals
nominated by the Stockholders Representative on its Board of Directors until the
Note is repaid in full, except that at any time when, because of prepayments or
transfers of portions of the Note, the principal amount of the Note beneficially
owned by Selling Stockholders is less than 50% of the original principal amount
of the Note, the Buyer need only take all actions in its power to maintain one
individual nominated by the Stockholders Representative on its Board of
Directors. The Stockholders Representative will use its best efforts to cause
the individuals who it nominates to resign from the Board of Directors promptly
after the Note is paid in full, and if at the time the principal amount of the
Note beneficially owned by Selling Stockholders ceases to be at least 50% of the
original principal amount of the Note, there are two individuals nominated by
the Stockholders Representative serving on the Board of Directors, at the
Company's request the Stockholders Representative will use its best efforts to
cause one of those individuals to resign from the Board of Directors.
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4. CLOSING. The closing (the " Closing") of the purchase of the Notes
and the Warrants to be issued at the Closing will take place at the same place
and time as the closing under the Stock Purchase Agreement. At the Closing, (i)
the Buyer will deliver to the Stockholders Representative, on behalf of the
Selling Stockholders, the Note and the Warrants described in subparagraph 1(a),
registered in the name of the Stockholders Representative, as Stockholders
Representative, and (ii) the Stockholders Representative will deliver to the
Buyer evidence of the wire transfer described in Paragraph 2.
5. CONDITIONS TO OBLIGATIONS OF SELLING STOCKHOLDERS. The obligations
of the Selling Stockholders at the Closing are subject to (i) satisfaction of
all the conditions set forth in Section 5.2 of the Stock Purchase Agreement and
(ii) Buyer's purchasing all the outstanding stock of Precision Industrial
Corporation from the Selling Stockholders at the Closing under the Stock
Purchase Agreement.
6. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of the Buyer at
the Closing are subject to (i) satisfaction of all the conditions set forth in
Section 5.1 of the Stock Purchase Agreement and (ii) Buyer's purchasing all the
outstanding stock of Precision Industrial Corporation from the Selling
Stockholders at the Closing under the Stock Purchase Agreement.
7. SECURITIES LAW MATTERS. Each of the Selling Stockholders
acknowledges that the Note and the Warrants, and the shares of Buyer Common
Stock issuable upon the Warrants, may not have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
or transferred other than in a transaction which is registered under the
Securities Act or is exempt from the registration requirements of the Securities
Act.
8. AUTHORITY OF STOCKHOLDERS REPRESENTATIVE. The Stockholders
Representative represents and warrants to the Buyer that the Stockholders
Representative is duly authorized to execute and delivery this Agreement on
behalf of each of the Selling Stockholders.
IN WITNESS WHEREOF, the Buyer and the Stockholders Representative, on
behalf of the Selling Stockholders, have executed this Agreement, intending to
be legally bound by it, on the day shown on the first page of this Agreement.
THE MONARCH MACHINE TOOL
COMPANY
By:________________________________
Title: President
THREE CITIES RESEARCH, INC., as
Stockholders Representative
By:________________________________
Title:
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