STOCKHOLDER OPTION AGREEMENT
AGREEMENT dated as of October 17, 1997 between Xxxxxxx Electric
Co., a Missouri corporation ("Buyer"), and Xxxxxx X. Canada (the
"Stockholder").
W I T N E S S E T H:
WHEREAS, immediately prior to the execution of this Agreement,
Buyer, Computational Systems, Incorporated, a Tennessee corporation (the
"Company"), and Emersub LVII, Inc., a Delaware corporation ("Merger
Subsidiary"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Subsidiary will be merged with and into the Company
(the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Buyer has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
Option
Section 1.1. Grant of Option. The Stockholder hereby grants to
Buyer an irrevocable, unconditional option (the "Option") to purchase any and
all of the shares of common stock, no par value per share, of the Company
beneficially owned (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) by the Stockholder or
with respect to which the Stockholder has a contractual right to acquire,
whether conditioned on continued employment, payment of the purchase price
therefor or otherwise (the "Shares"), at a purchase price of $29.65 per Share
(the "Purchase Price").
Section 1.2. Exercise of Option. (a) Subject to the
conditions set forth in Section 1.5 hereof, the Option may be exercised by
Buyer, in whole or in part, at any time or from time to time after the
termination of the Merger Agreement pursuant to (x) Section 9.01(b)(iii)
thereof; provided that a Takeover Proposal (as defined in the Merger
Agreement) shall have been publicly announced at any time prior to the date of
the Company's stockholder vote on the approval of the Merger and the Merger
Agreement, or (y) Section 9.01(c) thereof and, in each case, prior to the 30th
business day after such termination. In the event Buyer wishes to exercise
the Option for all or some of the Shares, Buyer shall send a written notice
(the "Exercise Notice") to the Stockholder and Escrow Agent (as defined in
Section 1.3) specifying the total number of Shares it wishes to purchase
pursuant to such exercise and the place, the date (not less than one nor more
than 20 business days from the date of the Exercise Notice), and the time for
the closing of such purchase, provided that such date and time may be earlier
than one day after the Exercise Notice if reasonably practicable. Each
closing of a purchase of Shares (a "Closing") shall take place at the place,
on the date and at the time designated by Buyer in its Exercise Notice,
provided that if, at the date of the Closing herein provided for, the
conditions set forth in Section 1.5 shall not have been satisfied (or waived
by the Stockholder), Buyer may postpone the Closing until a date within five
business days after such conditions are satisfied.
(b) Buyer shall not be under any obligation to deliver any Exercise
Notice and may allow the Option to terminate without purchasing any Shares
hereunder; provided however that once Buyer has delivered to the Stockholder
an Exercise Notice, subject to the terms and conditions of this Agreement,
Buyer shall be bound to effect the purchase as described in such Exercise
Notice.
Section 1.3. Deposit in Escrow. Within five calendar days of
the execution and delivery of this Agreement, the Stockholder shall execute and
deliver to Buyer and the escrow agent (the "Escrow Agent") a copy of the
Escrow Agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). Concurrently with the execution and delivery of the Escrow
Agreement, the Stockholder shall deliver a certificate or certificates
representing (or cause to be made book entry delivery to an account designated
by the Escrow Agent of) all of the Shares to the Escrow Agent, duly endorsed
or accompanied by stock powers duly executed in blank. All Shares so
delivered to the Escrow Agent shall remain subject to the Escrow Agreement
until the earlier of (i) the purchase of any of such Shares by Buyer hereunder,
or (ii) termination of this Agreement.
Section 1.4. Closing. At any Closing, (a) Buyer shall deliver
to the Stockholder a certified or bank cashier's check payable to or upon the
order of the Stockholder in an amount equal to (i) the number of the Shares
being purchased at such Closing multiplied by (ii) the Purchase Price (the
"Purchase Amount"), and (b) upon receipt of the items enumerated in Section
2 of the Escrow Agreement, the Escrow Agent shall deliver to Buyer a
certificate or certificates representing such Shares, duly endorsed or
accompanied by stock powers duly executed in blank, or make book entry
delivery of such Shares to an account designated by Buyer.
Section 1.5. Conditions to the Obligations of the Stockholder.
The obligations of the Stockholder to sell Shares at any Closing is subject to
the following conditions:
(a) The representations and warranties of Buyer contained in
Article 4 shall be true and correct in all material respects on the date
thereof.
(b) All waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") applicable to the exercise of the
Option shall have expired or been terminated.
(c) There shall be no preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or
by a governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining the exercise of the Option.
Section 1.6. Adjustment Upon Change in Capitalization or
Merger. (a) In the event of any change in the Company's capital stock by
reason of stock dividends, stock splits, mergers, consolidations,
recapitalizations, combinations, conversions, exchanges of shares,
extraordinary or liquidating dividends, or other changes in the corporate or
capital structure of the Company which would have the effect of diluting or
changing Buyer's rights hereunder, the number and kind of shares or securities
subject to the Option and the purchase price per Share (but not the total
purchase price) shall be appropriately and equitably adjusted so that Buyer
shall receive upon exercise of the Option the number and class of shares or
other securities or property that Buyer would have received in respect of the
Shares purchasable upon exercise of the Option if the Option had been
exercised immediately prior to such event. The Stockholder shall take such
steps in connection with such consolidation, merger, liquidation or other such
action as may be necessary to assure that the provisions hereof shall
thereafter apply as nearly as possible to any securities or property
thereafter deliverable upon any exercise of the Option.
(b) In the event the consideration per Share to be paid by Buyer
pursuant to the Merger is increased, the Purchase Price shall be similarly
increased.
ARTICLE 2
Grant of Proxy
The Stockholder hereby revokes any and all previous proxies
granted with respect to the Shares. By entering into this Agreement, the
Stockholder hereby grants a proxy appointing Buyer as his attorney-in-fact and
proxy, with full power of substitution, for and in such Stockholder's name, to
vote the Shares held of record by such Stockholder (a) in favor of the Merger
Agreement and the transactions contemplated by the Merger Agreement (including
the Merger) and any actions required in furtherance thereof; (b) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) against any and all of the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement):
(i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or
its subsidiaries;
(ii) any sale, lease or transfer of a material amount of
assets of the Company or its subsidiaries, or any share exchange,
reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of the Company or its subsidiaries; or
(iii) (A) any change in a majority of the persons who
constitute the board of directors of the Company; (B) any material change in
the present capitalization of the Company including any proposal to issue or
sell a substantial equity interest in the Company or its subsidiaries; (C) any
amendment of the Company's certificate of incorporation or by-laws; (D) any
other change in the Company's corporate structure or business; or (E) any
other action which is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially adversely affect the Merger or
the transactions contemplated by this Agreement or the Merger Agreement.
The proxy granted by the Stockholder pursuant to this Article 2
is irrevocable, is coupled with an interest and shall survive the death,
disability, incapacity or incompetency of the Stockholder and in all other
circumstances; provided, however, that such proxy shall be automatically
revoked upon termination of this Agreement in accordance with its terms. For
Shares of which the Stockholder is the beneficial but not the record owner,
the Stockholder shall use his best efforts to cause any record owner of such
Shares to grant to Buyer a proxy to the same effect as that contained herein.
The Stockholder shall perform such further acts and execute such further
documents as may be required to vest in Buyer the sole power to vote such
Shares during the term of the proxy granted herein.
ARTICLE 3
Representations and Warranties of the Stockholder
The Stockholder represents and warrants to Buyer that:
Section 3.1. Valid Title. The Stockholder is the sole, true,
lawful and beneficial owner of the Shares purported to be owned by the
Stockholder with no restrictions on his voting rights or rights of disposition
pertaining thereto. At any Closing, the Stockholder will convey good and
valid title to the Shares being purchased free and clear of any and all
claims, liens, charges, encumbrances and security interests. None of the
Shares is subject to any voting trust or other agreement or arrangement with
respect to the voting of such Shares.
Section 3.2. Non-Contravention. The execution, delivery and
performance by the Stockholder of this Agreement and the consummation of the
transactions contemplated hereby do not and will not contravene or constitute
a default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Stockholder or to a loss of any
benefit of the Stockholder under any provision of applicable law or regulation
or of any agreement, judgment, injunction, order, decree or other instrument
binding on the Stockholder or result in the imposition of any lien on any asset
of the Stockholder.
Section 3.3. Binding Effect. This Agreement is a valid and
binding Agreement of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally.
Section 3.4. Total Shares. As of the date of this Agreement,
the Stockholder beneficially owns 1,070,692 Shares (of which 1,066,652 of these
Shares are held of record) and has options to purchase an aggregate of 24,661
Shares (of which options to purchase an aggregate of 4,040 Shares are
exercisable). Except as set forth in this Section and except for 53,000 Shares
held of record by the Stockholder as trustee for the benefit of Xxxxxxx X.
Xxxxx'x children, the Stockholder owns no securities of the Company or options
to purchase or rights to subscribe for or otherwise acquire any securities of
the Company and has no other interest in or voting rights with respect to any
securities of the Company.
Section 3.5. Finder's Fees. No investment banker, broker or
finder is entitled to a commission or fee from Buyer or the Company in respect
of this Agreement based upon any arrangement or agreement made by or on behalf
of the Stockholder.
ARTICLE 4
Representations and Warranties of Buyer
Buyer represents and warrants to the Stockholder:
Section 4.1. Corporate Power and Authority. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by the board of directors of
Buyer and no other corporate action on the part of Buyer is necessary to
authorize the execution, delivery or performance by Buyer of this Agreement
and the consummation by Buyer of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and is a valid and
binding Agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally.
Section 4.2. Acquisition for Buyer's Account. The Shares to be
acquired by Buyer upon any exercise of the Option will be acquired by Buyer
for its own account and not with a view to the public distribution thereof and
will not be transferred except in compliance with the Securities Act of 1933.
ARTICLE 5
Covenants of the Stockholder
The Stockholder hereby covenants and agrees that:
Section 5.1. No Proxies for or Encumbrances on Shares. Except
pursuant to the terms of this Agreement, the Stockholder shall not, without the
prior written consent of Buyer, directly or indirectly, (i) grant any proxies
or enter into any voting trust or other agreement or arrangement with respect
to the voting of any of the Shares or (ii) acquire, sell, assign, transfer,
encumber or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the direct or indirect acquisition
or sale, assignment, transfer, encumbrance or other disposition of, any of the
Shares during the term of this Agreement. The Stockholder shall not seek or
solicit any such acquisition or sale, assignment, transfer, encumbrance or
other disposition or any such contract, option or other arrangement or
assignment or understanding and agrees to notify Buyer promptly and to provide
all details requested by Buyer if the Stockholder shall be approached or
solicited, directly or indirectly, by any person with respect to any of the
foregoing.
Section 5.2. No Shopping. The Stockholder shall not directly
or indirectly (i) solicit, initiate or knowingly encourage (or authorize any
person to solicit, initiate or knowingly encourage) the submission of any
Takeover Proposal or (ii) subject to the fiduciary duty of the Stockholder as
a director of the Company under applicable law, participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect to the Company, or take any other action to facilitate any inquiries
or the making of any proposal that constitutes or may reasonably be expected
to lead to a Takeover Proposal. The Stockholder shall promptly advise Buyer
of the terms of any communications it may receive relating to any of the
foregoing.
ARTICLE 6
Miscellaneous
Section 6.1. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost
or expense.
Section 6.2. Further Assurances. In the event any exercise of
the Option occurs, each of Buyer and the Stockholder will execute and deliver
or cause to be executed and delivered all further documents and instruments and
use its best efforts to secure such consents and take all such further action
as may be reasonably necessary in order to consummate the transactions
contemplated hereby or to enable Buyer to exercise and enjoy all benefits and
rights of the Stockholder with respect to the Shares to be acquired upon such
exercise of the Option.
Section 6.3. Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or
bound, to consummate and make effective the transactions contemplated by this
Agreement, to obtain all necessary waivers, consents and approvals and effect
all necessary registrations and filings, including, but not limited to,
filings under the HSR Act, responses to requests for additional information
related to such filings, and submission of information requested by
governmental authorities, and to rectify any event or circumstances which
could impede consummation of the transactions contemplated hereby.
Section 6.4. Specific Performance. Buyer and the Stockholder
agree that Buyer would be irreparably damaged if for any reason the Stockholder
failed to sell the Shares (or other securities deliverable pursuant to Section
1.6) to be purchased upon any exercise of the Option or to perform any of its
other obligations under this Agreement, and that Buyer would not have an
adequate remedy at law for money damages in such event. Accordingly, Buyer
shall be entitled to specific performance and injunctive and other equitable
relief to enforce the performance of this Agreement by the Stockholder. This
provision is without prejudice to any other rights that Buyer may have against
the Stockholder for any failure to perform his obligations under this
Agreement.
Section 6.5. Notices. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram or telex, or by registered or
certified mail (postage prepaid, return receipt requested) to such party at its
address set forth on the signature page hereto.
Section 6.6. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares to be acquired by Buyer upon any
exercise of the Option.
Section 6.7. Amendments; Termination. 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. This
Agreement will automatically terminate upon the termination of the Merger
Agreement in accordance with its terms, except that if the termination of the
Merger Agreement results in the Option becoming exercisable as provided in
Section 1.02 hereof, then this Agreement shall automatically terminate on the
31st business day after such termination. Such termination will not adversely
affect any rights that have accrued hereunder prior to the date of such
termination.
Section 6.8. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 6.9. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of Delaware without giving effect to
the principles of conflicts of laws thereof.
Section 6.10. 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 on October 18, 1997 when
each party hereto shall have received counterparts hereof signed by all of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
XXXXXXX ELECTRIC CO.
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
Assistant Vice President-Development
Xxxxxxx Electric Co.
0000 X. Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
/s/ Xxxxxx X. Canada
------------------------------------
Xxxxxx X. Canada
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Exhibit A
ESCROW AGREEMENT
AGREEMENT dated as of October __, 1997 among Xxxxxxx Electric
Co., a Missouri corporation ("Buyer"), Xxxxxx X. Canada (the "Stockholder")
and ___________ (the "Escrow Agent").
The parties hereto hereby agree as follows:
1. Pursuant to Section 1.3 of the Stockholder Option Agreement,
the Stockholder hereby delivers to the Escrow Agent a certificate or
certificates representing the Shares (the "Certificates"). The Escrow Agent
hereby acknowledges receipt of the Certificate or Certificates in escrow
pursuant to the terms and conditions of this Agreement.
2. (a) Upon receipt of (i) a certificate of Buyer stating that
(x) all conditions set forth in the Stockholder Option Agreement have been met
or waived pursuant to the terms thereof and (y) Buyer has tendered the Purchase
Amount as provided therein and (ii) evidence from Buyer that the Purchase
Amount has been so tendered and received by the Stockholder, the Escrow Agent
will deliver to Buyer the Certificates.
(b) The Escrow Agent will deliver the Certificates to Buyer upon
receipt of the certificate and evidence provided for in paragraph 2(a) above,
notwithstanding any claim given to, or demand made upon, the Escrow Agent or
any action taken or threatened to be taken by any other person or entity. The
Escrow Agent's obligation to so deliver such Certificates shall survive the
death, disability, incapacity, incompetence or other circumstance relating to
the Stockholder.
(c) Buyer will deliver simultaneously to the Stockholder a copy of
all certificates, evidences and instructions delivered to the Escrow Agent
hereunder.
3. Except pursuant to the terms and conditions of this Agreement
or by joint written instructions signed by all parties hereto, the Escrow Agent
shall not sell, transfer or otherwise dispose of in any manner the Shares held
in escrow by it.
4. The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and the Escrow
Agent shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement.
5. The Escrow Agent is not a party to, and is not bound by or
charged with notice of, any agreement out of which this escrow may arise,
including but not limited to the Stockholder Option Agreement.
6. The Escrow Agent shall not be responsible for any failure or
inability of the other parties hereof, or any one of them, to perform or comply
with the provisions of this Agreement or the Stockholder Option Agreement.
7. In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely upon any document, instrument or signature believed
by it in good faith to be genuine and signed by any party hereto or an
authorized officer or agent thereof, and shall not be required to investigate
the truth or accuracy of any statement contained in any such document or
instrument. The Escrow Agent may assume that any person purporting to give
any notice in accordance with the provisions hereof has been duly authorized
to do so.
8. The Escrow Agent shall not be liable for any error of judgment,
or any action taken, suffered or omitted to be taken hereunder except in the
case of its gross negligence or willful misconduct, nor shall it be liable for
the default or misconduct of any employee, agent or attorney appointed by it
who shall have been selected with reasonable care.
9. The Escrow Agent shall have no responsibility as to the
validity or value of the escrowed Shares. The Escrow Agent shall have no duty
as to the collection or protection of the Shares held in escrow by it or income
thereon, nor as to the preservation of any rights pertaining thereto, beyond
the safe custody of any such securities actually in its possession.
10. The Escrow Agent or any successor to it as escrow agent
hereafter appointed may at any time resign and be discharged of the duties
imposed hereunder by giving notice to each of the parties hereto, such
resignation to take effect upon a successor escrow agent's acceptance of
appointment.
11. Upon execution of this Agreement the Escrow Agent shall receive
an acceptance fee in the amount to which the Escrow Agent and Buyer have
heretofore agreed together with reasonable attorney's fees incurred in
connection with the preparation of this Agreement.
12. Buyer will reimburse and indemnify the Escrow Agent for, and
hold it harmless against, any loss, liability or expense, including, but not
limited to, reasonable attorney's fees, incurred without gross negligence or
willful misconduct on the part of the Escrow Agent arising our of or in
connection with the acceptance of, or the performance of its duties and
obligations under, this Agreement, as well as the reasonable costs and
expenses of defending itself against any claim or liability arising out of or
relating to this Agreement.
13. All notices, requests, demands and other communications
provided for by this Agreement (unless otherwise specified herein) shall be in
writing and delivered by mail, telegram, telex or personal delivery and shall
be given to all persons specified below, and shall be deemed given, if by
telegram, telex or personal delivery when received, and if mailed, two
business days after being mailed postage prepaid, registered or certified mail,
and addressed to the respective parties as set forth below or at such other
address as any party may specify to the other parties in writing (such change
of address to become effective only upon receipt of such notification in
writing).
If to the Stockholder:
Xxxxxx X. Canada
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
If to Buyer:
Xxxxxxx Electric Co.
0000 X. Xxxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx
If to the Escrow Agent:
________________
________________
________________
14. This Agreement shall terminate upon the earlier of (a) the
transfer of all the Shares by the Escrow Agent to Buyer as provided in
Section 2 of this Agreement or (b) the termination of the Stockholder Option
Agreement as provided therein. The Stockholder and Buyer shall give notice to
the Escrow Agent of a termination of this Agreement pursuant to clause 14(b)
above and, upon receipt of both such notices, any Shares held by the Escrow
Agent pursuant hereto shall be returned immediately to the Stockholder.
15. This Agreement shall be governed by and construed and enforced
in accordance with the law of the State of Delaware.
16. This Agreement may be amended, modified, superseded or
canceled, and any of the terms hereof may be waived, only by written
instrument executed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any breach of any
term contained in this Agreement shall be deemed to be or construed as a
further or continuing waiver of any such breach in any subsequent instance or
a waiver of any breach of any other term contained in this Agreement.
17. 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 instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
XXXXXXX ELECTRIC CO.
By:
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Xxxxxx X. Xxxx Assistant Vice
President-Development
[ESCROW AGENT]
By:
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Name:
Title:
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Xxxxxx X. Canada
