Exhibit 2
EXECUTION COPY
COMPANY OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 1, 1997 (this "Agreement"),
between Fremont Acquisition Company, LLC, a Delaware limited liability company
("Parent"), and Xxxx Group, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Xxxx Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), and the Company, concurrently
with the execution and delivery of this Agreement, will enter into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"),
providing for, among other things, the merger of Sub with and into the Company
(the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and Sub to enter
into the Merger Agreement, Parent and Sub have required that the Company agree,
and in order to induce Parent and Sub to enter into the Merger Agreement the
Company has agreed, to grant Parent the option (as hereinafter defined) upon the
terms and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE OPTION
SECTION 1.1 GRANT OF OPTION. The Company hereby grants to Parent an
irrevocable option (the "Option") to purchase up to 782,685 newly-issued shares
(the "Shares") of the Common Stock, par value $.50 per share ("Company Common
Stock"), of the Company at a purchase price per share of $5.40 (the "Exercise
Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement;
PROVIDED, HOWEVER, that in no event shall the number of Shares for which the
Option is exercisable exceed 19.9% of the Company's issued and outstanding
shares of Company Common Stock. The number of Shares that may be received upon
the exercise of the Option and the Exercise Price are subject to adjustment as
herein set forth. This Agreement shall terminate, and the Option hereby granted
expire, on the earliest of (i) the Effective Time (as defined in the Merger
Agreement) and (ii) to the extent that no Option Notice (as defined below) has
theretofore been given by Parent, six (6) months after any termination of the
Merger Agreement pursuant to Article VIII thereof.
SECTION 1.2 EXERCISE OF OPTION. At any time or from time to time
prior to the termination of the option granted hereunder in accordance with the
terms of this Agreement, Parent
(or its designee) may exercise the option, in whole or in part, if on or after
the date hereof:
(a) any corporation, partnership, individual, trust,
unincorporated association, or other entity or "person" (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) other than Parent or any of its "affiliates" (as defined in the Exchange
Act) (a "Third Party"), shall have:
(i) commenced a BONA FIDE tender offer or exchange offer
for any shares of Company Common Stock, the consummation of which would
result in "beneficial ownership" (as defined under the Exchange Act) by
such Third Party (together with all such Third Party's affiliates and
"associates" (as such term is defined in the Exchange Act)) of 15% or more
of the then outstanding voting equity of the Company (either on a primary
or a fully diluted basis);
(ii) acquired beneficial ownership of shares of Company
Stock which, when aggregated with any shares of Company Stock already owned
by such Third Party, its affiliates and associates, would result in the
aggregate beneficial ownership by such Third Party its affiliates and
associates of 15% (or, in the case of The Gabelli Funds, Inc. and its
affiliates and associates, 32%), or more of the then outstanding voting
equity of the Company (either on a primary or a fully diluted basis),
PROVIDED, HOWEVER, that "Third Party" for purposes of this clause (ii)
shall not include any corporation, partnership, person, other entity or
group which beneficially owns more than 15% of the outstanding voting
equity of the Company (either on a primary or a fully diluted basis) as of
the date hereof and that does not, after the date hereof, increase such
ownership percentage by more than an additional 1% of the outstanding
voting equity of the Company (either on a primary or a fully diluted
basis);
(iii) solicited "proxies" in a "solicitation" subject to
the proxy rules under the Exchange Act, executed any written consent or
become a "participant" in any "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act), in each case with respect to the
Company Stock; or
(b) any of the events described in Section 8.1(g) or (h) of the
Merger Agreement that would allow Parent to terminate the Merger Agreement has
occurred (but without the necessity of Parent having terminated the Merger
Agreement).
In the event that Parent wishes to exercise all or any part of the
Option, Parent shall give written notice (the "Option Notice," with the date of
the Option Notice being hereinafter called the "Notice Date") to the Company
specifying
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the number of Shares it will purchase and a place and date (not earlier than
three (3) nor later than twenty (20) business days from the Notice Date) for
closing such purchase (a "Closing"). Parent's obligation to purchase Shares
upon any exercise of the option is subject (at its election) to the conditions
that (i) no preliminary or permanent injunction or other order against the
purchase, issuance or delivery of the Shares issued by any federal, state or
foreign court of competent jurisdiction shall be in effect (and no action or
proceeding shall have been commenced or threatened for purposes of obtaining
such an injunction or order) and (ii) any applicable waiting period under the
HSR Act shall have expired and (iii) there shall have been no material breach of
the representations, warranties, covenants or agreements of the Company
contained in this Agreement or the Merger Agreement; PROVIDED, HOWEVER, that any
failure by Parent to purchase Shares upon exercise of the Option at any Closing
as a result of the nonsatisfaction of any of such conditions shall not affect or
prejudice Parent's right to purchase such Shares upon the subsequent
satisfaction of such conditions. Upon request by Parent, the Company will
promptly take all action required to effect all necessary filings by the Company
under the HSR Act.
SECTION 1.3 PURCHASE OF SHARES. At any Closing, (i) the Company will
deliver to Parent the certificate or certificates representing the number of
Shares being purchased in proper form for transfer upon exercise of the Option
in the denominations designated by Parent in the Option Notice, and, if the
Option has been exercised in part, a new Option evidencing the rights of Parent
to purchase the balance of the Shares subject thereto, and (ii) Parent shall pay
the aggregate purchase price for the Shares to be purchased by delivery to the
Company of a certified or bank cashier's check payable in New York Clearing
House funds to the order of the Company in the amount of the Exercise Price
times the number of shares to be purchased.
SECTION 1.4 ADJUSTMENTS UPON SHARE ISSUANCES, CHANGES IN
CAPITALIZATION, ETC. (a) In the event of any change in Company Common Stock or
in the number of outstanding shares of Company Common Stock by reason of a stock
dividend, split-up, recapitalization, combination, exchange of shares or similar
transaction 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, securities or other property), the type and
number of the Shares to be issued by the Company upon exercise of the Option
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Parent shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Parent would have received in respect to the Company Common Stock
if the Option had been exercised immediately prior to such event, or the record
date therefor,
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as applicable, and such Company Common Stock had elected to the fullest extent
it would have been permitted to elect, to receive such securities, cash or other
property.
(b) In the event that the Company shall enter into an agreement
(i) to consolidate with or merge into any person, other than Parent or one of
its subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Parent or
one of its subsidiaries, to merge into the Company and the Company shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other person or
cash or any other property, or then outstanding shares of Company Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the surviving corporation or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than Parent
or one of its subsidiaries, then, and in each such case, proper provision shall
be made in the agreements governing such transaction so that Parent shall
receive upon exercise of the Option the number and class of shares or other
securities or property that Parent would have received in respect of Company
Common Stock if the Option had been exercised immediately prior to such
transaction, or the record date therefor, as applicable, and such Company Common
Stock had elected to the fullest extent it would have been permitted to elect,
to receive such securities, cash or other property.
(c) The rights of Parent under this Section 1.4 shall be in
addition to, and shall in no way limit, its rights against the Company for any
breach of the Merger Agreement.
(d) The provisions of this Agreement shall apply with
appropriate adjustments to any securities for which the Option becomes
exercisable pursuant to this Section 1.4.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
SECTION 2.1 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware. The Company has all necessary power and authority (corporate and
otherwise) 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 and the consummation by the Company of the
transactions contemplated hereby have been
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duly and validly authorized by the Board of Directors of the Company, and no
other corporate proceeding on the part of the Company is necessary to authorize
this Agreement or for the Company to consummate such transactions. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding obligation of Parent,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
SECTION 2.2 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the certificate of incorporation or by-laws of the Company,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or by which the Company is bound or affected,
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance of any kind on any of the Shares
pursuant to, any agreement, contract, indenture, notice or instrument to which
the Company is a party or by which the Company is bound or affected, or
(iv) except for applicable requirements, if any, of the HSR Act, the Exchange
Act and the Securities Act of 1933, as amended (the "Securities Act"), require
any filing by the Company with, or any permit, authorization, consent or
approval of, any governmental or regulatory authority, domestic or foreign.
SECTION 2.3 OPTION SHARES. The Company has taken all necessary
corporate action to authorize and reserve for issuance upon exercise of the
Option a total of 782,685 Shares, and the Shares, when issued and delivered by
the Company to Parent upon exercise of the Option, will be duly authorized,
validly issued, fully paid and nonassessable shares of Company Common Stock, and
will be free and clear of any security interests, liens, claims, pledges,
charges or encumbrances of any kind.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
SECTION 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Parent is a
limited liability company duly organized and validly existing under the laws of
the State of Delaware. Parent has all necessary power and authority (corporate
and otherwise) to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
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The execution and delivery of this Agreement and the consummation by Parent of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Parent, and no other corporate proceeding on the part of Parent is
necessary to authorize this Agreement or for Parent to consummate such
transactions. This Agreement has been duly executed and delivered by Parent
and, assuming its due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms.
SECTION 3.2 NO CONFLICT, REQUIRED FILING AND CONSENTS. The execution
and delivery of this Agreement by Parent do not, and the performance of this
Agreement by Parent will not, (i) conflict with or violate the certificate of
formation of Parent, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or by which Parent is bound or
affected, (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, contract, indenture, note or instrument to which Parent is a
party or by which it is bound or affected or (iv) except for applicable
requirements, if any, of the HSR Act, the Exchange Act, and the Securities Act,
require any filing by Parent with, or any permit, authorization, consent or
approval of, any governmental or regulatory authority, domestic or foreign,
except in the case of each of the foregoing clauses (i) through (iv) for any
such conflicts, violations, breaches, defaults, failures to file or obtain the
consent or approval of, or other occurrences that would not cause or create a
material risk of non-performance or delayed performance by Parent of its
obligations under this Agreement.
SECTION 3.3 INVESTMENT INTENT. The purchase of Shares pursuant to
this Agreement is for the account of Parent for the purpose of investment and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act and the rules and regulations
promulgated thereunder.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 REGISTRATION RIGHTS; LISTING OF SHARES. (a) Upon the
written request of Parent, the Company agrees to effect up to two registrations
under the Securities Act and any applicable state securities laws covering any
part or all of the Option (provided that only Shares will be distributed to the
public) and any part or all of the Shares purchased under this Agreement, which
registration shall be continued in effect for 90 days, unless, in the written
opinion of counsel to the Company,
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addressed to Parent and reasonably satisfactory in form and substance to counsel
for Parent, such registration is not required for the sale and distribution of
such Shares in the manner contemplated by Parent. The registration effected
under this paragraph shall be effected at the Company's expense except for any
underwriting commissions. If Shares are offered in a firm commitment
underwriting, the Company will provide reasonable and customary indemnification
to the underwriters. In the event of any demand for registration pursuant to
this paragraph, the Company may delay the filing of the registration statement
for a period of up to 90 days if, in the good faith judgment of the Board of
Directors of the Company, such delay is necessary in order to avoid interference
with a planned material transaction involving the Company. In the event the
Company effects a registration of Company Common Stock for its own account or
for any other stockholder of the Company (other than on Form S-4 or Form S-8, or
any successor or similar form), it shall allow Parent to participate in such
registration; PROVIDED, HOWEVER, that if the managing underwriters in such
offering advise the Company in writing that in their opinion the number of
shares of Company Common Stock requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
the securities requested to be included therein pro rata among the holders
requesting to be included.
(b) The Company shall, at its expense, use its best efforts to cause
the Shares to be approved for quotation on the New York Stock Exchange, Inc.
(the "NYSE") subject to notice of issuance, as promptly as practicable following
the date of this Agreement, and will provide prompt notice to the NYSE of the
issuance of each Share pursuant to any exercise of the Option.
SECTION 4.2 LIMITATION ON PROFIT. (a) Notwithstanding any other
provision of this Agreement, in no event shall Parent's Total Profit (as
hereinafter defined) exceed $1,000,000 and, if it otherwise would exceed such
amount, Parent, at its sole election, shall either (a) reduce the number of
shares of Company Common Stock subject to the Company Option, (b) deliver to
Company for cancellation Company Shares previously purchased by Parent, (c) pay
cash to Company, or (d) any combination thereof, so that Parent's actually
realized Total Profit shall not exceed $1,000,000 after taking into account the
foregoing actions.
(b) As used herein, the term "TOTAL PROFIT" shall mean the aggregate
amount (before taxes) of the following: (i) (x) the net cash amounts received
by Parent pursuant to the sale of Company Shares (or any other securities into
which such Company Shares are converted or exchanged) to any unaffiliated party,
less (y) Parent's purchase price of such Company Shares, and (ii) any Notional
Total Profit (as defined below).
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(c) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Parent may propose to exercise the Company
Option shall be the Total Profit determined as of the date of such proposal
assuming that the Company Option were exercised on such date for such number of
shares and assuming that such shares, together with all other Company Shares
held by Parent and its affiliates as of such date, were sold for cash at the
closing market price for the Company Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions).
SECTION 4.3 TRANSFER OF SHARES; RESTRICTIVE LEGEND. Parent agrees
not to transfer or otherwise dispose of the Shares, or any interest therein,
without first providing to the Company an opinion of counsel for Parent,
reasonably satisfactory in form and substance to counsel for the Company, to the
effect that such transfer or disposition will not violate the Securities Act or
any applicable state law governing the offer and sale of securities, and the
rules and regulations thereunder. Parent further agrees to the placement on the
certificate(s) representing the Shares of the following legend:
"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."
provided that upon provision to the Company of any opinion of counsel for
Parent, reasonably satisfactory in form and substance to counsel for the
Company, to the effect that such legend is no longer required under the
provisions of the Securities Act or applicable state securities laws, the
Company shall promptly cause new unlegended certificates representing such
Shares to be issued to Parent against surrender of such legended certificates.
SECTION 4.4 BEST EFFORTS. Subject to the terms and conditions of
this Agreement, Parent and the Company shall each use its best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Each party shall promptly consult with the other and provide any necessary
information and material with respect to all filings made by such party with any
governmental or regulatory authority in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4.5 FURTHER ASSURANCES. The Company shall perform such
further acts and execute such further documents and instruments as may
reasonably be required to vest in Parent the power to carry out the provisions
of this Agreement. If Parent shall exercise the Option, or any portion thereof,
in accordance with the terms of this Agreement, the Company shall, without
additional consideration, execute and deliver all such further documents and
instruments and take all such further
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documents and instruments and take all such further action as Parent may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
SECTION 4.6 SURVIVAL. All of the representations, warranties and
covenants contained herein shall survive a Closing and shall be deemed to have
been made as of the date hereof and as of the date of each Closing.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 SPECIFIC PERFORMANCE. The parties hereto agree that if
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, without any requirement for securing or posting any bond, in
addition to any other remedy at law or equity.
SECTION 5.2 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
SECTION 5.3 AMENDMENT; ASSIGNMENT. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto and specifically
referencing this Agreement. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the rights and obligations of Parent
hereunder may, upon written notice to the Company prior to or promptly following
such action, be assigned by Parent to any of its corporate affiliates, but no
such transfer shall relieve Parent of its obligations hereunder if such
transferee does not perform such obligations.
SECTION 5.4 SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provisions hereof
or thereof shall not affect the validity and enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstances, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid and unenforceable provision and (ii) the
remainder of this Agreement and the application of such provision to other
persons, entities
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or circumstances shall not be affected by such invalidity or unenforceability,
nor shall such invalidity or unenforceability affect the validity or
enforceability of such provision, or the application thereof, in any other
jurisdiction.
SECTION 5.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
SECTION 5.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but each of
which together shall constitute one and the same document.
SECTION 5.7 NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the addresses specified below (or at such
other address for a party as shall be specified by like notice): (i) if to
Parent, to its address set forth in Section 9.2(a) of the Merger Agreement; and
(ii) if to the Company, to the Company's address set forth in Section 9.2(b) of
the Merger Agreement.
SECTION 5.8 BINDING EFFECT. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the successors and assigns of the
parties hereto. Nothing expressed or referred to in this Agreement is intended
or shall be construed to give any person other than the parties to this
Agreement, or their respective successors or assigns, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
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IN WITNESS WHEREOF, each of the Company and Parent have caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
XXXX GROUP, INC.
By: /s/ D. Xxxxxx Xxxxxxxxxx
-----------------------------
Name: D. Xxxxxx Xxxxxxxxxx
Title: President & CEO
FREMONT ACQUISITION
COMPANY, LLC
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Director
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