AGREEMENT FOR OPTION TO ACQUIRE COMMON STOCK OF
XXXXXX, INC.
AGREEMENT FOR OPTION TO ACQUIRE COMMON STOCK OF XXXXXX, INC., dated as
of December 8, 1998 (the "AGREEMENT"), by and between Xxxxxx, Inc., a Colorado
corporation (the "COMPANY"), and Zuellig Group N.A., Inc. a Delaware corporation
("ZGNA").
R E C I T A L S :
WHEREAS, the Company, ZG Merger Sub 1 and ZG Merger Sub 3, each of
which is a Delaware corporation and wholly owned subsidiary of the Company and
ZG Merger Sub 2, a New York corporation and wholly owned subsidiary of the
Company (the "ACQUISITION SUBSIDIARIES"), ZGNA and certain subsidiaries of ZGNA
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "MERGER AGREEMENT"), which provides, upon the terms and subject to the
conditions set forth therein, for the merger of Acquisition Subsidiaries with
and into certain subsidiaries of ZGNA (the "MERGERS"); and
WHEREAS, the Company and ZGNA have entered into an inventory purchase
agreement, dated as of the date hereof (the "INVENTORY PURCHASE AGREEMENT"),
which provides, upon the terms and subject to the conditions set forth therein,
for the purchase from time to time by ZGNA of certain inventory of the Company;
and
WHEREAS, as a condition and inducement to ZGNA's pursuit of the
transactions contemplated by the Merger Agreement and the Inventory Purchase
Agreement, and in consideration therefor, the Company has agreed to grant ZGNA
the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, the Company and
ZGNA, agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Company hereby grants to Holder (as hereinafter defined) an
irrevocable option (the "OPTION") to purchase 2,000,000 shares of common stock,
par value $.001 per share ("COMMON STOCK"), of the Company (as adjusted as set
forth herein, the "OPTION SHARES"), at a purchase price per Option
Share (as adjusted as set forth herein, the "PURCHASE PRICE") equal to
$4.11; PROVIDED, HOWEVER, that this Option may never be exercised for
20% or more of the Common Stock or otherwise in a fashion to require a
vote of the Company's stockholders pursuant to Rule 4310H of the NASD.
3. EXERCISE OF OPTION.
(a) Holder may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of an Exercise Event (as
hereinafter defined); PROVIDED that the Option shall terminate and be of no
further force or effect as follows:
(A) If the Mergers are consummated, upon the Effective Date;
(B) If the Merger Agreement is terminated other than as provided
in the next subsection (C), nine (9) months after the date on which such
termination occurs;
(C) If the Merger Agreement is terminated because the credit
facility contemplated by Sections 7.9 and 8.7 is not received, upon the date of
such termination; and
(D) As provided in Section 7(c) hereof.
The term "HOLDER" shall mean the holder or holders of the Option from
time to time, and which is initially ZGNA.
(b) As used herein, an "EXERCISE EVENT" shall be deemed to have
occurred if any of the following events shall occur:
(i) the Company shall have recommended to its shareholders any
merger, business combination, sale of all or substantially all of its
assets, or the issuance and sale of shares representing more than 20% of
its outstanding Common Stock, other than the Mergers (a "TAKEOVER
TRANSACTION"); or
(ii) any person (other than ZGNA or any Affiliate or associate
of ZGNA) shall have acquired beneficial ownership (as such term is defined
in Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "GROUP" (as such term is defined in
Section 13(d)(3) of the Exchange Act), other than a group of which ZGNA or
any Affiliate or associate of ZGNA is a member, shall have been formed
which beneficially owns,
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or has the right to acquire beneficial ownership of, 20% or more of the
voting power of the Company; or
(iii) any person (other than ZGNA or any Affiliate or associate
of ZGNA) shall have merged or consolidated with the Company (other than a
merger solely to change the Company's state of incorporation) or acquired
all or substantially all of the assets of the Company excluding a sale only
of the paclitaxel assets.
(c) The Company shall notify Holder promptly in writing of the
occurrence of any Exercise Event, it being understood that the giving of such
notice by the Company shall not be a condition to the right of Holder to
exercise the Option.
(d) In the event Holder wishes to exercise the Option, it shall send
to the Company a written notice (the date of which being herein referred to as
the "NOTICE DATE") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier than
three (3) business days nor later than fifteen (15) business days from the
Notice Date for the closing (the "CLOSING") of such purchase (the "CLOSING
DATE"). If prior notification to or approval of any governmental regulatory
agency is required in connection with such purchase, the Company shall cooperate
with Holder in the filing of the required notice or application for approval and
the obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods). Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) The purchase rights evidenced by this Option shall be exercised
by the Holder presenting this Agreement to the Company at its office in Boulder,
Colorado, accompanied by payment, of an amount (the "EXERCISE PAYMENT") equal to
the Purchase Price multiplied by the number of Option Shares being purchased
pursuant to such exercise, payable as follows: (i) by payment to the Company in
cash, by certified or official bank check, or by wire transfer of the Exercise
Payment, (ii) by surrender to the Company for cancellation of securities of the
Company having a Market Price (as hereinafter defined) on the date of exercise
equal to the Exercise Payment; or (c) by a combination of the methods described
in clauses (a) and (b) above. In lieu of exercising the Option, the Holder may
elect to receive a payment equal to the difference between (i) the Market Price
multiplied by the number of Option Shares as to which the payment is then being
elected and (ii) the exercise price with
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respect to such Option Shares, payable by the Company to the Holder only
in shares of Common Stock valued at the Market Price on the date of
exercise. For purposes hereof, the term "MARKET PRICE" shall mean the
average closing price of a share of Common Stock for the 15 consecutive
trading days preceding such day on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange, the average of the reported bid and asked prices
during such 15 trading day period on the Nasdaq National Market or, if
the shares are not listed on the Nasdaq National Market, in the
over-the-counter market or, if the shares of Common Stock are not
publicly traded, the Market Price for such day shall be the fair market
value thereof determined jointly by the Company and the Holder;
PROVIDED, HOWEVER, that if such parties are unable to reach agreement
within a reasonable period of time, the Market Price shall be determined
in good faith by an independent investment banking firm selected jointly
by the Company and the Holder or, if that selection cannot be made
within 15 days, by an independent investment banking firm selected by
the American Arbitration Association in accordance with its rules. All
costs and expenses incurred in connection with the determination of
Market Price shall be borne by the Company.
(b) At each Closing, simultaneously with the delivery of the Exercise
Payment, and presentation of this Agreement as provided in Section 4(a), the
Company shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, fully paid and nonassessable and subject to no
preemptive rights, and (B) an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the Option Shares
purchasable hereunder, if any, and the remaining rights of the Holder.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities
law, and may not be sold, transferred or otherwise disposed of except
pursuant to an effective registration under the Act or in a transaction
which, in the opinion of counsel reasonably acceptable to the Company, is
exempt from such registration.
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It is understood and agreed that the portion of the above legend
relating to restrictions on transfer shall be removed by delivery of substitute
certificate(s) without such legend if Holder shall have delivered to the Company
a copy of a letter from the staff of the SEC, or an opinion of counsel in form
and substance reasonably satisfactory to the Company and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to the Company of the written notice of
exercise of the Option provided for under Section 3(d), the tender of the
applicable Exercise Payment and the tender of this Agreement to the Company,
Holder shall be deemed to be the holder of record of the shares of the Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of the Common Stock shall not then be actually delivered to Holder. The
Company shall pay all expenses, and any and all United States federal, state,
and local stamp and similar taxes and other similar charges that may be payable
in connection with the preparation, issuance and delivery of stock certificates
under this Section in the name of Holder or its assignee, transferee, or
designee.
(e) The Company agrees (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of the Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase the Common Stock,
(ii) 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 (iii) promptly to take all action as may from time to time be
required to accomplish the issuance of the Common Stock (including (A)
complying with all premerger notification, reporting and waiting period
requirements and (B) in the event prior approval of or notice to any
governmental regulatory agency is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Governmental Authority as it may require).
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to ZGNA (and Holder, if different from ZGNA) as
follows:
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(a) CORPORATE AUTHORITY. The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated; this Agreement has
been duly and validly executed and delivered by the Company.
(b) SHARES RESERVED FOR ISSUANCE; CAPITAL STOCK. The Company has
taken all necessary corporate action to authorize and reserve and permit it to
issue, and at all times from the date hereof through the termination of this
Agreement in accordance with its terms, will have reserved for issuance upon the
exercise of the Option, that number of shares of the Common Stock equal to the
maximum number of shares of the Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances, and security interests (other than those created by this
Agreement) and not subject to any preemptive rights.
(c) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not or will not, and the consummation by the Company of any of
the transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, its articles of incorporation or
by-laws, or the comparable governing instruments of any of its subsidiaries, or
(B) a breach or violation of, or a default under, any 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 law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which it
or any of its subsidiaries is subject, that would, in any case give any other
person the ability to prevent or enjoin the Company' performance under this
Agreement in any material respect.
6. REPRESENTATIONS AND WARRANTIES OF ZGNA. ZGNA hereby represents
and warrants to the Company as follows:
(a) CORPORATE AUTHORITY. ZGNA has 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
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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 ZGNA; and this Agreement has
been duly executed and delivered by ZGNA.
(b) INVESTMENT REPRESENTATIONS.
(i) ZGNA is acquiring the Option and the Option Shares (collectively,
the "SECURITIES") for its own account for investment only, and not with a view
to, or for sale in connection with, any distribution of the Securities in
violation of the Securities Act, or any rule or regulation under the Securities
Act.
(ii) ZGNA has had such opportunity as it deems adequate to obtain from
representatives of the Company such information as is necessary to permit ZGNA
to evaluate the merits and risks of its investment in the Company.
(iii) ZGNA has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Securities and to make an informed investment decision with respect to such
purchase.
(iv) ZGNA acknowledges that (1) the Securities have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act and (2) the Securities cannot be
sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
(v) ZGNA is an "accredited investor" as defined in Regulation D of
the Securities Act.
(vi) ZGNA is a resident of California and the offer and sale of the
Option occurred in Colorado and California.
7. ADJUSTMENT UPON CHANGES IN THE COMPANY CAPITALIZATION, ETC.
(a) In the event of any change in the Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares of Common Stock for other securities of the Company, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Holder shall receive, upon exercise of
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the Option, the number and class of shares or other securities or
property that Holder would have received in respect of the Common Stock
if the Option had been exercised immediately prior to such event, or the
record date therefor, as applicable. No provision of this Section 7
shall be deemed to affect or change, or constitute authorization for any
violation of, any of the covenants or representations in the Merger
Agreement.
(b) In the event that the Company shall enter into an agreement (i)
to consolidate with or merge into any person, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any person
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
the 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
the outstanding shares of the Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option to acquire the number and class of shares or other securities or
property that Holder would have received in respect of the Common Stock if the
Option had been exercised immediately prior to such consolidation, merger, sale
or transfer, or the record date therefor, as applicable.
(c) Notwithstanding Section 7(b), in the event the Company's Board of
Directors approves a transaction involving a merger or consolidation of the
Company with, or sale of all or substantially all of its assets as a part of a
plan of liquidation to, any other corporation or entity which is not an
affiliate of the Company, the Board of Directors may require, upon written
notice to the Holder, that the Holder must exercise the Option simultaneously
with the consummation of such merger or consolidation or the option shall
terminate on the business day preceding the closing of such transaction, but if
such transaction does not close such exercise or termination shall be null and
void and the Option shall remain in effect.
8. QUOTATION; LISTING. If the Common Stock or any other securities
to be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on any securities exchange, the Company,
upon the request of Holder, will promptly file an application, if required, to
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authorize for quotation or trading or listing the shares of the Common Stock or
other securities to be acquired upon exercise of the Option on such securities
exchange and will use its best efforts to obtain approval, if required, of such
quotation or listing as soon as practicable.
9. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of the
Company for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of the Common Stock purchasable hereunder. The terms "AGREEMENT" and
"OPTION" as used herein include any other Agreements and related Options for
which this Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Agreement, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, the Company will
execute and deliver a new Agreement of like tenor and date. Subject to
fulfillment of such indemnification obligation, any such new Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of the Company, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such State.
(b) PARAGRAPH AND SECTION HEADINGS. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
(c) NOTICES.
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand, by facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid:
(1) if to ZGNA, at 0000 Xx Xxxxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxxxxxx
00000-0000 (facsimile: (000) 000-0000),
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marked for attention of President, or at such other address as ZGNA
may have furnished the Company in writing (with a copy to Xxxxxxx Xxxx
& Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000-0000, Attention:
Xxxxxx X. Xxxxxx, Esq. (facsimile: 212-728-8111), or at such other
address it may have furnished the Company in writing), or
(2) if to the Company, at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxx
00000 (facsimile: (000) 000-0000), marked for the attention of Xxxx
Xxxxx, or at such other address as the Company may have furnished
Investor in writing (with a copy to Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.,
0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxx
Xxxxxxxxx, Esq. (facsimile: 303-449-5426) or at such other address as
it may have furnished in writing to the Investor and the Escrow
Agent), or
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery; if delivered by
courier, on the first Business Day following the date of the delivery to the
courier; and if mailed by registered or certified mail, on the third Business
Day after the date of such mailing.
(d) EXPENSES AND TAXES. Each party shall pay its own fees and
expenses incurred in connection with the transactions contemplated hereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. ZGNA may only assign its rights hereunder to an Affiliate of ZGNA.
(f) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement
constitutes the entire understandings of the parties hereto and supersede all
prior agreements or understandings with respect to the subject matter hereof
among such parties. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and ZGNA. No course of dealing between the Company and ZGNA nor
any delay in exercising any rights hereunder shall operate as a waiver of any
rights of either party hereto.
(g) SEVERABILITY. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such
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determination shall not effect the remaining provisions of this
Agreement which shall remain in full force and effect.
(h) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
XXXXXX, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------
Name: Xxxx X. Xxxxx
Title: CEO
ZUELLIG GROUP N.A., INC.
By: /s/ Xxxxxx Xxxxxxxx
-------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
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