STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of August 11, 1998
("Agreement"), between Liberty Technologies, Inc., a Pennsylvania corporation
(the "Company"), and Crane Co., a Delaware corporation ("Crane");
W I T N E S S E T H:
WHEREAS, the Company, Crane and LTI Merger, Inc., a Pennsylvania
corporation and wholly owned subsidiary of Crane ("Merger Sub"), propose to
enter into an Agreement and Plan of Merger, of even date herewith (the "Merger
Agreement"), which provides that, among other things, upon the terms and
subject to the conditions thereof, Merger Sub will be merged with and into the
Company, with the Company continuing as the surviving corporation; and
WHEREAS, as a condition to the willingness of Crane to enter into the
Merger Agreement, Crane has required that the Company agree, and in order to
induce Crane to enter into the Merger Agreement, the Company has agreed, to
xxxxx Xxxxx an option to purchase certain shares of the common stock of the
Company together with the Rights associated therewith, in accordance with the
terms of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and in the Merger Agreement, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
THE STOCK OPTION
Section 1.1 Grant of Stock Option. The Company hereby grants to Crane
an irrevocable option (the "Stock Option") to purchase up to 997,633 newly
issued shares (the "Option Shares") of common stock, par value $.01 per share,
together with the Rights associated therewith, of the Company ("Company Common
Stock") in the manner set forth below at a price (the "Purchase Price") of
$2.75 per Option Share. Capitalized terms used herein but not defined herein
shall have the meanings set forth in the Merger Agreement.
Section 1.2 Exercise of Stock Option. (a) Subject to the satisfaction
of the conditions set forth in Section 1.3 hereof, the Stock Option may be
exercised by Crane, in whole or in part, at any time or from time to time after
the occurrence of an Exercise Event (as defined below) and prior to the
Termination Date (as defined below).
(b) An "Exercise Event" shall occur for purposes of this
Agreement upon the termination of the Merger Agreement pursuant to Section
7.01(d) or (e) thereof.
(c) The "Termination Date" shall occur for purposes of this
Agreement upon the first to occur of any of the following:
(i) the consummation of the Offer;
(ii) the date on which the Merger Agreement is terminated
pursuant to Section 7.01 thereof, if an Exercise Event shall not have
occurred; or
(iii) the date which is 365 days after the date on which the
Merger Agreement is terminated pursuant to Section 7.01 thereof, if an
Exercise Event shall have occurred;
provided that, with respect to clause (iii) above, if the Stock Option cannot
be exercised as of such date by reason of any applicable judgment, decree, law,
regulation or order, then the Termination Date shall be extended until fifteen
days after such impediment has been removed.
(d) In the event Crane wishes to exercise the Stock Option, Crane
shall send a written notice (an "Exercise Notice") to the Company specifying
the total number of Option Shares, if any, Crane wishes to purchase, the number
of Option Shares, if any, with respect to which Crane wishes to exercise its
Cash-Out Right (as defined herein) pursuant to Section 1.4 hereof, the
denominations of the certificate or certificates evidencing such Option Shares
which Crane wishes to receive, a date (a "Closing Date"), which shall be a
business day which is at least three business days after delivery of such
notice, and place for the closing of such purchase (a "Closing").
(e) Upon receipt of an Exercise Notice, the Company shall be
obligated to deliver to Crane the number of Option Shares specified therein, in
accordance with the terms of this Agreement, on the later of (i) the Closing
Date and (ii) the first business day on which there shall be no preliminary or
permanent injunction or other order by any court of competent jurisdiction
preventing or prohibiting such exercise of the Stock Option or the delivery of
the Option Shares in respect of such exercise.
Section 1.3 Closings. At each Closing, the Company will deliver to
Crane a certificate or certificates evidencing the number of Option Shares
specified in Crane's Exercise Notice, registered in the name of Crane or its
nominee, and Crane will deliver to the Company the aggregate Purchase Price for
such Option Shares. All payments made by Crane to the Company pursuant to this
Section 1.3 shall be made, at the option of Crane, by wire transfer of
immediately available funds, or by delivery to the Company of a certified or
bank check or checks payable to or on the order of the Company.
Section 1.4 Cash-Out Right. If, at any time during the period
commencing on the occurrence of an Exercise Event and terminating on the
Termination Date, Crane sends to the Company an Exercise Notice indicating
Crane's election to exercise its rights (the "Cash-Out Right") pursuant to this
Section 1.4, then the Company shall pay to Crane, on the Closing Date, in
exchange for the cancellation of the Stock Option with respect to such number
of Option Shares as Crane specifies in the Exercise Notice, an amount in cash
equal to such number of Option Shares multiplied by the difference between (i)
the average closing price for the 10 trading days commencing on the 12th
trading day immediately preceding the date of the Exercise
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Notice per share of Company Common Stock (the "Average Price") and (ii) the
Purchase Price. If Crane has sent an Exercise Notice to the Company prior to
the Termination Date, Crane shall be entitled to all of its rights under this
Section 1.4 to the extent exercised pursuant to the Exercise Notice
notwithstanding the failure of the Company to perform all of its obligations
under this Section 1.4 prior to the Termination Date.
Section 1.5 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 shares or securities to be issued by the Company upon exercise of the
Stock Option shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction, so that Crane shall receive upon
exercise of the Stock Option the number and class of shares or other securities
or property that Crane would have received in respect of Company Common Stock if
the Stock Option had been exercised immediately prior to such event, 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.
(b) No adjustment made in accordance with this Section 1.5 shall
constitute or be deemed a waiver of any breach of any of the Company's
representations, warranties, covenants, agreements or obligations contained in
the Merger Agreement.
(c) The provisions of this Agreement, including, without
limitation, Sections 1.1, 1.2, 1.3, 1.4 and 3.2, shall apply with appropriate
adjustments to any securities for which the Stock Option becomes exercisable
pursuant to this Section 1.5.
Section 1.6 Covenants of Crane. Crane agrees not to transfer or
otherwise dispose of the Option or the Option Shares, or any interest therein,
except in compliance with the Securities Act of 1933, as amended (the
"Securities Act") and any applicable state securities laws. Crane further
agrees to the placement of the following legend on the certificate(s)
representing the Option Shares (in addition to any legend required under
applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER EITHER (i) THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
(ii) ANY APPLICABLE STATE LAW GOVERNING THE OFFER AND SALE OF
SECURITIES, NO TRANSFER OR OTHER DISPOSITION OF THESE SHARES, OR OF
ANY INTEREST THEREIN, MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH OTHER STATE LAWS OR
PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH OTHER
STATE LAWS, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
represents and warrants to Crane that (a) the Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement, (b) the execution and delivery by the Company
of this Agreement and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, (c) this Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, (d) 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 Date shall have reserved, all the Option Shares
issuable pursuant to this Agreement, and the Company will take all necessary
corporate action to authorize and reserve and permit it to issue all additional
shares of Company Common Stock or other securities which may be issued pursuant
to Section 1.5 hereof, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, shall be duly authorized, validly
issued, fully paid and nonassessable, shall be delivered free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on Crane's voting rights, charges and other
encumbrances of any nature whatsoever (other than this Agreement) and shall not
be subject to any preemptive rights, and (e) the execution and delivery of this
Agreement by the Company does not, and the consummation by the Company of the
transactions contemplated by this Agreement will not, conflict with, or result
in a violation of, or default under (with or without notice or lapse of time or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Amended
and Restated Articles of Incorporation or Bylaws of the Company or (ii) any
mortgage, indenture, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or its properties or assets, except in the case of the preceding clause (ii)
for any such conflicts, violations, default, terminations, cancellations or
accelerations which would not have a Material Adverse Effect on the Company.
Section 2.2 Representations and Warranties of Crane. Crane represents
and warrants to the Company that (a) Crane is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by this Agreement,
(b) the execution and delivery by Crane of this Agreement and the consummation
by Crane of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Crane, and (c) the
execution and delivery of this Agreement by Crane does not, and the
consummation by Crane of the transactions contemplated by this Agreement will
not conflict with, or result in a violation of, or default under (with or
without notice or lapse of time or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Certificate of Incorporation or Bylaws
of Crane or (ii) any mortgage, indenture, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Crane or its properties or assets, except in the case of the
preceding clause (ii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which would not have a Material
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Adverse Effect on Crane.
ARTICLE III
COVENANTS OF THE COMPANY
Section 3.1 Listing; Other Action. (a) The Company shall, at its
expense, use its best efforts to cause the Option Shares to be approved for
trading on the Nasdaq National Market ("Nasdaq"), subject to notice of
issuance, as promptly as practicable following the date of this Agreement, and
will provide prompt notice to Nasdaq of the issuance of each Option Share.
(b) The Company shall use its best efforts to take, or cause to
be taken, all appropriate action, 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 hereunder,
including, without limitation, obtaining all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental
Authorities.
Section 3.2 Registration. (a) As used in this Agreement, "Registrable
Securities" means each of the Option Shares issued to Crane hereunder and any
other securities issued in exchange for, or issued as dividends or otherwise on
or in respect of, any of such Option Shares.
(b) At any time or from time to time following the first Closing,
Crane may make a written request to the Company for registration under and in
accordance with the provisions of the Securities Act with respect to all or
part of the Registrable Securities (a "Demand Registration"). A Demand
Registration may be, at the option of Crane, a shelf registration or a
registration involving an underwritten offering. As soon as reasonably
practicable after Crane's request for a Demand Registration, the Company shall
file one or more registration statements on any appropriate form with respect
to all of the Registrable Securities requested to be so registered; provided
that the Company will not be required to file any such registration statement
during any period of time (not to exceed 30 days after such request) when (A)
the Company is in possession of material non-public information which it
reasonably believes, upon the advice of its outside counsel, would have to be
disclosed if a registration statement were filed at that time, and that any
such disclosure at that time would be materially detrimental to the Company, or
(B) the Company is required under the Securities Act to include audited
financial statements for any period in such registration statement that are not
yet available for inclusion therein. The Company shall use its best efforts to
have the Demand Registration declared effective as soon as reasonably
practicable after such filing and to keep the Demand Registration continuously
effective; provided that the effectiveness of any Demand Registration may be
terminated if and when all of the Registrable Securities covered thereby shall
have been sold. If any Demand Registration involves an underwritten offering,
(i) the Company shall have the right to select the managing underwriter, which
shall be reasonably acceptable to Crane, and (ii) the Company shall enter into
an underwriting agreement in customary form. The Company shall not include in
any Demand Registration any securities other than the Registrable Securities
requested to be registered therein by Crane.
(c) Up to two registrations effected under this Section 3.2 shall
be effected at the Company's expense except for underwriting commissions
allocable to the Registrable
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Securities. The Company shall indemnify and hold harmless Crane, its affiliates
and controlling persons and their respective officers, directors, agents and
representatives from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, all out-of-pocket
expenses, investigation expenses, expenses incurred with respect to any
judgment and fees and disbursements of counsel and accountants) arising out of
or based upon any statements contained in, or omissions or alleged omissions
from, each registration statement (and related prospectus) filed pursuant to
this Section 3.2; provided, however, that the Company shall not be liable in
any such case to Crane or any affiliate or controlling person of Crane or any
of their respective officers, directors, agents or representatives to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or omission or alleged omission made in such registration statement or
prospectus in reliance upon, and in conformity with, written information
furnished to the Company specifically for use in the preparation thereof by
Crane, such affiliate, controlling person, officer, director, agent or
representative, as the case may be.
ARTICLE IV
COVENANT OF CRANE
Section 4.1 Distribution. Crane hereby covenants and agrees that Crane
is acquiring the Stock Option and will acquire the Option Shares for investment
purposes only and not with a view to any distribution thereof in violation of
the Securities Act, and shall not sell any Option Shares purchased pursuant to
this Agreement except in compliance with the Securities Act and applicable law.
ARTICLE V
MISCELLANEOUS
Section 5.1 Expenses. Except as otherwise provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
Section 5.2 Further Assurances. The Company and Crane will execute and
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 5.3 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 5.4 Entire Agreement. This Agreement and the Merger Agreement
(together with the annexes and the other documents delivered pursuant thereto)
constitute the entire agreement between the parties and supersede all prior
agreements and understandings, both written and oral, between the parties or
any of them, with respect to the subject matter hereof.
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Section 5.5 Assignment. This Agreement shall not be assigned by either
party without the prior written consent of the other party.
Section 5.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
Section 5.7 Amendment; Waiver. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto. Either party
hereto may with respect to the other party (i) extend the time for the
performance of any obligation or other act, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby.
Section 5.8 Severability. If any term or other provision of this
Agreement is held by a court or other competent authority to be invalid,
illegal or incapable of being enforced by any rule of law, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect.
Section 5.9 Notice. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, sent or transmitted, if delivered personally,
sent by reputable overnight courier to the respective parties at their
addresses as specified in the Merger Agreement or sent by electronic
transmission to the respective parties at their telecopier numbers as specified
in the Merger Agreement.
Section 5.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without giving effect to the principles of conflicts of law thereof.
Section 5.11 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 5.12 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Company and Crane have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
LIBERTY TECHNOLOGIES, INC.
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R. Xxx Xxxxx
President
CRANE CO.
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Xxxxx X. Xxxxx
Vice President - Finance and Chief
Financial Officer
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