THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of May 3, 1998, between Echlin
Inc., a Connecticut corporation ("Issuer"), and Xxxx Corporation, a Virginia
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto simultaneously with this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 12,655,345 fully paid and nonassessable shares
of Issuer's Common Stock, par value $1.00 per share ("Common
Stock"), at an aggregate price of $55 per share (the "Option
Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding shares of Common
Stock without giving effect to any shares subject to or issued
pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement), or (ii)
redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares
of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such
number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject
or issued pursuant to the Option. Noth-
ing contained in this Section 1(b) or elsewhere in this Agreement
shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
a Triggering Event (as defined in Section 8.3(a) of the Merger
Agreement) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that
the Holder shall have sent the written notice of such exercise (as
provided in subsection (c) of this Section 2 within 60 days
following such Triggering Event. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as defined
in the Merger Agreement) of the Merger; or (ii) the passage of 12
months after termination of the Merger Agreement. The term
"Holder" shall mean the holder or holders of the Option.
(b) Issuer shall notify Grantee promptly in writing of the
occurrence of any Triggering Event of which it has knowledge, it
being understood that the giving of such notice by Issuer shall
not be a condition to the right of the Holder to exercise the
Option, but that the 60-day time period set forth in the prior
subsection shall not commence until the giving of such notice.
(c) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of shares it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business
days nor later than 60 days from the Notice Date for the closing
of such purchase (the "Closing Date"); provided that if prior
notification to or approval of any regulatory agency is required
in connection with such purchase, the Issuer and the Holder shall
promptly file the required notice or application for approval and
shall cooperate and use reasonable best efforts to expeditiously
process the same, and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting
period or periods shall have passed; provided further that if any
such required notification periods have not expired or been
terminated or such approvals have not been obtained or any
requisite waiting period or periods shall not have passed on or
prior to the 12-month anniversary of the Notice Date, despite the
Issuer's compliance with all of its obligations hereunder, the
provisions of Section 7(a)(i) shall be deemed to have been
invoked, without regard to the expiration of any time periods that
might otherwise apply thereto, and the
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Issuer shall thereupon immediately pay to the Holder the Option
Repurchase Price. Any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto.
(d) At the closing referred to in subsection (c) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of
the Option in immediately available funds by wire transfer to a
bank account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (d) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this
Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(f) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933
Act"), in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the reference
to the provisions to this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under
circum-
-3-
stances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(g) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (c) of
this Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the
Holder. Issuer shall pay all expenses, and any and all United
States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery
of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer 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 Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase 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 Issuer; (iii) use its best
efforts to promptly take all action as may from time to time be
required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
and regulations promulgated thereunder and (y) in the event prior
approval of or notice to any regulatory authority is necessary
before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing
such information to such regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) use its best efforts to promptly take all action
provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject
-4-
to the same conditions as are set forth herein, in the aggregate
the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any
Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by Issuer 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, Issuer will execute and deliver
a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on
or in respect of the Common Stock, in each case, that would be
prohibited under the terms of the Merger Agreement, the type and
number of shares of Common Stock purchasable upon exercise hereof
and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations
hereunder.
6. Upon the occurrence of a Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 60 days of such Triggering Event (whether
on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current a
shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option
and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and
any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its rea-
-5-
sonable best efforts to cause such registration statement first to
become effective and then to remain effective for such period not
in excess of 120 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated
hereby may be reduced; and provided, however, that after any such
required reduction the number of Option Shares to be included in
such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that
if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical
and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registration,
Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and
other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be
obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one
Grantee as a result of any assignment or division of this
Agreement.
7. (a) At any time from or after the occurrence of a Triggering
Event, (i) at the request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto)
shall repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as
-6-
defined below) exceeds (B) the Option Price, multiplied by the
number of shares for which this Option may then be exercised and
(ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 60 days of such occurrence
(or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number
of Option Shares so designated. The term "Market/Offer Price"
shall mean the highest of (i) the highest price per share of
Common Stock to be paid or received in connection with or as a
result of such Triggering Event (including, in the event of a
sale of all or a substantial portion of Issuer's assets, the sum
of the price paid in such sale for such assets and the current
market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably
acceptable to the Issuer, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale), or
(ii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares,
as the case may be. In determining the Market/Offer Price, the
value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to
the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any
Option Shares pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with
the provisions of this Section 7. Within the latter to occur of
(x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Triggering Event, Issuer
shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof, if any, that Issuer is not
then prohibited under applicable law and regulation from so
delivering or with respect to which Issuer does not require the
approval (or has obtained such ap-
-7-
proval) of its stockholders pursuant to Article VIII of Issuer's
Amended Certificate of Incorporation.
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing, or requires any approval of its
stockholders to repurchase, the Option and/or the Option Shares in
full, Issuer shall immediately so notify the Holder and/or the
Owner and thereafter deliver or cause to be delivered, from time
to time, to the Holder and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 7 is prohibited under
applicable law or regulation from delivering, or requires any
approval of its stockholders to deliver, to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain such approval of its
stockholders and all required regulatory and legal approvals and
to file any required notices, in each case as promptly as
practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of
the Option Repurchase Price or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event
unless no Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or
merge
-8-
into any person, other than Grantee 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 Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision
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 (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined), or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially
all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(C) "Assigned Value" shall mean the Market/Offer Price,
as defined in Section 7.
(D) "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for the 45
business days immediately preceding the consolidation,
merger or sale in question; provided that if Issuer is
the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock
issued by the person merging into Issuer or by any
company which controls or is controlled by such person,
as the Holder may elect.
-9-
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned
Value multiplied by the number of shares of Common Stock for which
the Option is then exercisable, divided by the Average Price. The
exercise price of the Substitute Option per share of Substitute
Common Stock shall then be equal to the Option Price multiplied by
a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing subsections,
shall the Substitute Option be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding prior to
exercise of the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder
equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation
and any person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder.
9. (a) Prior to the Exercise Termination Date, at the request of
the holder of the Substitute Option (the "Substitute Option
Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to (x) the amount
by which (i) the Highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of
-10-
the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised plus (y) Grantee's reasonable out-of-pocket expenses
(to the extent not previously reimbursed), and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option
Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Grantee's reasonable Out-of-Pocket Expenses
(to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of
the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of
the Substitute Shares, as applicable.
(b) Prior to the Exercise Termination Date, the Substitute Option
Holder and the Substitute Share Owner, as the case may be, may
exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such
an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option
Issuer to repurchase the Substitute Option and/or the Substitute
Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option
Issuer shall deliver or cause to be delivered to the Substitute
Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable
law and regulation, or under any express provision of its
certificate of incorporation or similar charter document requiring
prior stockholder approval, from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing, or requires
any approval of its stockholders pursuant to its certificate of
incorporation or similar charter document to repurchase, the
Substitute Option and/or the Substitute Shares in part or in full,
the Substitute Option
-11-
Issuer following a request for repurchase pursuant to this
Section 9 shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter deliver
or cause to be delivered, from time to time, to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate,
the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering,
within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to subsection (b) of this Section
9 prohibited under applicable law or regulation from delivering,
or requires the any approval of its stockholders under its
certificate of incorporation or similar charter document to
deliver, to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Optio Repurchase
Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts
to obtain any such required stockholder approval and all required
regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered
to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substitute
Share Owner, a certificate for the Substitute Common Shares it is
then so prohibited from repurchasing.
10. The 60-day period for exercise of certain rights under
Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, for the expiration of all statutory waiting periods,
and to the extent required to obtain any required stockholder
approval or until such stockholder approval is no longer required
pursuant to the relevant certificate of
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incorporation or similar charter document; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act
by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer 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
Issuer and no other corporate proceedings on the part of Issuer
(other than the shareholder approval referred to in Sections 7(b)
and 9(a)) are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to 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 Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests and
not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming
all of the Rights or amending or terminating the Rights Agreement)
so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the
grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The 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 Grantee. This Agreement has been duly executed and delivered by
Grantee.
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(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option
will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration
under the Securities Act.
13. (a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined below
in Section 13(c)) exceed $35 million.
(b) Notwithstanding anything to the contrary contained herein,
the Option may not be exercised for a number of shares as would,
as of the date of exercise, result in a Notional Total Profit (as
defined below in Section 13(d)) of more than $35 million;
provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) pursuant to Section 7, (ii) (x) the
amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 7, less (y) Grantee's purchase
price for such Option Shares, and (iii) any equivalent amount with
respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to
exercise the Option shall be the Total Profit determined as of the
date of such proposed exercise assuming that the Option were
exercised on such date for such number of shares and assuming that
such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage
commissions).
14. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent
of the other party, except that Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder to any of its wholly owned subsidiaries.
15. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including making
application to list
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the shares of Common Stock issuable hereunder on the New York
Stock Exchange upon official notice of issuance.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section 1(a) (as adjusted pursuant to Section 1(b) or 5), it is
the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as
may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed
given if personally delivered, telecopied (with confirmation) or
mailed by registered or certified mail (return receipt requested)
at the respective addresses of the parties set forth in the Merger
Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, regardless
of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and
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supersedes all prior arrangements or understandings with
respect thereof, written or oral. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger
Agreement.
24. Subject to compliance with applicable law, prior to the
Effective Time, any provision hereof may be (i) waived by the
party benefited by the provision, or (ii) amended or modified at
any time, by an agreement in writing between the parties hereto
approved by their respective Boards of Directors and executed in
the same manner as this Agreement.
25. The provisions of Sections 9.9 and 9.10 of the Merger
Agreement shall apply equally to this Agreement as if included
herein.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
ECHLIN INC.
By: /s/ Xxxxx X. XxXxxxx
------------------------------
Name: Xxxxx X. XxXxxxx
Title: Chairman, President and
Chief Executive Officer
XXXX CORPORATION
By: /s/ Southwood X. Xxxxxxx
------------------------------
Name: Southwood X. Xxxxxxx
Title: Chairman and Chief Executive
Officer
