EXHIBIT 2
COMPANY OPTION AGREEMENT
------------------------
STOCK OPTION AGREEMENT, dated as of January 28, 1998 (this
"Agreement"), between Xxxx Group, Inc., a Delaware corporation ("Parent"), and
--------- ------
Sun Coast Industries, Inc., a Delaware corporation (the "Company").
-------
WHEREAS, Parent, Saffron 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 500,000 newly-issued shares
------
(the "Shares") of the common stock, par value $.01 per share of the Company (the
------
"Company Common Stock") at a purchase price per share of $10.75 (the "Exercise
-------------------- --------
Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement. 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 shall expire, on the earliest of
(i) the
1
Effective Time (as defined in the Merger Agreement) and (ii) six (6) months
after any termination of the Merger Agreement pursuant to Article VIII thereof;
provided, however, this Agreement shall not terminate, and the Option shall not
-------- -------
expire if the Option Notice (as defined below) has been given by Parent prior to
such date.
SECTION 1.2 Exercise Of Option. At any time or from time to time
------------------
prior to the termination of the Option 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
Common 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 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 or other entity or
group which beneficially owns more than 15% of the outstanding voting
equity of the Company
2
(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 or executed any written consent with
respect to, 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 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
3
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 with respect to the Company Common
Stock if the 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) In the event that the Company shall enter into an agreement (i)
to consolidate with or
4
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
the 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 with respect to 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:
5
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 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
6
reserve for issuance upon exercise of the Option a total of 500,000 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
------------------------------------
corporation 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. 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
incorporation 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)
7
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, 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
8
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 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."
9
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 4.3 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 4.4 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 action as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Agreement.
SECTION 4.5 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
10
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
11
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 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 9.4(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.
12
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.
SUN COAST INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------
Name:
Title:
XXXX GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name:
Title:
13
