EXHIBIT F
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered into as of
February __, 1999, by and among: (i) Xxxxxx Financial Corporation, a Florida
corporation ("Xxxxxx"), (ii) J. Xxxxxx Xxxxxx, an individual of Jacksonville,
Florida ("Xxxxxx"), and (iii) Imagine Investments, Inc., a Delaware corporation
with principal office and place of business in Dallas, Texas ("Imagine").
Recitals:
X. Xxxxxx and Xxxxxx both own shares of common stock of Riverside Group, Inc.,
a Florida corporation (the "Corporation").
X. Xxxxxx and Xxxxxx are willing to grant to Imagine an option to purchase
785,173 shares (the "Shares") of the common stock of the Corporation, and
Imagine desires to acquire such option from Xxxxxx and Xxxxxx, upon the terms
and provisions set forth herein.
C. The parties hereto recognize and represent that at the time this Agreement
was negotiated, the common stock of the Corporation was trading for less than
$1.75 per share on the NASDAQ SmallCap Stock Market.
Agreement:
Now, Therefore, the parties hereby agree as follows:
1. Option.
1.1 Grant of Option. In consideration of the payment by Imagine to
Xxxxxx and Xxxxxx of the sum of $10,000, the receipt and sufficiency of which
they hereby acknowledge (the "Option Consideration"), Xxxxxx and Xxxxxx hereby
jointly and severally grant to Imagine the exclusive right and option to
purchase the Shares (the "Option"). The purchase price for each Share shall be
$1.75 (the "Option Price"). The Option Consideration shall not apply against
the Option Price of the shares purchased by Imagine hereunder.
1.2 Term. The term of the Option shall commence on the date hereof and
shall expire on December 31, 2001 (the "Term"). Provided, however, that Imagine
may unilaterally extend the Term until December 31, 2004, upon written notice to
Xxxxxx and Xxxxxx; provided, further, however, if that certain Promissory Note
in the face principal amount of Six Million Dollars ($6,000,000) made by Xxxxxx
payable to the order of Imagine, of even date herewith (the "Note"), has not
been paid in full by the date of such extension by Imagine, then Imagine must
extend the maturity date of the Promissory Note until December 31, 2004 (or such
earlier date as Imagine may select in its sole discretion for both the Option
and the maturity date of such Promissory Note),
with interest on such Note still being due and payable on a quarterly basis as
provided therein. If the Note has been paid prior to December 31, 2001, Imagine
may nevertheless extend the Option until December 31, 2004, and the payment by
Xxxxxx of the Note prior to its extended maturity date shall not affect the
extended Term of the Option, which shall remain December 31, 2004 (or such
earlier date selected by Imagine).
1.3 Adjustments. Notwithstanding any provision to the contrary contained
in this Agreement, if, and whenever, prior to the delivery of Certificates
representing all of the Shares by Xxxxxx and Xxxxxx to Imagine, the Corporation
shall effect a subdivision or consolidation or other capital readjustment with
respect to its stock, by stock split, stock combination or otherwise, or the
Corporation shall issue any additional shares by way of a stock dividend, or the
Corporation shall otherwise effect or become obligated to effect any other
increase in the number of shares outstanding without receiving the full fair
market value therefor in money, services or other property or shall effect a
reduction in the number of shares outstanding without the payment of money or
other property for the repurchase or redemption thereof, then the number of
shares remaining subject to the Option and the Purchase Price therefor shall be
proportionately adjusted, immediately following each such action, as follows:
(a) In the event of an increase in the number of outstanding shares as a
result of any such action, the number of Shares remaining subject to the Option
shall be proportionately increased, and the Option Price shall be
proportionately reduced, so that, upon exercise of the Option, Imagine shall be
entitled to receive the aggregate number of Shares which it would have been
entitled to receive upon exercise of such Option had Imagine exercised such
Option immediately prior to such event or, if earlier, immediately prior to the
record date for determining shareholders entitled to participate in such event
(if the Corporation has issued additional Shares or has become obligated to
issue additional Shares for some consideration but for less that the full fair
market value thereof, the adjustment in the number of Shares subject to the
Option and the Option Price per Share shall be made on an equitable pro rata
basis to the complete satisfaction of Imagine),
(b) In the event of a reduction in the number of outstanding shares of
the Corporation as a result of any such action, the number of Shares remaining
subject to the Option shall be proportionately reduced, and the Option Price per
Share shall be proportionately increased, in each case in accordance with the
change in the number of shares outstanding as a result of such action(s)
described in this Section,
(c) Simultaneously with any adjustment of the total number of Shares
purchased upon exercise of the Option, in accordance with Section 1.3(a) or (b)
above, the Purchase Price per Share shall be adjusted to equal the quotient
resulting by dividing the number of Shares (including fractional share
interests) covered by this
Option immediately after such adjustment into the Option Price that would have
been paid upon the exercise of the Option as to all of the Shares then remaining
subject to the Option. The adjustments provided for in this Section 1.3(c) shall
become effective immediately after the opening of business on the day next
following (i) the record date of such dividends, (ii) the date upon such
subdivision, combination or reclassification shall become effective, or (iii)
the record date for any similar action contemplated by this Section 1.3.
1.4 Manner of Exercise.
(a) Imagine may exercise the Option as to any or all of the Shares at
any time on or prior to the expiration of the Term by delivery of written notice
of such exercise ("Notice") to Xxxxxx and Xxxxxx. The Notice shall specify the
number of Shares to be purchased pursuant to exercise of the Option, and shall
be accompanied by a certified or cashier's check payable to Xxxxxx and Xxxxxx or
wire of immediately available funds in an amount equal to (i) the Option Price,
multiplied by (ii) the total number of Shares then being purchased by Imagine
pursuant to exercise of the Option; provided, however, if the Note has not then
been paid in full, then the Option Price for all the Shares purchased upon such
exercise shall instead be applied against the Note.
(b) Upon exercise of the Option by Imagine and simultaneously with
delivery by Imagine of the applicable Option Price to Xxxxxx and Xxxxxx, Xxxxxx
and Xxxxxx shall deliver to Imagine the certificate(s), accompanied by duly
executed stock powers, evidencing the Shares being purchased pursuant to such
exercise of the Option, free and clear of all liens, claims, options, pledges,
security interests and the like and free of all restriction; provided, however,
that if any amount is owed under the Note, or the instruments securing the Note,
the entire amount of the applicable Option Price shall be applied directly by
Imagine on the Note or such other indebtedness owed to Imagine (except to the
extent of $1.35 per Share if necessary to be paid to Bank Boston, N.A. ("Bank
Boston") to have such Shares released from its lien) but, nevertheless, the
entire amount of such Option Price shall be deemed to have been paid to Xxxxxx
and Xxxxxx, and thereupon, Imagine shall release such Shares so purchased by
Imagine from its lien that secures the Note.
2. Legend on Share Certificates. The following legend shall be placed upon
each Certificate representing the Shares (other than those still pledged to Bank
Boston) until such time as such Shares are placed in the name of Imagine:
A Stock Option Agreement dated as of February __, 1999 among Xxxxxx
Financial Corporation and J. Xxxxxx Xxxxxx, shareholders of the
Corporation, and Imagine Investments, Inc. ("Imagine"), has been delivered
to the Secretary of the Corporation to be kept on file at the Corporation's
registered office. That Agreement imposes various restrictions upon the
shares represented by this Certificate and subjects such shares to an
exclusive option in favor of Imagine to purchase such shares and certain
other rights and interests with respect to these
shares.
3. Further Assurances. Each party shall execute such additional documents
and take such other actions as the other party shall reasonably request to
consummate the transactions contemplated hereby and otherwise as may be
necessary to effectively carry out the terms and provisions of this Agreement.
4. Representations, Warranties and Covenant of Xxxxxx and Xxxxxx.
4.1 Representations and Warranties. Xxxxxx and Xxxxxx hereby represent
and warrant to Imagine that (i) Xxxxxx and Xxxxxx are the sole legal and
beneficial owners of the Shares, and that the Shares are free and clear of all
liens, claims, encumbrances, charges and restrictions of any nature whatsoever
except for prior liens in favor of Bank Boston, N.A. and Imagine; (ii) Xxxxxx
and Xxxxxx have the sole right and authority to enter into and perform this
Agreement and transfer title to the Shares to Imagine; and (iii) the execution
and delivery of this Agreement and the sale of the Shares to Imagine pursuant to
the provisions hereof will not breach or constitute default under any contract
or agreement to which either Xxxxxx or Xxxxxx is a party. Such representations
and warranties of Xxxxxx and Xxxxxx shall survive the execution of this
Agreement.
4.2 Covenant. During the Term, Xxxxxx and Xxxxxx shall not sell, convey,
further pledge or encumber, or otherwise transfer any Shares, except pursuant to
the laws of descent and distribution upon the death of Xxxxxx; provided that, in
the event of the death of Xxxxxx, the Shares shall remain subject to the terms
of this Agreement.
5. Indemnification. Xxxxxx and Xxxxxx shall indemnify and hold Imagine
harmless against and in respect of:
(a) Any damage, deficiency, liability or costs resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of Xxxxxx or Xxxxxx under this Agreement; and
(b) Any claim, action, suit, proceeding, demand, judgment, assessment,
cost and expense, including reasonable counsel fees, resulting from any
misrepresentation, breach of warranty or non-fulfillment of any covenant or
agreement on the part of Xxxxxx or Xxxxxx under this Agreement.
6. Additional Agreements Regarding Shares. Xxxxxx and Xxxxxx hereby assign
to Imagine all of the respective rights, titles and interests of Xxxxxx and
Xxxxxx under any and all registration rights and similar agreements with respect
to the Shares of the Corporation, to the extent Imagine has from time to time
acquired or thereafter does acquire any of the Shares.
In addition, in the event Imagine has from time to time purchased or acquired
any of
the Shares of the Corporation pursuant to the Option or otherwise, and if Xxxxxx
and/or Xxxxxx shall, at any time and from time to time through December 31,
2009, agree to sell any of the stock of the Corporation owned by either of them,
or to otherwise transfer any of such stock, either directly or indirectly,
Xxxxxx and/or Xxxxxx, and or either or both of them that are selling or
transferring such Shares, shall:
(i) Give written notice to Imagine by certified or registered mail
(return receipt requested) or by hand delivery (with a return receipt) as
promptly as practicable (but in no event less than fifteen (15) days prior to
such sale or transfer) of all the details, price and terms of such sale or
transfer and the identity of the party (the "Buyer") to whom such stock is to
be sold or transferred; and
(ii) Require as a condition of such sale or transfer that the Buyer
include in such sale or transfer the number of Shares owned by Imagine (but
not greater than (a) the product determined by multiplying the number of
shares of stock of the Corporation involved in such sale by a fraction, the
numerator of which is the number of Shares subject to this Option plus the
number of shares of stock of the Corporation owned by Imagine and the
denominator of which is the number of shares of stock constituting the
numerator of such fraction plus the number of shares of stock of the
Corporation owned by Xxxxxx and Xxxxxx at the time of such calculation (b)
plus the number of shares of stock of the Corporation that Imagine is
entitled to sell under the Loan Agreement of even date herewith pursuant to
which the Note has been issued) that are specified by Imagine in a written
notice to be given by Imagine to Xxxxxx or Xxxxxx, as applicable, within ten
(10) days after Imagine's receipt of the notice provided for in subparagraph
(i) above, all on the same terms and conditions and at the same price per
share of stock as Xxxxxx and/or Xxxxxx are selling such shares of stock of
the Corporation; and
(iii) Imagine shall bear its own legal expenses in connection with
participating in such sale or transfer, but Xxxxxx and Xxxxxx shall pay all
other expenses of Lender in connection with such sale or transfer.
7. Proxy. Xxxxxx and Xxxxxx hereby appoint Imagine as Xxxxxx and Steven's
true and lawful proxy and attorney-in-fact to vote the Shares on any manner as
to which holders of common stock of the Corporation are otherwise entitled to
vote, but only as to the Shares as to which Imagine has exercised the Option.
The proxy granted by Xxxxxx and Xxxxxx herein is coupled with an interest and
shall be irrevocable with respect to any Shares unexercised.
8. Miscellaneous.
8.1 Waiver. The failure of any party to enforce any provision of this
Agreement cannot be construed to be a waiver of such provision or of the right
hereafter to enforce the same, and no waiver of any breach shall be construed as
an agreement to waive any subsequent breach of the same or any other provision.
8.2 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof, and no
prior or collateral promises or conditions in connection with or with respect to
the subject matter hereof not incorporated herein shall be binding upon the
parties hereto.
8.3 Amendment. No modification, extension, renewal, rescission,
termination or waiver of any of the provisions contained herein or any future
representation, promise or condition in connection with the subject matter
hereof shall be binding upon either of the parties unless made in writing and
duly executed by the parties or their authorized representatives.
8.4 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and legal and personal representa tives. Imagine may assign its rights under
this Agreement, in whole or in part, and from time to time, without the need for
consent from Xxxxxx or Xxxxxx.
8.5 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.6 Captions. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this document.
8.7 Governing Law. This Agreement is executed and delivered in, and
shall be construed and enforced in accordance with the laws of, the Commonwealth
of Kentucky.
In Witness Whereof, the parties have entered into this Agreement as of the
date first written above.
Xxxxxx Financial Corporation
By:
Title:
("Xxxxxx")
J. Xxxxxx Xxxxxx
("Xxxxxx")
Imagine Investments, Inc.
By:
Title:
("Imagine")
