Xxxxxxxxx X. Xxxxx
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, X.X. 00000
October 29, 1996
First Medical Corporation
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Gentlemen:
When countersigned below, this letter agreement will constitute a legal
and binding agreement between us with respect to the following matters.
1. GRANT OF OPTION. I hereby grant to First Medical Corporation ("FMC")
an option to acquire up to 6,000,000 shares of common stock of The Lehigh Group
Inc. ("Lehigh") upon the terms and subject to the conditions set forth in this
letter agreement.
2. CONSIDERATION. Concurrently with the acceptance of this letter
agreement, FMC is delivering its note in the principal amount of $100,000 in
payment for the option. The form of the FMC note is attached hereto as Exhibit
A.
3. TERM OF THE OPTION. The option shall expire at the earlier of (a)
January 15, 1997 or (b) consummation or termination for any reason of the
Agreement and Plan of Merger between Lehigh and FMC (the "Merger Agreement").
4. EXERCISE PRICE. The price and terms upon which the option may be
exercised shall be governed by the Warrant Agreement between Lehigh and me, a
copy of which is attached hereto as Exhibit B. In the event of any inconsistency
between this letter agreement and the Warrant Agreement, this letter agreement
shall govern. In order to avoid any penalties for "short swing profits" under
Section 16(b), to the extent necessary this letter agreement shall be deemed to
constitute an assignment of my rights under the Warrant Agreement. The parties
agree to take any other actions which may be necessary to structure the exercise
of the option and the warrant so as to avoid any liability under Section 16(b).
In order to induce the grant of this option, FMC hereby represents and warrants
to Xxxxxxxxx X. Xxxxx that FMC has obtained a Commitment from First Union
National Bank of Florida to lend to FMC the sum of $3,000,000 to be used by FMC
to exercise the option, which commitment is embodied in a commitment letter a
copy of which is annexed hereto as Exhibit C.
5. STANDSTILL AGREEMENTS. Until December 31, 2001, FMC agrees to the
following: (i) it shall not acquire, directly or indirectly, any shares of
common stock of Lehigh or any voting rights with
respect thereto, except (a) by means of the option granted pursuant to this
letter agreement and (b) up to 15% of the common stock of Lehigh through open
market or privately negotiated purchases which are consummated prior to January
15, 1997; (ii) the only matter for which it may solicit proxies from Lehigh
shareholders is approval of the Merger Agreement, for which it shall vote all
shares of common stock of Lehigh under its control or for which it obtains
proxies in favor of the Merger Agreement; (iii) on all other matters submitted
for a vote of stockholders, it shall vote all shares of common stock of Lehigh
under its control in accordance with the recommendation of the Board of
Directors of Lehigh (so long as such matter has no detrimental effect on the
Merger Agreement); and (iv) it shall not transfer, assign, hypothecate, pledge
or otherwise dispose of any of the shares of common stock of Lehigh under its
control (or the voting rights attendant thereto) without first obtaining (a) my
consent, and (b) the agreement of the purchaser to be bound by these standstill
provisions; provided, however, that FMC may sell shares pursuant its demand
registration right pursuant to the terms of an agreement with Lehigh dated as of
the date hereof.
6. NON-TRANSFERABILITY OF OPTION. This letter agreement, and the option
contained herein, may not be transferred, assigned, hypothecated or pledged
(either directly or indirectly) by FMC in any fashion to any entity without my
prior written consent. For this purposes, a "change of control" of FMC would
constitute a transfer of the option for which my prior written consent would be
required.
7. INDEMNIFICATION AND CONTRIBUTION. FMC agrees to indemnify and hold
me harmless against any and all claims, causes of action or liabilities which
may arise from this letter agreement or the exercise of the option or warrant
hereunder. I agree to provide FMC with prompt notification of any matter which
could give rise to a claim for indemnification; FMC agrees to promptly pay all
fees and expenses which I might incur in defending any such matters, and to pay
in full any ultimate liability which might result. Notwithstanding FMC's
agreement to provide such indemnification, I shall control the selection of
counsel and direct the defense strategy. In the event indemnification is not
available due to public policy or otherwise, the parties shall reformulate this
provision to provide for contribution by FMC based on the relative benefits
obtained by it, which shall be assumed to be 99%. FMC agrees that it will not
prosecute or support any claim which seeks to invalidate this provision.
8. PROXY AT MEETING. Prior to the record date for the stockholder
meeting at which the Merger Agreement shall be voted upon, I will use my best
efforts to obtain irrevocable proxies from major stockholders (including myself
and other officers and directors of Lehigh) in favor of approval of the Merger
Agreement.
9. MISCELLANEOUS. This letter agreement: constitutes the entire
agreement between us with respect to this subject; shall inure to the benefit of
my successors and assigns; may only be modified or amended by a writing signed
by both parties; and is governed by the laws of the state of Delaware.
Very truly yours,
/s/ Xxxxxxxxx X. Xxxxx
--------------------------
Xxxxxxxxx X. Xxxxx
Agreed and accepted as of the date first written above.
First Medical Corporation
By /s/ Xxxxxx X. Xxxxx
------------------------
Name: Xxxxxx X. Xxxxx
Title: Chairman
