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Exhibit 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Agreement"), dated as of September 1, 1998, among
Photobition Group PLC, a company organized under the laws of England
("Photobition"), KDT Acquisition Corp., a Delaware corporation ("KDT"), and Xxxx
Digital Technologies, Inc., a Delaware corporation (the "Company").
BACKGROUND
A. Photobition, KDT and the Company have entered into an Agreement and
Plan of Merger (as such agreement may hereafter be amended from time to time,
the "Merger Agreement"), which provides, among other things, for the merger of
KDT with and into the Company and the receipt by the stockholders of the Company
of the Merger Consideration (as defined in the Merger Agreement).
B. As an inducement and a condition to Photobition's and KDT's willingness
to enter into the Merger Agreement, Photobition and KDT have required that the
Company agree, and the Company has agreed, as set forth herein, to grant to KDT
an option to purchase certain authorized but unissued shares of the common
stock, par value $.001, of the Company ("Shares").
C. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and in
the Merger Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION
1.1 The Company hereby grants to KDT an option, exercisable as provided herein
(the "Option"), to purchase for $5.125 per share (the "Exercise Price") up to an
aggregate of 1,012,964 Shares (the "Option Shares"); provided, however, that in
no event shall the number of Option Shares exceed 19.9% of the Company's issued
and outstanding Shares (without giving effect to any Shares subject to or issued
pursuant to this Option). The number of Option Shares that may be received upon
the exercise of the Option and the Exercise Price are subject to adjustment as
herein set forth.
1.2 In the event that any additional Shares 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 this Agreement, the number of Option Shares shall
be increased or decreased, as appropriate, so that after such issuance, such
number equals 19.9% of the number of Shares then issued and outstanding without
giving effect to any Shares subject to issuance pursuant to the Option.
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2. EXERCISE OF OPTION. The Option may be exercised by KDT at any time within one
year following the occurrence of a Triggering Event (as hereinafter defined), in
whole or in part. If KDT wishes to exercise the Option, KDT shall give written
notice to the Company of its intention to exercise the Option, specifying the
number of Option Shares it will purchase and a place, time and date not earlier
than one day and not later than five (5) days from the date such notice is given
for the closing of such purchase (a "Closing"). Each Closing shall be held on
the date specified in such notice unless, on such date, there shall be any
preliminary or permanent injunction or other order by any court of competent
jurisdiction or any other legal restraint or prohibition preventing the
consummation of such purchase, in which event such Closing shall be held as soon
as practicable following the lifting, termination or suspension of such
injunction, or on the date such order, restraint or prohibition preventing the
consummation of such purchase has expired or been terminated, but in any event
within two days thereof. The Company's obligation to issue Option Shares upon
exercise of the Option is subject to the conditions that (i) all waiting periods
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), required for the purchase of the Option Shares upon such exercise
shall have expired or been waived and (ii) there shall not be in effect any
preliminary injunction or other order issued by any governmental entity
prohibiting the exercise of the Option pursuant to this Agreement. Photobition
and the Company shall each promptly make such filings and provide such
information as may be required under the HSR Act with respect to the purchase of
the Option Shares, and Photobition shall pay any fees payable in connection
therewith. In the event any required waiting period under the HSR Act has not
expired or been terminated, the Closing will be postponed until the expiration
or early termination of any required waiting period under the HSR Act.
The term "Triggering Event" shall mean the Board of Directors of the
Company shall have approved or recommended any Acquisition Proposal, or the
Company shall have entered into any agreement with respect to any Acquisition
Proposal (as such terms are defined in the Merger Agreement).
3. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing hereunder (a) KDT shall
make payment to the Company of the aggregate purchase price for the Option
Shares so purchased (i) in immediately available funds by certified or official
bank check or by wire transfer to a bank account designated by the Company to
KDT prior to such Closing, (ii) by actual or constructive transfer to the
Company of Company Common Stock owned by Photobition, KDT or their respective
affiliates, or (iii) by any combination of the foregoing methods of payment, and
(b) the Company shall deliver to or cause to be delivered to KDT a certificate
or certificates, duly executed by the Company and registered in the name of KDT,
representing the number of Option Shares so purchased. Company Common Stock that
is transferred by Photobition, KDT or their respective affiliates in payment of
all or any part of the purchase price will be valued at the Closing Price. The
requirement of payment in cash or shares of Company Common Stock will be deemed
satisfied if KDT makes arrangements with a broker that is a member of the
National Association of Securities Dealers, Inc. to sell a sufficient number of
the Option Shares which are being purchased pursuant to the exercise of the
Option so that the net proceeds of the sale transaction will at least equal the
amount of the aggregate purchase price and pursuant to which the broker
undertakes to deliver to the Company the amount of the aggregate purchase price
not later than the date on which the sale transaction will settle in the
ordinary course of business. "Closing Price" means the closing price per share
of Company
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Common Stock on the American Stock Exchange ("AMEX") on the trading day
immediately preceding the date of notice of the exercise of the Option as
reported on the AMEX (or, if the Company Common Stock is not listed on the AMEX,
as reported on any other national securities exchange or national securities
quotation system on which the Company Common Stock is listed or quoted, as
reported in the Wall Street Journal (Northeast edition), or, if not reported
thereby, any other authoritative source).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to Photobition and KDT as follows:
(a) DUE AUTHORIZATION, ETC. The Company has the corporate power and
authority to enter into and perform all of its obligations under this Agreement.
The execution, delivery and performance of this Agreement by the Company will
not conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or result in the creation of any lien upon any of the properties or
assets of the Company or any of its Subsidiaries under, any agreement to which
it is a party. This Agreement has been duly and validly executed and delivered
by the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms. The Board of
Directors of the Company has duly and validly approved the transactions
contemplated hereby and by the Merger Agreement, including the Merger and the
acquisition of Option Shares, for purposes of Section 203 of the Delaware
General Corporation Law, such approval occurring prior to the time KDT became an
"interested stockholder" as that term is defined in Section 203 of the Delaware
General Corporation Law.
(b) OPTION SHARES. The Company has taken all necessary corporate
action to authorize and reserve for issuance upon exercise of the Option the
Option Shares and will take all necessary corporate action to authorize and
reserve for issuance all additional Shares or other securities which may be
issued as a result of Section 6 hereof upon exercise of the Option. The Shares
(or such other securities) to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights,
without liability attaching to the ownership thereof, and will be delivered free
and clear of all claims, liens, encumbrances and security interests of any kind
whatsoever. The Option Shares represent 19.9% of the total number of shares of
Company Common Stock outstanding on the date hereof.
5. REPRESENTATIONS AND WARRANTIES OF PHOTOBITION AND KDT. Each of Photobition
and KDT hereby represents and warrants to the Company as follows:
(a) DUE AUTHORIZATION, ETC. Photobition and KDT each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this Agreement
by each of Photobition and KDT will not any conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a material benefit under, or result in the creation of
any lien upon any of the properties or assets of Photobition, KDT or any of
their respective Subsidiaries under, any agreement to
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which either of them is a party. This Agreement has been duly and validly
executed and delivered by each of Photobition and KDT and constitutes a valid
and binding agreement of each of Photobition and KDT, enforceable against each
of Photobition and KDT in accordance with its terms.
(b) NO DISTRIBUTION. KDT is acquiring the Option, and will acquire
the Option Shares issuable upon exercise of the Option, for its own account and
not with a view to or for sale in connection with any distribution thereof, and
KDT will not sell or otherwise dispose of the Option, or any Option Shares,
except in each case in compliance with the Securities Act and the rules and
regulations thereunder.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of any change in Company Common Stock by reason of
a stock dividend, split-up, merger, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Exercise Price therefor, will be adjusted
appropriately, and proper provision will be made in the agreements governing
such transaction so that KDT will receive upon exercise of the Option the number
and class of shares or other securities or property that KDT would have received
in respect of Company Common Stock if the Option had been exercised immediately
prior to such event or the record date therefor, as applicable. If any
additional shares of Company Common Stock are issued after the date of this
Agreement, the number of shares of Company Common Stock subject to the Option
will be adjusted so that, after such issuance, it equals 19.9% of the number of
shares of Company Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that the Company enters into an
agreement (i) to consolidate with or merge into any Person, other than
Photobition or one of its Subsidiaries, and the Company will not be the
continuing or surviving corporation in such consolidation or merger, (ii) to
permit any Person, other than Photobition or one of its Subsidiaries, to merge
into the Company and the Company will be the continuing or surviving
corporation, but in connection with such merger, the shares of Company Common
Stock outstanding immediately prior to the consummation of such merger will 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 shares of Company Common
Stock outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting securities
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any Person, other than Photobition or one of
its Subsidiaries, then, and in each such case, subject to clause (c) below, the
agreement governing such transaction shall make proper provision so that the
Option will, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class of
shares or other securities or property that Photobition would have received in
respect of Company Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale or transfer, or the record date
therefor, as applicable.
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(c) If the Company enters into any agreement pursuant to which all
outstanding shares of Company Common Stock are to be purchased for, or converted
into the right to receive, cash (a "Transaction"), the Company covenants that
proper provision will be made in such agreement to provide that, if the Option
shall not theretofore have been exercised, then upon the closing of the
Transaction (which in the case of a Transaction involving a tender offer will be
when shares of Company Common Stock are accepted for payment), KDT will receive
in exchange for the cancellation of the Option an amount in cash equal to the
Cash Consideration. For purposes of this Agreement, the term "Cash
Consideration" means the difference between (A) the amount of cash per share of
Company Common Stock to be received by a holder of Company Common Stock in the
Transaction and (B) the Exercise Price.
7. REGISTRATION RIGHTS. The Company will, if requested by Photobition at any
time and from time to time within three years of the exercise of the Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to KDT upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by KDT, including a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and the Company will use its best efforts to qualify such
shares or other securities under any applicable state securities laws. The
Company will use reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for such
period, not in excess of 180 calendar days from the day such registration
statement first becomes effective, as may be reasonably necessary to effect such
sale or other disposition. The obligations of the Company hereunder to file a
registration statement and to maintain its effectiveness may be suspended for
one or more periods of time not exceeding 60 calendar days in the aggregate if
the Board of Directors of the Company shall have determined that the filing of
such registration statement or the maintenance of its effectiveness would
require disclosure of nonpublic information that would materially and adversely
affect the Company. Any registration statement prepared and filed under this
Section 7, and any sale covered thereby, will be at the Company's expense,
except for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of KDT's counsel related thereto. KDT will provide all information
reasonably requested by the Company for inclusion in any registration statement
to be filed hereunder. If the Company effects a registration under the
Securities Act of Company Common Stock for its own account or for any other
stockholders of the Company (other than on Form S-4 or Form S-8, or any
successor form), it will allow KDT the right to participate in such
registration, and such participation will not affect the obligation of the
Company to effect demand registration statements for KDT under this Section 7;
provided that, if the managing underwriters of such offering advise the Company
in writing that in their opinion the number of shares of the 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 shares requested to be
included therein by KDT pro rata with the shares intended to be included therein
by the Company. In connection with any registration pursuant to this Section 7,
the Company and KDT will provide each other and any underwriter of the offering
with customary representations, warranties, covenants, indemnification and
contribution in connection with such registration.
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8. LISTING. If Company Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on a national securities exchange or
national securities quotation system, the Company, upon the request of KDT, will
promptly file an application to list the shares of Company Common Stock or other
securities to be acquired upon exercise of the Option on such national
securities exchange or national securities quotation system and will use
reasonable efforts to obtain approval of such listing as promptly as
practicable.
9. MISCELLANEOUS
9.1 ENTIRE AGREEMENT. This Agreement, the Transaction Agreements and any other
agreements to be executed pursuant hereto and thereto constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
9.2 ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties hereto,
provided that Photobition or KDT may assign, in their sole discretion, their
rights and obligations hereunder to any direct or indirect wholly owned
Subsidiary of Photobition, but no such assignment shall relieve Photobition or
KDT of its obligations hereunder if such assignee does not perform such
obligations.
9.3 AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
9.4 NOTICES. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received upon receipt) in accordance with the terms of Section 10.9 of
the Merger Agreement.
9.5 SEVERABILITY. Whenever possible, each provision or portion of any provision
of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision or portion of any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
herein.
9.6 SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and acknowledges
that a breach by it of any covenants or agreements contained in this Agreement
will cause the other party to sustain damages for which it would not have an
adequate remedy at law for money damages, and therefore in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
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9.7 REMEDIES CUMULATIVE. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party
9.8 NO WAIVER. The failure of any party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.
9.9 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be for the
benefit of, and shall not be enforceable by, any person or entity who or which
is not a party hereto.
9.10 CONSENTS. Each of the parties hereto will use its best efforts to obtain
consents of all third parties and governmental entities necessary to the
consummation of the transactions contemplated by this Agreement.
9.11 GOVERNING LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware without giving effect to the principles
of conflicts of law thereof. Any disputes arising out of, in connection with or
with respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the transactions
contemplated hereby shall be adjudicated in a court of competent civil
jurisdiction sitting in the City and State of New York and nowhere else. Each of
the Parties hereto hereby irrevocably submits to the jurisdiction of such court
for the purposes of any suit, civil action or other proceeding arising out of,
in connection with or with respect to this Agreement, the subject matter hereof,
the performance or non-performance of any obligation hereunder, or any of the
transactions contemplated hereby (collectively, "Suit"). Each of the Parties
hereto hereby waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that it is not subject to the jurisdiction
of the above courts, that such Suit is brought in an inconvenient forum, or that
the venue of such Suit is improper. The Company hereby irrevocably designates
and appoints Feder, Kaszovitz, Isaacson, Weber, Xxxxx & Bass LLP, 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, XX 00000-0000 to receive for it and on its behalf summonses
and other legal process in any Suit, and agrees that service upon Feder,
Kaszovitz, Isaacson, Weber, Xxxxx & Bass LLP shall constitute valid and
effective service upon the Company. Photobition and KDT each hereby irrevocably
designate and appoint The Corporation Trust Company, New York, New York to
receive for it and on its behalf summonses and other legal process in any Suit,
and each agrees that service upon The Corporation Trust Company, New York, New
York shall constitute valid and effective service upon KDT or Photobition, as
the case may be. Photobition agrees that, so long as it has any rights or
obligations under or arising out of or in connection with this Agreement, the
subject matter hereof or any of the transactions contemplated hereby, it shall
maintain a duly appointed agent for service of summonses and other legal process
in New York, New York. Nothing in this Agreement shall affect or diminish any
Party's right to serve summonses and other legal process in any other manner
permitted by law in connection with any Suit in the City and State of New York.
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9.12 WAIVER OF JURY TRIAL. Each party hereto hereby waives any right to a trial
by jury in connection with any action, suit or proceeding brought in connection
with this Agreement.
9.13 DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9.14 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
Photobition, KDT and the Company on the date first written above.
PHOTOBITION GROUP PLC
By: /s/ X. X. Xxxxx
Name: X. X. Xxxxx
Title: Group Finance Director
KDT ACQUISITION CORP.
By: /s/ X. X. Xxxxx
Name: X. X. Xxxxx
Title: Group Finance Director
XXXX DIGITAL TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxx
Name: Xxxx Xxxx
Title: Chairman and Chief Executive Officer
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