Exhibit (d)(5)
EXECUTION COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of February 7, 2001 (this "Agreement") by
and among Court Square Capital Limited, a Delaware corporation ("Parent"), DRI
Acquisition LLC, a Delaware limited liability company and a subsidiary of Parent
(the "Purchaser"), and Delco Remy International, Inc., a Delaware corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, on January 11, 2001, Parent and Purchaser commenced (within the
meaning of Rule 14d-2 under the Exchange Act) a tender offer (such offer,
including any amendments and changes thereto (including those contemplated by
the Merger Agreement, as defined below) the "Offer") to purchase all of the
outstanding shares of Class A common stock, par value $.01 per share (the "Class
A Common Stock"), of the Company not currently owned by Parent at a price of
$8.00 per Share, net to the seller in cash, without interest (such price, being
referred to herein as the "Original Offer Price");
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties hereto are entering into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement")
which provides, upon the terms and subject to the conditions set forth therein,
for (i) the amendment of the Offer, to among other things, increase the Original
Offer Price to $9.50 per Share (or any higher price paid for each Share in the
Offer, the "Offer Price") and (ii) the subsequent merger of Purchaser with and
into the Company (the "Merger"), whereby each share of Company Common Stock then
issued and outstanding (other than shares owned by Parent or any of its
subsidiaries or held by the Company and other than dissenting shares) will be
converted into the right to receive the Offer Price;
WHEREAS, as a condition to the willingness of Parent and Purchaser to enter
into the Merger Agreement, Parent and Purchaser have required that the Company
agree, and in order to induce Parent and Purchaser to enter into the Merger
Agreement, the Company has agreed, to grant to Purchaser certain options to
purchase shares of Class A Common Stock (shares of Class A Common Stock being
for purposes hereof, the "Shares") upon the terms and subject to the conditions
of this Agreement; and
WHEREAS, capitalized terms used but not defined in this Agreement shall
have the meanings ascribed to them in the Merger Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
The Top-up Option
Section 1.01. Grant of Top-Up Stock Option. Subject to the terms and
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conditions set forth herein, the Company hereby grants to Purchaser an
irrevocable option (the "Top-Up Stock Option") to purchase that number of
authorized Shares (the "Top-Up Option Shares") equal to the number of Shares
that, when added to the number of Shares owned by Purchaser and Parent
immediately following consummation of the Offer, shall constitute 90.01% of the
Shares then outstanding (assuming the issuance of the Top-Up Option Shares) at a
purchase price per Top-Up Option Share equal to the Offer Price. The Company
agrees to provide Parent and Purchaser with information regarding the number of
authorized Shares available for issuance on an ongoing basis.
Section 1.02. Exercise of Top-Up Stock Option.
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(a) Purchaser may, at its election and in its sole discretion,
exercise the Top-Up Stock Option pursuant to Section 1.02(d) below at any time
after the occurrence of a Top-Up Exercise Event (as defined below) and prior to
the Top-Up Termination Date (as defined below).
(b) A "Top-Up Exercise Event" shall occur for purposes of this
Agreement upon Purchaser's acceptance for payment pursuant to the Offer of
Shares constituting, together with Shares owned directly or indirectly by Parent
and Purchaser, more than 80% but less than 90.01% of the Shares then
outstanding.
(c) The "Top-Up Termination Date" shall occur for purposes of this
Agreement upon the earliest to occur of: (i) the Effective Time, (ii) the
termination of the Merger Agreement and (iii) the sixth (6th) business day after
the date the Purchaser has accepted Shares for payment in the Offer.
(d) In the event Purchaser wishes to exercise the Top-Up Stock
Option, Purchaser shall send to the Company a written notice (a "Top-Up Exercise
Notice," the date of which notice is referred to herein as the "Top-Up Notice
Date") specifying the denominations of the certificate or certificates
evidencing the Top-Up Option Shares which Purchaser wishes to receive, the place
for the closing of the purchase and sale pursuant to the Top-Up Stock Option
(the "Top-Up Closing") and a date not earlier than one business day nor later
than three business days after the Top-Up Notice Date for the Top-Up Closing.
The Company shall, promptly after receipt of the Top-Up Exercise Notice, deliver
a written notice to Purchaser confirming the number of Top-Up Option Shares and
the aggregate purchase price therefor.
(e) Parent and Purchaser each agree to use its best efforts to
cause the consummation of the Merger to occur as promptly as practicable (and in
any event no later than one (1) business day) after the Top-Up Closing. If for
any reason the Merger has not been consummated within one business day after the
Top-Up Closing, the Company may elect to
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rescind the sale of the Top-Up Shares to Purchaser hereunder. The Company's
election to rescind the sale must be by written notice delivered to Purchaser
within five (5) business days after the scheduled Top-Up Closing specifying the
place for the closing of this rescission and a date for the closing not earlier
than one business day nor later than three business days after delivery of such
notice. At such closing, (i) the Purchaser shall deliver to the Company the
certificate or certificates evidencing the Top-Up Option Shares, free and clear
of all Liens, and (ii) the Company shall pay to Purchaser, by delivery of
immediately available funds by wire transfer to an account designated by the
Purchaser, an amount equal to the aggregate purchase price paid for the Top-Up
Shares at the Top-Up Closing.
ARTICLE 2
Closing
Section 2.01. Conditions to Closing. The obligation of the Company to
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deliver Top-Up Option Shares upon the exercise of the Top-Up Stock Option is
subject to the following conditions:
(a) any applicable waiting period under the HSR Act and any
applicable non-United States laws regulating competition, antitrust, investment
or exchange controls relating to the issuance of the Top-Up Option Shares
hereunder shall have expired or been terminated;
(b) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the exercise of the Top-Up
Stock Option, the delivery of the Top-Up Option Shares in respect of any such
exercise, the exercise of the Company's recission right set forth in Section
1.02(e) or the delivery of the Top-Up Shares in respect of any such recission;
(c) delivery of the Top-Up Option Shares would not violate, or
otherwise cause a violation of, Section 312.03 of the New York Stock Exchange
("NYSE") Listed Company Manual; and
(d) the Company's satisfaction that the exercise by the Company of
the recission right set forth in Section 1.02(e) is permitted under the
Company's indentures and financing agreements and will not be impaired by any
action of the Purchaser.
Section 2.02. Closing.
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(a) At the Top-Up Closing (i) the Company shall deliver to
Purchaser a certificate or certificates evidencing the applicable number of Top-
Up Option Shares (in the denominations designated by Purchaser in the Top-Up
Exercise Notice) and (ii) Purchaser shall purchase each Top-Up Option Share from
the Company at the Offer Price. Payment by Purchaser of the purchase price for
the Top-Up Option Shares shall be made by delivery of immediately available
funds by wire transfer to an account designated by the Company.
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(b) The Company shall pay all expenses, and any and all federal,
state and local taxes and other charges, that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2.02.
(c) Certificates evidencing Top-Up Option Shares delivered
hereunder shall include legends legally required including the legend in
substantially the following form:
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.
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Top-Up Option Shares pursuant to a registered public offering or Rule 144 under
the Securities Act, or any other sale as a result of which such legend is no
longer required by law.
ARTICLE 3
Additional Agreements
Section 3.01. Further Assurances. The Company shall perform such further
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acts and execute such further documents and instruments as may reasonably be
required to vest in Purchaser and Parent the power to carry out the provisions
of this Agreement. If Purchaser shall exercise the Top-Up Stock Option granted
hereunder 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 Purchaser or Parent may
reasonably request to carry out the transactions contemplated by this Agreement.
ARTICLE 4
Representations and Warranties; Acknowledgment
Section 4.01. Representations and Warranties of Purchaser. Purchaser
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hereby represents and warrants to the Company, understanding and agreeing that
the Company is entering into this Agreement in part in reliance on such
representations and warranties, as follows:
(a) Purchaser is an "Accredited Investor" as that term is defined
in Rule 501(a) of Regulation D promulgated under the Securities Act;
(b) Purchaser is purchasing the Top-Up Option Shares and being
granted the Top-Up Option for investment purposes, for its own account and not
with a view to, or for sale in connection with, any distribution thereof in
violation of federal or state securities laws; and
(c) By reason of its business or financial experience, Purchaser
has the capacity to protect its own interest in connection with the transactions
contemplated hereunder.
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Section 4.02. Representations and Warranties of Company. The Company
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hereby represents and warrants to Purchaser, understanding and agreeing that
Purchaser is entering into this Agreement in part in reliance on such
representations and warranties, that, as of the date of the Top-Up Closing, the
Company's authorized capital stock shall consist of at least that number of
Shares required for the Company to issue the Top-Up Option Shares.
Section 4.03. Acknowledgment. Purchaser has been advised by the Company
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that the Top-Up Option Shares and the Top-Up Option have not been registered
under the Securities Act, that the Top-Up Option Shares and the Top-Up Option
will be issued on the basis of the statutory exemption provided by Section 4(2)
of the Securities Act or Regulation D promulgated thereunder, or both, relating
to transactions by an issuer not involving any public offering and under similar
exemptions under certain state securities laws, that this transaction has not
been reviewed by, passed on or submitted to any federal or state agency or self-
regulatory organization where an exemption is being relied upon, and that the
Company's reliance thereon is based in part upon the representations made by
Purchaser in this Agreement. Purchaser acknowledges that it has been informed
by the Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Securities Act and the rules and regulations thereunder on the
transfer of securities.
ARTICLE 5
Miscellaneous
Section 5.01. Notices. All notices, requests and other communications to
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any party hereunder shall be in writing (including facsimile transmission) and
shall be given as specified in Section 8.4 of the Merger Agreement.
Section 5.02. Amendments; No Waivers.
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(a) Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed, in the case
of an amendment, by each party to this Agreement or, in the case of a waiver, by
each party against whom the waiver is to be effective. Notwithstanding anything
in this Agreement to the contrary, during the period from and after the date
hereof but prior to the Effective Time, the Board of Directors of the Company
shall delegate to the Special Committee, the sole responsibility for (i) any
amendment or modification of this Agreement on behalf of the Company and (ii)
any waiver of any of the Company's rights or remedies hereunder. No amendment to
this Agreement shall be effective without being approved by the Special
Committee.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or
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privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
Section 5.03. Expenses. Except as otherwise provided herein or in Section
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7.3 of the Merger Agreement, all costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Section 5.04. Successors and Assigns. The provisions of this Agreement
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shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Purchaser may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or a portion of the Top-Up Option Shares
pursuant to this Agreement, but no such transfer or assignment will relieve
Purchaser of its obligations under this Agreement.
Section 5.05. Governing Law. This Agreement shall be governed and
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construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof or of any other
jurisdiction. All parties hereto hereby irrevocably waive a trial by jury in
any proceedings arising out of this Agreement or matters related hereto.
Section 5.06. Counterparts; Effectiveness; Benefit. This Agreement may be
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signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto. No
provision of this Agreement is intended to confer any rights, benefits,
remedies, obligations, or liabilities hereunder upon any person other than the
parties hereto and their respective successors and assigns.
Section 5.07. Entire Agreement. This Agreement and the Merger Agreement
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(including the documents and instruments referred therein) constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
Section 5.08. Captions. The captions herein are included for convenience
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of reference only and shall be ignored in the construction or interpretation
hereof.
Section 5.09. Severability. If any term, provision, covenant or
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restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the
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parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
Section 5.10. Enforcement. The parties agree that irreparable damage would
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occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the State of Delaware
or of the United States located in the State of Delaware in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, and each party will not attempt to deny or defeat personal
jurisdiction or venue in any such court by motion or other request for leave
from any such court.
Section 5.11. Submission to Jurisdiction; Waivers. Each of the Company,
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Parent and Purchaser irrevocably agrees that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any judgment in
respect hereof brought by any other party hereto or its successors or assigns
shall be brought and determined in the Chancery or other Courts of the State of
Delaware or of the United States located in the State of Delaware, and each of
the Company, Parent and Purchaser hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the exclusive jurisdiction of the aforesaid courts.
Each of the Company, Parent and Purchaser hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, (a) any claim that it is
not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to lawfully serve process, (b) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (c) to the fullest extent permitted by
applicable law, that (i) the suit, action, or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DELCO REMY INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
______________________________
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
DRI ACQUISITION LLC
By: COURT SQUARE CAPITAL LIMITED,
its sole member
By: /s/ Xxxxxxx X. Xxxxxxx
________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Managing Director
COURT SQUARE CAPITAL LIMITED
By: /s/ Xxxxxxx X. Xxxxxxx
______________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Managing Director
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