STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated October 27, 1998, by and among GENERAL
SCANNING INC., a Massachusetts corporation ("Grizzly") and LUMONICS INC., an
Ontario corporation ("Lynx").
WHEREAS, Lynx, Grizzly and a subsidiary of Lynx are entering into an
Agreement for Merger and Reorganization of even date herewith (the "Merger
Agreement", terms defined therein and not otherwise defined herein having the
same meanings when used herein), which provides, among other things, for the
merger of such subsidiary with and into Grizzly; and
WHEREAS, Lynx has agreed, to induce Grizzly to enter into the Merger
Agreement, to grant the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. Lynx hereby grants Grizzly an irrevocable option (the
"Option") to purchase up to 3,391,656 shares (the "Lynx Shares") of common
stock of Lynx (the "Lynx Common Stock") in the manner set forth below at a
price of Can. $8.09 per share (the "Exercise Price").
Exercise of Option. The Option may be exercised by Grizzly, in whole or in
part, at any time or from time to time after the Merger Agreement becomes
terminable by Grizzly under circumstances which could entitle Grizzly to
payment of Specified Amounts under Article VIII of the Merger Agreement. In
the event Grizzly wishes to exercise the Option, Grizzly shall deliver to Lynx
a written notice (an "Exercise Notice") specifying the total number of the
Lynx Shares it wishes to purchase. Each closing of a purchase of the Lynx
Shares (a "Closing") shall occur at a place, on a date and at a time
designated by Grizzly and reasonably acceptable to Lynx in an Exercise Notice
delivered at least three business days prior to the date of the Closing. The
Option shall terminate upon the earlier of: (i) the Effective Time; (ii) the
termination of the Merger Agreement pursuant to Section 8.01 thereof (other
than a termination in connection with which Grizzly is or may be entitled to
the payment specified in Section 8.02 thereof); and (iii) one year following
any termination of the Merger Agreement in connection with which Grizzly is or
may be entitled to the payment specified in Section 8.02 thereof (or if, at
the expiration of such one year period, the Option cannot be exercised by
reason of any applicable judgment, decree, order, law or regulation, ten
business days after such impediment to exercise shall have been removed or
shall have become final and not subject to appeal, but in no event under this
clause (iii) later than the second anniversary of the date hereof).
Notwithstanding the foregoing, the Option may not be exercised if Grizzly is
in willful breach of any of its representations or warranties, or in material
breach of any of its covenants, contained in this Agreement or in the Merger
Agreement.
Conditions to Closing. The obligation of Lynx to issue the Lynx Shares to
Grizzly hereunder is subject to the conditions that (i) all waiting periods,
if any, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder ("HSR Act"),
applicable to the issuance of the Lynx Shares hereunder shall have expired or
have been terminated; (ii) all consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any Federal, provincial,
state or local administrative agency or commission or other Federal,
provincial, state or local governmental authority or instrumentality or
securities exchange, if any, required in connection with the issuance of the
Lynx Shares hereunder shall have been obtained or made, as the case may be;
(iii) no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect; and (iv) Grizzly shall not be in material breach of any of
its covenants under the Merger Agreement.
Closing. At any Closing, (a) Lynx will deliver to Grizzly a single
certificate in definitive form representing the number of the Lynx Shares
designated by Grizzly in its Exercise Notice, such certificate to be
registered in the name of Grizzly and to bear the legend set forth in Section
11 of this Agreement, and (b) Grizzly will deliver to Lynx the aggregate price
for the Lynx Shares so designated and being purchased by wire transfer of
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immediately available funds or certified check or bank check or by delivery of
shares of Grizzly Common Stock (as defined in the Merger Agreement) valued for
this purpose at the average closing sales price on their principal market over
the ten trading days preceding such Closing. Upon delivery of an Exercise
Notice, satisfaction of the conditions specified in Section 3 of this
Agreement and tender of the aggregate price, Grizzly shall be deemed to be a
holder of record of the Lynx Shares so deliverable. At any Closing at which
Grizzly is exercising the Option in part, Grizzly shall present and surrender
this Agreement to Lynx, and Lynx shall deliver to Grizzly an executed new
agreement with the same terms as this Agreement evidencing the right to
purchase the balance of the shares of the Lynx Common Stock purchasable
hereunder.
1. Representations and Warranties of Lynx. Lynx represents and warrants to
Grizzly that (a) Lynx is a corporation duly incorporated, validly existing and
in good standing under the laws of the Province of Ontario and has the
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Lynx and the consummation by Lynx of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Lynx and
no other corporate proceedings on the part of Lynx are necessary to authorize
this Agreement or any of the transactions contemplated hereby, (c) this
Agreement has been duly executed and delivered by Lynx and constitutes a valid
and binding obligation of Lynx, and, assuming this Agreement constitutes a
valid and binding obligation of Grizzly, is enforceable against Lynx in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and subject to usual equity principles, (d) Lynx has taken
all necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Option, and at all times from the
date hereof through the expiration of the Option will have reserved, 3,391,656
unissued Lynx Shares and such other shares of the Lynx Common Stock or other
securities which may be issued pursuant to Section 10 of this Agreement, all
of which, upon their issuance, payment and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
and free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever (other than those created by or through
Grizzly), (e) the execution and delivery of this Agreement by Lynx does not,
and the performance of this Agreement by Lynx will not materially conflict
with, or result in any material violation of, or material 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 the loss of a
material benefit under, or the creation of a lien, pledge, security interest
or other encumbrance on assets pursuant to (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss or creation,
a "Violation"), (A) any provision of the Articles of Organization or By-laws
of Lynx or (B) any provisions of any loan or credit agreement, note, mortgage,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license of or applicable to Lynx, or (C) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Lynx or its properties or assets, which Violation, in the case
of each of clauses (B) and (C), individually or in the aggregate would prevent
or materially delay the exercise by Grizzly of the Option or any other right
of Grizzly under this Agreement, or be subject to any statute or regulation of
the type referred to in Section 6.16 of the Merger Agreement or result in a
"Distribution Date" or "Triggering Event" under any Lynx shareholder rights
plan, (f) except as described in Section 4.04 of the Merger Agreement, the
execution and delivery of this Agreement by Lynx does not, and the performance
of this Agreement by Lynx will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, and (g) any shares of Grizzly Common
Stock acquired by Lynx in connection with Grizzly's exercise of the Option
will not be acquired by Lynx with a view to public distribution or resale in
any manner which would be in violation of federal or state securities laws.
Representations and Warranties of Grizzly. Grizzly represents and warrants
to Lynx that (a) each of Grizzly is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts, and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by Grizzly and the consummation by Grizzly of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grizzly and no other corporate proceedings on
the part of Grizzly are necessary to authorize this Agreement or any of the
transactions contemplated hereby, (c) this Agreement has been duly
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executed and delivered by Grizzly and constitutes a valid and binding
obligation of Grizzly, and, assuming this Agreement constitutes a valid and
binding obligation of Lynx, is enforceable against Grizzly in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally
and subject to usual equity principles, (d) the execution and delivery of this
Agreement by Grizzly does not, and the performance of this Agreement by
Grizzly will not, result in any Violation pursuant to, (A) any provision of
the charter documents of Grizzly, (B) any provisions of any loan or credit
agreement, note, mortgage, indenture, lease, or other agreement, obligation,
instrument, permit, concession, franchise, license of or applicable to it or
(C) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Grizzly or its properties or assets, which Violation, in the
case of each of clauses (B) and (C), would, individually or in the aggregate
have a material adverse effect on Grizzly's ability to consummate the
transactions contemplated by this Agreement, (e) except as described in
Section 3.04 of the Merger Agreement, the execution and delivery of this
Agreement by Grizzly does not, and the performance of this Agreement by
Grizzly will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority
and (f) any Lynx Shares acquired upon exercise of the Option will not be, and
the Option is not being, acquired by Grizzly with a view to public
distribution or resale in any manner which would be in violation of federal,
provincial or state securities laws.
1. Put Right.
(a) Exercise of Put. At any time during which the Option is exercisable
pursuant to Section 2 or would be exercisable but for the circumstances
referred to in the parenthetical in Section 2(iii) of this Agreement (the
"Repurchase Period"), upon demand by Grizzly, Grizzly shall have the right to
sell to Lynx (or any successor entity thereof) and Lynx (or such successor
entity) shall be obligated to repurchase from Grizzly (the "Put"), all or any
portion of the Option, at the price set forth in subparagraph (i) below, or
all or any portion of the Lynx Shares purchased by Grizzly pursuant hereto, at
a price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price" for shares of
the Lynx Common Stock as of the date (the "Notice Date") notice of exercise
of the Put is given to Lynx (defined as the higher of (A) the price per
share offered as of the Notice Date pursuant to any tender or exchange
offer or other Alternative Proposal which was made prior to the Notice Date
and not terminated or withdrawn as of the Notice Date (the "Tender Price")
and (B) the average of the closing prices of shares of the Lynx Common
Stock on the Toronto Stock Exchange ("TSE") or the Nasdaq Stock Market for
the five trading days immediately preceding the Notice Date (the "Market
Price")), and the Exercise Price, multiplied by the number of Lynx Shares
purchasable pursuant to the Option (or portion thereof with respect to
which Grizzly is exercising its rights under this Section 7);
(ii) the Exercise Price paid by Grizzly for the Lynx Shares acquired
pursuant to the Option plus the difference between the Market/Tender Offer
Price and the Exercise Price, multiplied by the number of Lynx Shares so
purchased. For purposes of this clause (ii), the Tender Price shall be the
highest price per share offered pursuant to a tender or exchange offer or
other Alternative Proposal during the Repurchase Period.
In determining the Market-Tender Offer Price, the value of consideration other
than cash or stock as provided above shall be determined by a nationally
recognized investment banking firm selected by Grizzly and reasonably
acceptable to Lynx.
(a) Payment and Redelivery of Option or Shares. In the event Grizzly
exercises its rights under this Section 7, Lynx shall, within ten business
days of the Notice Date, pay the required amount to Grizzly in immediately
available funds and Grizzly shall surrender to Lynx the Option or the
certificates evidencing the Lynx Shares purchased by Grizzly pursuant hereto,
and Grizzly shall warrant that it owns such shares and that such shares are
then free and clear of all liens, claims, charges and encumbrances of any kind
or nature whatsoever.
1. Restrictions on Certain Actions. Lynx shall not adopt any Rights
Agreement or shareholder rights plan in any manner which would cause Grizzly,
if Grizzly has complied with its obligations under this Agreement, to
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become an "Acquiring Person" under such Rights Agreement or shareholder rights
plan solely by reason of the beneficial ownership of the shares purchasable
hereunder.
2. Registration Rights.
(a) Lynx will, if requested by Grizzly at any time and from time to time
within two years of the exercise of the Option, as expeditiously as possible
prepare and file up to two registration statements under the Securities Act of
1933, as amended (the "Securities Act") (provided it has shares registered
under the Exchange Act) or prospectuses under the Securities Act (Ontario)
(the "Ontario Act") if such registration or the obtaining of a receipt for a
prospectus is necessary in order to permit the sale or other disposition of
any or all shares or other securities that have been acquired by or are
issuable to Grizzly upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Grizzly, including
without limitation a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, or similar provision under the
Ontario Act and related rules, regulations, rulings or policy statements, and
Lynx will use its best efforts to qualify such shares or other securities
under any applicable state or other provincial securities laws. Lynx will use
reasonable efforts to cause each such registration statement to become
effective and to obtain a (final) receipt for each such prospectus, to obtain
all consents or waivers of other parties which are required therefor, and to
keep such registration statement or prospectus effective for such period not
in excess of 180 calendar days from the day such registration statement first
becomes effective or the date of the (final) receipt for such prospectus as
may be reasonably necessary to effect such sale or other disposition. The
obligations of Lynx hereunder to file a registration statement or prospectus
and to maintain its effectiveness may be suspended for up to 90 calendar days
in the aggregate if the Board of Directors of Lynx shall have determined that
the filing of such registration statement or prospectus or the maintenance of
its effectiveness would require premature disclosure of material nonpublic
information that would materially and adversely affect Lynx or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of Lynx or any other material transaction involving Lynx. Subject
to applicable law, any registration statement or prospectus prepared and filed
under this Section 9, and any sale covered thereby, will be at Lynx's expense
except for underwriting discounts or commissions, brokers' fees and the fees
and disbursements of Grizzly's counsel related thereto. Grizzly will provide
and be responsible for, in connection with indemnification provisions, all
information reasonably requested by Lynx for inclusion in any registration
statement or prospectus to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 9, Lynx effects a
registration under the Securities Act of , or qualifies a prospectus under the
Ontario Act in respect of, the Lynx Common Stock for its own account or for
any other stockholders of Lynx (other than on Form S-4 or Form S-8, or any
successor form), it will allow Grizzly the right to participate in such
registration or qualification, and such participation will not affect the
obligation of Lynx to effect demand registration statements or prospectus for
Grizzly under this Section 9; provided that, if the managing underwriters of
such offering advise Lynx in writing that in their opinion the number of
shares of the Lynx Common Stock requested to be included in such registration
or qualification exceeds the number which can be sold in such offering, Lynx
will include the shares requested to be included therein by Grizzly after the
shares intended to be included therein by Lynx have been included and prior to
any shares requested to be included by any third parties are included. In
connection with any registration or qualification pursuant to this Section 9,
Lynx and Grizzly will provide each other and any underwriter of the offering
with customary representations, warranties, covenants, indemnification, and
contribution in connection with such registration or qualification. Lynx shall
provide to any underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require.
(b) If Lynx's securities of the same type as the Lynx Common Stock
beneficially owned by Grizzly are then authorized for quotation or trading or
listing on the TSE, Nasdaq National Market System, or any other securities
exchange or automated quotations system, Lynx, upon the request of Grizzly,
shall promptly file an application, if required, to authorize for quotation,
trading or listing such shares of the Lynx Common Stock on such exchange or
system and will use its reasonable efforts to obtain approval, if required, of
such quotation, trading or listing as soon as practicable.
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(c) If shares of Grizzly Common Stock are delivered to exercise the Option,
Grizzly will prepare appropriate registration statements and prospectuses, and
attempt to obtain approvals of quotation, trading or listing, on the same
basis as provided with respect to Lynx Common Stock in this Section.
3. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in the Lynx Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchange of
shares or the like, the type and number of shares or securities subject to the
Option, and the purchase price per share provided in Section 1 of this
Agreement, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction so that Grizzly shall receive,
upon exercise of the Option, the number and class of shares or other
securities or property that Grizzly would have received in respect of the Lynx
Common Stock if the Option had been exercised immediately prior to such event
or the record date therefor, as applicable. In the event that any additional
shares of Lynx Common Stock otherwise become outstanding after the date of
this Agreement (other than pursuant hereto), the number of shares of Lynx
Common Stock subject to the Option shall be increased to equal 19.9% of the
number of shares of Lynx Common Stock then issued and outstanding.
(b) In the event that Lynx shall enter in an agreement: (i) to consolidate
with or merge into any person, other than Grizzly or another direct or
indirect wholly-owned subsidiary of Grizzly, and shall not be the continuing
or surviving corporation of such consolidation or merger; (ii) to permit any
person, other than Grizzly or another direct or indirect wholly-owned
subsidiary of Grizzly, to merge into Lynx and Lynx shall be the continuing or
surviving corporation, but, in connection with such merger, the then-
outstanding shares of the Lynx Common Stock shall be changed into or exchanged
for stock or other securities of Lynx or any other person or cash or any other
property or the outstanding shares of the Lynx Common Stock immediately prior
to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grizzly or another direct or indirect wholly-owned
subsidiary of Grizzly, then, and in each such case, Lynx shall immediately so
notify Grizzly, and the agreement governing such transaction shall make proper
provisions so that upon the consummation of any such transaction and upon the
terms and conditions set forth herein, Grizzly shall, upon exercise of the
Option, receive for each Lynx Share with respect to which the Option has not
been exercised an amount of consideration in the form of and equal to the per
share amount of consideration that would be received by the holder of one
share of the Lynx Common Stock less the Exercise Price (and, in the event of
an election or similar arrangement with respect to the type of consideration
to be received by the holders of the Lynx Common Stock, subject to the
foregoing, proper provision shall be made so that the holder of the Option
would have the same election or similar rights as would the holder of the
number of shares of the Lynx Common Stock for which the Option is then
exercisable.
4. Restrictive Legends. Each certificate representing shares of the Lynx
Common Stock issued to Grizzly hereunder shall include a 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.
Certificates representing shares (i) as to which an opinion of counsel
reasonably satisfactory to Lynx to the effect that such legend is not required
under the Securities Act, or (ii) sold in a registered public offering
pursuant to Section 9 of this Agreement shall not be required to bear the
legend set forth in this Section 11.
Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement, neither
this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the
other party. Nothing contained in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature whatsoever
by reason of this Agreement.
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Specific Performance. The parties recognize and agree that if for any reason
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies,
the other party shall be entitled to an injunction restraining any violation
or threatened violation of the provisions of this Agreement. In the event that
any action should be brought in equity to enforce the provisions of this
Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
Entire Agreement. This Agreement and the Merger Agreement (including the
Exhibits and Schedules thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among the parties
or any of them with respect to the subject matter hereof.
Further Assurances. Each party will execute and deliver all such further
documents and instruments and take all such further action including obtaining
necessary regulatory approvals and making necessary filings (including without
limitation under the HSR Act and filings with the Toronto Stock Exchange) as
may be necessary in order to consummate the transactions contemplated hereby
(including the issuance, registration and listing of the Lynx Shares).
Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith the execution and delivery of an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision. Each party agrees that, should any court or other competent
authority hold any provision of this Agreement or part hereof to be null, void
or unenforceable, or order any party to take any action inconsistent herewith,
or not take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to any other
remedy, including but not limited to money damages, for breach hereof or of
any other provision of this Agreement or part hereof as the result of such
holding or order.
Notices. Any notice or communication required or permitted hereunder shall
be in writing and either delivered personally, telegraphed or telecopied or
sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
address or telecopy number specified for the addressee in the Merger
Agreement, or to such other address or addresses as such person may
subsequently designate by notice given hereunder.
1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State without regard to any
applicable conflicts of law rules.
Descriptive Headings. The descriptive headings 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.
Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
Expenses. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
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Amendments; Waiver. This Agreement may be amended by the parties hereto and
the terms and conditions hereof may be waived only by an instrument in writing
signed on behalf of each of the parties hereto, or, in the case of a waiver,
by an instrument signed on behalf of the party waiving compliance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
GENERAL SCANNING INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
LUMONICS INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman
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