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EXHIBIT 2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of December 14, 1997, by and between Physician Sales & Service, Inc., a
Florida corporation ("Issuer"), and Gulf South Medical Supply, Inc., a
Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of December 14, 1997 (the "Merger Agreement"),
providing for, among other things, the merger of a wholly owned Subsidiary of
Grantee with and into Issuer, with Issuer as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 8,098,523 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, $.01 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $23.00 per share of Issuer
Common Stock.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of its agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, Holder may exercise the Option, in whole
or in part, at any time and from time to time following the occurrence of a
Purchase Event; provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (A) the Effective Time, (B)
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event (other
than a termination of the Merger Agreement by Grantee pursuant to Section
10.1(b) (but only if such termination was a result of a willful breach by
Issuer) or Section 10.1(c) thereof (each a "Default Termination")), (C) 120
days after a Default Termination (provided, that if, within 120 days after such
termination of the Merger Agreement, a Purchase Event or a Preliminary Purchase
Event shall occur, then notwithstanding anything to the contrary contained
herein (including clause (D) of this sentence), this Option shall terminate 120
days after the first occurrence of such an event), and (D) 120 days after any
termination of the Merger Agreement (other than a Default Termination)
following the occurrence of a Purchase Event or a Preliminary Purchase Event.
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is the Grantee. The rights set forth in Section 8
shall terminate when the right to exercise the Option terminates (other than as
a result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
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agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries), (B) except as permitted pursuant to Section 7.1 of the
Merger Agreement, the disposition, by sale, lease, exchange or otherwise,
of Assets of Issuer or any of its Subsidiaries representing in either
case 15% or more of the consolidated assets of Issuer and its
Subsidiaries, or (C) the issuance, sale or other disposition of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities representing 25% or more of the voting power of
Issuer or any of its Subsidiaries (any of the foregoing, an "Acquisition
Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the right
to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act), other than a group of which Grantee or
any of its Subsidiaries of Grantee is a member, shall have been formed
which beneficially owns or has the right to acquire beneficial ownership
of, 25% or more of the then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of
the following events:
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 25% or more
of the then-outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement and the amendment to the Articles of
Incorporation of Issuer to increase the authorized shares of Gator
CommonStock at the meeting of such stockholders held for such purposes,
such meeting shall not have been held or shall have been canceled prior
to termination of the Merger Agreement, or Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the Merger
Agreement, in each case after it shall have been publicly announced that
any person (other than Grantee or any Subsidiary of Grantee) shall have
(A) made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether
in draft or final form, under any federal or state statute or regulation
(including a notice filed under the HSR Act) seeking the Consent to an
Acquisition Transaction from any federal or state governmental or
regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 15 business days from the Notice Date
for the closing (the "Closing") of such purchase (the "Closing Date"). If
prior Consent of any governmental or regulatory agency or authority is required
in connection with such purchase, Issuer shall cooperate with Holder in the
filing of the required notice or application for such Consent and the obtaining
of such Consent and the Closing shall occur immediately following receipt of
such Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Holders (in the aggregate) purchase under the terms
of this Agreement that number of Option Shares which have a "Spread Value" in
excess of the remainder obtained by subtracting (A) all payments under Section
11.2(c) of the
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Merger Agreement from (B) $24,000,000 (the "Maximum Amount"). For purposes of
this Agreement, "Spread Value" shall mean the difference between (i) the
product of (1) the sum of the total number of Option Shares Holder(x) intends
to purchase at the Closing Date pursuant to the exercise of the Option and (y)
previously purchased pursuant to the prior exercise of the Option, and (2) the
closing bid price of Issuer Common Stock as quoted on the Nasdaq National
Market on the last trading day immediately preceding the Closing Date, and (ii)
the product of (1) the total number of Option Shares that Holder (x) intends to
purchase at the Closing Date pursuant to the exercise of the Option and (y)
previously purchased pursuant to the prior exercise of the Option and (2) the
applicable Purchase Price of such Option Shares. In the event the Spread Value
exceeds the Maximum Amount, the number of Option Shares which Holder is
entitled to purchase at the Closing Date shall be reduced to that number of
shares necessary such that the Spread Value equals or is less than the Maximum
Amount.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of
Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer specified
in Section 13(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of
the shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER
14, 1997. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Issuer. This Agreement has
been duly executed and delivered by Issuer. The execution and delivery
of this Agreement, the consummation of the transactions contemplated
hereby and compliance by Issuer with any of the provisions hereof will
not (i) conflict with or result in a breach of any provision of its
Certificate of Incorporation or Bylaws or a default (or give rise to any
right of termination, cancellation or acceleration) under any of the
terms, condition or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
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instrument or obligation to which Issuer is bound, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to Issuer or any of its properties or assets. No Consent by any
governmental or regulatory agency or authority, other than compliance
with applicable federal and state securities laws or the filing of a
notification under the HSR Act, is required of Issuer in connection with
the execution and delivery by Issuer of this Agreement or the
consummation by Issuer of the transactions contemplated hereby.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Holder to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid, and
nonassessable, and shall be delivered free and clear of all liens,
claims, charges, and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Issuer.
(c) The authorized capital stock of Issuer consists of (i) 60,000,000
shares of Gator Common Stock, of which 40,696,097 shares are issued and
outstanding at this date, and (ii) 1,000,000 shares of Gator Preferred
Stock, none of which are issued and outstanding. Except as disclosed in
Section 6.3(b) of the Gator Disclosure Memorandum, there are no other
equity securities of Gator outstanding and no outstanding Equity Rights
relating to the capital stock of Gator.
6. REPRESENTATIONS AND WARRANTS OF GRANTEE. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or Consents referred to
herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason
of a stock dividend, stock split, split- up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Purchase Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Holder would have received in respect of Issuer 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 Issuer Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in the
first sentence of this Section 7(a)), the number of shares of Issuer Common
Stock subject to the Option shall be adjusted, without any further action by or
on behalf of the Issuer or Holder, so that, after such issuance, it, together
with any shares of Issuer Common Stock previously issued pursuant hereto,
equals 19.9% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued pursuant
to the Option.
(b) In the event that Issuer shall enter into an agreement: (i)
to consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of
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such consolidation or merger; (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of Issuer or any other person or cash
or any other property or the outstanding shares of Issuer 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 Grantee or one of its Subsidiaries, then, and in each
such case, the agreement governing such transaction shall make proper
provisions so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
Holder, of either (x) the Acquiring Corporation (as defined below), (y) any
person that controls the Acquiring Corporation, or (z) in the case of a merger
described in clause (ii), the Issuer (in each case, such person being referred
to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. The Substitute Option Issuer
shall also enter into an agreement with each Holder of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as hereinafter defined) as is equal
to the Assigned Value (as hereinafter defined) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common
Stock (the "Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable and
the denominator is the number of shares for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving person, and (z) the transferee of all or any substantial part
of the Issuer's assets (or the Assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock having
the greatest voting rights to be issued by the Substitute Option Issuer
upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee or any
Subsidiary of Grantee), (y) the price per share of the Issuer Common
Stock to be paid by any person (other than Grantee or any Subsidiary of
Grantee) pursuant to an agreement with Issuer, and (z) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Holder) within
the 30-day period immediately preceding the agreement; provided, that in
the event of a sale of less than all of Issuer's assets, the Assigned
Value shall be the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by Holder (or
by a majority in interest of the Holders if there shall be more than one
Holder (a "Holder Majority")), divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale. In the event
that an exchange offer is made for the Issuer Common Stock or an
agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for the Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
mutually selected by Holder and Issuer (or if applicable, Acquiring
Corporation), provided that if a
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mutual selection cannot be made as to such investment banking firm, it
shall be selected by Holder. (If there shall be more than one Holder,
any such selection shall be made by a Holder Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by
Issuer, the person merging into Issuer or by any company which controls
or is controlled by such merger person, as Holder may elect.
(f) In no event pursuant to any of the foregoing paragraphs
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder (or a Holder Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so that
the shares of Substitute Common Stock are in no way distinguishable from or
have lesser economic value than other shares of common stock issued by the
Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option," "Substitute Purchase Price" and "Substitute Common Stock,"
respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request
of Holder at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d))and ending 12 months immediately thereafter,
Issuer shall repurchase from Holder the Option and all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number
of shares of Issuer Common Stock with respect to which the Option has not
been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
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Notwithstanding the foregoing, in no event shall the sum of (A) the remainder
obtained by subtracting (1) the aggregate Purchase Price paid from (2) the
Section 8 Repurchase Consideration plus (B) all payments recieved by Gazelle,
if any, under Section 11.2(c) of the Merger Agreement, exceed $24,000,000.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
Consent and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such Consent). If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If any
governmental or regulatory agency or authority prohibits the repurchase in part
but not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such agency or authority, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable
at the Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq National
Market, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all
of Issuer's Assets, the Applicable Price shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to Issuer (which
determination shall be conclusive for all purposes of this Agreement), divided
by the number of shares of the Issuer Common Stock outstanding at the time of
such sale. If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or
more of the then-outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be
consummated.
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9. REGISTRATION RIGHTS.
(a) Following termination of the Merger Agreement, Issuer shall,
subject to the conditions of subparagraph (c) below, if requested by any
Holder, including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition
of any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other
securities for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities
Laws in connection with an underwritten public offering of such Issuer Common
Stock, Issuer will promptly give written notice to Holder of its intention to
do so and, upon the written request of Holder given within 30 days after
receipt of any such notice (which request shall specify the number of shares of
Issuer Common Stock intended to be included in such underwritten public
offering by Selling Holder), Issuer will cause all such shares, the holders of
which shall have requested participation in such registration, to be so
registered and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement a dividend reinvestment or similar
plan, an employee benefit plan or a registration filed on Form S-4 or any
successor form, or a registration filed on a form which does not permit
registrations of resales; provided, further, that such election pursuant to
clause (i) may only be made two times. If some but not all the shares of
Issuer Common Stock, with respect to which Issuer shall have received requests
for registration pursuant to this subparagraph (b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Selling Holders and any other person (other than Issuer or any
person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become
effective and to obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement effective, provided,
that Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement pursuant to Section 10.1 thereof, (b) failure to obtain the
requisite stockholder approval pursuant to Section 9.1(a) of the Merger
Agreement, and (c) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling
Holders concerned were afforded the opportunity to register such shares
under the Securities Laws and such shares were registered as requested;
and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement after the
expiration of 120 days from the effective date of such registration statement.
Issuer shall use all reasonable efforts to make any filings, and take all
steps, under all applicable state securities laws to the
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extent necessary to permit the sale or other disposition of the Option Shares
so registered in accordance with the intended method of distribution for such
shares, provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses including the reasonable fees
and expenses of one counsel to the Selling Holders, printing expenses, expenses
of underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a)
or (b) above Issuer hereby indemnifies the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement of a material fact contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was included by Issuer
in any such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon,
and in conformity with, information furnished in writing to Issuer by such
holder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of
such action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any indemnified
party under this subparagraph (e). In case notice of commencement of any such
action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense of such action at its own expense, with counsel chosen by it
and satisfactory to such indemnified party. The indemnified party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party
unless (i) the indemnifying party either agrees to pay the same, (ii) the
indemnifying party falls to assume the defense of such action with counsel'
satisfactory to the indemnified party, or (iii) the indemnified party has been
advised by counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear fees and expenses
of such counsel. No indemnifying party shall be liable for any settlement
entered into without its consent, which consent may not be unreasonably
withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein, then
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the indemnifying party, in lieu of indemnifying such party otherwise entitled
to be indemnified, shall contribute to the amount paid or payable by such party
to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, all selling stockholders and the underwriters from
the offering of the securities and also the relative fault of Issuer, all
selling stockholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
amount paid or payable by a party as a result of the expenses, losses, claims,
damages and liabilities referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, that in no case shall
any Selling Holder be responsible, in the aggregate, for any amount in excess
of the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall comply with all reporting requirements and will
do all such other things as may be necessary to permit the expeditious sale at
any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time,
including, without limitation, Rules 144 and 144A. Issuer shall at its expense
provide Holder with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Laws, or required pursuant to any state securities laws or the rules
of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on the Nasdaq National Marketor any other
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq National Market or any other securities exchange
and will use its best efforts to obtain approval, if required, of such
quotation or listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
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(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
governmental or regulatory agency or authority to be invalid, void or
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. If for any reason such court
or regulatory agency determines that the Option does not permit Holder to
acquire, or does not require Issuer to repurchase, the full number of shares of
Issuer Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to
Section 7), it is the express intention of Issuer to allow Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard
to any applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the addresses set forth in the
Merger Agreement (or at such other address for a party as shall be specified by
like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: PHYSICIAN SALES & SERVICE, INC.
By:. By: /s/ ▇▇▇▇▇▇▇ ▇.▇▇▇▇▇
-------------------- ---------------------------------
[CORPORATE SEAL]
ATTEST: GULF SOUTH MEDICAL SUPPLY, INC.
By:. By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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President
[CORPORATE SEAL]
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