SHAREHOLDERS OPTION AGREEMENT
This SHAREHOLDERS OPTION AGREEMENT (this
"Agreement"), dated November 9, 1998, by and among American
Express Company, a New York corporation ("Holder"), and the
shareholders of Rockford Industries, Inc., a California
corporation (the "Company"), listed on the signature page
hereto (each a "Shareholder" and collectively the
"Shareholders").
WITNESSETH THAT:
WHEREAS, concurrently herewith Holder, RXP
Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of Holder ("Newco"), and Company are
entering into a Plan and Agreement of Merger (the "Merger
Agreement") pursuant to which Holder would, subject to the
terms and conditions set forth therein, acquire all of the
capital stock of the Company on a fully diluted basis for
consideration of approximately $11.88 per share (the
"Merger"); and
WHEREAS, the transaction is expected to be
structured as a tax-free reorganization for shares of Holder
capital stock; and
WHEREAS, each Shareholder owns of record the
number of shares of common stock, without par value, of the
Company ("Common Stock") set forth opposite such
Shareholder's name on Schedule A hereto (all of such shares
being referred to herein, whether with respect to a
particular Shareholder or collectively with respect to all
Shareholders, and giving effect to Section 15 hereof, as the
"Shares"); and
WHEREAS, the Shareholders desire to induce Holder
to proceed with the Merger and enter into the Merger
Agreement;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, Holder's
willingness to enter into the Merger Agreement and the sum
of $100, and such other valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Grant of Option. Each of the Shareholders hereby
grants to Holder an irrevocable and continuing option (the
"Option") to purchase all of the Shares owned by him for a
per share price equal to $11.88 (the "Purchase Price"); provided,
however, if Holder, Newco and the Company consummate the Merger
after the purchase of the Shares upon exercise of the Option and
pursuant thereto Holder pays to the shareholders of the
Company as Merger consideration a per share price greater
than $11.88 per share (the "Holder Price"), on the Effective
Date of the Merger Holder will pay each of the Shareholders
an additional amount equal to the product of (x) the
difference between the Holder Price and the Purchase Price
multiplied by (y) the number of such Shareholder's Shares
purchased upon exercise of the Option.
2. Exercise of Option. Holder may exercise the Option, in
whole, at any time following the occurrence of a First Date
for Exercise (as defined below). Upon any exercise of the
Option, Holder shall deliver a written notice to each of the
Shareholders and to U.S. Trust Company of California, as
escrow agent (the "Escrow Agent") under the Escrow
Agreement, dated as of the date hereof, among Holder, the
Shareholders and the Escrow Agent (the "Escrow Agreement")
of its intention to exercise the Option (the "Notice"),
specifying a time, place and date for the closing (the
"Closing"), which shall occur as soon as practicable, but
not later than three (3) business days from the date of the
Notice; provided, however, that (a) if any approvals under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") or otherwise shall be required with respect
to such exercise, then the Closing shall be the later of the
date specified in the Notice or the next business day
following the date on which such approvals shall have been
obtained, and (b) if any Shareholder shall fail to perform
his obligations hereunder, Holder may (i) exercise the
Option only with respect to the Shares held by those
Shareholders who have performed their respective obligations
hereunder or (ii) withdraw the Notice and decline to
exercise the Option with respect to the Shares without
prejudice to its right to exercise the Option at any time
thereafter during the term of this Agreement. As used
herein, the "First Date for Exercise" shall mean the
earliest to occur of any of the following events:
(i) any person shall have commenced (as such term is
defined in Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange
Act")), or shall have filed a registration
statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a
tender offer or exchange offer to purchase any
shares of Common Stock such that, upon
consummation of such offer, such person would own
or control 10% or more of the then outstanding
Common Stock;
(ii) the Company, without having received Holder's
prior written consent, shall (A) have authorized,
recommended, proposed or publicly announced an
intention to authorize, recommend or propose, or
shall have entered into or publicly announced an
intention to enter into, an agreement with any
person (other than Holder, Newco or any other
subsidiary of Holder) to (1) effect a merger,
consolidation, combination, reorganization, share
exchange, joint venture involving an equity
control event (as defined below) or similar
transaction involving the Company or any
subsidiary of the Company, (2) directly or
indirectly sell, lease or otherwise transfer or
dispose of, or agree to sell, lease or otherwise
transfer or dispose of, assets of the Company or
its subsidiaries representing 10% or more of the
consolidated assets of the Company and its
subsidiaries or (3) directly or indirectly issue,
sell or otherwise transfer or dispose of or agree
to issue, sell or otherwise transfer or dispose of
(including, without limitation, by way of merger,
consolidation, reorganization, share exchange,
dividend, distribution or any similar transaction)
securities representing 10% or more of the voting
power of the Company (any of the foregoing an
"Acquisition Transaction"), or (B) directly or
indirectly have otherwise taken any action
including, without limitation, responding to, or
entering into discussions or negotiations, in
respect of an Acquisition Transaction or an
Acquisition Proposal (as defined in the Merger
Agreement) made by any party other than Holder;
(iii) any person or group (as such term is defined under
the Exchange Act) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire
beneficial ownership of, or any group shall have
been formed which beneficially owns or has the
right to acquire beneficial ownership of, 10% or
more of the then outstanding Common Stock (other
than any person or group that, at the date hereof,
beneficially owns or has the right to acquire
beneficial ownership of 10% or more of the
outstanding shares of Common Stock) (an "equity
control event"); or
(iv) any person other than Holder shall have made an
Acquisition Proposal to the Company or its
shareholders and such proposal shall have been
publicly announced (the events described in the
preceding clauses (i), (ii), (iii) and (iv) are
collectively and individually hereinafter referred
to as an "Acquisition Event").
3. Payment and Delivery of Certificates. Concurrent with
the execution of this Agreement, the Shareholders shall
deliver to the Escrow Agent the certificates representing
the Shares, duly endorsed in blank for transfer, or
accompanied by duly executed stock powers in blank, in each
case with signatures guaranteed by a national bank or trust
company or a member firm of the New York Stock Exchange,
Inc. At any Closing hereunder, the Escrow Agent shall
promptly deliver to Holder the Shares with respect to which
the Option has been exercised and, simultaneously with the
proper surrender by Escrow Agent to Holder of the Shares to
be purchased by Holder, Holder shall deliver to the Escrow
Agent a wire transfer of immediately available funds equal
to the aggregate Purchase Price.
4. Sharing of Gain. If (i) Holder exercises the Option
and the Merger is not consummated, and (ii) within one year
from the date Holder exercised the Option Holder sells all
or substantially all of the Shares to another Person in
connection with an Acquisition Event involving the Company
and any party other than a wholly owned subsidiary of Holder
at a price per share above $13.38 (the "Measuring Price"),
Holder will pay each of the Shareholders an amount equal to
fifty percent (50%) of the product of (x) the difference
between the sales price per share paid to Holder for the
shares of Common Stock of the Company sold by Holder in such
Acquisition Event and the Measuring Price multiplied by
(y) the number of Shares sold by such Shareholder to Holder
pursuant to the exercise of the Option.
5. Representations and Warranties of the Shareholders.
Each Shareholder represents and warrants (such
representations and warranties being deemed repeated at any
Closing at which Shares of such Shareholder are purchased)
that:
5.1 Ownership of Shares. Such Shareholder is the
record owner of the number of Shares listed opposite his
name on Schedule A hereto; except as set forth on Schedule B
hereto, such Shareholder does not own beneficially or of
record any other capital stock of the Company; such Shares
are validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof; and
such Shares are owned by such Shareholder free and clear of
any pledges, liens, security interests, adverse claims,
assessments, options, equities, charges or encumbrances with
respect to the ownership of or right to vote or dispose of
such Shares.
5.2 Transfer of Title. The sale by such Shareholder
of his Shares and the delivery by Escrow Agent of the
certificates representing such Shares to Holder pursuant
hereto will transfer to Holder good and valid title to such
Shares free and clear of all pledges, liens, security
interests, adverse claims, assessments, options, equities,
charges and encumbrances whatsoever, and with no proxies or
restrictions on the voting rights or other incident of
record or beneficial ownership pertaining thereto (other
than the proxy being granted pursuant to Section 7 of this
Agreement).
5.3 Authority; Due Execution; Enforceability. Such
Shareholder has the full right, power, capacity and
authority to enter into this Agreement; and this Agreement
has been duly and validly executed and delivered by such
Shareholder and constitutes a legal, valid and binding
obligation of such Shareholder enforceable against him in
accordance with its terms.
5.4 No Conflicts. The execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby will not, with or without giving of
notice or the passage of time, (a) violate any judgment,
award, decree, injunction or order of any court, arbitrator
or governmental agency applicable to such Shareholder or
such Shareholder's property or assets or any federal or
state law, statute or regulation, or (b) conflict with,
result in the breach of any provision of or constitute a
violation of or default under any agreement or instrument to
which such Shareholder is a party or by which such
Shareholder or such Shareholder's property or assets may be
bound.
6. Covenants of the Shareholders. Each Shareholder hereby
covenants and agrees that:
6.1 Bring-Down of Representations. During the term
hereof such Shareholder will not enter into any transaction,
take any action or by inaction permit any event to occur
that would result in any of the representations or
warranties of such Shareholder herein contained not being
true and correct at and as of (a) the time immediately after
the occurrence of such transaction, action or event or
(b) the date of any Closing of the purchase of Shares.
Without limiting the generality of the foregoing, each
Shareholder covenants and agrees that such Shareholder will
not sell, transfer, pledge, assign or otherwise convey or
dispose of, or enter into any contract, option, agreement or
other arrangement or understanding with respect to the sale,
transfer, pledge, assignment, conveyance or other
disposition of, any Shares, other than to or in favor of
Holder or Holder's assignee, or in connection with the
Merger or an Acquisition Transaction between the Company
and Holder, Newco or another subsidiary of Holder (a "Holder
Acquisition Transaction").
6.2 Surrender of Shares. Concurrent with the
execution of this Agreement, each Shareholder will execute
an Escrow Agreement authorizing the Escrow Agent to take the
actions contemplated by this Agreement on behalf of the
Shareholders and will surrender the certificates
representing his Shares to the Escrow Agent to be held
pursuant to the Escrow Agreement. Each Shareholder agrees
that the Company may instruct the transfer agent for the
Common Stock to place a stop transfer order against any
attempt to transfer the Shares except in accordance with the
Escrow Agreement and this Agreement.
7. Irrevocable Proxy and Release; Agreement to Vote
Shares.
(a) Each Shareholder has revoked or terminated any
proxies, voting agreements or similar arrangements
previously given or entered into with respect to the Shares
and hereby irrevocably appoints Holder, during the term of
this Agreement, as proxy for such Shareholder to vote (or
refrain from voting) in any manner as Holder, in its sole
discretion, may see fit, all of the Shares of such
Shareholder for such Shareholder and in such Shareholder's
name, place and stead, at any annual, special or other
meeting or action of the shareholders of the Company or at
any adjournment thereof or pursuant to any consent of
shareholders of the Company in lieu of a meeting or
otherwise, with respect to any issue brought before
shareholders of the Company. The parties acknowledge and
agree that, except as specifically provided for in
Section 7(c) hereof, neither Holder, nor Holder's
successors, assigns, subsidiaries, divisions, employees,
officers, directors, shareholders, agents and affiliates
shall owe any duty to, whether in law or otherwise, or incur
any liability of any kind whatsoever, including without
limitation, with respect to any and all claims, losses,
demands, causes of action, costs, expenses (including
reasonable attorney's fees) and compensation of any kind or
nature whatsoever to any Shareholder in connection with, as
a result of or otherwise relating to any vote (or refrain
from voting) by Holder of the Shares subject to the
irrevocable proxy hereby granted to Holder at any annual,
special or other meeting or action or the execution of any
consent of the shareholders of the Company. If the issue on
which Holder is voting pursuant to the irrevocable proxy is
the proposal to approve the Merger and the Merger Agreement,
Holder shall vote for such proposal or give its consent, as
applicable.
(b) Notwithstanding the foregoing grant to Holder of
the irrevocable proxy, in the event Holder elects not to
exercise its rights to vote the Shares pursuant to the
irrevocable proxy, upon the request of Holder each
Shareholder agrees to vote all of his Shares during the term
of this Agreement (i) if the issue on which the Shareholder
is requested to vote is a proposal to approve the Merger and
the Merger Agreement, each Shareholder agrees to vote in
favor of or give its consent to, as applicable, the Merger
and the Merger Agreement or (ii) otherwise in the manner
directed by Holder at any annual, special or other meeting
or action of shareholders of the Company in lieu of a
meeting or otherwise with respect to any issue brought
before the shareholders of the Company.
(c) If Holder (i) exercises its right to vote the
Shares pursuant to the irrevocable proxy as provided in
Section 7(a) other than with respect to the approval of the
Merger, or (ii) instructs a Shareholder how to vote pursuant
to Section 7(b)(ii), other than with respect to the approval
of the Merger, and such Shareholder votes his Shares in
accordance with such instruction, Holder agrees to indemnify
and hold harmless such Shareholder from any and all claims,
liabilities, losses, demands, causes of action, expenses
(including reasonable attorneys' fees) that arise from or
occur by reason of such actions.
8. Survival. All rights and authority granted herein by
each Shareholder shall survive the death or incapacity of
such Shareholder. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their
respective spouses, heirs, personal representatives,
successors and assigns. Holder may, without the consent of
any of the Shareholders, assign its rights hereunder to any
wholly owned subsidiary of Holder, but otherwise the consent
of each Shareholder shall be required to assign the rights
of Holder hereunder.
9. Further Assurances. Each Shareholder shall cooperate
with Holder and execute and deliver any additional documents
necessary or desirable, in the opinion of Holder or its
counsel, to (i) obtain any third party approvals necessary
or advisable to consummation of the exercise of the Option,
including, without limitation, approvals under the HSR Act,
if applicable, (ii) complete the sale and transfer of the
Shares with respect to which the Option is exercised and the
vesting of title to such Shares in Holder and (iii) evidence
the irrevocable proxy granted herein with respect to the
Shares.
10. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by
registered or certified mail, postage prepaid, addressed to
the respective party at the following addresses:
To Holder: American Express Company
American Express Tower
World Financial Center
New York, New York 10285-4900
Attn: Carol V. Schwartz, Esq.
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: Bruce N. Hawthorne, Esq.
To each Shareholder: At the address set forth opposite the
Shareholder's name on Schedule A.
11. Termination. Except as provided in the following
sentence, this Agreement and the Option, other than the
provisions of Section 7(c) and as provided in Section 14
below, shall terminate on the earlier of: (i) the delivery
by Holder to the Shareholders of written notice of Holder's
determination to terminate this Agreement and (ii) the
termination of the Merger Agreement in accordance with the
terms thereof (the "Termination Date"). Notwithstanding
anything to the contrary in this Agreement or any other
agreement, if during the term of this Agreement an
Acquisition Event shall occur or if the Merger Agreement
shall have been terminated by the Company in accordance with
Section 7.1(b)(v) of the Merger Agreement (the date of the
earlier of the occurrence or termination being the "Trigger
Date"), this Agreement and the Option shall remain in full
force and effect and the Termination Date of this Agreement
shall automatically extend to the date which occurs
12 months from the Trigger Date.
12. Remedies. The Shareholders each acknowledge that
Holder will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the
covenants or agreements of the several Shareholders which
are contained in this Agreement. It is accordingly agreed
that, in addition to any other remedies which may be
available to Holder upon the breach by any of the
Shareholders of such covenants and agreements, Holder shall
have the right to obtain injunctive relief to restrain any
breach or threatened breach of such covenants or agreements
or otherwise to obtain specific performance of any of such
covenants or agreements.
13. Commissions. Each of the parties hereto represents and
warrants that there are no agreements or claims for
brokerage commissions or finders' fees in connection with
the transactions contemplated by this Agreement, and the
Shareholders and Holder will respectively pay or discharge
and will indemnify each other for brokerage commissions or
finders' fees incurred by reason of any action taken by such
indemnifying party.
14. Survival of Representations. Notwithstanding any
provision of this Agreement to the contrary, all
representations and warranties made by the Shareholders in
this Agreement and the covenants of the Shareholders set
forth in Sections 20 and 21 below shall survive (i) any
exercise of the Option by Holder, (ii) any vote by Holder of
the Shares pursuant to the irrevocable proxy or (iii) any
vote by any Shareholder in accordance with Section 7(b).
15. Changes in Capitalization. For all purposes of this
Agreement, the Shares shall include any securities for cash
or other property issued or exchanged with respect to such
Shares upon any recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation,
dividend in cash or stock or other property, split-up or
combination of the securities of the Company, or any other
change in its capital structure and shall also include all
Shares of Common Stock issued to any Shareholder after the
date hereof pursuant to the exercise by any Shareholder of
stock options.
16. Compliance with Securities Laws. The parties agree
that any transfer of the Shares effected hereunder shall be
effected so as to comply with all applicable federal and
state securities laws.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York without regard to the conflicts of laws principles
thereof.
18. Counterparts. This Agreement may be executed in one or
more counterparts, all of which together shall constitute a
single agreement.
19. Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any
current or future law, and if the rights or obligations of
the parties under this Agreement would not be materially and
adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, the remaining
provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. In
lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this
Agreement, a legal, valid and enforceable provision as
similar in terms to such illegal, invalid or unenforceable
provision as may be possible, and the parties hereto request
the court or any arbitrator to whom disputes relating to
this Agreement are submitted to reform the otherwise
illegal, invalid or unenforceable provision in accordance
with this Section 19.
20. Waiver of Rights Under Shareholders' Agreement. Each
Shareholder hereby waives any and all rights of purchase,
first refusal or similar rights or prohibitions or
restrictions on transfers of the Shares that he, his spouse
or his estate may have with respect to the Shares of any
other Shareholder under that certain Shareholders'
Agreement, dated May 1, 1995, among Gerry Ricco, Larry
Hartmann and Brian Seigel (the "Shareholders' Agreement)
with respect to the transactions contemplated by this
Agreement and the Merger Agreement including, without
limitation, the rights and restrictions set forth in
Section 1.1, 1.2, 2.1, 2.2, 3.1 and 3.2 of the Shareholders'
Agreement. Each Shareholder acknowledges that concurrently
herewith he is delivering to Holder a spousal consent duly
signed by his spouse acknowledging, agreeing and consenting
to the transactions contemplated by this Agreement and the
Merger Agreement.
21. Agreements to Notify.
(a) Each Shareholder and Holder agree to notify
promptly the Escrow Agent of the termination of this
Agreement and agree to deliver to the Escrow Agent any
written instructions that may reasonably be requested by the
Escrow Agent relating to the release of the Shares upon the
termination of this Agreement.
(b) Each Shareholder agrees to notify Holder promptly,
and in any event, without limiting the foregoing
undertaking, prior to any exercise of the Option by Holder,
of any commencement or threatened commencement known to such
Shareholder by any person, entity or governmental authority
or agency of any suit, action or legal proceedings with
respect to the Option.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be signed as of the date first
above written.
SHAREHOLDERS:
/S/ Gerry J. Ricco
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Gerry J. Ricco
/s/ Larry Hartmann
------------------------------
Larry Hartmann
/s/ Brian Seigel
------------------------------
Brian Seigel
HOLDER:
AMERICAN EXPRESS COMPANY
By: /s/ Steven Alesio
--------------------------
Title: Authorized Signatory
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By: /s/ Stephen P. Norman
--------------------------
Title: Secretary
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Schedule A
Name of Number of Address for
Shareholder Shares Owned of Record Notice Purposes
Gerry J. Ricco 734,666 45 Fortuna
Irvine, California
92720
Larry Hartmann 734,667 507 Old Post Road
Wyckoff, New Jersey
07481
Brian Seigel 734,667 19691 Vista del Valle
Santa Ana, California
92705
Schedule B
Stock Options 401(K) Plan
Gerry J. Ricco 40,000 1,336.7659
Larry Hartmann 40,000 1,201.7736
Brian Seigel 40,000 1,308.6629