STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 19, 1999, between Motorola,
Inc. ("Grantee") and Metrowerks Inc. ("Issuer").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Grantee and Issuer are entering into an
agreement providing for Grantee to offer to acquire 100% of the outstanding
Common Shares of Issuer (the "Offer Agreement");
WHEREAS, the Offer Agreement provides for a maximum Termination Fee (as
defined therein; the "Termination Fee") of U.S. $4,700,000;
WHEREAS, Grantee and Issuer agree that the value of the Option and the
Termination Fee, together, is not to exceed U.S. $4,700,000;
WHEREAS, as a condition and inducement to Grantee's execution of the
Offer Agreement and pursuant to the transactions contemplated thereby and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Offer Agreement prior to the execution hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Offer Agreement, the
parties hereto agree as follows:
1. THE OPTION.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 2,913,172 fully paid and nonassessable common shares of Issuer
("Common Shares") at a price per share equal to U.S. $6.25 (such price, as
adjusted if applicable, the "Option Price") or an aggregate purchase price for
the Common Shares of U.S. $18,207,325 (the "Aggregate Option Price"); provided,
however, that in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding Common Shares (without
giving effect to any exercise of this Option) at the time of exercise without
giving effect to the Common Shares issued or issuable under the Option. The
number of Common Shares that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional Common Shares are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of Common Shares subject to the Option shall be
increased so that, after such issuance, such number together with any Common
Shares previously issued pursuant hereto, equals 19.9% of the number of Common
Shares then issued and outstanding (without giving effect to any exercise of
this Option) without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach any provision
of the Offer Agreement. Any such increase shall not affect the Aggregate Option
Price.
2. EXERCISE; CLOSING.
(a) Grantee and/or any other person that shall become a holder of all
or part of the Option in accordance with the terms of this Agreement (each such
person being referred to herein as the "Holder") may exercise the Option, in
whole or part, if, but only if, the Termination Fee has become payable (a
"Triggering Event") and such exercise is prior to the occurrence of an Exercise
Termination Event (as hereinafter defined).
(b) Each of the following shall be an "Exercise Termination Event":
(i) the passage of thirteen (13) months (or such longer
period as provided in Section 10) after termination
of the Offer Agreement; or
(ii) the completion of the acquisition of all of the
issued and outstanding Common Shares of Issuer by
Grantee or a direct or indirect wholly-owned
subsidiary of Grantee; or
(iii) the payment of any combination of the Option
Repurchase Price or the Option Share Repurchase Price
(as defined in Section 7(a) hereof) or the Substitute
Option Repurchase Price or the Substitute Share
Repurchase Price (as defined in Section 9(a) hereof)
aggregating U.S. $4,700,000.
(c) In the event Holder is entitled to and wishes to exercise the
Option (or any portion thereof), 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 shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if the closing of such purchase cannot be consummated by reason
of any applicable judgment, injunction, decree, order, law or regulation, the
period of time that would otherwise run pursuant to this sentence shall run
instead from the date on which such restriction on consummation has expired or
been terminated; and provided, further, that if prior notification to or
approval of any regulatory or antitrust agency is required in connection with
such purchase, Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process
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the same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Issuer agrees to use
its best efforts to obtain any and all regulatory or other approvals necessary
in connection with the granting or exercise of the Option. Any exercise of the
Option, in whole or in part, shall be deemed to occur on the Notice Date
relating to that portion of the exercise of the Option.
(d) At the closing referred to in subsection (c) of this Section 2,
Holder shall (i) pay to Issuer the aggregate purchase price for the Common
Shares purchased pursuant to an exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
Holder from exercising the Option by delivery of a certified check or bank draft
and (ii) present and surrender this Agreement to Issuer, against delivery, in
the case of any exercise of the Option in part only, of the new Agreement
referred to in subsection (e) of this Section 2.
(e) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (d) of this Section 2, Issuer shall
deliver to Holder a certificate or certificates representing the number of
Common Shares purchased by Holder and, if the Option should be exercised in part
only, a new Agreement evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder, which new Agreement shall be on
the same terms and conditions as are set forth herein except with respect to the
number of Common Shares issuable pursuant thereto, which shall be reduced
accordingly in respect of any prior exercises of the Option.
(f) Certificates for Common Shares delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain resale restrictions arising under
applicable securities laws (including the United States
Securities Act of 1933, as amended)."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Holder shall
have delivered to Issuer a copy of a letter from the United States Securities
and Exchange Commission or a written opinion of counsel of nationally recognized
standing addressed to Issuer, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the
Unites States Securities Act of 1933, as amended (the "1933 Act") or other
applicable securities laws. In addition, such certificates shall bear any other
legend as may be required by law.
(g) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (c) of this Section 2 and
the tender of the applicable purchase price in immediately available funds,
Holder shall be deemed to be the holder of record of the Common Shares issuable
upon such exercise, notwithstanding that the share transfer books of Issuer
shall then
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be closed or that certificates representing such Common Shares shall not then be
actually delivered to Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of share
certificates under this Section 2 in the name of Holder or its assignee,
transferee or designee.
3. COVENANTS OF ISSUER.
In addition to its other agreements and covenants herein, Issuer
agrees:
(a) that it shall at all times maintain, free from any subscription or
preemptive rights, sufficient authorized but unissued Common Shares so that the
Option may be exercised without additional authorization of Common Shares after
giving effect to all other options, warrants, convertible securities and other
rights of third parties to purchase Common Shares from Issuer or to cause Issuer
to issue Common Shares;
(b) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer;
(c) promptly to take all action as may from time to time be required
(including complying with all applicable notification, filing reporting and
waiting period requirements under the Xxxx-Xxxxx-Xxxxxx Act or otherwise, and
cooperating fully with Holder in preparing any applications or notices and
providing such information to any regulatory authority as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively to
issue Common Shares pursuant hereto and to protect the rights of Holder against
dilution; and
(d) it will forthwith following the execution of this Agreement make
application, and thereafter use its best efforts to (i) secure the approval of
The Toronto Stock Exchange (the "TSE") and the NASDAQ Market, and any other
stock exchange or market on which the Common Shares are listed or quoted for
trading, in respect of the issuance and exercise of the Option and (ii) cause
the Common Shares to be issued pursuant to the Option to be conditionally
approved for listing (to the extent they are not already so approved) on the
TSE, the NASDAQ Market and all other stock exchanges or markets on which such
Common Shares are then listed or quoted for trading, subject to the usual
conditions of the TSE and, in the case of the NASDAQ Market, subject to official
notice of issuance. Issuer agrees to provide Grantee with copies of all
correspondence with all stock exchanges or markets in connection with the
provisions of this paragraph and to provide Grantee with the opportunity to
participate in the process of obtaining, and any proceedings relating to
obtaining, all such approvals.
4. EXCHANGE; REPLACEMENT.
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This Agreement (and the Option evidenced 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,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of Common Shares purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any 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 any person other than
the holder of the new Agreement.
5. ADJUSTMENTS.
In addition to the adjustment in the number of Common Shares that are
purchasable upon exercise of the Option pursuant to Section 1(b) of this
Agreement, the number of Common Shares purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Shares by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of Common Shares purchasable upon exercise
hereof shall be appropriately adjusted and proper provision shall be made so
that (i) any Holder shall receive upon exercise of the Option the number and
class of shares, other securities, property or cash that such Holder would have
received in respect of the Common Shares purchasable upon exercise of the Option
if the Option had been exercised and such Common Shares had been issued to such
Holder immediately prior to such event or the record date therefor, as
applicable, and (ii) in the event that any additional Common Shares are to be
issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of Common Shares
purchasable upon exercise of the Option shall be increased so that, after such
issuance and together with Common Shares previously issued pursuant to the
exercise of the Option (as adjusted on account of any of the foregoing changes
in the Common Shares), it equals 19.9% of the number of Common Shares issued and
outstanding (without giving effect to any exercise of this Option) immediately
after the consummation of such change.
(b) Whenever the number of Common Shares purchasable upon exercise
hereof is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of which
shall be equal to the number of Common Shares purchasable prior to the
adjustment and the denominator of which shall be equal to the number of Common
Shares purchasable after the adjustment, with the intention that such adjustment
in the
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Option Price will result in the Option having the same economic value to the
Holder following such adjustment in the Option Price as it did prior to the
event giving rise to the adjustment in the number of Common Shares provided for
in this Section 5. More specifically, in no event shall the Aggregate Option
Price increase.
6. REGISTRATION.
(a) If any Triggering Event has occurred prior to an Exercise
Termination Event, Issuer shall, at the request of Grantee delivered within
twelve (12) months (or such later period as provided in Section 10) of such
Triggering Event (whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the Common Shares issued
pursuant hereto), promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering any shares issued and issuable pursuant to
this Option and shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to permit the sale or
other disposition of any Common Shares issued upon total or partial exercise of
this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. Issuer shall bear the costs of such
registrations (including, but not limited to, Issuer's attorneys' fees, printing
costs and filing fees, except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's counsel related
thereto). The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering by Issuer of Common
Shares, and if in the good faith judgment of the managing underwriter or
managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the inclusion of the Option Shares would interfere with the
successful marketing of the Common Shares offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement contemplated
hereby may be reduced; provided, however, that after any such required reduction
the number of Option Shares to be included in such offering for the account of
Holder shall constitute at least 25% of the total number of shares to be sold by
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each
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case by promptly mailing the same, postage prepaid, to the address of record of
the persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement. Securities held by persons entitled to "piggy-back" registration
rights pursuant to any contractual commitment of the Company may be included for
registration under the registration statement referred to in this Section 6(a),
but only if such inclusion (i) would not reduce the number of Common Shares to
be sold by Holder and (ii) could not reasonably be expected to adversely affect
the offering being made by Holder pursuant to the registration statement.
(b) In the event that Grantee shall desire to sell any of the Common
Shares issued upon total or partial exercise of the Option and such sale in the
manner proposed by Grantee requires, in the opinion of counsel to Grantee,
qualification of such Common Shares for resale under applicable Canadian
securities laws, Issuer shall cooperate with Grantee and any underwriters in
qualifying such Common Shares for resale, including, without limitation,
promptly filing a prospectus which complies with the requirements of applicable
Canadian securities laws and entering into an underwriting agreement with such
underwriters upon such terms and conditions as are customarily contained in
underwriting agreements with respect to secondary distribution.
(c) If Common Shares are qualified for distribution pursuant to this
Section 6, Issuer agrees (i) to furnish copies of the prospectus relating to the
Common Shares covered thereby in such numbers as Grantee may from time to time
reasonably request, and (ii) if any event shall occur as a result of which it
becomes necessary to amend or supplement any prospectus, to prepare and file
under the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 60 days a prospectus covering Common
Shares meeting the requirements of such securities laws, and to furnish Grantee
such numbers of copies of the prospectus, as amended or supplemented, as may
reasonably be requested. Issuer shall bear the cost of the qualification,
including but not limited to, all filing fees, printing expenses, underwriting
fees and fees and disbursements of its counsel and counsel and accountants for
Grantee.
(d) Issuer shall indemnify and hold harmless Grantee, its affiliates
and its officers and directors from and against any and all losses, claims,
damages, liabilities and expenses arising out of or based upon any statements
contained in or omissions or alleged omissions from, each registration statement
or Canadian prospectus filed pursuant to this Section 6; provided, however, that
this provision shall not apply to any loss, liability, claim, damage or expense
to the extent it arises out of any untrue statement or omission made in reliance
upon and in conformity with written information furnished to Issuer by Grantee,
its affiliates and its officers and other representatives expressly for use in
any registration statement or Canadian prospectus (or any amendment thereto)
filed pursuant to this Section 6. Issuer shall also indemnify and hold harmless
each underwriter and each person who controls any underwriter against any and
all losses, claims, damages, liabilities and expenses arising out of or based
upon any statements contained in or omissions or alleged omissions from, each
registration statement or Canadian prospectus filed pursuant to this Section 6;
provided, however, that this provision shall not apply to any loss, liability,
claim, damage or expense to the
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extent it arises out of any untrue statement or omission made in writing by the
underwriters expressly for use in any registration statement or Canadian
prospectus (or any amendment thereto) filed pursuant to this Section 6.
(e) In the event that Grantee so requests, the closing of the sale or
other disposition of the Common Shares or other securities pursuant to a
registration statement or Canadian prospectus filed pursuant to Section 6 shall
occur substantially simultaneously with the exercise of the Option.
(f) If any of the Common Shares acquired upon exercise of the Option
are not yet listed on any stock exchange or included for trading on any stock
market, or have only been conditionally listed or included for trading subject
to notice of issuance, Issuer, upon the request of Holder, shall promptly use
its best efforts to obtain unconditional approval of such listing or inclusion
for trading as soon as practicable.
7. REPURCHASE OF OPTION AND/OR OPTION SHARES.
(a) At any time and from time to time after the occurrence of a
Triggering Event (i) at the request of Holder, delivered in writing prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase the Option (or such portion
of the Option as Holder shall designate) from Holder at a price (the "Option
Repurchase Price") equal to the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which this Option may then be exercised and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered in writing prior to
an Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase such number of the Option
Shares from Owner as Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the market/offer price multiplied by the number of
Option Shares so designated. The term "market/offer price" shall mean the
highest of (i) the price per Common Share at which a tender or exchange offer
therefor has been made, (ii) the price per Common Share to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest trading price for
Common Shares on the TSE or the NASDAQ Market (or, if the Common Shares are not
then listed on the TSE or the NASDAQ Market, any other stock exchange or
automated quotation system on which the Common Shares are then listed or quoted)
within the six-month period immediately preceding the date Holder gives notice
of the required repurchase of this Option or Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all Issuer's assets, the sum of the net price paid in
such sale for such assets and the current market value of the remaining net
assets of Issuer as determined by a nationally recognized investment banking
firm selected by Holder or Owner, as the case may be, and reasonably acceptable
to Issuer, divided by the number of Common Shares of Issuer outstanding at the
time of such sale, which determination, absent manifest error, shall be
conclusive for all purposes of this Agreement. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by Holder or Owner, as
the case may be, and reasonably acceptable to Issuer, which determination,
absent manifest error, shall be conclusive for all purposes of this Agreement.
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(b) Holder and Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that Holder or Owner, as the
case may be, elects to require Issuer to repurchase this Option and/or the
Option Shares in accordance with the provisions of this Section 7. As promptly
as practicable, and in any event within five business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall deliver or cause to be
delivered to Holder the Option Repurchase Price and/or to Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify Holder and/or Owner and thereafter deliver or cause
to be delivered, from time to time, to Holder and/or Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation from delivering to Holder and/or Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), Holder or Owner may revoke its notice of repurchase of the Option
and/or the Option Shares whether in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to Holder
and/or Owner, as appropriate, that portion of the Option Repurchase Price and/or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to Holder, a new Agreement, on the
same terms and subject to the same conditions as are set forth herein,
evidencing the right of Holder to purchase that number of Common Shares obtained
by multiplying the number of Common Shares for which the surrendered Agreement
was exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price less the portion
thereof theretofore delivered to Holder and the denominator of which is the
Option Repurchase Price, and/or (B) to Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing. If an Exercise Termination
Event shall have occurred prior to the date of the notice by Issuer described in
the first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, Holder shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
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8. SUBSTITUTE OPTION.
(a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or any of its subsidiaries and Issuer shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or any of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving or acquiring corporation,
but in connection with such merger, the then outstanding Common Shares shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding Common Shares shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged or acquiring company, or (iii) to sell or otherwise
transfer all or substantially all of its or any Significant Subsidiary's assets
to any person, other than to Grantee or any of its subsidiaries, then, and in
each such case, the agreement governing such transaction shall make proper
provision 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 hereinafter defined) or (y)
any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing
or surviving person of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving
or acquiring person, and (iii) the transferee of all
or substantially all of Issuer's assets (or the
assets of a Significant Subsidiary of Issuer).
(ii) "Substitute Shares" shall mean the shares of capital
stock (or similar equity interest) with the greatest
voting power in respect of the election of directors
(or other persons similarly responsible for direction
of the business and affairs) of the issuer of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price
per Substitute Share, on the principal trading market
on which such shares are traded as reported by a
recognized source, for one year immediately preceding
the consolidation, merger or sale in question, but in
no event higher than the closing price of the
Substitute Shares on such market 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
common share issued by the person merging into Issuer
or by any company which controls or is controlled by
such person, as Holder may elect.
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(v) "Significant Subsidiary" has the meaning ascribed to
such term in Rule 405 promulgated under the
Securities Exchange Act of 1934, as amended (the
"1934 Act"), as if the Company were the registrant
referred to therein.
(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 issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
Substitute Shares as is equal to the Assigned Value multiplied by the number of
Common Shares for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a), divided by the Average
Price. The exercise price of the Substitute Option per Substitute Share shall
then be equal to the Option Price multiplied by a fraction, the numerator of
which shall be the number of Common Shares for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a)
and the denominator of which shall be the number of Substitute Shares for which
the Substitute Option is exercisable. In no event shall the Aggregate Option
Price be increased.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
number of shares purchasable upon exercise of the Substitute Option exceed 19.9%
of the Substitute Shares then issued and outstanding (without giving effect to
any exercise of this Option) at the time of exercise (without giving effect to
Substitute Shares issued or issuable under the Substitute Option). In the event
that the Substitute Option would be exercisable for more than 19.9% of the
Substitute Shares then issued and outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (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 (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee (or, if
Grantee is not then the Holder owning Options with respect to the largest number
of Substitute Shares, the largest Holder), which determination, absent manifest
error, shall be conclusive for all purposes of this Agreement.
(f) In addition to any other restrictions or covenants, Issuer agrees
that it shall not enter or agree to enter into any transaction described in
Section 8(a) unless the Acquiring Corporation and any person that controls the
Acquiring Corporation (i) assume in writing all the obligations of Issuer
hereunder and (ii) take all other actions that may be necessary so that the
provisions of this Section 8 are given full force and effect. Without limiting
the foregoing, the Acquiring Corporation and any person that controls the
Acquiring Corporation shall take any action that may be necessary (x) so that
the holders of the other common shares issued by the Substitute Option Issuer or
any successor to
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the Substitute Option Issuer are not entitled to exercise any rights by reason
of the issuance or exercise of the Substitute Option and (y) to prevent the
exercise of any rights by the holders of the other common shares issued by the
Substitute Option Issuer or any successor to the Substitute Option Issuer that
(A) any holder of the Substitute Option (each such person being referred to
herein as a "Substitute Option Holder") or any holder of Substitute Shares (each
such person being referred to herein as a "Substitute Share Owner") purchased
upon exercise of the Substitute Option would be prohibited or precluded from
exercising or (B) the exercise of which would adversely affect the rights of any
Substitute Option Holder under the agreement for such Substitute Option or the
transactions contemplated by the Offer Agreement.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) At the written request of a Substitute Option Holder at any time
and from time to time, the Substitute Option Issuer shall repurchase the
Substitute Option (or such portion of the Substitute Option as the Substitute
Option Holder shall designate) from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of Substitute Shares for
which the Substitute Option may then be exercised, and at the request of the
Substitute Share Owner, the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for Substitute Shares within the six-month period immediately preceding
the date the Substitute Option Holder gives notice of the required repurchase of
the Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the
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Substitute Option Issuer shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use its best efforts to receive
all required regulatory and legal approvals as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of Substitute Shares obtained by multiplying the number of
Substitute Shares for which the surrendered Substitute Option was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, and/or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Substitute Option Holder shall nevertheless have the right
to exercise the Substitute Option until the expiration of such 30-day period.
10. EXTENSION.
The time periods for the exercise of certain rights under this
Agreement shall be extended: (i) to the extent necessary to obtain all
governmental and regulatory approvals for the exercise of such rights (for so
long as Holder, Owner, Substitute Option Holder or Substitute Share Owner, as
the case may be, is using commercially reasonable efforts to obtain such
regulatory approvals), and for the expiration of all statutory waiting periods;
(ii) during any period for which an injunction or similar legal prohibition on
exercise shall be in effect and (iii) if applicable, to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. REPRESENTATIONS AND WARRANTIES.
Issuer hereby represents and warrants to Grantee as follows:
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(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer and constitutes a valid and legally binding obligation
of Issuer enforceable in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of Common
Shares equal to the maximum number of Common Shares at any time and from time to
time issuable hereunder, and all such shares, upon issuance pursuant to the
Option, will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrances and security
interests (other than those created by this Agreement) and not subject to any
preemptive rights.
(c) The execution, delivery and performance of this Agreement does not
or will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of or a default under, its articles or certificate of incorporation or by-laws,
or the comparable governing instruments of any of its subsidiaries, or (ii) a
breach or violation of or a default under, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or non-governmental permit or licence to which it or any
of its subsidiaries is subject.
12. ASSIGNMENT.
Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that
Grantee may, without the prior written consent of Issuer, assign the Option, in
whole or in part, to any affiliate of Grantee.
13. FILINGS; OTHER ACTIONS.
Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and regulatory and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, notices and
filings under the Xxxx-Xxxxx-Xxxxxx Act.
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14. TOTAL PROFIT.
(a) Notwithstanding any other provision of this Agreement, in no event
shall Grantee's Total Profit (as hereinafter defined) exceed U.S. $4,700,000
million less the amount of any fee paid pursuant to Section 10(b) of the Offer
Agreement and, if it otherwise would exceed such amount, Grantee, at its sole
election, shall either (i) reduce the number of Common Shares subject to this
Option, (ii) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (iii) pay cash to Issuer or (iv) any combination thereof,
so that Grantee's actually realized Total Profit shall not exceed such amount
after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than U.S.
$4,700,000 million less the amount of any fee paid pursuant to Section 10(b) of
the Offer Agreement; provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party with the
prior written consent of Issuer, less (y) Grantee's purchase price of such
Option Shares, (iv) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party with the prior written
consent of Issuer, and (v) any amount equivalent to the foregoing with respect
to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposed exercise
assuming that this Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares (or any
other securities into which such Option Shares are converted or exchanged) held
by Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Shares as of the close of business on the preceding
trading day (less customary brokerage commissions).
(e) Grantee and the Company shall with reasonable diligence do all such
things and provide all such reasonable further assurances as may be required to
give effect to the intentions of this Section 14, and each of them shall provide
such further documents or instruments required by any other as may be reasonably
necessary or desirable to effect the purpose of this Section 14 and to carry out
its provisions.
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15. SPECIFIC PERFORMANCE.
The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. SEVERABILITY.
If any term, provision, covenant or restriction contained in this
Agreement is held by a court or federal, state or provincial regulatory agency
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in 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 Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of Common Shares provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or Section 5 hereof),
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.
17. NOTICES.
All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties and in the manner
set forth in the Offer Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario. The parties hereto irrevocably submit to
the non-exclusive jurisdiction of the courts of the Province of Ontario in
respect of the interpretation and enforcement of this Agreement.
19. 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 shall constitute one
and the same agreement.
20. EXPENSES.
Except as otherwise expressly provided herein, 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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21. ENTIRE AGREEMENT.
Except as otherwise expressly provided herein or in the Offer
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. CAPTIONS.
The Article, Section and paragraph captions herein are for convenience
of reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
METROWERKS INC.
By: /s/ Xxxx Xxxxxxxx
----------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Chairman & CEO
MOTOROLA, INC.
By: ----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Corporate Vice President and
Director, Strategic Management and
Planning, Semiconductor Products
Sector
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