EXHIBIT 99.4
STOCKHOLDER VOTING AND OPTION AGREEMENT
This STOCKHOLDER AGREEMENT (this "Agreement") dated as of June 7, 2006
between WT Acquisition Holdings, LLC ("Parent"), a Delaware limited liability
company, Warrantech Corporation, a Nevada corporation (the "Company"), and Xxxx
San Xxxxxxx (the "Stockholder").
WHEREAS, Parent, WT Acquisition Corp., a Nevada corporation ("Sub") and
Warrantech Corporation, a Nevada corporation (the "Company"), are entering into
an Agreement and Plan of Merger dated as of the date hereof (as the same may be
amended, modified or supplemented or restated, the "Merger Agreement";
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement);
WHEREAS, Stockholder owns the number of shares of Company Common Stock
set forth opposite his, her or its name on Schedule A hereto (such shares of
Company Common Stock, together with any other shares of capital stock of the
Company acquired by such Stockholder after the date hereof and during the term
of this Agreement, being collectively referred to herein as the "Subject Shares"
of such Stockholder);
WHEREAS, Stockholder owns the number of Options to acquire Company
Common Stock set forth opposite his, her or its name on Schedule A hereto (the "
Subject Options")
WHEREAS, Stockholder is the maker of that certain promissory note dated
as of July 24, 2002 (the "Note") in the original principal amount of
$4,165,061.72 (the "Stockholder Note");
WHEREAS, Stockholder and the Company are parties to that certain Pledge
Agreement dated as of March 15, 2001 (the "Pledge Agreement") pursuant to which
Stockholder has pledged certain Subject Shares to the Company to secure his
obligations under the Note; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent and Sub have required that Stockholder enter into this
Agreement and the Stockholder desires to enter into this Agreement to induce
Parent and Sub to enter into the Merger Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of Stockholder. Stockholder
hereby represents and warrants to Parent and the Company as of the date hereof
as follows:
(a) Authority; Execution and Delivery; Enforceability.
The Stockholder has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The Stockholder has duly authorized, executed and delivered
this Agreement, and this Agreement constitutes the legal, valid and
binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the
enforcement of creditors' rights and (b) the application of general
principles of equity, whether such enforceability is considered in a
proceeding in equity in law. The execution and delivery by the
Stockholder of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof
will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any lien upon any of the
properties or assets of the Stockholder under (i) if the Stockholder is
a corporation, partnership, limited liability company, trust or other
entity, the organizational documents of the Stockholder; (ii) any
provision of any contract, lease, license, indenture, agreement, note,
bond, permit, license, concession, franchise or other instrument
("Contract") to which the Stockholder is a party or by which any
properties or assets of the Stockholder are bound; or (iii) subject to
the filings and other matters referred to in the next sentence, any
provision of any Judgment or Law applicable to the Stockholder or the
properties or assets of the Stockholder. No Consent of, or
registration, declaration or filing with, any Governmental Entity is
required to be obtained or made by or with respect to the Stockholder
in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby,
other than such reports under Sections 13(d) and 16 of the Exchange Act
as may be required in connection with this Agreement and the
transactions contemplated hereby. If the Stockholder is married and the
Subject Shares of the Stockholder constitute community property or
otherwise need spousal or other approval to be legal, valid and
binding, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, the
Stockholder's spouse, enforceable against such spouse in accordance
with its terms. No trust of which the Stockholder is a trustee requires
the consent of any beneficiary to the execution and delivery of this
Agreement or to the consummation of the transactions contemplated
hereby. The Stockholder hereby acknowledges that it has received and
reviewed a copy of the Merger Agreement.
(b) The Subject Shares. The Stockholder is (i) the
beneficial owner of, and, except for any Subject Shares held in "street
name" and identified on Schedule A, the record owner of, or (ii) the
trustee of a trust that is the record holder of, and whose
beneficiaries are the beneficial owners of, the Subject Shares set
forth on Schedule A attached hereto. The Stockholder has good and
marketable title to the Subject Shares set forth on Schedule A free and
clear of any liens, other than those liens set forth on Schedule A. The
Stockholder does not own, of record or beneficially, any shares of
capital stock of the Company other than the Subject Shares set forth on
Schedule A attached hereto. The Stockholder has the sole right and
authority to vote and dispose of the Subject Shares, and the
Stockholder is not a party or bound by, and neither the Stockholder nor
the Subject Shares is subject to any voting trust or other agreement,
option, warrant, proxy, arrangement or restriction with respect to the
voting or disposition of the Subject Shares, except as contemplated by
this Agreement.
(c) Reliance. The Stockholder understands and
acknowledges that the Parent and Sub are entering into the Merger
Agreement in reliance upon Stockholder's execution and delivery of this
Agreement.
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SECTION 2. Representations and Warranties of Parent. Parent hereby
represents and warrants to Stockholder and the Company as follows: Parent has
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery by Parent of this Agreement and consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent. Parent has duly executed and delivered this Agreement,
and this Agreement constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity,
whether such enforceability is considered in a proceeding in equity or at law.
The execution and delivery by Parent of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any lien upon any of
the properties or assets of Parent under (i) the certificate of incorporation or
bylaws of Parent, (ii) any provision of any Contract to which Parent is a party
or by which any properties or assets of Parent are bound or (iii) subject to the
reports under Sections 13(d) and 16 of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, any
provision of any Judgment or Law applicable to Parent or the properties or
assets of Parent.
SECTION 3. Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent and Stockholder as follows: The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery by the Company of this Agreement and consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. The Company has duly executed and
delivered this Agreement, and this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law. The execution and delivery by the Company of
this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of the Company
under (i) the certificate of incorporation or bylaws of the Company, (ii) any
provision of any Contract to which the Company is a party or by which any
properties or assets of the Company are bound or (iii) subject to the reports
under Sections 13(d) and 16 of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated hereby, any provision of
any Judgment or Law applicable to the Company or the properties or assets of the
Company.
SECTION 4. Covenants of Stockholder. Stockholder covenants and agrees
as follows:
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(a) At any meeting of the stockholders of the Company
called to vote on the Merger, the Merger Agreement or the other
transactions contemplated thereby or at any adjournment thereof, or in
any other circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger, the Merger
Agreement or the other transactions contemplated by the Merger
Agreement is sought, the Stockholder shall, (i) when a meeting is held,
appear at such meeting or otherwise cause all Subject Shares to be
counted or present thereat for purposes of establishing a quorum, and
(ii) vote (or cause to be voted), including by executing a written
consent, the Subject Shares in favor of the adoption and approval of
the Merger and all of the Merger Agreement and all of the transactions
contemplated thereby.
(b) The Stockholder hereby irrevocably grants to, and
appoints, Parent and Sub, or any of them, and any individual designated
in writing by any of them, and each of them individually, as the
Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of the Stockholder,
to vote the Subject Shares of the Stockholder, or grant a consent or
approval in respect of the Subject Shares of the Stockholder in a
manner consistent with this Section 4 and to perform all other actions
as are required, authorized or contemplated to be taken by Stockholder
pursuant to this Agreement. The Stockholder understands and
acknowledges that Parent is entering into the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this
Agreement. The Stockholder hereby affirms that the irrevocable proxy
and power of attorney set forth in this Section 4(b) is given in
connection with the execution of the Merger Agreement, and that such
irrevocable proxy and power of attorney is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy and power
of attorney is coupled with an interest and may under no circumstances
be revoked. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy and attorney-in-fact may lawfully do or cause to be
done by virtue hereof. Such irrevocable proxy is executed and intended
to be irrevocable in accordance with the provisions of Section
78.355(5) of the Nevada Revised Statutes. The irrevocable proxy and
power of attorney granted hereunder shall automatically terminate upon
the termination of Sections 4(a) and 4(c).
(c) So long as this Agreement is in effect, and for
twelve (12) months thereafter, at any meeting of stockholders of the
Company or at any adjournment thereof or in any other circumstances
upon which the Stockholder's vote, consent or other approval is sought,
the Stockholder shall: (i) when a meeting is held, appear at such
meeting or otherwise cause all subject Shares to be counted or present
thereat for purposes of establishing a quorum, and (ii) vote (or cause
to be voted) the Subject Shares against (x) any merger agreement or
merger (other than the Merger Agreement and the Merger), consolidation,
combination, sale or transfer of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the
Company, (y) any Company Takeover Proposal and (z) any amendment of the
Company Charter or the Company By-laws or other proposal or transaction
involving the Company or any Company Subsidiary, which amendment or
other proposal or transaction would in any manner impede, delay,
frustrate, prevent or nullify the Merger or any provision of the Merger
Agreement or any of the transactions contemplated thereby (the
"Transactions") or change in any manner the voting rights of any class
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of Company Capital Stock. The Stockholder shall not commit or agree to
take any action inconsistent with the foregoing. The Stockholder agrees
that, as a condition to the transfer, whether by operation of law or
otherwise, of legal or beneficial ownership of the Subject Shares by
the Stockholder to any person or entity which is an Affiliate of the
Stockholder or member of the Stockholder's family (an "Affiliated
Person"), the Stockholder shall obtain such person's or entity's
agreement in writing to be bound by the terms of this Section 4(c) and
Section 5.
(d) Other than pursuant to this Agreement, the
Stockholder shall not directly or indirectly (A) sell, transfer,
pledge, encumber, assign or otherwise dispose of (including by gift)
(collectively, "Transfer"), or enter into any Contract, option or other
arrangement (including any profit sharing arrangement) with respect to
the Transfer of, any Subject Shares to any Person other than in
accordance with the Merger or (B) grant any proxy, deposit any Subject
Shares into any voting trust or enter into any other agreement or
arrangement related to the voting of the Subject Shares, whether by
proxy, voting agreement or otherwise, with respect to any Subject
Shares or (C) commit or agree to take any of the foregoing actions.
(e) The Stockholder shall, and shall cause his, her or
its advisors, agents and representatives to, immediately cease any
discussions or negotiations that may be ongoing with respect to a
Company Takeover Proposal and request the prompt return or destruction
of all confidential information previously furnished to any third
party. The Stockholder shall not, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or
other adviser or representative of, the Stockholder to, (i) directly or
indirectly solicit, initiate or encourage the submission of any Company
Takeover Proposal, or take any action designed to facilitate any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Takeover Proposal, (ii)
enter into any agreement with respect to any Company Takeover Proposal
or that may reasonably be expected to lead to any Company Takeover
Proposal, (iii) directly or indirectly enter into, participate in or
continue any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or otherwise cooperate with or
take any action to facilitate any Company Takeover Proposal or (iv)
make a Company Takeover Proposal. The Stockholder shall as promptly as
practical advise Parent orally and in writing of any Company Takeover
Proposal or any inquiry with respect to or that could reasonably be
expected to lead to any Company Takeover Proposal, and the identity of
the person making any such Company Takeover Proposal or inquiry and the
material terms of any such Company Takeover Proposal or inquiry. The
Stockholder shall keep Parent fully informed on a current basis of the
status of any such Company Takeover Proposal or inquiry and shall as
promptly as practical notify Parent orally and in writing of any
modification to the financial or other terms of such Company Takeover
Proposal or inquiry and shall as promptly as practical provide to
Parent a copy of all written material or correspondence (including
e-mail) subsequently provided to or by the Company in connection with
such Company Takeover Proposal or inquiry. Notwithstanding the
foregoing, if the Board of Directors of the Company determines pursuant
to and in accordance with Section 5.02 of the Merger Agreement to enter
into discussions with a third party or any of its representatives (the
"New Bidder") with respect to a Company Takeover Proposal, the
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Stockholder may also enter into discussions or negotiations with such
New Bidder with respect to such Company Takeover Proposal, provided
that the restrictions set forth in this Section 4(e) will continue to
apply with respect to any other Person that makes an inquiry or
proposal that constitutes or would reasonably be expected to lead to a
Company Takeover Proposal, and will apply with respect to the New
Bidder as soon as the Company ceases its discussions and negotiations
with such New Bidder. Nothing contained in this Section 4(e) shall
prohibit the Stockholder from responding to any unsolicited proposal or
inquiry solely by advising the Person making such proposal or inquiry
of the terms of this Section 4(e).
(f) The Stockholder shall use its commercially reasonable
best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, the Merger, the Merger Agreement and
the other Transactions. The Stockholder shall not issue any press
release or make any other public statement with respect to the Merger,
the Merger Agreement or any other Transaction without the prior consent
of Parent, except as may be required by applicable Law (including,
without limitation, making filings required by Sections 13(d) and 16 of
the Exchange Act).
(g) The Stockholder hereby consents to and approves the
actions taken by the Company Board in approving the Merger, the Merger
Agreement and the other Transactions. The Stockholder hereby waives,
and agrees not to exercise or assert, any dissenter's rights under
Sections 92A.300 to 92A.500 of the Nevada Revised Statutes in
connection with the Merger.
(h) The Stockholder agrees to promptly notify Parent of
the number of any Subject Shares acquired by the Stockholder after the
date hereof.
(i) The Stockholder hereby covenants and agrees that the
Stockholder (a) except for any existing liens identified on Schedule A,
has not entered into and shall not enter into any agreement that would
restrict, limit or interfere with the performance of the Stockholder's
obligations hereunder and (b) shall not knowingly take any action that
would reasonably be expected to make any of his, her or its
representations or warranties contained herein untrue or incorrect or
have the effect of preventing or disabling him, her or it from
performing his, her or its obligations under this Agreement.
SECTION 5. Option.
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(a) Stockholder hereby grants to Parent an irrevocable
option (the "Option") to purchase all the Subject Shares of such
Stockholder at a purchase price per share (the "Purchase Price") equal
to $0.75. The Option may be exercised in whole or in part, at any time
after the date hereof and prior to the date which is twelve (12) months
after termination of the Merger Agreement (such period, the "Exercise
Period"), so long as there shall not be in effect any preliminary
injunction or other order issued by any Governmental Entity prohibiting
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the exercise of the Option pursuant to this Agreement; provided,
however, that if there shall be in effect any such injunction or order
on the expiration of the Exercise Period, the Exercise Period shall be
extended until five (5) business days after the date of removal or
lifting of such injunction or order; provided, further, that no such
extension shall extend the Exercise Period for more than eighteen (18)
months following the termination of the Merger Agreement.
(b) If Parent wishes to exercise the Option, it may do so
by giving written notice (the date of such notice being herein called
the "Notice Date") to Stockholder specifying that the Subject Shares
are to be purchased the number of Subject Shares that are to be
purchased (the "Purchased Shares") and specifying the place, time and
date (not earlier than one trading day, nor later than 10 trading days,
from the Notice Date) for the closing of the purchase by Parent
pursuant to such exercise. Upon exercise of the Option, Parent will pay
the Purchase Price for the Purchased Shares in cash; provided, however,
that if Parent exercises the Option prior to the Effective Time, the
Parent may at its option pay the Purchase Price for the Purchased
Shares by delivering a Note with a principal amount equal to the
Purchase Price, which accrues interest at the prime rate of interest
per annum (as reported in The Wall Street Journal) and that is due and
payable on the earlier of (i) one year from the date of issuance or
(ii) the Effective Time (the "Note"). If the Merger is not consummated
within five (5) months after the date of the Merger Agreement, the
Parent may elect to sell the Purchased Shares back to the Stockholder
in exchange for the Note. If the Parent so elects the Stockholder shall
surrender such Note to Parent in exchange for the Purchased Shares.
(c) In addition, if the Merger Agreement is terminated
pursuant to Sections 8.01(c), 8.01(d) or 8.01(e) of the Merger
Agreement or by the Parent pursuant to Section 8.01(b)(i) of the Merger
Agreement, Stockholder shall pay to Parent on demand an amount equal to
all Profit (as defined below) realized by Stockholder or any Affiliated
Person, in connection with the consummation of any Company Takeover
Proposal that is consummated within twelve (12) months of such
termination. Any payment of Profit under this Section 5(c) shall be
paid by wire transfer of same day funds to an account designated by
Parent.
For purposes of this Section 5, the Profit of Stockholder or
an Affiliated Person from any Company Takeover Proposal shall equal (A)
the aggregate consideration received by Stockholder or such Affiliated
Person with respect to the Subject Shares pursuant to such Company
Takeover Proposal (including but not limited to the face amount of any
debt of Stockholder which is forgiven or otherwise satisfied in
connection herewith), valuing any non-cash consideration (including any
residual interest in the Company) at its Fair Market Value on the date
of such consummation plus (B) the Fair Market Value, on the date of
disposition, of all Subject Shares of such Stockholder or Affiliated
Person disposed of after the termination of the Merger Agreement and
prior to the date of such consummation less (C) the Merger
Consideration that would have been received by the Stockholder or
Affiliated Person with respect to the Subject Shares pursuant to the
Merger Agreement as originally executed. For purposes of this Section
5, the Fair Market Value of any non-cash consideration consisting of:
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(i) securities listed on a national securities
exchange or traded on the Nasdaq National Market shall be
equal to the average closing price per share of such security
as reported on such exchange or Nasdaq National Market for the
five trading days after the date of determination; and
(ii) debt of such Stockholder or Affiliated
Person owed to the Company shall be equal to the face amount
of such debt, plus all accrued and unpaid interest.
(iii) consideration which is other than cash or
securities of the form specified in clause (i) above or
Stockholder or Affiliated Person debt described in clause (ii)
above shall be determined in good faith the Board of Directors
of the Company; provided, that if Parent objects to the
valuation as determined by the Board of Directors of the
Company (A) Parent shall notify the Company of its objection,
(B) Parent shall deliver to the Company its good faith
determination of the Fair Market Value of the non-cash
consideration and (C) Parent and the Company shall engage a
nationally recognized independent investment banking firm
mutually agreed upon by the parties within 10 business days of
the Company's receipt of Parent's notice of objection;
provided, further, that if the parties are unable to agree
within two business days after the date of such event as to
the investment banking firm, then the parties shall each
select one firm, and those firms shall select a third
investment banking firm, which third firm shall make such
determination; provided, further that the fees and expenses of
the investment banking firm shall be borne by the person whose
estimate of Fair Market Value is furthest from the amount as
finally determined by the investment banking firm.
SECTION 6. Agreements of the Parties.
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(a) Proceeds from Shares and Options. At the Effective
Time of the Merger (i) Stockholder agrees that he will not directly
receive any cash proceeds in connection with his ownership of the
Subject Shares or the Subject Options, but instead the parties agree
(and Stockholder hereby directs) that all Merger Consideration
otherwise payable in respect of the Subject Shares and any amounts
payable to Stockholder pursuant to Section 2.03 of the Merger Agreement
in respect of the Option shall instead be delivered to the Surviving
Corporation and applied to reduce the outstanding principal balance of
the Stockholder Note, and (ii) all Subject Shares and Subject Options
shall automatically be canceled and retired and cease to exist pursuant
to the terms of the Merger Agreement.
(b) Company Consent; Release of Lien. The Company hereby
consents to the grant of the Option by the Stockholder to Parent and
the other transactions and agreements contained herein. Upon exercise
by Parent of the Option, (i) all of the Subject Shares with respect to
which the Option is being exercised which have been pledged by the
Stockholder pursuant to the Pledge Agreement (the "Pledged Subject
Shares") shall automatically, and without any further action of the
parties, be released from the security interest in favor of the Company
created pursuant to the Pledge Agreement and (ii) the Company shall
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immediately deliver the certificate or certificates representing the
Pledged Subject Shares to Parent.
(c) Voting. The Company acknowledges and agrees that any
rights it may have to vote or give or withhold consents with respect to
the Pledged Shares upon the occurrence of an Event of Default (as
defined in the Pledge Agreement) shall be subject to the obligations of
the Stockholder to vote the Subject Shares in the manner set forth in
Sections 4(a) and 4(c) hereof and the proxy and power of attorney
granted by the Stockholder to Parent and Sub pursuant to Section 4(b)
hereof. The Stockholder hereby grants to the Company a first priority
security interest in all of the proceeds of the Option, including but
not limited to, the Note and all proceeds of the Note. Stockholder
shall from time to time, at the request of the Company, execute such
further instruments and agreements required to evidence such security
interest and the Company may file UCC-1 financing statements necessary
or desirable to perfect such security interest.
(d) Termination of Current Employment Agreement.
Effective as of the Effective Time, that certain Employment Agreement,
dated as of July 1, 2003, between Stockholder and the Company shall be
terminated and of no further force or effect and, in consideration
therefor, the Company shall, subject to Section 6(f) below, pay
Stockholder $1,700,000 at the Effective Time. In connection with such
termination, at the Effective Time, Stockholder shall execute and
deliver to the Company a release agreement in form and substance
satisfactory to the Parent.
(e) New Employment Agreement. Stockholder and the Company
shall negotiate in good faith the terms of a new employment agreement
(the "New Employment Agreement") for the Stockholder to become
effective at the Effective Time on the following terms, together with
such additional terms and conditions mutually agreeable to the parties:
(i) Stockholder shall be granted common equity
interests in Parent representing 22.5% of the fully-diluted
common equity of Parent as of the Effective Time (the "Equity
Award"). Stockholder understands and acknowledges that Parent
will issue both preferred units and common units and the
preferred units will entitle the holders thereof to receive a
return of capital, plus a return, prior to the holders of
common units receiving any distribution. It is anticipated
that all capital contributed by H.I.G. Capital LLC or its
affiliates will be in the form of preferred units
(ii) The Equity Award shall be fully vested at
the Effective Time and shall be subject to restrictions on
transfer and repurchase, including the following:
(A) If the Stockholder's employment
with the Company is terminated by the Stockholder or
by the Company for cause (as such term shall be
defined in the New Employment Agreement), then Parent
shall have the right to repurchase the entire Equity
Award for $500,000.
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(B) If the Stockholder's employment
with the Company is terminated by the Company without
cause, or if the Stockholder's employment with the
Company is terminated upon the death or disability of
Stockholder, then Parent and Stockholder shall
negotiate in good faith regarding the potential
repurchase of the Equity Award and the terms of any
such repurchase; and
(C) The Equity Award will be subject to
restrictions on transfer and, tag-along and
drag-along rights. These provisions will either be
contained in the Parent's Operating Agreement or a
separate securityholders agreement.
(iii) Equity Plan. Following the Effective Time,
Parent shall establish an equity incentive plan for the
employees of the Company covering 10% of all outstanding
fully-diluted common equity of Parent. Stockholder, as chief
executive officer of the Company following the Effective Time,
shall be entitled to recommend to the Board of Directors which
key employees of the Company should receive equity incentive
awards and the amount of such awards. The grant of any awards
pursuant to the equity incentive plan of Parent shall at all
times be subject to the approval of the Board of Directors of
Parent.
(iv) Note Payment. The Company has or anticipates
issuing a Note to Wtech Holdings, LLC, (the "Noteholder") in
the face amount of $ 20.0 million (the "Wtech Note"). The New
Employment Agreement will provide that if more than $10.2
million of principal payments are made by the Company on the
Wtech Note then either (x) the Parent or the Company will make
a cash payment to Stockholder in an amount equal to 22.5% of
the amount of any principal payment in excess of $10.2
million, or (y) Parent will issue a number of additional
shares of equity of Parent with a value equal to the payment
described in (x) above. If any equity is issued to Stockholder
pursuant to the provision described in this clause (iv) such
equity will be subject to the same vesting schedule,
repurchase rights and transfer restrictions described in
clause (ii) above. Any forgiveness of any portion of the Note
by the Noteholder will not constitute a payment of principal
for this purpose.
(v) Term and Compensation. The New Employment
Agreement will have a term of three years. The New Employment
Agreement will provide for base compensation of $500,000 per
year, plus a performance-based bonus of up to $100,000 per
year. The amount of the bonus will be determined by the Board
based on the achievement of performance criteria established
by the Board. The New Employment Agreement will also provide
for a $1,000 per month automobile allowance. The New
Employment Agreement shall also provide for such other
benefits that are not inconsistent with benefits to comparable
executives.
(f) Withholding. The Company shall be entitled to deduct
and withhold from any payments due hereunder such amounts as the
Company is required to deduct and withhold with respect to the making
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of such payments under any provision of Federal, state or local income
tax law. If the amounts payable hereunder are insufficient to satisfy
the withholding obligations of the Company with respect to the
transactions contemplated hereby, Stockholder shall immediately pay to
the Company, by check or wire transfer of immediately available funds,
an amount equal to the deficiency.
SECTION 7. Termination. This Agreement shall terminate upon the earlier
of (a) the Effective Time and (b) the termination of the Merger Agreement;
provided that, except as set forth in the next sentence, Sections 4(c), 5, 6, 8
and 9 shall survive any termination of this Agreement pursuant to Section 5(b).
Notwithstanding the foregoing, if
(i) the conditions set forth in Sections 7.01
and 7.02 of the Merger Agreement are satisfied or would be
satisfied upon the Company's performance of its obligations at
Closing and Parent and Sub fail to close notwithstanding the
Company's confirmation that it remains ready, willing and able
to proceed with the Closing, or
(ii) Parent and Sub willfully breach a material
obligation contained in the Merger Agreement and the Company
gives written notice to Parent and Sub of such breach, and
Parent and Sub fail to cure such breach within fifteen (15)
business days of the receipt of such notice,
then Stockholder shall be entitled to give notice to Parent and Sub that it is
terminating Sections 4(c) and 5(a) of this Agreement. No party hereto shall be
relieved from any liability for breach of this Agreement by reason of any such
termination.
SECTION 8. Additional Matters.
------------------
(a) Stockholder and the Company shall, from time to time,
execute and deliver, or cause to be executed and delivered, such
additional or further consents, documents and other instruments as
Parent may reasonably request, including any amendments to the Pledge
Agreement, for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
(b) No person executing this Agreement who is or becomes
during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as a director
or officer of the Company. Stockholder is entering into this Agreement
solely in his, her or its capacity as the record holder and beneficial
owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of, the Subject Shares and nothing herein shall limit
or affect any actions taken by Stockholder in his or her capacity as an
officer or director of the Company to the extent specifically permitted
by the Merger Agreement.
(c) The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Subject Shares and shall be
binding upon any person or entity to which legal or beneficial
ownership of such Subject Shares shall pass, whether by operation of
law or otherwise, including the Stockholder's successors. In the event
of any stock split, stock dividend, merger, reorganization,
recapitalization or other change in the capital structure of the
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Company affecting the Company Common Stock, or the acquisition of
additional shares of Company Common Stock or other voting securities of
the Company by the Stockholder (whether by purchase, conversion or
otherwise), the number of Subject Shares listed on Schedule A set forth
opposite the name of such Stockholder shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional or decreased shares of Company Common Stock or other voting
securities of the Company issued to or acquired or disposed of by such
Stockholder.
SECTION 9. General Provisions.
------------------
(a) Amendments. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery)
to Parent in accordance with Section 9.02 of the Merger Agreement and
to the Stockholder at its address set forth on Schedule A hereto (or at
such other address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section to this
Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Wherever the words
"include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
(d) Severability. If any provision of this Agreement is
held to be invalid or unenforceable for any reason, it shall be
adjusted rather than voided, if possible, in order to achieve the
intent of the parties hereto to the maximum extent possible. In any
event, the invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction
or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
(e) Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement. This Agreement shall become effective against Parent when
one or more counterparts have been signed by Parent and delivered to
Stockholder. This Agreement shall become effective against Stockholder
when one or more counterparts have been executed by Stockholder and
delivered to Parent. Each party need not sign the same counterpart. Any
counterpart may be executed by facsimile signature and such facsimile
signature shall be deemed an original.
(f) Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Merger Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof. This
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Agreement is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
(g) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Nevada
regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise, by
Parent without the prior written consent of Stockholder or by
Stockholder without the prior written consent of Parent, and any
purported assignment without such consent shall be void; provided that
notwithstanding the foregoing Parent may assign or transfer its rights,
interests and obligations under this Agreement to any Person to which
Parent assigns or transfers its rights, interests and obligation under
the Merger Agreement in accordance with the Merger Agreement. Subject
to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
(i) Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies
provided herein shall be cumulative and not exclusive of any rights or
remedies provided by law or in equity. Parent shall be entitled to
recover its reasonable attorney's fees and expenses in enforcing its
rights under this Agreement.
(j) Jurisdiction; Waiver of Jury Trial.
----------------------------------
(i) Each of the parties hereto irrevocably and
unconditionally (x) agrees that any legal suit, action or
proceeding brought by any party hereto arising out of or based
upon this Agreement or the transactions contemplated hereby
may be brought in any Florida state court or any Federal court
located in the state of Florida (in each case, located in
Miami-Dade county) or any Nevada state court or any Federal
court located in the state of Nevada (in each case, located in
Xxxxx county) (each, a "Designated Court"), (y) waives, to the
fullest extent it may effectively do so, any objection which
it may now or hereafter have to the laying of venue of any
such proceeding brought in any Designated Court, and any claim
that any such action or proceeding brought in any Designated
Court has been brought in an inconvenient forum, and (z)
submits to the non-exclusive jurisdiction of Designated Courts
in any such suit, action or proceeding. Each of the parties
agrees that a judgment in any suit, action or proceeding
brought in a Designated Court shall be conclusive and binding
upon it and may be enforced in any other courts to whose
jurisdiction it is or may be subject, by suit upon such
judgment.
(ii) EACH OF THE PARTIES AGREES AND ACKNOWLEDGES
THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS
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LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELOCATING TO THIS AGREEMENT, OR
THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT.
(k) Specific Performance. Each Stockholder acknowledges
and agrees that (a) the covenants, obligations and agreements of
Stockholder contained in this Agreement relate to special, unique and
extraordinary matters, (b) Parent is and will be relying on such
covenants in connection with entering into the Merger Agreement and the
performance of its obligations under the Merger Agreement and (c) a
violation of any of the terms of such covenants, obligations or
agreements will cause Parent irreparable injury for which adequate
remedies are not available at law. Therefore, Stockholder agrees that
Parent shall be entitled to an injunction, restraining order or such
other equitable relief (without the requirement to post bond) as a
court of competent jurisdiction may deem necessary or appropriate to
restrain Stockholder from committing any violation of such covenants,
obligations or agreements. These injunctive remedies are cumulative and
in addition to any other rights and remedies Parent may have.
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IN WITNESS WHEREOF, each party has duly executed this Agreement, all as
of the date first written above.
WT ACQUISITION HOLDINGS, LLC
By: /s/ XXXX XXXXXX
-------------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
WARRANTECH CORPORATION
By: /s/ XXXX SAN XXXXXXX
-------------------------------------
Name: Xxxx San Antonio
Title: Chief Executive Officer
/s/ XXXX SAN XXXXXXX
-----------------------------------------
Xxxx San Antonio
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SCHEDULE A
----------
Number of Shares
Number of Shares of of Company
Name and Address Company Common Stock Common Stock
of Stockholder Beneficially Owned held in "Street name"
-------------- ------------------ ---------------------
Xxxx San Xxxxxxx 2,889,090 None
LIST OPTIONS
Liens on Subject Shares:
1,204,080 shares pledged to Warrantech
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