1
EXHIBIT 2.1
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF REORGANIZATION
Amendment No. 1 to Agreement and Plan of Reorganization (the "Amendment
No. 1") dated this December 29, 1997, by and among Iwerks Entertainment, Inc.,
a Delaware corporation ("Parent"), IWK-1 Merger Corporation, a Delaware
corporation ("Sub") and Showscan Entertainment Inc., a Delaware corporation
(the "Company").
RECITALS
A. Parent, Sub and the Company have entered into that certain
Agreement and Plan of Reorganization (the "Merger Agreement") dated August 4,
1997 pursuant to which Sub shall merge with and into the Company, the separate
existence of Sub shall cease and the Company shall continue as the surviving
corporation. As used herein and in the Merger Agreement the term "Agreement"
shall mean the Merger Agreement as amended by this Amendment No. 1, and the
term "Merger" shall mean the merger contemplated by the Merger Agreement as
amended by this Amendment No. 1. Terms used herein without definition shall
have the meanings given those terms in the Merger Agreement.
B. The consummation of the Merger is subject to the satisfaction
of various conditions, including but not limited to, the approval of the
stockholders of Parent.
C. The Merger Agreement provides, in certain circumstances, that
either Parent or the Company shall have the right to terminate the Merger
Agreement if the Merger is not consummated prior to December 31, 1997.
D. Because of the uncertainty associated with the receipt of
approval from Parent's stockholders and because of the uncertainty associated
with the consummation of the Merger prior to the termination of the Merger
Agreement, the parties have agreed to the amendment of Section 2.5 of the
Merger Agreement and the other amendments provided for herein.
E. The Boards of Directors of Parent, Company and Sub each has
determined that a business combination among Parent, the Company and Sub is in
the best interest of their respective companies and stockholders, and
accordingly have approved and adopted this Amendment No. 1 and adoption of the
Merger Agreement and Merger as amended hereby by their respective stockholders.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and mutual
covenants herein provided, the parties agree as follows:
1. Section 2.5(a)(i) and (ii) of the Merger Agreement is hereby
amended and restated
2
to read in its entirety as follows:
"(i) each share of Company Common Stock outstanding immediately prior
to the Effective Time shall entitle the holder thereof to 0.62 validly issued,
fully paid and nonassessable shares of Parent Common Stock (the "Per Share
Consideration");
(ii) each share of Company Preferred Stock outstanding immediately
prior to the Effective Time shall entitle the holder thereof to that number of
validly issued, fully paid and nonassessable shares of Parent Common Stock as
is equal to the number of shares of Company Common Stock into which such share
of Company Preferred Stock is convertible immediately prior to the Effective
Time multiplied by 0.62;"
2. Section 6.16 of the Merger Agreement is hereby amended by adding the
following to the end of such Section:
"The first sentence of this Section 6.16 shall not become applicable until
January 15, 1998, except that the Company shall notify Parent in writing
prior to furnishing any information to, or entering into discussions or
negotiations with, any Person concerning an Alternative Proposal (provided
that nothing herein shall require the Company to identify such Person)."
3. Section 6.18 of the Merger Agreement is hereby amended and restated
to read in its entirety as follows:
"APPOINTMENT OF COMPANY NOMINATED DIRECTOR. Parent hereby agrees to
appoint, immediately after the Effective Time, the Person designated by the
Company, which Person shall be one of the Company's directors on the date of
the Agreement and which shall be designated prior to the effectiveness of the
Registration Statement (the "Company Nominated Director") to serve as a
director on Parent's Board of Directors as a Class I director, all in
accordance with Parent's Bylaws until such time as such director's successor
has been duly elected or appointed and qualified or until the earlier death,
resignation or removal of such director in accordance with Parent's Bylaws.
Parent further agrees, as soon as practicable following the Effective Time, to
expand the number of directors to serve on Parent's Board of Directors to seven
and to commence a search for two additional qualified candidates to serve as a
Class II and Class III director, respectively, who shall be elected by a
majority of Parent's then existing Board of Directors."
4. Section 8.1 of the Merger Agreement is hereby amended and restated to
read in its entirety as follows:
"The Company shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time."
5. Section 8.2 of the Merger Agreement is hereby amended and restated to
read in its entirety as follows:
"Intentionally omitted."
2
3
6. Section 10.1(b) of the Merger Agreement is hereby amended and
restated to read in its entirety as follows:
"by either Parent of the Company, if the Merger shall not have been
consummated by March 31, 1998 (provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
a substantial contributor to the failure of the Merger to occur on or before
such date);
7. Section 10.3(a) of the Merger Agreement is hereby amended and
restated to read in its entirety as follows:
"The Company shall pay Parent a fee of $1,500,000 (the "Company Termination
Fee") in the event that (i) this Agreement is terminated pursuant to (x) Section
10.1(d)(i) or 10.1(e), or (y) Section 10.1(f) if prior to the meeting of the
stockholders of the Company contemplated pursuant to Section 6.4 an Alternative
Proposal is publicly announced and the Company consummates such Alternative
Proposal within 12 months of the termination of this Agreement pursuant to
Section 10.1(f), or (ii) the condition set forth in Section 7.6 is not satisfied
as a result of either (x) false or inaccurate statements made by the Company in
the representation letter delivered by the Company to Ernst & Young or (y) a
sale or other transfer after the date hereof of the capital stock of the Company
or of Parent by an "affiliate" of the Company, as such term is defined and used
in Accounting Series Releases 130 and 135, as amended; or (z) any action taken
by the Company subsequent to the date of this Agreement; provided, however, the
Company Termination Fee shall not be payable by the Company if this Agreement is
terminated by the Company pursuant to Section 10.1(d)(i) prior to January 15,
1998, in which case the Company shall reimburse Parent an amount equal to all
out of pocket expenses incurred by Parent up to the date of termination of this
Agreement in connection with the Merger, but in no event shall such
reimbursement obligation exceed $1,000,000 (the "Merger Expenses"). The company
Termination Fee and the Merger Expenses shall be payable by wire transfer of
same day funds either on the date contemplated in the last sentence of Section
10.1(d) if applicable, or otherwise, within two business days after such amount
becomes due. The Company acknowledges that the agreements contained in this
Section 10.3(a) are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 10.3(a) and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company for the fee set
forth in this Section 10.3(a) the Company shall pay to Parent its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the rate of 10% per annum."
8. The parties agree that the combined knowledge and experience of the
executive management teams of the respective companies will benefit the
stockholders of the Surviving Corporation. Accordingly, Parent shall use its
commercially reasonable efforts to retain the services of Messrs. Xxxx and
Lemon to assist in the integration of the two companies for a period of up to
six months following the closing on terms and conditions mutually satisfactory
to Parent and such persons; provided, however, Parent under no circumstances
shall be obligated to compensate either Xx. Xxxx or Xx. Xxxxx for such services
at a rate greater than that their current base salaries as
3
4
employees of Company; and provided that under no circumstances shall such
retention of Messrs. Xxxx and Lemon be given any effect under, or have any
affect on, their existing employment, severance and similar arrangements with
the Company.
9. The Company hereby represents and warrants to Parent that the Board
of Directors of the Company has approved this Amendment No. 1, has determined
that the Merger is in the best interests of the Company and its stockholders
and has resolved to recommend the adoption of the Merger Agreement (as amended
hereby) and the Merger by its stockholders. In connection with such actions,
the Board of Directors of the Company has received an opinion of Xxxxx &
Company, Inc., its financial adviser, to the effect that the consideration to
be paid to the holders of Company Common Stock and Company Preferred Stock
pursuant to the Merger is fair to such holders from a financial point of view.
10. Parent hereby represents and warrants to the Company that the Board
of Directors of Parent has approved this Amendment No. 1, has determined that
the Merger is in the best interests of Parent and its stockholders and has
resolved to recommend the approval of the issuance of Parent Common Stock
pursuant to the terms of the Merger Agreement (as amended hereby) by its
stockholders. In connection with such actions, the Board of Directors of the
Parent has received an opinion of Resource Financial corporation, its financial
adviser, to the effect that the consideration to be paid to the holders of
Company Common Stock and Company Preferred Stock pursuant to the Merger is fair
to Parent's stockholders from a financial point of view.
11. This Amendment No. 1 may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
12. Except as expressly modified or amended by the terms hereof, each and
everyone of the other provisions of the Merger Agreement shall remain in full
force and effect.
13. This Amendment No. 1, the Merger Agreement, the Exhibits and
Schedules attached thereto, the other schedules referred to in the Merger
Agreement and the Confidentiality Agreement contain the entire understanding of
the parties and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof unless expressly referred to herein.
4
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
Agreement and Plan of Reorganization to be duly executed as of the date and
year first above written.
IWERKS ENTERTAINMENT, INC.
a Delaware corporation
By: /s/ XXX X. XXXXXX
------------------------------------
Name: Xxx X. Xxxxxx
Title: Chief Executive Officer
SHOWSCAN ENTERTAINMENT INC.
a Delaware corporation
By: /s/ XXXXXX XXXX
------------------------------------
Name: Xxxxxx Xxxx
Title: President & CEO
IWK-1 MERGER CORPORATION
a Delaware corporation
By: /s/ XXX X. XXXXXX
------------------------------------
Name: Xxx X. Xxxxxx
Title: Chief Executive Officer
5
