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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
XXXX.XXX, Inc.
XXXX.XXX Merger Sub, Inc.
and
xXxx.xxx
Dated as of July 13, 2000
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TABLE OF CONTENTS
RECITALS
ARTICLE I
The Merger; Closing; Effective Time
Page
1.1. The Merger....................................................................2
1.2. Closing.......................................................................2
1.3. Effective Time................................................................3
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation..............................................3
2.2. The By-Laws...................................................................3
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors.....................................................................3
3.2. Officers......................................................................3
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock.......................................................4
(a) Merger Consideration...................................................4
(b) Cancellation of Shares.................................................4
(c) Merger Sub.............................................................4
(d) Preferred Stock........................................................5
(e) Warrants...............................................................5
4.2. Exchange of Certificates for Shares...........................................5
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(a) Exchange Agent.........................................................5
(b) Exchange Procedures....................................................6
(c) Distributions with Respect to Unexchanged Shares; Voting...............7
(d) Transfers..............................................................7
(e) Fractional Shares......................................................7
(f) Termination of Exchange Fund...........................................8
(g) Lost, Stolen or Destroyed Certificates.................................8
4.3. No Dissenters' Rights.........................................................8
4.4. Adjustments to Prevent Dilution...............................................9
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company.................................9
(a) Organization, Good Standing and Qualification..........................9
(b) Capital Structure.....................................................10
(c) Corporate Authority; Approval.........................................11
(d) Governmental Filings; No Violations...................................11
(e) Company Reports; Financial Statements.................................12
(f) Absence of Certain Changes............................................13
(g) Litigation and Liabilities............................................13
(h) Employee Benefits.....................................................14
(i) Compliance with Laws; Permits.........................................16
(j) Takeover Statutes.....................................................16
(k) [Reserved]............................................................16
(l) Taxes.................................................................16
(m) Labor Matters.........................................................17
(n) Insurance.............................................................17
(o) Intellectual Property.................................................18
(p) Brokers and Finders...................................................19
(q) Related Agreements....................................................19
5.2. Representations and Warranties of Parent and Merger Sub......................19
(a) Capitalization of Merger Sub..........................................19
(b) Organization, Good Standing and Qualification.........................20
(c) Parent Capital Structure..............................................20
(d) Corporate Authority; Approval.........................................21
(e) Governmental Filings; No Violations...................................21
(f) Parent Reports; Financial Statements..................................22
(g) Absence of Certain Changes............................................22
(h) Litigation and Liabilities............................................23
(i) Employee Benefits.....................................................23
(j) Compliance with Laws; Permits.........................................25
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(k) [Reserved.]...........................................................25
(l) Taxes.................................................................25
(m) Labor Matters.........................................................26
(n) Insurance.............................................................26
(o) Intellectual Property.................................................26
(p) Brokers and Finders...................................................27
(q) Related Agreements....................................................27
ARTICLE VI
Covenants
6.1. Interim Operations of the Company............................................28
6.1.1 Interim Operations of Parent.................................................29
6.2. Acquisition Proposals. .....................................................30
6.3. Information Supplied.........................................................31
6.4. Stockholders Meetings........................................................31
6.5. Filings; Other Actions; Notification.........................................32
6.6. [Reserved.]..................................................................33
6.7. Access.......................................................................33
6.8. Affiliates...................................................................34
6.9. Stock Exchange Listing and De-listing, etc...................................34
6.10. Publicity....................................................................35
6.11. Benefits.....................................................................35
(a) Stock Options.........................................................35
(b) Registration on Form S-8..............................................36
(c) Benefit Plans.........................................................36
(d) Option Issuance.......................................................37
(e) Obligations...........................................................37
(f) Severance Agreements..................................................37
(g) Effect of Section 6.11................................................38
(h) Election to Parent's Board of Directors...............................38
6.12. Expenses.....................................................................38
6.13. Indemnification; Directors' and Officers' Insurance..........................38
6.14. Worker Adjustment and Retraining Notification Act ("WARN Act")...............40
6.15. Parent Vote..................................................................40
6.16. Parent Vote..................................................................41
6.17. Related Agreements...........................................................41
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ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger...................41
(a) Stockholder Approval..................................................41
(b) NASDAQ Listing........................................................41
(c) Regulatory Consents...................................................42
(d) Litigation............................................................42
(e) S-4...................................................................42
(f) Blue Sky Approvals....................................................42
(g) Notification Filing Required Under HSR Act............................42
(h) Validity of Agreement of Understanding and Side Agreement.............43
(i) No Cash Redemption of Preferred Shares................................43
7.2. Conditions to Obligations of Parent and Merger Sub...........................43
(a) Representations and Warranties........................................43
(b) Performance of Obligations of the Company.............................43
(c) Consents Under Agreements.............................................43
(d) Dissenting Shares.....................................................44
(e) Legal Opinion.........................................................44
(f) Resignations..........................................................44
(g) Accountant Letters....................................................44
(h) Fairness Opinion......................................................44
(i) Affiliates Letters....................................................44
(j) Conversion of Company Preferred Stock.................................44
(k) Employment Agreements.................................................45
(l) Plan Terminations.....................................................45
(m) Accrued Vacation......................................................45
7.3. Conditions to Obligation of the Company......................................45
(a) Representations and Warranties........................................45
(b) Performance of Obligations of Parent and Merger Sub...................45
(c) Consents Under Agreements.............................................45
(d) [Reserved.]...........................................................46
(e) Accountant Letters....................................................46
(f) Registration Statement................................................46
(g) Fairness Opinion......................................................46
(h) Legal Opinion.........................................................46
(i) Term Loan Agreement...................................................46
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ARTICLE VIII
Termination
8.1. Termination by Mutual Consent................................................46
8.2. Termination by Either Parent or the Company..................................46
8.3. Termination by the Company...................................................47
8.4. Termination by Parent........................................................48
8.5. Effect of Termination and Abandonment........................................48
ARTICLE IX
Miscellaneous and General
9.1. Survival.....................................................................49
9.2. Modification or Amendment....................................................50
9.3. Waiver of Conditions.........................................................50
9.4. Counterparts.................................................................50
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL................................50
9.6. Notices......................................................................51
9.7. Entire Agreement; NO OTHER REPRESENTATIONS...................................52
9.8. No Third-Party Beneficiaries.................................................52
9.9. Obligations of Parent and of the Company.....................................52
9.10. Severability.................................................................53
9.11. Interpretation...............................................................53
9.12. Assignment...................................................................53
9.13 Term Loan Agreement..........................................................53
List of Exhibits
A. Shareholder Agreement
B. Conversion Number
C. New Exchange Warrants
D. Affiliates Letter
E. Current Severance Agreements
F. The Company's Opinion of Counsel
G. Parent's Opinion of Counsel
H. Formula
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this
"Agreement"), dated as of July 13, 2000, among xXxx.xxx, a Delaware corporation
(the "Company"), XXXX.XXX, Inc., a Delaware corporation ("Parent"), and XXXX.XXX
Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Sub," the Company and Merger Sub sometimes being hereinafter
collectively referred to as the "Constituent Corporations").
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Merger Sub and the Company have approved the merger of Merger Sub with and into
the Company (the "Merger") and approved the Merger upon the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, it is intended that, for federal income tax purposes,
the Merger shall be a taxable transaction under the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder (the
"Code");
WHEREAS, for financial accounting purposes, it is intended that
the Merger shall be accounted for as a "purchase";
WHEREAS, each of the directors who is a shareholder and certain
officers of the Company, in their capacity as shareholders, in exchange for good
and valuable consideration, have executed and delivered to Parent shareholder
agreements substantially in the form of Exhibit A hereto (the "Shareholder
Agreements"), committing such persons, among other things, (i) to vote their
shares of Company Common Stock (as defined herein) in favor of the Agreement at
the Stockholders Meeting (as defined herein), (ii) to certain representations
concerning the ownership of Company Common Stock and Parent Common Stock (as
defined herein) to be received in the Merger and (iii) certain other matters;
WHEREAS, the Company, Parent and Xxxxxx Capital Ltd. and Xxxxxxx
Capital Ltd. (collectively, Xxxxxx Capital Ltd. and Xxxxxxx Capital Ltd. are the
"Investors") have entered into a side agreement, dated July 13, 2000 (the "Side
Agreement"), containing certain provisions with respect to the Series B Shares
(hereinafter defined) of the Company including agreements by the Investors
waiving appraisal rights, terminating or amending certain prior agreements and
agreeing to the treatment of the Series B Shares as set forth in Article IV
hereof;
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WHEREAS, Parent and the Company have entered into an Agreement of
Understanding (the "Agreement of Understanding") with Integrated Global
Concepts, Inc. ("IGC"), dated June 30, 2000, to resolve certain disputes between
the Company and IGC;
WHEREAS, Parent and the Company, for good and valuable
consideration, have executed and delivered a Term Loan Agreement, dated as of
May 5, 2000 (the "Term Loan Agreement"), pursuant to which the Parent has agreed
to lend up to $5 million to the Company; and
WHEREAS, the Company, Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3)
Merger Sub shall be merged with and into the Company and the separate corporate
existence of Merger Sub shall thereupon cease. The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"), and the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth in Article III. The
Merger shall have the effects specified in the Delaware General Corporation Law,
as amended (the "DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall
take place (i) at the offices of Xxxxxxxx & Xxxxxxxx, 0000 Xxxxxxx Xxxx Xxxx,
Xxx Xxxxxxx, Xxxxxxxxxx 00000 at 9:00 A.M. on the first business day on which
the last to be fulfilled or waived of the conditions set forth in Article VII
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those
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conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other place and time and/or on such other date as the Company and
Parent may agree in writing (the "Closing Date").
1.3. Effective Time. As soon as practicable following the
Closing, the Company and Parent will cause a Certificate of Merger (the
"Delaware Certificate of Merger") to be executed, acknowledged and filed with
the Secretary of State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective at the time when the Delaware Certificate of
Merger has been duly filed with the Secretary of State of Delaware (the
"Effective Time").
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
(the "Charter"), until duly amended as provided therein or by applicable law,
except that Article III of the Charter shall be amended to read in its entirety
as follows: "The aggregate number of shares that the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $0.01 per share."
2.2. The By-Laws. The by-laws of the Company in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
3.2. Officers. The officers of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their
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successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a result
of the Merger and without any action on the part of the holder of any capital
stock of the Company:
(a) Merger Consideration. Each share of the Common Stock, par
value $0.01 per share, of the Company (a "Share" or, collectively, the "Shares"
and such Common Stock being herein called the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
Parent, Merger Sub or any other direct or indirect subsidiary of Parent
(collectively, the "Parent Companies") or Shares that are owned by the Company
or any direct or indirect subsidiary of the Company and in each case not held on
behalf of third parties (each, an "Excluded Share" and collectively, "Excluded
Shares")) shall be converted into, and become exchangeable for, the number of
shares (the "Merger Consideration") of Common Stock, par value $0.01 per share,
of Parent ("Parent Common Stock") equal to the amount (the "Conversion Number")
determined pursuant to the formula set forth in Exhibit B. At the Effective
Time, all Shares shall no longer be outstanding and shall be cancelled and
retired and shall cease to exist, and each certificate (a "Certificate")
formerly representing any of such Shares (other than Excluded Shares) shall
thereafter represent only the right to the Merger Consideration and the right,
if any, to receive pursuant to Section 4.2(e) cash in lieu of fractional shares
into which such Shares have been converted pursuant to this Section 4.1(a) and
any distribution or dividend pursuant to Section 4.2(c). Subject to Section 4.3,
the Excluded Shares shall also include any Shares ("Dissenting Shares") that are
owned by stockholders ("Dissenting Stockholders") exercising appraisal rights
pursuant to Section 262 of the DGCL.
(b) Cancellation of Shares. Each Excluded Share (other than any
Dissenting Shares which shall receive payment as required by the DGCL) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of Common
Stock, par value $0.01 per share, of Merger Sub issued and outstanding
immediately prior to the
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Effective Time shall be converted into one share of common stock of the
Surviving Corporation.
(d) Preferred Stock. Each share of Series B Convertible Preferred
Stock, par value $0.01 per share, and each share of Series D Convertible
Preferred Stock, par value $0.01 per share, of the Company (such shares of
Preferred Stock, whether of Series B or Series D, being herein collectively
called the "Series B Shares," except as the context may require, and the
particulars of such two Series of Preferred Stock are more fully explained in
Section 5.1(b)), either (x) shall be converted into Shares prior to the
Effective Time, pursuant to the applicable Certificate of Designations,
Preferences and Rights of such Preferred Stock, or (y) in the case of Series B
Shares that are not so converted into Shares prior to the Effective Time, shall
be converted into, and become exchangeable for, shares of Parent Common Stock on
the same basis as if such Series B Shares had been converted into Shares
immediately prior to the Effective Time; provided, however, that pursuant to and
subject to the terms and conditions of the Side Agreement, each Investor shall
receive a Consideration Warrant (as defined in the Side Agreement) in lieu of
some of the shares of Parent Common Stock that they would otherwise receive. In
either such event, the resulting Shares or the Series B Shares (treated for this
purpose as if such Series B Shares had been converted into Shares) shall be
converted into and be exchangeable for Parent Common Stock (together with
Consideration Warrants in lieu of certain shares of Parent Common Stock if the
foregoing proviso becomes applicable) on the same basis as other Shares as
provided in Section 4.1(a) and, at the Effective Time, such Shares or Series B
Shares shall be cancelled and retired and shall cease to exist.
(e) Warrants. At the Effective Time, Parent shall exchange for
each then outstanding warrant of the Company listed on Schedule 4.1(e) under the
caption "Exchange Warrants" (the "Exchange Warrants") new warrants in the form
of Exhibit C attached hereto (the "New Exchange Warrants") and exercisable for a
corresponding number of shares of Parent Common Stock (on an as converted basis
from the Shares, giving effect to the Conversion Number) acquirable and
receivable upon exercise of the Exchange Warrants. At the Effective Time, Parent
shall assume all obligations pursuant to the other warrants of the Company set
forth on Schedule 4.1(e) (the "Other Warrants"), subject to the same adjustment
mechanism as set forth in Section 6.11(a) that is applicable to stock options.
4.2. Exchange of Certificates for Shares.
(a) Exchange Agent. As of the Effective Time, Parent shall
deposit, or shall cause to be deposited, with an exchange agent selected by
Parent with the Company's prior approval, which shall not be unreasonably
withheld (the "Exchange Agent"), for the benefit of the holders of Shares,
certificates representing the shares of Parent Common Stock and, after the
Effective Time, if applicable, any cash, dividends or other distributions with
respect to the Parent Common Stock to be issued or paid pursuant
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to the last sentence of Section 4.1(a) in exchange for Shares outstanding
immediately prior to the Effective Time upon due surrender of the Certificates
(or affidavits of loss in lieu thereof) pursuant to the provisions of this
Article IV (such certificates for shares of Parent Common Stock, together with
the amount of any dividends or other distributions payable with respect thereto,
being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of Shares (other than holders of Excluded Shares) (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent, such letter of
transmittal to be in such form and have such other provisions as Parent and the
Company may reasonably agree, and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for (A) certificates representing
shares of Parent Common Stock and (B) any unpaid dividends and other
distributions and cash in lieu of fractional shares. Subject to Section 4.2(g),
upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor (x) a certificate representing
that number of whole shares of Parent Common Stock that such holder is entitled
to receive pursuant to this Article IV, (y) a check in the amount (after giving
effect to any required tax withholdings) of (A) any cash in lieu of fractional
shares plus (B) any unpaid non-stock dividends and any other dividends or other
distributions that such holder has the right to receive pursuant to the
provisions of this Article IV, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any amount
payable upon due surrender of the Certificates. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent Common
Stock, together with a check for any cash to be paid upon due surrender of the
Certificate and any other dividends or distributions in respect thereof, may be
issued and/or paid to such a transferee if the Certificate formerly representing
such Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Person (as defined below) requesting such
exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for shares of Parent Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall establish
to the satisfaction of Parent or the Exchange Agent that such tax has been paid
or is not applicable.
For the purposes of this Agreement, the term "Person" shall mean
any individual, corporation (including not-for-profit), general or limited
partnership, limited
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liability company, joint venture, estate, trust, association, organization,
Governmental Entity (as defined in Section 5.1(d)) or other entity of any kind
or nature.
(c) Distributions with Respect to Unexchanged Shares; Voting. (i)
All shares of Parent Common Stock to be issued pursuant to the Merger shall be
deemed issued and outstanding as of the Effective Time and whenever a dividend
or other distribution is declared by Parent in respect of the Parent Common
Stock, the record date of which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares of Parent Common Stock issuable pursuant to this Agreement. No dividends
or other distributions in respect of the Parent Common Stock shall be paid to
any holder of any unsurrendered Certificate until such Certificate is
surrendered for exchange in accordance with this Article IV. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be issued and/or paid to the holder of the certificates representing whole
shares of Parent Common Stock issued in exchange therefor, without interest, (A)
at the time of such surrender, the dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of Parent Common Stock and not paid and (B) at the appropriate
payment date, the dividends or other distributions payable with respect to such
whole shares of Parent Common Stock with a record date after the Effective Time
but with a payment date subsequent to surrender.
(ii) Holders of unsurrendered Certificates shall be entitled to
vote after the Effective Time at any meeting of Parent stockholders the number
of whole shares of Parent Common Stock represented by such Certificates,
regardless of whether such holders have exchanged their Certificates.
(d) Transfers. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the Shares
that were outstanding immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of
this Agreement, no fractional shares of Parent Common Stock will be issued and
any holder of Shares entitled to receive a fractional share of Parent Common
Stock but for this Section 4.2(e) shall be entitled to receive a cash payment in
lieu thereof, which payment shall represent such holder's proportionate interest
in a net proceeds from the sale by the Exchange Agent on behalf of such holder
of the aggregate fractional shares of Parent Common Stock that such holder
otherwise would be entitled to receive. Any such sale shall be made by the
Exchange Agent within five business days after the date upon which the
Certificate(s) (or affidavit(s) of loss in lieu thereof) that would otherwise
result in the issuance of such fractional shares of Parent Common Stock have
been received by the Exchange Agent.
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(f) Termination of Exchange Fund. Any portion of the Exchange
Fund (including the proceeds of any investments thereof and any Parent Common
Stock) that remains unclaimed by the stockholders of the Company for one year
after the Effective Time shall be paid to Parent. Any stockholders of the
Company who have not theretofore complied with this Article IV shall thereafter
look only to Parent for payment of their shares of Parent Common Stock and any
cash, dividends and other distributions in respect thereof payable and/or
issuable pursuant to Section 4.1 and Section 4.2(c) upon due surrender of their
Certificates (or affidavits of loss in lieu thereof), in each case, with out any
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and any cash payable and any unpaid dividends or other distributions in respect
thereof pursuant to Section 4.2(c) upon due surrender of and deliverable in
respect of the Shares represented by such Certificate pursuant to this
Agreement.
4.3. No Dissenters' Rights. In accordance with Section 262 of the
DGCL, and after giving effect to the waiver of appraisal rights set forth in the
Side Agreement, no appraisal rights shall be available to holders of Shares in
connection with the Merger, so long as the Shares remain designated as a
national market system security, i.e., designated on the Nasdaq National Market,
as provided in Section 262 of the DGCL.
In case dissenter's rights should become applicable to the
Shares, the following provisions are agreed to by the parties. No Dissenting
Stockholder shall be entitled to shares of Parent Common Stock or cash in lieu
of fractional shares thereof or any dividends or other distributions pursuant to
this Article IV unless and until the holder thereof shall have failed to perfect
or shall have effectively withdrawn or lost such holder's right to dissent from
the Merger under the DGCL, and any Dissenting Stock holder shall be entitled to
receive only the payment provided by Section 262 of the DGCL with respect to
Shares owned by such Dissenting Stockholder. If any Person who otherwise would
be deemed a Dissenting Stockholder shall have failed to properly perfect or
shall have effectively withdrawn or lost the right to dissent with respect to
any Shares, such Shares shall thereupon be treated as though such Shares had
been converted into shares of Parent Common Stock pursuant to Section 4.1 hereof
and shall no longer be treated as Dissenting Shares. The Company shall give
Parent (i) prompt notice of any
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written demands for appraisal, attempted withdrawals of such demands, and any
other instruments served pursuant to applicable law received by the Company
relating to stock holders' rights of appraisal and (ii) the opportunity to
direct all negotiations and proceedings with respect to demand for appraisal
under the DGCL. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisals
of Dissenting Shares, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
4.4. Adjustments to Prevent Dilution. In the event that the
Company changes the number of Shares or securities convertible or exchangeable
into or exercisable for Shares, or Parent changes the number of shares of Parent
Common Stock or securities convertible or exchangeable into or exercisable for
shares of Parent Common Stock, issued and outstanding prior to the Effective
Time as a result of a reclassification, stock split (including a reverse split),
stock dividend or distribution, recapitalization, merger, subdivision, issuer
tender or exchange offer, or other similar transaction, the provisions of the
formula, attached as Exhibit B, that determines the Merger Consideration shall
be adjusted accordingly.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. Except as set
forth in the corresponding sections or subsections of the disclosure letter
delivered to Parent by the Company on or prior to entering into this Agreement
(the "Company Disclosure Letter"), the Company hereby represents and warrants to
Parent and Merger Sub that:
(a) Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its assets
or properties or conduct of its business requires such qualification, except
where the failure to be so organized, qualified or in good standing, or to have
such power or authority, when taken together with all other such failures, is
not reasonably likely to have a Company Material Adverse Effect (as defined
below). The Company has made available to Parent a complete and correct copy of
the Company's and its Subsidiaries' organic documents (including certificates of
incorporation and by-laws where applicable), each as amended to date. The
Company's and its Subsidiaries' organic documents so delivered are in full force
and effect. Section 5.1(a) of the
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16
Company Disclosure Letter contains a correct and complete list of each
jurisdiction where the Company and each of its Subsidiaries is organized and
qualified to do business.
As used in this Agreement, the term (i) "Subsidiary" means, with
respect to the Company, Parent or Merger Sub, as the case may be, any entity,
whether incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions is directly or indirectly owned or controlled by such party or by one
or more of its respective Subsidiaries or by such party and any one or more of
its respective Subsidiaries and (ii) "Company Material Adverse Effect" means a
material adverse effect on the financial condition, properties, prospects,
business or results of operations of the Company and its Subsidiaries taken as a
whole.
(b) Capital Structure. The authorized capital stock of the
Company consists of 35,000,000 Shares, of which 13,520,895 Shares were
outstanding as of the close of business on July 6, 2000, and 5,000,000 shares of
Preferred Stock, par value $0.01 per share (the "Preferred Shares"), of which
1,447 shares of the Series B Shares were outstanding as of the date hereof.
Pursuant to the terms of the Series B Shares, the Series B Shares are
convertible into shares of Series C Convertible Preferred Stock, under certain
circumstances (that will not become applicable, however, if the Merger occurs),
and at the Company's option, the Series B Shares are convertible, subject to
certain limitations, into shares of Parent Common Stock in connection with the
Merger. In addition, the Series B Shares are exchangeable for shares of Series D
Convertible Preferred Stock ("Series D Shares") of the Company, and, at the
Company's option, the resulting Series D Shares are convertible, subject to
certain limitations, indirectly into shares of the Parent Common Stock in
connection with the Merger. The Series D Shares are convertible into shares of
Series E Convertible Preferred Stock under certain circumstances (that will not
become applicable, however, if the Merger occurs). The Company hereby agrees to
cause the exchange of the Series B Shares into Series D Shares no later than
July 31, 2000. Inasmuch as the provisions in Article IV of this Agreement, and
other pertinent provisions, have been prepared on the basis that such provisions
will be correctly applicable to either the Series B Shares or the Series D
Shares, in this Agreement, except as the context may otherwise require,
references to the Series B Shares include both the Series B Shares and the
Series D Shares and the defined term contained in Section 4.1(d) so reflects.
All of the outstanding Shares and Series B Shares have been duly authorized and
are validly issued, fully paid and nonassessable. The Company Disclosure Letter
contains a correct and complete list of each outstanding warrant and each
outstanding option to purchase Shares under the Company's Stock Option Plans (as
defined in Section 6.11(a)), such list, however, does not specify the options to
acquire Shares pursuant to the Company's Stock Purchase Plan (as defined in
Section 6.11(a)), but the Company Disclosure Letter does set forth the terms of
the Stock Purchase Plan that determine the maximum number of Shares that may be
issued pursuant thereto. The list required by the preceding sentence includes
the holder, date of
-10-
17
grant, exercise price and number of Shares subject to each warrant and each
option (other than options pursuant to the Stock Purchase Plan). Except as set
forth above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements, calls, commitments or rights of any
kind that obligate the Company or any of its Subsidiaries to issue or sell any
shares of capital stock or other securities of the Company or any of its
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding. The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. The Company Disclosure Letter contains a true and
complete list of each person in which the Company owns, directly or indirectly,
any voting interest that may require a filing by Parent under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
(c) Corporate Authority; Approval. (i) The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate, subject only to approval of this Agreement by the
holders of a majority of the outstanding Shares (the "Company Requisite Vote"),
the Merger. This Agreement is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (the "Bankruptcy and Equity Exception").
(ii) The board of directors of the Company has approved this
Agreement and the Merger and the other transactions contemplated hereby.
(d) Governmental Filings; No Violations. (i) Other than the
filings and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"),
(C) to comply with state securities or "blue-sky" laws and (D) required to be
made with the NASDAQ, no notices, reports or other filings are required to be
made by the Company with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by the Company from, any
governmental or regulatory authority, agency, commission, body or other
governmental entity ("Governmental Entity"), in connection with the execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
-11-
18
(ii) The execution, delivery and performance of this Agreement by
the Company do not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, the certificate of incorporation or
by-laws of the Company or the comparable governing instruments of any of its
Subsidiaries, (B) a breach or violation of, or a default under, the acceleration
of any obligations or the creation of a lien, pledge, security interest or other
encumbrance on the assets of the Company or any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
license, contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") binding upon the Company or any of its Subsidiaries or any Law (as
defined in Section 5.1(i)) or governmental or non-governmental permit or license
to which the Company or any of its Subsidiaries is subject or (C) any change in
the rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for any breach(es), violation(s),
default(s), acceleration(s), creation(s) or change(s) that individually is, and
in the aggregate are, not reasonably likely to have a Company Material Adverse
Effect or prevent, materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement. Section
5.1(d) of the Company Disclosure Letter sets forth, to the knowledge of the
officers of the Company, a correct and complete list of Contracts of the Company
and its Subsidiaries pursuant to which consents or waivers are or may be
required prior to consummation of the transactions contemplated by this
Agreement (whether or not subject to the exception set forth with respect to
clauses (B) and (C) above).
(e) Company Reports; Financial Statements. The Company has
delivered to the Parent each registration statement, report, proxy statement or
information statement prepared by it since January 1, 2000 (the "Audit Date"),
including (i) the Company's Annual Report on Form 10-K for the year ended
January 1, 2000, (ii) the Company's Current Report on Form 8-K, filed with the
XXX xx Xxxxx 0, 0000, (xxx) the Company's Form 10-K/A filed with the SEC on May
1, 2000, and (iv) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended April 1, 2000, each in the form (including exhibits, annexes and
any amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") and (v) an unaudited consolidated balance sheet for the Company and its
Subsidiaries as of June 1, 2000 (collectively, including any such reports filed
subsequent to the date hereof and as amended, the "Company Reports"). As of
their respective dates (or, if amended, as of the date of such amendment), the
Company Reports did not, and any Company Reports filed with the SEC subsequent
to the date hereof will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of income and of changes in financial position
-12-
19
included in or incorporated by reference into the Company Reports (including any
related notes and schedules) fairly presents, or will fairly present, the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein.
(f) Absence of Certain Changes. Except as disclosed in the
Company Reports filed prior to the date hereof, since the Audit Date the Company
and its Subsidiaries have conducted their respective businesses only in, and
have not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
change in the financial condition, properties, prospects, business or results of
operations of the Company and its Subsidiaries or any development or combination
of developments of which management of the Company has knowledge that,
individually or in the aggregate, has had or is reasonably likely to have a
Company Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by the Company or any of its Subsidiaries, whether or not covered
by insurance; (iii) any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property in respect of the capital stock of
the Company, except for dividends or other distributions on its capital stock
publicly announced prior to the date hereof and except as expressly permitted
hereby; (iv) any event that would constitute a violation of Section 6.1 hereof
if such event occurred after the date of this Agreement and prior to the
Effective Time; or (v) any change by the Company in accounting principles,
practices or methods. Since the Audit Date, except as provided for herein or as
disclosed in the Company Reports filed prior to the date hereof, there has not
been any increase in the compensation payable or that could become payable by
the Company or any of its Subsidiaries to officers or key employees or any
amendment of any of the Compensation and Benefit Plans (as defined in Section
5.1(h)) other than increases or amendments in the ordinary course.
(g) Litigation and Liabilities. Except as disclosed in the
Company Reports filed prior to the date hereof, there are no (i) civil, criminal
or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the officers of the Company,
threatened against the Company or any of its Affiliates or (ii) obligations or
liabilities, whether or not accrued, contingent or otherwise and whether or not
required to be disclosed, including those relating to environmental and
occupational safety and health matters, or any other facts or circumstances of
which the officers of the Company has knowledge that could result in any claims
against, or obligations or liabilities of, the Company or any of its Affiliates,
except for those that are not, individually or in the aggregate, reasonably
likely to have a Company Material
-13-
20
Adverse Effect or prevent or materially burden or materially impair the ability
of the Company to consummate the transactions contemplated by this Agreement.
For purposes of this Agreement, an "Affiliate" of a specified Person is a Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified, and the
term "control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option (including the Stock
Option Plans), employment, termination, severance, compensation, medical, health
or other plan, agreement, policy or arrangement that covers employees,
directors, former employees or former directors of the Company and its
Subsidiaries (the "Compensation and Benefit Plans") and any trust agreement or
insurance contract forming a part of such Compensation and Benefit Plans has
been made available to Parent prior to the date hereof. The Compensation and
Benefit Plans are listed in Section 5.1(h) of the Company Disclosure Letter and
any "change of control" or similar provisions therein are specifically
identified in Section 5.1(h) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans are in substantial
compliance with all applicable law, including the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Each Compensation
and Benefit Plan that is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "Pension Plan") and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS"), and the Company is not aware of
any circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the officers
of the Company, threatened material litigation relating to the Compensation and
Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Compensation and Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
the Company or any of its Subsidiaries to a material tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA.
(iii) As of the date hereof, no liability under Subtitle C or D
of Title IV of ERISA has been or is expected to be incurred by the Company or
any Subsidiary with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer plan of
any entity which is considered one employer with the Company
-14-
21
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate").
The Company and its Subsidiaries have not incurred and do not expect to incur
any withdrawal liability with respect to a multiemployer plan under Subtitle E
to Title IV of ERISA. The Company and its Subsidiaries have not contributed, or
been obligated to contribute, to a multiemployer plan under Subtitle E of Title
IV of ERISA at any time since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for any
Pension Plan or by any ERISA Affiliate within the 12-month period ending on the
date hereof or will be required to be filed in connection with the transactions
contemplated by this Agreement.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date hereof.
Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as
of the last day of the most recent plan year ended prior to the date hereof, the
actuarially deter mined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan, and there has been no material change in the financial condition of such
Pension Plan since the last day of the most recent plan year.
(vi) Neither the Company nor its Subsidiaries have any
obligations for retiree health and life benefits under any Compensation and
Benefit Plan, except as set forth in the Company Disclosure Letter. The Company
or its Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
(vii) The consummation of the Merger and the other transactions
contemplated by this Agreement will not (x) entitle any employees of the Company
or its Subsidiaries to severance pay, (y) accelerate the time of payment or
vesting or trigger any payment of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or (z) result in any breach or violation of, or a
default under, any of the Compensation and Benefit Plans.
-15-
22
(i) Compliance with Laws; Permits. The businesses of each of the
Company and its Subsidiaries have not been, and are not being, conducted in
violation of any federal, state, local or foreign law, statute, ordinance, rule,
regulation, judgment, order, injunction, decree, arbitration award, agency
requirement, license or permit of any Governmental Entity (collectively,
"Laws"), except for violations or possible violations that, individually or in
the aggregate, are not reasonably likely to have a Company Material Adverse
Effect or prevent or materially burden or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement. No
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the knowledge of the officers of
the Company, threatened, nor has any Governmental Entity indicated an intention
to conduct the same, except for those the outcome of which are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent or materially burden or materially impair the ability of the Company
to consummate transactions contemplated by this Agreement. To the knowledge of
the officers of the Company, no material change is required in the Company's or
any of its Subsidiaries' processes, properties or procedures in connection with
any such Laws, and the Company has not received any notice or communication of
any material noncompliance with any such Laws that has not been cured as of the
date hereof. The Company and its Subsidiaries each has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business as presently conducted
except those the absence of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the Merger and the other transactions contemplated by this Agreement.
(j) Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation or any
anti-takeover provision in the Company's certificate of incorporation and
by-laws is, or at the Effective Time will be, applicable to the Company, the
Shares, the Series B Shares, the Merger or the other transactions contemplated
by this Agreement.
(k) [Reserved].
(l) Taxes. The Company and each of its Subsidiaries (i) have
prepared in good faith and duly and timely filed (taking into account any
extension of time within which to file) all Tax Returns (as defined below)
required to be filed by any of them and all such filed Tax Returns are complete
and accurate in all material respects; (ii) have paid all Taxes (as defined
below) that are shown as due on such filed Tax Returns or that the Company or
any of its Subsidiaries are obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters contested in
good faith; and (iii) have not waived any statute of limitations with respect to
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
-16-
23
As of the date hereof, there are not pending or, to the knowledge of the
officers of the Company threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters. There
are not, to the knowledge of the officers of the Company, any unresolved
questions or claims concerning the Company's or any of its Subsidiaries' Tax
liability that are reasonably likely to have a Company Material Adverse Effect.
The Company has made available to Purchaser true and correct copies of the
United States federal income Tax Returns filed by the Company and its
Subsidiaries for each of the fiscal years ended January 3, 1998, January 2, 1999
and January 1, 2000. Neither the Company nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that accrued on or
before the end of the latest completed fiscal quarter of the Company in excess
of the amounts accrued with respect thereto that are reflected in the financial
statements included in the Company Reports filed on or prior to the date hereof.
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, severances, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term "Tax Return" includes all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
(m) Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is the Company or any of its
Subsidiaries the subject of any material proceeding asserting that the Company
or any of its Subsidiaries has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor is there
pending or, to the knowledge of the officers of the Company, threatened, nor has
there been for the past five years, any labor strike, dispute, walk-out, work
stoppage, slow-down or lockout involving the Company or any of its Subsidiaries.
(n) Insurance. The Company has provided Parent with copies of all
policies of fire, liability, workmen's compensation and other forms of insurance
owned or held by the Company, all of which are listed in Section 5.1(n) of the
Company Disclosure Letter. Except as set forth in Section 5.1(n) of the Company
Disclosure Letter, such policies are in adequate amounts and cover risks
customarily insured against by businesses of the type operated by the Company;
except for any such failures to maintain insurance policies that, individually
or in the aggregate, are not reasonably likely to have a Company Material
Adverse Effect.
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24
(o) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or
materials that are used in the business of the Company and its
Subsidiaries as currently conducted, except for any such failures to
own, be licensed or possess that, individually or in the aggregate, are
not reasonably likely to have a Company Material Adverse Effect, and to
the knowledge of the officers of the Company all patents, trademarks,
trade names, service marks and copyrights held by the Company and/or its
Subsidiaries are valid and subsisting.
(ii) Except as disclosed in Company Reports filed prior to the
date hereof or as is not reasonably likely to have a Company Material
Adverse Effect:
(A) the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which the Company is authorized to use any third-party patents,
trademarks, service marks, copyrights, trade secrets or computer
software (collectively, "Third-Party Intellectual Property Rights");
(B) no claims with respect to (I) the patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names, and any applications therefor, trade secrets or
computer software owned by the Company or any of its Subsidiaries
(collectively, the "Company Intellectual Property Rights"); or (II)
Third-Party Intellectual Property Rights are currently pending or, to
the knowledge of the officers of the Company, are threatened by any
Person;
(C) there are no valid grounds for any bona fide claims (I) to
the effect that the manufacture, sale, licensing or use of any product
as now used, sold or licensed or proposed for use, sale or license by
the Company or any of its Subsidiaries, infringes on any copyright,
patent, trademark, service xxxx or trade secret of any Person; (II)
against the use by the Company or any of its Subsidiaries, of any
Company Intellectual Property Right or Third-Party Intellectual Property
Right used in the business of the Company or any of its Subsidiaries as
currently conducted or as proposed to be conducted; (III) challenging
the ownership, validity or enforceability of any of the Company
Intellectual Property Rights; or (IV) challenging the license or legally
enforceable
-18-
25
right to use of the Third-Party Intellectual Rights by the Company or
any of its Subsidiaries; and
(D) there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property Rights by
any third party, including any employee or former employee of the
Company or any of its Subsidiaries.
(p) Brokers and Finders. Neither the Company nor any of its
officers, directors, employees, representatives or agents has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the Merger or the other transactions
contemplated in this Agreement, except that the Company has employed Pacific
Growth Equities, Inc. as its financial advisor, the arrangements with which have
been disclosed in writing to Parent prior to the date hereof.
(q) Related Agreements. Each of the representations and
warranties of the Company set forth in the Agreement of Understanding and the
Side Agreement, including the other related agreements referred to in any of the
foregoing or exhibited or annexed to any of the foregoing, is true and correct.
5.2. Representations and Warranties of Parent and Merger Sub.
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter"), Parent and Merger Sub each
hereby represents and warrants to the Company that:
(a) Capitalization of Merger Sub. The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, par value $0.01 per share,
all of which are validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective Time will be,
owned by Parent, and there are (i) no other shares of capital stock or voting
securities of Merger Sub, (ii) no securities of Merger Sub convertible into or
exchangeable for shares of capital stock or voting securities of Merger Sub and
(iii) no options or other rights to acquire from Merger Sub, and no obligations
of Merger Sub to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Merger Sub. Merger Sub has not conducted any business prior to the date hereof
and has no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement.
(b) Organization, Good Standing and Qualification. Each of Parent
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on
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26
its business as presently conducted and is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership
or operation of its assets or properties or conduct of its business requires
such qualification, except where the failure to be so organized, qualified or in
such good standing, or to have such power or authority when taken together with
all other such failures, is not reasonably likely to have a Parent Material
Adverse Effect (as defined below). Parent has made available to the Company a
complete and correct copy of Parent's and its Subsidiaries' certificates of
incorporation and by-laws, each as amended to the date hereof. Parent's and its
Subsidiaries' certificates of incorporation and by-laws so delivered are in full
force and effect.
As used in this Agreement, the term "Parent Material Adverse
Effect" means a material adverse effect on the financial condition, properties,
business or results of operations of the Parent and its Subsidiaries taken as a
whole.
(c) Parent Capital Structure. The authorized capital stock of
Parent consists of 200,000,000 shares of Parent Common Stock, of which
36,122,600 shares were outstanding as of the close of business on July 7, 2000,
and 1,000,000 shares of Preferred Stock, par value $0.01 per share, of which 120
shares of Series B Convertible Stock were outstanding as of the close of
business on July 7, 2000 (the "Parent Preferred Shares"). All of the outstanding
Parent Common Stock and Parent Preferred Shares have been duly authorized and
are validly issued, fully paid and nonassessable. Parent has no Parent Common
Stock or Parent Preferred Shares reserved for issuance, except that, as of July
7, 2000, there were 4,375,000 shares of Parent Common Stock reserved for
issuance pursuant to the XXXX.Xxx, Inc. 1997 Stock Option Plan (the "Parent
Stock Plan") and an aggregate of 3,431,666 shares of Parent Common Stock
reserved for issuance upon the conversion of the Parent Preferred Shares or upon
the exercise of outstanding warrants. Each of the outstanding shares of capital
stock of each of Parent's Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable and owned by a direct or indirect wholly-owned subsidiary
of Parent, free and clear of any lien, pledge, security interest, claim or other
encumbrance. Except as set forth above or in the Parent Disclosure Letter, there
are no preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements, calls, commitments or rights of any kind that obligate
the Parent or any of its Subsidiaries to issue or to sell any shares of capital
stock or other securities of Parent or any of its Subsidiaries or any securities
or obligations convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire, any securities of the Parent or
any of its Subsidiaries, and no securities or obligation evidencing such rights
are authorized, issued or outstanding. Parent does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of Parent on any matter.
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(d) Corporate Authority; Approval.
(i) Each of the Parent and Merger Sub has all requisite corporate
power and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate, subject only to any stockholder approval necessary to permit the
issuance of the shares of Parent Common Stock required to be issued pursuant to
Article IV (the "Parent Requisite Vote"), the Merger. This Agreement is a valid
and binding agreement of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy
and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent Common
Stock required to be issued pursuant to Article IV. The Parent Common Stock,
when issued, will be validly issued, fully paid and nonassessable, and no
stockholder of Parent will have any preemptive right of subscription or purchase
in respect thereof. The Parent Common Stock, when issued, will be registered
under the Securities Act and Exchange Act and registered or exempt from
registration under any applicable state securities or "blue sky" laws.
(e) Governmental Filings; No Violations. (i) Other than the
filings and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities or
"blue sky" laws and (D) required to be made with the NASDAQ, no notices, reports
or other filings are required to be made by Parent or Merger Sub with, nor are
any consents, registrations, approvals, permits or authorizations required to be
obtained by Parent or Merger Sub from, any Governmental Entity, in connection
with the execution and delivery of this Agreement by Parent and Merger Sub and
the consummation by Parent and Merger Sub of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent, materially delay or materially impair
the ability of Parent or Merger Sub to consummate the transactions contemplated
by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of
the Merger and the other transactions contemplated hereby will not, constitute
or result in (A) a breach or violation of, or a default under, the certificate
of incorporation or by-laws of Parent and Merger Sub or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on the assets of Parent or any of
its Subsidiaries (with or without notice, lapse of time or both) pursuant to,
any Contracts binding upon Parent or any of its
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Subsidiaries or any Law or governmental or non-governmental permit or license to
which Parent or any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any of the Contracts, except, in the
case of clause (B) or (C) above, for any breach(es), violation(s), default(s),
acceleration(s), creation(s) or change(s) that individually is, and in the
aggregate are, not reasonably likely to have a Parent Material Adverse Effect or
prevent, materially delay or materially impair the ability of Parent or Merger
Sub to consummate the transactions contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has delivered to
the Company each registration statement, report, proxy statement or information
statement prepared by it since December 31, 1999 (the "Parent Audit Date"),
including (i) Parent's Annual Report on Form 10-K for the year ended December
31, 1999 and (ii) Parent's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2000, each in the form (including exhibits, annexes and
any amendments thereto) filed with the SEC (collectively, including any such
reports filed subsequent to the date hereof, the "Parent Reports"). As of their
respective dates, the Parent Reports did not, and any Parent Reports filed with
the SEC subsequent to the date hereof will not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the Parent Reports (including the
related notes and schedules) fairly presents, or will fairly present, the
consolidated financial position of Parent and its Subsidiaries as of its date
and each of the consolidated statements of income and of changes in financial
position included in or incorporated by reference into the Parent Reports
(including any related notes and schedules) fairly presents, or will fairly
present, the results of operations, retained earnings and changes in financial
position, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
(g) Absence of Certain Changes. Except as disclosed in the Parent
Reports filed prior to the date hereof, since the Parent Audit Date Parent and
its Subsidiaries have conducted their respective businesses only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such businesses and there has not been (i) any change in the
financial condition, properties, business or results of operations of Parent and
its Subsidiaries or any development or combination of developments of which
management of Parent has knowledge that, individually or in the aggregate, has
had or is reasonably likely to result in a Parent Material Adverse Effect; (ii)
any material damage, destruction or other casualty loss with respect to any
material asset or property owned, leased or otherwise used by Parent or any of
its Subsidiaries, whether or not covered by insurance; or (iii) any declaration,
setting aside or payment of any dividend or other distribution in cash, stock or
property in respect of the capital stock of Parent, except for dividends or
other distribution on its capital
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stock publicly announced prior to the date hereof and except as expressly
permitted hereby; (iv) any event that would constitute a violation of Section
6.1.1 hereof if such event occurred after the date of this Agreement and prior
to the Effective Time; or (v) any change by Parent in accounting principles,
practices or methods.
(h) Litigation and Liabilities. Except as disclosed in the Parent
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the officers of Parent, threatened against
Parent or any of its Affiliates or (ii) obligations or liabilities, whether or
not accrued, contingent or otherwise and whether or not required to be
disclosed, including those relating to environmental and occupational safety and
health matters, or any other facts or circumstances of which the officers of
Parent has knowledge that could result in any claims against, or obligations or
liabilities of, Parent or any of its Affiliates, except for those that are not,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect or prevent or materially burden or materially impair the ability
of Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
(i) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option (including the Parent
Stock Plan), employment, termination, severance, compensation, medical, health
or other plan, agreement, policy or arrangement that covers employees,
directors, former employees or former directors of Parent and its Subsidiaries
(the "Parent Compensation and Benefit Plans") and any trust arrangement or
insurance contract forming a part of such Parent Compensation and Benefits Plans
has been made available to the Company prior to the date hereof. The Parent
Compensation and Benefit Plans are listed in Section 5.2(i) of the Parent
Disclosure Letter and any "change of control" or similar provision therein are
specifically identified in Section 5.2.(i) of the Parent Disclosure Letter.
(ii) All Parent Compensation and Benefit Plans are in substantial
compliance with all applicable law, including the Code and ERISA. Each Parent
Compensation and Benefit Plan that is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA (a "Parent Pension Plan") and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS, and Parent is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. As of the date hereof, there is no pending or, to the knowledge of the
officers of Parent, threatened material litigation relating to the Parent
Compensation and Benefit Plans. Neither Parent nor any of its Subsidiaries has
engaged in a transaction with respect to any Parent Compensation and Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would
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subject Parent or any of its Subsidiaries to a material tax or penalty imposed
by either Section 4975 of the Code or Section 502 of ERISA.
(iii) As of the date hereof, no liability under Subtitle C or D
of Title IV of ERISA has been or is expected to be incurred by Parent or any
Subsidiary with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered an ERISA Affiliate of Parent. Parent and its Subsidiaries have not
incurred and do not expect to incur any withdrawal liability with respect to a
multiemployer plan under Subtitle E to Title IV of ERISA. Parent and its
Subsidiaries have not contributed, or been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA at any time since
September 26, 1980. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Parent Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof or will be
required to be filed in connection with the transactions contemplated by this
Agreement.
(iv) All contributions required to be made under the terms of any
Parent Compensation and Benefit Plan as of the date hereof have been timely made
or have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Parent Reports prior to the date hereof.
Neither any Parent Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. Neither Parent
nor its Subsidiaries has provided, or is required to provide, security to any
Parent Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(v) Under each Parent Pension Plan which is a single-employer
plan, as of the last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit liabilities",
within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in the Parent Pension Plan's most recent
actuarial valuation), did not exceed the then current value of the assets of
such Parent Pension Plan, and there has been no material change in the financial
condition of such Parent Pension Plan since the last day of the most recent plan
year.
(vi) Neither Parent nor its Subsidiaries have any obligations for
retiree health and life benefits under any Parent Compensation and Benefit Plan,
except as set forth in the Parent Disclosure Letter. Parent or its Subsidiaries
may amend or terminate any such plan under the terms of such plan at any time
without incurring any material liability thereunder.
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(j) Compliance with Laws; Permits. The businesses of each of
Parent and its Subsidiaries have not been, and are not being, conducted in
violation of any Laws, except for violations or possible violations that,
individually or in the aggregate, are not reasonably likely to have a Parent
Material Adverse Effect or prevent or materially burden or materially impair the
ability of Parent or Merger Sub to consummate the transactions contemplated by
this Agreement. No investigation or review by any Governmental Entity with
respect to Parent or any of its Subsidiaries is pending or, to the knowledge of
the officers of Parent, threatened, nor has any Governmental Entity indicated an
intention to conduct the same, except for those the outcome of which are not,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect or prevent or materially burden or materially impair the ability
of Parent or Merger Sub to consummate the transactions contemplated by this
Agreement. To the knowledge of the officers of Parent, no material change is
required in Parent's or any of its Subsidiaries' processes, properties or
procedures in connection with any such Laws, and Parent has not received any
notice or communication of any material noncompliance with any such Laws that
has not been cured as of the date hereof. Parent and its Subsidiaries each has
all permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted except those the absence of which are not,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect or prevent or materially burden or materially impair the ability
of Parent or Merger Sub to consummate the Merger and the other transactions
contemplated by this Agreement.
(k) [Reserved.]
(l) Taxes. Parent and each of its Subsidiaries (i) have prepared
in good faith and duly and timely filed (taking into account any extension of
time within which to file) all Tax Returns required to be filed by any of them
and all such filed Tax Returns are complete and accurate in all material
respects; (ii) have paid all Taxes that are shown as due on such filed Tax
Returns or that Parent or any of its Subsidiaries are obligated to withhold from
amounts owing to any employee, creditor or third party, except with respect to
matters contested in good faith; and (iii) have not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. As of the date hereof, there are not
pending or, to the knowledge of the officers of Parent threatened in writing,
any audits, examinations, investigations or other proceedings in respect of
Taxes or Tax matters. There are not, to the knowledge of the officers of Parent,
any unresolved questions or claims concerning Parent's or any of its
Subsidiaries' Tax liability that are reasonably likely to have a Parent Material
Adverse Effect. Neither Parent nor any of its Subsidiaries has any liability
with respect to income, franchise or similar Taxes that accrued on or before the
end of the latest completed fiscal quarter of Parent in excess of the amounts
accrued with respect thereto that are reflected in the financial statements
included in the Parent Reports filed on or prior to the date hereof.
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(m) Labor Matters. Neither Parent nor any of its Subsidiaries is
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization,
nor, as of the date hereof, is Parent or any of its Subsidiaries the subject of
any material proceeding asserting that Parent or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor is there pending or, to the knowledge
of the officers of Parent, threatened, nor has there been for the past five
years, any labor strike, dispute, walk-out, work stoppage, slow-down or lockout
involving Parent or any of its Subsidiaries.
(n) Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by Parent or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of Parent and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Parent Material Adverse Effect.
(o) Intellectual Property.
(i) Parent and/or each of its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications, and
tangible or intangible proprietary information or materials that are used in the
business of Parent and its Subsidiaries as currently conducted, except for any
such failures to own, be licensed or possess that, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse Effect,
and to the knowledge of the officers of Parent all patents, trademarks, trade
names, service marks and copyrights held by Parent and/or its Subsidiaries are
valid and subsisting.
(ii) Except as disclosed in Parent Reports filed prior to the
date hereof or as is not reasonably likely to have a Parent Material Adverse
Effect:
(A) Parent is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which Parent is a party and pursuant to which Parent is
authorized to use any third-party patents, trademarks, service marks,
copyrights, trade secrets or computer software (collectively, "Parent
Third-Party Intellectual Property Rights");
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(B) no claims with respect to (I) the patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names, and any applications therefor, trade secrets or
computer software owned by Parent or any of its Subsidiaries
(collectively, the "Parent Intellectual Property Rights"); or (II)
Parent Third-Party Intellectual Property Rights are currently pending
or, to the knowledge of the officers of Parent, are threatened by any
Person;
(C) there are no valid grounds for any bona fide claims (I) to
the effect that the manufacture, sale, licensing or use of any product
as now used, sold or licensed or proposed for use, sale or license by
Parent or any of its Subsidiaries, infringes on any copyright, patent,
trademark, service xxxx or trade secret; (II) against the use by Parent
or any of its Subsidiaries, of any Parent Intellectual Property Rights
or Parent Third-Party Intellectual Property Rights used in the business
of Parent or any of its Subsidiaries as currently conducted or as
proposed to be conducted; (III) challenging the ownership, validity or
enforceability of any of the Parent Intellectual Property Rights; or
(IV) challenging the license or legally enforceable right to use of the
Parent Third-Party Intellectual Rights by Parent or any of its
Subsidiaries; and
(D) there is no unauthorized use, infringement or
misappropriation of any of the Parent Intellectual Property Rights by
any third party, including any employee or former employee of Parent or
any of its Subsidiaries.
(p) Brokers and Finders. Neither Parent nor any of its officers,
directors, employees, representatives or agents has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the Merger or the other transactions contemplated by
this Agreement, except that Parent has employed Xxxxxx Xxxxxxx Incorporated as
its financial advisor, the arrangements with which have been disclosed in
writing to the Company prior to the date hereof.
(q) Related Agreements. Each of the representations and
warranties of the Parent set forth in the Agreement of Understanding and the
Side Agreement, including the other related agreements referred to in any of the
foregoing or exhibited or annexed to any of the foregoing, is true and correct.
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ARTICLE VI
Covenants
6.1. Interim Operations of the Company. The Company covenants and
agrees as to itself and its Subsidiaries that, after the date hereof and prior
to the Effective Time (unless Parent shall otherwise approve and except as
otherwise expressly contemplated by this Agreement and except as required
pursuant to the terms of the Term Loan Agreement and the related loan documents,
including the repayment of any principal or interest, the Side Agreement, the
Series D Exchange Agreement (as defined in the Side Agreement), the Series D
Certificate of Designations (as defined in the Series D Exchange Agreement) or
the Agreement of Understanding):
(a) the business of it and its Subsidiaries shall be conducted in
the ordinary and usual course and, to the extent consistent therewith, it and
its Subsidiaries shall use all reasonable efforts to maintain its existing
relations and goodwill with customers, suppliers, distributors, creditors,
lessors and business associates; provided, however, that the Company may sell
those assets which it is permitted to dispose of pursuant to and in accordance
with the terms of the Term Loan Agreement and may continue to de-emphasize its
sales and licensing of its multifunction products business.
(b) it shall not (i) issue, sell, pledge, dispose of or encumber
any capital stock owned by it in any of its Subsidiaries; (ii) amend its
certificate of incorporation or by-laws; (iii) split, combine or reclassify its
outstanding shares of capital stock; (iv) declare, set aside or pay any dividend
payable in cash, stock or property in respect of any capital stock other than
dividends from its direct or indirect wholly-owned Subsidiaries; or (v)
repurchase, redeem or otherwise acquire, except in connection with the Stock
Option Plans, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock;
(c) neither it nor any of its Subsidiaries shall (i) issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of any class or
any other property or assets (other than Shares issuable pursuant to options
outstanding on the date hereof under the Stock Option Plans, options for Shares
and Shares issuable pursuant to the Stock Purchase Plan, options issuable
pursuant to the terms of the Directors' Plan (as defined in Section 6.11(a)),
Shares issuable upon the conversion of Series B Shares, the exchange of the
Series B Shares for the Series D Shares or Shares issuable upon the exercise of
the Exchange Warrants or the Other Warrants); (ii) other than in the ordinary
and usual course of business and except for sales permitted by and made in
accordance with Section 9(c) of the Term Loan Agreement, transfer, lease,
license, guarantee, sell, mort-
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gage, pledge, dispose of or encumber any other property or assets (including
capital stock of any of its Subsidiaries) or incur or modify any material
indebtedness or other liability; or (iii) make or authorize or commit for any
capital expenditures other than in the ordinary and usual course of business or,
by any means, make any acquisition of, or investment in, assets or stock of or
other interest in, any other Person or entity;
(d) except as required by the terms of this Agreement, or
permitted pursuant to Section 6.11(d) of this Agreement, and except for option
grants pursuant to the Directors' Plan, neither it nor any of its Subsidiaries
shall terminate, establish, adopt, enter into, make any new grants or awards
under, reprice or substitute any options previously granted under, amend or
otherwise modify, any Compensation and Benefit Plans or increase the salary,
wage, bonus or other compensation of any employees;
(e) neither it nor any of its Subsidiaries shall settle or
compromise any material claims or litigation or, except in the ordinary and
usual course of business, modify, amend or terminate any of its material
Contracts or waive, release or assign any material rights or claims;
(f) neither it nor any of its Subsidiaries shall make any Tax
election or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be cancelled or terminated except in the ordinary and
usual course of business;
(g) neither it nor any of its Subsidiaries shall take any action
or omit (other than omissions in good faith) to take any action that would cause
any of its representations and warranties herein to become untrue in any
material respect; and
(h) neither it nor any of its Subsidiaries will authorize or
enter into an agreement to do any of the foregoing.
6.1.1 Interim Operations of Parent. Parent covenants and agrees
as to itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless the Company shall otherwise approve and except as
otherwise expressly contemplated by this Agreement, the Side Agreement or the
Agreement of Understanding):
(a) it shall not (i) amend its certificate of incorporation or
by-laws (other than to change its name); (ii) split, combine or reclassify its
outstanding shares of capital stock; or (iii) declare, set aside or pay any
dividend payable in cash, stock or property in respect of any capital stock
other than dividends from its direct or wholly-owned Subsidiaries;
(b) neither it nor any of its Subsidiaries shall take any action
or omit (other than omissions in good faith) to take any action that would cause
any of its representations and warranties herein to become untrue in any
material respect; and
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(c) neither it nor any of its Subsidiaries will authorize or
enter into an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company agrees that neither it
nor any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any purchase
of any assets or any equity securities of, it or any of its Subsidiaries (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"). The Company further agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and cause its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that nothing contained in
this Agreement shall prevent the Company or its Board of Directors from (A)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal; (B) providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written proposal
relating to (1) the acquisition, purchase or lease of a business or assets that
constitute 80% or more of the consolidated net revenues, consolidated net income
or consolidated assets of the Company and its Subsidiaries taken as a whole, (2)
the acquisition or purchase of 80% or more of the common stock of the Company,
or (3) a tender offer or exchange offer that if consummated would result in any
Person beneficially owning 80% or more of any class of common stock or voting
securities of the Company (any such unsolicited bona fide written proposal
described in the foregoing clauses (1) - (3), a "Competing Proposal"), but only
if the Board of Directors receives from the Person so requesting such
information an executed confidentiality agreement on terms substantially similar
to those contained in the Confidentiality Agreement (as defined in Section 9.1)
between the Company and Parent; (C) engaging in any negotiations or discussions
with any Person who has made a Competing Proposal; or (D) recommending such a
Competing Proposal to the stockholders of the Company, if and only to the extent
that, (i) in each such case referred to in clause (B), (C) or (D) above, the
Board of Directors of the Company determines in good faith after consultation
with outside legal counsel that such action is necessary in order for its
directors to comply with their respective fiduciary duties under applicable law
and (ii) in each case referred to in clause (C) or (D) above, the Board of
Directors of the Company determines in good faith (after consultation with its
financial advisor) that such Competing Proposal, if accepted, is reasonably
likely to be consummated, taking into account all legal, financial and
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regulatory aspects of the proposal and the Person making the proposal and would,
if consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Competing Proposal being referred to in
this Agreement as a "Superior Proposal"). The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. The Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 6.2 and in the
Confidentiality Agreement . The Company agrees that it will notify Parent
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall keep Parent
informed, on a current basis, on the status and terms of any such proposals or
offers and the status of any such discussions or negotiations. The Company also
agrees that it will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring it
or any of its Subsidiaries to return all confidential information heretofore
furnished to such Person by or on behalf of it or any of its Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees, as
to itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger
(including the joint proxy statement and prospectus (the "Prospectus/Proxy
Statement") constituting a part thereof) (the "S-4 Registration Statement")
will, at the time the S-4 Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders and at the times
of the meetings of stockholders of the Company and Parent to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company and Parent will cause the Form S-4
to comply as to form in all material respects with the applicable provisions of
the Securities Act and the rules and regulations thereunder.
6.4. Stockholders Meetings. The Company will take, in accordance
with its certificate of incorporation and by-laws, all action necessary to
convene a meeting of holders of Shares (the "Stockholders Meeting") as promptly
as practicable
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after the S-4 Registration Statement is declared effective to consider and vote
upon the approval of this Agreement and the Merger. Parent will take, in
accordance with its certificate of incorporation and by-laws, all action
necessary to convene a meeting of holders of Parent Common Stock as promptly as
practicable after the S-4 Registration Statement is declared effective to
consider and vote upon the approval of the issuance of Parent Common Stock in
the Merger. Subject to the provisions of Section 6.2, each of the Company's and
Parent's board of directors shall recommend such approval and shall take all
lawful action to solicit such approval.
6.5. Filings; Other Actions; Notification. (a) Parent and the
Company shall promptly prepare and file with the SEC the Prospectus/Proxy
Statement, and Parent shall prepare and file with the SEC the S-4 Registration
Statement as promptly as practicable. Parent and the Company each shall use its
best efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the respective stockholders of
each of the Company and Parent. Parent shall also use its efforts to obtain
prior to the effective date of the S-4 Registration Statement all necessary
state securities law or "blue sky" permits and approvals required in connection
with the Merger and to consummate the other transactions contemplated by this
Agreement and will pay all expenses incident thereto. The Prospectus/Proxy
Statement shall contain the recommendation of the Company's Board of Directors
in favor of approval of this Agreement and the transactions contemplated hereby.
(b) The Company and Parent each shall use its best efforts to
cause to be delivered to the other party and its directors a letter of its
independent auditors, dated (i) the date on which the S-4 Registration Statement
shall become effective and (ii) the Closing Date, and addressed to the other
party and its directors, in form and substance customary for "comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the S-4 Registration Statement.
(c) The Company and Parent shall cooperate with each other and
use (and shall cause their respective Subsidiaries to use) their respective best
efforts to take or cause to be taken all actions, and do or cause to be done all
things, necessary, proper or advisable on its part under this Agreement and
applicable Laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as promptly as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement; provided, however, that nothing in
this Section 6.5 shall require, or be construed to require, Parent or the
Company or any of their Affiliates to proffer to, or agree to, sell or hold
separate and agree to sell, before or, in the case of Parent and its
Subsidiaries, after
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the Effective Time, any assets, businesses, or interest in any assets or
businesses of Parent, the Company or any of their respective Affiliates (or to
consent to any sale, or agreement to sell, by the Company of any of its assets
or businesses) or to agree to any material changes or restriction in the
operations of any such assets or businesses. Subject to applicable laws relating
to the exchange of information, Parent and the Company shall have the right to
review in advance, and to the extent practicable each will consult the other on,
all the information relating to Parent or the Company, as the case may be, and
any of their respective Subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Merger and the other transactions contemplated by this
Agreement. In exercising the foregoing right, each of the Company and Parent
shall act reasonably and as promptly as practicable.
(d) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement.
(e) The Company and Parent and each of their Affiliates shall
keep the other apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other with
copies of notice or other communications received by Parent or the Company, as
the case may be, or any of its Subsidiaries, from any third party and/or any
Governmental Entity with respect to the Merger and the other transactions
contemplated by this Agreement.
6.6. [Reserved.]
6.7. Access. Upon reasonable notice, and except as may otherwise
be required by applicable law, the Company and Parent each shall (and shall
cause its Subsidiaries to) afford the other's officers, employees, counsel,
accountants and other authorized representatives ("Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to its properties, books, contracts and records and, during such
period, each shall (and shall cause its Subsidiaries to) furnish promptly to the
other all information concerning its business, properties and personnel as may
reasonably be requested, provided that no investigation pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by the
Company, Parent or Merger Sub, and provided, further, that the foregoing shall
not require the Company or Parent to permit any inspection, or to disclose any
information, that in the reasonable judgment of the Company or Parent, as the
case may be, would result in the disclosure of any trade secrets of third
parties or violate any of its obligations
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with respect to confidentiality if the Company or Parent, as the case may be,
shall have used best efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or Parent, as
the case may be, or such Person as may be designated by either of its officers,
as the case may be. All such information shall be governed by the terms of the
Confidentiality Agreement.
6.8. Affiliates. Prior to the date of the Stockholders Meeting,
the Company shall deliver to Parent a list of names and addresses of those
Persons who are, in the opinion of the Company, as of the time of the
Stockholders Meeting referred to in Section 6.4, "affiliates" of the Company
within the meaning of Rule 145 under the Securities Act. The Company shall
provide to Parent such information and documents as Parent shall reasonably
request for purposes of reviewing such list. There shall be added to such list
the names and addresses of any other Person subsequently identified by either
Parent or the Company as a Person who may be deemed to be such an affiliate of
the Company; provided, however, that no such Person identified by Parent shall
be added to the list of affiliates of the Company if Parent shall receive from
the Company, on or before the date of the Stockholders Meeting, an opinion of
counsel reasonably satisfactory to Parent to the effect that such Person is not
such an affiliate. The Company shall exercise its best efforts to deliver or
cause to be delivered to Parent, prior to the date of the Stockholders Meeting,
from each affiliate of the Company identified in the foregoing list (as the same
may be supplemented as aforesaid), a letter dated as of the Closing Date
substantially in the form attached as Exhibit D (the "Affiliates Letter").
Except for the registration statement required pursuant to Section 6.11(b),
Parent shall not be required to maintain the effectiveness of the S-4
Registration Statement or any other registration statement under the Securities
Act for the purposes of resale of Parent Common Stock received by such
affiliates in the Merger and the certificates representing Parent Common Stock
received by such affiliates shall bear a customary legend regarding applicable
Securities Act restrictions and the provisions of this Section.
6.9. Stock Exchange Listing and De-listing, etc. Parent shall use
its best efforts to cause the shares of Parent Common Stock to be issued in the
Merger to be approved for quotation on the NASDAQ subject to official notice of
issuance, prior to the Closing Date. The Surviving Corporation shall use its
best efforts to cause the Shares to be no longer quoted on the NASDAQ and to be
de-registered under the Exchange Act as soon as practicable following the
Effective Time. Parent shall use its best efforts to have the shares of Parent
Common Stock into which the New Exchange Warrants, the Consideration Warrants,
and the Other Warrants are exercisable be listed or approved for listing upon
issuance on NASDAQ in the manner required by the rules and regulations of
NASDAQ. At all times, Parent shall ensure that the number of authorized, but
unissued shares of Parent Common Stock are sufficient to permit the exercise of
the New Exchange Warrants, the Consideration Warrants, the Other Warrants and
the Company Options (as defined in Section 6.11(a)). Parent shall cause the
Parent Common Stock
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issuable pursuant to the New Exchange Warrants, the Consideration Warrants, the
Other Warrants and the Company Options, at the time of such issuance to be duly
authorized, validly issued, fully paid and non-assessable and free and clear of
any lien, pledge, security interest, claim or other encumbrance.
6.10. Publicity. Each of Company and Parent agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NASDAQ rules (provided that the issuing party shall nevertheless
provide the other party with notice of, and the opportunity to review, any such
press release or written statement).
6.11. Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option to purchase
Shares (a "Company Option") under the Stock Option Plans, whether vested or
unvested, shall be deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under such Company Option, a number of shares
of Parent Common Stock equal to the number of Shares underlying such Company
Option multiplied by the Conversion Number (rounded to the nearest whole number
with .5 being rounded up), at a price per share (rounded to the nearest whole
cent with .5 being rounded up) equal to (y) the exercise price for the Shares
otherwise purchasable pursuant to such Company Option divided by (z) the
Conversion Number; provided, however, that in the case of any Company Option to
which Section 422 of the Code applies, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in accordance with the foregoing, subject to
such adjustments as are necessary in order to satisfy the requirements of
Section 424(a) of the Code. At or prior to the Effective Time, the Company shall
make all necessary arrangements with respect to the Stock Option Plans to permit
the assumption of the unexercised Company Options by Parent pursuant to this
Section.
(ii) Effective at the Effective Time, Parent shall assume each
Company Option in accordance with the terms of the Stock Option Plan under which
it was issued and the stock option agreement by which it is evidenced. At or
prior to the Effective Time, Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Options assumed by it in accordance with this
Section. In addition, the Board of Directors of the Company and Parent shall,
prior to the Effective Time, take all such actions as may be necessary or
appropriate pursuant to Rule 16b-3(e) to exempt (i) the conversion of Shares and
Company Options into Parent Common Stock or options to purchase Parent Common
Stock, as the case may be, and (ii) the acquisition of Parent
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Common Stock or options to purchase Parent Common Stock, as the case may be,
pursuant to the terms of this Agreement by officers and directors of the Company
subject to the reporting requirements of Section 16(a) of the Exchange Act.
Parent and the Company shall provide to counsel to the other party copies of the
resolutions to be adopted by the respective Boards of Directors to implement the
foregoing.
(iii) Immediately prior to the Effective Time, the Company shall
terminate its 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan"), the
1997 Directors' Stock Option Plan (the "Directors' Plan") and the other Stock
Option Plans (as defined below). The Company prior to the Effective Date shall
amend the then current offering period for the Stock Purchase Plan so that the
exercise date is on the date of the Company's payday immediately preceding, but
not on, the Effective Date. As used in this Agreement, the term "Stock Option
Plans" shall mean the Directors' Plan, the Company's 1989 Stock Option Plan and
the Company's 1995 Stock Plan.
(b) Registration on Form S-8. No later than the Effective Time,
the Parent shall prepare and file with the SEC registration statements on Form
S-8 (or any successor or other appropriate form) registering a number of shares
of Parent Common Stock into which any outstanding options issued under the Stock
Option Plans are convertible or exercisable and shall use its commercially
reasonable efforts to maintain the effectiveness of such registration statements
(and maintain the current status of the prospectuses contained therein) for so
long as any such options remain outstanding.
(c) Benefit Plans. Commencing at the Effective Time, Parent shall
use its reasonable efforts to cause those employees of the Surviving Corporation
or any of its Subsidiaries, who were employed by the Company or any of its
Subsidiaries as of the Effective Time (the "Company Employees") and who are
retained as employees following the Effective Time, to be eligible to
participate in Parent Compensation and Benefit Plans in which similarly situated
employees of Parent are eligible to participate. To the extent any Company
Employee participates in any Parent Compensation and Benefit Plan providing for
medical, dental or life insurance or 401K benefits after the Effective Time,
such Company Employee shall be credited under such Parent Compensation and
Benefit Plan with his or her service for the Company or its Subsidiaries prior
to the Effective Time to the same extent such Company Employee would have been
credited if such service had been for Parent, but only to the extent a waiver of
any required waiting period is available from the applicable benefits provider.
With respect to the plan year in which the Effective Time occurs under any
Parent Compensation and Benefit Plan providing for medical or dental benefits,
Parent shall use its reasonable efforts to obtain the agreement of the plan
provider to cause the dollar amount of all expenses incurred by the Company
Employees and their eligible dependents during such year to be credited for
purposes of satisfying such Parent Compensation and Benefit Plan's deductible
and co-payment limitations for such plan year, to the extent such expenses would
have been credited under any corresponding plan prior to the
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Effective Time. The Company Employees shall be subject to other personnel
policies and practices of Parent in all respects.
(d) Option Issuance. Notwithstanding any other provision of this
Agreement, prior to the Effective Time, the Company may issue stock options
pursuant to its 1995 Stock Plan to the employees and exercisable for the number
of Shares set forth on Schedule 6.11(d). No option shall be exercisable for
Shares at a price that is less than the fair market value of the Shares (as
defined in the 1995 Stock Plan) at the time of the authorization of the option.
Notwithstanding any other provision of this Agreement, the Company may, prior to
the Closing, amend the terms of any non-qualified stock option previously
granted by the Company pursuant to the 1995 Stock Plan or the 1989 Stock Option
Plan to Xxxxxxx X. Tonnenson, Xxxx X. Xxxxx, Xxxxxx X. Xxxxx or Xxxxxxx X.
Xxxxxxxx to provide that such option will not terminate until the earlier of (a)
the expiration date of the term of such option or (b) 18 months after the
termination of the optionee's consulting relationship or continuous status as an
employee with the Company. Notwithstanding any other provisions of this
Agreement, the Company may refund to all employees the amounts collected under
the Stock Purchase Plan for the first offering period of 2000.
(e) Obligations. Parent shall cause the Surviving Corporation to
honor all written contractual obligations (including the Current Severance
Agreements (as defined below) and indemnification agreements) of the Company and
its Subsidiaries to their respective current and former employees, directors and
independent contractors, but only to the extent such obligations are set forth
on Schedule 6.11(e). The provisions of this Section 6.11(e) are not meant to
prevent Parent or any of its Subsidiaries, including the Surviving Corporation,
from terminating, amending or modifying any such obligation pursuant to the
terms of such obligation. The provisions of this Section are intended to be for
the benefit of and shall be enforceable by the current and former employees,
directors and independent contractors to whom the Company has obligations as set
forth on Schedule 6.11(e), their heirs and their representatives.
(f) Severance Agreements. Notwithstanding any other provision of
this Agreement, prior to the Effective Time, the Company may offer the severance
agreements (the "Current Severance Agreements") to the employees, and providing
for severance payments in the respective amounts, set forth on Schedule 6.11(f).
The Current Severance Agreements shall be in the form set forth as Exhibit E.
After the Closing, Parent agrees to cause the Current Severance Agreements to be
executed by the Surviving Corporation as required by any employee accepting such
an offer. The provisions of this Section are intended to be for the benefit of
and shall be enforceable by the employees to whom the Current Severance
Agreements are offered. During the period from the date hereof until the
Closing, the Company agrees to deliver the 30-day written notice required by the
Current Severance Agreements to any employee or employees for which the Parent
gives the Company a written direction to send such 30-day written notice;
provided that
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the Company will have the right to approve the contents of any such notice (such
approval not to be unreasonably withheld), no such notice shall provide for a
termination date prior to the Effective Time, and any wrongful termination
action or claim resulting from any such notice shall be deemed not to have a
Company Material Adverse Effect. The Company will deliver such notices to
employees within two (2) business days after receipt of such written direction
from Parent.
(g) Effect of Section 6.11. Except as otherwise provided in this
Agreement, nothing in this Section 6.11 shall be interpreted as preventing
Parent or the Surviving Corporation after the Effective Time from amending,
modifying or terminating any Parent Compensation and Benefit Plan, Company
Compensation and Benefit Plan, or other employee benefit plans, contracts,
arrangements, commitments or understandings, or terminating any Company
Employee, in each case in accordance with the terms of the respective plans and
applicable law.
(h) Election to Parent's Board of Directors. At the Effective
Time of the Merger, Parent shall promptly increase the size of its Board of
Directors or exercise its best efforts to secure the resignation of present
directors in order to cause one person designated by the Company, to be
appointed to Parent's Board of Directors and, subject to fiduciary obligations
under applicable law, shall nominate one person designated by such person
designated by the Company (or, in the event such Person no longer wishes to be a
director, the Person designated by such director) as a director of Parent at the
first and second annual meetings of stockholders of Parent with a proxy mailing
date after the Effective Time.
6.12. Expenses. Each party hereto will bear all expenses incurred
by it in connection with this Agreement and the transactions contemplated
hereby, except that the Company and Parent shall split equally the HSR Act
filing fees, if any.
6.13. Indemnification; Directors' and Officers' Insurance.
(a) Parent shall indemnify and hold harmless for six years, to
the fullest extent permitted under applicable law (and Parent shall also advance
expenses as incurred to the fullest extent permitted under applicable law
provided the Person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification), each present and former director, officer and
employee of the Company and its Subsidiaries (collectively, the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys' and
experts' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, relating to any acts or omissions by such Persons in their
capacities as directors, officers, or employees of the Company and its
Subsidiaries and arising out of matters existing or occurring at or prior to the
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Effective Time, including the transactions contemplated by this Agreement;
provided, however, that Parent shall not be required to indemnify any
Indemnified Party pursuant hereto if it shall be determined that the Indemnified
Party acted in bad faith and not in a manner such Party believed to be in or not
opposed to the best interests of the Company.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.13, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Parent or the Surviving
Corporation shall have the right to assume the defense thereof and Parent shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if Parent or the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and Parent or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that Parent shall be obligated pursuant to this paragraph (b) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
(ii) the Indemnified Parties will cooperate in the defense of any such matter
and (iii) Parent shall not be liable for any settlement effected without its
prior written consent; and provided, further, that Parent shall not have any
obligation hereunder to any Indemnified Party if and when a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. If such indemnity is not
available with respect to any Indemnified Party, then the Surviving Corporation
and the Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect relative faults and benefits.
(c) The Surviving Corporation shall maintain officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each person currently covered by the Company's
officers' and directors' liability insurance policy on terms with respect to
coverage no less favorable than those of such policy in effect on the date
hereof and with a policy amount of at least $20 million ("D&O Insurance") for a
period of six years after the Effective Time so long as the annual premium
therefor does not exceed 150% of the last annual premium paid prior to the date
hereof (the "Current Premium"); provided, however, that if the D&O Insurance
expires, is terminated or cancelled during such six-year period, the Surviving
Corporation will use its best efforts to obtain D&O Insurance in a policy amount
of at least $20 million or, if lower, as much D&O Insurance as can be obtained
for the remainder of such period for a premium not in excess (on an annualized
basis) of 1.5 times the Current Premium.
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(d) The certificate of incorporation or by-laws of the Company,
with respect to indemnification of all officers, directors, employees and
agents, shall not be amended, repealed or otherwise modified after the Effective
Time in any manner that would adversely affect the rights thereunder of the
Persons who at any time prior to the Effective Time were identified as
prospective indemnities under the certificate of incorporation or by-laws of the
Company in respect to actions or omissions occurring at or prior to the
Effective Time (including the transactions contemplated hereby), unless such
modification is required by law.
(e) In the event that after the Effective Time, Parent or any of
its successors or assigns or the Surviving Corporation or any its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person then, and in its such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as applicable, assume the respective obligations of
Parent or the Surviving Corporation, as the case may be, as set forth in this
Section 6.13.
(f) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
6.14. Worker Adjustment and Retraining Notification Act ("WARN
Act"). The parties agree to consult with each other on the need for and timing
of notices pursuant to the WARN Act which applies generally to businesses with
the equivalent of 100 or more full-time employees and requires employers to give
at least 60 days' advance notice of defined types of employment loss. The
parties agree that the WARN Act does not apply to the Company prior to
consummation of the Merger but may or may not apply to the Surviving Corporation
following consummation of the Merger. However, pending the Closing, the Company
agrees, as agent for the Parent, upon the prior written request of Parent, to
give notices to its employees when requested by the Parent in order to comply
with the applicable provisions of the WARN Act. The Parent will be responsible
for the form of such notices and for ensuring that such notices comply with the
WARN Act. No such notice will provide for a termination date prior to the
Effective Time.
6.15. Parent Vote. Parent shall vote (or consent with respect to)
or cause to be voted (or a consent to be given with respect to) any Shares and
any shares of common stock of Merger Sub beneficially owned by it or any of its
Affiliates or with respect to which it or any of its Affiliates has the power
(by agreement, proxy or otherwise) to cause to be voted (or to provide a
consent), in favor of the adoption and approval of this Agreement at any meeting
of stockholders of the Company or Merger Sub, respectively, at which this
Agreement shall be submitted for adoption and approval
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and at all adjournments or postponements thereof (or, if applicable, by any
action of stockholders of either the Company or Merger Sub by consent in lieu of
a meeting).
6.16. Parent Vote. The Company shall vote (or consent with
respect to) or cause to be voted (or a consent to be given with respect to) any
Shares of Parent Common Stock beneficially owned by the Company or any of its
Affiliates or with respect to which it or any of its Affiliates has the power
(by agreement, proxy or otherwise) to cause to be voted (or to provide a
consent), in favor of the approval of the issuance of Parent Common Stock in the
Merger at any meeting of stockholders of Parent at which such issuance or this
Agreement shall be submitted for adoption and approval and at all adjournments
or postponement thereof (or, if applicable, by any action of stockholders of
Parent by consent in lieu of a meeting).
6.17. Related Agreements. Each of the parties agrees to perform
all of its obligations under the Agreement of Understanding and the Side
Agreement, including the other related agreements referred to in any of the
foregoing or exhibited or annexed to any of the foregoing.
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been duly
approved by holders of Shares constituting the Company Requisite Vote and shall
have been duly approved by the sole stockholder of Merger Sub in accordance with
applicable law and the certificate of incorporation and by-laws of each such
corporation, and the issuance of Parent Common Stock pursuant to the Merger
shall have been duly approved by the holders of Parent Common Stock constituting
the Parent Requisite Vote.
(b) NASDAQ Listing. The shares of Parent Common Stock issuable to
the Company stockholders pursuant to this Agreement shall have been authorized
for listing on NASDAQ upon official notice of issuance. To the extent required
by the rules and regulations of NASDAQ, the shares of Parent Common Stock
issuable pursuant to (a) the exercise of any options issued prior to the
Effective Time pursuant to the Stock Option Plans, and (b) the exercise of the
New Exchange Warrants, the Consideration Warrants and the Other Warrants, shall
have been authorized for listing on the NASDAQ upon official notice of issuance.
The Parent Common Stock shall continue to be listed on the Nasdaq National
Market and not subject to any suspension from trading.
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(c) Regulatory Consents. If the HSR Act applies to the Merger,
the waiting period applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated. Other than the filing provided for in
Section 1.3, all notices, reports and other filings required to be made prior to
the Effective Time by the Company or Parent or any of their respective
Subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries from, any Governmental
Entity (collectively, "Governmental Consents") in connection with the execution
and delivery of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby by the Company, Parent and Merger Sub shall
have been made or obtained (as the case may be), except those that the failure
to make or to obtain are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect or a Parent Material Adverse
Effect or to provide a reasonable basis to conclude that the parties hereto or
any of their affiliates or respective directors, officers, agents, advisors or
other representatives would be subject to the risk of criminal or material
financial liability.
(d) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement (collectively, an "Order"),
and no Governmental Entity shall have instituted any proceeding or threatened in
writing to institute any proceeding seeking any such Order.
(e) S-4. The S-4 Registration Statement shall have become
effective under the Securities Act. No stop order suspending the effectiveness
of the S-4 Registration Statement shall have been issued, and no proceedings for
that purpose shall have been initiated or be threatened, by the SEC.
(f) Blue Sky Approvals. Parent shall have received all state
securities and "blue sky" permits and approvals necessary to consummate the
transactions contemplated hereby.
(g) Notification Filing Required Under HSR Act. If required, the
parties shall make good faith efforts to complete and file without delay, and in
any event within thirty (30) days after the date of this Agreement, any
notification filing required under the HSR Act with respect to the transactions
contemplated by this Agreement. Parent and Company shall in good faith take (or
fully cooperate in the taking of) all actions, and provide any additional
information that may be, required or reasonably requested in order to comply
with the requirements of the HSR Act. If a notification
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filing is required under the HSR Act, Company and Parent shall each pay equal
amounts of all filing fees in connection therewith.
(h) Validity of Agreement of Understanding and Side Agreement.
The Agreement of Understanding and the Side Agreement, including the other
related agreements exhibited or annexed to any of the foregoing, shall remain in
full force and effect and there shall be no material breach under any such
agreement (provided that a breaching party shall not be entitled to utilize its
own breach as constituting a failure of a closing condition).
(i) No Cash Redemption of Preferred Shares. No holder of Series B
Shares or Series D shares shall have elected to receive a cash redemption of
such shares.
7.2. Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date), and Parent shall have received
a certificate signed on behalf of the Company by the Chief Executive Officer of
the Company to such effect; provided, however, that notwithstanding anything
herein to the contrary, this Section 7.2(a) shall be deemed to have been
satisfied even if such representations or warranties are not so true and correct
unless the failure of such representations or warranties to be so true and
correct, individually or in the aggregate, has had, or is reasonably likely to
have, a Company Material Adverse Effect or is reasonably likely to prevent or to
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive Officer of the Company to such effect.
(c) Consents Under Agreements. The Company shall have obtained
the consent or approval of each Person whose consent or approval shall be
required under any material Contract to which the Company or any of its
Subsidiaries is a party, except for those consents or approvals which the
failure to obtain is not reasonably likely to have
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a Company Material Adverse Effect or materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement.
(d) Dissenting Shares. The aggregate amount of Dissenting Shares
at the Effective Time shall be less than five percent (5%) of the total
outstanding Shares as of the date hereof. However, the parties recognize that so
long as the conditions set forth in the first paragraph of Section 4.3 are met,
there should be no Dissenting Shares. In addition, Parent acknowledges that the
Shares ceasing to be designated as a national market system security will not,
as such, be deemed to be a Company Material Adverse Effect. This acknowledgment
shall not exclude, however, the possibility of a Company Material Adverse Effect
resulting or following or deriving from the Shares ceasing to be so designated.
(e) Legal Opinion. Parent shall have received an opinion of
Howard, Rice, Nemerovski, Canady, Xxxx & Xxxxxx, A Professional Corporation,
counsel to the Company, dated the Closing Date, substantially in the form
attached as Exhibit F.
(f) Resignations. To the extent requested by Parent, Parent shall
have received the resignations of each director and officer of the Company and
each of its Subsidiaries. No such resignation shall require any officer to lose
any rights which such officer may have under his change in control agreement
with the Company provided such change in control agreements are listed on
Schedule 7.2(f).
(g) Accountant Letters. Parent shall have received, in form and
substance reasonably satisfactory to Parent, from the accountants for the
Company, the "comfort" letter described in Section 6.5(b).
(h) Fairness Opinion. Prior to the Closing Date, Parent shall
have received an opinion of Xxxxxx Xxxxxxx Incorporated dated on or about the
Closing Date, to the effect that, as of such date, the consideration to be
received by Parent in the Merger is fair to the holders of Parent Common Stock
from a financial point of view.
(i) Affiliates Letters. Parent shall have received an Affiliates
Letter from each Person identified as an affiliate of the Company pursuant to
Section 6.8.
(j) Conversion of Company Preferred Stock. Parent shall have
received appropriate information as to the status of the Series B Shares (and
written confirmation by the Company of the exchange of the Series B Shares into
Series D Shares, it being understood that references to the Series B Shares
include the Series D Shares) as either (x) having been converted into Shares
prior to the Effective Time or (y) remaining outstanding immediately prior to
the Effective Time, in order to facilitate the application of Article IV. The
Company shall have provided the appropriate notice to the holders of the Series
B Shares in compliance with Section 6 of the Series D Certificate of
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Designations at least five days prior to the Effective Time and shall not have
rescinded such notice in any manner.
(k) Employment Agreements. Parent shall have entered into an
employment agreement with Xxxxxxx Xxxxxxxx on terms that are satisfactory to
Parent and to such employee.
(l) Plan Terminations. The Company shall have terminated the
Stock Option Plans and the Stock Purchase Plan.
(m) Accrued Vacation. No employee of the Company shall have more
than six and one-half weeks of accrued personal time off as of the Closing Date.
7.3. Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, (except to the extent any such
representation and warranty expressly speaks as of an earlier date) and the
Company shall have received a certificate signed on behalf of Parent by the
Chief Executive Officer of Parent to such effect; provided, however, that
notwithstanding anything herein to the contrary, this Section 7.3(a) shall be
deemed to have been satisfied even if such representations or warranties are not
so true and correct unless the failure of such representations or warranties to
be so true and correct, individually or in the aggregate, has had, or is
reasonably likely to have, a Parent Material Adverse Effect or is reasonably
likely to prevent or to materially burden or materially impair the ability of
Parent to consummate the transactions contemplated by this Agreement.
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by the Chief Executive Officer of Parent to such effect.
(c) Consents Under Agreements. Parent shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate the transactions contemplated by this Agreement under any
material Contract to which Parent or any of its Subsidiaries is a party, except
for those consents or approvals which the failure to obtain is not reasonably
likely to have a Parent Material
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Adverse Effect or materially delay or materially impair the ability of Parent to
consummate the transactions contemplated by this Agreement.
(d) [Reserved.]
(e) Accountant Letters. The Company shall have received, in form
and substance reasonably satisfactory to the Company, from the accountants for
Parent the "comfort" letter described in Section 6.5(b).
(f) Registration Statement. The registration statements of Parent
required pursuant to Section 6.11(b) shall have become effective and shall not
be subject to any stop order suspending the effectiveness of such registration
statements and no proceeding for that purpose shall have been initiated or
threatened by the SEC.
(g) Fairness Opinion. Prior to the Closing Date, the Company
shall have received an opinion of Pacific Growth Equities, Inc., dated on or
about the Closing Date, to the effect that, as of such date, the consideration
to be received in the Merger is fair to the holders of the Company's equity
securities from a financial point of view.
(h) Legal Opinion. The Company shall have received an opinion of
Xxxxxxxx & Xxxxxxxx, counsel to Parent and Merger Sub, dated the Closing Date,
substantially in the form attached as Exhibit G.
(i) Term Loan Agreement. Each installment requested by the
Company to be funded by Parent pursuant to the Term Loan Agreement shall have
been funded in accordance with the terms of the Term Loan Agreement except where
such installment was not funded because the conditions to funding were not met
under the terms of the Term Loan Agreement.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval by stockholders of the Company and
Parent referred to in Section 7.1(a), by mutual written consent of the Company
and Parent by action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the Board of Directors of either Parent or the
Company if (i) the
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Merger shall not have been consummated by December 31, 2000, whether such date
is before or after the date of approval by the stockholders of the Company or
Parent (the "Termination Date"), (ii) the approval of the Company's or Parent's
stockholders required by Section 7.1(a) shall not have been obtained at a
meeting duly convened therefor or at any adjournment or postponement thereof, or
(iii) any Order permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable (whether before
or after the approval by the stockholders of the Company or Parent); provided,
that the right to terminate this Agreement pursuant to clause (i) above shall
not be available to any party that has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure of the Merger to be consummated.
8.3. Termination by the Company. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company:
(a) if (i) the Board of Directors of Parent shall have withdrawn
or adversely modified its approval or recommendation of this Agreement or failed
to reconfirm its recommendation of this Agreement within five business days
after a written request by the Company to do so, or (ii) there has been a breach
of any representation, warranty, covenant or agreement made by Parent or Merger
Sub in this Agreement, or any such representation and warranty shall have become
untrue after the date of this Agreement, such that Section 7.3(a) or 7.3(b)
would not be satisfied and such breach or condition is not curable or, if
curable, is not cured within 30 days after written notice thereof is given by
the Company to Parent; or
(b) if (i) the Company's Board of Directors has received a
Superior Proposal, (ii) the Company has notified Parent in writing of the
determination of the Company's Board of Directors to accept the Superior
Proposal, with such notice to include a summary of all material terms and
conditions of the Superior Proposal, (iii) at least ten business days following
receipt by Parent of the notice referred to in clause (ii) above, and taking
into account any revised proposal made by Parent since receipt of the notice
referred to in clause (ii) above, such Superior Proposal remains a Superior
Proposal, (iv) the Company is in compliance with Section 6.2, (v) the Company is
not in material breach of any of the other provisions of this Agreement or of
the Term Loan Agreement, (vi) the Company's Board of Directors concurrently
approves, and the Company concurrently enters into, a definitive agreement
providing for the implementation of such Superior Proposal and (vii) the Company
concurrently delivers to Parent an agreement by the acquiring Person(s) that are
party to such agreement providing for implementation of such Superior Proposal,
in which such Person(s) agree, subject only to completion of such Superior
Proposal, to pay or to cause the Company to pay to Parent any amount that may
become payable pursuant to Section 8.5(b)(i), and the
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Company concurrently pays the charges and expenses of Parent and Merger Sub as
provided in Section 8.5(b)(ii).
8.4. Termination by Parent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by the stockholders of Parent referred to in
Section 7.1(a), by action of the Board of Directors of Parent:
(a) if (i) the Board of Directors of the Company shall have
withdrawn or adversely modified its approval or recommendation of this Agreement
or failed to reconfirm its recommendation of this Agreement (including rejecting
any then applicable Competing Proposal) within five business days after a
written request by Parent to do so, (ii) there has been a breach of any
representation, warranty, covenant or agreement made by the Company in this
Agreement, or any such representation and warranty shall have become untrue
after the date of this Agreement, such that Section 7.2(a) or 7.2(b) would not
be satisfied and such breach or condition is not curable or, if curable, is not
cured within 30 days after written notice thereof is given by Parent to the
Company or (iii) if the Company or any of the other Persons described in Section
6.2 as affiliates, representatives or agents of the Company shall take any of
the actions proscribed by Section 6.2.
8.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, this Agreement (other
than as set forth in Section 9.1) shall become void and of no effect with no
liability on the part of any party hereto (or of any of its directors, officers,
employees, agents, legal and financial advisors or other representatives);
provided, however, except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages resulting from any
willful breach of this Agreement.
(b) (i) In the event that this Agreement is terminated for any
reason prior to the Effective Time, then the Company shall promptly, upon the
conditions set forth in the following sentence being met, pay to Parent a cash
payment according to the formula set forth in Exhibit H. The conditions to the
payment referred to in the preceding sentence are that, within two years after
the date of any such termination, the Company (x) shall consummate (on a
solicited or unsolicited basis) an Acquisition Proposal (or shall enter into a
binding agreement to consummate an Acquisition Proposal that is subsequently
consummated) which in either case would meet the standard set forth in
subsection (B)(1), (2) or (3) of Section 6.2 hereof, or (y) shall issue any
securities (other than pursuant to the Stock Option Plans or other employee
benefit plans) and receive cash proceeds (on a cumulative basis for all such
issuances within two years after the termination date) aggregating at least $5
million. Promptly upon such consummation or promptly upon such receipt of
proceeds, the Company (or the successor to the
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Company, if applicable) shall make the cash payment to Parent according to the
formula set forth in Exhibit H; provided that in the case of an event described
in clause (y) of the preceding sentence, the cash payment will not be due until
270 days following the receipt of such proceeds.
(ii) In addition, in any case where termination of this
Agreement arises as a result of failure to obtain approval by the Company's
stockholders as contemplated in Section 6.4, or any action on the part of the
Company's Board of Directors (including, without limitation, action pursuant to
Section 8.3(b) or Section 8.4(a)(i)), or as a result of any material breach by
the Company hereunder, then the Company shall promptly, but in no event later
than two business days after being notified of such by Parent, pay all of the
out-of-pocket charges and expenses, including those of the Exchange Agent,
incurred by Parent or Merger Sub in connection with this Agreement and the Term
Loan Agreement and the transactions contemplated by this Agreement and the Term
Loan Agreement payable by wire transfer of same day funds.
(iii) The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Sub would not enter into this Agreement; accordingly, if the Company
fails to promptly pay the amounts due pursuant to this Section 8.5(b), and, in
order to obtain such payment, Parent or Merger Sub commences a suit which
results in a judgment against the Company for any payment set forth in this
Section 8.5(b), the Company shall pay to Parent or Merger Sub its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount owing, until paid in full, at the same rate as is
applicable to the loan made by Parent to the Company pursuant to the Term Loan
Agreement.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Sections 6.9 (Stock Exchange Listing and
De-listing, etc.), 6.11 (Benefits), 6.12 (Expenses) and 6.13 (Indemnification;
Directors' and Officers' Insurance) shall survive the consummation of the
Merger. This Article IX, the agreements of the Company, Parent and Merger Sub
contained in Section 6.12 (Expenses), Section 8.5 (Effect of Termination and
Abandonment) and the Confidentiality Agreement, dated March 26, 2000, between
the Company and Parent (the "Confidentiality Agreement") shall survive the
termination of this Agreement. All other representations, warranties, covenants
and agreements in this Agreement shall not survive the consummation of the
Merger or the termination of this Agreement, but the other separate agreements
of the parties, e.g., the Term Loan Agreement (including the security
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agreement, the security documents, and the other agreements entered into in
connection therewith or related thereto), shall survive or terminate pursuant to
their own terms.
9.2. Modification or Amendment. Subject to the provisions of the
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4. Counterparts. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (A) THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The
parties hereby irrevocably submit to the jurisdiction of the courts of the State
of Delaware and the Federal courts of the United States of America located in
the State of Delaware solely in respect of the interpretation and enforcement of
the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a
Delaware State or Federal court. The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
9.6 or in such other manner as may be permitted by law shall be valid and
sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS 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
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ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
9.6. Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile:
if to Parent or Merger Sub
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, President and CEO, and
Xxxxxxxx X. Xxxxxxxx, Secretary and General Counsel
fax: (000) 000-0000
with a copy to Xxxxx X. Xxxxx, Xx.
Xxxxxxxx & Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
fax: (000) 000-0000.
if to the Company
0000 Xxxxxx Xxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Vice President and Chief Financial Officer
fax: (000) 000-0000
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with a copy to Xxxxxx X. Xxxxxxxxxx, Esq.
Howard, Rice, Nemerovski, Canady, Xxxx & Rabkin
A Professional Corporation
Three Xxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement; NO OTHER REPRESENTATIONS. This Agreement
(including any exhibits hereto), the other agreements between the parties
referred to in the recitals hereof, the Company Disclosure Letter, the Parent
Disclosure Letter and the Confidentiality Agreement constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof. In particular, all of the terms of the
Letter of Intent, dated April 5, 2000, between the Company and Parent, including
Section 3 thereof, are hereby terminated. EACH PARTY HERETO AGREES THAT, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, OR IN SUCH
OTHER AGREEMENTS REFERRED TO ABOVE, NEITHER PARENT AND MERGER SUB NOR THE
COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS
ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY IT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE
TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8. No Third-Party Beneficiaries. Except as provided in Section
6.11(e) (Obligations), Section 6.11(f) (Severance Agreements) and Section 6.13
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of
the Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
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9.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings 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. Where a reference in this Agreement is made to a Section or Exhibit,
such reference shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
9.12. Assignment. This Agreement shall not be assignable by
operation of law or otherwise; provided, however, that Parent may designate, by
written notice to the Company, another wholly-owned direct or indirect
subsidiary to be a Constituent Corporation in lieu of Merger Sub, in which event
all references herein to Merger Sub shall be deemed references to such other
subsidiary, except that all representations and warranties made herein with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as of
the date of such designation.
9.13 Term Loan Agreement. Neither the entering into of this
Agreement nor the consummation of the Merger shall be deemed to be a breach of
the terms of the Term Loan Agreement and Parent hereby waives any claim of
breach of any provision of the Term Loan Agreement insofar as such provision
might be deemed to be breached by the entering into of this Agreement or the
consummation of the Merger or any actions required by the provisions of this
Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
xXxx.xxx
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Senior Vice President
XXXX.XXX, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
XXXX.XXX Merger Sub, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
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EXHIBIT A
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of July 13, 2000 (the "Agreement"), by
and among ________________, a director and stockholder (the "Stockholder") of
xXXX.xxx, a Delaware corporation (the "Company"), XXXX.XXX, Inc., a Delaware
corporation ("JFAX"), and XXXX.XXX Merger Sub, Inc., a Delaware corporation
("Merger Sub").
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), with JFAX and Merger Sub;
WHEREAS, the Stockholder owns the shares of common stock, par value
$0.01 per share (the "Common Stock"), of the Company and the shares of Series B
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
of the Company in each case as identified on Annex I hereto (such shares,
together with all shares of Common Stock and Preferred Stock, if any,
subsequently acquired by the Stockholder during the term of this Agreement,
being referred to as the "Shares"); and
WHEREAS, in order to induce JFAX and Merger Sub to enter into the Merger
Agreement and in consideration of the substantial expenses incurred and to be
incurred by JFAX and Merger Sub in connection therewith, the Stockholder has
agreed to enter into and perform this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
agreements and covenants contained herein, the Stockholder, JFAX and Merger Sub
hereby agree as follows:
1. Agreement to Vote Shares. Stockholder shall vote or cause to be
voted, or execute a written consent with respect to, the Shares (a) in favor of
adoption and approval of the Merger Agreement and all transactions relating
thereto or contemplated thereby at every meeting of the Stockholders of the
Company at which such matters are considered and at every adjournment thereof
and in connection with every proposal to take action by written consent with
respect thereto and (b) against any other third-party proposal to merge or
consolidate with the Company or any subsidiary of the Company or to sell all or
substantially all the assets of the Company or any subsidiary of the Company at
every meeting of the Stockholders of the Company at which such matters are
considered and at every adjournment thereof and in connection with every
proposal to take action by written consent with respect thereto.
2. No Voting Trusts. Stockholder agrees that Stockholder will not, nor
will Stockholder permit any entity under Stockholder's control to, deposit any
Shares in a voting trust or subject the Shares to any agreement, arrangement or
understanding with respect to the voting of the Shares inconsistent with this
Agreement.
3. Limitation on Sales. During the term of this Agreement, absent the
prior written consent of JFAX, Stockholder agrees not to sell, assign, transfer,
pledge, encumber or otherwise dispose of any of the Shares except that (x) any
shares of Preferred Stock may be
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converted into shares of Common Stock and (y) in the case of shares held by
Xxxxxx Capital Ltd. and Xxxxxxx Capital Ltd. (collectively, the "Investors"),
any shares of Common Stock may be sold in the amounts permitted by Section 4(s)
of the Exchange Agreement, dated as of April 5, 2000, between the Company and
the Investors.
4. Representations and Warranties of Stockholder. Stockholder represents
and warrants to and agrees with JFAX and Merger Sub as follows:
a. Capacity. Stockholder has all requisite capacity and
authority to enter into and perform Stockholder's obligations under this
Agreement.
b. Binding Agreement. This Agreement constitutes the valid and
legally binding obligation of Stockholder, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
c. Non-Contravention. The execution and delivery of this
Agreement by Stockholder does not, and the performance by Stockholder of
Stockholder's obligations hereunder and the consummation by Stockholder
of the transactions contemplated hereby will not, violate or conflict
with, or constitute a default under, any agreement, instrument, contract
or other obligation or any order, arbitration award, judgment or decree
to which Stockholder is a party or by which Stockholder is bound, or any
statute, rule or regulation to which Stockholder is subject or, in the
event that Stockholder is a corporation, partnership, trust or other
entity, any charter, bylaw or other organizational document of the
Stockholder.
d. Ownership of Shares. Annex I hereto correctly sets forth, as
of the date of this Agreement, the number of shares of Common Stock and
Preferred Stock owned beneficially and of record by the Stockholder.
Stockholder has good title to all of the Shares indicated as owned by
Stockholder in the capacity set forth on Annex I as of the date hereof,
and such Shares are so owned free and clear of any liens, security
interests, charges or other encumbrances.
5. Specific Performance and Remedies. Stockholder acknowledges that in
the event of any breach of this Agreement by Stockholder, JFAX and Merger Sub
would be irreparably harmed, no adequate remedy at law or in damages would exist
and damages would be difficult to determine. Accordingly, Stockholder agrees
that injunctive relief or other equitable remedy, in addition to remedies at law
or in damages, is the appropriate remedy for any such failure and will not
oppose the granting of such relief on the basis that JFAX and Merger Sub have an
adequate remedy at law. Stockholder agrees that it will not seek, and agrees to
waive
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any requirement for, the securing or posting of a bond in connection with the
seeking or obtaining of such equitable relief by any of JFAX or Merger Sub. In
addition to all other rights or remedies which JFAX or Merger Sub may have
against Stockholder in the event of a default in Stockholder's performance of
Stockholder's obligations under this Agreement, Stockholder shall be liable to
JFAX and Merger Sub for all litigation costs and attorneys' fees incurred by any
of JFAX or Merger Sub in connection with the enforcement of any of its rights or
remedies against Stockholder. In addition, JFAX and Merger Sub shall have the
right to inform any third party that JFAX or Merger Sub reasonably believe to
be, or to be contemplating, participating with Stockholder or receiving from
Stockholder assistance in violation of this Agreement, of the terms of this
Agreement and of the rights of JFAX and Merger Sub hereunder, and that
participation by any such persons with Stockholder in activities in violation of
Stockholder's agreement with JFAX and Merger Sub set forth in this Agreement may
give rise to claims by JFAX and Merger Sub against such third party.
6. Term of Agreement; Termination. The term of this Agreement shall
commence on the date hereof and such term and this Agreement shall terminate
upon the earlier to occur of (i) the Effective Time (as defined in the Merger
Agreement) and (ii) the date on which the Merger Agreement is terminated in
accordance with its terms. Upon such termination, no party shall have any
further obligations or liabilities hereunder; provided, however, such
termination shall not relieve any party from liability for any breach of this
Agreement prior to such termination.
7. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by each party hereto. No waiver of any provisions
hereof by either party shall be deemed a waiver of any other provisions hereof
by any such party, nor shall any such waiver be deemed a continuing waiver of
any provision hereof by such party.
8. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by a
reputable overnight courier service to the parties at the addresses (or at such
other address for a party as shall be specified by like notice) specified in the
Merger Agreement or specified on the signature page hereof in the case of
Stockholder.
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9. Miscellaneous.
a. Severability. If any provision of this Agreement or the
application of such provision to any person or circumstances shall be
held invalid or unenforceable by a court of competent jurisdiction, such
provision or application shall be unenforceable only to the extent of
such invalidity or unenforceability, and the remainder of the provision
held invalid or unenforceable and the application of such provision to
persons or circumstances, other than the party as to which it is held
invalid, and the remainder of this Agreement, shall not be affected.
b. Capacity. The covenants contained herein shall apply to
Stockholder solely in such Stockholder's capacity as a Stockholder of
the Company, and no covenant contained herein shall apply to Stockholder
in such Stockholder's capacity as a director of the Company, if
applicable.
c. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
d. Headings. All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction
or reference shall be derived therefrom.
e. Choice of Law. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the
laws of the State of Delaware, without reference to its conflicts of law
principles.
f. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Agreement as of the date first written above.
------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
Tel:
--------------------------------
Fax:
--------------------------------
XXXX.XXX, Inc.
By:
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
XXXX.XXX Merger Sub, Inc.
By:
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
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EXHIBIT B
FORMULA TO DETERMINE CONVERSION NUMBER
The exchange ratio, or the number of shares of JFAX Common Stock into which each
share of the Company's Common Stock shall be convertible, and for which each
share of the Company's Common Stock shall be exchanged, shall be determined by
the following formula:
CN = 11,000,000 + $5,000,000 - LA + M - O$
---------- ------------------------
N FMV(J) x N
Where:
CN = the Conversion Number (the second of the fractions
comprising CN may be a negative number).
LA = the sum of (x) the amount of loan proceeds disbursed
under the Term Loan Agreement as of the Closing Date which
have not been repaid and (y) the amount of payables of the
Company that are 45 days or more past due as of the Closing
Date.
FMV(J) = the average closing price of the Parent Common Stock
for the five trading days beginning on and including the
seventh trading day prior to the Closing Date.
M = the sum of (x) cash on hand at the Company as of the
Closing Date (but not including any cash deposited or required
under the terms of the Term Loan Agreement to be deposited
into the Asset Sales Account (as defined in the Term Loan
Agreement) plus (y) any of the Company's pre-paid rents and
insurance premiums (but only to the extent a pro-rata refund
of any such premium is available as to insurance policies
(other than the Company's D&O Insurance policy) which will be
cancelled, at the election of Parent or otherwise, following
the Closing) as of Closing (in no event will M exceed LA).
O$ = the amount of any cash received by the Company upon (a)
exercise of employee stock options under the Stock Option
Plans, (b) purchases pursuant to the Stock Purchase Plan, or
(c) exercise of Exchange Warrants or Other Warrants, in each
case during the period between the date hereof and the time
immediately prior to the Effective Time.
N = an amount equal to the sum of (w) 13,520,895 (the number
of outstanding Shares as of the date hereof), plus (x) Shares,
if any, issued upon conversion of the Series B Shares during
the period between the date hereof and the time immediately
prior to the Effective Time, plus (y) any other Shares issued
during the period
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between the date hereof and the time immediately prior to the
Effective Time, except any shares issued (a) upon exercise of
employee stock options under the Stock Option Plans, (b) upon
purchase pursuant to the Stock Purchase Plan, or (c) upon
exercise of Exchange Warrants or Other Warrants, plus (z) the
total number of Shares that would be issuable upon the
conversion of the Series B Shares that remain outstanding
immediately prior to the Effective Time, assuming that all
such Series B Shares were then converted.
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EXHIBIT C
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES
ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES ACT, AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACTS.
Number of Shares: 195,000 multiplied by the Conversion Number
(as hereinafter defined)
Date of Issuance: ________, 2000
WARRANT
To Purchase Common Stock of
XXXX.XXX, Inc.
1. Grant of Warrant. THIS IS TO CERTIFY THAT for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
XXXXXX CAPITAL LTD. ("Holder"), is entitled at any time from and after the date
hereof and prior to May 13, 2003 (the "Expiration Date"), to exercise this
Warrant to purchase from XXXX.XXX, Inc., a Delaware corporation (the "Company"),
up to a number of shares (the "Warrant Shares") of the common stock, $.01 par
value per share (the "Common Stock"), of the Company determined in accordance
with the following sentence, at an exercise price of equal to the Exercise Price
(as hereinafter defined) per Warrant Share, all on the terms and conditions and
pursuant to the provisions hereinafter set forth. The aggregate number of
Warrant Shares for which this Warrant may be exercised is equal to the product
of (x) 195,000 multiplied by (y) the Conversion Number (as hereinafter defined);
provided, however that the Company shall not effect the exercise of this Warrant
and the Holder of this Warrant shall not have the right to exercise this Warrant
to the extent that after giving effect to such exercise such Holder (together
with such Holder's affiliates) would have acquired, through the exercise of this
Warrant or otherwise, beneficial ownership of a number of shares of Common Stock
during the 60-day period ending on and including the date this Warrant was
exercised (the "60 Day Period"), that, when added to the number of shares of
Common Stock beneficially owned by such Holder (together which such Holder's
affiliates) at the beginning of the 60 Day Period, exceeds 10% of the number of
shares of Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates or acquired by the
Holder and its affiliates, as the case may be, shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect
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to which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (i) conversion of
the remaining, non-exercised Warrants beneficially owned by the Holder and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder and its affiliates. Except as set forth in the preceding
sentence, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock the
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (2)
a more recent public announcement by the Company or (3) any other notice by the
Company or its transfer agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder of this Warrant, the Company shall within two (2) Business Days confirm
orally and in writing to the Holder the number of shares Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the exercise of this Warrant by the Holder
and it affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. This Warrant is granted by the Company to the
Holder in accordance with the Agreement and Plan of Merger, dated as of July 13,
2000 (the "Merger Agreement") among the Company, xXXX.xxx, and XXXX.XXX Merger
Sub, Inc. The "Conversion Number" shall have the meaning set forth in the Merger
Agreement. The "Exercise Price" shall be equal to a fraction, the numerator of
which is $13.95 and the denominator of which is the Conversion Number. This
Warrant shall not be valid or obligatory for any purpose until it has been
executed and delivered by the Company and accepted and agreed to by the Holder,
as set forth on the signature page hereof.
2. Exercise. This Warrant may be exercised at any time or from time to
time, but only during the period specified in Section 1 of this Warrant, on any
day that is a business day, for all or any part of the number of shares of
Common Stock purchasable upon its exercise; provided, however, that this Warrant
shall be void and all rights represented hereby shall cease unless exercised
before the Expiration Date. In order to exercise this Warrant, in whole or in
part, the Holder hereof shall deliver to the Company at its principal office at
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at such
other office as shall be designated in writing to the Holder by the Company, (i)
a written notice of such Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased
pursuant to such exercise, (ii) cash or a certified or cashier's check payable
to the order of the Company in an amount equal to the aggregate purchase price
for all shares of Common Stock to be purchased pursuant to such exercise, or in
lieu of such payment, an election for cashless exercise as provided herein, and
(iii) this Warrant. Such notice may be given
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by the Subscription Form appearing at the end of this Warrant. Upon receipt
thereof, the Company shall, as promptly as practicable, execute or cause to be
executed and delivered to such Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such exercise.
The stock certificates so delivered shall be registered in the name of such
Holder or such other person as Holder shall designate. Holder acknowledges that
the stock certificates shall bear a restrictive legend comparable to that
appearing on the face of this Warrant. This Warrant shall be deemed to have been
exercised and such certificates shall be deemed to have been issued, and the
Holder or any other person so designated shall be deemed to have become a holder
of record of such shares for all purposes, as of the date said notice, together
with payment (or election of cashless exercise) and this Warrant, are received
by the Company. If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the stock certificates, deliver to the Holder
a new Warrant evidencing the right of the Holder to purchase the number of
shares of Common Stock with respect to which this Warrant has not been
exercised.
3. Covenants as to Common Stock. The Company hereby covenants and
agrees as follow:
(a) This Warrant is, and any Warrants issued in substitution for
or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issues thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved 100% of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Exercise
Price.
(d) The Company shall promptly secure the listing of the shares
of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
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as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant. The Company
(i) will not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the Exercise Price then in effect, and
(ii) will take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets or otherwise.
4. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, the Holder, as such, of this Warrant shall not be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in the Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.
5. Representations of Holder.
(a) The Holder of this Warrant, by the acceptance hereof,
represents that it is acquiring this Warrant and the Warrant Shares for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities Act
of 1933, as amended (the "Securities Act"); provided, however, that by making
the representations herein, the Holder does not
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agree to hold this Warrant or any of the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of this Warrant and the Warrant
Shares at any time in accordance with or pursuant to a registration statement or
an exemption under the Securities Act. The Holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such Holder is an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor").
(b) Upon exercise of this Warrant, except pursuant to a cashless
exercise, the Holder shall confirm, which confirmation shall be deemed to be
made by delivery of an Exercise Notice, (i) that the Warrant Shares so purchased
are being acquired its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making such representation, the
Holder does not agree to hold any of the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of the Warrant Shares at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act and (ii) the Holder is an Accredited Investor.
6. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the Holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and the Holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall not be
assignable by the Holder hereof without the prior written consent of the
Company; provided, however, that this Warrant and the rights granted to the
Holder hereof are transferable, in whole or in part, to an Affiliate (as defined
below) of the Holder with the prior written consent of the Company, which
consent shall not be unreasonably withheld, upon surrender of this Warrant,
together with a properly executed warrant power; provided, however, that any
transfer or assignment shall be subject to the conditions set forth in Section
6(c) below. An "Affiliate" shall mean "affiliate" as such term is defined in
Rule 501(b) under the Securities Act.
(c) The Holder of this Warrant understands that this Warrant has
not
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been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) the Holder shall have
delivered to the Company an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that the securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration; provided that (i) any sale of such securities made in
reliance on Rule 144 promulgated under the Securities Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and (ii)
neither the Company nor any other person is under any obligation to register the
Warrants under the Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder.
7. Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of this Warrant, but instead, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be rounded
up or down to the nearest whole share (calculated at the time of final exercise
of this Warrant).
8. Adjustment of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of the following events:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(1) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, additional shares of Common Stock,
(2) subdivide its shares of Common Stock outstanding into a
larger number of shares of such Common Stock, or
(3) combine its shares of Common Stock outstanding into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to
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the number of shares of Common Stock outstanding immediately prior to the
event requiring such adjustment and the denominator of which is equal to the
number of shares of Common Stock outstanding immediately after giving effect to
such event. Upon any such adjustment of the Exercise Price, the Holder shall
thereafter be entitled to purchase upon the exercise of this Warrant, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable on the exercise thereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(b) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to such
transaction, then the Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which the Warrant is exercisable
immediately prior to such event. In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of the
Warrant shall be allocated among the shares of common stock and Other Property
receivable upon exercise of this Warrant as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be reasonably deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of any shares of the common stock of such successor or
acquiring
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corporation for which the Warrants thus become exercisable, which modifications
shall be as equivalent as practicable to the adjustments provided for in this
Section 8. For purposes of this Section 8, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class that
is not preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event, and any
warrants or other rights to subscribe for or purchase any stock. The foregoing
provisions of this Section 8(b) shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
(c) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the adjustments
provided for pursuant to this Section 8:
(1) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 8 shall be made during the period from the date of this
Warrant and until the Expiration Date, whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its occurrence.
(2) FRACTIONAL INTERESTS. In computing adjustments under this
Section 8, fractional interests in Common Stock shall be taken into
account to the nearest 1/100th of a share.
(3) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution to which the provisions of
Section 8 would apply, but shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay
or deliver such dividend or distribution, then thereafter no
adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(4) CERTAIN LIMITATIONS. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that,
by reason of any adjustment under the foregoing provisions, would
cause the Exercise Price to be less than the par value of the Common
Stock, if any, unless the Company first
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reduces the par value of the Common Stock to be less than the Exercise Price
that would result from such transaction.
(5) NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Common Stock for which the Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 8, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated, specifying the number of shares of Common Stock for which
the Warrant is exercisable and (if such adjustment was made pursuant
to Section 8(b)) describing the number and kind of any other shares of
stock or Other Property for which the Warrant is exercisable, and
setting forth any related change in the Exercise Price, after giving
effect to such adjustment or change. The Company shall promptly cause
a signed copy of such certificate to be delivered to the Holder. The
Company shall keep at its principal office copies of all such
certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder.
(6) INDEPENDENT APPLICATION. Except as otherwise provided herein,
all subsections of this Section 8 are intended to operate
independently of one another (but without duplication). If an event
occurs that requires the application of more than one subsection, all
applicable subsections shall be given independent effect without
duplication.
9. Cashless Exercise. Subject to the following provisions, the
Holder may elect to receive, without the payment by the Holder of any additional
consideration, Warrant Shares equal to the value of this Warrant or any portion
hereof by the surrender of this Warrant or such portion to the Company, by so
indicating on the Subscription Form attached hereto, at the office of the
Company. Any such election shall be treated as a conversion of this Warrant or
portion hereof into Warrant Shares. Thereupon, the Company shall issue to the
Holder such number of shares of Common Stock as is computed using the following
formula:
X = Y (A-B)
-------
(A)
where:
X = the number of shares to be issued to the Holder pursuant to
this Section 9.
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Y = the number of shares covered by this Warrant in respect of
which the cashless exercise election is made pursuant to this
Section 9.
A = the fair market value of one share of the Company's Common
Stock as determined below at the time the cashless exercise
election is made pursuant to this Section 9.
B = the Exercise Price in effect under this Warrant at the time
the cashless exercise election is made pursuant to this
Section 9.
For the purposes hereof, the fair market value of one share of the Company's
Common Stock shall mean the average of the daily prices for the Company's Common
Stock on the applicable market specified below, over the latest ten (10) trading
days prior to the date of the cashless exercise, based upon:
(a) the closing prices per share of the Company's Common Stock on
the principal national securities exchange on which the Common Stock
is listed or admitted to trading, or
(b) if not listed or traded on any such exchange, the last
reported sales prices per share on the Nasdaq National Market or the
Nasdaq Stock Market (collectively, "Nasdaq"), or
(c) if not listed or traded on any such exchange or Nasdaq, the
daily average of the high and low bid prices per share as reported in
the NASD OTC Bulletin Board.
However, if such quotations are not available during such ten trading day
period, then the cashless exercise shall be inapplicable.
10. Applicable Law. THIS WARRANT SHALL BE INTERPRETED AND THE
RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED
STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE.
11. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the permitted
successors and assigns of the Company and the Holder hereof; provided, however,
that the Holder shall not assign or transfer any of its rights or obligations
under this Warrant except as expressly permitted in Section 6.
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12. Headings. Headings of the Sections in this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
13. Amendments. This Warrant and any terms hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
party or Holder hereof against which enforcement of such change, waiver,
discharge or termination is sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed.
DATED: __________, 2000
XXXX.XXX, Inc.
By:
---------------------------------
Name:Xxxxxx X. Xxxxxxxxx
Title: President and Chief Executive
Officer
Accepted and agreed to:
XXXXXX CAPITAL LTD.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
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SUBSCRIPTION FORM
(To be executed only upon exercise of this Warrant)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for and purchases ____________ shares of the Common Stock
of XXXX.XXX, Inc. purchasable with this Warrant, and [herewith makes payment
therefor,] [designates that a cashless exercise of this Warrant shall be
effected in lieu of a cash payment,] all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
___________________________________________________ whose address is
_______________________________________________________________, and if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor for the
balance of the shares of Common Stock issuable thereunder be delivered to the
undersigned.
DATED: ________, ____.
Holder:
--------------------------------------
By: --------------------------------------
Title: --------------------------------------
Address: ---------------------------------
---------------------------------
---------------------------------
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NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES
ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES ACT, AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACTS.
Number of Shares: 105,000 multiplied by the Conversion Number
(as hereinafter defined)
Date of Issuance: ________, 2000
WARRANT
To Purchase Common Stock of
XXXX.XXX, Inc.
1. Grant of Warrant. THIS IS TO CERTIFY THAT for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
XXXXXXX CAPITAL LTD. ("Holder"), is entitled at any time from and after the date
hereof and prior to May 13, 2003 (the "Expiration Date"), to exercise this
Warrant to purchase from XXXX.XXX, Inc., a Delaware corporation (the "Company"),
up to a number of shares (the "Warrant Shares") of the common stock, $.01 par
value per share (the "Common Stock"), of the Company determined in accordance
with the following sentence, at an exercise price of equal to the Exercise Price
(as hereinafter defined) per Warrant Share, all on the terms and conditions and
pursuant to the provisions hereinafter set forth. The aggregate number of
Warrant Shares for which this Warrant may be exercised is equal to the product
of (x) 105,000 multiplied by (y) the Conversion Number (as hereinafter defined);
provided, however that the Company shall not effect the exercise of this Warrant
and the Holder of this Warrant shall not have the right to exercise this Warrant
to the extent that after giving effect to such exercise such Holder (together
with such Holder's affiliates) (B) would have acquired, through the exercise of
this Warrant or otherwise, beneficial ownership of a number of shares of Common
Stock during the 60-day period ending on and including the date this Warrant was
exercised (the "60 Day Period"), that, when added to the number of shares of
Common Stock beneficially owned by such Holder (together which such Holder's
affiliates) at the beginning of the 60 Day Period, exceeds 10% of the number of
shares of Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates or acquired by the
Holder and its affiliates, as the case may be, shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect
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to which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (i) conversion of
the remaining, non-exercised Warrants beneficially owned by the Holder and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder and its affiliates. Except as set forth in the preceding
sentence, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock the
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (2)
a more recent public announcement by the Company or (3) any other notice by the
Company or its transfer agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder of this Warrant, the Company shall within two (2) Business Days confirm
orally and in writing to the Holder the number of shares Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the exercise of this Warrant by the Holder
and it affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. This Warrant is granted by the Company to the
Holder in accordance with the Agreement and Plan of Merger, dated as of July 13,
2000 (the "Merger Agreement") among the Company, xXXX.xxx, and XXXX.XXX Merger
Sub, Inc. The "Conversion Number" shall have the meaning set forth in the Merger
Agreement. The "Exercise Price" shall be equal to a fraction, the numerator of
which is $13.95 and the denominator of which is the Conversion Number. This
Warrant shall not be valid or obligatory for any purpose until it has been
executed and delivered by the Company and accepted and agreed to by the Holder,
as set forth on the signature page hereof.
2. Exercise. This Warrant may be exercised at any time or from time to
time, but only during the period specified in Section 1 of this Warrant, on any
day that is a business day, for all or any part of the number of shares of
Common Stock purchasable upon its exercise; provided, however, that this Warrant
shall be void and all rights represented hereby shall cease unless exercised
before the Expiration Date. In order to exercise this Warrant, in whole or in
part, the Holder hereof shall deliver to the Company at its principal office at
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at such
other office as shall be designated in writing to the Holder by the Company, (i)
a written notice of such Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased
pursuant to such exercise, (ii) cash or a certified or cashier's check payable
to the order of the Company in an amount equal to the aggregate purchase price
for all shares of Common Stock to be purchased pursuant to such exercise, or in
lieu of such payment, an election for cashless exercise as provided herein, and
(iii) this Warrant. Such notice may be given
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by the Subscription Form appearing at the end of this Warrant. Upon receipt
thereof, the Company shall, as promptly as practicable, execute or cause to be
executed and delivered to such Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such exercise.
The stock certificates so delivered shall be registered in the name of such
Holder or such other person as Holder shall designate. Holder acknowledges that
the stock certificates shall bear a restrictive legend comparable to that
appearing on the face of this Warrant. This Warrant shall be deemed to have been
exercised and such certificates shall be deemed to have been issued, and the
Holder or any other person so designated shall be deemed to have become a holder
of record of such shares for all purposes, as of the date said notice, together
with payment (or election of cashless exercise) and this Warrant, are received
by the Company. If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the stock certificates, deliver to the Holder
a new Warrant evidencing the right of the Holder to purchase the number of
shares of Common Stock with respect to which this Warrant has not been
exercised.
3. Covenants as to Common Stock. The Company hereby covenants and
agrees as follow:
(a) This Warrant is, and any Warrants issued in substitution for
or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issues thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved 100% of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Exercise
Price.
(d) The Company shall promptly secure the listing of the shares
of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
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as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant. The Company
(i) will not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the Exercise Price then in effect, and
(ii) will take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets or otherwise.
4. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, the Holder, as such, of this Warrant shall not be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in the Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.
5. Representations of Holder.
(a) The Holder of this Warrant, by the acceptance hereof,
represents that it is acquiring this Warrant and the Warrant Shares for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities Act
of 1933, as amended (the "Securities Act"); provided, however, that by making
the representations herein, the Holder does not
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agree to hold this Warrant or any of the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of this Warrant and the Warrant
Shares at any time in accordance with or pursuant to a registration statement or
an exemption under the Securities Act. The Holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such Holder is an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor").
(b) Upon exercise of this Warrant, except pursuant to a cashless
exercise, the Holder shall confirm, which confirmation shall be deemed to be
made by delivery of an Exercise Notice, (i) that the Warrant Shares so purchased
are being acquired its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making such representation, the
Holder does not agree to hold any of the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of the Warrant Shares at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act and (ii) the Holder is an Accredited Investor.
6. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the Holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and the Holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall not be
assignable by the Holder hereof without the prior written consent of the
Company; provided, however, that this Warrant and the rights granted to the
Holder hereof are transferable, in whole or in part, to an Affiliate (as defined
below) of the Holder with the prior written consent of the Company, which
consent shall not be unreasonably withheld, upon surrender of this Warrant,
together with a properly executed warrant power; provided, however, that any
transfer or assignment shall be subject to the conditions set forth in Section
6(c) below. An "Affiliate" shall mean "affiliate" as such term is defined in
Rule 501(b) under the Securities Act.
(c) The Holder of this Warrant understands that this Warrant has
not
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been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) the Holder shall have
delivered to the Company an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that the securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration; provided that (i) any sale of such securities made in
reliance on Rule 144 promulgated under the Securities Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and (ii)
neither the Company nor any other person is under any obligation to register the
Warrants under the Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder.
7. Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of this Warrant, but instead, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be rounded
up or down to the nearest whole share (calculated at the time of final exercise
of this Warrant).
8. Adjustment of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of the following events:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(1) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, additional shares of Common Stock,
(2) subdivide its shares of Common Stock outstanding into a
larger number of shares of such Common Stock, or
(3) combine its shares of Common Stock outstanding into a smaller
number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to
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the number of shares of Common Stock outstanding immediately prior to the event
requiring such adjustment and the denominator of which is equal to the number of
shares of Common Stock outstanding immediately after giving effect to such
event. Upon any such adjustment of the Exercise Price, the Holder shall
thereafter be entitled to purchase upon the exercise of this Warrant, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable on the exercise thereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(b) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to such
transaction, then the Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which the Warrant is exercisable
immediately prior to such event. In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of the
Warrant shall be allocated among the shares of common stock and Other Property
receivable upon exercise of this Warrant as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets in proportion
to the respective fair market values of such shares of common stock and Other
Property as determined in good faith by the Board of Directors of the Company.
In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be reasonably deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of any shares of the common stock of such successor or
acquiring
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corporation for which the Warrants thus become exercisable, which modifications
shall be as equivalent as practicable to the adjustments provided for in this
Section 8. For purposes of this Section 8, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class that
is not preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event, and any
warrants or other rights to subscribe for or purchase any stock. The foregoing
provisions of this Section 8(b) shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
(c) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the adjustments
provided for pursuant to this Section 8:
(1) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 8 shall be made during the period from the date of this
Warrant and until the Expiration Date, whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its occurrence.
(2) FRACTIONAL INTERESTS. In computing adjustments under this
Section 8, fractional interests in Common Stock shall be taken into
account to the nearest 1/100th of a share.
(3) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution to which the provisions of
Section 8 would apply, but shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay
or deliver such dividend or distribution, then thereafter no
adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(4) CERTAIN LIMITATIONS. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that,
by reason of any adjustment under the foregoing provisions, would
cause the Exercise Price to be less than the par value of the Common
Stock, if any, unless the Company first
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reduces the par value of the Common Stock to be less than the Exercise Price
that would result from such transaction.
(5) NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Common Stock for which the Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to this Section 8, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated, specifying the number of shares of Common Stock for which
the Warrant is exercisable and (if such adjustment was made pursuant
to Section 8(b)) describing the number and kind of any other shares of
stock or Other Property for which the Warrant is exercisable, and
setting forth any related change in the Exercise Price, after giving
effect to such adjustment or change. The Company shall promptly cause
a signed copy of such certificate to be delivered to the Holder. The
Company shall keep at its principal office copies of all such
certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder.
(6) INDEPENDENT APPLICATION. Except as otherwise provided herein,
all subsections of this Section 8 are intended to operate
independently of one another (but without duplication). If an event
occurs that requires the application of more than one subsection, all
applicable subsections shall be given independent effect without
duplication.
9. Cashless Exercise. Subject to the following provisions, the Holder
may elect to receive, without the payment by the Holder of any additional
consideration, Warrant Shares equal to the value of this Warrant or any portion
hereof by the surrender of this Warrant or such portion to the Company, by so
indicating on the Subscription Form attached hereto, at the office of the
Company. Any such election shall be treated as a conversion of this Warrant or
portion hereof into Warrant Shares. Thereupon, the Company shall issue to the
Holder such number of shares of Common Stock as is computed using the following
formula:
X = Y (A-B)
-------
(A)
where:
X = the number of shares to be issued to the Holder pursuant to this
Section 9.
C-II-9
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Y = the number of shares covered by this Warrant in respect of which
the cashless exercise election is made pursuant to this Section 9.
A = the fair market value of one share of the Company's Common Stock
as determined below at the time the cashless exercise election is
made pursuant to this Section 9.
B = the Exercise Price in effect under this Warrant at the time the
cashless exercise election is made pursuant to this Section 9.
For the purposes hereof, the fair market value of one share of the Company's
Common Stock shall mean the average of the daily prices for the Company's Common
Stock on the applicable market specified below, over the latest ten (10) trading
days prior to the date of the cashless exercise, based upon:
(a) the closing prices per share of the Company's Common Stock on
the principal national securities exchange on which the Common Stock
is listed or admitted to trading, or
(b) if not listed or traded on any such exchange, the last
reported sales prices per share on the Nasdaq National Market or the
Nasdaq Stock Market (collectively, "Nasdaq"), or
(c) if not listed or traded on any such exchange or Nasdaq, the
daily average of the high and low bid prices per share as reported in
the NASD OTC Bulletin Board.
However, if such quotations are not available during such ten trading day
period, then the cashless exercise shall be inapplicable.
10. Applicable Law. THIS WARRANT SHALL BE INTERPRETED AND THE RIGHTS
OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE.
11. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the permitted
successors and assigns of the Company and the Holder hereof; provided, however,
that the Holder shall not assign or transfer any of its rights or obligations
under this Warrant except as expressly permitted in Section 6.
X-XX-00
00
00. Headings. Headings of the Sections in this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
13. Amendments. This Warrant and any terms hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
party or Holder hereof against which enforcement of such change, waiver,
discharge or termination is sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
DATED: __________, 2000
XXXX.XXX, Inc.
By:
-----------------------------------------
Name:Xxxxxx X. Xxxxxxxxx
Title:President and Chief Executive
Officer
Accepted and agreed to:
XXXXXXX CAPITAL LTD.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
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SUBSCRIPTION FORM
(To be executed only upon exercise of this Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases ____________ shares of the Common Stock of
XXXX.XXX, Inc. purchasable with this Warrant, and [herewith makes payment
therefor,] [designates that a cashless exercise of this Warrant shall be
effected in lieu of a cash payment,] all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
___________________________________________________ whose address is
_______________________________________________________________, and if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor for the
balance of the shares of Common Stock issuable thereunder be delivered to the
undersigned.
DATED: ________, ____.
Holder:
-------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
-----------------------------
-----------------------------
-----------------------------
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EXHIBIT D
AFFILIATES LETTER
July 13, 2000
XXXX.XXX, INC.
XXXX.XXX Merger Sub, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
xXXX.xxx, a Delaware corporation (the "Company"), for purposes of paragraphs (c)
and (d) of Rule 145 promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Act").
XXXX.XXX, Inc., a Delaware corporation ("JFAX"), XXXX.XXX Merger Sub,
Inc., a Delaware corporation and wholly-owned subsidiary of JFAX, and the
Company have entered into an Agreement and Plan of Merger, dated as of July 13,
2000 (the "Merger Agreement"), pursuant to which, among other things, the Merger
Sub will merge with and into the Company and the Company will become a
wholly-owned subsidiary of JFAX (the "Merger"). Upon consummation of the Merger,
I will be entitled to receive a portion of a share of common stock, par value
$0.01 per share, of JFAX (the "JFAX Common Stock") in exchange for each of my
shares of common stock, par value $0.01 per share, of the Company (the "Company
Common Stock") that I own as of this date or that I may receive upon conversion
of my shares of Series B Convertible Preferred Stock of the Company. This
agreement is hereinafter referred to as this "Letter Agreement."
I represent and warrant to, and agree with, JFAX as follows:
1. I have read this Letter Agreement and the Merger Agreement
and have discussed their requirements and other applicable limitations upon my
ability to sell, pledge, transfer or otherwise dispose of shares of JFAX Common
Stock and Company Common Stock, to the extent I felt necessary, with my counsel
or counsel for the Company.
2. I have been advised that any issuance of shares of JFAX
Common Stock to me pursuant to the Merger will be registered with the SEC. I
have also been advised, however, that, because I may be an "affiliate" of the
Company at the time the Merger will be
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submitted for a vote of the stockholders of the Company and my offer, sale,
transfer or other disposition of such shares has not been registered under the
Act, I shall not make any offer, sale, pledge, transfer or other disposition of
such shares unless (i) such offer, sale, transfer or other disposition of such
shares is subject to an effective registration statement and to the availability
of a prospectus under the Act, (ii) a sale of such shares is made in conformity
with the provisions of Rule 145(d) under the Act (and I agree to provide those
representations as JFAX may reasonably request in order to determine such
conformity) or (iii) in an opinion of counsel, in form and substance reasonably
satisfactory to JFAX, some other exemption from registration is available with
respect to any such proposed disposition of such shares.
3. Stop transfer instructions may be given to the transfer agent of the
Company and JFAX with respect to the shares of Company Common Stock and with
respect to the shares of JFAX Common Stock in connection with the restrictions
set forth herein, and there will be placed on the certificate representing
shares of JFAX Common Stock I receive pursuant to the Merger, or any
certificates delivered in substitution therefor, a legend stating in substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933
applies. The shares represented by this certificate may only be
transferred in accordance with the terms of an agreement between
the registered holder hereof and JFAX, a copy of which agreement
is on file at the principal offices of JFAX. A copy of such
agreement shall be provided to the holder hereof without charge
upon receipt by JFAX of a written request.
4. Unless a transfer of my shares of JFAX Common Stock is a sale made in
conformity with the provisions of Rule 145(d) under the Act, or made pursuant to
a effective registration statement under the Act, JFAX reserves the right to put
an appropriate legend on the certificates issued to my transferee.
5. I recognize and agree that the foregoing provisions also apply to (i)
my spouse, (ii) any relative of mine or my spouse occupying my home, (iii) any
trust or estate in which I, my spouse or any such relative owns at least a 10%
beneficial interest or of which any of us serves as trustee, executor or in any
similar capacity and (iv) any corporation or other organization in which I, my
spouse or any such relative owns at least a 10% of any class of equity
securities or of the equity interest.
6. I further recognize that in the event I become an officer of JFAX
upon consummation of the Merger, any purchase or sale of the capital stock of
JFAX by me may be subject to liability pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended.
X-0
00
0. Execution of this letter should not be construed as an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this Letter
Agreement.
8. It is understood and agreed that this Letter Agreement shall
terminate and be of no further force and effect if the Merger Agreement is
terminated in accordance with its terms. It is also understood and agreed that
the stop transfer instructions set forth in Paragraph 3 above shall be lifted
forthwith upon the delivery by the undersigned to JFAX of a copy of a letter
from the staff of the SEC, an opinion of counsel in form and substance
reasonably satisfactory to JFAX, or representations or other evidence reasonably
satisfactory to JFAX, to the effect that a transfer of my shares of JFAX Common
Stock will not violate the Act or any of the rules and regulations of the SEC
thereunder. In addition, it is understood and agreed that the legend set forth
in Paragraph 3 above shall be removed forthwith from the certificate or
certificates representing my shares of JFAX Common Stock if I shall have
delivered to JFAX a copy of a letter from the staff of the SEC, an opinion of
counsel in form and substance reasonably satisfactory to JFAX, or other
representations or evidence reasonably satisfactory to JFAX that a transfer of
my shares of JFAX Common Stock represented by such certificate or certificates
will be a sale made in conformity with the provisions of Rule 145(d) under the
Act, or made pursuant to an effective registration statement under the Act, or
that such legend is not required for purposes of the Securities Act or the rules
and regulation promulgated thereunder.
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95
This Letter Agreement shall be binding on my heirs, legal
representatives and successors.
Very truly yours,
Accepted this ___ day
of July, 2000
XXXX.XXX, Inc.
By:
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
XXXX.XXX Merger Sub, Inc.
By:
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
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EXHIBIT E
CURRENT SEVERANCE AGREEMENT
SEVERANCE AGREEMENT AND
GENERAL RELEASE
1. This Severance Agreement and General Release ("Agreement") is
entered into by and between [EMPLOYEE'S NAME] (hereafter referred to as
"Employee") and xXXX.xxx (hereafter referred to as "the Company"), effective
upon [BRACKETED LANGUAGE REQUIRED ONLY FOR THOSE EMPLOYEES WHO ARE OVER 40;
OTHERWISE, INSERT TERMINATION DATE] [the expiration of the revocation period set
forth in Paragraph 16] (the "Effective Date"). Employee has agreed to
definitively resolve and settle any and all claims against the Company,
including any claims that have not been raised, according to the following
terms, and s/he freely and voluntarily enters into this Agreement for that
purpose.
2. Termination of Employment. Employee's employment with the Company
will terminate effective __________, 2000 ("the Termination Date"), at which
time Employee will receive all wages due through and including the Termination
Date, including any accrued but unused vacation to which s/he is entitled, less
all applicable deductions.
3. Severance Consideration. In return for the general release and
waiver of claims in Paragraph 4 and the other provisions of this Agreement, the
Company has agreed to provide Employee the following consideration, to which
s/he otherwise is not entitled: Severance payment equivalent to [INSERT] months'
salary based upon Employee's annual base salary as of the Termination Date (less
all applicable deductions), payable in a lump sum within fifteen (15) business
days of the effective date, or the date of full execution of this Agreement,
whichever is later.
4. GENERAL RELEASE AND WAIVER OF CLAIMS:
(a) General Release. Employee, on behalf of her/himself, her/his
family members and her/his and their heirs and successors, assigns, affiliates,
attorneys and agents, fully releases and forever discharges the Company and any
other affiliated entities, including XXXX.XXX, Inc., as well as anyone connected
with them, including but not limited to their past and present officers,
directors, management staff, employees, attorneys and agents, and the
predecessors, successors and assigns of each of the foregoing (collectively the
"the Company Releasees") from any and all claims, demands, costs, contracts,
lawsuits, charges and liabilities of every kind, whether in law or in equity,
known or unknown,
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suspected or unsuspected, which he ever had or now has against one or more of
the Company Releasees of any type, nature, and description. The foregoing
releases include claims arising out of the execution of this Agreement or the
negotiation of this Agreement, or any purported representations or omissions
leading to this Agreement. However, nothing in this release extends to claims
for breach of any party's obligations under this Agreement.
(b) Employee's Release Includes Employment-Related and
Non-Employment Related Claims. Employee's general release and waiver set forth
in paragraph 5(a) is intended to cover any and all claims which Employee may
have against the Company Releasees and anyone connected with them, including but
not limited to any employment-related claims such as claims for damages arising
from racial discrimination, sex discrimination, claims under the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the
federal Family Medical Leave Act and its state counterpart, the California
Family Rights Act, the California Fair Employment and Housing Act, applicable
provisions of the California Labor Code, and any amendments to those statutes,
as well as any claims in tort or contract related to Employee' employment
relationship with the Company or the termination of that relationship, any
claims for commissions, bonuses, stock options, or any other form of
compensation, equity or benefits, and for any acts or omissions of the Company
Releasees or anyone connected with them. This release covers all potential
employment-related claims and any other potential claims held by Employee
against the Company Releasees; it is not limited to those claims described in
this Agreement.
(c) Release Includes Claims, Whether Known Or Unknown, Existing Prior
to Signing of Agreement. The general release and waiver set forth above extends
to all claims which existed before the execution of this Agreement and Employee
expressly waives all rights under Section 1542 of the California Civil Code.
That Section reads as follows:
"1542. A general release does not extend to claims
which the creditor does not know or suspect to exist
in his favor at the time of executing the release
which if known to him must have materially affected
his settlement with the debtor."
Employee understands that any rights or claims under the ADEA
that may arise after the date he executes this Agreement are not waived.
5. Covenant Not to Xxx. Employee will not xxx or initiate against the
Company or any of the Company Releasees any action or proceeding, or participate
in same, individually or as a member of a class, under any contract (express or
implied), law, or regulation, federal, state, or local, pertaining in any manner
whatsoever to Employee's released claims, except to enforce the terms of this
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98
Agreement. Employee also specifically warrants and represents that he has no
pending complaint or charge against the Company or any of the Company Releasees
in any state or federal court or any local, state or federal agency based on his
employment relationship with the Company, or on any other events occurring prior
to the execution of this Agreement.
6. No Assignment. Employee warrants and represents that he has not
assigned or transferred to any person not a party to this Agreement any released
claim or portion thereof.
7. Confidentiality. The terms of this Agreement are confidential. The
parties will disclose the terms of this Agreement to no one other than their
attorneys, tax advisor(s), or if required by law.
8. Non-disparagement. Employee acknowledges and agrees that s/he will
not in any way disparage the Company, or its officers, directors, management,
shareholders, employees, agents, or staff, which shall include, but not be
limited to, writing disparaging articles or making disparaging statements to the
Company's customers, suppliers, employees or prospective employees.
9. Company Property and Proprietary Information. Employee acknowledges
and agrees that, as a result of her/his employment, s/he has acquired and had
access to highly confidential, proprietary and/or trade secret information about
the Company and its successor, its affiliated entities and its or their clients
and potential clients. Employee acknowledges and agrees that his obligation
under the [INSERT NAME OF EFAX'S PROPRIETARY INFORMATION AGREEMENT, IF ANY, AND
ATTACH SIGNED COPY AS EXHIBIT], attached hereto as Exhibit A, to preserve the
confidentiality of the Company's proprietary information survives the
termination of her/his employment with the Company. In addition, Employee
warrants and represents that s/he will return to the Company any and all
documents, files, computers, computer diskettes, cell phones, pagers and other
tangible things in his possession or under his control which were purchased by
the Company, as well as any and all documents, files, computers, computer
diskettes, cell phones, pagers and other tangible things in her/his possession
or under her/his control containing confidential, proprietary and/or trade
secret information belonging to the Company or any of its affiliated entities,
or its or their clients, within five business days of the Termination Date.
Employee further warrants and represents that s/he shall not use or disclose in
any way to any person any confidential, proprietary or trade secret information
belonging to the Company or any of its affiliated entities except (1) with the
prior written consent of the Board of Directors of the Company, (2) pursuant to
a validly executed subpoena, or (3) pursuant to court order. Employee agrees to
give written notice to the Company within a reasonable time, or as early as
practicable, and in no event later than ten (10) days before the date for his
testimony or production (after
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receipt of any subpoena or other court order for testimony relating to or
production of confidential, proprietary and/or trade secret information covered
by this Agreement, and further agrees that s/he will not testify until the date
required by the subpoena or court order.
10. No Admission of Liability. Employee understands that the Company
Releasees believe that they have acted properly, and not unlawfully in any
respect; similarly, the Company understands that Employee believes that s/he has
acted properly and not unlawfully in any respect. Nothing in this Agreement is
intended to be nor will it be alleged to constitute evidence of or be an
admission by Employee or by any Company Releasee of any liability, omission, or
wrongdoing of any kind whatever, nor shall this Agreement be offered or received
into evidence or otherwise filed or lodged in any proceeding against Employee or
any Company Releasee, except as may be necessary to prove the terms of this
Agreement or to enforce the same.
11. Acknowledgment. Employee acknowledges that s/he is entering into
this Agreement, freely, knowingly, and voluntarily, with a full understanding of
its terms.
12. Arbitration of Claims. Any claimed violation of this Agreement must
be submitted to binding arbitration under the applicable rules of the American
Arbitration Association ("AAA"), or a reasonably equivalent agency if AAA is not
available, with any such arbitration to be held in San Francisco, California.
The arbitrator is to be selected by the mutual agreement of Employee and the
Company. The expense of the arbitration will be borne equally by the parties.
Each party is entitled to seek injunctive relief in a judicial forum to prevent
a material breach of the Agreement which could lead to immediate harm to that
party.
13. Integration and Severability. This Agreement and its Exhibit A
constitutes the entire Agreement between Employee and the Company with respect
to the subject matter hereof and supersedes all prior or contemporaneous
agreements, representations or understandings with respect to the subject matter
hereof. In entering this Agreement, neither party has relied on any
representations made by the other, except as expressly set forth herein in
writing. This Agreement may not be changed orally and shall be construed under
and governed by the laws of the State of California, without regard for its
conflict of law provisions. If any part of this Agreement shall be determined to
be illegal, invalid or unenforceable, the remaining parts of the Agreement will
not be affected thereby and any such illegal, invalid or unenforceable part
shall not be deemed to be a part of this Agreement.
14. Opportunity to Consult with Counsel. In executing this Agreement,
Employee acknowledges that s/he has had the opportunity to consult
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with and be advised by an attorney, and that pursuant to the Age Discrimination
in Employment Act of 1967 ("ADEA"), 29 U.S.C. section 621 et seq., as amended by
the Older Workers Benefit Protection Act, the Company hereby advises him to do
so. Employee further acknowledges that s/he has executed this Agreement after
independent investigation, and without fraud, duress, or undue influence.
15. [PARAGRAPHS 15 AND 16 REQUIRED ONLY FOR THOSE EMPLOYEES WHO ARE
OVER 40]21-Day Consideration Period. Employee acknowledges that s/he has been
given up to twenty-one (21) days to consider whether to enter into this
agreement (but he need not use the entire 21-day period) and that his decision
must be communicated to [INSERT NAME AND ADDRESS OF APPROPRIATE CONTACT PERSON],
in writing, by the end of that period.
16. Seven-Day Revocation Period. Employee shall have up to seven (7)
days from the date immediately following the date of her/his execution of this
Agreement during which s/he may revoke her/his acceptance (the "Revocation
Period"). Any such revocation must be delivered to and received by [INSERT NAME
AND ADDRESS OF APPROPRIATE CONTACT PERSON], in writing, within the Revocation
Period. Employee hereby is advised in writing that this Agreement shall not
become effective or enforceable until the Revocation Period has expired. The
Company will commence providing Employee the benefits described in Paragraph 2
within three (3) business days after the expiration of the Revocation Period.
17. Paragraph Headings Not Terms of Agreement. The paragraph headings
in this Agreement are for purposes of convenience only and do not constitute
binding terms or binding interpretation of the terms of the Agreement.
18. Execution in Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original of one and the same
agreement.
Date: ____________, 2000 ___________________________________________
EMPLOYEE
Date: ____________, 2000 ___________________________________________
For ___________________________________
xXXX.xxx
By Its__________________________________
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Letter to Employees re Severance
Dear [EMPLOYEE]:
As you may be aware, xXxx.xxx is in the process of a contemplated
merger with XXXX.XXX, Inc.; if all goes as planned, we estimate that the closing
will occur in late summer or early fall.
Your contribution to the company is highly valued and we hope
that you will remain with eFAX through this transition. In exchange for your
commitment to continue with us through this period and although your employment
at eFAX has been and will remain "at will," I am authorized to offer you the
assurance of a severance package, to which you would not otherwise be entitled,
in the event that, within twelve months of June ___, 2000 (the date of the
definitive Merger Agreement), you are either terminated without cause or resign
with good reason, as those terms are defined herein.(1) [Exercise of the
Company's right to termination without cause or your right to resign for good
reason will require thirty days' written notice.] [BRACKETED LANGUAGE EXCLUDED
FROM LETTERS TO XXXXXX XXXXX AND ANY OTHER EMPLOYEE WHOSE SERVICES WILL NOT BE
NEEDED DURING TRANSITION PERIOD.] Receipt of the severance payment will be
conditioned upon your execution of the release and other provisions of a
Severance Agreement and General Release. Attached for your review is the form
Agreement, which you and the company would enter into, at your election, if and
when either a "termination without cause" or a "resignation for good cause"
occurs.
Please feel free to contact me if you have any questions or
concerns.
Very truly yours,
--------------------------------
(1) "Termination without cause" shall mean an involuntary termination
that is not based upon any or all of the following: (1) any fraud,
misappropriation or embezzlement by you in connection with the employer's
business; (2) any conviction of or nolo contendere plea to, or commission of, a
felony or a gross misdemeanor by you that has or can reasonably be expected to
have a detrimental effect on the company or on your ability to perform your job
duties; (3) any intentional or gross neglect by you of your job duties; or (4)
any material breach by you of any other provision of this agreement or of the
[INSERT NAME OF GOVERNING PROPRIETARY INFORMATION AGREEMENT EXECUTED BY
EMPLOYEE] you have entered into with the company.
"Resignation for good reason" shall mean a voluntary resignation
following any or all of the following: (1) any material reduction in your
guaranteed compensation; (2) any material reduction in the nature of your duties
or level of responsibilities; or (3) any relocation of your principal workplace
beyond a fifty mile radius from its current location, provided that such
reduction, change or relocation is effected by the company without your written
consent.
E-II-1
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Xxxx X. Xxxxx
E-II-2
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EXHIBIT F
THE COMPANY'S OPINION OF COUNSEL
(1) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with the
corporate power and authority to execute, deliver and perform its obligations
under the Merger Agreement.
(2) Immediately prior to the Merger, the Company has an authorized
capitalization as set forth in the Joint Proxy Statement-Prospectus and the
outstanding shares of capital stock of the Company were duly authorized, validly
issued, fully paid and nonassessable.
(3) The Merger Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(4) Upon the filing of the Certificate of Merger with the Secretary of
State of Delaware as contemplated by Section 1.3 of the Merger Agreement, the
Merger shall become effective, the Company shall be the surviving corporation in
the Merger and the shares of outstanding capital stock of the Company (other
than the Excluded Shares as defined in Section 4.1(a)of the Merger Agreement)
shall be converted into, and become exchangeable for, the Merger Consideration
as
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defined in Section 4.1(a) of the Merger Agreement (or equivalent consideration
as specified in Section 4.1(d) in the case of the Series B Shares of the
Company).
(5) The execution and delivery by the Company of the Merger Agreement
and its consummation of the Merger did not and do not (A) require the Company to
obtain the consent, approval or authorization of, or make any filing or
registration with, any governmental body or regulatory authority of the United
States or the State of California, other than such consents, approval or
authorizations of and filings and registrations with such bodies and authorities
as (i) have been obtained or made or (ii) are not required to be obtained or
made until after the Closing (as defined in the Merger Agreement), and in such
case are of a routine or administrative nature or are otherwise expected to be
obtained or made in the ordinary course of business following the Closing; (B)
result in a default under or a breach of the agreements listed in Annex A to
this opinion; or (C) violate any federal law of the United States or law of the
State of California applicable to the Company, provided that no opinion is
expressed with respect to disclosure requirements or anti-fraud laws.
(6) We do not know of any litigation or any governmental proceedings
instituted or threatened against the Company or any of its subsidiaries that
would be required to be disclosed in the Joint Proxy Statement-Prospectus,
except for such matters as are disclosed therein.
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EXHIBIT G
PARENT'S OPINION OF COUNSEL
(1) Each of the Company and Merger Sub has been duly incorporated and
is an existing corporation in good standing under the laws of the State of
Delaware, with the corporate power and authority to execute, deliver and perform
its obligations under the Merger Agreement.
(2) The Company has an authorized capitalization as set forth in the
Joint Proxy Statement-Prospectus and the shares of the Company's Common Stock,
$0.01 par value (the "Company's Common Stock"), to be issued in the Merger have
been duly authorized and, when issued as provided in the Merger Agreement, will
be validly issued, fully paid and nonassessable.
(3) The Merger Agreement has been duly authorized, executed and
delivered by each of the Company and Merger Sub and constitutes a valid and
legally binding agreement of each of the Company and Merger Sub, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(4) Upon the filing of the Certificate of Merger with the Secretary of
State of Delaware as contemplated by Section 1.3 of the Merger Agreement, the
Merger shall become effective, xXxx.xxx shall be the surviving corporation in
the Merger and the shares of outstanding capital stock of xXxx.xxx (other than
the Excluded Shares as defined in Section 4.1(a)of the Merger Agreement) shall
be converted into, and become exchangeable for, the Merger Consideration as
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defined in Section 4.1(a) of the Merger Agreement (or equivalent consideration
as specified in Section 4.1(d) in the case of the Series B Shares of xXxx.xxx).
(5) The execution and delivery by the Company and Merger Sub of the
Merger Agreement and their consummation of the Merger did not and do not (A)
require the Company or Merger Sub to obtain the consent, approval or
authorization of, or make any filing or registration with, any governmental body
or regulatory authority of the United States or the State of California, other
than such consents, approval or authorizations of and filings and registrations
with such bodies and authorities as (i) have been obtained or made or (ii) are
not required to be obtained or made until after the Closing (as defined in the
Merger Agreement), and in such case are of a routine or administrative nature or
are otherwise expected to be obtained or made in the ordinary course of business
following the Closing; (B) result in a default under or a breach of the
agreements listed in Annex A to this opinion; or (C) violate any federal law of
the United States or law of the State of California applicable to the Company or
Merger Sub, provided that no opinion is expressed with respect to disclosure
requirements or anti-fraud laws.
(6) We do not know of any litigation or any governmental proceedings
instituted or threatened against the Company or any of its subsidiaries that
would be required to be disclosed in Joint Proxy Statement-Prospectus, except
for such matters as are disclosed therein.
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107
EXHIBIT H
The cash payment from the Company to Parent required by Section
8.5(b)(i), if and when the conditions of such Section are met, shall be
determined by the following formula:
CP = N x (FMV(E) - EP)
Where:
CP = the cash payment required, but not less than zero.
N = 1,750,000, provided that N shall be reduced to 750,000 if the
termination of this Agreement arises as a result of a failure to obtain approval
by Parent's stockholders as referred to in Section 6.4 or as a result of a
material breach by Parent under this Agreement (in either case N is subject to
adjustment as provided below).
FMV(E) = The fair market value of one share of the Company Common
Stock as of the date the conditions of Section 8.5(b)(i) are met, which shall
mean the average of the daily prices for the Company Common Stock on the
applicable market specified below, over the latest 10 trading days prior to the
date such conditions are met, based upon:
(a) the closing prices per share of the Company Common Stock on
the principal national securities exchange on which such stock is listed or
admitted to trading, or
(b) if not listed or traded on such exchange, the last reported
sales prices per share on the Nasdaq National Market or the Nasdaq Stock Market
(collectively, "Nasdaq"), or
(c) if not listed or traded on any such exchange or Nasdaq, the
daily average of the high and low bid prices per share as reported in the NASD
OTC Bulletin Board, or
(d) if not so listed or traded, and not so reported, then as
determined by negotiations in good faith between the Company and Parent.
EP = $0.10 (subject to adjustment as provided below)
In the event that the Company changes the number or kind of shares of Company
Common Stock, or securities convertible or exchangeable into or exercisable for
shares of Company Common Stock, at or prior to the date when the conditions of
Section 8.5(b)(i)
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108
are met, as a result of any reclassification, stock split (including a reverse
split), stock dividend or distribution, recapitalization, merger, consolidation,
sale of all or substantially all assets, subdivision, tender or exchange offer,
for other similar transaction, then for purposes of the foregoing formula, at
any time or times when such a change occurs, N and EP shall be proportionately
adjusted so as to preserve the relative amount of any payment resulting from
such formula in relation to the capitalization of the Company after giving
effect to any such change or changes.
H-2
