SUPPORT AGREEMENT
Exhibit 1
THIS SUPPORT AGREEMENT (this “Agreement”) is made and entered into as of February 22, 2007 by
and between KEG Holdings, Inc., an Oregon corporation (“Parent”), and the undersigned stockholder
(the “Stockholder”) of Applied Innovation Inc., a Delaware corporation (the “Company”).
RECITALS
A. Parent, Buckeye Merger Co., a Delaware corporation and wholly owned subsidiary of Parent
(“Merger Sub”), and the Company have entered into an Agreement and Plan of Merger of even date
herewith (the “Merger Agreement”), which provides for, among other things, the merger of Merger Sub
with and into the Company (the “Merger”) pursuant to which all outstanding shares of capital stock
of the Company will be converted into the right to receive the consideration as set forth in the
Merger Agreement.
B. The Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
of such number of shares of the outstanding capital stock of the Company or options to purchase
such number of shares of capital stock of the Company as is indicated on the signature page of this
Agreement.
C. In consideration of the execution of the Merger Agreement by Parent, Parent has requested
that the Stockholder (in the Stockholder’s capacity as such) enter into this Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows:
1. Certain Definitions. All capitalized terms that are used but not defined herein, as well
as the lowercase terms “person” and “business day,” shall have the respective meanings ascribed to
them in the Merger Agreement. For all purposes of and under this Agreement, the following terms
shall have the following respective meanings:
(a) “Expiration Date” shall mean the earlier to occur of (i) such date and time as the Merger
Agreement shall have been terminated pursuant to Article VIII thereof, (ii) such date and time as
the Merger shall become effective in accordance with the terms and provisions of the Merger
Agreement, or (iii) February 22, 2008.
(b) “Shares” shall mean (i) all equity securities of the Company (including all shares of
Company Common Stock and all options and other rights to acquire shares of Company Common Stock)
owned by the Stockholder as of the date hereof, and (ii) all additional equity securities of the
Company (including all additional shares of Company Common Stock and all additional options,
warrants and other rights to acquire shares of Company Common Stock) of which the Stockholder
acquires ownership during the period from the date of this Agreement through the Expiration Date
(including by way of stock dividend or distribution, split-up, recapitalization, combination,
exchange of shares and the like).
(c) “Transfer” A person shall be deemed to have effected a “Transfer” of a Share if such
person directly or indirectly (i) sells, pledges, encumbers, assigns, grants an option with
respect to, transfers, tenders or disposes of such Share or any interest in such Share, or
(ii) enters into an agreement or commitment providing for the sale of, pledge of, encumbrance of,
assignment of, grant of an option with respect to, transfer, tender of or disposition of such Share
or any interest therein.
2. Transfer of Shares.
(a) Transfer Restrictions. The Stockholder shall not cause or permit any Transfer of any of
the Shares to be effected or enter into any agreement relating thereto, except as follows: (i)
using already-owned Shares either to pay the exercise price upon exercise of a stock option or to
satisfy the option holder’s tax withholding obligation upon exercise of a stock option, in each
case, as permitted by any Company Employee Plan, (ii) transferring the Shares to affiliates,
immediate family members or charitable organizations, provided that the recipient agrees to be
bound by this Agreement and the Proxy, or (iii) transferring all or any portion of the Shares to
Parent or its affiliate(s).
(b) Transfer of Voting Rights. The Stockholder shall not deposit (or permit the deposit of)
any Shares in a voting trust or grant any proxy or enter into any voting agreement or similar
agreement in contravention of the obligations of the Stockholder under this Agreement with respect
to any of the Shares.
3. Agreement to Vote Shares.
(a) To the extent that the Stockholder has the power to vote the Shares, at every meeting of
the stockholders of the Company called, and at every adjournment or postponement thereof, and on
every action or approval by written consent of the stockholders of Company, the Stockholder (in the
Stockholder’s capacity as such), to the extent not voted by the person(s) appointed under the Proxy
(as defined below), shall, or shall cause the holder of record on any applicable record date to,
vote the Shares:
(i) in favor of the adoption of the Merger Agreement, and in favor of each of the other
actions contemplated by the Merger Agreement and any action required in furtherance thereof;
(ii) against approval of any proposal made in opposition to, or in competition with,
consummation of the Merger or any other transactions contemplated by the Merger Agreement; and
(iii) against any of the following actions (other than those actions that relate to the Merger
and any other transactions contemplated by the Merger Agreement): (A) any merger, consolidation,
business combination, sale of assets, reorganization or recapitalization of the Company or any
Subsidiary of the Company with any party, (B) any sale, lease or transfer of any significant part
of the assets of the Company or any Subsidiary of the Company, (C) any reorganization,
recapitalization, dissolution, liquidation or winding up of the Company or any Subsidiary of the
Company, (D) any material change in the capitalization of the Company or any Subsidiary of the
Company, or the corporate structure of the Company or any subsidiary of the
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Company, or (E) any other action that is intended, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the Merger or any other
transactions contemplated by the Merger Agreement.
(b) In the event that a meeting of the stockholders of the Company is held, to the extent that
the Stockholder has the power to vote the Shares, the Stockholder shall, or shall cause the holder
of record on any applicable record date to, appear at such meeting or otherwise cause the Shares to
be counted as present thereat for purposes of establishing a quorum.
(c) The Stockholder shall not enter into any agreement or understanding with any person to
vote or give instructions in any manner inconsistent with the terms of this Section 3.
(d) Notwithstanding the foregoing, the Stockholder shall not be liable for any failure to
take, or to cause any person to take, any of the actions that the Stockholder is required to take
under (a) and (b) above, if any such action may be taken by the person(s) appointed by the Proxy.
4. Agreement Not to Exercise Appraisal Rights. The Stockholder shall not exercise any rights
to demand appraisal of any Shares (including any appraisal rights under Section 262 of the DGCL)
that may arise with respect to the Merger.
5. Directors and Officers. Each of Parent and Stockholder hereby acknowledge and agree that,
notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall
(or require the Stockholder to attempt to) limit or otherwise restrict Stockholder with respect to
any act or omission that such Stockholder may undertake or authorize in such Stockholder’s capacity
as a director or officer of the Company (it being understood that this Agreement shall apply to the
Stockholder solely in the Stockholder’s capacity as a stockholder of the Company) including,
without limitation, any board vote that Stockholder may make as a director of the Company with
respect to any matter presented to the Company. In this regard, the Stockholder shall not be
deemed to make any agreement or understanding in this Agreement in Stockholder’s capacity as a
director or officer of the Company.
6. Irrevocable Proxy. Concurrently with the execution of this Agreement, the Stockholder
shall deliver to Parent a proxy in the form attached hereto as Exhibit A (the “Proxy”), which shall
be irrevocable to the fullest extent permissible by applicable Law, with respect to the Shares
during the term of this Agreement.
7. Representations and Warranties of the Stockholder.
(a) Power; Binding Agreement. The Stockholder has legal capacity, full power and authority to
execute and deliver this Agreement and the Proxy, to perform the Stockholder’s obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Stockholder, and, assuming this Agreement constitutes a valid and
binding obligation of Parent, constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
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(b) No Conflicts. None of the execution and delivery by the Stockholder of this Agreement,
the performance by the Stockholder of the Stockholder’s obligations hereunder or the consummation
by the Stockholder of the transactions contemplated hereby will (i) result in a violation or breach
of any agreement to which the Stockholder is a party or by which the Stockholder may be bound,
including any voting agreement or voting trust, or (ii) violate any order, writ,
injunction, decree, judgment, order, statute, rule, or regulation applicable to the Stockholder.
(c) Ownership of Shares. The Stockholder (i) is the beneficial owner of the shares of Company
Common Stock indicated on the signature page of this Agreement, all of which are free and clear of
Encumbrances (except any Encumbrances arising under securities laws or arising hereunder), (ii) is
the owner of options that are exercisable for the number of shares of Company Common Stock
indicated on the signature page of this Agreement, all of which options and shares of Company
Common Stock issuable upon the exercise of such options are, or in the case of Company Common Stock
received upon exercise of an option after the date hereof will be, free and clear of any
Encumbrances (except any Encumbrances arising under securities laws or arising hereunder), and
(iii) except as set forth on the signature page to this Agreement, does not own, beneficially or
otherwise, any securities of the Company other than the shares of Company Common Stock or options
to purchase shares of Company Common Stock, and shares of Company Common Stock issuable upon the
exercise of such options, indicated on the signature page of this Agreement.
(d) Voting Power. The Stockholder has or will have sole voting power, sole power of
disposition, sole power to issue instructions with respect to the matters set forth herein, and
sole power to agree to all of the matters set forth in this Agreement, in each case with respect to
all of the Shares, with no limitations, qualifications or restrictions on such rights, subject to
applicable federal securities laws and the terms of this Agreement.
(e) No Finder’s Fees. No broker, investment banker, financial advisor or other person is
entitled to any broker’s, finder’s, financial adviser’s or other similar fee or commission in
connection with this Agreement based upon arrangements made by or on behalf of the Stockholder.
(f) Reliance by Parent. The Stockholder understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon the Stockholder’s execution and delivery of this
Agreement.
(g) No Legal Actions. Stockholder agrees that Stockholder will not in Stockholder’s capacity
as a stockholder of the Company bring, commence, institute, maintain, prosecute or voluntarily aid
any action, claim, suit or cause of action, in law or in equity, in any court or before any
Governmental Authority, which (i) challenges the validity of or seeks to enjoin the operation of
any provision of this Agreement or (ii) alleges that the execution and delivery of this Agreement
by Stockholder, either alone or together with any other Company voting agreements and proxies to be
delivered in connection with the execution of the Merger Agreement, or the approval of the Merger
Agreement by the Company Board, breaches any fiduciary duty of the Company Board or any member
thereof.
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8. Certain Restrictions. The Stockholder shall not, directly or indirectly, take any action
that would make any representation or warranty of the Stockholder contained herein untrue or
incorrect.
9. Disclosure. The Stockholder shall permit Parent to publish and disclose in all documents
and schedules filed with the SEC, and any press release or other disclosure document that Parent
determines to be necessary or desirable in connection with the Merger and the other transactions
contemplated by the Merger Agreement, the Stockholder’s identity and ownership of Shares and the
nature of the Stockholder’s commitments, arrangements and understandings under this Agreement.
10. No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in
Parent any direct or indirect ownership or incidence of ownership of or with respect to any Shares.
Except as provided in this Agreement, all rights, ownership and economic benefits relating to the
Shares shall remain vested in and belong to Stockholder.
11. Further Assurances. Subject to the terms and conditions of this Agreement, the
Stockholder shall use commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary to fulfill such Stockholder’s obligations
under this Agreement.
12. Stop Transfer Instructions. At all times commencing with the execution and delivery of
this Agreement and continuing until the Expiration Date, the Stockholder covenants that the
Stockholder will not request that the Company register the Transfer (by book-entry or otherwise) of
any certificate or uncertificated interest representing any of the Shares unless such Transfer is
made pursuant to and in compliance with the terms and conditions of this Agreement.
13. Termination. This Agreement and the Proxy shall terminate and shall have no further force
or effect as of the Expiration Date. Notwithstanding the foregoing, nothing set forth in this
Section 13 or elsewhere in this Agreement shall relieve either party hereto from liability, or
otherwise limit the liability of either party hereto, for any intentional breach of this Agreement.
14. Miscellaneous.
(a) Validity. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of the other provisions of this Agreement, which will remain
in full force and effect. In the event any Governmental Authority of competent jurisdiction holds
any provision of this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and execute and deliver an amendment to this Agreement in order, as nearly
as possible, to effectuate, to the extent permitted by applicable Law, the intent of the parties
hereto with respect to such provision.
(b) Binding Effect and Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests or
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obligations of the parties hereto may be assigned by either of the parties without prior
written consent of the other.
(c) Amendments; Waiver. This Agreement may be amended by the parties hereto, and the terms
and conditions hereof may be waived, only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument signed on behalf of the party
waiving compliance.
(d) Specific Performance; Injunctive Relief. The parties hereto acknowledge that Parent shall
be irreparably harmed and that there shall be no adequate remedy at law for a violation of any of
the covenants or agreements of the Stockholder set forth herein. Therefore, it is agreed that, in
addition to any other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific performance, injunctive
relief or by any other means available to Parent at law or in equity.
(e) Notices. All notices, requests, claims, demands and other communications pursuant to this
Agreement shall be in writing and shall be given, and shall be deemed to have been duly given (i)
on the date of delivery if delivered personally and/or by messenger service, (ii) on the date of
confirmation of receipt (or, the first business day following such receipt if the date is not a
business day) of transmission by facsimile, or (iii) on the date of confirmation of receipt (or,
the first business day following such receipt if the date is not a business day) if delivered by a
nationally recognized overnight courier, to the respective parties at the following addresses (or
at such other address for a party as shall be specified in a notice given in accordance with this
Section 14(e)):
If to Parent:
KEG Holdings, Inc.
00000 XX Xxxxxxxxxxx Xx.
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
KEG Holdings, Inc.
00000 XX Xxxxxxxxxxx Xx.
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to the Stockholder:
Xxxxxx X. Xxxxxxxxx, Xx.
0000 Xxxxxxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Xxxxxx X. Xxxxxxxxx, Xx.
0000 Xxxxxxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
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Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx, Esq.
One Americana
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
One Americana
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(f) No Waiver. The failure of either party hereto to exercise any right, power or remedy
provided under this Agreement or otherwise available in respect of this Agreement at law or in
equity, or to insist upon compliance by any other party with its obligation under this Agreement,
and any custom or practice of the parties at variance with the terms of this Agreement, shall not
constitute a waiver by such party of such party’s right to exercise any such or other right, power
or remedy or to demand such compliance.
(g) No Third Party Beneficiaries. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by the laws of the State of Delaware,
without reference to rules of conflicts of law.
(i) Submission to Jurisdiction. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any state or federal court in the State of Oregon,
the State of Ohio or the State of Delaware. Each of the parties hereto irrevocably consents to the
jurisdiction and venue of federal and state courts in the State of Oregon, the State of Ohio and
the State of Delaware in connection with any matter based upon or arising out of this Agreement or
the matters contemplated herein, and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and venue.
(j) Rules of Construction. The parties hereto hereby waive the application of any Law,
holding or rule of construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
(k) Entire Agreement. This Agreement and the Proxy contain the entire understanding of the
parties hereto in respect of the subject matter hereof, and supersede all prior negotiations,
agreements and understandings, both written and oral, between the parties hereto with respect to
the subject matter hereof.
(l) Interpretation.
(i) Whenever the words “include,” “includes” or “including” are used in this Agreement they
shall be deemed to be followed by the words “without limitation.” As used in
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this Agreement, the term “affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.
(ii) The article and section headings contained in this Agreement are solely for the purpose
of reference, are not part of the agreement of the parties hereto and shall not in any way affect
the meaning or interpretation of this Agreement.
(m) Expenses. All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring the expenses.
(n) Counterparts. This Agreement may be executed in several counterparts, each of which shall
be an original, but all of which together shall constitute one and the same agreement.
(o) No Obligation to Exercise Options or Warrants. Notwithstanding any provision of this
Agreement to the contrary, nothing in this Agreement shall obligate the Stockholder to exercise any
option, warrant or other right to acquire shares of Company Common Stock.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed and caused to be effective this Agreement as
of the date first above written.
| KEG HOLDINGS, INC. | STOCKHOLDER | |||||||
By:
|
/s/ Xxxx Xxxxxxxx
|
/s/ Xxxxxx X. Xxxxxxxxx, Xx.
|
||||||
Name:
|
Xxxx Xxxxxxxx | Xxxxxx X. Xxxxxxxxx, Xx. | ||||||
Title:
|
President & CEO | |||||||
| Shares beneficially owned as of the date hereof: | ||||||||
| 3,311,250 shares of Company Common Stock | ||||||||
| 2,122,779 shares of Company Common Stock (by virtue of a Stock Transfer and Restriction Agreement with Xxxxx Xxxxxxxxx dated 5/30/01) | ||||||||
| 15,000 shares of Company Common Stock issuable upon exercise of outstanding options | ||||||||
****SUPPORT AGREEMENT ****
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder (the “Stockholder”) of Applied Innovation Inc., a Delaware
corporation (the “Company”), hereby irrevocably (to the fullest extent permitted by applicable Law)
appoints KEG Holdings, Inc., an Oregon corporation (“Parent”), acting through any of its Chief
Executive Officer, Chief Financial Officer or General Counsel, as the sole and exclusive attorneys
and proxies of the undersigned, with full power of substitution and resubstitution, to vote and
exercise all voting and related rights (to the full extent that the undersigned is entitled to do
so) with respect to all of the shares of capital stock of the Company that now are or hereafter may
be beneficially owned by the undersigned, and any and all other shares or equity securities of the
Company issued or issuable in respect thereof on or after the date hereof (collectively, the
“Shares”) in accordance with the terms of this Irrevocable Proxy until the Expiration Date (as
defined below); provided, however, that such proxy and voting and related rights are expressly
limited to the matters discussed in clauses (i) through (iii) in the fourth paragraph of this
Irrevocable Proxy. Upon the undersigned’s execution of this Irrevocable Proxy, any and all prior
proxies given by the undersigned with respect to any Shares are hereby revoked and the undersigned
agrees not to grant any subsequent proxies with respect to the Shares until after the Expiration
Date.
This Irrevocable Proxy is irrevocable to the fullest extent permitted by applicable Law, is
coupled with an interest and is granted pursuant to that certain Support Agreement of even date
herewith by and between Parent and the undersigned stockholder (the “Support Agreement”), and is
granted in consideration of Parent entering into that certain Agreement and Plan of Merger of even
date herewith (the “Merger Agreement”), among Parent, Buckeye Merger Co., a Delaware corporation
and wholly-owned subsidiary of Parent (“Merger Sub”), and the Company. The Merger Agreement
provides for, among other things, the merger of Merger Sub with and into the Company, pursuant to
which all outstanding shares of capital stock of the Company will be converted into the right to
receive the consideration set forth in the Merger Agreement.
As used herein, the term “Expiration Date” shall mean the earliest to occur of (i) such date
and time as the Merger Agreement shall have been terminated pursuant to Article VIII thereof, (ii)
such date and time as the Merger shall become effective in accordance with the terms and provisions
of the Merger Agreement, and (iii) February 22, 2008.
The attorneys and proxies named above, and each of them, are hereby authorized and empowered
by the undersigned, at any time prior to the Expiration Date, to act as the undersigned’s attorney
and proxy to vote the Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the power to execute and
deliver written consents) at every annual, special, adjourned or postponed meeting of stockholders
of the Company and in every written consent in lieu of such meeting:
(i) in favor of the adoption of the Merger Agreement, and in favor of each of the other
actions contemplated by the Merger Agreement and any action required in furtherance thereof;
(ii) against approval of any proposal made in opposition to, or in competition with,
consummation of the Merger or any other transactions contemplated by the Merger Agreement; and
(iii) against any of the following actions (other than those actions that relate to the Merger
and any other transactions contemplated by the Merger Agreement): (A) any merger, consolidation,
business combination, sale of assets, reorganization or recapitalization of the Company or any
Subsidiary of the Company with any party, (B) any sale, lease or transfer of any significant part
of the assets of the Company or any Subsidiary of the Company, (C) any reorganization,
recapitalization, dissolution, liquidation or winding up of the Company or any Subsidiary of the
Company, (D) any material change in the capitalization of the Company or any Subsidiary of the
Company, or the corporate structure of the Company or any Subsidiary of the Company, or (E) any
other action that is intended, or could reasonably be expected to, impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any other transactions contemplated by the
Merger Agreement.
This Irrevocable Proxy shall be limited strictly to the power to vote the Shares in the manner
set forth in the immediately preceding paragraph and the items set forth in subparagraphs (i)
through (iii) thereof. The attorneys and proxies named above may not exercise this Irrevocable
Proxy on any other matter. The undersigned stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns
of the undersigned.
This Irrevocable Proxy shall terminate, and be of no further force and effect, automatically
upon the Expiration Date.
Dated: February 22, 2007
|
STOCKHOLDER | |||
| /s/ Xxxxxx X. Xxxxxxxxx, Xx.
|
***** IRREVOCABLE PROXY ****
