FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
Exhibit
2.1
FIRST AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
THIS
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Amendment”) is made
effective as of August 13, 2008, among Onstream Media Corporation, a Florida
corporation ( “Parent”), Onstream
Merger Corp., a Delaware corporation ("Merger Sub"), and
Narrowstep Inc., a Delaware corporation (the “Company”).
BACKGROUND
WHEREAS,
the Parent, Merger Sub, the Company and X. Xxxxxx Xxxxx XX are parties to that
certain Agreement and Plan of Merger, dated as of May 29, 2008 (the “Agreement”);
and
WHEREAS,
pursuant Section 8.4 of the Agreement, the Agreement may be amended by a written
instrument executed by Parent, Merger Sub and the Company.
AGREEMENTS
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
| 1. | Exchange Ratio, Minimum Exchange Ratio and Preferred Stock Exchange Ratio. |
(a) The
second sentence of Section 1.6(a)(i) of the Agreement is hereby amended by
deleting the phrase “the greater of (1) the amount of cash and cash equivalents
held by the Company immediately prior to the Effective Time and (2) ONE MILLION
FIVE HUNDRED THOUSAND (1,500,000)” and inserting “the amount of cash and cash
equivalents held by the Company and its subsidiaries immediately prior to the
Effective Time plus any cash held in escrow by the applicable escrow agent in
respect of the Company's proposed issuance and sale of Company Series A
Preferred Stock (as defined herein), but the sum of the preceding items in this
clause (y) not exceeding SIX HUNDRED THOUSAND (600,000)” in lieu
thereof.
(b) The
third sentence of Section 1.6(a)(i) of the Agreement is hereby amended by
deleting the phrase “TEN MILLION FIVE HUNDRED THOUSAND (10,500,000)” and
inserting “NINE MILLION ONE HUNDRED THOUSAND (9,100,000)” in lieu
thereof.
(d) The
second sentence of Section 1.6(a)(iv) of the Agreement is hereby amended by
deleting the phrase “SIX HUNDRED THOUSAND (600,000)” and inserting “TWO MILLION
(2,000,000)” in lieu thereof.
| 2. |
Company
Form 10-KSB and Form 10-QSB. The preamble to Article II of the
Agreement is hereby amended by deleting the phrase "or (ii)" and inserting
the
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"(ii) as
disclosed in the Company's Form 10-KSB for the fiscal year ended February 29,
2008, as filed with the SEC on June 16, 2008, the Company's Form 10-KSB/A for
the fiscal year ended February 29, 2008, as filed with the SEC on June 16, 2008,
the Company's Form 10-KSB/A for the fiscal year ended February 29, 2008, as
filed with the SEC on June 20, 2008, or the Company’s Form 10-QSB for the
quarterly period ended May 31, 2008, as filed with the SEC on July 8, 2008, or
(iii)".
| 3. | Termination Date. Section 8.1(b) of the Agreement is hereby amended by deleting the phrase "October 31, 2008" and inserting "November 30, 2008" in lieu thereof. | |
| 4. |
CVR Agreement. Exhibit C to the
Agreement is hereby deleted in its entirety and replaced with the Form of
Contingent Value Rights Agreement attached
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as Annex I
hereto.
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| 5. | Defined Terms. Capitalized terms which are used in this Amendment but are not otherwise defined herein shall have the meanings ascribed to such terms in the | |
| Agreement. | ||
| 6. |
Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the State of
Delaware, without regard to conflicts of
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laws provisions
thereof.
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| 7. | Section Headings. Section headings used in this Amendment are for convenience only and shall not affect the construction of this Amendment. | |
| 8. |
Ratification of
Agreement. Except as expressly modified or
amended by this Amendment, all of the provisions of the Agreement are
hereby ratified,
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confirmed and
approved and shall remain in full force and effect.
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| 9. |
Further Assurances. Each party
hereto shall, upon the reasonable request of any other party hereto,
execute and deliver such further instruments and
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do such further acts
as may be reasonably necessary or proper to carry out more effectively the
provisions of and the transactions contemplated by this
Amendment.
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| 10. |
Counterparts. This Amendment
may be executed and delivered (including, without limitation, by facsimile
transmission), in counterparts, each of which
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shall be deemed an
original, but all of which shall constitute the same
instrument.
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[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
first written above.
| Parent: | |||
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ONSTREAM
MEDIA CORPORATION
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By:
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| Name: Xxxxx Xxxxxx | |||
| Title: President | |||
| Merger Sub: | |||
| ONSTREAM MERGER CORP. | |||
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By:
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| Name: Xxxxx Xxxxxx | |||
| Title: President | |||
| Company: | |||
| NARROWSTEP INC. | |||
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By:
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| Name: | |||
| Title: | |||
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Annex I
4
FORM
OF CONTINGENT VALUE RIGHTS AGREEMENT
CONTINGENT
VALUE RIGHTS AGREEMENT (this "Agreement"), dated
_________ __, 2008, by and among Onstream Media Corporation (“Parent”), a Florida
corporation, X. Xxxxxx Xxxxx XX, as CVR Representative (the "CVR Representative")
and Interwest Transfer Co., as Rights Agent (the “Rights Agent”), in
favor of each person (a “Holder”) who from
time to time holds one or more Contingent Value Rights (the “CVRs”) to receive a
number of shares of Parent common stock, $0.0001 par value per share (the “Parent Common
Stock”), in the amounts and subject to the terms and conditions set forth
herein. A registration statement on Form S-4 (No. 333-______) (the
“Registration
Statement”) with respect to, among other securities, the CVRs, has been
prepared and filed by Parent with the Securities and Exchange Commission (the
“Commission”)
and has become effective in accordance with the Securities Act of 1933, as
amended (the “Act”). This
Agreement is entered into in connection with the Agreement and Plan of Merger,
dated as of May 29, 2008, by and among Parent, Onstream Merger Corp. (“Merger Sub”),
Narrowstep Inc. (the “Company”), and X.
Xxxxxx Xxxxx XX, as amended by First Amendment to Agreement and Plan of Merger,
dated as of August __, 2008 (the “Merger Agreement”),
which sets forth the allocation of (i) one CVR for each outstanding share of
Company Common Stock immediately prior to the Effective Time (including any
Company Restricted Stock Awards outstanding immediately prior to the Effective
Time) and (ii) one CVR issuable for each share of Company Common Stock issuable
immediately prior to the Effective Time upon exercise of a Company Warrant, on
the terms and subject to the conditions set forth herein. Unless the
context requires otherwise, terms used but not defined herein shall have the
meanings assigned to such terms in the Merger Agreement.
| Section 1. |
Appointment of Rights
Agent. Parent hereby appoints the Rights Agent to act in
accordance with the instructions set forth herein, and the Rights
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Agent hereby
accepts such appointment, upon the terms and conditions hereinafter set
forth.
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| Section 2. | Issuance of CVRs; Form of CVR Certificate. |
2.1 The
CVRs shall be issued (i) as a portion of the Merger Consideration at the times
and in the manner set forth in the Merger Agreement, and (ii) in connection with
the exercise of the Company Warrants pursuant to Section 1.6(f) of the Merger
Agreement at the times and in the manner set forth in the Merger Agreement and
in this Agreement.
2.2 In
the event of the exercise of a Company Warrant prior to the Final Exercise Date
(as defined herein), Parent shall, as soon as practicable following the date of
such exercise, notify the Rights Agent of such exercise, including the name and
mailing address of the exercising Company Warrant holder; and (ii) the Rights
Agent shall record in the CVR Register (as defined herein) that such holder owns
a number of CVRs equal to the number of shares of Company Common Stock that
would have been issued if such exercise occurred immediately prior to the
Effective Time.
2.3 As
soon as practicable following the Final Exercise Date, Parent shall notify the
Rights Agent of any Company Warrants that have not been exercised in full as of
such time. Any Company Warrants that are not exercised prior to the
Final Exercise Date shall not be entitled to receive any CVRs or CVR
Consideration (as defined herein); provided, however, that nothing contained
herein shall affect the rights of the holders of Company Warrants to receive
Parent Common Stock upon the exercise thereof in accordance with their
respective terms and the Merger Agreement.
2.4 The
CVRs shall be evidenced by certificates (the “CVR Certificates”),
substantially in the form attached hereto as Exhibit
A. The CVR Certificates may have such letters, numbers, or
other marks of identification or designation and such legends, summaries, or
endorsements printed, lithographed, or engraved thereon as Parent may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with applicable law or with any rule or
regulation made pursuant thereto.
2.5 The
CVR Certificates shall be executed on behalf of Parent by the manual or
facsimile signature of the present or any future President or Vice President of
Parent, under its corporate seal, affixed or in facsimile, attested by the
manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of Parent and countersigned by Rights Agent. CVR
Certificates shall be dated as of the date of the initial issuance thereof or
the date of any subsequent transfer, as the case may be.
2.6 Notwithstanding
the foregoing, CVRs issued upon exercise of Company Warrants may, at Parent's
option, be issued in uncertificated form. Any CVRs issued in
uncertificated form shall be the same security, in every manner and in every
respect, as a CVR for which a CVR Certificate has been issued (including, but
not limited, with respect to the rights, powers, privileges and preferences
existing under this Agreement.
| Section 3. | Registration. |
3.1 The
Rights Agent shall maintain an ownership register (the "CVR Register") in
which the Rights Agent shall provide for the registration of the CVRs, including
any CVRs issued in certificated or book entry form to holders of Company
Warrants. Prior to transfer of any CVR as provided for herein, in the
case of CVRs for which CVR Certificates have been issued, Parent and the Rights
Agent may deem and treat the registered Holder thereof as the absolute owner of
the CVR Certificates (notwithstanding any notation of ownership or other writing
thereon made by anyone other than Parent or the Rights Agent), for the purpose
of the CVR Consideration and for all other purposes, and neither Parent nor the
Rights Agent shall be affected by any notice to the contrary.
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3.2 A
Holder may make a written request to the Rights Agent or Parent to change such
Holder's address of record in the CVR Register. Upon receipt of such
written notice by the Rights Agent, the Rights Agent shall promptly record the
change of address in the CVR Register.
| Section 4. | Payment and Exchange of CVRs. |
4.1 CVR Exchange Ratio.
(a) Subject
to and in accordance with the terms of this Agreement, each CVR (including any
CVRs owned by Company Warrant holders pursuant to this Agreement) shall be
converted and become the right to receive a number of duly authorized, validly
issued, fully paid and nonassessable shares of Parent Common Stock (the "CVR Shares") equal to
the sum of (i) the CVR Year One Exchange Ratio (as defined herein), plus (ii) the CVR
Year Two Exchange Ratio (as defined herein), plus (iii) in the
case of CVRs issued other than in respect of Company Warrants, the Warrant
Expiration Exchange Ratio (as defined herein); plus (iv) the 2006 Warrant
Expiration Exchange Ratio (as defined herein); provided, however, that, the
maximum number of CVR Shares deliverable hereunder shall not exceed (A)
20,000,000, minus (B) the number
of shares of Parent Common Stock into which shares of Company Common Stock are
converted pursuant to Section 1.6(a)(i)(a) of the Merger Agreement, excluding,
in the case of this clause (B) any unvested Company Restricted Stock Awards that
fail to vest in accordance with their respective terms, minus (C) the number
of shares of Parent Common Stock into which shares of Company Series A Preferred
Stock are converted pursuant to Section 1.6(a)(iv) of the Merger
Agreement. The CVR Shares that may be issued pursuant to the terms of
this Agreement are sometimes referred to herein as the "CVR
Consideration". Notwithstanding anything in this Agreement to
the contrary, the number referenced in clause (A) of the immediately preceding
sentence shall, until the such time as any CVR Shares are issuable pursuant to
Section 4.3(e) hereof, be deemed to equal 19,900,000 and thereafter shall be 20,000,000
less the number of shares of Parent Common Stock issued upon the cashless
exercise of Company 2006 Warrants but such reduction not to exceed
100,000.
(b) "CVR Year One Exchange
Ratio" means the quotient obtained by dividing (i) the sum of (A) the
First Year Revenue Shares (as defined herein), plus (B) the First
Year Additional Revenue Shares (as defined herein), less (C) the lesser
of 100,000 or the sum of the First Year Revenue Shares and the First Year
Additional Revenue Shares by (ii) the sum of
(X) the total number of shares of Company Common Stock outstanding immediately
prior to the Effective Time (other than Cancelled Shares and Subsidiary Held
Shares) plus
(Y) the number of CVRs issuable upon exercise of the Company Warrants pursuant
to Section 1.6(f) of the Merger Agreement. Notwithstanding anything
contained herein to the contrary, in the event the CVR Year One Exchange Ratio
is a negative number, the CVR Year One Exchange Ratio shall be deemed, for all
purposes, to be zero.
(c) "First Year Revenue
Shares" means a number of shares of Parent Common Stock equal to the
product of (A) two (2) multiplied by (B) the
First Year Revenue (as defined herein) minus the Annualized
Company Revenue (as defined in the Merger Agreement) or minus $4,250,000 if
the Minimum Exchange Ratio (as defined in the Merger Agreement) exceeded the
Exchange Ratio (as defined in the Merger Agreement); provided, however, that if the
First Year Revenue exceeds $8,000,000, for purposes of this Section 4.1(c) only,
First Year Revenue shall be deemed to be $8,000,000. "First Year Revenue"
means (A) all revenue recognized by Parent, the Surviving Corporation or any of
their respective affiliates, in accordance with generally accepted accounting
principles, applied on a basis consistent with the Company's financial
statements, with respect to the Business, during the period commencing on 180
day anniversary of the Closing Date and ending on the eighteen month anniversary
of the Closing Date (such period the “First Year” and such anniversary, the
"Eighteen Month
Anniversary") (the "First Year Gross
Revenue"), minus (B) any First
Year Bad Debt Expense (as defined herein). "First Year Bad Debt
Expense" means, subject to the immediately following sentence, an amount
equal to the product of (X) (1) the amount recorded by Parent or the Surviving
Corporation as actual write-offs of revenue of the Business during the First
Year divided by
First Year Gross Revenue minus (2) 0.01 multiplied by (Y)
First Year Gross Revenue, but only to the extent such product exceeds one
percent (1.0%) of the First Year Gross Revenue. Notwithstanding
anything in this Agreement to the contrary, in the event the amount recorded by
Parent or the Surviving Corporation as actual write-offs of revenue of the
Business during the First Year exceeds nine percent (9.0%) of the First Year
Gross Revenue, First Year Bad Debt expense shall be deemed to equal eight
percent (8.0%) of the First Year Gross Revenue.
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(d) "Business" means the
business of developing, selling and servicing (including, but not limited to,
with respect to customers of Parent, or any of its affiliates, existing prior to
the Effective Time) (i) any products or services offered by the Company or its
subsidiaries on or prior to the date of the Merger Agreement; (ii) any products
or services in development by the Company or its subsidiaries on or prior to the
date of the Merger Agreement, including, but not limited to, the Company's
"TelvOS" product; and (iii) any products or services derived or based, in whole
or in part, on the products or services referenced in the foregoing clauses (i)
and (ii).
(e) "First Year Additional
Revenue Shares" means a number of shares of Parent Common Stock equal to
the product of (A) one (1) multiplied by (B) an
amount equal to the First Year Revenue minus
$8,000,000.
(f) "CVR Year Two Exchange
Ratio" means the quotient obtained by dividing (i) (A) the Second Year
Revenue Shares (as defined herein) minus (B) the lesser
of (1) 100,000 less the number determined under Section 4.1(b)(i)(C) hereof or
(2) the Second Year Revenue Shares by (ii) the sum of
(X) the total number of shares of Company Common Stock outstanding immediately
prior to the Effective Time (other than Cancelled Shares and Subsidiary Held
Shares) plus
(Y) the number of CVRs issuable upon exercise of the Company Warrants pursuant
to Section 1.6(f) of the Merger Agreement. Notwithstanding anything
contained herein to the contrary, in the event the CVR Year Two Exchange Ratio
is a negative number, the CVR Year Two Exchange Ratio shall be deemed, for all
purposes, to be zero.
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(g) "Second Year Revenue
Shares" means a number of shares of Parent Common Stock equal to the
product of (A) one (1) multiplied by (B) an
amount equal to (x) the Second Year Revenue (as defined herein) minus (y) the product
of 0.5 and the First Year Revenue provided that in the event First Year Revenue
is less than $4,250,000 then Second Year Revenue Shares shall be
zero. "Second Year Revenue"
means (A) all revenue recognized by Parent, the Surviving Corporation or any of
their respective affiliates, in accordance with generally accepted accounting
principles, consistently applied, with respect to the Business during the period
commencing on the eighteen month anniversary of the Closing Date and ending on
the twenty-four month anniversary of the Closing Date (such anniversary, the
"Twenty-four Month
Anniversary") (the "Second Year Gross
Revenue"), minus (B) any Second
Year Bad Debt Expense (as defined herein). "Second Year Bad Debt
Expense" means, subject to the immediately following sentence, an amount
equal to the product of (X) (1) the amount recorded by Parent or the Surviving
Corporation as actual write-offs of revenue of the Business during the First
Year divided by
First Year Gross Revenue minus (2) 0.01 multiplied by (Y)
Second Year Gross Revenue, but only to the extent such product exceeds one
percent (1.0%) of the Second Year Gross Revenue. Notwithstanding
anything in this Agreement to the contrary, in the event the amount recorded by
Parent or the Surviving Corporation as actual write-offs of revenue of the
Business during the Second Year exceeds nine percent (9.0%) of the Second Year
Gross Revenue, Second Year Bad Debt expense shall be deemed to equal eight
percent (8.0%) of the Second Year Gross Revenue.
(h) "Warrant Expiration Exchange
Ratio" means a number of shares of Parent Common Stock equal to the
quotient obtained by dividing (i) (A) the number of shares of Parent Common
Stock holders of Company Warrants would have been entitled to receive pursuant
to this Agreement if such holders exercised all Company Warrants in full prior
to the Final Exercise Date, minus (B) the number
of shares of Parent Common Stock holders of Company Warrants received (or became
entitled to receive) in connection with CVRs acquired (or deemed to be acquired)
upon exercise of all Company Warrants prior to the Final Exercise Date, by (ii) the total
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time (other than Cancelled Shares and Subsidiary Held
Shares).
(i) "2006 Warrant Expiration
Exchange Ratio" means the quotient obtained by dividing (i) the positive
difference, if any, obtained by subtracting (A) the product of 0.5 multiplied by
the number of shares of Parent Common Stock acquired in the aggregate upon
cashless exercises of the Company 2006 Warrants (as defined herein) from (B)
100,000 by (ii)
the sum of (X) the total number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (other than Cancelled Shares and
Subsidiary Held Shares) plus (Y) the number
of CVRs issuable upon exercise of the Company Warrants pursuant to Section
1.6(f) of the Merger Agreement. "Company 2006
Warrants" means those warrants issued pursuant to that certain Purchase
Agreement, dated as of February 22, 2006, by and among the Company and the
purchasers named therein.
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(j) Parent
will deliver to Rights Agent all calculations and a list of any CVRs or CVR
Shares to be issued including all registration and issuance information, as it
is understood that the Rights Agent does not determine these
matters.
| 4.2 | Statements of Additional Shares. |
(a) No
later than sixty (60) days after the Eighteen Month
Anniversary, Parent shall deliver to CVR Representative a certificate
setting forth a calculation of the CVR Year One Exchange Ratio. Such
statement shall be certified by Parent's chief financial officer ("Parent's Year One
Report").
(b) No
later than sixty (60) days after the Twenty-four Month Anniversary, Parent shall
deliver to CVR Representative a certificate setting forth a calculation of the
CVR Year Two Exchange Ratio. Such statement shall be certified by
Parent's chief financial officer ("Parent's Year Two
Report"). Parent's Year One Report and Parent's Year Two
Report are sometimes individually and collectively referred to herein as "Parent's
Report".
(c) If
within thirty (30) days upon delivery of a Parent's Report, CVR Representative
has not given written notice of its objection to such report (which notice shall
state in reasonable detail the basis of CVR Representative's response or
objection), then such Parent's Report shall be binding on the
Holder. If CVR Representative gives Parent a written objection and if
the parties fail to resolve the issues outstanding with respect to such report
within a period of thirty (30) days after notification of rejection, the parties
shall submit the issues remaining in dispute to an independent public accounting
firm (the "Independent
Accountant") acceptable to the parties for resolution. The
parties agree to execute such engagement or similar letter as reasonably
requested by the Independent Accountant. If issues are submitted to
the Independent Accountant for resolution, the parties shall or cause to be
furnished to the Independent Accountant such work papers and other documents and
information related to those disputed issues as the Independent Accountant may
request and are available to that party or its representatives before the
opportunity to present to the Independent Accountant any material related to the
disputed issues and discuss the issues with the Independent
Accountant. Parent and the CVR Representative shall use their
commercially reasonable efforts to cause the Independent Accountant to make a
determination within thirty days of accepting its selection.
(d) The
decision of the Independent Accountant shall be final, binding and conclusive
resolution of the parties' dispute, shall be non-appealable and shall not be
subject to further review.
(e)
Parent will bear one hundred percent (100%) of the fees and costs of the
Independent Accountant for such determination; provided, however, that in the
event that the Independent Accountant determines pursuant to Section 4.2(d) that
a Parent's Report, as submitted pursuant to Section 4.2(a) or Section 4.2(b), as
applicable, is correct, then the fees and costs of the Independent Accountant
(the "Accountant Fees") shall be paid by Parent to the Independent Accountant
and to the extent so paid shall be set off against the number of CVR Shares
otherwise deliverable to Holders hereunder, in accordance with the following
sentence of this Section 4.2(e). The aggregate CVR Shares issuable in
respect of (i) the Year One Exchange Ratio shall be reduced by an amount equal
to the quotient obtained by dividing the Accountant Fees relating to Parent's
Year One Report by the average of the last reported sales prices of Parent
Common Stock on the primary exchange where it is traded for the last fifteen
trading days immediately preceding the date of determination of the Year One
Exchange Ratio, and (ii) the Year Two Exchange Ratio shall be reduced by an
amount equal to the quotient obtained by dividing the Accountant Fees relating
to Parent's Year Two Report by the average of the last reported sales prices of
Parent Common Stock on the primary exchange where it is traded for the last
fifteen trading days immediately preceding the date of determination of the Year
Two Exchange Ratio.
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(f) Upon
delivery of a Parent's Report, Parent will provide the CVR Representative and
its accountants and advisors access to (i) Parent's Chief Financial Officer for
questions, and (ii) the books and records of the Surviving Corporation
(including any work papers used to prepare a Parent's Report) and such other
information requested by such persons, in each case to the extent reasonably
necessary related to the CVR Representative's evaluation of a Parent's Report
and the calculations therein.
| 4.3 | Issuance of CVR Shares. |
(a) The
date on which the Parent's Year One Report becomes final and binding on the
parties pursuant to Section 4.2 hereof shall be referred to herein as the "Year One Final Determination
Date" and the date on which the Parent's Year Two Report becomes final
and binding on the parties pursuant to Section 4.2 hereof shall be referred to
herein as the "Year
Two Final Determination Date". Each of the Year One Final
Determination Date and the Year Two Final Determination Date are sometimes
referred to herein as a "Final Determination
Date".
(b) On
the Year One Final Determination Date, each CVR outstanding immediately prior to
such date shall be entitled to receive a number of shares of Parent Common Stock
equal to the CVR Year One Exchange Ratio as finally determined hereunder and
subject to the maximum number of CVR Shares set forth in Section
4.1(a).
(c) On
the Year Two Final Determination Date, each CVR outstanding immediately prior to
such date shall be entitled to receive a number of shares of Parent Common Stock
equal to the CVR Year Two Exchange Ratio as finally determined hereunder and
subject to the maximum number of CVR Shares set forth in Section
4.1(a).
(d) On
the Year Two Final Determination Date, each CVR outstanding immediately prior to
such date (other than CVRs issued in respect of Company Warrants) shall be
entitled to receive a number of Shares of Parent Common Stock equal to the
Warrant Expiration Exchange Ratio as finally determined hereunder and subject to
the maximum number of CVR Shares set forth in Section 4.1(a).
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(e) On
the first business day following the expiration date of the Company 2006
Warrants (or such earlier date as when each outstanding Company 2006 Warrant has
been exercised in full), each CVR outstanding immediately prior to such date
shall be entitled to receive a number of shares of Parent Common Stock equal to
the 2006 Warrant Exchange Ratio, subject to the maximum number of CVR Shares set
forth in Section 4.1(a). The
Parent may at its sole option elect to issue the shares under this Section
4.3(e) on a date earlier than stated herein.
(f) Notwithstanding
anything in foregoing to the contrary, if prior to either the Year One Final
Determination Date or the Year Two Final Determination Date, there is a change
in the number or class of issued and outstanding shares of Parent Common Stock
as the result of reclassification, subdivision, recapitalization, stock split
(including reverse stock split), stock dividend, combination or exchange of
shares, the number of shares of Parent Common Stock to be issued in exchange for
the CVRs pursuant to Sections 4.1(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.4 or 4.5
hereof, as the case may be, shall be correspondingly adjusted to reflect such
event.
(g) No
fractional shares of Parent Common Stock shall be issued pursuant to this
Agreement. In lieu of fractional shares, each Holder who would
otherwise have been entitled to a fraction of a share of Parent Common Stock
hereunder (after aggregating all fractional shares to be received by such
Holder), shall have any fractional shares rounded down to the nearest whole
share of Parent Common Stock.
| 4.4 | Change of Control. |
(a) Notwithstanding
anything in this Agreement to the contrary, in the event Parent publicly
announces (or is required by law to publicly announce) a Change of Control (as
defined herein) transaction at any time before the six month anniversary of the
date of this Agreement (the "Six Month
Anniversary"), the Surviving Person (as defined herein) shall assume all
of the Parent's and the Surviving Corporation's obligations under this Agreement
pursuant to Section 14.1 through 14.3 hereof. In the event Parent
enters into a Change of Control at any time on or after the Six Month
Anniversary and the Surviving Person does not assume all of the Parent’s and the
Surviving Corporation’s obligations under this Agreement pursuant to Section
14.1 through 14.3 hereof, then subject to and in accordance with the terms of
this Agreement, immediately following such announcement each CVR shall be
converted and become the right to receive a number of CVR Shares as set forth in
Section 4.4(b) below.
(b) Subject
to the conditions set forth in Section 4.4(a) above, in the event Parent
publicly announces (or is required by law to publicly announce) (the date of
such announcement or required announcement, the "Post-Six Month Change of
Control Announcement Date") a Change of Control at any time on or after
the Six Month Anniversary (a "Post-Six Month Change of
Control"), each CVR (including any CVRs owned by Company Warrant holders
pursuant to Section 2.2 hereof and any CVRs issued in respect of Company
Restricted Stock Awards) shall be converted and become the right to receive a
number of CVR Shares equal to the CVR Year One Exchange Ratio plus the CVR Year Two
Exchange Ratio (except that in calculating each of such ratios, First Year
Revenue and Second Year Revenue shall each be deemed to equal the corresponding
portion of the Change of Control Revenue (as defined herein) relative to each of
those two periods, respectively).
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(c) Notwithstanding
the above, nothing in this Section 4.4 shall result in (i) a change in the
calculation of the CVR Year One Exchange Ratio set forth in Section 4.1(b), or
the replacement of First Year Revenue used in that calculation, if the Change of
Control occurs after the Eighteen Month Anniversary or (ii) a change in the
calculation of the CVR Year Two Exchange Ratio set forth in Section 4.1(f), or
the replacement of Second Year Revenue, if the Change of Control occurs after
the Twenty-four Month Anniversary.
(d) "Change of Control
Revenue " means (A) all revenue recognized by Parent, the Surviving
Corporation or any of their respective affiliates, in accordance with generally
accepted accounting principles, applied on a basis consistent with the Company's
financial statements, with respect to the Business ("Business Revenue"), during
the period commencing on the Closing Date and ending on the last full quarter
immediately preceding the Post-Six Month Change of Control Announcement Date,
plus (B) the
Estimated Quarter Amount (as defined below) for the quarter during which the
Post-Six Month Change of Control occurs, plus (C) an amount
equal to (x) the Estimated Quarter Amount multiplied by (y) the
average quarter over quarter growth rate (expressed as a decimal plus 1.0) for
the immediately preceding two quarters multiplied by (z) the
number of quarters remaining until and including the occurrence of Twenty-four
Month Anniversary, in each case compounded quarterly. Business
Revenue calculated under this Section 4.4(d), as well as under Section 4.4(e)
below, shall reflect (i) a reduction for (1) bad debt expense computed on basis
consistent with Section 4.1(c) of this Agreement and (2) non-recurring fees and
terminated contracts computed on a basis consistent with clauses (C)(i) and
(C)(ii) contained in the second sentence of Section 1.1(e) of the Merger
Agreement; and (ii) an increase for Eligible Contracts computed on a basis
consistent with clause (B) of the second sentence of Section 1.1(e) of the
Merger Agreement.
(e) "Estimated Quarter
Amount" means (1) all Business Revenue during each completed month during
such quarter plus (2) (x) all
Business Revenue for the last completed month during such quarter multiplied by (y) the
average month over month growth rate (expressed as a decimal plus 1.0) for the
immediately preceding three months multiplied by (z) the
number of remaining uncompleted months in such quarter.
(f) For
purposes of this Agreement, "Change of Control"
means (1) the consummation of any transaction, including without limitation, any
merger or consolidation, pursuant to which any of the voting stock of Parent is
converted into or exchanged for cash, securities or other property, other than
any transaction where the voting stock of Parent outstanding immediately prior
to such transaction is converted into or exchanged for voting stock of the
surviving or transferee entity constituting more than 50% of such voting stock
of such surviving or transferee entity (immediately after giving effect to such
issuance); or (2) a sale of all or substantially all of Parent’s
assets.
9
| 4.5 | Issuance of CVR Shares upon Exercise of Company Warrants. |
(a) As
soon as practicable, and in any event within ten business days, after each of
the Year One Final Determination Date and the Year Two Final Determination Date,
Parent shall deliver to each holder of an outstanding Company Warrant a notice
stating (i) the number of CVR Shares issuable in respect of each share of Parent
Common Stock subject to such Company Warrant with respect to the CVR Year One
Exchange Ratio and the CVR Year Two Exchange Ratio, as applicable; and (ii) in
order to receive such CVR Shares the holder must exercise the Company Warrant by
not later than the Initial Exercise Date (as defined herein) and the Final
Exercise Date, as applicable, except that if the holder exercises subsequent to
the Initial Exercise Date but prior to the Final Exercise Date, such holder
shall be entitled to receive any CVR Shares payable in respect of the CVR Year
One Exchange Ratio and the CVR Year Two Exchange Ratio. "Initial Exercise
Date" means the thirty day anniversary of the Year One Final
Determination Date. "Final Exercise Date"
means the thirty day anniversary of the Year Two Final Determination
Date.
(b) In
the event of any exercise of any Company Warrant prior to the Final Exercise
Date in accordance with the terms of such Company Warrants, in lieu of issuing
CVR Certificates to the holder of such Company Warrant, the Rights Agent shall
(i) record such issuance of CVRs in the CVR Register in accordance with Section
2.2 hereof and (ii) in the same manner and the same times it delivers CVR Shares
to CVR Holders pursuant to Section 4.6 of this Agreement, deliver to such
Company Warrant holder the number of CVR Shares such holder became entitled to
receive by virtue of exercising such Company Warrant.
(c) As
soon as practicable, and in any event within ten business days, after the
Post-Six Month Control Announcement Date, Parent shall deliver to each holder of
an outstanding Company Warrant a notice stating (i) the number of CVR Shares
issuable in respect of each share of Parent Common Stock subject to such Company
Warrant pursuant to Section 4.4 hereof; and (ii) in order to receive such CVR
Shares the holder must exercise the Company Warrant by not later than the
Post-Six Month Change of Control Exercise Date. "Post-Six Month Change of
Control Exercise Date" means the thirty-five day anniversary of the
Post-Six Month Change of Control Announcement Date.
(d) In
the event of any exercise of any Company Warrant prior the Post-Six Month Change
of Control Exercise Date, in accordance with the terms of such Company Warrants,
in lieu of issuing CVR Certificates to the holder of such Company Warrant, the
Rights Agent shall (i) record such issuance of CVRs in the CVR Register in
accordance with Section 2.2 hereof and (ii) in the same manner and the same time
it delivers CVR Shares to CVR Holders pursuant to Section 4.6 of this Agreement,
deliver to such Company Warrant holder the number of CVR Shares such holder
became entitled to receive by virtue of exercising such Company
Warrant.
10
(e) Prior
to any delivery of CVR Shares pursuant to Sections 4.4(b) or 4.4(d) above, each
holder who exercises a Company Warrant shall be the Holder of a CVR evidencing
such CVR Shares deliverable in respect thereof and may transfer such ownership
in accordance with Article 6 hereof, regardless of whether such CVR was issued
in uncertificated form.
| 4.6 | Delivery of CVR Shares. |
(a) Each
Holder of record of CVRs (including CVRs issued to holders of Company Warrants)
as of the Initial Exercise Date and as of the Final Exercise Date, shall be
entitled to receive CVR Shares issuable in respect of the Year One Exchange
Ratio (in the case of the Initial Exercise Date) and the Year Two Exchange Ratio
(in the case of the Final Exercise Date). Within ten business days
after each of the Initial Exercise Date and the Final Exercise Date, Parent
shall issue and deliver to each CVR Holder as of such date a certificate
representing that number of whole shares of Parent Common Stock into which the
CVRs theretofore owned by such person shall have been converted pursuant to the
provisions of this Agreement. Shares of Parent Common Stock into
which the CVRs shall be converted (including exercised Company Warrants) at the
Year One Final Determination Date and the Year Two Final Determination Date, as
applicable, shall be deemed to have been issued on such respective
date. If any certificates representing shares of Parent Common Stock
are to be issued in a name other than that in which the CVR Certificate is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall deliver to the Rights Agent all documents necessary to
evidence and effect such transfer and shall pay to the Rights Agent any transfer
or other taxes required by reason of the issuance of a certificate representing
shares of Parent Common Stock in a name other than that of the registered Holder
of the CVR Certificate surrendered, or establish to the satisfaction of the
Rights Agent that such tax has been paid or is not applicable.
(b) Notwithstanding
the foregoing, in the event of conversion of the CVRs upon a Change of Control
pursuant to Section 4.4 hereof, Parent shall deliver CVR Shares to the Holders
(including the Company Warrant holders) in accordance with the procedures set
forth in this Section 4.6(b). Parent shall issue and deliver to each
CVR Holder as of the Post-Six Month Change of Control Exercise Date a
certificate representing that number of whole shares of Parent Common Stock into
which the CVRs theretofore owned by such person shall have been converted
pursuant to the provisions of this Agreement. Shares of Parent Common
Stock into which the CVRs shall be converted (including in the case of exercised
Company Warrants) shall be deemed to have been issued on such respective
date. If any certificates representing shares of Parent Common Stock
are to be issued in a name other than that in which the CVR Certificate is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall deliver to the Rights Agent all documents necessary to
evidence and effect such transfer and shall pay to the Rights Agent any transfer
or other taxes required by reason of the issuance of a certificate representing
shares of Parent Common Stock in a name other than that of the registered Holder
of the CVR Certificate surrendered, or establish to the satisfaction of the
Rights Agent that such tax has been paid or is not applicable.
11
4.7 Lost
Certificates. If any CVR Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such CVR Certificate to be lost, stolen or destroyed and, if required
by the Rights Agent, the posting by such person of an open ended indemnity bond
as indemnity of both Parent and Rights Agent against any claim that may be made
against it with respect to such CVR Certificate, the Rights Agent shall deliver
in exchange for such lost, stolen or destroyed CVR Certificate (a) if prior to a
Final Determination Date, a new CVR Certificate of like tenor and evidencing the
number of CVRs evidenced by the CVR Certificate so lost, stolen or destroyed or
(b) if after a Final Determination Date, the applicable certificates
representing shares of Parent Common Stock.
4.8 Withholding
Rights. Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any Holder of
CVRs such amounts as it is required to deduct and withhold with respect to the
making of such payment under the any provision of federal, state, local or
foreign tax law. To the extent that amounts are so withheld by Parent
and paid over to the appropriate taxing authority, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the Holder
of the CVRs in respect of which such deduction and withholding was
made.
Section
5. Registration of
CVRs.
5.1 The
CVRs have been registered pursuant to the Registration Statement under the
Act. Parent covenants and agrees:
(a) to
prepare and file with the SEC such amendment and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary
and to maintain the effectiveness of the Registration Statement so long as any
CVRs or Company Warrants remain outstanding;
(b) as
expeditiously as possible, to register or qualify the CVRs under the Securities
or Blue Sky laws of each jurisdiction in which such registration or
qualification is necessary; and
(c) to
pay all expenses incurred by it in complying with this Section 5.1, including,
without limitation, (i) all registration and filing fees, (ii) all printing
expenses, (iii) all fees and disbursements of counsel and independent public
accountants for Parent, and (iv) all National Association of Securities
Dealers, Inc., FINRA, and Blue Sky fees and
expenses.
Section
6. Exchange, Transfer,
or Assignment of CVRs.
6.1 CVRs
and any interest therein shall not be sold, assigned, transferred, pledged,
encumbered or in any other manner transferred or disposed of, in whole or in
part, other than through a Permitted Transfer (as defined herein) and in
compliance with applicable United States federal and state securities laws and
the terms and conditions hereof. A “Permitted Transfer” shall mean
the transfer of any or all of the CVRs by operation of law (including a
consolidation or merger) or in connection with the dissolution of any
corporation or other entity.
12
6.2 In
the event of a Permitted Transfer, CVRs may be assigned or transferred upon
surrender of CVR Certificates to the Rights Agent (except with respect to such
Holders for which CVR Certificates were not issued), accompanied (if so required
by Parent or the Rights Agent) by a written instrument or instruments of
transfer in form reasonably satisfactory to Parent and the Rights Agent, duly
executed by the registered holder or by a duly authorized representative or
attorney, such signature to be have a Medallion Guarantee from a commercial bank
or trust company having an office in the United States, by a broker or dealer
that is a member of the National Association of Securities Dealers, Inc., or by
a member of a national securities exchange. Upon any such
registration of transfer, a new CVR Certificate shall be issued to the
transferee and the surrendered CVR Certificate shall be cancelled by the Rights
Agent. CVR Certificates so cancelled shall be delivered by the Rights
Agent to Parent from time to time or otherwise disposed of by the Rights Agent
in its customary manner.
6.3 The
cost of any transfer or assignment of CVRs shall be paid (including the cost of
any transfer tax) by the holder, based on the Rights Agents customary fee
schedule, and any new CVR Certificates issued pursuant to this Section 6 shall
be dated the date of such transfer or assignment.
6.4 Notwithstanding
anything in the foregoing to the contrary, a Company Warrant holder (or former
Company Warrant holder) that owns a CVR, regardless of whether such CVR was
issued in uncertificated form, may effect a Permitted Transfer by delivering to
the Rights Agent such documentation as reasonably requested by the Rights
Agent.
Section
7.
Parent Covenants
Regarding Operation of the Business.
7.1 From
and after the Effective Time and until the Twenty-four Month Anniversary, Parent
and the Surviving Corporation, shall perform, or cause to be performed, the
actions set forth in Sections 7.2 and 7.3 hereof with respect to the
Business.
7.2 Parent
shall keep complete and accurate records with respect to the
Business. The books and records shall be maintained in such a manner
that the CVR Year One Exchange Ratio and the CVR Year Two Exchange Ratio shall
be readily verifiable and shall be available for inspection by the CVR
Representative upon reasonable prior notice during normal business
hours.
7.3 Parent
shall operate the Business, or cause the Business to be operated, (i) using
commercially reasonable efforts to maximize revenues generated by the Business
and to minimize write-offs of such revenues, and (ii) without limiting the
generality of the foregoing, in accordance with the Plan.
13
7.4 Notwithstanding
anything contained in this Agreement, Parent may discontinue the operations of
the Business of the Surviving Corporation at any time following the three month
anniversary of the Effective Time, without the consent of the Holders or the CVR
Representative and without liability to the Holders or the CVR Representative
with respect to such discontinuation, in the event that Parent's Board of
Directors determines in good faith that, despite compliance with Sections 7.1
through 7.3 hereof, it is reasonably certain that (i) First Year Revenue will
not exceed the greater of Annualized Company Revenue and $4,500,000, or (ii) in
the case of a determination after the Eighteen Month Anniversary, the Second
Year Revenue will not exceed 50% of the greater of First Year Revenue and
$4,500,000.
Section
8. Rights of CVR Certificate
Holder. Except as otherwise provided in this Agreement, the
Holder of any CVR Certificate or CVR, shall not, by virtue thereof, be entitled
to any rights of a stockholder of Parent, either at law or in
equity. The rights of the Holders are limited to those
expressed in this Agreement and the Merger Agreement and, in the case of holders
of any Company Warrants, in such Company Warrants and any related agreements
pursuant to which such Company Warrants were issued.
Section
9. Availability of
Information. Parent will provide to the Rights Agent all
information in connection with this Agreement and the CVRs that the Rights Agent
may reasonably request.
Section
10. Reservation of
Stock. Parent covenants that it will reserve from its
authorized and unissued Parent Common Stock a sufficient number of shares to
provide for the issuance of Parent Common Stock pursuant to the CVRs (including
Parent Common Stock issuable pursuant to CVRs issued, or that may be issued, to
holders of Company Warrants). Parent further covenants that all
shares that may be issued pursuant to the CVRs will be free from all taxes,
liens and charges in respect of the issue thereof. Parent agrees that
its issuance of the CVRs shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Parent Common Stock issuable pursuant
hereto and that upon issuance such shares of Parent Common Stock shall be
validly issued, fully paid and nonassessable.
Section
11. Tax
Treatment. Parent (and each of its affiliates) shall for
federal income tax purposes treat any issuance of CVR Shares as a payment made
in connection with the acquisition of Company Common Stock, and Parent (and each
of its affiliates) shall file any tax return reporting the issuance of CVR
Shares consistent with such treatment.
Section
12. Duties of Rights
Agent. The Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which Parent and the Holders, by their acceptance hereof, shall be
bound.
14
12.1 The
statements contained herein and in the CVR Certificates shall be taken as
statements of Parent, and the Rights Agent assumes no responsibility for the
correctness of any of the same except such as describe the Rights Agent or
actions taken or to be taken by it. The Rights Agent assumes no
responsibility with respect to the delivery of CVRs and the CVR Consideration
except as herein otherwise provided.
12.2 The
Rights Agent shall not be responsible for any failure of Parent to comply with
any of the covenants contained in this Agreement or in the CVR Certificates to
be complied with by Parent.
12.3 The
Rights Agent shall have no duties or obligations other than those specifically
set forth in this Agreement.
12.4 The
Rights Agent shall not be obligated to take any action hereunder which may, in
the Rights Agent’s sole judgment, involve any expense or liability to the Rights
Agent unless it shall have been furnished with indemnity against such expense or
liability which, in the Rights Agent’s sole judgment, is adequate.
12.5 The
Rights Agent may rely on and shall be protected in acting upon any certificate,
instrument, opinion, notice, instruction, letter, telegram or other document, or
any security, delivered to the Rights Agent and believed by the Rights Agent to
be genuine and to have been signed by the proper party or parties.
12.6 The
Rights Agent may rely on and shall be protected in acting upon the written
instructions of the Parent, its counsel, or its representatives.
12.7 The
Rights Agent shall not be liable for any claim, loss, liability or expense
incurred without the Rights Agent’s gross negligence or willful misconduct,
arising out of or in connection with the administration of the Rights Agent’s
duties hereunder.
12.8 The
Rights Agent may consult with counsel, and the written advice of such counsel or
any written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by the Rights
Agent hereunder in accordance with such advice of such counsel or any such
opinion of such counsel.
12.9 Notwithstanding
any other provision of this Agreement, the Rights Agent shall not be obligated
to perform any obligation hereunder and shall not incur any liability for the
nonperformance or breach of any obligation hereunder to the extent that the
Rights Agent is delayed in performing, unable to perform or breaches such
obligation because of acts of God, war, terrorism, fire, floods, strikes,
electrical outages, equipment or transmission failures, or other causes
reasonably beyond its control.
12.10 IN
NO EVENT SHALL THE RIGHTS AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING BUT NOT
LIMITED TO LOST PROFITS), EVEN IF THE RIGHTS AGENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF
ACTION.
15
12.11 In
the event that the Rights Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action until the questions regarding its
duties and rights are clarified to its satisfaction or it shall be directed
otherwise by a final judgment of a court of competent jurisdiction.
12.12 Parent
will pay the Rights Agent its customary fees plus expenses, including without
limitation fees and expenses of legal counsel, and disbursements, as previously
provided to Parent.
12.13 Parent
covenants and agrees to indemnify and hold harmless the Rights Agent, its
directors, officers, employees, attorneys and agents (the “Indemnified Persons”)
from and against any and all losses, damages, liabilities, costs or expenses
(including reasonable attorney’s fees and expenses and court costs), arising out
of or attributable to its acceptance of its appointment and execution and
performances of its duties as the Rights Agent hereunder, provided however, that such
indemnification shall not apply to losses, damages, liabilities, costs or
expenses finally adjudicated to have been primarily caused by the gross
negligence or willful misconduct of the Rights Agent. The Rights Agent shall
notify the Issuer in writing of any written asserted claim against the Rights
Agent or of any other action commenced against the Rights Agent reasonably
promptly after the Rights Agent shall have received any such written assertion
or shall have been served with a summons in connection therewith. The Issuer
shall be entitled to participate at its own expenses in the defense of any such
claim or other action and, if the Issuer so elects, the Parent may assume the
defense of any pending or threatened action against the Rights Agent in respect
of which indemnification may be sought hereunder; provided however, that the
Parent shall not be entitled to assume the defense without Rights Agent’s
explicit agreement and agrees to pay the costs of counsel for Rights Agent in
monitoring of any such action if defense has been assumed by
Parent.
12.14 Notwithstanding
anything else provided for in this agreement, the provisions of this Section 12
shall survive the resignation or removal of the Rights Agent and the termination
of this Agreement.
12.15 The
Rights Agent shall act hereunder solely as agent, and its duties shall be
determined solely by the provisions hereof. The Rights Agent shall
not be liable for anything, which it may do or refrain from doing in connection
with this Agreement except for its own gross negligence, willful misconduct or
bad faith.
| Section 13. | Change of Rights Agent. |
13.1 Any
corporation into which the Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent, shall be the successor to the
Rights Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
16
13.2 The
Rights Agent may resign and be discharged from its duties under this Agreement
by giving to Parent notice in writing, specifying a date when such resignation
shall take effect, which notice shall be sent at least 15 days prior to the date
so specified. If the Rights Agent shall resign or otherwise become
incapable of acting, Parent shall appoint a successor to the Rights Agent
reasonably acceptable to the CVR Representative. After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties,
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the former Rights Agent shall deliver and transfer to
the successor Rights Agent copies of all books, records, plans, and other
documents in the former Rights Agent's possession relating to the CVRs or this
Agreement and execute and deliver any further assurance, conveyance, act, or
deed necessary for the purpose. Failure to give any notice provided
for in this Section 13.2 or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
13.3 The
Rights Agent may be removed at any time upon 15 days written notice by act of
the CVR Representative and Parent.
13.4 If
at any time the Rights Agent shall become incapable of acting, any Holder of a
CVR may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Rights Agent and the
appointment of a successor Rights Agent.
13.5 Parent
shall give notice of each resignation and each removal of a Rights Agent and
each appointment of a successor Rights Agent by mailing written notice of such
event by first-class mail, postage prepaid, to the Holders as their names and
addresses appear in the CVR Register. Each notice shall include the
name and address of the successor Rights Agent. If Parent fails to
send such notice within ten days after acceptance of appointment by a successor
Rights Agent, the successor Rights Agent shall cause the notice to be mailed at
the expense of Parent.
13.6 Each
successor Rights Agent appointed hereunder shall execute, acknowledge and
deliver to Parent and to the retiring Rights Agent an instrument accepting such
appointment and a counterpart of this Agreement, and thereupon such successor
Rights Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Rights Agent;
but, on request of Parent or the successor Rights Agent, such retiring Rights
Agent shall execute and deliver an instrument transferring to such successor
Rights Agent all the rights, powers and trusts of the retiring Rights
Agent.
17
| Section 14. | Consolidation, Merger, Sale or Conveyance. |
14.1 Company May Not Consolidate,
Etc. So long as the CVRs remain outstanding, Parent and the
Surviving Corporation shall not consolidate with or merge into any other person
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless:
(a) in
the case where Parent or the Surviving Corporation shall consolidate with or
merge into any other person or convey, transfer or lease its properties and
assets substantially as an entirety to any person, the person formed by such
consolidation or into which Parent or the Surviving Corporation is merged or the
person which acquires by conveyance or transfer, or which leases, the properties
and assets of Parent or the Surviving Corporation substantially as an entirety
(the “Surviving
Person”) shall assume in writing all of Parent's and the Surviving
Corporation's obligations under this Agreement; and
(b) Parent
or the Surviving Corporation has delivered to the Rights Agent an officer’s
certificate stating that such consolidation, merger, conveyance, transfer or
lease complies with all of the terms of Sections 14.1 through 14.3 hereof and
that all conditions precedent herein provided for relating to such transaction
have been complied with.
(c) For
purposes of this Section 14.1, "convey, transfer or lease its properties and
assets substantially as an entirety" means properties and assets contributing in
the aggregate at least 60% of Parent's or the Surviving Corporation's total
consolidated revenues as reported in Parent's last available periodic financial
report (quarterly or annual, as the case may be).
14.2 Successor
Substituted. Upon any consolidation of or merger by Parent
with or into any other person, or any conveyance, transfer or lease of the
properties and assets substantially as an entirety to any person in accordance
with Section 14.1, the Surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of, Parent under this Agreement with
the same effect as if the Surviving Person had been named as Parent
herein.
14.3 Joint and Several
Liability. Parent, the Surviving Corporation and Merger Sub
are jointly and severally responsible for the performance of all actions, and
the payment of all sums and delivery of all CVR Shares, required under this
Agreement of any of such party.
| Section 15. | CVR Representative. |
15.1 Designation;
Duties. The (i) adoption and approval of the Merger Agreement
by the stockholders of the Company, and (ii) any exercise of the Company
Warrants by the holder thereof, shall constitute by each such person,
respectively, the authorization, designation and appointment of the CVR
Representative, in each case to act as the sole and exclusive agent,
attorney-in-fact and representative of each of the Holders by the consent of the
Holders and as such is hereby authorized and directed to (a) take any and all
actions (including without limitation executing and delivering any documents,
incurring any costs and expenses for the account of the Holders and making any
and all determinations required by this Agreement) which may be required in
carrying out his duties under this Agreement, (b) give notices and
communications on behalf of the Holders as set forth in this Agreement, (c)
exercise such other rights, power and authority as are authorized, delegated and
granted to the CVR Representative under this Agreement in connection with the
transactions contemplated by the Merger Agreement and hereby, and (d) exercise
such rights, power and authority as are incidental to the foregoing, and any
decision or determination made by the CVR Representative consistent therewith
shall be absolutely and irrevocably binding on each Holder as if such Holder
personally had taken such action, exercised such rights, power or authority or
made such decision or determination in such Holder’s individual
capacity.
18
15.2 Removal; Successor CVR
Representative. The CVR Representative may be removed at any
time by act of the Holders of a majority of the outstanding CVRs (the “Majority
Holders”). In the event the Majority Holders determine to
remove the CVR Representative, the Majority Holders shall give notice of the
removal of the CVR Representative and the appointment of a successor CVR
Representative by delivering written notice of such event by first-class mail to
Parent. Any such notice shall include the name and address of the
successor CVR Representative. Any successor CVR Representative
appointed hereunder shall execute, acknowledge and deliver to Parent an
instrument accepting such appointment and a counterpart of this Agreement, and
thereupon such successor CVR Representative shall be become vested with the
powers of the prior CVR Representative.
15.3 No
Liability. The CVR Representative shall not be liable, in any
manner or to any extent, for any mistake or fact or error of judgment or for any
acts or omissions by it of any kind, except to the extent that such action or
inaction shall have been held by a court of competent jurisdiction to constitute
willful misconduct, gross negligence or bad faith. The Holders shall
jointly and severally indemnify the CVR Representative and hold it harmless
against any and all liabilities incurred by it, except for liabilities incurred
by the CVR Representative resulting from its own willful misconduct,
gross negligence or bad faith, provided, however, that any indemnification
obligations of the Holders shall be satisfied solely out of the CVR Shares
deliverable under this Agreement, but only to the extent such CVR Shares were
not issued prior to the time such indemnification obligation
arises. The CVR Representative shall be entitled to receive a number
of CVR Shares equal to the quotient obtained by dividing the amount of the
indemnification obligation referenced in the immediately preceding sentence by
the average of the last reported sales prices of Parent Common Stock on the
primary exchange where it is traded for the last fifteen trading days
immediately preceding the date of issuance of such shares pursuant to this
Agreement.
15.4 Decision of CVR
Representative. A decision, act, consent or instruction of the
CVR Representative shall constitute a decision of all Holders and shall be
final, binding and conclusive upon each such Holder, and Parent may rely upon
any decision, act, consent or instruction of the CVR Representative as being the
decision, act, consent or instruction of each and every such
Holder.
19
Section
16. Successors. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns.
Section
17. Counterparts. This
Agreement may be executed in any number of counterparts; and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same agreement.
Section
18. Headings. The
headings of sections of this Agreement have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section
19. Amendments. This
Agreement may be amended by the written consent of Parent and the affirmative
vote or the written consent of Holders holding not less than a majority of the
then outstanding CVRs; provided, however, that no such modification or amendment
to this Agreement may, (i) without the consent of each Holder
affected thereby, change in manner adverse to the Holders, (a) the amount of CVR
Consideration to be issued according to the terms of this Agreement to the
Holders of the CVRs, or (b) the provisions of this Section 19; (ii) without the
consent of the Rights Agent, change in a manner adverse to the Rights Agent any
of its rights or obligations under this Agreement or the provisions of this
Section 19; and (iii) without the consent of the CVR Representative, change in a
manner adverse to the CVR Representative any of its rights or obligations under
this Agreement or the provisions of this Section 19.
Section
20. Notices. Any
notice or other communication hereunder shall be in writing and shall be deemed
duly delivered (i) four business days after being sent by registered or
certified mail, return receipt requested, postage prepaid, (ii) one business day
after being sent for next business day delivery, fees prepaid, via a reputable
overnight courier service, or (iii) on the date of confirmation of receipt (or
the first business day following receipt if the date of such receipt is not a
business day) of facsimile transmission, in each case to the intended recipient
set forth below:
If to
Parent:
Onstream
Media Corporation
0000 X.X.
00xx
Xxxxxx
Xxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx
Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
20
If to the
Rights Agent:
Interwest
Transfer Co.
0000 X
0000 Xxxxx, Xxx. 000
Xxxx Xxxx
Xxxx, XX 00000
Telephone:
Facsimile:
If to CVR
Representative:
X. Xxxxxx
Xxxxx XX
c/x Xxxxx
Asset Management
00
Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Any party
may, by notice given in accordance with this Section 20 to the other parties,
change the address for receipt of notices hereunder.
Section
21. Benefits of this
Agreement. Nothing in this Agreement shall be construed to
give to any person or corporation, other than Parent, the Rights Agent, the CVR
Representative and the Holders, any legal or equitable right, remedy, or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of Parent, the Rights Agent, the CVR Representative and the registered
Holders.
Section
22. Governing Law; Submission to
Jurisdiction. As between Parent and CVR Representative, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida without regard to its rules of conflict of laws
provisions. The parties hereto agree that any suit, action, or
proceeding seeking to enforce any provision of, or based on any matter arising
out of, this Agreement may be brought in the United States District Court for
the District of Florida, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such suit, action, or proceeding and irrevocably waives any objection which it
may now or hereafter have to the laying of the venue of any such suit, action,
or proceeding in any such court or that any such suit, action, or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action, or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service
of process on such party in the manner provided for notices in Section 20 shall
be deemed effective service of process on such party.
21
As
between the Parent or CVR Representative, on the one hand, and Rights Agent, on
the other hand, this Agreement shall be governed by and construed in accordance
with the laws of the State of Utah applicable to contracts made in Utah by
persons domiciled in Salt Lake City and without regard to its principles of
conflicts of laws. Each of the Parties agrees to submit himself to
the in personam
jurisdiction of the state and federal courts situated within the State of Utah
with regard to any controversy arising out of or relating to this
Agreement. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. The parties hereby waive all rights
to a trial by jury.
22
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
| ONSTREAM MEDIA CORPORATION | |||
|
|
By:
|
||
| Name: | |||
| Title: | |||
| Interwest Transfer Co., as Rights Agent | |||
| By: | |||
| Name: | |||
| Title: | |||
| X. Xxxxxx Xxxxx XX, as CVR Representative | |||
| Name: | |||
23
Exhibit
A
ONSTREAM
MEDIA CORPORATION
CONTINGENT
VALUE RIGHTS TO RECEIVE SHARES OF COMMON STOCK
THIS
CERTIFIES THAT, FOR VALUE RECEIVED, __________________, or its permitted
assigns, is the registered holder of _______________ Contingent Value Rights of
Onstream Media Corporation, a Florida corporation (“Parent”), subject to the
terms of the Contingent Value Rights Agreement (“CVR Agreement”), dated
_______________, 2008, between Parent, X. Xxxxxx Xxxxx XX (the "CVR
Representative") and Interwest Transfer Co. (the "Rights Agent").
REFERENCE
IS MADE TO THE PROVISIONS OF THIS CVR CERTIFICATE SET FORTH ON THE REVERSE SIDE
HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH ON THE FRONT OF THIS CERTIFICATE.
This CVR
Certificate shall be governed by and construed in accordance with the laws of
the State of Florida.
IN
WITNESS WHEREOF, Parent has caused this CVR Certificate to be executed by its
duly authorized officer.
| Dated: | ONSTREAM MEDIA CORPORATION | ||||
|
|
By:
|
||||
| Name | |||||
| Title | |||||
| Countersigned: | |||||
| Interwest Transfer Co., As Rights Agent | |||||
|
|
By:
|
||
| Name | |||
| Title | |||
This CVR
Certificate is subject to all of the terms, provisions and conditions of the
Contingent Value Rights Agreement, dated as of ________________, 2008 (the “CVR
Agreement”), by and among Parent, Rights Agent and the CVR Representative, to
all of which terms, provisions and conditions the registered holder of the CVR
consents by acceptance hereof. Copies of the CVR Agreement are
available for inspection at the principal office of the Rights Agent or may be
obtained upon written request addressed to the Rights Agent at its principal
office at [__________________________________].
Parent
shall not be required, upon conversion of the CVRs evidenced by this CVR
Certificate into shares of common stock of Parent, to issue fractional shares,
but shall round down to the nearest whole share of Parent Common Stock as
provided in the CVR Agreement.
Parent
has filed and caused to become effective a registration statement under the
Securities Act of 1933, as amended, covering the CVRs and CVR Shares (as defined
in the Agreement) and has agreed to register or qualify the CVRs and the CVR
Shares to be delivered upon conversion of the CVRs under the laws of each
jurisdiction in which such registration or qualification is
necessary.
The
holder of this CVR Certificate shall not, by virtue hereof, be entitled to any
of the rights of a stockholder in Parent, either at law or in equity, and the
rights of the holder are limited to those expressed in the CVR
Agreement.
Every
holder of this CVR Certificates, by accepting the same, consents and agrees with
Parent, the Rights Agent and with every other holder of a CVR Certificate that
Parent and the Rights Agent may deem and treat the person in whose name this CVR
Certificate is registered as the absolute owner hereof (notwithstanding any
notation of ownership or other writing hereon made by anyone other than Parent
or the Rights Agent) for all purposes whatsoever and neither Parent nor the
Rights Agent shall be affected by any notice to the contrary.
2
This CVR
Certificate shall not be valid or obligatory for any purpose until it shall have
been countersigned by the Rights Agent.
The CVR
Agreement and this CVR Certificate shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its rules of
conflict of laws.
The
following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM,
as tenants in common
TEN ENT,
as tenants by the entireties
JT TEN,
as joint tenants with right of survivorship and not as tenants in
common
COM PROP,
as community property
UNIF GIFT
MIN ACT, ___________ Custodian ____________________-(Cust) (Minor) Under Uniform
Gifts to Minors Act
_____________________________________________________
(State)
Addition
abbreviations may also be used though not in the above list.
For Value
Received ________________ hereby sells, assigns and transfers unto
________________ Contingent Value Rights ("CVRs") represented by this
Certificate, and do hereby irrevocably constitute and appoint
_____________________________ Attorney in Fact to transfer the said CVRs on the
books of the within named Corporation with full power of substitution in the
premises.
Dated
_____________________________
In the
presence of _______________________________________________________
3
