EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WELLSFORD REAL PROPERTIES, INC.
XXXX SERVICES, LLC
AND
XXXX, INC.
Dated as of October 11, 2006
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.................................................... 2
Section 1.1 Definitions............................................. 2
Section 1.2 Other Defined Terms..................................... 6
ARTICLE II THE MERGER.................................................... 9
Section 2.1 Merger.................................................. 9
Section 2.2 Effective Time of the Merger............................ 9
Section 2.3 Closing................................................. 10
Section 2.4 Articles of Organization and Limited Liability Company
Agreement of the Surviving Company...................... 10
Section 2.5 Officers of the Surviving Company....................... 10
ARTICLE III CONVERSION OF SHARES......................................... 10
Section 3.1 Merger Consideration.................................... 10
Section 3.2 Conversion of Shares.................................... 11
Section 3.3 Consideration Election.................................. 14
Section 3.4 Exchange of Certificates; Payment for Shares............ 18
Section 3.5 Stock Options........................................... 20
Section 3.6 Withholding............................................. 21
Section 3.7 Lost, Stolen or Destroyed Certificates.................. 21
Section 3.8 Stock Transfer Books.................................... 21
Section 3.9 Appraisal Rights........................................ 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 22
Section 4.1 Organization and Good Standing.......................... 22
Section 4.2 Capitalization.......................................... 22
Section 4.3 Authorization; Validity of Agreement.................... 23
Section 4.4 No Conflicts; Consents.................................. 23
Section 4.5 Financial Information................................... 24
Section 4.6 Subsidiaries............................................ 24
Section 4.7 Intellectual Property................................... 24
Section 4.8 Legal Compliance........................................ 26
Section 4.9 Contracts............................................... 26
Section 4.10 Real Property - Owned and Leased........................ 28
Section 4.11 Personal Property....................................... 28
Section 4.12 Insurance............................................... 28
Section 4.13 Labor and Employee Matters.............................. 28
Section 4.14 Employee Benefits....................................... 28
Section 4.15 Litigation.............................................. 29
Section 4.16 Tax Matters............................................. 30
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Section 4.17 Environmental Matters................................... 31
Section 4.18 Brokers................................................. 31
Section 4.19 Accounts................................................ 31
Section 4.20 Related Party Transactions.............................. 31
Section 4.21 Customers............................................... 32
Section 4.22 Accounts Receivable; Evidences of Indebtedness.......... 32
Section 4.23 Absence of Certain Changes.............................. 32
Section 4.24 Board Recommendation.................................... 32
Section 4.25 Required Vote by Company Stockholders................... 32
Section 4.26 Information Supplied.................................... 33
Section 4.27 Opinion of Financial Advisor............................ 33
Section 4.28 Full Disclosure......................................... 33
Section 4.29 No Other Representations or Warranties.................. 33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY..................................................... 33
Section 5.1 Organization and Good Standing.......................... 34
Section 5.2 Authority; Validity of Agreement........................ 34
Section 5.3 Capitalization.......................................... 35
Section 5.4 Subsidiaries............................................ 35
Section 5.5 No Conflicts; Consents.................................. 36
Section 5.6 SEC Documents........................................... 36
Section 5.7 No Undisclosed Liabilities.............................. 37
Section 5.8 Information Supplied.................................... 37
Section 5.9 Absence of Certain Changes or Events.................... 38
Section 5.10 Compliance with Applicable Laws......................... 38
Section 5.11 Litigation.............................................. 38
Section 5.12 Transactions with Affiliates............................ 38
Section 5.13 Financing............................................... 39
Section 5.14 Opinion of Financial Advisor............................ 39
Section 5.15 Brokers................................................. 39
Section 5.16 Board Recommendation and Actions........................ 39
Section 5.17 Required Vote By Parent Stockholders.................... 39
Section 5.18 Prior Knowledge......................................... 39
Section 5.19 No Other Representations or Warranties.................. 39
Section 5.20 Access to Information................................... 40
Section 5.21 Tax Matters............................................. 40
Section 5.22 Real Property........................................... 40
Section 5.23 Environmental Matters................................... 41
ARTICLE VI COVENANTS..................................................... 43
Section 6.1 Access.................................................. 43
Section 6.2 Interim Operations of the Company....................... 44
Section 6.3 No Solicitation by the Company.......................... 46
Section 6.4 Regulatory Approvals.................................... 47
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Section 6.5 Public Announcements.................................... 48
Section 6.6 Employee Benefits....................................... 49
Section 6.7 Directors' and Officers' Insurance and Indemnification.. 49
Section 6.8 Consents................................................ 50
Section 6.9 Further Action.......................................... 51
Section 6.10 [Intentionally Omitted]................................. 51
Section 6.11 Certain Tax Matters..................................... 51
Section 6.12 Name Changes............................................ 52
Section 6.13 Governance of Parent.................................... 52
Section 6.14 Preparation of the Form S-4 and the Joint Proxy
Statement; Stockholders Meetings........................ 52
Section 6.15 Listing................................................. 54
Section 6.16 Affiliate Letters....................................... 54
Section 6.17 Xxxxxxxx-Xxxxx Act Compliance........................... 54
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES........... 55
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger.................................................. 55
Section 7.2 Conditions to the Company's Obligation to Effect the
Merger.................................................. 56
Section 7.3 Conditions to Parent and Merger Subsidiary's Obligations
to Effect the Merger.................................... 56
ARTICLE VIII TERMINATION PRIOR TO CLOSING................................ 58
Section 8.1 Termination............................................. 58
Section 8.2 Effect of Termination................................... 59
Section 8.3 Fees and Expenses....................................... 59
ARTICLE IX INDEMNIFICATION............................................... 60
Section 9.1 Holdback................................................ 60
Section 9.2 Recoverable Amounts..................................... 61
Section 9.3 Release of Escrow Fund and FR Escrow Fund............... 64
Section 9.4 Stockholder Representatives............................. 65
Section 9.5 BC Escrow Account....................................... 66
Section 9.6 Tax Treatment........................................... 67
ARTICLE X GENERAL........................................................ 67
Section 10.1 Usage................................................... 67
Section 10.2 Survival................................................ 68
Section 10.3 Transfer Taxes.......................................... 68
Section 10.4 Governing Law........................................... 68
Section 10.5 Consent to Jurisdiction................................. 68
Section 10.6 Successors and Assigns.................................. 69
Section 10.7 Notices................................................. 69
Section 10.8 Severability............................................ 70
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Section 10.9 Representation by Counsel; No Inferences................ 70
Section 10.10 Divisions and Headings.................................. 71
Section 10.11 No Third-party Beneficiaries............................ 71
Section 10.12 Amendment and Waiver.................................... 71
Section 10.13 Knowledge............................................... 71
Section 10.14 Schedules and Exhibits.................................. 71
Section 10.15 Counterparts............................................ 71
Section 10.16 Entire Agreement........................................ 72
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EXHIBITS:
Exhibit 1.1(a) - Company Charter Amendment
Exhibit 2.5 - Officers of the Surviving Company
Exhibit 6.16 - Rule 145 Affiliate Letter
Exhibit 7.2(d) - Registration Rights Agreement
Exhibit 7.3(h) - Lock-up Agreement
Exhibit 9.1 - Escrow Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of October
11, 2006, among XXXX, INC., a Delaware corporation (the "Company"), Wellsford
Real Properties, Inc., a Maryland corporation ("Parent"), and Xxxx Services LLC,
a Maryland limited liability company and wholly owned subsidiary of Parent
("Merger Subsidiary").
WITNESSETH:
WHEREAS, (a) the Board of Directors of Parent and Parent, as the sole
member of Merger Subsidiary have approved this Agreement and deem it advisable
and in the best interests of their stockholders and sole member, respectively,
to consummate the merger provided for herein, in which the Company will merge
with and into Merger Subsidiary (the "Merger"), on the terms set forth herein
and (b) the Board of Directors of Parent has recommended that the Parent's
stockholders approve the issuance of the Parent Common Stock (as hereinafter
defined) in the Merger;
WHEREAS, the Board of Directors of the Company has: (a) determined that the
Merger is advisable, fair to and in the best interests of the stockholders of
the Company; (b) approved this Agreement and the transactions contemplated
hereby; and (c) recommended that the Company's stockholders adopt this Agreement
and approve the Merger, on the terms set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement, as
a condition and inducement to Parent's willingness to enter into this Agreement,
the Parent is entering into a voting agreement (the "Voting Agreement") with
each of Xxxxx Xxxxxxx ("Xxxxxxx") and Xxxxxxxx Xxxxxxxx ("Garfield") pursuant to
which, among other things, each of Xxxxxxx and Garfield has agreed, subject to
the terms and conditions therein, to vote or deliver written consents with
respect to all shares of capital stock of the Company owned by such shareholder
in favor of adoption of this Agreement and approval of the transactions
contemplated hereby (including the Merger and the Company Charter Amendment (as
hereinafter defined));
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent and Merger Subsidiary are entering into an (a) employment agreement with
Xxxxxxx, pursuant to which, among other things, Xxxxxxx shall be appointed
President and Chief Executive Officer of Parent and the Surviving Company and
(b) employment agreement with Garfield, pursuant to which, among other things,
Garfield shall be appointed Executive Vice President of Parent and the Surviving
Company; and
WHEREAS, for U.S. federal income tax purposes, the parties hereto intend
that (a) the Merger will qualify as a "reorganization" within the meaning of
Section 368(a) of the Code (as hereinafter defined), (b) this Agreement shall
constitute a plan of reorganization, and (c) the Company and Parent shall each
be a party to such reorganization within the meaning of Section 368(b) of the
Code.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following terms
shall have the meanings assigned to them in this Section 1.1.
"Affiliate" means, as to the Person in question, any Person that directly
or indirectly controls, is controlled by, or is under common control with, the
Person in question and any successors or assigns of such Person; and the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person whether through
ownership of voting securities, by contract or otherwise.
"Aggregate Merger Consideration" means the Cash Consideration plus the
Share Consideration, subject to Section 3.4, constituting the aggregate amount
payable to the Holders and to the holders of Plan Options and Non-Plan Options
at the Effective Time with respect to the Company Common Stock, the Company
Preferred Stock, the Plan Options and the Non-Plan Options.
"AMEX" means the American Stock Exchange.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banks located in New York City are authorized or required by law to close.
"Cash Consideration" means $34,579,414, constituting the aggregate amount
of the Common Stock Cash Merger Consideration, the Series A Cash Merger
Consideration, the Series B Cash Merger Consideration, the Series C Cash Merger
Consideration and the Series D Cash Merger Consideration.
"Company Charter Amendment" means the amendment to the certificate of
incorporation of the Company substantially in the form attached hereto as
Exhibit 1.1(a).
"Company Common Stock" means the Company's common stock, $0.01 par value
per share.
"Company Loan" means the secured loan in the principal amount of $25
million to be made to the Company immediately prior to the Effective Time, for
payment of a portion of the Cash Consideration, pursuant to the terms of the
Loan Agreement, dated as of the date hereof, between the Bank of Montreal,
Chicago Branch, as administrative agent, BMO Capital Markets, as lead arranger,
the lenders listed therein, and the Company, as borrower (the "Loan Agreement").
"Company Material Adverse Effect" means any change, effect or event that is
or would be reasonably expected to (a) be materially adverse to the business,
assets, results of operations,
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or financial condition of the Company, or (b) materially impair or delay the
ability of the Company to perform its obligations under this Agreement or to
consummate the Merger or the transactions contemplated hereby, other than, in
each case, any change, effect or event that results from or relates to (i) any
change affecting general national, international or regional political,
economic, financial or capital market conditions; (ii) any change relating to
the Company's industry, so long as such change does not disproportionately
affect the Company or its business; (iii) any breach by Parent or Merger
Subsidiary of any provision of this Agreement; (iv) any condition described in
the Company Disclosure Schedule and (v) any action taken by the Company or any
of its Affiliates at the written request of Parent or Merger Subsidiary.
"Company Preferred Stock" means collectively, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
"Company Stock" means Company Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
as applicable.
"Eligible Stockholder" means each Holder other than either of the LG
Stockholders or the Wellsford Holder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which is treated as a single employer with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Fundamental Representations" means those representations and warranties of
the Company set forth in Sections 4.1, 4.2, 4.3, 4.4(a)(i), 4.14, 4.16, 4.17 and
4.18.
"Governmental Entity" means any government or any agency, bureau, board,
directorate, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any foreign or domestic federal, state or
local government, with jurisdiction over the business of the Company.
"Holder" and "Holders" means any and all holders immediately prior to the
Effective Time of Company Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock; provided,
however, that the Wellsford Holder, holders of Company Common Stock or Company
Preferred Stock cancelled pursuant to Section 3.2(f) or 3.2(g), and holders of
any Dissenting Shares shall not be considered "Holders."
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Joint Proxy Statement" means a joint proxy statement/prospectus relating
to the Company Stockholders Meeting and the Parent Stockholders Meeting, as the
same may be amended or supplemented from time to time.
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"Law" means any constitutional provision, statute, ordinance or other law
which is duly enacted and enforceable, or any binding interpretation or Order of
any Governmental Entity.
"LG Shares" means the shares of Company Common Stock held by the LG
Stockholders on the Election Date.
"LG Stockholders" means, together, Xxxxxxx and Garfield.
"Liability" or Liabilities" means any and all liabilities and obligations,
whether or not required to be disclosed on the Financial Statements in
accordance with GAAP, including (a) any indebtedness for borrowed money; (b) any
obligations evidenced by bonds, debentures, notes or other similar instruments;
(c) any obligations to pay the deferred purchase price of property or services,
except trade accounts payable and other current liabilities arising in the
ordinary course of business; (d) any obligations as lessee under capitalized
leases; (e) any indebtedness created or arising under any conditional sale or
other title retention agreement with respect to acquired property; (f) any
obligations, contingent or otherwise, under banker's acceptance, letters of
credit or similar facilities; and (g) any guaranty of any of the foregoing
liabilities and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured or determined or determinable.
"Order" means any binding and enforceable decree, injunction, judgment,
order, ruling, assessment or writ issued by a Governmental Entity.
"Parent Common Stock" means the common stock of Parent, par value $0.02 per
share.
"Parent Confidentiality Agreement" means the Confidentiality Agreement,
dated as of June 5, 2006, by and between Parent and the Company, pursuant to
which Parent was provided with certain Company information.
"Parent Material Adverse Effect" means any change, effect or event that is
or would be reasonably expected to (a) be materially adverse to the business,
assets, results of operations, or financial condition of Parent, or (b)
materially impair or delay the ability of Parent to perform its obligations
under this Agreement or to consummate the Merger or the transactions
contemplated hereby, other than, in each case, any change, effect or event that
results from or relates to (i) any change affecting general national,
international or regional political, economic, financial or capital market
conditions; (ii) any change relating to Parent's industry, so long as such
change does not disproportionately affect Parent or its business; (iii) any
breach by the Company of any provision of this Agreement; (iv) any condition
described in the Parent Disclosure Schedule and (v) any action taken by the
Parent or any of its Affiliates at the written request of the Company.
"Permit" means any license, permit, variance, authorization, waiver, grant,
franchise, concession, exemption, order, registration, approval or certificate
of need required to be issued by any Governmental Entity.
"Permitted Liens" means (a) Liens for Taxes that are not yet due and
payable or that are being contested in good faith by appropriate proceedings,
(b) workers', carriers', suppliers' and mechanics' or other like Liens arising
under Law and incurred in the ordinary course of business, (c) immaterial liens
that do not interfere, individually or in the aggregate with any other Liens,
4
with the present use of the properties they affect, and (d) those Liens and
other matters listed in Section 1.1(a) of the Company Disclosure Schedule.
"Per Share Cash Consideration" means, with respect to each share of Company
Stock, the Common Stock Cash Merger Consideration, the Series A Cash Merger
Consideration, the Series B Cash Merger Consideration, the Series C Cash Merger
Consideration or the Series D Cash Merger Consideration, as applicable.
"Per Share Price" means $8.16.
"Per Share Stock Consideration" means, with respect to each share of
Company Stock, the Common Stock Share Merger Consideration, the Series A Share
Merger Consideration, the Series B Share Merger Consideration, the Series C
Share Merger Consideration or the Series D Share Merger Consideration, as
applicable.
"Person" means any association, corporation, limited liability company,
individual, partnership, limited liability partnership, firm, trust or any other
entity or organization, including a Governmental Entity.
"Preferred Stock Merger Consideration" means the aggregate amount of the
Series A Merger Consideration, the Series B Merger Consideration, the Series C
Merger Consideration and the Series D Merger Consideration.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Share Consideration" means 6,795,266 fully paid and nonassessable shares
of Parent Common Stock constituting the aggregate Common Stock Share Merger
Consideration and Series A Share Merger Consideration, Series B Share Merger
Consideration, Series C Share Merger Consideration and Series D Share Merger
Consideration.
"Securities Laws" means the Exchange Act, the Securities Act, and any
applicable state securities and blue sky laws.
"Subsidiary" when used with respect to any party shall mean any
corporation, partnership, limited liability company, business trust or other
entity, or joint venture, of which such party or a Subsidiary of such party,
directly or indirectly, owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
"Tax" or "Taxes" means any and all federal, state, local, or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, registration,
deed, stamp, transfer, alternative or add-on minimum, estimated, environmental,
profits, windfall profits, excess profits, transaction, license, lease, service,
service use, occupation, severance, energy, unemployment, social security,
workers'
5
compensation, capital, premium, and other taxes, assessments, customs, duties,
fees, levies, deductions, withholdings or other governmental charges (including
any interest, penalty or addition thereto).
"Treasury Regulations" means the regulations promulgated from time to time
under the Code.
"Wellsford Holder" means Wellsford Capital, a Maryland corporation and
Subsidiary of Parent.
Section 1.2 Other Defined Terms. The following terms have the meanings
assigned to such terms on the page of the Agreement set forth below:
Additionally-Elected Parent Shares ........................................ 14
Agreement ................................................................. 1
Articles of Merger ........................................................ 9
BC Escrow Account ......................................................... 67
BC Escrow Agreement ....................................................... 67
Benefit Plans ............................................................. 29
Cash Holdback ............................................................. 60
CERCLA .................................................................... 42
Certificate of Merger ..................................................... 9
Certificates .............................................................. 19
Change in Control of Parent ............................................... 59
Claim Notice .............................................................. 62
Claims Payment ............................................................ 63
Claims Recoveries ......................................................... 63
Closing ................................................................... 10
Closing Date .............................................................. 10
COBRA ..................................................................... 29
Code ...................................................................... 29
Common Stock Cash Merger Consideration .................................... 11
Common Stock Merger Consideration ......................................... 11
Common Stock Share Merger Consideration ................................... 11
Company ................................................................... 1
Company Disclosure Schedule ............................................... 22
Company Financial Documents ............................................... 24
Company Intellectual Property ............................................. 25
Company Option Plan ....................................................... 20
Company Representatives ................................................... 46
Company Stockholder Amendment Approval .................................... 33
Company Stockholder Approval .............................................. 33
Company Stockholder Merger Approval ....................................... 33
Company Stockholders Meeting .............................................. 53
Company Superior Proposal ................................................. 47
Company Takeover Proposal ................................................. 47
Company Termination Fee ................................................... 60
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Contract .................................................................. 23
Deductible ................................................................ 62
DGCL ...................................................................... 9
Dissenting Shares ......................................................... 22
Dissenting Stockholder .................................................... 22
Effective Time ............................................................ 10
Electing Stockholder ...................................................... 14
Election Date ............................................................. 18
Election Form Record Date ................................................. 17
Employee Agreement ........................................................ 28
Environmental Law ......................................................... 43
Environmental Permit ...................................................... 43
ERISA ..................................................................... 29
Escrow Agent .............................................................. 60
Escrow Agreement .......................................................... 60
Escrow Fund ............................................................... 60
Expenses .................................................................. 59
Form of Election .......................................................... 17
Form S-4 .................................................................. 33
FR Cash Holdback .......................................................... 61
FR Escrow Fund ............................................................ 61
FR Holdback ............................................................... 61
FR Share Holdback ......................................................... 61
GAAP ...................................................................... 24
Garfield .................................................................. 1
Hazardous Material ........................................................ 43
Holdback .................................................................. 60
Incumbent Director ........................................................ 59
Indemnified Parties ....................................................... 50
Intellectual Property ..................................................... 24
IRS ....................................................................... 29
Lazard .................................................................... 39
Leased Property ........................................................... 40
Leased Real Property ...................................................... 28
LG Cash Number ............................................................ 16
LG Cash Shares ............................................................ 16
LG Share Number ........................................................... 16
LG Stock Shares ........................................................... 16
Lien ...................................................................... 23
Liens ..................................................................... 23
Xxxxxxx ................................................................... 1
Material Contracts ........................................................ 28
Material Customers ........................................................ 32
Max Election Stock Shares ................................................. 17
Max LG Cash Shares ........................................................ 16
Maximum Elected Share Number .............................................. 14
7
Merger .................................................................... 1
Merger Subsidiary ......................................................... 1
Merger Subsidiary Units ................................................... 35
Min Election Cash Shares .................................................. 17
Min LG Stock Shares ....................................................... 16
MLLCA ..................................................................... 9
Non-Electing Cash Shares .................................................. 15
Non-Electing Shares ....................................................... 14
Non-Electing Stock Shares ................................................. 15
Non-Plan Option ........................................................... 21
Notice of a Superior Proposal ............................................. 47
Objection Notice .......................................................... 62
Owned Real Property ....................................................... 40
Parent .................................................................... 1
Parent Charter Amendment .................................................. 52
Parent Disclosure Schedule ................................................ 34
Parent Indemnified Persons ................................................ 61
Parent Material Adverse Effect ............................................ 4
Parent SEC Reports ........................................................ 36
Parent Stockholder Approval ............................................... 39
Parent Stockholders Meeting ............................................... 53
Parent's Expenses ......................................................... 60
Payment Fund .............................................................. 18
Permitted Investments ..................................................... 19
Plan Option ............................................................... 20
Proprietary Software ...................................................... 26
Qualifying Claim .......................................................... 61
Real Property ............................................................. 40
Receivables ............................................................... 32
Recoverable Amounts ....................................................... 61
Rule 145 Affiliate ........................................................ 54
Series A Cash Merger Consideration ........................................ 12
Series A Merger Consideration ............................................. 12
Series A Preferred Stock .................................................. 11
Series A Share Merger Consideration ....................................... 12
Series B Cash Merger Consideration ........................................ 12
Series B Merger Consideration ............................................. 12
Series B Preferred Stock .................................................. 12
Series B Share Merger Consideration ....................................... 12
Series C Cash Merger Consideration ........................................ 12
Series C Merger Consideration ............................................. 12
Series C Preferred Stock .................................................. 12
Series C Share Merger Consideration ....................................... 12
Series D Cash Merger Consideration ........................................ 13
Series D Merger Consideration ............................................. 13
Series D Preferred Stock .................................................. 13
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Series D Share Merger Consideration ....................................... 13
Share Holdback ............................................................ 60
SOX ....................................................................... 54
Stock Election ............................................................ 14
Stock Election Ratio ...................................................... 17
Stock Election Shares ..................................................... 14
Stockholder Representative ................................................ 65
Stockholder Representatives ............................................... 65
Stockholder Representatives Indemnity ..................................... 66
Surviving Company ......................................................... 9
Tax Returns ............................................................... 30
Transfer Taxes ............................................................ 68
Voting Agreement .......................................................... 1
Wellsford Shares .......................................................... 14
ARTICLE II
THE MERGER
Section 2.1 Merger. Subject to the terms and conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law ("DGCL")
and the Maryland Limited Liability Company Act ("MLLCA"), at the Effective Time
(as defined in Section 2.2), the Company shall be merged with and into Merger
Subsidiary. Following the Merger, the separate corporate existence of the
Company shall cease and Merger Subsidiary shall continue as the surviving
company and a wholly owned subsidiary of Parent (the Merger Subsidiary following
the Merger, the "Surviving Company"). At the Effective Time, the Merger will
have the other effects provided in the applicable provisions of the DGCL and the
MLLCA. Without limiting the generality of the foregoing and subject thereto, at
the Effective Time, all the property, rights, privileges, powers, immunities and
franchises of the Company and Merger Subsidiary will vest in the Surviving
Company, and all the debts, liabilities, obligations and duties of the Company
and Merger Subsidiary will become the debts, liabilities, obligations and duties
of the Surviving Company.
Section 2.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, on the Closing Date, the Company and Merger Subsidiary will cause (i)
an appropriate certificate of merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware in such
form as required by, and executed in accordance with the relevant provisions of,
DGCL Section 264 and (ii) appropriate articles of merger (the "Articles of
Merger") to be executed and filed with the Secretary of State of the State of
Maryland in such form as required by, and executed in accordance with the
pursuant to Sections 4A-206 and 4A-703 of the MLLCA. The Merger shall become
effective on the date and at the time when the Certificate of Merger has been
duly filed with the Department of Assessments and Taxation of the State of
Delaware and the Articles of Merger have been filed pursuant to the MLLCA (but
not earlier than the Closing Date) or, subject to the DGCL and the MLLCA, such
later time as is agreed upon by the parties hereto and specified in the
Certificate of Merger and the Articles of Merger (such effective time, the
"Effective Time").
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Section 2.3 Closing. Unless this Agreement shall have been terminated and
the Merger herein contemplated shall have been abandoned pursuant to Section 8.1
and subject to the conditions of this Agreement, the closing of the Merger (the
"Closing") shall be held at the offices of Xxxxx Xxxx LLP, 1290 Avenue of the
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as promptly as practicable, but in no event
later than 10:00 a.m., local time, on the Business Day following satisfaction or
waiver of all of the conditions set forth in Article VII (other than those
conditions that by their nature will be satisfied at the Closing), unless
another time, date and/or place is agreed to in writing by the parties. The date
on which the Closing occurs is hereinafter referred to as the "Closing Date."
Section 2.4 Articles of Organization and Limited Liability Company
Agreement of the Surviving Company. The articles of organization of the Merger
Subsidiary as in effect immediately prior to the Effective Time shall be the
articles of organization of the Surviving Company. The limited liability company
agreement of Merger Subsidiary as in effect immediately prior to the Effective
Time shall be the limited liability company agreement of the Surviving Company.
Section 2.5 Officers of the Surviving Company. The persons set forth on
Exhibit 2.5 hereto shall, from and after the Effective Time, be the officers of
the Surviving Company until their respective successors are chosen and have
qualified in accordance with the articles of organization and limited liability
company agreement of the Surviving Company or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Merger Consideration. The Company, Parent and Merger Subsidiary
acknowledge and agree, subject to this Article III, as follows:
(a) The Holders are entitled to receive, in the aggregate, total
merger consideration that is payable (i) one-half in shares of the Parent Common
Stock (valued at the Per Share Price) and (ii) one-half in cash.
(b) Wellsford Holder is entitled to receive total merger consideration
that is payable 100% in Parent Common Stock.
(c) Each Holder initially will have the right to receive one-half of
the merger consideration to which such Holder is entitled in shares of Parent
Common Stock and one-half of the merger consideration to which such Holder is
entitled in cash, with each Eligible Stockholder having the right to elect to
receive, subject to clause (d) below, all the merger consideration to which such
Eligible Stockholder is entitled in shares of Parent Common Stock (in lieu of
the corresponding cash amount).
(d) Each Electing Stockholder will be allocated shares of Parent
Common Stock (in lieu of the corresponding cash amount) from the shares of
Parent Common Stock to which the LG Stockholders were entitled to receive under
clause (a) above, with the corresponding amounts of cash to which the Electing
Stockholders were entitled to receive under
10
clause (a) above being allocated to the LG Stockholders (in lieu of the
corresponding shares of Parent Common Stock), subject to the limitations that
each of the LG Stockholders must receive at least one-third of his merger
consideration in shares of Parent Common Stock and the Wellsford Holder must
receive all of its merger consideration in shares of Parent Common Stock.
(e) If the Electing Stockholders, in the aggregate, elect to receive
more shares of Parent Common Stock than are permitted by the limitation
described in clause (d) above, then the Electing Stockholders will receive
shares of Parent Common Stock up to this limitation, with each Electing
Stockholder receiving a pro rata number of shares of Parent Common Stock based
upon the number of shares of Company Common Stock (on an as-converted basis)
held by such Electing Stockholder relative to those shares held by the other
Electing Stockholders (and will receive in cash the remaining merger
consideration to which such Holder is entitled).
Section 3.2 Conversion of Shares. Subject to the Cash Holdback, the
Stockholder Representatives Indemnity and the Share Holdback as set forth in
Article IX, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Subsidiary, the Company or the holders of
any shares of Company Common Stock or Company Preferred Stock.
(a) Each share of Company Common Stock, issued and outstanding
immediately prior to the Effective Time (other than the Company Common Stock to
be canceled pursuant to subsections (f) and (g) below and any Dissenting Shares
(as defined in Section 3.9)) shall be converted into the right to receive (i)
$8.16 in cash (the "Common Stock Cash Merger Consideration"), payable to the
holder thereof without interest, or (ii) 1.0000 share of Parent Common Stock
(the "Common Stock Share Merger Consideration" and together, with the Common
Stock Cash Consideration collectively referred to as the "Common Stock Merger
Consideration") in the manner provided by the election and allocation procedures
set forth in Section 3.3, payable upon surrender of the certificate or
certificates which immediately prior to the Effective Time represented issued
and outstanding shares of Company Common Stock. All such Company Common Stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a certificate or
certificates previously evidencing such shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect thereto, except the right to receive the Common Stock Merger
Consideration for each share of Company Common Stock upon the surrender of such
certificates in accordance with Section 3.4 and cash in lieu of fractional
shares of Parent Common Stock in accordance with Section 3.4(c). Any payment
made pursuant to this Section 3.2(a) shall be made net of applicable withholding
taxes to the extent such withholding is required by law.
(b) Each share of the Company's Series A Preferred Stock, $0.01 par
value per share ("Series A Preferred Stock"), issued and outstanding immediately
prior to the Effective Time (other than the Series A Preferred Stock to be
canceled pursuant to subsections (f) and (g) below and any Dissenting Shares)
shall be converted into (i) $463.11 in cash (the "Series A Cash Merger
Consideration"), payable to the holder thereof without interest, or (ii) 56.75
shares of Parent Common Stock (the "Series A Share Merger Consideration" and,
together, with the Series A Cash Merger Consideration, collectively referred to
as the "Series A Merger Consideration")
11
in the manner provided by the election and allocation procedures set forth in
Section 3.3, payable upon surrender of the certificate or certificates which
immediately prior to the Effective Time represented issued and outstanding
shares of Series A Preferred Stock. All such Series A Preferred Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of a certificate or certificates
previously evidencing such shares of Series A Preferred Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect thereto, except the right to receive the Series A Merger Consideration
for each share of Series A Preferred Stock upon the surrender of such
certificates in accordance with Section 3.4 and cash in lieu of fractional
shares of Parent Common Stock in accordance with Section 3.4(c). Any payment
made pursuant to this Section 3.2(b) shall be made net of applicable withholding
taxes to the extent such withholding is required by law.
(c) Each share of the Company's Series B Preferred Stock, $0.01 par
value per share ("Series B Preferred Stock"), issued and outstanding immediately
prior to the Effective Time (other than the Series B Preferred Stock to be
canceled pursuant to subsections (f) and (g) below and any Dissenting Shares)
shall be converted into the right to receive (i) $272.00 in cash (the "Series B
Cash Merger Consideration"), payable to the holder thereof without interest, or
(ii) 33.33 shares of Parent Common Stock (the "Series B Share Merger
Consideration" and, together, with the Series B Cash Merger Consideration,
collectively referred to as the "Series B Merger Consideration") in the manner
provided by the election and allocation procedures set forth in Section 3.3,
payable upon surrender of the certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Series
B Preferred Stock. All such Series B Preferred Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and shall cease to
exist, and each holder of a certificate or certificates previously evidencing
such shares of Series B Preferred Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect thereto, except the
right to receive the Series B Merger Consideration for each share of Series B
Preferred Stock upon the surrender of such certificates in accordance with
Section 3.4 and cash in lieu of fractional shares of Parent Common Stock in
accordance with Section 3.4(c). Any payment made pursuant to this Section 3.2(c)
shall be made net of applicable withholding taxes to the extent such withholding
is required by law.
(d) Each share of the Company's Series C Preferred Stock, $0.01 par
value per share ("Series C Preferred Stock"), issued and outstanding immediately
prior to the Effective Time (other than the Series C Preferred Stock to be
canceled pursuant to subsections (f) and (g) below and any Dissenting Shares)
shall be converted into the right to receive (i) $205.65 in cash (the "Series C
Cash Merger Consideration"), payable to the holder thereof without interest, or
(ii) 25.20 shares of Parent Common Stock (the "Series C Share Merger
Consideration" and, together, with the Series C Cash Merger Consideration,
collectively referred to as the "Series C Merger Consideration") in the manner
provided by the election and allocation procedures set forth in Section 3.3,
payable upon surrender of the certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Series
C Preferred Stock. All such Series C Preferred Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and shall cease to
exist, and each holder of a certificate or certificates previously evidencing
such shares of Series C Preferred Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect thereto, except the
right to receive
12
the Series C Merger Consideration for each share of Series C Preferred Stock
upon the surrender of such certificates in accordance with Section 3.4 and cash
in lieu of fractional shares of Parent Common Stock in accordance with Section
3.4(c). Any payment made pursuant to this Section 3.2(d) shall be made net of
applicable withholding taxes to the extent such withholding is required by law.
(e) Each share of the Company's Series D Preferred Stock, $0.01 par
value per share ("Series D Preferred Stock"), issued and outstanding immediately
prior to the Effective Time (other than the Series D Preferred Stock to be
canceled pursuant to subsections (f) and (g) below and any Dissenting Shares)
shall be converted into the right to receive (i) $253.42 in cash (the "Series D
Cash Merger Consideration"), payable to the holder thereof without interest, or
(ii) 31.06 shares of Parent Common Stock (the "Series D Share Merger
Consideration" and, together, with the Series D Cash Merger Consideration,
collectively referred to as the "Series D Merger Consideration") in the manner
provided by the election and allocation procedures set forth in Section 3.3,
payable upon surrender of the certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Series
D Preferred Stock. All such Series D Preferred Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and shall cease to
exist, and each holder of a certificate or certificates previously evidencing
such shares of Series D Preferred Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect thereto, except the
right to receive the Series D Merger Consideration for each share of Series D
Preferred Stock upon the surrender of such certificates in accordance with
Section 3.4 and cash in lieu of fractional shares of Parent Common Stock in
accordance with Section 3.4(c). Any payment made pursuant to this Section 3.2(e)
shall be made net of applicable withholding taxes to the extent such withholding
is required by law.
(f) Notwithstanding the foregoing, each share of Company Common Stock
or Company Preferred Stock issued and outstanding immediately prior to the
Effective Time that is held by the Company as treasury stock, shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
canceled and cease to exist, and no payment or distribution shall be made with
respect thereto.
(g) Notwithstanding the foregoing, each share of Company Common Stock
or Company Preferred Stock, if any, held of record by Parent or Merger
Subsidiary (other than in each case, shares in trust accounts, managed accounts,
custodial accounts and the like that are beneficially owned by third parties)
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled and
cease to exist, and no payment shall be made with respect thereto.
(h) If between the date of this Agreement and the Effective Time: (i)
the outstanding shares of Company Common Stock or any series of Company
Preferred Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares or any similar event,
the Per Share Cash Consideration and Per Share Stock Consideration with respect
to the series and/or class of Company Stock that has been changed shall be
correspondingly adjusted to the extent appropriate to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares or similar event; or (ii)
13
the outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares or any similar event, the Per Share Stock Consideration for
the Company Common Stock and the Company Preferred Stock shall be
correspondingly adjusted to the extent appropriate to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares or similar event. Notwithstanding the foregoing, except as
expressly contemplated by this Section 3.2(h), nothing in Section 3.2 hereof
shall be deemed to require an increase in either the aggregate amount of Cash
Consideration or the aggregate amount of Share Consideration to be paid to
holders of Company Stock in the Merger (not including cash in lieu of fractional
shares).
Section 3.3 Consideration Election.
(a) Stock Election. Notwithstanding the provisions of Section 3.2(a),
(b), (c), (d) and (e), but subject to the election and allocation procedures set
forth in this Section 3.3, each Eligible Stockholder will be entitled, with
respect to all but not less than all of the Company Stock held by such Eligible
Stockholder, to make an election (a "Stock Election") to receive the Per Share
Stock Consideration in lieu of the Per Share Cash Consideration applicable to
all of such holder's Company Stock.
(b) Defined Terms. When used in this Agreement, the following terms
shall have the following meanings:
(i) "Electing Stockholder" means any Eligible Stockholder who
makes a Stock Election in accordance with the provisions of Section 3.3(a).
(ii) "Stock Election Share" means each share of Company Common
Stock or Company Preferred Stock as to which an Electing Stockholder has made a
valid Stock Election under Section 3.3(a), and "Stock Election Shares" means all
such shares.
(iii) "Wellsford Shares" means the shares of Company Common Stock
and Company Preferred Stock held by the Wellsford Holder.
(iv) "Non-Electing Shares" means any shares of Company Common
Stock or Company Preferred Stock held by an Eligible Stockholder that are not
Stock Election Shares.
(v) "Additionally-Elected Parent Shares" means one-half of the
number of shares of Parent Common Stock into which the Stock Election Shares
would be converted assuming that each Stock Election Share was converted into
the Per Share Stock Consideration applicable thereto (without taking into
account any allocation or adjustment under Section 3.3(c)).
(vi) "Maximum Elected Share Number" means one-sixth of the
aggregate number of shares of Parent Common Stock into which the LG Shares would
be converted assuming that each LG Share was converted into the Per Share Stock
Consideration applicable thereto (without taking into account any allocation or
adjustment under Section 3.3(c)).
14
(c) Election Adjustments. The allocation among the holders of Company
Stock of rights to receive the applicable Per Share Stock Consideration and the
applicable Per Share Cash Consideration in the Merger will be made as follows:
(i) Wellsford Shares. The Wellsford Shares shall be converted
into the right to receive the Per Share Stock Consideration applicable thereto.
(ii) Non-Electing Shares. The Non-Electing Shares shall be
converted into merger consideration as follows:
(A) one-half of (I) the Non-Electing Shares that are Company
Common Stock, (II) the Non-Electing Shares that are Series A Preferred Stock,
(III) the Non-Electing Shares that are Series B Preferred Stock, (IV) the
Non-Electing Shares that are Series C Preferred Stock and (V) the Non-Electing
Shares that are Series D Preferred Stock (in each case rounded down to the
nearest whole share) will, as of the Effective Time, be converted into the right
to receive the Per Share Cash Consideration applicable thereto (collectively,
the "Non-Electing Cash Shares"); and
(B) one-half of (I) the Non-Electing Shares that are Company
Common Stock, (II) the Non-Electing Shares that are Series A Preferred Stock,
(III) the Non-Electing Shares that are Series B Preferred Stock, (IV) the
Non-Electing Shares that are Series C Preferred Stock and (V) the Non-Electing
Shares that are Series D Preferred Stock (in each case rounded up to the nearest
whole share) will, as of the Effective Time, be converted into the right to
receive the Per Share Stock Consideration applicable thereto (the "Non-Electing
Stock Shares").
The Surviving Company will allocate to each holder of Non-Electing Shares in
each series and/or class of Company Stock one-half of the total number of such
holder's Non-Electing Shares in such series or class in Non-Electing Cash Shares
and one-half of the total number of such holder's Non-Electing Shares in such
series or class in Non-Electing Stock Shares; provided, however, if any holder
of Non-Electing Shares in such series and/or class owns an odd number of shares
in such series and/or class of Company Stock, the Surviving Company, in its sole
discretion, may allocate to each such holder (i) one more such Non-Electing
Stock Share and one less such Non-Electing Cash Share or (ii) one more such
Non-Electing Cash Share and one less such Non-Electing Stock Shares as the
Surviving Company deems necessary.
(iii) Stock Election Shares and LG Shares (When
Additionally-Elected Parent Shares Less Than or Equal to Maximum Elected Share
Number). If the number of Additionally-Elected Parent Shares is less than or
equal to the Maximum Elected Share Number, then the Stock Election Shares and
the LG Shares shall be converted into merger consideration as follows:
(A) Each Stock Election Share will, as of the Effective
Time, be converted into the right to receive the Per Share Stock Consideration
applicable thereto.
(B) When used in this Agreement, the following terms shall
have the following meanings:
15
(I) "LG Cash Number" means the sum of (X) the number of
shares equal to the Additionally-Elected Parent Shares and (Y) one-half of the
total number of LG Shares; provided that if the total number of LG Shares is an
odd number then the LG Cash Number shall be increased by 0.5.
(II) "LG Share Number" means the total number of LG
Shares minus the LG Cash Number.
(C) The LG Shares shall be converted into merger
consideration as follows:
(I) the number of LG Shares equal to the LG Cash Number
will, as of the Effective Time, be converted into the right to receive the
Common Stock Cash Merger Consideration (collectively, the "LG Cash Shares"); and
(II) the number of LG Shares equal to the LG Share
Number will, as of the Effective Time, be converted into the right to receive
the Common Stock Share Merger Consideration (collectively, the "LG Stock
Shares").
The Surviving Company will allocate to each LG Stockholder a pro rata number of
LG Cash Shares and LG Stock Shares based upon the number of shares of Company
Common Stock held by such LG Stockholder relative to those shares held by the
other LG Stockholder; provided, however, the Surviving Company, in its sole
discretion, may allocate to each LG Stockholder (i) one more such LG Stock Share
and one less such LG Cash Share or (ii) one more such LG Cash Share and one less
such LG Stock Share as the Surviving Company deems necessary.
(iv) Stock Election Shares and LG Shares (When
Additionally-Elected Parent Shares Greater Than Maximum Elected Share Number).
If the number of Additionally-Elected Parent Shares is greater than the Maximum
Elected Share Number, then the Stock Election Shares and the LG Shares shall be
converted into merger consideration as follows:
(A) The LG Shares shall be converted into merger
consideration as follows:
(I) two-thirds of the LG Shares will, as of the
Effective Time, be converted into the right to receive the Common Stock Cash
Merger Consideration (collectively, the "Max LG Cash Shares"); and
(II) one-third of the LG Shares will, as of the
Effective Time, be converted into the right to receive the Common Stock Share
Merger Consideration (collectively, the "Min LG Stock Shares").
The Surviving Company will allocate to each LG Stockholder a pro rata number of
Max LG Cash Shares and Min LG Stock Shares based upon the number of shares of
Company Common Stock held by such LG Stockholder relative to those shares held
by the other LG Stockholder; provided, however, the Surviving Company, in its
sole discretion, may allocate to each LG Stockholder (i) one more such Min LG
Stock Share and one less such Max LG Cash Share or (ii)
16
one more such Max LG Cash Share and one less such Min LG Stock Share as the
Surviving Company deems necessary.
(B) When used in this Agreement, "Stock Election Ratio"
means the ratio of (i) (x) the total number of shares of Share Consideration,
minus (y) the Share Consideration issuable in respect of the Non-Electing Stock
Shares and the Wellsford Shares, minus (z) the number of the Min LG Stock Shares
over (ii) the total number of shares of Share Consideration.
(C) The Stock Election Shares shall be converted into merger
consideration as follows:
(I) all Stock Election Shares equal to the Stock
Election Ratio of (v) the Stock Election Shares that are Company Common Stock,
(w) the Stock Election Shares that are Series A Preferred Stock, (x) the Stock
Election Shares that are Series B Preferred Stock, (y) the Stock Election Shares
that are Series C Preferred Stock and (z) the Stock Election Shares that are
Series D Preferred Stock (in each case rounded up to the nearest whole share
(the shares referred to in clauses (v), (w), (x), (y) and (z) being referred to
collectively as the "Max Election Stock Shares") will, as of the Effective Time,
be converted into the right to receive the Per Share Stock Consideration
applicable thereto; and
(II) all Stock Election Shares that are not Max
Election Stock Shares under subsection (I) above (collectively, the "Min
Election Cash Shares") will, as of the Effective Time, be converted into the
right to receive the Per Share Cash Consideration applicable thereto.
The Surviving Company will allocate to each holder of Stock Election Shares in
each series and/or class of Company Stock, (x) a number of Max Election Stock
Shares in such series and/or class equal to the Stock Election Ratio multiplied
by the total number of such holder's Stock Election Shares in such series or
class and (y) the remainder of such holder's Stock Election Shares in such
series or class in Min Election Cash Shares; provided, however, the Surviving
Company, in its sole discretion, may allocate to each such holder (i) one more
such Max Election Stock Share and one less such Min Election Cash Share or (ii)
one more such Min Election Cash Share and one less such Max Election Stock Share
as the Surviving Company deems necessary.
(d) Parent shall (i) prepare a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election"), and
(ii) mail such Form of Election to the holders of record of shares of Company
Stock as of the record date for the Company Stockholders Meeting (the "Election
Form Record Date"), together with the Joint Proxy Statement, which Form of
Election shall be used by each record holder of Company Stock who wishes to make
a Stock Election with respect to all Company Stock held by such holder. Parent
and the Company shall make available one or more Forms of Election as may be
reasonably requested by all persons who become holders of record of Company
Stock between the Election Form Record Date and the Election Date. Any such
holder's Stock Election shall have been properly made only if Parent shall have
received at its designated office, by 5:00 p.m., New York City time, on or
before the Election Date, a Form of Election properly completed and signed and
accompanied by such letter of transmittal and certificates for the Company
Common
17
Stock and Company Preferred Stock to which such Form of Election relates, duly
endorsed in blank or otherwise in form acceptable for transfer on the books of
Parent (or by an appropriate guarantee of delivery of such certificates as set
forth in such Form of Election from a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States, provided such certificates are in fact
delivered to Parent within three NASDAQ trading days after the date of execution
of such guarantee of delivery). As used herein, the "Election Date" means the
Business Day that is the second Business Day prior to the Company Stockholders
Meeting; provided, however, that if the Closing Date is more than five Business
Days after the Company Stockholders Meeting then the Election Date shall be
extended to a date reasonably agreed upon by Parent and the Company, which date
shall be announced by Parent in a news release delivered to Dow Xxxxx News
Service and which date shall be at least five Business Days following the date
of such news release.
(e) Any Form of Election may be revoked by the stockholder submitting
it to Parent only by written notice received by Parent prior to 5:00 p.m., New
York City time, on the Election Date. If a Form of Election is revoked, the
certificate or certificates (or guarantees of delivery, as appropriate) for the
Company Common Stock and Company Preferred Stock to which such Form of Election
relates shall be retained for processing by Parent pursuant to Section 3.4.
(f) The determination of Parent shall be binding as to whether or not
a Stock Election has been properly made or revoked pursuant to this Section 3.3.
If Parent determines that any Stock Election was not properly made, such shares
shall be treated as shares that were Non-Electing Shares at the Election Date
and the holder of such shares shall not be treated as an Electing Stockholder,
and such shares shall be exchanged in the Merger pursuant to Section 3.3(c)(ii).
Parent and the Company may, upon mutual agreement, make such rules as are
consistent with this Section 3.3 for the implementation of the Stock Elections
provided for herein as shall be necessary or desirable fully to effect such
Stock Elections.
Section 3.4 Exchange of Certificates; Payment for Shares.
(a) The Surviving Company shall act as exchange agent for the Holders
and the Wellsford Holder in connection with the Merger. Immediately prior to the
Effective Time, and subject to the deposit by the Company in a Company account
of the proceeds of the Company Loan, Parent shall deposit, or cause to be
deposited in such Company account for the benefit of the Holders (other than
Dissenting Shares and shares to be canceled pursuant to Sections 3.2(f) and (g))
(x) an amount in cash equal to the Cash Consideration (minus an amount equal to
the proceeds of the Company Loan) payable pursuant to this Article III, less (A)
the Cash Holdback to be deposited with the Escrow Agent pursuant to Section 9.1,
(B) the FR Cash Holdback to be deposited with the Escrow Agent pursuant to
Section 9.1 and (C) the Stockholder Representatives Indemnity to be deposited
with Xxxxx Xxxx LLP pursuant to Section 9.5, and (y) a certificate representing
the shares of Parent Common Stock being issued hereunder less the Share Holdback
and the FR Share Holdback (such cash funds and certificate so deposited with or
for the account of the Company, the "Payment Fund"). Such funds held by the
Company shall not be used for any purpose except as expressly provided in this
Agreement. Any interest, dividends or other income earned from investment of the
cash portion of the Payment Fund shall
18
be for the account of the Surviving Company. Such cash portion of the Payment
Fund shall (i) be deposited in interest-bearing money market or custodial
accounts at Wachovia Bank, N.A., US Trust Company, N.A., JPMorgan Chase Bank,
the Bank of New York, N.A., or Key Bank, N.A. or (ii) invested in obligations
of, or guaranteed by, the United States of America, in commercial paper
obligations receiving the highest investment grade rating from both Xxxxx'x
Investors Services, Inc. and Standard & Poor's, a division of McGraw Hill, Inc.,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1,000,000,000
(collectively, "Permitted Investments"); provided, however, that the maturities
of Permitted Investments shall be such as to permit the Surviving Company to
make prompt payment to the holders of shares of Company Common Stock or Company
Preferred Stock pursuant to the Merger.
(b) Promptly after the Effective Time, and in any event no later than
two Business Days following the Effective Time, the Surviving Company will mail
to each holder of record of a certificate or certificates that immediately prior
to the Effective Time evidenced outstanding shares of Company Common Stock and
Company Preferred Stock (the "Certificates"), whose shares were converted
pursuant to Section 3.1 into the right to receive the Common Stock Merger
Consideration or the Preferred Stock Merger Consideration, respectively, and who
did not previously submit such materials pursuant to Section 3.3(d) (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon delivery of such
Certificates to the Surviving Company) and shall be in such form and have such
other provisions as the Company and Merger Subsidiary may reasonably specify and
(ii) instructions for use of the letter of transmittal in effecting the
surrender of the Certificates in exchange for payment of the Common Stock Merger
Consideration or the Preferred Stock Merger Consideration, respectively. Upon
surrender of a Certificate for cancellation to the Surviving Company, together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Common Stock
Merger Consideration or the applicable Preferred Stock Merger Consideration for
each share of Company Common Stock or Company Preferred Stock, respectively,
formerly represented by such Certificate, without any interest (other than
pursuant to Article IX), less any required withholding of taxes (including (i) a
certificate representing the number of whole shares of Parent Common Stock, if
any, to which such Holder is entitled, and (ii) a check representing the amount
of cash, if any, to which such Holder shall be entitled), and the Certificate so
surrendered shall forthwith be canceled. The Common Stock Merger Consideration
or the Preferred Stock Merger Consideration (less the pro rata portion of the
Stockholder Representatives Indemnity, the Holdback and the FR Holdback) will be
delivered by the Surviving Company as promptly as practicable following the
Election Date and the surrender of a Certificate and the related transmittal
documents, duly executed. In the event of a transfer of ownership of Company
Common Stock or Company Preferred Stock which is not registered in the transfer
records of the Company, the Common Stock Merger Consideration or Preferred Stock
Merger Consideration and any dividends or other distributions to which such
holder is entitled, may be issued with respect to such Company Common Stock or
Company Preferred Stock, to such a transferee if the Certificates representing
such Company Common Stock or Company Preferred Stock are presented to the
Surviving Company (or if lost, stolen or destroyed, the procedures set forth in
Section 3.7 are complied with), accompanied by all
19
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(c) No fractional shares of Parent Common Stock shall be issued
pursuant to this Agreement. In lieu of the issuance of any fractional shares of
Parent Common Stock pursuant to this Agreement, each holder of Company Common
Stock and Company Preferred Stock shall be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the Per
Share Price by (ii) the fractional amount of the Parent Common Stock which such
holder would otherwise be entitled to receive under this Article III.
(d) Until surrendered as contemplated by this Section 3.4, each
Certificate (other than Dissenting Shares and shares to be canceled pursuant to
Sections 3.2(f) and (g)) shall be deemed at any time after the Effective Time to
represent only the right to receive the Common Stock Merger Consideration or the
applicable Preferred Stock Merger Consideration, as contemplated by this Section
3.4. Except as set forth in Article IX, no interest shall be paid or will accrue
on any Common Stock Merger Consideration or Preferred Stock Merger
Consideration, payable to holders of Certificates pursuant to the provisions of
this Article III.
(e) Neither Parent nor the Surviving Company shall be liable to any
holder of shares for any Common Stock Merger Consideration or Preferred Stock
Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat or similar law.
Section 3.5 Stock Options.
(a) Prior to the Effective Time, the Company shall take all necessary
action by an appropriate committee of the Board of Directors of the Company, to
cause each Plan Option (as defined in this clause (a)) to convert to the right
to receive as a result of the occurrence of the Merger a cash payment pursuant
to Section 5.10 of the Company's 1999 Stock Option Plan, as amended (the
"Company Option Plan"), such that at the Effective Time, each Plan Option
outstanding immediately prior to the Effective Time, whether or not then
exercisable, shall be canceled and only entitle the holder thereof to receive as
soon as reasonably practicable after the surrender thereof, cash in an amount
equal to the product of (i) the amount, if any, by which $8.16 exceeds the per
share exercise price of such Plan Option, times (ii) the number of shares of
Company Common Stock into which such Plan Option is exercisable, all as set
forth in Section 3.5(a) of the Company Disclosure Schedule; provided that any
such payment shall be net of all withholding taxes required by law to be
withheld by the Company. For purposes of this Agreement, "Plan Option" shall
mean an outstanding option to purchase Company Common Stock granted under the
Company Option Plan.
(b) Prior to the Effective Time, the Company shall take all action by
appropriate committee of the Board of Directors of the Company, to cause each
Non-Plan Option (as defined in this clause (b)) to convert to the right to
receive as a result of the occurrence of the Merger a cash payment pursuant to
the terms of each such Non-Plan Option such that immediately after the Effective
Time, each Non-Plan Option outstanding immediately prior to the Effective Time,
whether or not then exercisable, shall be canceled and only entitle the holder
thereof to receive as soon as reasonably practicable after the surrender
thereof, cash in an amount equal to the product of (i) the amount, if any, by
which $8.16 exceeds the per share exercise
20
price of such Non-Plan Option, times (ii) the number of shares of Common Stock
into which such Non-Plan Option is exercisable, all as set forth in Section
3.5(b) of the Company Disclosure Schedule; provided that any such payment shall
be net of all withholding taxes required by law to be withheld by the Company.
For purposes of this Agreement, "Non-Plan Option" shall mean an outstanding
option to purchase Company Common Stock which is not granted pursuant to the
Company Option Plan.
(c) Subject to clause (a) above, promptly following receipt by the
Surviving Company after the Closing of a Plan Option from each holder thereof,
such holder shall be entitled to receive in exchange therefor from the Surviving
Company such payment as provided in this Section 3.5 and set forth in Section
3.5(a) of the Company Disclosure Schedule. The holder of a Plan Option shall not
be entitled to any further payments under this Agreement or otherwise with
respect to any Plan Option held by such holding, including, without limitation,
by reason of any distribution of the Holdback or any other escrowed funds.
(d) Subject to clause (b) above, promptly following receipt by the
Surviving Company after the Closing of a Non-Plan Option from each holder
thereof, such holder shall be entitled to receive in exchange therefor from the
Surviving Company such payment as provided in this Section 3.5 and set forth in
Section 3.5(b) of the Company Disclosure Schedule. The holder of a Non-Plan
Option shall not be entitled to any further payments under this Agreement or
otherwise with respect to any Non-Plan Option held by such holder, including,
without limitation, by reason of any distribution of the Holdback or any other
escrowed funds.
Section 3.6 Withholding. The Surviving Company shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock or Company Preferred Stock or
any holder of a Plan Option or Non-Plan Option such amounts as the Surviving
Company is required to deduct and withhold with respect to the making of such
payment under any provision of federal, state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Company, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock or Company Preferred Stock
or the holder of a Plan Option or Non-Plan Option in respect of which such
deduction and withholding was made by the Surviving Company.
Section 3.7 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed, the Surviving Company will issue in exchange for such lost,
stolen or destroyed Certificate the Common Stock Merger Consideration or
Preferred Stock Merger Consideration deliverable in respect thereof as
determined in accordance with this Article III, provided that the Person to whom
such consideration is paid shall, as a condition precedent to the payment
thereof, give the Surviving Company a written indemnity agreement in form and
substance reasonably satisfactory to the Surviving Company against any claim
that may be made against the Surviving Company with respect to the Certificate
claimed to have been lost, stolen or destroyed.
Section 3.8 Stock Transfer Books. After the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers on the stock
21
transfer books of the Surviving Company of shares of Company Common Stock or
Company Preferred Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Company, they shall be canceled and their holders shall be entitled to
the rights provided herein.
Section 3.9 Appraisal Rights. Shares of Company Common Stock and Company
Preferred Stock that have not voted for adoption of this Agreement and with
respect to which appraisal has been properly demanded in accordance with Section
262 of the DGCL ("Dissenting Shares") will not be converted into the right to
receive the Common Stock Merger Consideration or Preferred Stock Merger
Consideration, as applicable, at or after the Effective Time unless and until
the holder of such shares (a "Dissenting Stockholder") withdraws such demand for
such appraisal (in accordance with Section 262(k) of the DGCL) or becomes
ineligible for such appraisal, but shall be converted into the right to receive
such consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the DGCL. If a holder of Dissenting Shares withdraws such demand for
appraisal (in accordance with Section 262(k) of the DGCL) or becomes ineligible
for such appraisal, then, as of the Effective Time or the occurrence of such
event, whichever last occurs, each of such holder's Dissenting Shares will cease
to be a Dissenting Share and will be converted as of the Effective Time into and
represent the right to receive the Common Stock Merger Consideration or the
applicable Preferred Stock Merger Consideration, as appropriate, without
interest thereon. The Company shall give Parent and Merger Subsidiary prompt
notice of any demands for appraisal, attempted withdrawals of such demands and
any other instruments received by the Company relating to stockholders' rights
of appraisal, and, prior to the Effective Time, Parent and Merger Subsidiary
shall have the right to participate in, and after the Effective Time the
Surviving Company shall have the right to direct, all negotiations and
proceedings with respect to such demands except as required by applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary that
the statements contained in this Article IV are true and correct as of the date
hereof and will be true and correct as of the Closing Date except as set forth
herein or in the disclosure letter separately delivered by the Company to Parent
and Merger Subsidiary on the date hereof (the "Company Disclosure Schedule").
Section 4.1 Organization and Good Standing. The Company is duly formed,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified to do
business and is in good standing as a corporation in the jurisdiction in which
the conduct or nature of its business or the ownership, leasing or holding of
its properties makes such qualification necessary, except where the failure to
be so qualified would not have a Company Material Adverse Effect.
Section 4.2 Capitalization.
22
(a) The authorized and outstanding capital stock of the Company is as
set forth on Section 4.2(a) of the Company Disclosure Schedule.
(b) Except as set forth on Section 4.2(b) of the Company Disclosure
Schedule, all of the issued and outstanding shares of the Company's capital
stock are duly authorized, validly issued, fully paid and nonassessable, and
free of preemptive rights.
(c) Except as set forth in Section 4.2(c) of the Company Disclosure
Schedule, as of the date hereof, there are no (i) options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, convertible
securities or other rights, agreements, arrangements or commitments obligating
the Company to issue or sell any shares of capital stock of, or any other equity
interest in, the Company, (ii) outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of, or interests
in, the Company or (iii) voting trusts or similar agreements to which the
Company is a party with respect to the voting of the capital stock of the
Company.
Section 4.3 Authorization; Validity of Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of its stockholders as contemplated by Section 6.14(b)
hereof, to consummate the transactions contemplated hereby. The execution and
delivery by the Company of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved and authorized by the
Board of Directors of the Company and, other than the Company Stockholder
Approval, no other corporate proceedings on the part of the Company are
necessary to approve and authorize the execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and,
assuming due authorization, execution and delivery of this Agreement by Parent
and Merger Subsidiary, is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be subject to or limited by (a) bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting the rights of creditors'
generally and (b) the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Section 4.4 No Conflicts; Consents.
(a) Except as set forth in Section 4.4 of the Company Disclosure
Schedule, the execution and delivery by the Company of this Agreement will not,
and the consummation by the Company of the transactions contemplated hereby will
not, (i) violate the provisions of its certificate of incorporation or by-laws,
(ii) violate any material mortgage, note, indenture, lease, license, agreement,
contract or other instrument or obligation ("Contract") to which the Company is
a party or by which it or its assets are bound, (iii) assuming compliance by the
Company with the matters referred to in clause (b) below, violate any Order or
Law applicable to the Company on the date hereof, or (iv) result in the creation
of any mortgage, lien, pledge, charge, security interest or any encumbrance
(each a "Lien" and, collectively, the "Liens") upon any of the assets owned or
used by the Company, except in the case of clauses (ii) or (iii) above, where
such violation would not, individually or in the aggregate, have a Company
Material Adverse Effect.
23
(b) No consent, waiver, approval, authorization, order of,
registration, declaration or filing with, or notice to any Governmental Entity
is required to be obtained or made by or with respect to the Company in
connection with the execution and delivery of this Agreement or the consummation
of the Merger or the other transactions contemplated hereby, except for such
authorizations, consents, waivers, approvals, orders, registrations,
declarations, filings and notices (i) as may be required under the DGCL and the
MLLCA, (ii) as may be required under the HSR Act, (iii) as may be required to be
filed under the Securities Laws, or (iv) the failure to obtain which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 4.5 Financial Information.
(a) The Company has previously made available to Parent (i) audited
financial statements of the Company for the years ended October 31, 2003,
October 31, 2004 and October 31, 2005 and (ii) unaudited financial statements of
the Company for the eight-month period ending June 30, 2006, a copy of which
unaudited financial statements are set forth in Section 4.5(a) of the Company
Disclosure Schedule (collectively, the "Company Financial Documents"). The
Company Financial Documents are consistent with the books and records of the
Company, have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as otherwise noted therein and except that the quarterly
financial statements are subject to year-end adjustments and do not contain all
footnote disclosures required by GAAP) and fairly present in all material
respects the consolidated financial position and the consolidated statements of
operations and cash flows of the Company as at the dates thereof or for the
periods presented therein.
(b) Since October 31, 2005, there are no Liabilities which were
incurred by the Company or for which the Company has become liable except for
(i) those Liabilities set forth in the Company Financial Documents, (ii) those
Liabilities incurred in the ordinary course of business and (iii) those
Liabilities set forth in Section 4.5(b) of the Company Disclosure Schedule.
Section 4.6 Subsidiaries. The Company does not have any direct or indirect
Subsidiaries or any equity interest in any other Person.
Section 4.7 Intellectual Property.
(a) For the purposes of this Agreement: (i) "Intellectual Property"
means collectively (A) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents
and patent applications, (B) all registered trademarks, registered trade dress,
registered service marks, trademark applications, trade dress applications and
service xxxx applications and unregistered trademarks, service marks, trade
dress, logos, trade names, fictitious names, brand names, brand marks, domain
names and corporate names, including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (C) all
copyrights, registered and unregistered, and all applications, registrations,
and renewals in connection therewith, (D) all mask works and all applications,
registrations, and renewals in connection therewith, (E) all trade secrets and
24
confidential business information (including, without limitation, ideas,
research and development, know-how, formulae, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (F) all computer software and
databases (including, without limitation, data, source codes and related
documentation and the computer software described in Section 4.7(g)), (G) all
other proprietary rights, and (H) all copies and tangible embodiments thereof
(in whatever form or medium); and (ii) "Company Intellectual Property" means all
Intellectual Property owned, used or held for use by the Company.
(b) To the Company's knowledge, the Company owns all right, title and
interest in and to, or has a valid license to use, all material Company
Intellectual Property, free and clear of all Liens (other than Permitted Liens).
To the Company's knowledge, there is no unauthorized use, disclosure,
infringement or misappropriation of any Company Intellectual Property by any
other Person. To the Company's knowledge, neither the Company Intellectual
Property nor the use thereof infringes upon or violates the rights of any other
Person. Except as set forth in Section 4.7(b)(i) of the Company Disclosure
Schedule, the Company has not received any notice or claim alleging any
unauthorized use or infringement by the Company of any Intellectual Property of
any other Person, and no suit, claim, action or proceeding is pending, or to the
Company's knowledge, is threatened to such effect. Except as set forth in
Section 4.7(b)(ii) of the Company Disclosure Schedule, the Company is not
obligated and does not have any liability whatsoever to make any payments by way
of royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any Intellectual Property with respect to the use thereof, nor to the
Company's knowledge will any such obligation or liability arise as a result of
the consummation of the transactions contemplated by this Agreement.
(c) Section 4.7(c) of the Company Disclosure Schedule sets forth a
complete list of all material registered and unregistered Company Intellectual
Property owned by the Company. All such Company Intellectual Property is valid,
enforceable and subsisting, and owned in the name of the Company. The
consummation of the transactions contemplated by this Agreement will not alter
or impair the Company's rights in and to the Company Intellectual Property, and
the application, registration and maintenance of the Company Intellectual
Property, including payment of all fees, are in good standing and fully paid.
(d) Section 4.7(d)(i) of the Company Disclosure Schedule sets forth a
complete list of all material contracts, licenses and agreements to which the
Company is a party with respect to any Company Intellectual Property, all of
which are in full force and effect. To the Company's knowledge, the consummation
of the transactions contemplated by this Agreement will neither violate nor
result in the breach, modification, cancellation, termination or suspension of
the contracts, licenses and agreements set forth on Section 4.7(d)(i) of the
Company Disclosure Schedule. Except as set forth on Section 4.7(d)(ii) of the
Company Disclosure Schedule, to the Company's knowledge, the Company is in
material compliance with, and has not breached any material term of, the
contracts, licenses and agreements set forth on Section 4.7(d)(i) of the Company
Disclosure Schedule and, to the knowledge of the Company, all other parties to
such contracts, licenses and agreements are in material compliance with, and
have not breached any material term of, such contracts, licenses and agreements.
25
(e) The Company has maintained a customary business practice requiring
each employee, consultant and contractor having access to the Company's
confidential or proprietary Company Intellectual Property to execute
confidentiality or similar agreements and, except as set forth on Section 4.7(e)
of the Company Disclosure Schedule, all current and former employees,
consultants and contractors of the Company have executed such an agreement.
Except as set forth in Section 4.7(e) of the Company Disclosure Schedule, to the
Company's knowledge, no current or former employee, consultant or contractor has
breached such confidentiality or similar agreement.
(f) Except as set forth on Section 4.7(f) of the Company Disclosure
Schedule, to the extent that any material work or invention has been developed
or created by a third party for the Company, to the Company's knowledge, the
Company has obtained exclusive ownership of all material Intellectual Property
in such work or invention by operation of law or by valid assignment.
(g) Section 4.7(g)(i) of the Company Disclosure Schedule sets forth a
correct and complete list of: (i) all software owned by or developed on behalf
of the Company (the "Proprietary Software"); and (ii) any other material
software used by the Company. The Company owns all right, title and interest in
and to the Xxxx Subscriber Edition, Portfolio Valuation and Sales Comparables
products, and all other material Proprietary Software and to the knowledge of
the Company without infringement of any intellectual property or other rights of
any other Person. Except as set forth on Section 4.7(g)(ii) of the Company
Disclosure Schedule, the source code for all Proprietary Software is maintained
in confidence and has not been disclosed to any Person.
Section 4.8 Legal Compliance.
(a) Except as set forth in Section 4.8(a) of the Company Disclosure
Schedule, the Company is operating its business in compliance in all material
respects with all applicable Laws (including the USA Patriot Act of 2001), rules
and regulations.
(b) Except as set forth in Section 4.8(b) of the Company Disclosure
Schedule, the Company has not received since October 31, 2002, a written notice
or other written communication (or, to the knowledge of the Company, any oral
notice or other communication) alleging a possible violation by the Company of
any Law applicable to the business or operations of the Company. It is the
intent of the parties hereto that this representation and warranty is not
applicable to matters relating to employee benefit matters, Taxes or
environmental matters, which are the subject of Sections 4.14, 4.16, and 4.17,
respectively.
Section 4.9 Contracts.
(a) Section 4.9(a) of the Company Disclosure Schedule includes a true
and complete list of each Contract to which the Company is a party which:
(i) involves aggregate payments to the Company in excess of
$150,000 per annum or $300,000 in the aggregate;
26
(ii) involves aggregate payments by the Company in excess of
$20,000 per annum or $100,000 in the aggregate;
(iii) relates to the employment of any individual employee of the
Company whose annual base salary is $100,000 or greater;
(iv) is (A) a lease relating to the Leased Real Property or (B) a
lease (whether "capitalized" or "operating" for purposes of GAAP) of any
property, whether real, personal or mixed, with Liability in excess of $20,000;
(v) involves an investment by the Company in or loan to any
partnership, limited liability company, joint-venture or any other Person in
excess of $50,000;
(vi) involves a non-compete provision or any other provision that
restricts the Company with respect to the geographical area of operations or
scope or type of business of the Company or contains any "non-solicitation" or
"no-hire" provision that restricts the Company;
(vii) is a Contract under which the Company has borrowed any
money from, or issued any note, bond, debenture or other evidence of
indebtedness to, any Person (other than trade debt incurred in the ordinary
course of business);
(viii) is a Contract under which (A) any Person has directly or
indirectly guaranteed Liabilities of the Company or (B) the Company has directly
or indirectly guaranteed Liabilities of any Person (in each case other than
endorsements for the purpose of collection in the ordinary course of business);
(ix) provides for indemnification of any Person by the Company,
other than in the ordinary course of business;
(x) is a Contract pursuant to which the Company grants or is
granted any license or other rights to use any of the assets of the Company or
any rights of joint use with respect to any of such assets;
(xi) is a Contract with or involving any stockholder or any
Affiliate (other than the Company) of the Company or of any stockholder;
(xii) is for the disposition of any significant portion of the
assets or business of the Company or is an agreement for the acquisition,
directly or indirectly, of the assets or business of any other Person; or
(xiii) relates to any acquisition or disposition of any capital
stock or equity interest of the Company.
(b) Each Contract set forth in Section 4.9(a) of the Company
Disclosure Schedule (collectively, the "Material Contracts"), is in full force
and effect and enforceable in accordance with its terms and neither the Company
nor, to the Company's knowledge, any other party thereto is in default under any
Material Contract, except where any such failure to be in full
27
force and effect or enforceable, or any such default, would not have a Company
Material Adverse Effect.
Section 4.10 Real Property - Owned and Leased.
(a) The Company does not own any real property.
(b) Section 4.10 of the Company Disclosure Schedule lists (i) the
address of each parcel of real property leased by the Company (the "Leased Real
Property"), and (ii) the identity of the lessor and lessee of each such parcel
of Leased Real Property.
(c) The Company has delivered to Parent true and complete copies of
all leases and subleases listed in Section 4.10 of the Company Disclosure
Schedule pursuant to which the Company leases the Leased Real Property. Except
as set forth in Section 4.10 of the Company Disclosure Schedule, each such lease
or sublease is valid, binding and enforceable against the Company and in full
force and effect. The Company has not received written notice that it is in
default under the terms of any such lease or sublease.
Section 4.11 Personal Property. Except as set forth in Section 4.11 of the
Company Disclosure Schedule, the Company owns good and marketable title to all
tangible personal property assets and valid title to all intangible assets, free
and clear of all Liens, other than Permitted Liens.
Section 4.12 Insurance. Section 4.12 of the Company Disclosure Schedule
sets forth a true and complete list of all insurance policies maintained by the
Company as of September 19, 2006, covering the business of the Company,
indicating the types of insurance, identity of insurers, premium amounts and
coverage (including applicable deductibles).
Section 4.13 Labor and Employee Matters.
(a) Section 4.13 of the Company Disclosure Schedule contains a list of
the following information for each full-time and part-time employee (including
any employee who is on a leave of absence) of the Company as of October 9, 2006:
name, job title and annual base salary or hourly wage. The Company has delivered
or made available to Parent true copies of all agreements between an officer or
employee of the Company and the Company concerning terms and conditions of
employment ("Employee Agreement"). The Company is not a party or subject to any
labor union or collective bargaining agreement. There are no pending labor
disputes, work stoppages, requests for representation, pickets, work slow-downs,
and to the Company's knowledge, no such labor disputes, work stoppages, requests
for representations, pickets or work slow-downs.
(b) Each individual who renders services to the Company who is
classified by the Company as having the status of an independent contractor is
properly so classified.
Section 4.14 Employee Benefits.
(a) Section 4.14(a) of the Company Disclosure Schedule lists any plan,
contract, program, policy or arrangement for the benefit of the employees of the
Company under
28
which the Company has any liability, whether direct or indirect, contingent or
otherwise, including, (i) any "employee benefit plan" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
(ii) any profit-sharing, deferred compensation, bonus, stock option, severance
or change in control plan, and (iii) any plan, contract, program, policy or
arrangement providing for fringe benefits that are maintained or contributed to
by the Company for the benefit of its employees (the "Benefit Plans") and
Employee Agreements. True and complete copies of all Benefit Plans and related
Company agreements have been made available to Parent. Each Benefit Plan has
been established, administered and funded in accordance with its terms and in
compliance in all material respects with the applicable provisions of ERISA and
the Internal Revenue Code of 1986, as amended through the date hereof and any
rules and regulations promulgated thereunder (the "Code"), and each Benefit Plan
intended to qualify under Section 401(a) of the Code has received a favorable
determination from the Internal Revenue Service of the United States (the "IRS")
as to its qualified status and nothing has occurred since the date of such
determination that would reasonably be expected to result in the loss of such
qualification. None of the Benefit Plans (i) is or has been subject to Title IV
of ERISA or Section 412 of the Code, and neither the Company nor any ERISA
Affiliate has, or could reasonably be expected to incur, any material liability
under Title IV of ERISA or Section 412 of the Code, (ii) has, and no fiduciary
under any such benefit plan has, engaged in any prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Code for which no
exemption has been complied with under Section 408 of ERISA or 4975 of the Code,
or (iii) has been the subject of any inquiry, investigation or audit by any
Governmental Entity, and, to the Company's knowledge, no such inquiry,
investigation or audit has been threatened.
(b) With respect to any Benefit Plans which are "group health plans"
under Section 4980B of the Code or Section 607(i) of ERISA, there has been
timely compliance with all material requirements imposed by Part 6 of Subtitle B
of Title I of ERISA and Section 4980B of the Code ("COBRA") and the Company has
no knowledge of any Liabilities that could be expected to be incurred arising
from the Company's obligations under COBRA or any similar state law. Except as
may be required by COBRA, no Benefit Plan provides any benefits to or on behalf
of any persons (or their dependents) who have retired or otherwise separated
from service from the Company or who may in the future retire or otherwise
separate service from the Company. Each "group health plan" is in material
compliance with the Health Insurance Portability and Accountability Act and the
regulations promulgated thereunder.
(c) The Company has paid or caused to be paid all amounts, if any,
required under applicable law or the terms of any Benefit Plan and no claims for
payment with respect to any Benefit Plans (other than benefits payable on claims
in the ordinary course) have been brought or, to the Company's knowledge,
threatened and, to the Company's knowledge, there is no basis for any such
claims. With respect to each Benefit Plan, all required payments, premiums and
contributions have been made or properly accrued. Except as set forth in Section
4.14(c) of the Company Disclosure Schedule, the transactions contemplated by
this Agreement will not cause the acceleration of vesting in, or payment of, any
benefits under any Benefit Plan and shall not otherwise accelerate or increase
any Liabilities under any Benefit Plan.
Section 4.15 Litigation. Except as set forth in Section 4.15 of the Company
Disclosure Schedule, there is no suit, claim, action or proceeding pending or,
to the Company's knowledge,
29
threatened in writing against or affecting the Company. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, there is no unsatisfied
judgment, penalty or award against the Company. The Company is in compliance in
all material respects with each decree, injunction, judgment, order or writ
entered, issued or rendered by any Governmental Entity to which the Company is
subject.
Section 4.16 Tax Matters.
(a) All returns, declarations, reports, claims for refund, or
information returns or statements relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof ("Tax Returns") required
to have been filed by the Company prior to the Closing Date have been or will
have been filed, and each such Tax Return is true, correct and complete in all
material respects. All Taxes required to be paid by the Company have been paid.
(b) Except as set forth in Section 4.16(b) of the Company Disclosure
Schedule, there is no audit, action, suit, proceeding, investigation or claim
currently pending or, to the Company's knowledge, threatened in writing against
the Company in respect of any Taxes. There are no Liens on any of the assets of
the Company that relate to Taxes, other than Liens for Taxes not yet due and
payable.
(c) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any third party.
(d) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Since January 1, 2002, no written claim has been made by any Tax
authority in a jurisdiction where the Company has not filed a Tax Return that it
is or may be subject to Tax by such jurisdiction, nor to the Company's knowledge
is any such assertion threatened.
(f) There is no outstanding request for any extension of time within
which to pay any Taxes or file any Tax Returns. The Company is not a party to or
bound by any agreement, whether written or unwritten, providing for the sharing,
allocation or payment of Taxes, payment for Tax losses, entitlements to refunds
or similar Tax matters. No closing agreement pursuant to Section 7121 of the
Code (or any other provision of state, local, or foreign Tax law), private
letter ruling, technical advice memorandum, or similar agreement or ruling has
been entered into, or been requested by or with respect to the Company.
(g) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) The Company has not distributed stock of another Person, or has
had its stock distributed by another Person, in a transaction that was purported
or intended to be governed in whole or in part by Section 355 or Section 361 of
the Code.
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(i) The Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code. The Company
has not entered into, or otherwise participated (directly or indirectly) in any
"reportable transaction" within the meaning of Treasury Regulations Section
1.6011-4(b) or has received a written opinion from a tax advisor that was
intended to provide protection against a tax penalty.
(j) None of the Company's existing employment agreements with its
employees has resulted or could result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the Code (or any corresponding provision of state, local or foreign Tax law).
(k) The Company (i) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return and (ii) does not have any
liability for the Taxes of any Person under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise.
(l) The Company has not taken any action and has no knowledge of any
facts, agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.17 Environmental Matters. Except for any matter that would not
have a Company Material Adverse Effect, (a) no written notice, notification,
demand, request for information, citation, summons, complaint or order has been
received by, and no Action is pending, or to the knowledge of the Company,
threatened against the Company with respect to any Environmental Laws (as
hereinafter defined); and (b) the Company is in compliance with all, and has no
material Liability under, Environmental Laws, and possesses all material
permits, authorizations, licenses, exemptions and other governmental
authorizations required for its current operations under applicable
Environmental Laws.
Section 4.18 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 4.19 Accounts. Section 4.19 of the Company Disclosure Schedule is a
true and complete list of the names of each bank, savings and loan association,
securities or commodities broker or other financial institution in which the
Company has an account, including cash contribution or cash concentration
accounts, and the identification number of each.
Section 4.20 Related Party Transactions. Except as set forth in Section
4.14 or Section 4.20 of the Company Disclosure Schedule, no employee, director,
officer, stockholder, "affiliate" or "associate" (as such terms are defined in
Rule 12b-2 under the Exchange Act of the Company (a) has outstanding any
indebtedness, liabilities or other similar obligations to the Company other than
indebtedness to any individual not exceeding $10,000 in connection with expense
advances and similar arrangements, or (b) owns any property or right, tangible
or intangible, which is used in the business of the Company.
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Section 4.21 Customers. Section 4.21 of the Company Disclosure Schedule
sets forth the 25 largest customers of the Company by revenue for the rolling
12-month period ended June 30, 2006 (the "Material Customers"). Except as set
forth in Section 4.21 of the Company Disclosure Schedule, no such customer has
terminated or materially adversely changed its relationship with the Company nor
has the Company received written notification that any such customer intends to
terminate or materially adversely change its relationship with the Company.
There are no currently pending or, to the Company's knowledge, threatened
disputes between the Company and any of the Material Customers that could
materially and adversely effect the relationship between the Company and any
such customer.
Section 4.22 Accounts Receivable; Evidences of Indebtedness. Section 4.22
of the Company Disclosure Schedule sets forth all accounts receivable as of
August 31, 2006, promissory notes, contract rights, commercial paper, debt
securities and other rights to receive money ("Receivables") of the Company
showing the name of the account debtor, maker or obligor, the unpaid balance,
the age of the Receivable and, if applicable, the maturity date, the interest
rate and the collateral securing the obligation. Except as set forth on Section
4.22 of the Company Disclosure Schedule or in the Company Financial Documents,
to the Company's knowledge all Receivables are undisputed, legal, valid and
binding obligations of the obligors and the Company has not (i) written off,
cancelled, committed or become obligated to cancel or write off any Receivables;
(ii) disposed of or transferred any Receivables; or (iii) acquired or permitted
to be created any Receivables except in the ordinary course of its business
consistent with past practice.
Section 4.23 Absence of Certain Changes. Since October 31, 2005, the
Company has conducted its business only in the ordinary course of business
consistent with past practice and, since such date, there has not been any
change, event, circumstance or development that individually or in the aggregate
has had, or is reasonably likely to have, a Company Material Adverse Effect.
Section 4.24 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has by the requisite vote of those directors
present (a) determined that this Agreement and the transactions contemplated
hereby are advisable, fair to and in the best interests of the stockholders of
the Company and has approved the same, (b) recommended, subject to the fiduciary
duties of the Company's Board of Directors, that the holders of the shares of
Company Common Stock and Company Preferred Stock adopt this Agreement and the
transactions contemplated herein and (c) resolved to submit this Agreement to
the Company's stockholders for adoption.
Section 4.25 Required Vote by Company Stockholders. The affirmative vote of
the holders of: (a) a majority in voting power of (i) Company Common Stock and
Company Preferred Stock (on an as converted basis) voting together as a single
class, (ii) Series C Preferred Stock (on an as-converted basis), voting as a
separate class, and (iii) Series D Preferred Stock (on an as-converted basis),
voting as a separate class, is the only vote of any class of capital stock of
the Company required by the DGCL, the certificate of incorporation or the bylaws
of the Company to adopt and approve this Agreement and the Merger (the "Company
Stockholder Merger Approval"); and (b) a majority in voting power of (i) Company
Common Stock and Company Preferred Stock (on an as-converted basis), voting
together as a single class,
32
(ii) Company Preferred Stock (on an as-converted basis), voting as a single
class, (iii) Series A Preferred Stock (on an as-converted basis), voting as a
separate class, (iv) Series B Preferred Stock (on an as-converted basis), voting
as a separate class, (v) Series C Preferred Stock (on an as-converted basis),
voting as a separate class, and (vi) Series D Preferred Stock (on an
as-converted basis), voting as a separate class, is the only vote necessary to
adopt the Company Charter Amendment (the "Company Stockholder Amendment
Approval", and clauses (a) and (b) together, the "Company Stockholder
Approval").
Section 4.26 Information Supplied. None of the information supplied or to
be supplied by the Company specifically for inclusion or incorporation by
reference in (i) registration statement to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger (the "Form
S-4") will, at the time the Form S-4 becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading or (ii)
the Joint Proxy Statement will, at the date it is first mailed to the Company's
stockholders and Parent's stockholders or at the time of the Company
Stockholders Meeting or the Parent Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 4.27 Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion of Houlihan, Lokey, Xxxxxx & Xxxxx Financial
Advisors, Inc. dated the date of this Agreement, to the effect that, as of such
date and subject to the considerations set forth therein, the Aggregate Merger
Consideration is fair, from a financial point of view, to the Holders.
Section 4.28 Full Disclosure. This Agreement (including the Company
Disclosure Schedule) does not, (a) contain any representation, warranty or
information that is false or misleading with respect to any material fact, or
(b) omit to state any material fact necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
Section 4.29 No Other Representations or Warranties. Except as expressly
set forth herein and in the Company Disclosure Schedule, the Company has not
made, nor shall be deemed to have made, any representations or warranties to
Parent or Merger Subsidiary in or pursuant to this Agreement or otherwise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary, jointly and severally, represent and warrant
to the Company that the statements contained in this Article V are true and
correct as of the date hereof and will be true and correct as of the Closing
Date except (i) as set forth herein or in the
33
disclosure letter separately delivered by Parent and Merger Subsidiary to the
Company on the date hereof (the "Parent Disclosure Schedule") or (ii) as set
forth in any Parent SEC Reports filed with the SEC since January 1, 2005.
Section 5.1 Organization and Good Standing.
(a) The Parent is a corporation duly formed, validly existing and in
good standing under the laws of the State of Maryland, has all requisite
corporate power to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the conduct
of its business or the ownership, leasing or holding of its properties makes
such qualification necessary, except where the failure to be so qualified would
not have a Parent Material Adverse Effect.
(b) Merger Subsidiary is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Maryland.
Merger Subsidiary was formed solely for the purposes of engaging in the
transactions contemplated by this Agreement, and since its date of
incorporation, has not engaged in any activities nor conducted its operation
other than in connection with or as contemplated by this Agreement. Merger
Subsidiary has all requisite limited liability company power to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the conduct of its business or the
ownership, leasing or holding of its properties makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Parent Material Adverse Effect.
Section 5.2 Authority; Validity of Agreement.
(a) Parent has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by Parent of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, the issuance of the Parent Common Stock as contemplated by this
Agreement, have been duly authorized by the Board of Directors of Parent, and no
other corporate proceedings on the part of Parent are necessary to authorize the
execution and delivery of this Agreement by Parent and the consummation of the
transactions contemplated hereby other than the approval of the stockholders of
Parent to the issuance of the Parent Common Stock as contemplated by this
Agreement. This Agreement has been duly executed and delivered by Parent and,
assuming due authorization, execution and delivery of this Agreement by the
Company, is a valid and binding obligation of Parent, enforceable against it in
accordance with its terms, except as such enforcement may be subject to or
limited by (i) bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally and (ii) the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(b) Merger Subsidiary has the requisite limited liability company
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Merger
Subsidiary of this Agreement and
34
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Managers of Merger Subsidiary, and no other
proceedings on the part of Merger Subsidiary are necessary to authorize the
execution and delivery of this Agreement by Merger Subsidiary and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Merger Subsidiary and, assuming due
authorization, execution and delivery of this Agreement by the Company, is a
valid and binding obligation of Merger Subsidiary, enforceable against it in
accordance with its terms, except as such enforcement may be subject to or
limited by (i) bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally and (ii) the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 5.3 Capitalization.
(a) The authorized capital stock of Parent consists of (i) 2,000,000
shares of Series A 8% convertible redeemable preferred stock, $.01 par value per
share, (ii) 98,825,000 shares of Parent Common Stock, and (iii) 175,000 shares
of Class A-1 common stock, $.02 par value per share. As of September 30, 2006
there were (1) 6,471,179 shares of Parent Common Stock issued and outstanding,
(2) no shares of Class A-1 common stock issued and outstanding, and (3) no
shares of Series A 8% convertible redeemable preferred stock issued and
outstanding. All such outstanding shares of Parent are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. The total
equity interests in Merger Subsidiary consists of 100 outstanding membership
units ("Merger Subsidiary Units"). All Merger Subsidiary Units are validly
issued, fully paid, nonassessable and free of preemptive rights. Parent has no
outstanding bonds, debentures, notes or other obligations the holders of which
have or upon the happening of certain events would have the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Parent on any matter. Except as set forth in the
Parent SEC Reports and in other filings made by Parent with the SEC, there are
no existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements, stock appreciation rights or similar derivative
securities or instruments or commitments which obligate Parent to issue,
transfer or sell any shares of Parent Common Stock or Merger Subsidiary Units or
make any payments in lieu thereof other than options or warrants granted to
employees, directors, consultants and licensors after the date of the most
recent Parent SEC Report.
(b) The Parent Common Stock to be issued pursuant to this Agreement
will, upon issuance in accordance with this Agreement, be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any nature.
Section 5.4 Subsidiaries. All outstanding shares of capital stock of, or
other equity interests in, each Subsidiary of Parent (including, without
limitation, Merger Subsidiary) (i) have been validly issued and are fully paid
and nonassessable and (ii) are free and clear of all Liens. All outstanding
shares of capital stock (or equivalent equity interests of entities other than
corporations) of each Subsidiary of Parent (including, without limitation,
Merger Subsidiary) are beneficially owned, directly or indirectly by Parent. No
Subsidiary of Parent owns, either directly or indirectly, any shares of capital
stock of Parent. Parent does not, directly or
35
indirectly, own capital stock or other equity interest in any Person other than
its Subsidiaries and the Company.
Section 5.5 No Conflicts; Consents.
(a) The execution and delivery by each of Parent and Merger Subsidiary
of this Agreement do not, and the consummation by each of Parent and Merger
Subsidiary of the transactions contemplated hereby will not, (i) violate the
provisions of the articles of incorporation or by-laws of Parent or the articles
of organization or limited liability company agreement of Merger Subsidiary,
(ii) violate any Contract to which either of Parent or Merger Subsidiary is a
party or by which it or its assets is bound, (iii) to Parent's knowledge,
assuming compliance by each of Parent and Merger Subsidiary with the matters
referred to in Section 5.5(b), violate any order, writ, injunction, decree, or
Law applicable to either Parent or Merger Subsidiary on the date hereof, or (iv)
result in the creation of any Liens upon any of the assets owned or used by
either of Parent or Merger Subsidiary, except in the case of clauses (ii), (iii)
or (iv) where such violation or Lien would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(b) No consent, waiver, approval, authorization, order of,
registration, declaration or filing with, or notice to any Governmental Entity
is required to be obtained or made by or with respect to Parent or Merger
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation of the Merger or the other transactions contemplated hereby,
except for such authorizations, consents, waivers, approvals, orders,
registrations, declarations, filings and notices (i) as may be required under
the DGCL and the MLLCA, (ii) as may be required under the HSR Act, (iii) as
required under the Securities Laws, or (iv) the failure to obtain which would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 5.6 SEC Documents.
(a) Parent has timely filed with the SEC all forms, reports and
documents required to be filed by Parent since January 1, 2004 under the
Exchange Act including, without limitation, (i) all Annual Reports on Form 10-K,
(ii) all Quarterly Reports on Form 10-Q, and (iii) all Current Reports on Form
8-K (collectively, the "Parent SEC Reports"), all of which were prepared in
compliance in all material respects with the applicable requirements of the
Exchange Act. As of their respective dates, the Parent SEC Reports (A) complied
in all material respects with the applicable requirements of the Securities Laws
and (B) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated statements of net assets in
liquidation and changes in net assets in liquidation and each of the
consolidated statements of operations, cash flows and stockholders' equity
included in or incorporated by reference into the Parent SEC Reports (including
any related notes and sections) fairly presents the results of operations, cash
flows and stockholders' equity, as the case may be, of Parent and its
consolidated subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year end audit adjustments which would
not be material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted therein
and
36
except, in the case of the unaudited statements, as permitted by Form 10-Q
pursuant to Section 13 or 15(d) of the Exchange Act.
(b) Parent and its Subsidiaries have designed and maintain a system of
internal controls over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP. Parent (i)
has designed and maintains disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material
information required to be disclosed by it in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms and is
accumulated and communicated to the Parent's management as appropriate to allow
timely decisions regarding required disclosure, and (ii) has disclosed, based on
its most recent evaluation of such disclosure controls and procedures prior to
the date hereof, to the Parent's auditors and the audit committee of the
Parent's Board of Directors (1) any significant deficiencies and material
weaknesses in the design or operation of internal controls over financial
reporting that are reasonably likely to adversely affect in any material respect
the Parent's ability to record, process, summarize and report financial
information and (2) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Parent's internal controls
over financial reporting. Parent has made available to the Company a summary of
any such disclosure made by management to the Parent's auditors and audit
committee since January 1, 2004.
Section 5.7 No Undisclosed Liabilities. Except as disclosed on Section 5.7
of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries
has any Liabilities of a nature required by GAAP to be reflected in a
consolidated balance sheet (or equivalent statement) or the notes thereto,
except Liabilities that (i) are accrued or reserved against in the most recent
financial statements included in the Parent SEC Reports filed prior to the date
hereof or are reflected in the notes thereto, (ii) were incurred in the ordinary
course of business since June 30, 2006, (iii) are incurred pursuant to the
transactions contemplated by this Agreement, or (iv) have been discharged or
paid in full prior to the date of this Agreement in the ordinary course of
business.
Section 5.8 Information Supplied. None of the information supplied or to
be supplied by Parent specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading or (ii) the Joint Proxy Statement will, at the date it is first
mailed to the Parent's stockholders and the Company's stockholders or at the
time of the Parent Stockholders Meeting or the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Parent with
respect to statements made or incorporated by reference therein based on
37
information supplied by the Company specifically for inclusion or incorporation
by reference in the Joint Proxy Statement.
Section 5.9 Absence of Certain Changes or Events. Except as disclosed on
Section 5.9 of the Parent Disclosure Schedule or in the Parent SEC Reports filed
prior to the date of this Agreement, since June 30, 2006, Parent and its
Subsidiaries have conducted their respective businesses only in the ordinary
course of business and, since such date, there has not been any change, event,
circumstance or development that individually or in the aggregate has had, or is
reasonably likely to have, a Parent Material Adverse Effect.
Section 5.10 Compliance with Applicable Laws.
(a) Except as disclosed in the Parent SEC Reports, the Parent and its
Subsidiaries are, and have been, in compliance with all applicable Laws
(including the Xxxxxxxx-Xxxxx Act and the USA Patriot Act of 2001), except where
any such non-compliance, individually or in the aggregate, would not reasonably
be expected to have or result in a Parent Material Adverse Effect. The
operations of the Parent and its Subsidiaries have not been and are not being
conducted in violation of any Permit necessary for the conduct of their
respective businesses as currently conducted, except where any such violations,
individually or in the aggregate, would not reasonably be expected to have or
result in a Parent Material Adverse Effect.
(b) Parent and its Subsidiaries hold all Permits necessary for the
conduct of their respective businesses as currently conducted, except where the
failure to hold such Permits, individually or in the aggregate, would not
reasonably be expected to have or result in a Parent Material Adverse Effect.
Section 5.11 Litigation. Except as set forth in Section 5.11 of the Parent
Disclosure Schedule or as disclosed in the Parent SEC Reports filed prior to the
date hereof, there is no suit, claim, action or proceeding pending or, to the
Parent's knowledge, threatened in writing against or affecting the Parent or
Merger Subsidiary. There is no unsatisfied judgment, penalty or award against
the Parent or Merger Subsidiary. Each of the Parent and Merger Subsidiary is in
compliance in all material respects with each decree, injunction, judgment,
order or writ entered, issued or rendered by any Governmental Entity to which
Parent or Merger Subsidiary is subject.
Section 5.12 Transactions with Affiliates. Except as set forth in Parent
SEC Reports filed prior to the date of this Agreement, there are no outstanding
amounts payable to or receivable from, or advances by Parent or any of its
Subsidiaries to, and neither Parent nor any of its Subsidiaries is or was
otherwise a creditor or debtor to, or party to or otherwise bound by any
contract, agreement, arrangement, understanding, undertaking, commitment,
obligation or promise, with, any stockholder holding more than 5% of the
outstanding securities of Parent, director or officer of Parent or any of its
Subsidiaries, or any member of their immediate families, other than (i) payment
of regular salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of Parent or its Subsidiaries and (iii) for other
standard employee benefits made generally available to all employees. Since June
30, 2006, there has been no transaction, or series of similar transactions,
agreements, arrangements or understandings, nor are there any currently proposed
transactions, or series of similar
38
transactions, agreements, arrangements or understandings to which Parent or any
of its Subsidiaries was or is to be a party, that would be required to be
disclosed under Item 404 of Regulation S-K promulgated under the Securities Act.
Section 5.13 Financing. Subject to the Company obtaining the Company Loan,
Parent and Merger Subsidiary have sufficient funds available (either through
internal sources or through existing credit arrangements) to pay the Aggregate
Merger Consideration as of the Effective Time, and all payments potentially
required under Article III and to perform their obligations hereunder and the
obligations of the Surviving Company and its Subsidiaries following the
Effective Time.
Section 5.14 Opinion of Financial Advisor. The Board of Directors of Parent
has received the opinion of Lazard Ltd. ("Lazard"), dated the date of this
Agreement, to the effect that, as of such date and subject to the considerations
set forth therein, the Aggregate Merger Consideration is fair, from a financial
point of view, to Parent.
Section 5.15 Brokers. Except for Lazard, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Subsidiary.
Section 5.16 Board Recommendation and Actions. The Board of Directors of
Parent, at a meeting duly called and held, has by the requisite vote of those
directors present (a) approved this Agreement and the transactions contemplated
hereby, including, without limitation, the Merger, (b) determined that the
issuance of Parent Common Stock as contemplated by this Agreement are fair to
and in the best interests of the stockholders of Parent and has approved the
same, (c) recommended, subject to such Board of Director's fiduciary duties,
that the holders of Parent Common Stock approve the issuance of Parent Common
Stock as contemplated by this Agreement and (d) determined to abandon Parent's
plan of liquidation (as more fully described in the Parent SEC Reports)
immediately prior to the Effective Time, subject to the consummation of the
Merger.
Section 5.17 Required Vote By Parent Stockholders. The affirmative vote at
the Parent Stockholders Meeting of a majority of the votes entitled to be cast
by the holders of outstanding shares of Parent Common Stock is the only vote of
the stockholders of Parent necessary to issue the shares of Parent Common Stock
as contemplated by this Agreement (collectively, the "Parent Stockholder
Approval").
Section 5.18 Prior Knowledge. If Parent or Merger Subsidiary had knowledge
prior to the execution of this Agreement that any representation or warranty of
the Company contained in this Agreement was not true and correct as of the date
hereof, neither Parent nor Merger Subsidiary may assert such breach of a
representation and warranty as a basis not to consummate the transactions
contemplated by this Agreement.
Section 5.19 No Other Representations or Warranties. Except as expressly
set forth herein, Parent and Merger Subsidiary have not made nor shall be deemed
to have made, any representations or warranties to the Company in or pursuant to
this Agreement or otherwise.
39
Section 5.20 Access to Information. Each of Parent and Merger Subsidiary is
entering into this Agreement with the benefit only of those representations and
warranties specifically set forth in Article IV of this Agreement and no other
representations or warranties from the Company or its representatives. Each of
Parent and Merger Subsidiary has conducted such due diligence examination of the
Company and its assets, business, liabilities, operations, investments and
prospects as it has determined to be appropriate or necessary.
Section 5.21 Tax Matters. Neither Parent nor Merger Subsidiary has taken
any action or knows of any facts, agreement, plan or other circumstance that
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code. Merger Subsidiary is (and will be, at the time of
the Closing) an entity disregarded as an entity separate from Parent for federal
income tax purposes, as contemplated by Treasury Regulations Section 301.7701-3.
Section 5.22 Real Property.
(a) A true and correct list and the location of (i) each parcel of
real property owned by Parent or one of its Subsidiaries is set forth on
Schedule 5.22(a)(i) (collectively, the "Owned Real Property"). Parent or one of
its Subsidiaries has good, valid, marketable and insurable title in fee simple
to all the Owned Real Property, free and clear of all encumbrances, liens,
charges or other restrictions of any kind or character, except for Permitted
Real Property Liens. For purposes of this Agreement, the term "Permitted Real
Property Liens" shall mean (i) liens reflected in Schedule 5.22(a)(ii), (ii)
liens consisting of zoning or planning restrictions, easements, and other
customary restrictions or limitations on the use of real property or other
liens, changes or encumbrances, none of which materially detracts from the value
of, or impair the use of, such property by Parent or its Subsidiaries in the
operation of their business, or the development or marketability of such real
property; or (iii) liens for current taxes, assessments or governmental charges
or levies on property not yet due and payable.
(b) Schedule 5.22(b) attached hereto sets forth a list of all leases
and subleases under which the Company or one of its Subsidiaries is the lessor,
lessee or occupant of any real property (the "Leased Property", and together
with the Owned Real Property, the "Real Property"). The Company or one of its
Subsidiaries has good, valid, marketable and insurable leasehold title to all
such Leased Property, free and clear of all encumbrances, liens, charges or
other restrictions of any kind or character, except for Permitted Real Property
Liens or as set forth in the terms of any Lease. Each lease, sublease or other
agreement set forth in Schedule 5.22(b) is in full force and effect, and no
notice alleging any material default under any such lease or sublease, which has
not been cured, has been received by the Company or any of its Subsidiaries from
any other party to such lease or sublease or has been delivered by the Company
or any of its Subsidiaries to any such other party.
(c) Valid policies of title insurance have been issued insuring
Parent's or its Subsidiaries' fee simple interests in the Owned Real Property,
and such policies are subject only to the matters set forth therein or on the
Parent Disclosure Schedules, and such policies, including all special
endorsements issued in connection therewith, are, at the date hereof, in full
force and effect and such policies will be enforceable by Parent after the
Effective Time.
40
(d) Neither Parent nor any of its Subsidiaries are a party to or
subject to any pending, or, to the knowledge of Parent, any threatened, Order
enjoining or restraining it from conducting any business or completing any
scheduled re-subdivision, condominiumization, replatting or development or
construction on or in respect of any of the Owned Real Property. Parent is not
in receipt of any written notice of any violation of any material federal, state
or municipal Law affecting any material portion of any Real Property issued by
any Governmental Entity, other than such violations which would not reasonably
be expected to result in a Parent Material Adverse Effect.
(e) To the knowledge of Parent, (i) there are no material structural
defects in the Owned Real Property and all structures located on the Real
Property are maintained in good operating condition and repair (with the
exception of normal wear and tear) and in accordance with all applicable Laws
and (ii) there is no physical damage to any of the Real Property for which there
is no insurance in effect covering the cost of the restoration (subject to
deductibles) as of the date hereof.
(f) Neither Parent nor any of its Subsidiaries have received any
written notice to the effect that (i) any condemnation or material rezoning or
other land use proceedings are pending or threatened with respect to any of the
Real Property where the fair market value of the object of such proceeding
exceeds $150,000 (ii) any zoning, building, condominium, re-subdivision or
similar or other Law has been or currently is being violated, except those
violations which, individually or in the aggregate, would not reasonably be
expected to result in a Parent Material Adverse Effect, or (iii) that they are
in material breach under any land use, development or construction agreement or
under any escrow, impound, or contribution agreement entered into with any
Governmental Entity or utility company.
(g) All work to be performed, payments to be made and actions to be
taken by Parent or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a Governmental Entity in connection with a site
approval, zoning reclassification, re-subidvision, condominium replatting or
other similar action relating to any of Owned Real Property has been performed,
paid or taken, as the case may be, except where the failure to do so would not,
individually or in the aggregate, reasonably be expected to result in a Parent
Material Adverse Effect.
Section 5.23 Environmental Matters.
(a) Except as set forth in Section 5.23 of the Parent Disclosure
Schedule:
(i) Parent and each of its Subsidiaries possess all Environmental
Permits (as defined below) currently required under applicable Environmental
Laws (as defined below) to conduct their business and are, and within the last
five years, have been, in compliance with the terms and conditions of such
Environmental Permits, except where such failures to possess or comply,
individually or in the aggregate, would not reasonably be expected to have a
Parent Material Adverse Effect, nor has Parent received written notice that any
Environmental Permits possessed by Parent or any of its Subsidiaries and
material to their business will be revoked, suspended or will not be renewed;
41
(ii) except as would not reasonably be expected to have a Parent
Material Adverse Effect, the execution and delivery of this Agreement and the
consummation by Parent of the transactions contemplated hereby will not affect
the validity or require the transfer of any Environmental Permits, and will not
require any notification, registration, reporting, filing, investigation, or
remediation under any Environmental Law, including any transfer law;
(iii) Parent and each of its Subsidiaries are currently in
compliance, and within applicable statutory and regulatory time limitations,
have complied, with all applicable Environmental Laws, except where such
failures to comply would not, individually or in the aggregate, reasonably be
expected to have Parent Material Adverse Effect;
(iv) except as would not reasonably be expected to have a Parent
Material Adverse Effect, (A) there is currently no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, notice or demand letter, or request for information pending or,
to the knowledge of Parent, threatened, which asserts liability under any
applicable Environmental Law against Parent or any of its Subsidiaries; and (B)
neither Parent nor any of its Subsidiaries has received written notice of actual
or potential liability or of violations under any applicable Environmental Law
that remains outstanding and has not been resolved, including, but not limited
to, any liability that Parent or its Subsidiaries may have retained or assumed
either contractually or by operation of law;
(v) as of the date hereof, no property or facility currently, or
to the knowledge of Parent, formerly owned, operated or leased by Parent or any
of its present or former Subsidiaries, or by any respective predecessor in
interest, is listed or has been formally proposed in writing by any Governmental
Entity for listing on the National Priorities List or the Comprehensive
Environmental Response, Compensation and Liability Information System, both
promulgated under the United States Comprehensive Environmental Response,
Compensation, and Liability Act, as amended ("CERCLA"), or on any comparable
foreign or state list established under any applicable Environmental Law;
(vi) to the knowledge of Parent, (A) there as has been no
disposal, spill, discharge or release of any Hazardous Material (as defined
below), on, at, or under any property presently or formerly owned, leased or
operated by Parent, any of its Subsidiaries, or any predecessor in interest,
except for such disposals, spills, discharges and releases that, individually or
in the aggregate, would not reasonably be expected to have a Parent Material
Adverse Effect; and (B) there are no Hazardous Materials located in, at, on, or
under such facility or property, or at any other location, in either case that
could reasonably be expected to require material expenditures by Parent or its
Subsidiaries for investigation, removal, remedial or corrective action or that
would reasonably likely result in material liabilities of, or losses, damages or
costs to Parent or any of its Subsidiaries under any Environmental Law;
(vii) except as would not reasonably be expected to have a Parent
Material Adverse Effect, (A) there has not been any underground or aboveground
storage tanks or other underground storage receptacles or related piping, or any
impoundment or other disposal area in each case containing Hazardous Materials
located on any facility or property owned, leased or operated by Parent, any of
its Subsidiaries or respective predecessors in interest, except in compliance
with Environmental Laws during the period of such ownership, lease or operation,
42
and (B) no asbestos-or polychlorinated biphenyls have been used or disposed of
or have been located at, on, or under any such facility or property during the
period of such ownership, lease or operation, except in compliance with any
applicable Environmental Laws; and
(viii) to the knowledge of Parent, no lien has been recorded
against any properties, assets or facilities currently owned, leased or operated
by Parent or any of its Subsidiaries under applicable Environmental Law.
(b) For purposes of this Agreement:
(i) "Environmental Law" shall mean CERCLA, the Resource
Conservation and Recovery Act of 1976, as amended, and any other applicable
federal, state, local, or foreign statute, rule, regulation, code order,
judgment, directive, ordinance, decree or common law as now or previously in
effect and regulating, relating to, or imposing liability or standards of
conduct concerning air emissions, water discharges, noise emissions, the release
or threatened release or discharge of any Hazardous Material into the
environment, the generation, handling, treatment, storage, transport or disposal
of any Hazardous Material, or otherwise concerning pollution or the protection
of the outdoor or indoor environment, or the protection of human health and
safety from any Hazardous Material.
(ii) "Environmental Permit" shall mean any permit, license,
approval, consent or other authorization by a federal, state, local or foreign
government or regulatory entity pursuant to any applicable Environmental Law.
(iii) "Hazardous Material" shall mean any pollutant, contaminant
or hazardous, toxic, or dangerous waste, substance, constituent or material,
defined or regulated as such in, or for purposes of, any applicable
Environmental Law, including, without limitation, any asbestos, any petroleum,
petroleum product or oil (including crude oil or any fraction thereof), any
radioactive substance, any pesticide, any polychlorinated biphenyls, any
lead-based paint, any chemical, any microbial matter, and any other substance
that can give rise to liability under any applicable Environmental Law, or is
regulated or classified by reason of its toxicity, carcinogenicity,
ignitability, corrosivity, reactivity or other characteristic under any
applicable Environmental Law.
ARTICLE VI
COVENANTS
Section 6.1 Access. Subject to the Confidentiality Agreement, applicable
laws and doctrines of attorney-client privilege, between the date hereof and the
Closing Date, the Company shall permit Parent and its respective representatives
(which term shall be deemed to include its independent accountants and counsel)
to have reasonable access during normal business hours, upon reasonable notice
and in such manner as will not unreasonably interfere with the conduct of the
business of the Company, to the properties, books and records of the Company as
Parent may from time to time reasonably request. Upon a termination of this
Agreement pursuant to Section 8.1, Parent, Merger Subsidiary and their
respective
43
representatives shall return (and hold confidential) all information provided
pursuant to this Section 6.1 pursuant to the procedures set forth in the Parent
Confidentiality Agreement.
Section 6.2 Interim Operations of the Company. The Company covenants and
agrees that, except as (a) contemplated or permitted by this Agreement or set
forth in Section 6.2 of the Company Disclosure Schedule, (b) required by
applicable Law, by any Contracts of the Company disclosed in Section 4.9 of the
Company Disclosure Schedule or by any Plan or Employee Agreement disclosed in
Section 4.14 of the Company Disclosure Schedule, or (c) agreed to in writing by
Parent or Merger Subsidiary, after the date hereof and prior to the Effective
Time:
(i) the business of the Company shall be conducted only in the
ordinary course consistent with past practices and the Company shall use its
reasonable efforts to preserve its business organization intact and maintain
existing relations with customers, suppliers, employees and creditors;
(ii) the Company shall not amend its certificate of incorporation
or by-laws;
(iii) the Company shall not (A) split, combine or reclassify or
recapitalize any shares of its capital stock or declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to any of its capital stock; (B) issue, sell, transfer, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company other than
issuances of shares of Company Common Stock pursuant to securities, options,
warrants, calls, commitments or rights existing and outstanding at the date
hereof and disclosed to Parent or Merger Subsidiary in the Company Disclosure
Schedules; (C) incur any long-term indebtedness or short-term indebtedness other
than under credit facilities existing on the date hereof and other than
financing and other equipment leases entered into in the ordinary course of
business (other than the incurrence of debt in connection with the payment of
the Cash Consideration and the cash payable to the holders of the Plan Options
and the Non-Plan Options); (D) grant, create, incur or suffer any Liens (other
than Permitted Liens) that did not exist on the date hereof; (E) redeem,
purchase or otherwise acquire directly or indirectly any of its capital stock;
or (F) other than in the ordinary course of business, make loans or advances or
assume, guarantee, endorse or otherwise as an accommodation become responsible
for, the obligations of any other individual or entity;
(iv) the Company shall not (A) except (1) pursuant to the terms
of any of the employment agreements set forth in Section 4.9 of the Company
Disclosure Schedule (including, without limitation, discretionary bonuses as
provided in such employment agreements consistent with past practice), (2) for
fiscal year-end and discretionary bonuses to employees (other than executive
officers and directors) consistent with past practice, (3) to reflect promotions
to employees (other than executive officers and directors), grant or announce
any material general or individual increase in the compensation payable or to
become payable by the Company to any employee or director of the Company; (B)
adopt, amend or otherwise increase, or accelerate the payment or vesting of the
amounts payable or to become payable to
44
any employee or director of the Company under any existing bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock appreciation right, restricted stock purchase, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement; (C) enter
into or amend in any material respect any existing employment or severance
agreement with, or, except in accordance with the existing written policies of
the Company or existing contracts or agreements, grant any severance or
termination pay to any employee of the Company; (D) create any new bonus,
incentive compensation, deferred compensation, severance, profit sharing, stock
option, stock appreciation right, restricted stock purchase, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement; or (E) pay,
loan or advance (other than the payment of compensation, directors' fees or
reimbursement of expenses in the ordinary course of business) any amount to, or
sell, transfer or lease any properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any agreement with, any of its
officers or directors;
(v) the Company shall not acquire or agree to acquire, directly
or indirectly, by merging or consolidating with, or by purchasing any equity
interest in, or any portion of the assets of, or by any other manner, any Person
or business (other than inventory or other items in the ordinary course of
business);
(vi) the Company shall not change the accounting principles used
by it unless required by GAAP or as a result of changes in GAAP;
(vii) the Company shall not enter into an agreement with respect
to the disposition of any of, or license, lease or other encumbrance of any of,
its assets, or any release or relinquishment of any Material Contract rights,
other than in the ordinary course of business;
(viii) the Company shall not (A) enter into any new Contract
(including, without limitation, any new Contract that would fit within the
definition of Material Contract if in effect on the date hereof) or (B)
terminate, amend, modify or waive compliance of any provision in any existing
Material Contract, which termination, amendment, modification or waiver would be
material to the Company, other than such Contracts entered into, terminated,
amended or modified in the ordinary course of business and any renewals or
extensions of any Contracts existing on the date hereof;
(ix) the Company shall not make or change any Tax election or
method of Tax accounting, release, assign, settle or compromise any Tax
liability, change any Tax accounting period, file any amended Tax return, enter
into any closing agreement or waive any statute of limitations for any Tax claim
or assessment unless required by any changes in tax laws or regulations or by
the issuance of cases, rulings or similar authorities after the date of this
Agreement;
(x) the Company shall not (A) dispose of or permit to lapse any
rights to the use of any material Company Intellectual Property owned or held by
the Company, (B) except pursuant to written confidentiality agreements entered
into between the Company and third parties, dispose of or disclose to any
Person, any trade secret, formula, process, technology or know-how of the
Company not heretofore a matter of public knowledge or (C) fail to have
45
any new employee or consultant enter into the Company's standard non-disclosure
agreement to protect the Company Intellectual Property;
(xi) the Company shall not make or agree to make any new capital
expenditure or expenditures (other than in the ordinary course of business
consistent with past practice or as set forth in the Company's capital
expenditures budget (a copy of which has been provided to Parent));
(xii) the Company will not enter into an agreement, contract,
commitment or arrangement or authorize to do any of the foregoing set forth in
this Section 6.2(i) through (xi).
Section 6.3 No Solicitation by the Company.
(a) From and after the date of this Agreement until the termination of
this Agreement, the Company shall, and will use its best efforts to cause its
officers, directors, employees and other representatives and agents
(collectively, "Company Representatives") to, immediately cease and cause to be
terminated immediately all existing activities, discussions and negotiations
with any parties conducted heretofore with respect to, or that would reasonably
be expected to lead to, any Company Takeover Proposal. From and after the date
of this Agreement until the termination of this Agreement, the Company shall
not, and will use its reasonable best efforts to cause its Company
Representatives not to, directly or indirectly, (i) solicit, initiate or
knowingly encourage or take any action designed to, or which would reasonably be
expected to, facilitate any inquiries or the making of a Company Takeover
Proposal, (ii) approve or recommend or propose to approve or recommend, or enter
into any agreement, arrangement or understanding with respect to any Company
Takeover Proposal (other than a confidentiality agreement entered into in
accordance with the provisions of this Section 6.3(a)) or (iii) other than
informing Persons of the existence of the provisions contained in clause (i) of
this sentence, participate in any discussions or negotiations regarding, or
furnish or disclose to any Person (other than a party to this Agreement) any
non-public information or data with respect to the Company in connection with
any inquiries or the making of any proposal that constitutes, or would
reasonably be expected to lead to, any Company Takeover Proposal; provided,
however, that at any time prior to obtaining the Company Stockholder Merger
Approval, (1) in response to a Company Takeover Proposal (A) that has not been
solicited, initiated or knowingly encouraged by the Company or any Company
Representative and (B) that the Board of Directors of the Company determines in
good faith (after consultation with outside counsel) may reasonably be expected
to constitute or constitutes a Company Superior Proposal (as defined below), and
which Company Takeover Proposal was made after the date hereof and did not
otherwise result, directly or indirectly, from a breach by the Company of this
Section 6.3, and (2) after the Company gives Parent written notice of such
determination (which notice shall include the material terms of such Company
Takeover Proposal and the identity of the person making it) the Company may,
subject to compliance with this Section 6.3(a), directly or indirectly, (x)
furnish information with respect to the Company to the Person making such
Company Takeover Proposal (and its representatives) pursuant to a customary
confidentiality agreement (which agreement shall be no more favorable, in any
material respect, to such Person than the Parent Confidentiality Agreement), and
(y) participate in discussions or negotiations with the Person
46
making such Company Takeover Proposal (and its representatives) regarding such
Company Takeover Proposal.
(b) The Company shall not be entitled to terminate this Agreement
pursuant to Section 8.1(e) unless: (1) it has provided to Parent written notice
of the receipt of such Company Superior Proposal (such notice to Parent, a
"Notice of a Superior Proposal"), which Notice of a Superior Proposal shall (i)
be delivered to Parent not less than three Business Days (exclusive of the
Business Day of delivery to Parent of the Notice of Superior Proposal) prior to
the date of termination pursuant to Section 8.1(e), (ii) advise Parent that the
Company has received a Company Takeover Proposal (or amendment or supplement
thereto) which it believes constitutes a Company Superior Proposal and which it
intends to accept and, with respect to which, enter into a definitive agreement,
and (iii) include a copy of any written offer or proposal describing the Company
Superior Proposal, specifying the material terms and conditions of such Company
Superior Proposal and identifying the person making such Company Superior
Proposal; and (2) during such three Business Day period, Parent shall not have
agreed in writing to amend the terms of the Merger such that the terms and
conditions thereof are no less favorable to the Company and its stockholders as
those set forth in the Company Superior Proposal.
(c) Nothing in this Section 6.3 shall prohibit the Company from making
any disclosure to the stockholders of the Company if, in the good faith judgment
of the Company (after consultation with outside counsel), failure to so disclose
would be inconsistent with the fulfillment of its fiduciary duties or other
obligations under applicable law.
(d) As used herein: (i) "Company Superior Proposal" means a Company
Takeover Proposal from any Person that the Board of Directors of the Company
determines in its good faith judgment (after consultation with outside counsel),
taking into account all legal, financial and regulatory and other aspects of the
proposal and the Person making the proposal (including any break-up fees,
expense reimbursement provisions and conditions to consummation), (A) would be
more favorable from a financial point of view to the stockholders of the Company
than the transactions contemplated by this Agreement, (B) for which financing,
to the extent required, is then committed or may reasonably be expected to be
committed and (C) is reasonably likely to receive all required governmental
approvals on a timely basis; and (ii) "Company Takeover Proposal" means any bona
fide written proposal or offer from any Person relating to any (A) direct or
indirect lease, acquisition or purchase of all or substantially all of the
assets of the Company, (B) direct or indirect acquisition or purchase of equity
securities of the Company representing 50 % or more of the combined voting power
of the Company, (C) any tender offer or exchange offer that if consummated would
result in any Person beneficially owning equity securities of the Company
representing 50% or more of the combined voting power of the Company, or (D) any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement.
Section 6.4 Regulatory Approvals.
(a) The Company and Parent shall, as promptly as practicable, but in
no event later than 15 Business Days following the date hereof, file with the
United States Federal Trade Commission and the United States Department of
Justice the pre-merger notification and report
47
form required for the Merger pursuant to the HSR Act. Each of the Company and
Parent shall furnish to each other's counsel such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission that is necessary under the HSR Act.
Parent shall be responsible for all filing fees payable in connection with such
filings and for any local counsel fees.
(b) The Company and Parent shall use their commercially reasonable
efforts promptly to obtain any clearance required under the HSR Act for the
consummation of the Merger and the other transactions contemplated hereby and
shall keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from, any Governmental Entity
and shall comply promptly with any such inquiry or request.
(c) The parties hereto agree to instruct their respective counsel to
cooperate with each other and use commercially reasonable efforts to facilitate
and expedite the identification and resolution of any issues arising under the
HSR Act at the earliest practicable dates. Such commercially reasonable efforts
and cooperation include counsel's undertaking (i) to promptly inform the other
parties hereto of any oral communication with, and provide copies of written
communications with, any Governmental Entity regarding any such filings or
applications or any such transaction, and (ii) to confer with each other
regarding appropriate contacts with and response to personnel of such
Governmental Entity. No party hereto shall independently participate in any
meeting or discussion with any Governmental Entity in respect of any such
filings, applications, investigation or other inquiry without giving the other
party hereto prior notice of the meeting and, to the extent permitted by the
relevant Governmental Authority, the opportunity to attend and participate
(which, at the request of any of the parties, shall be limited to outside
antitrust counsel only).
(d) In addition to obtaining any clearance required under the HSR Act,
between the date of this Agreement and the Closing Date, each of the Company and
Parent will (i) cooperate with one another and take all reasonable steps to
obtain, as promptly as practicable, all other approvals and Permits of any
Governmental Entities required of either party to consummate the transactions
contemplated by this Agreement and (ii) provide such other information and
communications to any Governmental Entity as may be reasonably requested. All
documents required to be filed by any of the parties or any of their respective
Affiliates with any Governmental Entity in connection with this Agreement or the
transactions contemplated hereby will comply in all material respects with the
provisions of applicable Law.
Section 6.5 Public Announcements. Neither Parent and Merger Subsidiary, on
the one hand, nor the Company, on the other hand, nor any of their respective
Affiliates, shareholders, partners or co-investors shall, without the approval
of the other party, issue any press releases or otherwise make any public
statements with respect to the transactions contemplated hereby, except as may
be required by applicable law or by obligations pursuant to any listing
agreement with any national securities exchange or stock market, in which case
the party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance; provided, however, that each party may make internal
announcements to its employees that are consistent with the parties' prior
public disclosures regarding the Merger and the other transactions contemplated
hereby. Notwithstanding the foregoing, if such an announcement is required by
applicable law or any
48
listing agreement with a national securities exchange or quotation system, the
party required to make such announcement shall provide notice to and a copy of
such as promptly as practicable in advance of such announcement and, to the
extent practicable, take the views of the other party in respect of such
announcement into account prior to making such announcement. Nothing herein
shall prevent reasonable pre-Closing communication between the Company and its
clients for the purpose of responding to client concerns regarding the effect of
the transactions contemplated by this Agreement on service delivery.
Section 6.6 Employee Benefits.
(a) Parent and Merger Subsidiary hereby agree to assume, honor and
maintain without any amendment to the terms of such Benefit Plan or other
agreement which would be materially adverse to participants in such Benefit Plan
as a group, and cause the Surviving Company to assume, honor and maintain
without any amendment to the terms of such Benefit Plan or other agreement which
would be materially adverse to participants in such Benefit Plan as a group
(except as may be required by applicable law), for a period of one year
immediately following the Effective Time, each Benefit Plan and each other
agreement identified in Section 6.6 of the Company Disclosure Schedule for the
benefit of the employees of the Company, and to make required payments when due
under each such Benefit Plan and Employee Agreement.
(b) Notwithstanding Section 6.6(a), the Surviving Company shall have
the right to terminate any Benefit Plan to the extent that it continues to
provide, for a period of one year immediately following the Effective Time, the
participants in such Benefit Plan with a benefit that is no less favorable to
such participants as a group than the benefit currently provided under such
Benefit Plan.
(c) Except as set forth in Section 6.7, no employee of the Company who
becomes an employee of the Surviving Company following the Effective Time (a
"Continuing Employee") shall be deemed to be a third-party beneficiary to this
Agreement. Nothing in this Section 6.6 or elsewhere in this Agreement shall be
construed to create a right of any Company employee to employment with the
Surviving Company following the Effective Time, and employment of any Continuing
Employee shall be "at-will" except as otherwise may be provided in any of the
employment agreements set forth in Section 4.9 of the Company Disclosure
Schedule. Nothing in this Section 6.6 or elsewhere in this Agreement shall be
construed to amend any Benefit Plan except to the extent that Section 6.10 shall
be deemed to amend (i) the Amended and Restated Employment Agreement, dated as
of July 25, 2003, between the Company and Xxxxxxx, and (ii) the Amended and
Restated Employment Agreement, dated as of July 25, 2003, between the Company
and Garfield.
Section 6.7 Directors' and Officers' Insurance and Indemnification.
(a) The articles of organization and limited liability company
agreement of the Surviving Company shall contain the provisions with respect to
indemnification no less favorable to directors and officers than those set forth
in Article SIXTH of the Company's certificate of incorporation and Article VIII
of the Company's bylaws on the date of this Agreement and shall provide for
indemnification to the fullest extent permitted by and in accordance with the
MLLCA, as applicable, which provisions shall not be amended, repealed or
49
otherwise modified for a period of six years after the Effective Time (provided
that in the event any claim is asserted or made within such six-year period, all
rights to indemnification in respect of any such claim shall continue until
final disposition of any such claim) in any manner that would adversely affect
the rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
(b) Parent agrees that at all times after the Effective Time it shall,
and shall cause Parent, the Surviving Company and its Subsidiaries to, (i)
indemnify each person who is now, or has been at any time prior to the date
hereof, a director or officer of the Company (collectively, the "Indemnified
Parties"), to the full extent permitted by applicable law, Article SIXTH of the
Company's certificate of incorporation and Article VIII of the Company's bylaws
on the date of this Agreement, with respect to any claim, liability, loss,
damage, cost or expense, whenever asserted or claimed, based in whole or in part
on, or arising in whole or in part out of, any matter existing or occurring at
or prior to the Effective Time, and (ii) advance expenses to any Indemnified
Party for the defense by such Indemnified Party of any such claim, liability,
loss, damage, cost or expense upon receipt of an undertaking by or on behalf of
such Indemnified Party to repay such amount if it shall ultimately be determined
that such Indemnified Party is not entitled to indemnification pursuant to
applicable law. Parent shall cause the Surviving Company to purchase and
maintain in effect for not less than six years after the Effective Time (1)
policies of directors' and officers' liability insurance and (2) policies of
liability insurance for the Stockholder Representatives, which insurance shall
contain coverage and other terms and conditions that are mutually acceptable to
Parent and the Stockholder Representatives with respect to matters existing or
occurring at or prior to the Effective Time; provided that in no event shall the
Surviving Company be obligated to pay premiums in excess of $65,000 per annum
for such insurance. If the Surviving Company or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, or if Parent sells or otherwise disposes of all or substantially all of
its equity interest in the Surviving Company or otherwise disposes of control of
the Surviving Company, then and in each such case proper provision shall be made
so that the successors and assigns of the Surviving Company, Parent or both, as
the case may be, assume the obligations set forth in this Section 6.7 for the
benefit of the directors and officers of the Company immediately prior to the
Effective Time and for the benefit of the Stockholder Representatives. The
provisions of this Section 6.7 are intended to be for the benefit of, and
enforceable by, each officer and director of the Company immediately prior to
the Effective Time and his or her heirs and representatives and each Stockholder
Representative and his heirs and representatives, and nothing herein shall
affect any indemnification rights that any such party and his or her heirs and
representatives may have under the certificate of incorporation or bylaws of the
Company or any contract or applicable law and shall be enforceable by all such
parties.
Section 6.8 Consents. Parent and Merger Subsidiary each acknowledge that
certain consents and waivers with respect to the transactions contemplated
hereby may be required from parties to Contracts to which the Company is a party
and that such consents and waivers have not been obtained. Prior to the Closing,
the Company shall cooperate with Parent and Merger Subsidiary, upon the request
of Parent and Merger Subsidiary, in any reasonable manner in
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connection with Parent and Merger Subsidiary giving notice to third parties and
obtaining any such consents and waivers; provided, however, that such
cooperation shall not include any requirement of the Company or any of its
Affiliates to expend money, commence, defend or participate in any litigation or
offer or grant any accommodation (financial or otherwise) to any third party.
Except as provided in the preceding sentence, the Company and its Affiliates
shall not have any liability whatsoever to Parent and Merger Subsidiary arising
out of or relating to the failure to obtain any consents or waivers that may be
required in connection with the transactions contemplated hereby or because of
the termination of any Contract as a result thereof. Parent and Merger
Subsidiary further agree that (subject to the first sentence of this section) no
representation, warranty or covenant of the Company contained herein shall be
breached or deemed breached, and no condition shall be deemed not satisfied, as
a result of (a) the failure to obtain any such consent or waiver, (b) any such
termination or (c) any suit, action or other proceeding commenced or threatened
by or on behalf of any Person arising out of or relating to the failure to
obtain any such consent or any such termination.
Section 6.9 Further Action. Each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable law, and to execute and deliver such documents and other instruments
or papers as may be required to carry out the provisions of this Agreement and
to consummate and render effective the transactions contemplated by this
Agreement.
Section 6.10 [Intentionally Omitted]
Section 6.11 Certain Tax Matters.
(a) The parties hereto agree that, pursuant to Treasury Regulation
Section 1.1502-76(b)(1)(ii)(B), the tax deductions resulting from the payments
to be made pursuant to Section 3.5 of this Agreement shall be allocable to the
portion of the Company's day after the Merger and, accordingly, shall be treated
for federal income tax purposes as occurring at the beginning of the day after
the Closing Date. The parties hereto agree not to take any action inconsistent
with the foregoing.
(b) None of the Company, Parent or Merger Subsidiary shall take any
action that would prevent the parties hereto from treating (A) the Merger as a
"reorganization" under Section 368(a) of the Code or (B) Parent and the Company
as each a party to the reorganization under Section 368(b) of the Code.
(c) For purposes of applying Treasury Regulations Section
1.368-1(e)(2), the parties hereto agree that the Agreement provides (i) for
61.59% (by value) of the proprietary interests in the Company to be exchanged
for Parent Common Stock, based on the Company Stock outstanding as of the date
hereof, and (ii) for a minimum of 60.64% (by value) of the proprietary interests
in the Company to be exchanged for Parent Common Stock, based on the Company
Stock that would be outstanding as of the Effective Time assuming the exercise,
prior to the Effective Time, of all Plan Options and Non-Plan Options that are
currently exercisable or that may become exercisable prior to the Effective
Time.
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Section 6.12 Name Changes. Parent and Company shall cooperate and take any
and all action as may be necessary to cause the name of Parent to be changed to
"Xxxx, Inc." immediately following the Closing, including the filing with the
State Department of Assessments and Taxation of the State of Maryland an
amendment to the articles of incorporation of Parent to reflect such name change
(the "Parent Charter Amendment").
Section 6.13 Governance of Parent. Prior to the Effective Time, Parent's
Board of Directors shall take such action as may be necessary to cause (a) the
number of directors that will comprise the full Board of Directors of Parent at
the Effective Time to be not less than nine (9) and (b) Xxxxxxx and Garfield to
be appointed to such Board of Directors effective as of the Effective Time and
to belong to the class of directors designated as the class of directors whose
terms expire at the 2007 annual meeting of Parent's stockholders and one
individual (to be mutually agreed upon by Parent and the Company prior to
Closing) to be appointed to such Board of Directors effective as the Effective
Time and to belong to the class of directors designated as the class of
directors whose terms expire at the 2009 annual meeting of Parent's
stockholders, in accordance with Parent's certificate of incorporation.
Section 6.14 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings.
(a) Form S-4 Proxy Statement. As soon as practicable following the
date of this Agreement, Parent shall prepare, together with the Company, and
file with the SEC the Joint Proxy Statement and Parent shall prepare, together
with the Company, and file with the SEC the Form S-4, in which the Joint Proxy
Statement will be included as a prospectus, and each of the Company and Parent
shall use its reasonable best efforts to respond as promptly as practicable to
any comments of the SEC with respect thereto. Each of the Company and Parent
shall use reasonable best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing and to maintain
the effectiveness of the Form S-4 through the Effective Time and to ensure that
it complies in all material respects with the applicable provisions of the
Exchange Act or Securities Act. The Company shall use all reasonable best
efforts to cause the Joint Proxy Statement to be mailed to the Company's
stockholders, and Parent shall use all reasonable best efforts to cause the
Joint Proxy Statement to be mailed to Parent's stockholders, in each case as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any applicable
state securities laws in connection with the registration and issuance of Parent
Common Stock in the Merger and the Company and Parent shall furnish all
information concerning themselves and their respective stockholders as may be
reasonably requested in connection with any such action. The information
provided and to be provided by Parent and the Company, respectively, (i) for use
in the Form S-4, at the time the Form S-4 becomes effective, shall be true and
correct in all material respects and shall not omit to state a material fact
required to be stated therein or necessary in order to make such information, in
the light of the circumstances in which the statements therein were made, not
misleading and (ii) for use in the Joint Proxy Statement, on the date the Joint
Proxy Statement is mailed to the Company's stockholders and on the date of the
Company's Stockholder Meeting (as defined below), shall be true and correct in
all material respects and shall not omit to state any material fact required to
be stated therein or necessary in order to
52
make such information, in the light of the circumstances in which the statements
therein were made, not misleading. No filing of, or amendment or supplement to,
the Form S-4 will be made by Parent, and no filing of, or amendment or
supplement to the Joint Proxy Statement will be made by the Company or Parent,
in each case, without providing the other parties and their respective counsel
the reasonable opportunity to review and comment thereon. The parties shall
notify each other promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Joint Proxy Statement or the Form S-4 or for additional information and
shall supply each other with copies of all correspondence between such party or
any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Joint Proxy Statement, the Form S-4 or the
Merger. Parent will advise the Company promptly after it receives notice
thereof, of the time when the Form S-4 has become effective, the issuance of any
stop order or the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction.
If at any time prior to the Effective Time any information relating to the
Company Parent, or any of their respective affiliates, officers or directors,
should be discovered by the Company or Parent which should be set forth in an
amendment or supplement to the Form S-4 or the Joint Proxy Statement, so that
any of such documents would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto
and the parties shall cooperate in the prompt filing with the SEC of an
appropriate amendment or supplement describing such information and, to the
extent required by Law, in the disseminating the information contained in such
amendment or supplement to the stockholders of each of the Company and Parent.
(b) Stockholders Meetings.
(i) The Company shall, as soon as practicable following the date
of this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Company Stockholders Meeting") in accordance with applicable
Law, the Company's certificate of incorporation and bylaws for the purpose of
obtaining the Company Stockholder Approval and (A) the Board of Directors of the
Company shall recommend to its stockholders the adoption of this Agreement and
the Company Charter Amendment, and the Company shall include in the Joint Proxy
Statement such recommendation and (B) the Company shall use its reasonable best
efforts to solicit and obtain such approval and adoption; provided that nothing
herein shall prohibit the directors of the Company from changing such
recommendation or failing to use such best efforts to obtain such approval if
the directors of the Company have determined in good faith (after consultation
with outside counsel) that such action is necessary for such directors to comply
with their fiduciary duties to the Company's stockholders under applicable law.
(ii) Parent shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Parent Stockholders Meeting") in accordance with applicable
Law, Parent's articles of incorporation and bylaws for the purpose of obtaining
the Parent Stockholder Approval and (A) the Board of Directors of Parent shall
recommend to its stockholders the issuance of the shares of Parent Common Stock
as contemplated by this Agreement, and Parent shall include in the Joint Proxy
53
Statement such recommendation and (B) Parent shall use its reasonable best
efforts to solicit and obtain such approval and adoption.
(iii) Each of Parent and the Company agrees to use its reasonable
best efforts to hold the Parent Stockholders Meeting and the Company
Stockholders Meeting on the same day.
Section 6.15 Listing. Parent shall use commercially reasonable efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the AMEX, subject to official notice of issuance, as
promptly as practicable after the date of this Agreement, and in any event prior
to the Closing Date. Parent shall use reasonable best efforts to cause the
Parent Common Stock to be approved for listing on the NASDAQ as promptly as
practicable after the Closing Date.
Section 6.16 Affiliate Letters. At least 30 days prior to the Closing Date,
the Company shall deliver to Parent a list of names and addresses of the
executive officers, directors and those persons who were, in the Company's
reasonable judgment, at the record date for the Company Stockholders Meeting,
its "affiliates" for purposes of Rule 145 under the Securities Act (each such
person, a "Rule 145 Affiliate"). The Company shall use all reasonable efforts to
deliver or cause to be delivered to Parent prior to the Closing Date, from each
of the Rule 145 Affiliates of the Company identified in the foregoing list, a
Rule 145 Affiliate Letter in the form attached hereto as Exhibit 6.16. Parent
shall be entitled to place legends as specified in such Rule 145 Affiliate
Letters on the certificates evidencing any Parent Common Stock to be received by
such Rule 145 Affiliates pursuant to the terms of this Agreement and to issue
appropriate stock transfer instructions to the transfer agent for the Parent
Common Stock consistent with the terms of such Rule 145 Affiliate Letter.
Section 6.17 Xxxxxxxx-Xxxxx Act Compliance. Between the date of this
Agreement and the Closing, the Company shall take all actions reasonably
requested by Parent and shall use reasonable best efforts to cooperate with
Parent to work toward enabling the Parent to satisfy its obligations under the
Xxxxxxxx-Xxxxx Act ("SOX") after the Closing. Without limiting the foregoing,
such actions shall include (i) allowing Parent's officers and consultants
access, during normal business hours, to the Company's officers and accountants
with respect to SOX matters, and (ii) implementing, to the extent practicable,
the reasonable recommendations of Parent and its consultants to progress towards
establishing internal controls over financial reporting and disclosure controls
and procedures as are necessary or appropriate to enable Parent to satisfy its
obligations under SOX after the Closing.
Section 6.18 Parent Option Plans. Parent shall, as soon as practicable
following the Effective Date, register any stock with the Securities and
Exchange Commission issuable under the Wellsford Real Properties, Inc. 1997
Management Incentive Plan and the Wellsford Real Properties, Inc. 1998
Management Incentive Plan, if it has not been registered.
54
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) The Company Stockholder Approval and the Parent Stockholder
Approval shall have been obtained and the Company Charter Amendment shall have
become effective.
(b) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any Order or Law which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting the consummation of the
Merger and there shall be no suit, action or proceeding by a Governmental Entity
seeking to restrain, enjoin or prohibit the Merger; provided, however, this
condition may not be asserted by a party to this Agreement if such party shall
have failed to use its best efforts to prevent the entry of any such injunction
or other Order and to appeal any injunction or other Order that may be entered.
(c) Other than the filings of the (i) Certificate of Merger in
accordance with the DGCL and (ii) Articles of Merger in accordance with the
MLLCA, all authorizations, consents and approvals of all Governmental Entities
required to be obtained prior to consummation of the Merger shall have been
obtained, except for such authorizations, consents and approvals the failure to
which to be obtained would not be reasonably likely to have a Company Material
Adverse Effect or a Parent Material Adverse Effect.
(d) Any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated.
(e) No Order or Law entered, enacted, promulgated, enforced or issued
by any court or other Governmental Authority of competent jurisdiction or
prohibition shall be in effect, and there shall not be pending any suit, action
or proceeding by any Governmental Entity (i) preventing the consummation of the
Merger or (ii) which otherwise is reasonably likely to have a Company Material
Adverse Effect or Parent Material Adverse Effect; provided, that each of Parent
and the Company shall have used its best efforts to prevent the entry of any
such Order or Law and to appeal as promptly as possible any such Order or Law
that may be entered.
(f) The Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop under or proceedings seeking a stop
order.
(g) Parent and the Company shall each have received written opinions
from their respective tax counsel (King & Spalding LLP and Xxxxx Xxxx LLP,
respectively), in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and that each of Parent and the Company will be "a
party to a reorganization" as described in and pursuant to Section 368(b) of the
Code. The parties to this Agreement agree to make such customary representations
as requested by such counsel for the purpose of rendering such opinions,
including representations
55
set forth in certificates of officers of Parent and the Company and any relevant
Subsidiaries thereof.
Section 7.2 Conditions to the Company's Obligation to Effect the Merger.
The obligations of the Company to effect the Closing shall be subject to the
following conditions, except to the extent waived in writing by the Company:
(a) The representations and warranties of Parent and Merger Subsidiary
contained herein shall be true and correct as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date, unless such
representations and warranties by their terms speak as of an earlier date, in
which case they shall be true and correct as of such date, except to the extent
that the failure of such representations and warranties to be true and correct
would not, individually or in the aggregate, have or reasonably be expected to
have a Parent Material Adverse Effect (provided that any representation or
warranty that is qualified by a materiality or Parent Material Adverse Effect
qualification shall not be further qualified hereby).
(b) Parent shall have performed all obligations and complied with all
covenants set forth in this Agreement that are required to be performed or
complied with by it at or prior to the Closing in all material respects.
(c) Parent shall have delivered to the Company a certificate, dated
the Closing Date and signed by a duly authorized officer, to the effect that
each of the conditions specified in clauses (a) and (b) of this Section 7.2 is
satisfied in all respects.
(d) Parent shall have entered into a registration rights agreement
substantially in the form attached hereto as Exhibit 7.2(d) with Xxxxxxx and
Garfield.
(e) Parent and Escrow Agent shall have executed the Escrow Agreement.
(f) Each of Xxxxxxx and Garfield shall have been fully and
unconditionally released from any and all guaranties set forth in Section 7.2(f)
of the Company Disclosure Schedule.
(g) Parent and Merger Subsidiary shall have delivered or made
available, as applicable, to the Company a copy of (i) a certificate from the
Maryland State Department of Assessments and Taxation dated a date not more than
two Business Days prior to the Closing Date, attesting to the incorporation,
existence and good standing of Parent and the organization, existence and good
standing of the Merger Subsidiary, and (ii) a copy, certified by the Maryland
State Department of Assessments and Taxation as of a date not more than ten days
prior to the Closing Date, of the Parent's articles of incorporation and the
Merger Subsidiary's articles of organization and all amendments thereto.
Section 7.3 Conditions to Parent and Merger Subsidiary's Obligations to
Effect the Merger. The obligations of Parent and Merger Subsidiary to effect the
Closing shall be subject to the following conditions, except to the extent
waived in writing by Parent:
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(a) The representations and warranties of the Company contained herein
shall be true and correct, as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, unless such
representations and warranties by their terms speak as of an earlier date, in
which case they shall be true and correct as of such date, except to the extent
that the failure of such representations and warranties to be true and correct
would not, individually or in the aggregate, have or reasonably be expected to
have a Company Material Adverse Effect (provided that any representation or
warranty that is qualified by a materiality or Company Material Adverse Effect
qualification shall not be further qualified hereby).
(b) The Company shall have performed all obligations and complied with
all covenants set forth in this Agreement that are required to be performed or
complied with by it at or prior to the Closing in all material respects.
(c) The Company shall have delivered to Parent a certificate, dated
the Closing Date and signed by a duly authorized officer, to the effect that
each of the conditions specified in clauses (a) and (b) of this Section 7.3 is
satisfied in all respects.
(d) The Company shall have delivered to Parent a statement pursuant to
Treasury Regulations Section 1.1445-2(c)(3), duly executed by an officer of the
Company and in a form reasonably acceptable to Parent, certifying that no class
of Company Stock is a U.S. real property interest.
(e) The Stockholder Representatives and the Escrow Agent shall have
executed the Escrow Agreement.
(f) No more than 5% of the outstanding Company Common Stock and
Company Preferred Stock (on an as-converted basis), together as a single class,
will be subject to appraisal under Section 262 of the DGCL.
(g) Prior to the Closing Date, the Company shall have delivered or
made available, as applicable, to Parent and Merger Subsidiary all of the
following: a copy of (i) a certificate from the Delaware Secretary of State
dated a date not more than two Business Days prior to the Closing Date,
attesting to the incorporation, existence and good standing of the Company, and
(ii) a copy, certified by the Delaware Secretary of State a date not more than
ten days prior to the Closing Date, of the Company's Certificate of
Incorporation and all amendments thereto.
(h) Each of Xxxxxxx and Garfield shall have executed and delivered a
lock-up agreement, in substantially the form attached hereto as Exhibit 7.3(h),
pursuant to which Xxxxxxx and Garfield agree not to sell their shares of Parent
Common Stock received in the Merger for a period of nine months.
(i) Proceeds of the Company Loan shall have been obtained on the terms
and conditions described in the Loan Agreement.
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ARTICLE VIII
TERMINATION PRIOR TO CLOSING
Section 8.1 Termination. Anything herein to the contrary notwithstanding,
this Agreement may be terminated and the transactions hereby may be abandoned at
any time prior to the Closing Date:
(a) by mutual agreement of the Company and Parent;
(b) by the Company or Parent at any time after April 30, 2007 if the
Merger shall not have been consummated on or before such date; provided that the
right to terminate the Agreement under this clause (b) shall not be available to
any party whose breach of a representation, warranty, covenant or agreement
under this Agreement has been the cause of or resulted in the failure of the
Merger to be consummated on or before such date;
(c) at any time prior to the Closing Date, by the Company or Parent in
the event of either: (i) a breach by the Company, on the one hand, or Parent, on
the other hand, of any representation or warranty contained herein such that the
conditions set forth in Section 7.2(a) or 7.3(a), respectively, would not be
satisfied, and which breach cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party of such breach, or (ii) a
breach by the Company, on the one hand, or Parent, on the other hand, of any of
the covenants or agreements contained herein such that the conditions set forth
in Section 7.2(b) or 7.3(b), respectively, would not be satisfied, and which
breach cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach;
(d) by the Company or Parent, by written notice to the other party, if
a Governmental Entity shall have issued an Order or taken any other action, in
any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger, which Order or other action is final
and non-appealable;
(e) by written notice of the Company if, prior to receipt of the
Company Stockholder Approval, the Company receives a Company Superior Proposal;
provided, however, that such termination shall not be effective until such time
as payment of the Company Termination Fee required by Section 8.3(b) shall have
been made by the Company; and provided, further, that the Company's right to
terminate this Agreement under this Section 8.1(e) shall not be available if the
Company is then in breach of Section 6.3;
(f) by written notice of either the Company or Parent if either (i)
the Company Stockholder Approval shall not have been obtained at the Company
Stockholders Meeting or (ii) the Parent Stockholder Approval shall not have been
obtained at the Parent Stockholders Meeting;
(g) by written notice of Parent, given prior to the Company
Stockholder Meeting, if (i) the Company's Board of Directors fails to recommend
the adoption of this Agreement in accordance with the terms of Section
6.14(b)(i) or (ii) the Company's Board of Directors has withdrawn or changed its
recommendation to stockholders of the Company pursuant to Section 6.14(b)(i) in
a manner adverse to the Parent; provided, however, that if the
58
Company has provided written notice stating that either of the events in clause
(i) or (ii) above has occurred, then Parent shall provide its written notice
within five Business Days of receipt of such notice from the Company; and
(h) by written notice of the Company in the event of a Change in
Control of Parent. For the purposes hereof, a "Change in Control of Parent"
shall mean the occurrence of any of the following: (i) there shall have occurred
a change in control of Parent of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act whether or not Parent is then subject to such reporting
requirement, (ii) any merger or consolidation of Parent in which Parent is not
the continuing or surviving corporation or pursuant to which shares of Parent's
Common Stock would be converted into cash, securities or other property, other
than a merger of Parent in which the holders of the Parent's Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, (iii) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, the assets of Parent, or the
liquidation or dissolution of Parent, (iv) any tender offer or exchange offer
that if consummated would result in any Person beneficially owning equity
securities of Parent representing 50% or more of the combined voting power of
Parent or (v) a change in the composition of Parent's Board of Directors, as a
result of which fewer than a majority of the directors are Incumbent Directors.
An "Incumbent Director" is a director who either (A) is a director of Parent as
of the date hereof, or (B) is elected, or nominated for election, to the
Parent's Board of Directors with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination. For purposes
of the preceding, individuals who are elected pursuant to clause (B) also shall
be considered Incumbent Directors.
Section 8.2 Effect of Termination. In the event that this Agreement shall
be terminated pursuant to Section 8.1, all future obligations of the parties
under this Agreement shall terminate without further liability of any party to
another; provided that the obligations of the parties contained is this Article
VIII and in Article X shall survive any such termination. Subject to Section
8.3, a termination under Section 8.1 shall not relieve any party of any
liability for a willful breach of any covenant under this Agreement or be deemed
to constitute a waiver of any available remedy (including specific performance
if available) for any such breach.
Section 8.3 Fees and Expenses.
(a) Except as provided in this Section 8.3 or elsewhere in this
Agreement, all Expenses incurred in connection with the Merger, this Agreement
and the transactions contemplated hereby will be paid by the party incurring
such Expenses, whether or not the Merger is consummated, except that each of
Parent and the Company will bear and pay one-half of the costs and expenses
incurred in connection with the filing, printing and mailing of the Form S-4 and
the Joint Proxy Statement (including SEC filing fees). As used in this
Agreement, "Expenses" includes all out-of-pocket fees and expenses (including
all fees and expenses of accountants, investment bankers, counsel, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby.
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(b) In the event that this Agreement is terminated pursuant to Section
8.1(e), then the Company shall pay Parent concurrently with the termination (i)
a non-refundable fee equal to $500,000 (the "Company Termination Fee") and (ii)
Parent's out-of-pocket fees and expenses, upon reasonable substantiation
thereof, not to exceed $3,500,000 in the aggregate (the "Parent's Expenses"),
each payable by wire transfer of same day funds to an account designated in
writing to the Company by Parent or, if Parent fails to designate such account,
by certified or bank check.
(c) In the event that this Agreement is terminated pursuant to Section
8.1(g), or (h), then the Company shall pay Parent the Parent's Expenses
concurrently with termination and, if within six months of such effective date
of termination pursuant to Section 8.1(g) or (h) the Company consummates a
transaction that would have qualified as a Company Takeover Proposal prior to
the termination of this Agreement, then the Company shall pay Parent the Company
Termination Fee concurrently with the consummation of such transaction.
(d) In the event that this Agreement (i) is terminated pursuant to
Section 8.1(f)(ii), then Parent shall be liable for any and all of the costs and
expenses itemized on Schedule 8.3(d) (collectively, the "Loan Expenses") or (ii)
is terminated for any other reason, then each of Parent and the Company shall be
liable for one-half of any and all Loan Expenses. Promptly following such
termination, Parent and the Company shall calculate and reconcile the total
amount of the Loan Expenses paid or payable by each party and, to the extent
required pursuant hereto, each such party shall pay by wire transfer of same day
funds to an account designated in writing to the other party such amounts as are
owed hereunder or, if such party fails to designate such account, by certified
bank check. Notwithstanding the foregoing, Parent shall not be liable pursuant
to this Section 8.3(d) for any Loan Expenses if the Company draws amounts
available under the Loan Agreement for purposes other than the payment of Cash
Consideration and the Commitment Fees (as defined in Section 2.3(a) of the Loan
Agreement) incurred prior to termination of this Agreement; provided, however,
that the Company shall only draw amounts under the Loan Agreement to pay such
Commitment Fees if it does not have cash available between the date of this
Agreement and the Closing Date to make such required payments. In the event that
(i) this Agreement has terminated, (ii) Parent has made payments to the Company
pursuant to this Section 8.3(d) and (iii) the Company subsequently draws amounts
available under the Loan Agreement, then the Company shall promptly reimburse
Parent for any and all such amounts previously paid by it.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Holdback. The Company agrees that (a) (i) $2,593,456 of the
Cash Consideration (the "Cash Holdback") shall be deposited in an
interest-bearing escrow account and (ii) 317,825 shares of the Share
Consideration (the "Share Holdback" and together with the Cash Holdback, the
"Holdback") shall be deposited in an escrow account (together with any
additional monies and shares received by the Escrow Agent, as hereinafter
defined, for inclusion in such accounts and any interest earned thereon, the
"Escrow Fund") pursuant to the terms and conditions of an Escrow Agreement,
substantially in the form of Exhibit 9.1 hereto (the "Escrow Agreement"), dated
as of the Closing Date, among the Stockholder Representatives, Parent and
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The Bank of New York, as escrow agent (the "Escrow Agent") and (b) (i)
$1,500,000 of the Cash Consideration (the "FR Cash Holdback") shall be deposited
in an interest-bearing escrow account and (ii) 183,824 shares of the Share
Consideration (the "FR Share Holdback" and, together with the FR Cash Holdback,
the "FR Holdback") shall be deposited in an escrow account (together with any
additional monies and shares received by the Escrow Agent for inclusion in such
accounts and any interest earned thereon, the "FR Escrow Fund") pursuant to the
terms and conditions of the Escrow Agreement; provided, however, that for
purposes of this Article IX only, the term "Share Consideration" shall not
included any shares of Parent Common Stock constituting the merger consideration
to which Wellsford Holder is entitled. Any dividends and distributions on Parent
Common Stock while the Share Holdback is held in the Escrow Fund or the FR Share
Holdback is held in the FR Escrow Fund, shall be included in the Escrow Fund or
the FR Escrow Fund, as the case may be, and retained by the Escrow Agent until
such Share Holdback or FR Share Holdback is released pursuant to the terms of
the Escrow Agreement. The Holdback and FR Holdback shall be deposited with the
Escrow Agent concurrently with payment of the Payment Fund (less the Holdback,
the FR Holdback and the Stockholder Representatives Indemnity) to the Company
pursuant to Section 3.4. The cash included in the Escrow Fund and the FR Escrow
Fund shall be invested as provided in the Escrow Agreement. The Escrow Fund and
the FR Escrow Fund shall not be used for any purpose except as expressly
provided in this Agreement and the Escrow Agreement. Parent and Merger
Subsidiary hereby acknowledge and agree that the Holdback shall, after the
Closing Date, be their (and the Surviving Company's) sole and exclusive source
of recovery for breaches of representations, warranties and covenants of the
Company except in the case of fraud and breaches of the Fundamental
Representations. Notwithstanding the foregoing, the ability of Parent and/or the
Surviving Company to seek recovery for any damages claimed for breaches of any
of the Fundamental Representations shall be governed by and subject to the terms
and provisions of Section 9.2.
Section 9.2 Recoverable Amounts.
(a) Subject to the provisions hereof, Parent and Surviving Company and
their respective officers, directors and employees (the "Parent Indemnified
Persons") shall be entitled to be indemnified for and recover from the Escrow
Fund and, with respect to fraud and breaches of the Fundamental Representations,
from the FR Escrow Fund, any liability, loss, damage, cost or other expense
(including reasonable attorneys' fees) incurred by any Parent Indemnified Person
arising out of any breach by the Company of any representation or warranty
(including, without limitation, the Fundamental Representations) or covenant of
the Company set forth in this Agreement ("Recoverable Amounts"), provided,
however, that no Parent Indemnified Person shall be entitled to be paid any
amounts under this Section 9.2 other than on account of Qualifying Claims. For
purposes of this Agreement, a "Qualifying Claim" shall mean a claim (i) for
recovery of Recoverable Amounts, and (ii) submitted prior to the date that is 18
months after the Closing Date (except that any claim with respect to the
Fundamental Representations may be made at any time prior to the date that is 24
months after the Closing Date). Subject to the provisions hereof, the Escrow
Agent shall only be obligated to pay, and Parent Indemnified Persons shall only
be entitled to recover, the amount of each Qualifying Claim, net of Claims
Recoveries (as defined in Section 9.2(e)(ii)) actually received or to be
received by any of them at the time such Qualifying Claim is otherwise payable
hereunder. The parties hereto acknowledge that even if a claim at any time
qualifies as a Qualifying Claim hereunder, no payment from the
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Escrow Fund shall be made in respect of any such Qualifying Claim (other than
claims for breaches of the Fundamental Representations) unless, at the time
payment is otherwise to be made hereunder, the amount to be paid on account of
all such Qualifying Claims (without considering Claim Recoveries) in fact
exceeds or has exceeded $900,000 (the "Deductible"), in which event the
aggregate amount to be paid on account of all such Qualifying Claims shall be
for the amount of such Qualifying Claims in excess of the Deductible.
(b) With respect to Qualifying Claims in respect of the Fundamental
Representations, except in the case of fraud, the aggregate amount payable to
the Parent Indemnified Persons pursuant to this Article IX shall not exceed the
amount of the FR Escrow Fund plus the amount of the Escrow Fund so long as there
are any monies and/or shares of Parent Common Stock therein, provided, however,
that so long as there are any monies and/or shares of Parent Common Stock in the
Escrow Fund, any Parent Indemnified Person must first make Qualifying Claims
against and exhaust the Escrow Fund before making a Qualifying Claim against the
FR Escrow Fund.
(c) In order to assert a claim under this Section 9.2, as soon as
reasonably possible after Parent obtains knowledge of a Qualifying Claim
(provided that the failure to give such notice may limit the right to
indemnification, but only if, and only to the extent that such failure adversely
affects the Holders) but in any event not later than the date that is 18 months
after the Closing Date (except with regard to claims with respect to the
Fundamental Representations which must be asserted pursuant to the terms of this
Article IX not later than the date that is 24 months after the Closing Date)
Parent shall give written notice (a "Claim Notice") to the Stockholder
Representatives appointed pursuant to Section 9.4, with a copy to the Escrow
Agent of such claim, which Claim Notice shall set forth the facts and
circumstances giving rise to such claim, the amount of Recoverable Amounts
asserted with respect thereto, and the basis for concluding that such claim is a
Qualifying Claim. Upon and after becoming aware of any event which could
reasonably be expected to give rise to any claim hereunder, Parent and the
Surviving Company shall (i) promptly and diligently pursue all commercially
reasonable alternative sources of recovery for such claim, including but not
limited to any applicable insurance policies that the Parent and/or the
Surviving Company have in place, indemnifications or any other third party
arrangements which would offset or recoup such Recoverable Amounts, and (ii)
keep the Stockholder Representatives reasonably informed at all times of the
status of any such event or claim. Any Recoverable Amounts to which a Parent
Indemnified Person is entitled hereunder shall be paid out of the Escrow Fund or
the FR Escrow Fund, as applicable, 50% in cash and 50% in Parent Common Stock
(with each share of Parent Common Stock valued at the Per Share Price). If at
such time (A) there is no cash remaining in the Escrow Fund or the FR Escrow
Fund, as the case may be, any such Recoverable Amounts shall be paid out of any
shares of Parent Common Stock remaining in the Escrow Fund or the FR Escrow
Fund, as the case may be, or (B) no shares of Parent Common Stock remaining in
the Escrow Fund or the FR Escrow Fund, as applicable, any such Recoverable
Amounts shall be paid out of any cash remaining in the Escrow Fund or the FR
Escrow Fund, as applicable.
(d) If the Escrow Agent does not receive a written notice of objection
(the "Objection Notice") from the Stockholder Representatives on or before the
twentieth Business Day following delivery of the Claim Notice to the Escrow
Agent and the Stockholder Representatives, pursuant to the terms of the Escrow
Agreement, the Escrow Agent shall deliver
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to Parent the amount of Recoverable Amount asserted with respect thereto. If the
Escrow Agent receives an Objection Notice within such 20-Business Day period,
pursuant to the terms of the Escrow Agreement, it shall continue to hold the
amount of Recoverable Amounts asserted with respect to such Claim Notice in the
Escrow Fund or the FR Escrow Fund, as the case may be, and shall not distribute
the same except pursuant to written instructions executed and delivered by each
of Parent and the Stockholder Representatives or by depositing such funds with a
court of competent jurisdiction.
(e) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Claims Payment" shall mean the total amount of monies and
shares of Parent Common Stock paid to Parent pursuant to a Claim Notice and
Section 9.2.
(ii) "Claims Recoveries" shall mean the total amount of any
insurance and indemnity actually received by Parent or the Surviving Company for
any Qualifying Claim, excluding any Claims Payments.
(f) Notwithstanding anything herein to the contrary, in the event
Parent or Surviving Company receives Claims Recoveries:
(i) other than for Qualifying Claims with respect to Fundamental
Representations prior to the date that is 18 months after the Closing Date, then
promptly after receipt thereof, Parent or the Surviving Company, as the case may
be, shall pay to the Escrow Agent for deposit in the Escrow Fund an amount
payable 50% in cash and 50% in Parent Common Stock (with each share of Parent
Common Stock valued at the Per Share Price), equal to such Claims Recoveries,
provided that in the event that such payment is not made to the Escrow Agent,
the amount of any Claims Payments thereafter made by the Escrow Agent to Parent
or the Surviving Company, as the case may be, shall be reduced by an amount
equal to such Claims Recoveries not so paid;
(ii) other than for Qualifying Claims with respect to Fundamental
Representations on or after the date that is 18 months after the Closing Date
and on or before 36 months after the Closing Date, then promptly after receipt
thereof, Parent or the Surviving Company, as the case may be, shall distribute
to the Holders pursuant to Section 3.4 an amount, payable in 50% cash and 50%
Parent Common Stock (with each share of Parent Common Stock valued at the Per
Share Price), equal to such Claims Recoveries;
(iii) for Qualifying Claims with respect to Fundamental
Representations prior to the date that is 24 months after the Closing Date, then
promptly after receipt thereof, Parent or the Surviving Company, as the case may
be, shall pay to the Escrow Agent for deposit in the FR Escrow Fund an amount
payable 50% in cash and 50% in Parent Common Stock (with each share of Parent
Common Stock valued at the Per Share Price), equal to such Claims Recoveries,
provided that in the event that such payment is not made to the Escrow Agent,
the amount of any Claims Payments thereafter made by the Escrow Agent to Parent
or the Surviving Company, as the case may be, shall be reduced by an amount
equal to such Claims Recoveries not so paid; and
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(iv) for Qualifying Claims with respect to Fundamental
Representations on or after the date that is 24 months after the Closing Date
and on or before 42 months after the Closing Date, then promptly after receipt
thereof, Parent or the Surviving Company, as the case may be, shall distribute
to the Holders pursuant to Section 3.4 an amount, payable in 50% cash and 50%
Parent Common Stock (with each share of Parent Common Stock valued at the Per
Share Price), equal to such Claims Recoveries.
(g) Upon delivery of a Claim Notice asserting a Qualifying Claim based
upon a claim made by third parties against the Parent Indemnified Persons, the
Stockholder Representatives may elect to direct the defense of such claim
(including the selection of counsel and settlement of the claim), provided the
Stockholder Representatives shall keep Parent and the Surviving Company
reasonably informed of the status of the claim at all stages of the proceedings
thereof. Parent and the Surviving Company shall provide the Stockholder
Representatives with such cooperation and assistance as is reasonably necessary
to ensure the proper and adequate defense of such claim, including, without
limitation, providing access to and copies of relevant books and records of the
Surviving Company. The Stockholder Representatives shall be entitled to settle
and otherwise resolve any such claim, provided that the Stockholder
Representatives shall not consent to a settlement of or the entry of any
judgment against the Surviving Company arising from any such claim unless (i)
the settlement or judgment is solely for money damages and the Parent and Parent
Indemnified Persons are released from any liability with regard to any such
claim, or (ii) Parent or the Surviving Company consents thereto, which consent
shall not be unreasonably withheld or delayed. Parent and the Surviving Company
shall not settle or otherwise resolve any claims without the prior written
consent of the Stockholder Representatives in each instance.
Section 9.3 Release of Escrow Fund and FR Escrow Fund.
(a) In the event that on or prior to the date that is 18 months after
the Closing Date, no Claim Notices have been given pursuant to the terms and
conditions of Section 9.2 where the underlying claim has not been resolved, then
on the date that is 18 months after the Closing Date, or as soon as possible
thereafter, the Escrow Agent shall deliver to the Surviving Company the balance
of the Escrow Fund including any interest or dividends earned thereon or
distributions made with respect thereto for distribution by the Surviving
Company to the Holders in the same proportion and manner as the Common Stock
Merger Consideration and the Preferred Stock Merger Consideration were required
to be distributed.
(b) In the event that on or prior to the date that is 18 months after
the Closing Date, one or more Claim Notices have been given pursuant to the
terms and conditions of Section 9.2 where the underlying claim has not been
resolved, then on the date that is 18 months after the Closing Date, or as soon
as possible thereafter, and from time to time thereafter, the Escrow Agent shall
deliver to the Surviving Company the balance of the Escrow Fund (including any
interest or dividends earned on such portion or distributions made with respect
to such portion) for distribution by the Surviving Company to the Holders in the
same proportion and manner as the Common Stock Merger Consideration and the
Preferred Stock Merger Consideration were required to be distributed to the
extent it exceeds any Recoverable Amounts claimed but not yet paid due to a
Claim Notice for Qualifying Claims having been delivered
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(including any interest earned on such monies so delivered and any dividends or
distributions earned on such Parent Common Stock so delivered).
(c) In the event that on or prior to the date that is 24 months after
the Closing Date, no Claim Notices with respect to Fundamental Representations
been given pursuant to the terms and conditions of Section 9.2 where the
underlying claim has not been resolved, then on the date that is 24 months after
the Closing Date, or as soon as possible thereafter, the Escrow Agent shall
deliver to the Surviving Company the balance of the FR Escrow Fund (including
any interest or dividends earned thereon or distributions with respect thereto)
for distribution by the Surviving Company to the Holders in the same proportion
and manner as the Common Stock Merger Consideration and the Preferred Stock
Merger Consideration were required to be distributed.
(d) In the event that on or prior to the date that is 24 months after
the Closing Date, one or more Claim Notices with respect to Fundamental
Representations have been given pursuant to the terms and conditions of Section
9.2 where the underlying claim has not been resolved, then on the date that is
24 months after the Closing Date, or as soon as possible thereafter, and from
time to time thereafter, the Escrow Agent shall deliver to the Surviving Company
the balance of the FR Escrow Fund (including any interest or dividends earned on
such portion or distributions with respect to such portion) for distribution by
the Surviving Company to the Holders in the same proportion and manner as the
Common Stock Merger Consideration and the Preferred Stock Merger Consideration
were required to be distributed to the extent it exceeds any Recoverable Amounts
claimed but not yet paid due to a Claim Notice for Qualifying Claims with regard
to the Fundamental Representations having been delivered (including any interest
earned on such monies so delivered and any dividends or distributions earned on
such Parent Common Stock so delivered).
Section 9.4 Stockholder Representatives. Upon the adoption of this
Agreement by the requisite vote of the holders of the Company Common Stock and
the Company Preferred Stock, each of Xxxxxxx and Garfield (together, the
"Stockholder Representatives" and each, a "Stockholder Representative") shall be
irrevocably appointed to act as the representatives for the Holders with respect
to matters requiring any action or decision by the Holders following the
Closing, and the Stockholder Representatives are hereby authorized by the
Holders to take any and all such actions and make any decisions necessary or
desirable in connection with all matters arising under this Agreement or the
Escrow Agreement, the transactions contemplated hereby or thereby or arising
with regard to the Company before or after the Closing, including, without
limitation, the defense and/or settlement of any claims and any matters under
9.2. In furtherance of the foregoing, the Stockholder Representatives may by
written notice to the Escrow Agent, with a copy to Parent, request payment for
or reimbursement of any and all costs and expenses, including reasonable legal
fees and expenses, paid or payable by any of the Stockholder Representatives in
connection with any matters requiring any action by the Stockholder
Representatives as provided in this Article IX including, without limitation,
the defense and/or settlement of any claims or under the Escrow Agreement, and
the Escrow Agent shall promptly upon receipt of any such written notice make
such payment to the Stockholder Representatives. Any notice or other
communication to be delivered to the Stockholder Representatives shall be
delivered to each of them pursuant to Section 10.8 and any notice or other
communication to be signed by the Stockholder Representatives shall be valid and
binding if signed by either of the
65
Stockholder Representatives. Any decision, act, consent, or instruction of the
Stockholder Representatives shall constitute a decision of all of the Holders
and shall be final binding and conclusive upon each Holder. Parent and the
Surviving Company shall be entitled to rely on such appointment and treat the
Stockholder Representatives as the duly appointed representatives for the
Holders. If any Stockholder Representative shall be unable to serve, the
remaining Stockholder Representative shall appoint a replacement therefor, and
if at any time only one Stockholder Representative is then serving, then such
Stockholder Representative is authorized to act alone pursuant to this Section
9.4. Each Stockholder Representative, by execution hereof, confirms such
appointment and authority and acknowledges that, in acting as the representative
of the Holders, the Stockholder Representatives may rely upon, and shall not be
liable to any Holder for acting or refraining from acting upon, an opinion of
counsel, certificate of auditors or other certificates, statement, instrument,
opinion, report, notice, request, consent, order, arbitrator's award, appraisal,
bond other paper or document reasonably believed by him to be genuine and to
have been signed or presented by the proper party or parties. No Stockholder
Representative shall incur any liability to any Holder with respect to any
action taken or suffered by him in his capacity as Stockholder Representative in
reliance upon any note, direction, instruction, consent, statement or other
documents believed by him to be genuinely and duly authorized. In addition, no
Stockholder Representative shall incur any liability to any Holder for any
action or inaction except his own fraud or willful misconduct. Each Stockholder
Representative may perform his duties as Stockholder Representatives either
directly or by or through his agents or attorneys and no Stockholder
Representative shall be responsible to any other Holder for any misconduct or
negligence on the part of any agent or attorney appointed with reasonable care
by him hereunder or for any action or inaction by any other Stockholder
Representative. Adoption of this Agreement and the Merger by the requisite vote
of the holders of the Company Common Stock and Company Preferred Stock shall
constitute the agreement of (a) all Holders to the terms and provisions of this
Agreement including, without limitation, this Section 9.4, (b) each Holder to
defend, indemnify and hold harmless, severally and not jointly (based upon the
pro rata portion of the Aggregate Merger Consideration to which such Holder is
entitled pursuant to this Agreement), each Stockholder Representative from,
against and in respect of any and all claims, liabilities, obligations, costs,
expenses, deficiencies and damages incurred, sustained, suffered, paid or
payable by such Stockholder Representative in connection with acting as a
Stockholder Representative and any action or inaction taken by the Stockholder
Representatives under this Agreement other than any such claims, liabilities,
costs, expenses or damages to the extent arising from such Stockholder
Representative's fraud or willful misconduct, and (c) each Holder to waive any
and all claims, known or unknown, or conflicts of interest arising out of or
relating to the Stockholders Representatives being appointed officers and
directors of the Surviving Company and/or of Parent.
Section 9.5 BC Escrow Account.
(a) In order to secure the obligation of the Holders to indemnify the
Stockholder Representatives against any and all claims, liabilities,
obligations, costs, expenses, deficiencies or damages incurred, sustained,
suffered, paid or payable by any Stockholder Representative in connection with
this Agreement and the Escrow Agreement, the transactions contemplated hereby or
thereby or the Company, the Company and the Holders agree that, $500,000 (the
"Stockholder Representatives Indemnity") of the Aggregate Merger Consideration
shall be deposited (consisting of 50% cash and 50% Parent Common Stock, with
each share
66
valued at the Per Share Price) in escrow with Xxxxx Xxxx LLP (the "BC Escrow
Account"), with the cash portion of the Stockholder Representatives Indemnity
being held in an interest bearing escrow account, in accordance with and
pursuant to the terms and conditions of an escrow agreement, dated as of the
Closing Date, among the Stockholder Representatives and Xxxxx Xxxx LLP (the "BC
Escrow Agreement"). All such monies and shares in the BC Escrow Account shall be
available for indemnification pursuant to Section 9.4 and any payments to which
the Stockholder Representatives are entitled pursuant to Section 9.4 and as
determined in the sole discretion of the Stockholder Representatives. The
Stockholder Representatives Indemnity shall be deposited by Parent with Xxxxx
Xxxx LLP concurrently with the payment of the Payment Fund (less the Holdback,
the FR Holdback and the Stockholder Representatives Indemnity) to the Company
pursuant to Section 3.4. The Stockholder Representatives Indemnity shall not be
the Stockholder Representatives' sole and exclusive source of recovery for any
claims, liabilities, obligations, costs, expenses, deficiencies or damages
incurred, sustained, suffered, paid or payable by any Stockholder Representative
in connection with acting as a Stockholder Representative and, to the extent
that any claims of the Stockholder Representatives for indemnification pursuant
to Section 9.4 exceed the Stockholder Representatives Indemnity, the Stockholder
Representatives shall have recourse against the Holders for any such excess
amounts.
(b) Adoption of this Agreement by the requisite vote of the Company
Common Stock and the Company Preferred Stock shall constitute the agreement of
all Holders to the terms and provisions of the BC Escrow Agreement. All such
monies in the BC Escrow Account shall be invested and released as provided in
the BC Escrow Agreement and shall not be used for any other purpose except as
expressly provided herein and in the BC Escrow Agreement.
(c) Parent and Merger Subsidiary acknowledge and agree that neither
Parent nor the Surviving Company shall have any right, claim or title to any
funds in the BC Escrow Account.
Section 9.6 Tax Treatment. The parties hereto hereby agree that any
indemnification payments made pursuant to this Agreement shall be treated for
tax purposes as an adjustment to the Aggregate Merger Consideration, unless
otherwise required by applicable law.
ARTICLE X
GENERAL
Section 10.1 Usage.
(a) All terms defined herein have the meanings assigned to them herein
for all purposes, and such meanings are equally applicable to both the singular
and plural forms of the terms defined. "Include," "includes" and "including"
shall be deemed to be followed by "without limitation" whether or not they are,
in fact, followed by such words or words of like import. "Writing," "written"
and comparable terms refer to printing, typing, lithography and other means of
reproducing words in a visible form. Any instrument or law defined or referred
to herein means such instrument or law as from time to time amended, modified or
67
supplemented, including (in the case of instruments) by waiver or consent and
(in the case of any law) by succession of comparable successor laws and includes
(in the case of instruments) references to all attachments thereto and
instruments incorporated therein. References to a Person are, unless the context
otherwise requires, also to its successors and assigns. Any term defined herein
by reference to any instrument or law has such meaning whether or not such
instrument or law is in effect.
(b) References in an instrument to "Article," "Section" or another
subdivision or to an attachment are, unless the context otherwise requires, to
an article, section or subdivision of or an attachment to such instrument.
References to any gender include, unless the context otherwise requires,
references to all genders, and references to the singular include, unless the
context otherwise requires, references to the plural and vice versa. For
avoidance of doubt, the parties agree that the terms "material," "materiality,"
or "materially" as used in this Agreement with an initial lower case "m" shall
have their respective, customary and ordinary meanings, without regard to the
meanings ascribed to "Company Material Adverse Effect" and "Parent Material
Adverse Effect" in Section 1.1.
Section 10.2 Survival. Subject to Article IX, the respective
representations and warranties of Parent, Merger Subsidiary and the Company
contained herein or in any certificates or other documents delivered prior to or
as of the Effective Time shall survive until the date that 18 months from the
Closing Date; provided, however, that the Fundamental Representations and the
representations and warranties in Sections 5.1, 5.2, 5.3 and 5.5(a)(i) shall
survive until the date that is 24 months from the Closing Date. Subject to
Article IX, the covenants and agreements of the parties hereto (including the
Surviving Company after the Merger) shall survive the Effective Time without
limitation (except for those which, by their terms, contemplate a shorter
survival period).
Section 10.3 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with consummation of the transactions contemplated by this Agreement
(collectively, "Transfer Taxes") shall be paid by Parent when due, and Parent
will, at its own expense, file all necessary Tax Returns and other documentation
with respect to all such Taxes, fees and charges.
Section 10.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
New York.
Section 10.5 Consent to Jurisdiction. Each party hereto irrevocably submits
to the exclusive jurisdiction of any state or federal court located within the
County of New York in the State of New York for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby, and agrees to commence any such action, suit or proceeding
only in such courts. Each party hereto further agrees that service of any
process, summons, notice or document by United States registered mail to such
party's respective address set forth herein shall be effective service of
process for any such action, suit or proceeding. Each party hereto irrevocably
and unconditionally waives any objection to the
68
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in such courts, and hereby irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SUCH PARTY IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
Section 10.6 Successors and Assigns. This Agreement may not be assigned by
any party hereto without the prior written consent of the other parties. Subject
to the foregoing, all of the terms and provisions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
Section 10.7 Notices. Any notice or other communication hereunder must be
given in writing and shall be deemed delivered (a) upon delivery if sent by
facsimile transmission (confirmed by any of the methods that follow in clauses
(b) or (c) hereof), (b) upon delivery if sent by overnight courier service (with
proof of service) or hand delivery and (c) three days after mailing by certified
or registered mail (return receipt requested and first-class postage prepaid)
and addressed as follows:
If to Company: Xxxx, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to: Xxxxx Xxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to Parent or
Merger Subsidiary: Wellsford Real Properties, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
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with copies to: King & Spalding LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. X'Xxxxx
Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Stockholder
Representatives Xx. Xxxxx Xxxxxxx
Xx. Xxxxxxxx Xxxxxxxx
c/x Xxxx, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to: Xxxxx Xxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date received.
Section 10.8 Severability. If any provision of this Agreement is determined
to be invalid, illegal or unenforceable by any Governmental Entity, the
remaining provisions of this Agreement to the extent permitted by law shall
remain in full force and effect provided that the essential terms and conditions
of this Agreement for the parties hereto remain valid, binding and enforceable
and provided that the economic and legal substance of the transactions
contemplated by this Agreement is not affected in any manner materially adverse
to any party hereto. In event of any such determination, the parties hereto
agree to negotiate in good faith to modify this Agreement to fulfill as closely
as possible the original intents and purposes hereof. To the extent permitted by
law, the parties hereto hereby to the same extent waive any provision of law
that renders any provision hereof prohibited or unenforceable in any respect.
Section 10.9 Representation by Counsel; No Inferences. The parties hereto
each acknowledge that each party has been represented by counsel in connection
with this Agreement and the transactions contemplated hereby. Accordingly, any
rule of law or any legal decision that would require interpretation of any
claimed ambiguities in any portions of this Agreement against the party that
drafted it has no application and is expressly waived. If any provision of this
Agreement is, in the judgment of the trier of fact, ambiguous or unclear, that
provision shall be interpreted in a reasonable manner to effect the intent of
the parties.
70
Section 10.10 Divisions and Headings. The divisions of this Agreement into
sections and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall have no legal effect in
construing the provisions of this Agreement.
Section 10.11 No Third-party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement other
than (a) Xxxxxxx and Garfield, to the extent set forth in Section 6.10, (b) the
Stockholder Representatives and (c) the Indemnified Parties, to the extent set
forth in Section 6.7 (which Section 6.7 is intended for the benefit of such
persons covered thereby and may be enforced by such persons). Nothing in this
Agreement is intended to relieve or discharge the obligation of any third person
to any party to this Agreement.
Section 10.12 Amendment and Waiver. This Agreement, the Company Disclosure
Schedule, the Parent Disclosure Schedule, and any Exhibit attached hereto may be
amended only by agreement in writing of all parties hereto. No waiver of any
provision nor consent to any exception to the terms of this Agreement or any
agreement contemplated hereby shall be effective unless in writing and signed by
the party hereto to be bound and then only to the specific purpose, extent and
instance so provided. No failure on the part of any party hereto to exercise or
delay in exercising any right hereunder shall be deemed a waiver thereof, nor
shall any single or partial exercise preclude any further or other exercise of
such or any other right.
Section 10.13 Knowledge. Whenever any statement herein or in the Company
Disclosure Schedule, the Parent Disclosure Schedule, any Exhibit, certificate or
other document delivered to any party pursuant to this Agreement is made "to
[its] knowledge" or words of similar intent or effect of any party or its
representative, the Person making such statement shall be accountable only for
facts and other information, which as of the date the representation is given,
are actually known or could be known upon a reasonable investigation to the
Person making such statement, which (a) with respect to the Company, means any
of the persons identified in Section 10.13 of the Company Disclosure Schedule,
(b) with respect to Parent, means any of Xxxxxxx Xxxxxxx, Xxxxx Xxxxx and Xxxx
Xxxxxxxxxx, and (c) with respect to any other Persons that are corporations, any
of its executive officers.
Section 10.14 Schedules and Exhibits. The Company Disclosure Schedule, the
Parent Disclosure Schedule, and each Exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this
Agreement, although the Company Disclosure Schedule, the Parent Disclosure
Schedule and Exhibits need not be attached to each copy of this Agreement. The
mere inclusion of an item in a Company Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by the Company that
such item represents an exception or material fact, event or circumstance or
that such item has or may have a Company Material Adverse Effect. Further, any
fact or item which is clearly disclosed in any Section of the Company Disclosure
Schedule in such a way as to make its relevance or applicability to information
called for by another Section of the Company Disclosure Schedule or other
Sections of the Company Disclosure Schedule reasonably apparent shall be deemed
to be disclosed on such other Section or Sections, as the case may be,
notwithstanding the omission of a reference or cross-reference thereto.
Section 10.15 Counterparts. This Agreement and any amendment hereto or any
other agreement (or document) delivered pursuant hereto may be executed in one
or more counterparts and by different parties in separate counterparts. All of
such counterparts shall constitute one and the
71
same agreement (or other document) and shall become effective (unless otherwise
provided therein) when one or more counterparts have been signed by each party
and delivered to the other party.
Section 10.16 Entire Agreement. This Agreement (including the Exhibits
hereto, the Company Disclosure Schedule and the Parent Disclosure Schedule,
which are incorporated herein by reference and made a part hereof) and the
Confidentiality Agreement constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes any prior
understandings, agreements or representations by or between the parties hereto,
written or oral, with respect to such subject matter.
[SIGNATURE PAGE TO FOLLOW]
72
IN WITNESS WHERE OF, the parties hereto have caused this Agreement to be
executed in multiple originals by their authorized officers, all as of the date
and year first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxxxxx
------------------------------------------
Title: Chief Financial Officer and Vice President
------------------------------------------
XXXX SERVICES, LLC
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxxxxx
------------------------------------------
Title: Chief Financial Officer and Vice President
------------------------------------------
XXXX, INC.
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxx
------------------------------------------
Title: Chief Executive Officer
------------------------------------------
Acknowledged and Agreed as of the
date hereof in their individual
capacities as Stockholder
Representatives.
/s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxxxx Xxxxxxxx
------------------------------------
Xxxxxxxx Xxxxxxxx
[Signature Page to Agreement and Plan of Merger]
Exhibit 1.1(a)
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
XXXX, INC.
Xxxx, Inc., a corporation duly organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
1. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by deleting the second to last sentence of Article
FOURTH(I)(B), Section 6(a) in its entirety and replacing it with the following:
The Corporation shall mail written notice of any such Liquidation
Event, not less than 45 days prior to the payment date stated therein,
to each record holder of Preferred Stock; provided, however, that with
respect to the merger transaction contemplated by that certain
Agreement and Plan of Merger, dated as of October 11, 2006, among the
Corporation, Wellsford Real Properties, Inc. and Xxxx Services, LLC
(the "2006 Agreement and Plan of Merger"), no such notice shall be
required.
2. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by adding two new sentences at the end of Article
FOURTH(I)(B), Section 6(a) as follows:
Notwithstanding anything to the contrary contained in this Certificate
of Incorporation, in connection with the 2006 Agreement and Plan of
Merger and the transactions contemplated thereby, the holders of
shares of Preferred Stock shall not be entitled to receive the
Preferred Liquidation Amount applicable to such shares but shall
instead be entitled to receive the consideration that the holders of
such shares would be entitled to receive if such shares had been
converted into shares of Common Stock at the applicable Conversion
Price therefor as in effect immediately prior to the effective time of
the merger contemplated by the 2006 Agreement and Plan of Merger. For
the avoidance of doubt, the consideration to which holders of shares
of Preferred Stock shall be so entitled to receive shall be subject to
all holdbacks and escrow, indemnification and other obligations
applicable thereto under the 2006 Agreement and Plan of Merger.
3. The foregoing amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Xxxx, Inc. has caused this Certificate to be
executed by [NAME], its [OFFICE], on this ___ day of _____, 2007.
XXXX, INC.
By:
------------------------------------
Name:
----------------------------------
Office:
--------------------------------
Exhibit 2.5
OFFICERS OF THE SURVIVING COMPANY
Name Position
---- --------
Xxxxx Xxxxxxx* President, Chief Executive Officer and Treasurer
Xxxxxxxx Xxxxxxxx* Executive Vice President and Secretary
Xxxxxxx Xxxxxxx Executive Vice President
Xxxxxxx Xxxxxx Chief Operating Officer and Assistant Secretary
Xxxx Xxxxxxxxxx Chief Financial Officer and Assistant Secretary
Xxxxxxx Xxxxxxxxxx Vice President, Sales
* Neither Xx. Xxxxxxx nor Xx. Xxxxxxxx will be appointed to the positions
indicated until such time as their respective loans from the Company have
been paid in full.
EXHIBIT 6.16
FORM OF AFFILIATE LETTER
[_________] [_], 200[ ]
Wellsford Real Properties, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Xxxx, Inc., a Delaware corporation (the "Company"), as the
term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). Pursuant to the terms of the Agreement and Plan
of Merger, dated as of [__________], 2006 (the "Merger Agreement"), by and among
Wellsford Real Properties, Inc., a Maryland corporation ("Parent"), Xxxx
Services LLC, a Maryland limited liability company ("Merger Sub"), and the
Company, the Company will be merged with and into Merger Sub (the "Merger"),
with the Merger Sub surviving the Merger as a wholly owned subsidiary of Parent.
Capitalized terms used in this letter agreement without definition shall have
the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I will receive shares of common stock, par value
$0.02 per share, of Parent (the "Parent Common Stock") in exchange for shares
(or upon exercise of options for shares) owned by me of common stock, par value
$0.01 per share, of the Company (the "Company Common Stock") and Series D
preferred stock, par value $0.01 per share, of the Company.
1. I represent, warrant and covenant to Parent that with respect to the
shares of Parent Common Stock I will receive as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of
Parent Common Stock in violation of the Securities Act or the
Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise
dispose of Parent Common Stock, to the extent I felt necessary,
with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Common Stock to
me pursuant to the Merger has been registered with the Commission
under the Securities Act on a Registration Statement on Form S-4.
However, I have also been advised that, because at the time the
Merger is submitted for a vote of the stockholders of the
Company, (a) I may be deemed to be an affiliate of the Company
and (b) except as set forth in the Registration Rights Agreement
dated as of [__________] between
me and Parent (the "Registration Rights Agreement")(1), I may not
sell, transfer or otherwise dispose of Parent Common Stock issued
to me in the Merger unless (i) such sale, transfer or other
disposition is made in conformity with the volume and other
limitations of Rule 145 (as such rule may be hereafter amended)
promulgated by the Commission under the Securities Act, (ii) such
sale, transfer or other disposition has been registered under the
Securities Act or (iii) I shall have received opinion of counsel,
reasonably acceptable to Parent, or a "no action" letter from the
staff of the Commission to the effect that such sale, transfer or
other disposition is otherwise exempt from registration under the
Securities Act.
D. I understand that, except as set forth in the Registration Rights
Agreement, Parent is under no obligation to register the sale,
transfer or other disposition of Parent Common Stock by me or on
my behalf under the Securities Act or, except as provided in
paragraph 2(A) below, to take any other action necessary in order
to make compliance with an exemption from such registration
available.
E. I understand that there will be placed on the certificates for
Parent Common Stock issued to me, or any substitutions therefor,
a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, APPLIES AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IN COMPLIANCE WITH EITHER THE REQUIREMENTS
OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER THAT
ACT OR AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT.
F. I understand that unless a sale or transfer of Parent Common
Stock issued to me in the Merger is made in conformity with the
provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the
certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933.
----------
(1) Clause (b) will be included only in the Affiliate Letters executed by
stockholders who are party to the Registration Rights Agreement.
2
G. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in
the first paragraph of this letter, nor as a waiver of any rights
I may have to object to any claim that I am such an affiliate on
or after the date of this letter.
H. It is understood and agreed that certificates with the legends
set forth in paragraphs 1(E) and l(F) above will be substituted
by delivery of certificates without such legends if (i) evidence
or representations reasonably satisfactory to Parent that the
Parent Common Stock represented by the certificates are being or
have been sold in a transaction made in conformity with the
provisions of Rule 145(d)(2) (as that rule may be hereafter
amended), (ii) one year shall have elapsed from the date the
undersigned acquired Parent Common Stock received in the Merger
and the provisions of Rule 145(d)(2) are then available to the
undersigned, (iv) two years shall have elapsed from the date the
undersigned acquired Parent Common Stock received in the Merger
and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of
counsel, which opinion and counsel shall be reasonably
satisfactory to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Securities Act no
longer apply to the undersigned.
I.
----------------------------------------
Very truly yours,
Name:
----------------------------------
Agreed and accepted this [___] day
of [_________], 2006, by
WELLSFORD REAL PROPERTIES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
3
Exhibit 7.2(d)
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of [Closing Date] among
WELLSFORD REAL PROPERTY, INC., a Maryland corporation (the "Company"), Xxxxx
Xxxxxxx ("Xxxxxxx") and Xxx Xxxxxxxx ("Garfield", each of Xxxxxxx and Garfield
individually, with their permitted assigns, a "Shareholder" and together, the
"Shareholders").
RECITALS:
WHEREAS, pursuant to the Merger Agreement, dated as of October 11, 2006
(the "Merger Agreement"), among the Company, Xxxx Services, LLC and Xxxx, Inc.
("Xxxx"), Xxxxxxx is acquiring concurrently with the execution and delivery of
this Agreement, ______ shares of the Company's common stock, par value $0.02
(the "Common Stock") and Garfield is acquiring ____ shares of Common Stock;
WHEREAS, concurrently with execution and delivery of the Merger Agreement,
the Company entered into a voting agreement (the "Voting Agreement") with each
of the Shareholders pursuant to which, among other things, each of the
Shareholders has agreed, subject to the terms and conditions therein, to vote or
deliver written consents with respect to all shares of capital stock of Xxxx
owned by such Shareholder in favor of approval of the Merger Agreement and the
transactions contemplated thereby;
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Shareholders have entered into a lock-up agreement (the "Lock-up Agreement")
with the Company pursuant to which each Shareholder has agreed not to sell the
shares of Common Shares received in the Merger for a period of nine months from
the date hereof;
WHEREAS, as an inducement to the Shareholders entering into the Voting
Agreement and the Lock-up Agreement, the Shareholders have required that the
Company agree, and the Company has agreed, to provide the rights set forth in
this Agreement; and
WHEREAS, the consummation of the Closing (as defined in the Merger
Agreement) is conditioned upon, among other things, the execution and delivery
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
covenants and agreements of the parties hereto, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Adverse Disclosure" means public disclosure of material non-public
information, disclosure of which, in the Board's good faith judgment, after
consultation with independent outside counsel to the Company, (i) would be
required to be made in the Shelf Registration Statement or any other
Registration Statement filed with the SEC by the Company so that the Shelf
Registration Statement or such other Registration Statement would not be
materially misleading; (ii) would not be required to be made at such time but
for the filing of the Shelf Registration Statement or such other Registration
Statement; and (iii) the Company has a bona fide business purpose for not
disclosing publicly.
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act
as in effect on the date hereof.
"AMEX" means the American Stock Exchange LLC.
"Board" means the board of directors of the Company.
"Common Stock" has the meaning set forth in the recitals hereto.
"Company" has the meaning set forth in the preamble hereto and shall
include the Company's successors by merger, acquisition, reorganization or
otherwise.
"Company Public Sale" has the meaning set forth in Section 2.3(a).
"Demand Registration" has the meaning set forth in Section 2.2(a).
"Demand Registration Period" has the meaning set forth in Section 2.2(b).
"Demand Registration Suspension" has the meaning set forth in Section
2.2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor thereto, and any rules and regulations promulgated thereunder, all
as the same shall be in effect from time to time.
"Garfield" has the meaning set forth in the preamble hereto.
"Xxxxxxx" has the meaning set forth in the preamble hereto.
"Merger Agreement" has the meaning set forth in the recitals hereto.
"Person" means any individual, firm, limited liability company or
partnership, joint venture, corporation, joint stock company, trust or
unincorporated organization, incorporated or unincorporated association,
government (or any department, agency or political subdivision thereof) or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"Prospectus" means the prospectus included in the Shelf Registration
Statement or any other Registration Statement, all amendments and supplements to
such prospectus, including post-effective amendments, and all other material
incorporated by reference in such prospectus.
2
"Qualified Secondary Underwritten Offering" has the meaning set forth in
Section 2.1(c).
"Registrable Securities" means any shares of Common Stock issued to a
Shareholder pursuant to the Merger Agreement, upon original issuance thereof and
at all times subsequent thereto, or any securities that may be issued or
distributed or be issuable in respect of any Registrable Securities by way of
conversion, dividend, stock split or other distribution, merger, consolidation,
exchange, recapitalization or reclassification or similar transaction; provided,
however, that any such Registrable Securities shall cease to be Registrable
Securities to the extent (i) the Shelf Registration Statement or any other
Registration Statement with respect to the sale of such Registrable Securities
has been declared effective under the Securities Act and such Registrable
Securities have been disposed of in accordance with the plan of distribution set
forth in the Shelf Registration Statement or such other Registration Statement,
(ii) such Registrable Securities have been distributed pursuant to Rule 144 (or
any similar provisions then in force) under the Securities Act or are saleable
pursuant to Rule 144(k) promulgated by the SEC pursuant to the Securities Act,
(iii) such Registrable Securities shall have been otherwise transferred and new
certificates for them not bearing a legend restricting transfer under the
Securities Act shall have been delivered by the Company and such securities may
be publicly resold without Registration under the Securities Act or (iv) such
Registrable Securities are sold to the Company.
"Registration" means a registration with the SEC of the Company's
securities for offer and sale to the public under the Shelf Registration
Statement or any other Registration Statement. The terms "Register" and
"Registering" shall have a correlative meaning.
"Registration Expenses" has the meaning set forth in Section 2.8.
"Registration Period" has the meaning set forth in Section 2.1(d).
"Registration Statement" means any registration statement of the Company
filed with, or to be filed with, the SEC under the rules and regulations
promulgated under the Securities Act, including the related Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such registration statement.
"Xxxx" has the meaning set forth in the recitals hereto.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor thereto, and any rules and regulations promulgated thereunder, all as
the same shall be in effect from time to time.
"Shareholder and Shareholders" each have the meaning set forth in the
preamble hereto.
"Shelf Registration Period" has the meaning set forth in Section 2.1(d).
"Shelf Registration Statement" means a Registration Statement on Form S-3
or any other appropriate form under Rule 415 of the Securities Act (or any
similar rule that may be adopted
3
by the SEC from time to time), providing for the resale of Registrable Shares
held by the Shareholders.
"Shelf Registration Suspension" has the meaning set forth in Section
2.1(d).
"Underwritten Offering" means a Registration in which securities of the
Company are sold to an underwriter or underwriters on a firm commitment basis
for reoffering to the public.
1.2. General Interpretive Principles. Whenever used in this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
any noun or pronoun shall be deemed to include the plural as well as the
singular and to cover all genders. The name assigned this Agreement and the
section captions used herein are for convenience of reference only and shall not
be construed to affect the meaning, construction or effect hereof. Unless
otherwise specified, the terms "hereof," "herein" and similar terms refer to
this Agreement as a whole (including the exhibits, schedules and disclosure
statements hereto), and references herein to Sections refer to Sections of this
Agreement.
SECTION 2
REGISTRATION RIGHTS
2.1. Required Shelf Registration. At any time following 90 days prior to
the third anniversary of the date of this Agreement, the Shareholders shall have
the right to request in writing that the Company (i) prepare and file the Shelf
Registration Statement with the SEC as soon as reasonably practicable but no
later than the date that is 90 days after the date such request is received by
the Company; and (ii) maintain the effectiveness of the Shelf Registration
Statement until the earliest to occur of: (A) the completion of the distribution
of the Registrable Shares covered by the Shelf Registration Statement in
accordance with the intended methods of distribution by the Shareholders as set
forth in the Shelf Registration Statement, (B) the date upon which all the
Registrable Shares covered by the Shelf Registration Statement have been
distributed pursuant to Rule 144 (or any similar provisions then in force) under
the Securities Act or are saleable pursuant to Rule 144(k) promulgated by the
SEC pursuant to the Securities Act, (C) the second anniversary of the date on
which the Shelf Registration Statement first became effective, and (D) the date
upon which the Shareholders collectively hold less than 10% of Registrable
Shares outstanding on the date hereof.
(a) The Company shall (i) notify each Shareholder of the proposed
filing of the Shelf Registration Statement with the SEC at least 30 days prior
to the proposed filing date of the Shelf Registration Statement and (ii) afford
each Shareholder with the opportunity to include all or any part of the
Registrable Shares then owned by such Shareholder in the Shelf Registration
Statement.
(b) In order to exercise a Shareholder's right to include all or any
part of the Registrable Shares then owned by him, such Shareholder shall (i)
notify the Company of the number of Registrable Shares such Shareholder wishes
to include in the Shelf Registration Statement and complete and sign the selling
shareholder questionnaire, which shall be in customary form, included in the
notice described in Section 2.1(a) hereof within twenty (20)
4
days after the Company gives such notice and (ii) furnish to the Company such
information as the Company shall reasonably request in accordance with Section
2.5(b). No Shareholder shall be entitled to be named as a selling shareholder in
the Shelf Registration Statement or use the Prospectus forming a part thereof
unless such Shareholder complies with this Section 2.1(b).
(c) If any Shareholder proposes to distribute his Registrable Shares
pursuant to the Shelf Registration Statement in an underwritten offering (a
"Qualified Secondary Underwritten Offering"), the Company agrees to use its
reasonable best efforts to effect the registration and the sale of the
Registrable Shares pursuant to two (2) Qualified Secondary Underwritten
Offerings, and pursuant thereto the Company shall comply with the registration
procedures set forth herein with respect to Underwritten Offerings.
(d) Effective Registration. The Company shall be deemed to have
effected a Registration for purposes of this Section 2.1 if the Shelf
Registration Statement is declared effective by the SEC and remains effective
for the period specified in Section 2.1 above or, if such Shelf Registration
Statement relates to a Qualified Secondary Underwritten Offering, such longer
period as in the opinion of counsel for the underwriter or underwriters a
Prospectus is required by law to be delivered in connection with sales of
Registrable Securities by an underwriter or dealer (the applicable period, the
"Shelf Registration Period"). No Registration shall be deemed to have been
effective if the conditions to closing specified in the underwriting agreement,
if any, entered into in connection with such Registration are not satisfied by
reason of a wrongful act, misrepresentation or breach of such applicable
underwriting agreement by the Company. Notwithstanding any provision herein to
the contrary, if during the Shelf Registration Period such Registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court, the Company agrees that it shall
extend the period of time during which such Shelf Registration Statement shall
be maintained effective pursuant to this Agreement by one times the number of
days such interference is sustained.
(e) Delay in Filing; Suspension of Registration. (i) If the filing,
initial effectiveness or continued use of the Shelf Registration Statement at
any time would require the Company to make an Adverse Disclosure, (ii) the
Company is engaged, or has fixed plans to engage within thirty (30) days of the
time of such request, in a firm commitment underwritten offering of its
securities, or (iii) the Board of Directors of the Company reasonably determines
that such registration and offering would interfere with any material
transaction involving the Company, the Company may, upon giving prompt written
notice of such action to the Shareholders, delay the filing or initial
effectiveness of, or suspend use of, the Shelf Registration Statement (a "Shelf
Registration Suspension"); provided, however, that the Company shall not be
permitted to exercise a Shelf Registration Suspension (A) more than once during
any period in which the Shelf Registration Statement is effective, or (B) for a
period exceeding 90 days on any one occasion. Notwithstanding the foregoing, no
such delay shall exceed such number of days that the Company determines in good
faith to be reasonably necessary. In the case of a Shelf Registration
Suspension, the Shareholders agree to suspend use of the applicable Prospectus
in connection with any sale or purchase of, or offer to sell or purchase,
Registrable Securities, upon receipt of the notice referred to above. The
Company shall (1) immediately notify the Shareholders upon the termination of
any Shelf Registration Suspension, (2) amend or supplement the Prospectus, if
necessary, so it does not contain any untrue statement or omission
5
therein, and (3) furnish to the Shareholders such numbers of copies of the
Prospectus as so amended or supplemented as the Shareholders may reasonably
request. The limitation on the obligation of the Company to maintain
effectiveness of the Shelf Registration Statement imposed by Section 2.1(ii)(C)
shall be extended by the number of days of any Shelf Registration Suspension.
(f) Notwithstanding the foregoing provisions of this Section 2.1, in
the event that on the date that the Shareholders request that the Company
prepare and file the Shelf Registration Statement in accordance with this
Section 2.1 the Company is not eligible to use a Registration Statement on Form
S-3 under the Securities Act pursuant to the rules and regulations of the SEC,
then the Company shall not be required to prepare and file the Shelf
Registration Statement and the Shareholders will have the right to Demand
Registrations (as hereinafter defined) in accordance with Section 2.2.
2.2. Request. If (and only if) the Company is not required to file the
Shelf Registration Statement pursuant to Section 2.1(e), or if the Shelf
Registration Statement ceases to be effective during the Shelf Registration
Period, as such period may be extended pursuant to this Agreement, then each
Shareholder shall have the right to request that the Company file a Registration
Statement with the SEC on the appropriate registration form for all or part of
the Registrable Securities held by such Shareholder, by delivering a written
request thereof to the Company specifying the number of shares of Registrable
Securities such Shareholder wishes to register (a "Demand Registration"),
provided, however, that the aggregate number of Registrable Securities to be
registered pursuant to such Demand Registration constitutes at least 250,000
shares of Common Stock. The Company shall use its commercially reasonable
efforts to file the Registration Statement within 60 days and to cause the
Registration Statement to become effective in respect of each Demand
Registration in accordance with the intended method of distribution set forth in
the written request delivered by the Shareholder as expeditiously as possible.
(a) Limitations on Demand Registration Requests. Subject to Section
2.2(a), the Company shall only be required to effect a maximum of two Demand
Registrations for the Shareholders collectively; provided, however, that the
Company shall not be required to file (x) more than one such Demand Registration
in any twelve-month period; or (y) any such Demand Registration within 120 days
following the date of effectiveness of any registration statement relating to a
Demand Registration.
(b) Effective Registration. The Company shall be deemed to have
effected a Registration for purposes of this Section 2.2 if the Registration
Statement is declared effective by the SEC and remains effective for not less
than 120 days (or such shorter period as will terminate when all Registrable
Securities covered by such Registration Statement have been sold or withdrawn or
are no longer Registrable Securities) or, if such Registration Statement relates
to an Underwritten Offering, such longer period as in the opinion of counsel for
the underwriter or underwriters a Prospectus is required by law to be delivered
in connection with sales of Registrable Securities by an underwriter or dealer
(the applicable period, the "Demand Registration Period"). No Registration shall
be deemed to have been effective if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
Registration are not satisfied by reason of a wrongful act, misrepresentation or
breach of such
6
applicable underwriting agreement by the Company. Notwithstanding any provision
herein to the contrary, if during the Registration Period such Registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court, the Company agrees that it shall
extend the period of time during which such Registration Statement shall be
maintained effective pursuant to this Agreement by one times the number of days
such interference is sustained.
(c) Delay in Filing; Suspension of Registration. (i) If the filing,
initial effectiveness or continued use of such Registration Statement at any
time would require the Company to make an Adverse Disclosure, or (ii) the
Company is engaged, or has fixed plans to engage within 30 days of the time of
such request, in a firm commitment underwritten offering of its securities, the
Company may, upon giving prompt written notice of such action to the
Shareholders, delay the filing or initial effectiveness of, or suspend use of,
the Registration Statement (a "Demand Registration Suspension"); provided,
however, that the Company shall not be permitted to exercise a Demand
Registration Suspension (A) more than once during any period in which a Demand
Registration is effective, or (B) for a period exceeding 60 days on any one
occasion. Notwithstanding the foregoing, no such delay shall exceed such number
of days that the Company determines in good faith to be reasonably necessary. In
the case of a Demand Registration Suspension, the Shareholders agree to suspend
use of the applicable Prospectus in connection with any sale or purchase of, or
offer to sell or purchase, Registrable Securities, upon receipt of the notice
referred to above. The Company shall (1) immediately notify the Shareholders
upon the termination of any Demand Registration Suspension, (2) amend or
supplement the Prospectus, if necessary, so it does not contain any untrue
statement or omission therein, and (3) furnish to the Shareholders such numbers
of copies of the Prospectus as so amended or supplemented as the Shareholders
may reasonably request. The effectiveness period for any Demand Registration for
which the Company has exercised a Demand Registration Suspension shall be
increased by the period of time such Registration Suspension is in effect.
(d) Underwritten Offering. If either Shareholder whose Registrable
Securities are included in any offering pursuant to a Registration Statement so
elects, such offering of Registrable Securities shall be in the form of an
Underwritten Offering, and the Company shall amend or supplement the
Registration Statement for such purpose. The Shareholder with such Registrable
Securities included in such Underwritten Offering shall have the right to select
the managing underwriter or underwriters to administer such offering; provided
that such managing underwriter or underwriters shall be reasonably acceptable to
the Company.
(e) Priority of Securities Registered. If the managing underwriter or
underwriters of a proposed Underwritten Offering of Registrable Securities
included in a Registration pursuant to this Section 2.2 informs the Shareholders
with Registrable Securities in such Registration of such class of Registrable
Securities in writing that, in its or their opinion, the number of securities
requested to be included in such Registration exceeds the number which can be
sold in such offering without being likely to have a significant adverse effect
on the price, timing or distribution of the securities offered or the market for
the securities offered, the Shareholders shall have the right to (i) request the
number of Registrable Securities to be included in such Registration be
allocated pro rata among the Shareholders to the extent necessary to reduce the
total number of Registrable Securities to be included in such offering to the
number recommended by the managing underwriter or underwriters, provided that
any
7
securities thereby allocated to an Shareholder that exceed such Shareholder's
request shall be reallocated among the remaining Shareholder in like manner or
(ii) notify the Company in writing that the Registration Statement shall be
abandoned or withdrawn, in which event the Company shall abandon or withdraw
such Registration Statement. In the event a Shareholder notifies the Company
that such Registration Statement shall be abandoned or withdrawn and said
Shareholder pays the costs and expenses of the Company incurred to date in
connection with such Registration Statement, then said Shareholder shall not be
deemed to have requested a Demand Registration pursuant to Section 2.2(a) and
the Company shall not be deemed to have effected a Demand Registration pursuant
to Section 2.2(b). If the underwriter has not limited the number of shares to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities that would otherwise have been included in such registration and
underwriting will not be limited thereby.
2.3. Piggyback Registrations.
(a) Participation. If the Company at any time proposes to file a
Registration Statement under the Securities Act with respect to any offering of
its securities for its own account and/or for the account of any other Persons
(a "Company Public Sale") (other than (i) a Registration under Sections 2.1 or
2.2 hereof or (ii) Registrations made on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public)
then, as soon as practicable (but in no event less than 15 days prior to the
proposed date of filing such Registration Statement), the Company shall give
written notice of such proposed filing to each Shareholder, and such notice
shall offer the Shareholders the opportunity to Register under such Registration
Statement such number of Registrable Securities as each such Shareholder may
request in writing (a "Piggyback Registration"). Subject to Section 2.3(b), the
Company shall include in such Registration Statement all such Registrable
Securities which are requested to be included therein within 15 days after the
receipt of any such notice; provided, however, that if, at any time after giving
written notice of its intention to Register any securities and prior to the
effective date of the Registration Statement filed in connection with such
Registration, the Company shall determine for any reason not to Register or to
delay Registration of such securities, the Company may, at its election, give
written notice of such determination to each Shareholder and, thereupon, (i) in
the case of a determination not to Register, shall be relieved of its obligation
to Register any Registrable Securities in connection with such Registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any Shareholder to
request that such Registration be effected as a Demand Registration under
Section 2.2, and (ii) in the case of a determination to delay Registering, shall
be permitted to delay Registering any Registrable Securities, for the same
period as the delay in Registering such other securities. No registration
effected under this Section 2.3 shall relieve the Company of its obligation to
effect any Demand Registration under Section 2.2 or to prepare, file and
maintain the effectiveness of the Shelf Registration Statement pursuant to
Section 2.1. If the offering pursuant to such Registration Statement is to be
underwritten, then each Shareholder making a request for a Piggyback
Registration pursuant to this Section 2.3(a) shall, and the Company shall make
such arrangements with the underwriters so that each such Shareholder may,
participate in such Underwritten Offering. If the offering pursuant to such
Registration Statement is to be on any other basis, then each Shareholder making
a request for a Piggyback Registration pursuant to this Section 2.3(a) shall,
and the
8
Company will make such arrangements so that each such Shareholder may,
participate in such offering on such basis.
(b) Right to Withdraw. Each Shareholder shall have the right to
withdraw his request for inclusion of his Registrable Securities in any
Underwritten Offering pursuant to this Section 2.3(b) at any time prior to the
execution of an underwriting agreement with respect thereto by giving written
notice to the Company of his request to withdraw and, subject to the preceding
clause, each Shareholder shall be permitted to withdraw all or part of such
Shareholder's Registrable Securities from a Piggyback Registration at any time
prior to the effective date thereof; provided, however, no Shareholder may elect
to withdraw if, in the opinion of the counsel to the Company, such withdrawal
would cause the Company to recirculate a preliminary prospectus to prospective
investors in such Underwritten Offering.
(c) Plan of Distribution. Any participation by a Shareholder in a
Registration shall be in accordance with the Company's plan of distribution.
(d) Priority of Piggyback Registration. If the managing underwriter or
underwriters of any proposed Underwritten Offering of a class of Registrable
Securities included in a Piggyback Registration informs the Company and
Shareholders in writing that, in its or their opinion, the number of securities
of such class which such Shareholder and any other Persons intend to include in
such offering exceeds the number which can be sold in such offering without
being likely to have a significant adverse effect on the price, timing or
distribution of the securities offered or the market for the securities offered,
then the securities to be included in such Registration shall be (i) first, the
securities proposed to be included therein by the Company, and (ii) second, the
Registrable Securities requested to be included in such Registration by the
participating Shareholders, with such number to be allocated pro rata among the
Shareholders based on the relative number of Registrable Securities of such
class then held by each such Shareholder (provided that any securities thereby
allocated to a Shareholder that exceed such Shareholder's request shall be
reallocated among the remaining requesting Shareholders in like manner).
2.4. Black-Out Periods. In the event of a public sale of the Company's
equity securities by the Company in an Underwritten Offering, the Shareholders
agree, if requested by the managing underwriter or underwriters in such
Underwritten Offering, not to effect any public sale or distribution of any
securities (except, in each case, as part of the applicable Registration, if
permitted) that are the same as or similar to those being Registered in
connection with such Company Public Sale, or any securities convertible into or
exchangeable or exercisable for such securities, during the period beginning 7
days before, and ending 180 days (or such lesser period as may be permitted by
the Company or such managing underwriter or underwriters) after, the effective
date of the Registration Statement or the Shelf Registration Statement, as
applicable, filed in connection with such Registration, to the extent timely
notified in writing by the Company or the managing underwriter or underwriters.
2.5. Registration Procedures.
(a) In connection with the Company's Registration obligations under
Sections 2.1, 2.2, and 2.3 hereof, the Company will use its commercially
reasonable efforts to
9
effect such Registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of distribution thereof as
expeditiously as reasonably practicable, and in connection therewith the Company
will:
(i) prepare the required Registration Statement or Shelf
Registration Statement, as applicable, including, without limitation, all
exhibits and financial statements required under the Securities Act to be filed
therewith, and before filing with the SEC the Shelf Registration Statement, any
other Registration Statement or Prospectus, or any amendments or supplements
thereto, (x) furnish to the underwriters, if any, and to the Shareholders,
copies of all documents prepared to be filed, which documents will be subject to
the review of such underwriters and such Shareholders and their respective
counsel, and (y) not file with the SEC any Registration Statement, Shelf
Registration Statement or Prospectus or amendment or supplements thereto to
which any participating Shareholder or underwriters, if any, shall reasonably
object;
(ii) prepare and file with the SEC such amendments and
post-effective amendments to the Shelf Registration Statement or such other
Registration Statement and supplements to the Prospectus as may be (y)
reasonably requested by any participating Shareholder (to the extent such
request relates to information relating to such Shareholder), or (z) necessary
to keep such Registration effective for the period of time required by this
Agreement in case of a Registration under Sections 2.1 or 2.2, as applicable,
and, in case of a Registration under Section 2.3, for the period necessary for
the distribution of securities in accordance with the intended manner of
distribution and in order to comply with all requirements of the Securities Act;
(iii) notify the participating Shareholders and the managing
underwriter or underwriters, if any, and (if requested) confirm such advice in
writing and provide copies of the relevant documents, as soon as reasonably
practicable after notice thereof is received by the Company (A) when the Shelf
Registration Statement or other applicable Registration Statement or any
amendment thereto has been filed or becomes effective, when the applicable
Prospectus or any amendment or supplement to such Prospectus has been filed, (B)
any request by the SEC or any other federal or state governmental authority for
amendments or supplements to the Shelf Registration Statement or such other
Registration Statement or such Prospectus or for additional information, (C) of
the issuance by the SEC of any stop order suspending the effectiveness of the
Shelf Registration Statement, such other Registration Statement or any order
preventing or suspending the use of any preliminary or final Prospectus or the
initiation or threatening of any proceedings for such purposes, and (D) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for offering or sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;
(iv) promptly notify each selling Shareholder and the managing
underwriter or underwriters, if any, when the Company becomes aware of the
happening of any event as a result of which the Shelf Registration Statement,
other applicable Registration Statement or the Prospectus included in the Shelf
Registration Statement or such other Registration Statement (as then in effect)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein (in the case of such Prospectus
and any preliminary Prospectus, in light of the circumstances under which they
were
10
made) not misleading or, if for any other reason it shall be necessary during
such time period to amend or supplement the Shelf Registration Statement, such
other Registration Statement or Prospectus in order to comply with the
Securities Act and, in either case as promptly as reasonably practicable
thereafter, use commercially reasonable efforts to prepare and file with the
SEC, and furnish without charge to the selling Shareholder and the managing
underwriter or underwriters, if any, an amendment or supplement to the Shelf
Registration Statement, such other Registration Statement or Prospectus which
will correct such statement or omission or effect such compliance;
(v) use its commercially reasonable efforts to prevent or obtain
the withdrawal of any stop order or other order suspending the use of any
preliminary or final Prospectus;
(vi) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters and the Shareholders agree should be included therein relating to
the plan of distribution with respect to such Registrable Securities; and use
commercially reasonable efforts to make all required filings of such Prospectus
supplement or post-effective amendment as soon as reasonably practicable after
being notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(vii) furnish to each selling Shareholder and each underwriter,
if any, without charge, at least one conformed copy as such Shareholder or
underwriter may reasonably request of the Shelf Registration Statement, other
applicable Registration Statement and any amendment or post-effective amendment
thereto, including financial statements and schedules;
(viii) deliver to each selling Shareholder and each underwriter,
if any, without charge, as many copies of the applicable Prospectus (including
each preliminary prospectus) and any amendment or supplement thereto as such
Shareholder or underwriter may reasonably request (it being understood that the
Company consents to the use of such Prospectus or any amendment or supplement
thereto by each selling Shareholder and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto) in order to facilitate the
disposition of the Registrable Securities by such Shareholder or underwriter;
(ix) on or prior to the date on which the Shelf Registration
Statement other applicable Registration Statement is declared effective, use its
commercially reasonable efforts to register or qualify, and cooperate with each
selling Shareholder, the managing underwriter or underwriters, if any, and their
respective counsel, in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or "Blue Sky"
laws of each state and other jurisdiction of the United States as any selling
Shareholder or managing underwriter or underwriters, if any, or their respective
counsel reasonably request in writing and do any and all other acts or things
reasonably necessary or advisable to keep such registration or qualification in
effect for so long as the Shelf Registration Statement or such other
Registration Statement is required to be kept effective pursuant to Sections
2.1(a) and 2.2(c), respectively, and so as to permit the continuance of sales
and dealings in such jurisdictions for as long as may be necessary to complete
the distribution of the
11
Registrable Securities covered by the Shelf Registration Statement or other
Registration Statement, as applicable, provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to taxation or
general service of process in any such jurisdiction where it is not then so
subject;
(x) in connection with any sale of Registrable Securities that
will result in such securities no longer being Registrable Securities, cooperate
with each selling Shareholder of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and to register such Registrable Securities in
such denominations and such names as such selling Shareholder or the
underwriter(s), if any, may request at least two business days prior to such
sale of Registrable Securities;
(xi) not later than the effective date of the Shelf Registration
Statement or other applicable Registration Statement, provide a CUSIP number for
all Registrable Securities and, if necessary, provide the applicable transfer
agent with printed certificates for the Registrable Securities which are in a
form eligible for deposit with The Depository Trust Company;
(xii) in the case of an Underwritten Offering or a Qualified
Secondary Underwritten Offering, use commercially reasonable efforts to obtain
for delivery to the underwriter or underwriters, if any, an opinion or opinions
from counsel for the Company dated the date of the closing under the
underwriting agreement, in customary form, scope and substance, which counsel
and opinions shall be reasonably satisfactory to such underwriters, as the case
may be, and their respective counsel;
(xiii) in the case of an Underwritten Offering or a Qualified
Secondary Underwritten Offering, obtain for delivery to the Company and the
managing underwriter or underwriters, with copies to each selling Shareholder, a
cold comfort letter from the Company's independent certified public accountants
in customary form and covering such matters of the type customarily covered by
cold comfort letters as the managing underwriter or underwriters reasonably
request, dated the date of execution of the underwriting agreement and brought
down to the closing under the underwriting agreement;
(xiv) use its commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC and make generally available to its
security holders, as soon as reasonably practicable (but not more than 15
months) after the effective date of the applicable Registration Statement, an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act and the rules and regulations promulgated thereunder;
(xv) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the Shelf Registration
Statement or other applicable Registration Statement from and after a date not
later than the effective date of the Shelf Registration Statement or such other
Registration Statement;
12
(xvi) cause all Registrable Securities covered by the Shelf
Registration Statement or other applicable Registration Statement to be listed
on each securities exchange on which any of the Company's securities are then
listed or quoted and on each inter-dealer quotation system on which any of the
Company's securities are then quoted;
(xvii) provide (A) each Shareholder participating in the
Registration, (B) the underwriters (which term, for purposes of this Agreement,
shall include a Person deemed to be an underwriter within the meaning of Section
2(11) of the Securities Act), if any, of the Registrable Securities to be
registered, (C) the sale or placement agent therefor, if any, (D) counsel for
such underwriters or agent, and (E) any attorney, accountant or other agent or
representative retained by such Shareholder or any such underwriter, as selected
by such Shareholder, the opportunity to participate in the preparation of the
Shelf Registration Statement or such other Registration Statement, each
prospectus included therein or filed with the SEC, and each amendment or
supplement thereto; and for a reasonable period prior to the filing of such
registration statement, and throughout the period specified in Sections 2.1(d)
and 2.2(b), make available upon reasonable notice at reasonable times and for
reasonable periods for inspection by the parties referred to in (A) through (E)
above, all pertinent financial and other records, pertinent corporate documents
and properties of the Company, and cause all of the Company's officers,
directors and employees and the independent public accountants who have
certified its financial statements to make themselves available to discuss the
business of the Company and to supply all information reasonably requested by
any such Person in connection with the Shelf Registration Statement or such
other Registration Statement as shall be necessary to enable them to exercise
their due diligence responsibility; provided, however, that such records,
documents or information that the Company determines, in good faith, to be
confidential and with respect to which the Company notifies the foregoing
parties in advance of such confidential nature, shall not be disclosed by the
foregoing parties unless (i) the disclosure of such records, documents or
information is necessary to avoid or correct a material misstatement or omission
in the Shelf Registration Statement or such other Registration Statement, (ii)
the release of such records, documents or information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, or (iii) such
records, documents or information have been generally made available to the
public; and
(xviii) in the case of an Underwritten Offering or Qualified
Secondary Underwritten Offering, cause the senior executive officers of the
Company to reasonably facilitate, cooperate with and participate in each
proposed offering contemplated herein and in customary and reasonable selling
efforts related thereto.
(b) The Company may require each Shareholder to furnish to the Company
such material information regarding the proposed distribution by such
Shareholder of such Registrable Securities as the Company may from time to time
reasonably request in writing or as shall be required to effect the registration
of the Registrable Securities, and no Shareholder shall be entitled to be named
as a selling shareholder in the Shelf Registration Statement or any other
Registration Statement and no Shareholder shall be entitled to use the
Prospectus forming a part thereof if such Shareholder does not provide such
information to the Company. Each participating Shareholder further agrees to
furnish promptly to the Company in writing all information reasonably required
from time to time to make the information previously furnished by such
Shareholder not inaccurate or misleading.
13
(c) Each Shareholder agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 2.5(a)(iv) hereof, such Shareholder
will forthwith discontinue disposition of Registrable Securities pursuant to the
Shelf Registration Statement or such other Registration Statement until such
Shareholder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 2.5(a)(iv) hereof, or until such Shareholder is advised
in writing by the Company that the use of the Prospectus may be resumed, and if
so directed by the Company, such Shareholder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Shareholder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period during which the Shelf Registration Statement
or other applicable Registration Statement is required to be maintained
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by the Shelf Registration or such
other Registration Statement either receives the copies of the supplemented or
amended Prospectus contemplated by Section 2.5(a)(iv) hereof or is advised in
writing by the Company that the use of the Prospectus may be resumed.
2.6. Underwritten Offerings.
(a) Underwriting Agreements. If requested by the underwriters for any
Underwritten Offering requested by Shareholders pursuant to a Registration under
Section 2.2 or Qualified Secondary Underwritten Offering under Section 2.1, the
Company shall enter into an underwriting agreement with such underwriters for
such offering, such agreement to be reasonably satisfactory in substance and
form to the Company, each Shareholder with Registrable Securities to be included
in such Underwritten Offering or Qualified Secondary Underwritten Offering, and
the underwriters. Such agreement shall contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities no less
favorable to the recipient thereof than those provided in Section 2.9. Each
Shareholder with Registrable Securities to be included in any Underwritten
Offering or Qualified Secondary Underwritten Offering by such underwriters shall
enter into such underwriting agreement at the request of the Company. All of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Shareholders and any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement shall
be conditions precedent to the obligations of such Shareholders. Notwithstanding
the foregoing, (x) no Shareholder shall be required in any such underwriting
agreement to make any representations or warranties to, or agreements with, the
Company or the underwriters other than representations, warranties or agreements
regarding such Shareholder, such Shareholder's Registrable Securities, such
Shareholder's intended method of distribution and any representations required
by law, and (y) the liability of each such Shareholder to any underwriter under
such underwriting agreement will be limited to liability arising from
misstatements or omissions regarding such Shareholder and its intended method of
distribution and any such liability shall not exceed an amount equal to the
amount of net proceeds such Shareholder derives from such registration;
provided, however, that in an offering by the Company in which any Shareholder
requests to be included in a Piggyback Registration,
14
the Company shall use its commercially reasonable efforts to arrange the terms
of the offering such that the provisions set forth in clauses (x) and (y) of
this Section 2.6 are true.
(b) Participation In Underwritten Registrations. No Shareholder may
participate in any Underwritten Offering or Qualified Secondary Underwritten
Offering hereunder unless such Shareholder (i) agrees to sell such Shareholder's
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
2.7. No Inconsistent Agreements; Additional Rights. The Company will not
hereafter, without the written consent of each Shareholder, enter into, and is
not currently a party to, any agreement with respect to its securities which is
inconsistent with the rights granted to the Shareholders by this Agreement.
2.8. Registration Expenses Paid By Company. All expenses incident to the
Company's performance of or compliance with this Agreement will be paid by the
Company, including, without limitation, (a) all registration and filing fees,
and any other fees and expenses associated with filings required to be made with
the SEC, Nasdaq, or AMEX or any other exchange where the securities are listed,
(b) all fees and expenses in connection with compliance with state securities or
"Blue Sky" laws, (c) all printing, duplicating, word processing, messenger,
telephone, facsimile and delivery expenses (including expenses of printing
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company and of printing prospectuses), (d) all fees and
disbursements of counsel for the Company and of all independent certified public
accountants of the Company (including the expenses of any special audit and cold
comfort letters required by or incident to such performance), (e) Securities Act
liability insurance or similar insurance if the Company so desires or the
underwriters so require in accordance with then-customary underwriting practice,
(f) all fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange or quotation of the
Registrable Securities on any inter-dealer quotation system, (g) reasonable fees
and disbursements of one law firm or other counsel selected by the Shareholders
of a majority of the Registrable Securities being Registered, not to exceed, in
any case, $40,000, (h) any reasonable fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, (i) all fees and expenses
of any special experts or other Persons retained by the Company in connection
with any Registration, and (j) all of the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties); provided, however, that the
Company shall not be required to pay for any expenses of any Registration begun
pursuant to Section 2.1 or Section 2.2, as applicable, if such request is
subsequently withdrawn by the participating Shareholders (in which case all
participating Shareholders shall bear such expenses), unless the Shareholder
making such demand agrees to forfeit their right to one (1) demand registration
to which they are entitled pursuant to Section 2.2. All expenses described in
clause (a) through (j) of this Section 2.7 are referred to herein as
"Registration Expenses." The Company shall not be required to pay any fees and
disbursements of underwriters not customarily paid by the issuers of securities,
including underwriting discounts and commissions and transfer taxes, if any,
attributable to the sale of Registrable Securities.
15
2.9. Indemnification.
(a) Indemnification by Company. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, each Shareholder, his
Affiliates and their respective officers, directors, shareholders, employees,
advisors, and agents and each Person who controls (within the meaning of the
Securities Act or the Exchange Act) such Persons from and against any and all
losses, claims, damages, liabilities (or actions or proceedings in respect
thereof, whether or not such indemnified party is a party thereto) and expenses,
joint or several (including reasonable costs of investigation and legal
expenses) (each, a "Loss" and collectively "Losses") arising out of or based
upon (i) any untrue or alleged untrue statement of a material fact contained in
the Shelf Registration Statement or any other Registration Statement under which
such Registrable Securities were Registered under the Securities Act (including
any final, preliminary or summary Prospectus contained therein or any amendment
thereof or supplement thereto or any documents incorporated by reference
therein), or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a Prospectus or preliminary Prospectus, in light of the
circumstances under which they were made) not misleading; provided, however,
that the Company shall not be liable to any particular indemnified party in any
such case (A) to the extent that any such Loss arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Shelf Registration Statement or any other such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by a Shareholder expressly for use in the preparation thereof,
(B) for any amounts paid in settlement of any such Loss if such settlement is
effected without the consent of the Company, or (C) if and to the extent that,
in the case of a sale directly by a Shareholder (including a sale of such
Registrable Securities through any underwriter retained by such Shareholder to
engage in a distribution solely on behalf of such Shareholder) such untrue
statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary Prospectus and corrected in a final or amended
Prospectus, and such Shareholder failed to deliver a copy of the final or
amended Prospectus at or prior to the confirmation of the sale of Registrable
Securities to the Person asserting any such Loss in any case where such delivery
is required by the Securities Act or any state securities laws. This indemnity
shall be in addition to any liability the Company may otherwise have. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Shareholder or any indemnified party and shall
survive the transfer of such securities by such Shareholder.
(b) Indemnification by the Selling Shareholder. Each selling
Shareholder agrees (severally and not jointly) to indemnify and hold harmless,
to the full extent permitted by law, the Company, its Affiliates, and their
respective directors, officers, shareholders, employees, advisors, agents, each
Person who controls the Company (within the meaning of the Securities Act and
the Exchange Act) and each other Shareholder from and against any Losses
resulting from (i) any untrue or alleged untrue statement of a material fact
contained in the Shelf Registration Statement or any other Registration
Statement under which such Registrable Securities were Registered under the
Securities Act (including any final, preliminary or summary Prospectus contained
therein or any amendment thereof or supplement thereto or any documents
incorporated by reference therein), or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or preliminary Prospectus,
in light of the circumstances under which they were
16
made) not misleading; provided, however, that the selling Shareholders shall not
be liable to any particular indemnified party in any such case (A) to the extent
that any such Loss arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Shelf Registration
Statement or any other such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by a party other
than the Shareholders expressly for use in the preparation thereof, (B) for any
amounts paid in settlement of any such Loss if such settlement is effected
without the consent of the Shareholders, or (C) if and to the extent that, in
the case of a sale directly by a Shareholder (including a sale of such
Registrable Securities through any underwriter retained by such Shareholder to
engage in a distribution solely on behalf of such Shareholder) such untrue
statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary Prospectus and corrected in a final or amended
Prospectus, and the Company failed to deliver to such Shareholder a copy of the
final or amended Prospectus at or prior to the confirmation of the sale of
Registrable Securities to the Person asserting any such Loss in any case where
such delivery is required by the Securities Act or any state securities laws. In
no event shall the liability of any selling Shareholder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Shareholder
under the sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above (with appropriate modification) with respect to information so furnished
in writing by such Persons specifically for inclusion in any Prospectus, the
Shelf Registration Statement or other Registration Statement. Each Shareholder
also shall indemnify any underwriters of the Registrable Securities, their
officers and directors and each person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Company.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
(provided, that any delay or failure to so notify the indemnifying party shall
relieve the indemnifying party of its obligations hereunder only to the extent,
if at all, that it is actually and materially prejudiced by reason of such delay
or failure) and (ii) permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any Person entitled to indemnification hereunder shall
have the right to select and employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such Person unless (A) the indemnifying party has agreed in writing
to pay such fees or expenses, (B) the indemnifying party shall have failed to
assume the defense of such claim within a reasonable time after receipt of
notice of such claim from the Person entitled to indemnification hereunder and
employ counsel reasonably satisfactory to such Person, (C) the indemnified party
has reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, or (D) in the
reasonable judgment of any such Person, based upon advice of its counsel, a
conflict of interest may exist between such Person and the indemnifying party
with respect to such claims (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense
17
of such claim on behalf of such Person). If such defense is not assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent, but such consent may not be
unreasonably withheld; provided, that an indemnifying party shall not be
required to consent to any settlement involving the imposition of equitable
remedies or involving the imposition of any material obligations on such
indemnifying party other than financial obligations for which such indemnified
party will be indemnified hereunder. If the indemnifying party assumes the
defense, the indemnifying party shall not have the right to settle such action
without the consent of the indemnified party, such consent not to be
unreasonably withheld. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of an unconditional release from all liability in respect to such claim or
litigation. It is understood that the indemnifying party or parties shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm admitted to practice in such jurisdiction at any
one time from all such indemnified party or parties unless (x) the employment of
more than one counsel has been authorized in writing by the indemnified party or
parties, (y) an indemnified party has reasonably concluded (based on advice of
counsel) that there may be legal defenses available to it that are different
from or in addition to those available to the other indemnified parties or (z) a
conflict or potential conflict exists or may exist (based on advice of counsel
to an indemnified party) between such indemnified party and the other
indemnified parties, in each of which cases the indemnifying party shall be
obligated to pay the reasonable fees and expenses of such additional counsel or
counsels.
(d) Contribution. If for any reason the indemnification provided for
in paragraphs (a) and (b) of this Section 2.9 is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by paragraphs (a) and
(b) of this Section 2.9, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such Loss in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other hand. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. Notwithstanding anything in this Section 2.9(d) to
the contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 2.9(d) to contribute any amount in excess of the amount
by which the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the Losses of the indemnified
parties relate exceeds the amount of any damages which such indemnifying party
has otherwise been required to pay by reason of such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.9(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. If indemnification is
available under this Section 2.9, the indemnifying parties shall indemnify each
indemnified party to the full
18
extent provided in Sections 2.9(a) and 2.9(b) hereof without regard to the
relative fault of said indemnifying parties or indemnified party.
2.10. Reporting Requirements; Rules 144 and 144A. From and after the date
hereof, the Company shall use its best efforts to be and remain in compliance
with the periodic filing requirements imposed under the SEC's rules and
regulations, including the Exchange Act, and any other applicable laws or rules,
and thereafter shall timely file such information, documents and reports as the
SEC may require or prescribe under Section 13 or 15(d) (whichever is applicable)
of the Exchange Act. If the Company is not required to file such reports, it
will, upon the request of any Shareholder, make publicly available such
necessary information for so long as necessary to permit sales pursuant to Rules
144, 144A or Regulation S under the Securities Act, and it will take such
further action as any Shareholder may reasonably request, all to the extent
required from time to time to enable such Shareholder to sell Registrable
Securities without Registration under the Securities Act within the limitation
of the exemptions provided by (i) Rules 144, 144A or Regulation S under the
Securities Act, as such Rules may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC. From and after the date
hereof, the Company shall forthwith upon request furnish any Shareholder (a) a
written statement by the Company as to whether it has complied with such
requirements and, if not, the specifics thereof, (b) a copy of the most recent
annual or quarterly report of the Company, and (c) such other reports and
documents filed by the Company with the SEC as such Shareholder may reasonably
request in availing itself of an exemption for the sale of Registrable
Securities without registration under the Securities Act.
SECTION 3
MISCELLANEOUS
3.1. Term. This Agreement shall terminate upon the Registration of all the
Registrable Securities, except for the provisions of Sections 2.9 and 2.10 and
all of this Section 3, which shall survive any such termination.
3.2. Injunctive Relief. It is hereby agreed and acknowledged that it will
be impossible to measure in money the damage that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that in the event of any such failure, an aggrieved Person will be irreparably
damaged and will not have an adequate remedy at law. Any such Person shall,
therefore, be entitled (in addition to any other remedy to which it may be
entitled in law or in equity) to injunctive relief, including, without
limitation, specific performance, to enforce such obligations, and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.
3.3. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement or where any provision hereof is validly asserted as
a defense, the successful party shall, to the extent permitted by applicable
law, be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
19
3.4. Notices. All notices, other communications or documents provided for
or permitted to be given hereunder, shall be made in writing and shall be given
either personally by hand-delivery, by facsimile transmission, by mailing the
same in a sealed envelope, registered first-class mail, postage prepaid, return
receipt requested, or by air courier guaranteeing overnight delivery:
(a) if to the Company:
Wellsford Real Properties, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with copies to:
King & Spalding LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. X'Xxxxx
Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(b) if to the Shareholders:
Xx. Xxxxx Xxxxxxx
0 Xxxxxx Xxxx Xxxxx Xxxx
Xxxxxx-Xx-Xxxxxx, XX 00000
Facsimile: ___________________
Telephone: ___________________
Xx. Xxxxxxxx Xxxxxxxx
0 Xxxxxx Xxxxxx, Xxx. 0
XX, XX 00000
Facsimile: ___________________
Telephone: ___________________
20
with copies to:
Xxxxx Xxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Each Shareholder, by written notice given to the Company in accordance with
this Section 3.4 may change the address to which notices, other communications
or documents are to be sent to such Shareholder. All notices, other
communications or documents shall be deemed to have been duly given: (i) at the
time delivered by hand, if personally delivered; (ii) when receipt is
acknowledged in writing by addressee, if by facsimile transmission; (iii) five
business days after being deposited in the mail, postage prepaid, if mailed by
first class mail; and (iv) on the first business day with respect to which a
reputable air courier guarantees delivery; provided, however, that notices of a
change of address shall be effective only upon receipt.
3.5. Successors, Assigns and Transferees. This Agreement may not be
assigned by the Shareholders without the prior written consent of the Company,
except that Shareholders may assign this Agreement solely for estate and tax
planning purposes to the extent that such Shareholder is assigning Registrable
Shares; provided, however, that any assignee agree in writing to expressly
assume all obligations of Shareholders under this Agreement. Subject to the
foregoing, all of the terms and provisions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
3.6. GOVERNING LAW; SERVICE OF PROCESS; CONSENT TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
(a) To the fullest extent permitted by applicable law, each party hereto
(i) agrees that any claim, action or proceeding by such party seeking any relief
whatsoever arising out of, or in connection with, this Agreement or the
transactions contemplated hereby shall be brought only in the United States
District Court for the Southern District of New York and in any New York State
court located in the Borough of Manhattan and not in any other State or Federal
court in the United States of America or any court in any other country, (ii)
agrees to submit to the exclusive jurisdiction of such courts located in the
State of New York for purposes of all legal proceedings arising out of, or in
connection with, this Agreement or the transactions contemplated hereby, and
(iii) irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.
3.7. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
21
3.8. Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
therein.
3.9. Amendment; Waiver.
(a) This Agreement may not be amended or modified and waivers and
consents to departures from the provisions hereof may not be given, except by an
instrument or instruments in writing making specific reference to this Agreement
and signed by the Company, and the Shareholders.
(b) The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. Except
as otherwise expressly provided herein, no failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder, or
otherwise available in respect hereof at law or in equity, shall operate as a
waiver thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
3.10. Counterparts. This Agreement may be executed in any number of
separate counterparts and by the parties hereto in separate counterparts each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
3.11. Availability of Agreement. For so long as this Agreement shall be in
effect, this Agreement shall be made available for inspection by each
Shareholder upon request at the principal executive offices of the Company.
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
----------------------------------------
Xxxxx Xxxxxxx
----------------------------------------
Xxxxxxxx Xxxxxxxx
WELLSFORD REAL PROPERTIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[Signature Page to Registration Rights Agreement]
EXHIBIT 7.3(H)
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this "Agreement"), is made as of [_____], 200__, by
and among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Parent"),
and the stockholders of XXXX, INC., a Delaware corporation (the "Company"),
whose names appear on Schedule A hereto (each, a "Stockholder" and collectively,
the "Stockholders").
WITNESSETH:
WHEREAS, Parent, the Company, and Xxxx Services, LLC, a Maryland limited
liability company ("Merger Sub"), are parties to an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), whereby the
Company will merge with and into Merger Sub (the "Merger") and pursuant to
which, among other things, the Stockholders are to receive shares of common
stock, par value $0.02 per share, of Parent ("Parent Common Stock");
WHEREAS, as a condition and inducement to Parent's willingness to enter
into the Merger Agreement, each Stockholder has agreed not to sell the shares of
Parent Common Stock he receives in the Merger pursuant to the terms and
conditions of this Agreement; and
WHEREAS, all other capitalized terms not otherwise defined herein shall
have the meanings ascribed thereto in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual covenants and agreements contained herein and intending to be legally
bound, the parties agree as follows:
1 Representations and Warranties of Each Stockholder. Each Stockholder hereby
severally and not jointly represents and warrants to Parent as follows:
1.1 Authority Relative to this Agreement. Such Stockholder has all necessary
power and authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement has been duly and validly
executed and delivered by such Stockholder and, assuming the due
authorization, execution and delivery by Parent, constitutes a legal, valid
and binding obligation of such Stockholder, enforceable against him in
accordance with its terms, (a) except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally, and (b) subject to general
principles of equity. If such Stockholder is married, or marries during the
term of this Agreement, and such Stockholder's Shares constitute community
property or otherwise require spousal or other approval in order for this
Agreement to be legal, valid and binding, this Agreement has been (or,
prior to the marriage, will be) approved executed and delivered by, and
constitutes (or, prior to the marriage, will constitute) a legal, valid and
binding obligation of, such Stockholder's spouse, enforceable against such
spouse in accordance with its terms.
1.2 No Conflict. The execution and delivery of this Agreement by such
Stockholder does not, and the performance of this Agreement by such
Stockholder will not, (a) require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority by such Stockholder or (b)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to such Stockholder.
2 Lock-up Agreement.
2.1 Lock-up Agreement. Each Stockholder hereby agrees that during the period
specified in the following paragraph (the "Lock-Up Period"), he will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of Parent Common Stock or securities convertible
into or exchangeable or exercisable for any shares of Parent Common Stock,
enter into a transaction that would have the same effect, or enter into any
swap, hedge or other arrangement that transfers, in whole or in part, any
of the economic consequences of ownership of the Parent Common Stock,
whether any such aforementioned transaction is to be settled by delivery of
the Parent Common Stock or such other securities, in cash or otherwise, or
publicly disclose the intention to make any such offer, sale, pledge or
disposition, or to enter into any such transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of Parent.
Notwithstanding the foregoing, each Stockholder may pledge his shares of
Parent Common Stock as security during the Lock-Up Period; provided,
however, that any pledgee must agree in writing to be bound by all terms
and conditions of this Agreement as if such pledgee was a party hereto. In
addition, each Stockholder agrees that, without the prior written consent
of Parent, he will not, during the Lock-Up Period, make any demand for or
exercise any right with respect to, the registration of any Parent Common
Stock or any security convertible into or exercisable or exchangeable for
Parent Common Stock.
2.2 Lock-up Period. The initial Lock-Up Period will commence on the Effective
Date of the Merger and continue to and include the date that is nine (9)
months after the Effective Date of the Merger.
2.3 Transfers. A transfer of Parent Common Stock by gift, will or intestacy to
a family member, affiliate or trust may be made, but only to the extent the
transferee agrees to be bound in writing by the terms of this Agreement
prior to such transfer and no filing by any party (donor, donee, transferor
or transferee) under the Securities Exchange Act of 1934, as amended, shall
be required or shall be voluntarily made in connection with such transfer
(other than a filing on a Form 5 made after the expiration of the Lock-Up
Period). In furtherance of the foregoing, Parent and its transfer agent and
registrar are hereby authorized to decline to make any transfer of shares
of Parent Common Stock if such transfer would constitute a violation or
breach of this Agreement.
3 Miscellaneous.
3.1 Entire Agreement. This Agreement constitutes the entire agreement among the
parties to it with respect to the subject matter hereof and supersedes all
prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof.
3.2 Parties in Interest. This Agreement shall be binding on the undersigned and
the successors, heirs, personal representatives and assigns of the
undersigned.
3.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
3.4 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated to the fullest extent possible.
3.5 Termination. This Agreement shall lapse and become null and void if the
Merger Agreement is terminated in accordance with its terms.
3.6 Headings. The descriptive headings contained in this Agreement are included
for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
3.7 Counterparts. This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
3.8 Governing Law. This agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to it
conflicts of law principles that would require application of another law.
IN WITNESS WHEREOF, the parties have executed or have caused this Agreement
to be executed by their respective officers or other authorized persons
thereunto duly authorized as of the date first above written.
PARENT:
WELLSFORD REAL PROPERTIES, INC.
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
STOCKHOLDERS:
---------------------------------------
Xxxxx Xxxxxxx
Address:
c/x Xxxx, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
----------------------------------------
Xxxxxxxx Xxxxxxxx
Address:
c/x Xxxx, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Exhibit 9.1
(THE BANK OF NEW YORK LOGO)
FORM OF
ESCROW AGREEMENT
among
WELLSFORD REAL PROPERTIES, INC.
XXXXX XXXXXXX
XXXXXXXX XXXXXXXX
and
THE BANK OF NEW YORK
Dated as of _________, 2007
ACCOUNT NUMBER(S)____________________________
SHORT TITLE OF ACCOUNT_______________________________
ESCROW AGREEMENT made this _______ day of ________ 2007 by and among The
Bank of New York, a New York corporation (the "Escrow Agent"), Wellsford Real
Properties, Inc., a Maryland corporation ("Parent"), and Xxxxx Xxxxxxx and
Xxxxxxxx Xxxxxxxx (together, the "Stockholder Representatives," and each, a
"Stockholder Representative"). Parent, together with the Stockholder
Representatives, may hereafter be referred to as the "Parties," and each of
Parent and the Stockholder Representatives as a "Party."
WHEREAS:
A. Pursuant to the Agreement and Plan of Merger, dated as of __________,
2006 (the "Merger Agreement"), among Parent, Xxxx Services LLC, a Maryland
limited liability company ("Merger Subsidiary"), and Xxxx, Inc., a Delaware
corporation (the "Company"), Parent, Merger Subsidiary and the Company intend to
effect a merger of the Company with and into Merger Subsidiary (the "Merger"),
and upon consummation of the Merger, the Company will cease to exist and Merger
Subsidiary shall continue as the surviving company and a wholly-owned subsidiary
of Parent (the "Surviving Company"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Merger Agreement.
B. Pursuant to Section 9.1 of the Merger Agreement, Parent, Merger
Subsidiary and the Company have agreed to deposit with the Escrow Agent (a) (i)
$________ of the Cash Consideration (the "Cash Holdback") and (ii) [_____]
shares of the Share Consideration (the "Share Holdback" and together with the
Cash Holdback, the "Escrow Fund"), and (b) (i) $______ of the Cash Consideration
(the "FR Cash Holdback"), and (ii) [_______] shares of the Share Consideration
(the "FR Share Holdback" and, together with the FR Cash Holdback, the "FR Escrow
Fund").
C. Pursuant to Section 9.2(f) of the Merger Agreement, Parent or the
Surviving Company may deposit additional cash and shares of Parent Common Stock,
consisting of Claims Recoveries, to the Escrow Agent, which shall become part of
the Escrow Fund or the FR Escrow Fund, as applicable.
D. Pursuant to Section 9.4 of the Merger Agreement, the Stockholder
Representatives have been appointed to act on behalf of the Holders as their
representatives with respect to, among other matters, this Agreement.
E. The Escrow Agent is willing to act as escrow agent pursuant to the terms
of this Escrow Agreement with respect to the Escrow Fund.
NOW, THEREFORE, IT IS AGREED:
I. INSTRUCTIONS:
1. Escrow Property. On the date hereof, Parent shall deliver to the Escrow
Agent (i) the Cash Holdback, payable by wire transfer of immediately available
funds for deposit into an escrow account, (ii) the FR Cash Holdback, payable by
wire transfer of immediately available funds into an escrow account, (iii) the
Share Holdback, and (iv) the FR Share Holdback.
The foregoing property and/or funds, plus all interest, dividends and other
distributions and payments thereon (collectively the "Distributions") received
by the Escrow Agent, less any property and/or funds distributed or paid in
accordance with this Escrow Agreement, are collectively referred to herein as
"Escrow Property."
2. Investment of Cash Holdback and FR Cash Holdback; Holding of Share
Holdback and FR Share Holdback. (a) Within two business days after the date
hereof, the Escrow Agent shall cause the Cash Holdback and the FR Cash Holdback
deposited with it pursuant to this Agreement to be maintained and invested in
one or more of the investment classes listed on Schedule A hereto. Any interest
earned on or from the Cash Holdback shall become part of the Escrow Fund and any
interest earned on or from the FR Cash Holdback shall become part of the FR
Escrow Fund.
(b) The Escrow Agent shall not be responsible for any interest earned
on or from the Cash Holdback or the FR Cash Holdback except for such as is
actually received, nor shall the Escrow Agent be responsible for any loss
resulting from the investment of the Escrow Fund or the FR Escrow Fund
(including, but not limited to, the loss of any interest arising from the sale
of any investment prior to maturity) provided such investment is in accordance
with the terms of this Agreement.
(c) The Escrow Agent shall exercise reasonable care in holding the
Share Holdback and the FR Share Holdback. The Escrow Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Share
Holdback and the FR Share Holdback if the Share Holdback or the FR Share
Holdback, as applicable, is accorded treatment substantially equal to that which
the Escrow Agent accords its own property, it being understood that the Escrow
Agent shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to the Share Holdback or the FR Share Holdback, whether or not
the Escrow Agent has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to the Share Holdback or the FR Share Holdback.
3. Certain Matters Relating to the Share Holdback and the FR Share
Holdback.
(a) Voting Rights. The Holders entitled to receive shares of Parent
Common Stock in the Merger shall have the right to vote the Share Holdback and
FR Share Holdback with respect to any matter submitted to a vote of the holders
of Parent common stock, pro rata in accordance with the percentage of Parent
Common Stock which each such Holder is entitled to receive pursuant to the terms
of the Merger Agreement. The Escrow Agent shall not vote the Share Holdback or
FR Share Holdback or take any other action with respect thereto unless the
Stockholder Representatives have given the Escrow Agent written instructions in
that regard.
(b) Dividends and Distributions. In the case that during the term of
this Agreement the Escrow Agent or the Stockholder Representatives, on behalf of
any Holder entitled to receive Share Consideration in the Merger, shall receive
or shall have credited to it or them, as the case may be, as a dividend or other
distribution upon or on account of any of the Share Holdback or FR Share
Holdback any (i) cash dividends paid by Parent; (ii) stock dividends in the form
of additional shares of Parent Common Stock or other securities of Parent; or
(iii)
2
any other funds or any property through a distribution by Parent to its
stockholders or a capital transaction affecting the Parent Common Stock, the
Escrow Agent shall hold, or in the event any of such funds or property are
received by the Stockholder Representatives, the Stockholder Representatives
shall promptly deposit with the Escrow Agent for the Escrow Agent to hold, such
cash or other securities or property, in escrow as part of the Escrow Property
in accordance with this Agreement. If, at any time during the term of this
Agreement, Parent shall offer to its stockholders a choice between receiving a
stock dividend or a cash dividend, the Holders entitled to receive shares of
Parent Common Stock in the Merger shall make the determination as to which type
of dividend shall be received on the Share Holdback or FR Share Holdback with
respect thereto, pro rata in accordance with the percentage of the Share
Consideration which each such Holder is entitled to receive pursuant to the
terms of the Merger Agreement and shall notify the Stockholder Representatives,
who in turn shall notify Parent, which in turn shall notify the Escrow Agent
accordingly. Parent shall deliver to the Escrow Agent prior written notice of
any dividends or distributions payable to the Share Holdback or the FR Share
Holdback upon or on account of any of the Escrow Shares.
(c) Tax Treatment and Tax Distributions. Parent and the Stockholder
Representatives agree that, for U.S. federal and any applicable state and local
income tax purposes, Parent shall include the income (if any) on the Escrow Fund
and the FR Escrow Fund in its gross income for the taxable year of Parent in
which such income is accrued. No later than 30 days following the receipt of
cash corresponding to any item of income required to be included by Parent under
the previous sentence, the Escrow Agent shall distribute cash to Parent out of
the Escrow Fund or the FR Escrow Fund, as applicable, in an amount equal to the
product of (i) the amount of income required to be included by Parent and (ii)
the highest combined marginal federal, state and local income tax rates imposed
on a corporation resident in New York in effect during such taxable year (which
information shall be provided in writing to the Escrow Agent pursuant to written
instructions from Parent).
4. Distributions of the Escrow Fund.
(a) Generally. The Escrow Agent shall hold the Escrow Fund (including
all distributions with respect thereto) and shall not deliver any amounts
thereof to any party other than (i) pursuant to clauses (b), (c) and (d) below,
(ii) pursuant to written instructions executed and delivered to the Escrow Agent
by Parent and a Stockholder Representative, which instructions shall set forth
the amount of cash and the amount of shares to be delivered to each party or its
designee ("Joint Written Instruction"), (iii) by depositing the Escrow Fund with
a court of competent jurisdiction in accordance with the provisions of Article
II, Section 9 hereof or with a successor escrow agent in accordance with the
provisions of Article II, Section 8(b) hereof or (iv) pursuant to Section 3(c).
(b) Distribution During Holdback Period. If on or prior to __________,
2008,(1) the Escrow Agent receives from Parent a copy of a notice sent by Parent
to the Stockholder Representatives pursuant to Section 9.2(c) of the Merger
Agreement requesting a disbursement from the Escrow Fund (a "Claim Notice")
together with a certification from Parent certifying that such Claim Notice has
been delivered to the Stockholder Representatives
----------
(1) A date that is 18 months from the date hereof.
3
concurrently with the delivery of the copy of such Claim Notice to the Escrow
Agent pursuant to the terms of the Merger Agreement (a "Certification"), and if:
(i) the Escrow Agent does not receive written notice objecting to
the disbursement from the Escrow Fund (an "Objection Notice") from a Stockholder
Representative on or before the twentieth Business Day (as defined below)
following delivery of a Claim Notice to the Escrow Agent and the Stockholders
Representatives, then the Escrow Agent shall deliver to Parent from the Escrow
Fund the amount of funds requested in the Claim Notice (which amount shall be
delivered 50% in cash and 50% in shares included in the Share Holdback (which
shares shall be valued at a price per share equal to $_______)) within three
Business Days after the expiration of such 20 Business Day period; or
(ii) the Escrow Agent receives an Objection Notice from a
Stockholder Representative within such 20 Business Day period, then the Escrow
Agent shall not distribute such funds requested in the Claim Notice from the
Escrow Fund except (A) pursuant to Joint Written Instructions, or (B) by
depositing the amount of Escrow Funds requested in the Claim Notice with a court
of competent jurisdiction (which amount shall be delivered 50% in cash and 50%
in shares included in the Share Holdback (which shares shall be valued at a
price per share equal to $_______)).
(c) Distribution Following Holdback Period. (i) If on or prior to
________, 2008,(2) the Escrow Agent has not received copies of any Claim Notices
(together with Certifications) pursuant hereto, then the entire Escrow Fund
shall be delivered to the Surviving Company for distribution to the Holders in
the same proportion and manner as the Common Stock Merger Consideration and the
Preferred Stock Merger Consideration.
(ii) If, on or prior to ________, 2008,(3) the Escrow Agent has
received copies of one or more Claim Notices (together with Certifications), and
no Objection Notices have been delivered within the 20 Business Day period
pursuant hereto, then (1) a portion of the Escrow Fund shall be delivered to
Parent in an aggregate amount equal to that demanded in such Claim Notices
(which amount shall be delivered 50% in cash and 50% in shares included in the
Share Holdback (which shares shall be valued at a price per share equal to
$_______)), and (2) the balance of the Escrow Fund, if any, shall be delivered
to the Surviving Company for distribution to the Holders in the same proportion
and manner as the Common Stock Merger Consideration and the Preferred Stock
Merger Consideration.
(iii) If, on or prior to ________, 2008,(4) the Escrow Agent has
received copies of one or more Claim Notices (together with Certifications), an
Objection Notice has been delivered within the 20 Business Day period pursuant
hereto with respect to any such Claim Notice and no Joint Written Instruction
has been delivered with respect thereto (each such Claim Notice for which no
Joint Written Instruction has been delivered, an "Unresolved Claim Notice"),
then (1) the entire Escrow Fund less an amount equal to the aggregate amount
----------
(2) A date that is 18 months from the date hereof.
(3) A date that is 18 months from the date hereof.
(4) A date that is 18 months from the date hereof.
4
demanded in all Unresolved Claim Notices shall be delivered to the Surviving
Company for distribution to the Holders in the same proportion and manner as the
Common Stock Merger Consideration and the Preferred Stock Merger Consideration
(which amount shall be delivered 50% in cash and 50% in shares included in the
Share Holdback (which shares shall be valued at a price per share equal to
$________)), and (2) the balance, if any, shall continue to be held by the
Escrow Agent pursuant to this Agreement.
(d) Any distributions to the Surviving Company or to Parent of all or
a portion of (1) the Cash Holdback pursuant hereto shall be made by wire
transfer to an account or accounts designated by the Surviving Company or
Parent, as the case may be, and (2) the Share Holdback pursuant hereto shall be
made by Federal Express or other reputable overnight courier or by hand to such
address designated by the Surviving Company or Parent, as the case may be.
(e) For purposes of this Agreement, "Business Day" means a day other
than a Saturday, Sunday or other day on which banks located on New York City are
authorized or required by law to close.
5. Distributions of the FR Escrow Fund.
(a) Generally. The Escrow Agent shall hold the FR Escrow Fund and
shall not deliver any amounts thereof to any party other than (i) pursuant to
clauses (b), (c) and (d) below, (ii) pursuant to Joint Written Instructions,
(iii) by depositing the FR Escrow Fund with a court of competent jurisdiction in
accordance with the provisions of Article II, Section 9 hereof or with a
successor escrow agent in accordance with the provisions of Article II, Section
8(b) hereof, or (iv) pursuant to Section 3(c).
(b) Distributions During the FR Holdback Period. If on or prior to
__________, 2009,(5) the Escrow Agent receives from Parent a copy of a notice
sent by Parent to the Stockholder Representatives pursuant to Section 9.2(c) of
the Merger Agreement (and subject to the proviso set forth in Section 9.2(b) of
the Merger Agreement) requesting a disbursement from the FR Escrow Fund (a "FR
Claim Notice"), together with a certification from Parent certifying that such
FR Claim Notice has been delivered to the Stockholder Representatives
concurrently with the delivery of the copy of such FR Claim Notice to the Escrow
Agent pursuant to the terms of the Merger Agreement (a "FR Certification"), and
if:
(i) the Escrow Agent does not receive written notice objecting to
the disbursement from the FR Escrow Fund (a "FR Objection Notice") from a
Stockholder Representative on or before the twentieth Business Day following
delivery of a FR Claim Notice to the Escrow Agent and the Stockholders
Representatives, then the Escrow Agent shall deliver to Parent from the FR
Escrow Fund the amount of funds requested in the FR Claim Notice (which amount
shall be delivered 50% in cash and 50% in shares included in the FR Share
Holdback (which shares shall be valued at a price per share equal to $________))
within three Business Days after the expiration of such 20 Business Day period;
or
----------
(5) A date that is 24 months from the date hereof.
5
(ii) the Escrow Agent receives a FR Objection Notice from a
Stockholder Representative within such 20 Business Day period, then the Escrow
Agent shall not distribute such funds requested in the FR Claim Notice from the
FR Escrow Fund except (A) pursuant to Joint Written Instructions, or (B) by
depositing the amount of FR Escrow Funds requested in the FR Claim Notice with a
court of competent jurisdiction (which amount shall be delivered 50% in cash and
50% in shares included in the FR Share Holdback (which shares shall be valued at
a price per share equal to $________)).
(c) Distribution Following FR Holdback Period. (i) If on or prior to
__________, 2009,(6) the Escrow Agent has not received copies of any FR Claim
Notices (together with FR Certifications) pursuant hereto, then the entire FR
Escrow Fund shall be delivered to the Surviving Company for distribution to the
Holders in the same proportion and manner as the Common Stock Merger
Consideration and the Preferred Stock Merger Consideration.
(ii) If on or prior to __________, 2009,(7) the Escrow Agent has
received copies of one or more FR Claim Notices (together with FR
Certifications), and no FR Objection Notices have been delivered within the 20
Business Day period pursuant hereto, then (1) a portion of the FR Escrow Fund
shall be delivered to Parent in an aggregate amount equal to that demanded in
such FR Claim Notices (which amount shall be delivered 50% in cash and 50% in
shares included in the FR Share Holdback (which shares shall be valued at a
price per share equal to $_______)), and (2) the balance of the FR Escrow Fund,
if any, shall be delivered to the Surviving Company for distribution to the
Holders in the same proportion and manner as the Common Stock Merger
Consideration and the Preferred Stock Merger Consideration.
(iii) If on or prior to __________, 2009,(8) the Escrow Agent has
received copies of one or more FR Claim Notices (together with FR
Certifications), a FR Objection Notice has been delivered within the 20 Business
Day period pursuant hereto with respect to any such FR Claim Notice and no Joint
Written Instruction has been delivered with respect thereto (each such FR Claim
Notice for which no Joint Written Instruction has been delivered, a "FR
Unresolved Claim Notice"), then (1) the entire FR Escrow Fund less an amount
equal to the aggregate amount demanded in all FR Unresolved Claim Notices shall
be delivered to the Surviving Company for distribution to the Holders in the
same proportion and manner as the Common Stock Merger Consideration and the
Preferred Stock Merger Consideration (which amount shall be delivered 50% in
cash and 50% in shares included in the FR Share Holdback (which shares shall be
valued at a price per share equal to $________)), and (2) the balance, if any,
shall continue to be held by the Escrow Agent pursuant to this Agreement.
(d) FR Fund Payments. Any distributions to the Surviving Company or to
Parent of all or a portion of (1) the FR Cash Holdback pursuant hereto shall be
made by wire transfer to an account or accounts designated by the Surviving
Company or Parent, as the case may be, and (2) the FR Share Holdback pursuant
hereto shall be made by Federal Express or
----------
(6) A date that is 24 months from the date hereof.
(7) A date that is 24 months from the date hereof.
(8) A date that is 24 months from the date hereof.
6
other reputable overnight courier or by hand to such address designated by the
Surviving Company or Parent, as the case may be.
6. Notices and Addresses. All notices, instructions, requests, demands and
other communications hereunder shall be in writing, with copies to all of the
other parties hereto, and shall be deemed to have been duly given (i) when
delivered, if by hand, (ii) when delivered, if sent by Federal Express or other
overnight courier service or (iii) five days after the mailing thereof by first
class registered or certified mail, return receipt requested, postage prepaid,
as follows: (a) if to Parent, to 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000, Attention: Xxxx Xxxxxxxxxx, with a copy to King & Spalding LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxxx X. X'Xxxxx and Xxxxxxx
X. Xxxxxxx; (b) if to the Stockholder Representatives, to Xxxxx Xxxxxxx, 0
Xxxxxx Xxxx Xxxxx Xxxx, Xxxxxx-Xx-Xxxxxx, XX 00000 and Xxxxxxxx Xxxxxxxx, 0
Xxxxxx Xxxxxx, Xxx. 0, Xxx Xxxx, XX 00000 with a copy to Xxxxx Xxxx LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxx X. Xxxxx, Esq., and (c)
if to Escrow Agent, to The Bank of New York, 101 Xxxxxxx Street, 0xx Xxxxx Xxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxx Xxxxx or in any case to such other address
as a party may determine by delivery of notice pursuant to this paragraph.
7. Compensation. The Parties shall pay all fees, expenses and charges as
per Escrow Agent's fee schedule, which is set forth on Schedule B hereto.
II. TERMS AND CONDITIONS:
1. The duties, responsibilities and obligations of Escrow Agent shall be
limited to those expressly set forth herein and no duties, responsibilities or
obligations shall be inferred or implied. Escrow Agent shall not be subject to,
nor required to comply with, any other agreement between or among any or all of
the Parties or to which any of the Parties is a party, even though reference
thereto may be made herein, or to comply with any direction or instruction
(other than those contained herein or delivered in accordance with this Escrow
Agreement) from any Party or any entity acting on its behalf. Escrow Agent shall
not be required to, and shall not, expend or risk any of its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder.
2. This Agreement is for the exclusive benefit of the Parties and their
respective successors hereunder, and shall not be deemed to give, either express
or implied, any legal or equitable right, remedy, or claim to any other entity
or person whatsoever.
3. If at any time the Escrow Agent is served with any judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process which in any way affects the Escrow Fund or the FR Escrow
Fund (including but not limited to orders of attachment or garnishment or other
forms of levies or injunctions or stays relating to the transfer of the Escrow
Fund or the FR Escrow Fund), the Escrow Agent is authorized to comply therewith
in any manner as it or its legal counsel of its own choosing deems reasonably
appropriate; and if the Escrow Agent complies with any such judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person or entity even though such
7
order, judgment, decree, writ or process may be subsequently modified or vacated
or otherwise determined to have been without legal force or effect.
4. (a) The Escrow Agent shall not be liable for any action taken or omitted
or for any loss or injury resulting from its actions or its performance or lack
of performance of its duties hereunder in the absence of gross negligence or
willful misconduct on its part. In no event shall Escrow Agent be liable (i) for
any consequential, punitive or special damages, (ii) for the acts or omissions
of its nominees, correspondents, designees, subagents or subcustodians, or (iii)
for an amount in excess of the value of the Escrow Fund and the FR Escrow Fund,
valued as of the date of deposit.
(b) If after providing reasonable notice in accordance with Article I,
Section 4, any fees, expenses or costs incurred by, or any obligations owed to,
Escrow Agent hereunder are not paid when due, Escrow Agent may reimburse itself
therefor from the cash held in the Escrow Fund or the FR Escrow Fund.
(c) Escrow Agent may consult with legal counsel at the expense of the
Parties as to any matter relating to this Escrow Agreement, and Escrow Agent
shall not incur any liability in acting in good faith in accordance with any
advice from such counsel.
(d) Escrow Agent shall not incur any liability for not performing any
act or fulfilling any duty, obligation or responsibility hereunder by reason of
any occurrence beyond the control of Escrow Agent (including, but not limited
to, any act or provision of any present or future law or regulation or
governmental authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication facility).
5. Escrow Agent shall provide to the Parties monthly statements identifying
transactions, transfers or holdings of the Escrow Fund and the FR Escrow Fund.
6. Notices, instructions, requests, demands and other communications shall
be delivered in accordance with Article I, Section 4 hereto. Escrow Agent is
authorized to comply with and rely upon any notices, instructions or other
communications believed by it, in good faith, to have been sent or given by any
Parties or by a person or persons authorized by the Parties. Whenever under the
terms hereof the time for giving a notice or performing an act falls upon a
Saturday, Sunday, or banking holiday, such time shall be extended to the next
day on which Escrow Agent is open for business.
7. The Parties, jointly and severally, shall be liable for and shall
reimburse and indemnify the Escrow Agent and hold the Escrow Agent harmless from
and against any and all claims, losses, liabilities, costs, damages or expenses
(including reasonable attorneys' fees and expenses) (collectively, "Losses")
arising from or in connection with or related to this Escrow Agreement or being
the Escrow Agent hereunder, provided, however, that nothing contained herein
shall require the Escrow Agent to be indemnified for Losses caused by its gross
negligence or willful misconduct.
8. (a) The Parties may remove the Escrow Agent at any time by giving to the
Escrow Agent 30 calendar days' prior notice in writing signed by Parent and a
Stockholder Representative.
8
(b) If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the Escrow Fund and the FR
Escrow Fund, it may do so by delivering the same to any other escrow agent
mutually agreeable to Parent and a Stockholder Representative and if no such
escrow agent shall be selected, then Escrow Agent may do so by delivering the
Escrow Fund and the FR Escrow Fund (a) to any bank or trust company in the
Borough of Manhattan, City and State of New York, which is willing to act as
escrow agent thereunder in place and instead of Escrow Agent or (b) to the clerk
or other proper officer of a court of competent jurisdiction as may be permitted
by law within the State, County and City of New York. The fee of any such bank
or trust company or court officer shall be borne jointly and severally by Parent
and the Stockholder Representatives. Upon such delivery, Escrow Agent shall be
discharged from any and all further responsibility or liability with respect to
the Escrow Fund and the FR Escrow Fund except as herein provided.
(c) Upon delivery of the Escrow Fund and the FR Escrow Fund to a
successor escrow agent, the Escrow Agent shall have no further duties,
responsibilities or obligations hereunder.
(d) In the event that the Escrow 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 Escrow
Agreement, it shall be entitled to refrain from taking any action other than to
keep safely all property held in escrow until it shall jointly be directed
otherwise in writing by Parent and a Stockholder Representative or by a final
judgment of a court of competent jurisdiction.
9. In the event of any dispute between or conflicting claims by or among
the Parties and/or any other person or entity with respect to any portion of the
Escrow Fund or the FR Escrow Fund, the Escrow Agent shall be entitled, in its
sole discretion, to refuse to comply with any and all claims, demands or
instructions with respect to such portion of the Escrow Fund or the FR Escrow
Fund, as applicable, so long as such dispute or conflict shall continue, and the
Escrow Agent shall not be or become liable in any way to the Parties for failure
or refusal to comply with such conflicting claims, demands or instructions. The
Escrow Agent shall be entitled to refuse to act until, in its sole discretion,
such conflicting or adverse claims or demands shall have been determined by a
final order, judgment or decree of a court of competent jurisdiction, which
order, judgment or decree is not subject to appeal, or settled by agreement
between the conflicting parties as evidenced in a writing satisfactory to Escrow
Agent. Escrow Agent may, in addition, elect, in its sole discretion, to commence
an interpleader action or seek other judicial relief or orders as it may deem,
in its sole discretion, necessary. The costs and expenses (including reasonable
attorneys' fees and expenses) incurred in connection with such proceeding shall
be paid by, and shall be deemed a joint and several obligation of, the Parties.
10. This Agreement shall be interpreted, construed, enforced and
administered in accordance with the laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule that
would cause the application of the laws of any jurisdiction other than the State
of New York. Each of the Parties hereby submits to the personal jurisdiction of
and each agrees that all proceedings relating hereto shall be brought in courts
located within the City and State of New York. Each of the Parties hereby waives
the right to trial by jury. To the extent that any Party may be entitled to
claim, for itself or its assets, immunity from
9
execution, attachment (whether before or after judgment) or other legal process
in any jurisdiction, each hereby irrevocably agrees not to claim, and hereby
waives, such immunity. Each Party waives personal service of process and
consents to service of process by certified or registered mail, return receipt
requested, directed to it at the address last specified for notices in Article
I, Section 4, and such service shall be deemed completed 10 calendar days after
the same is so mailed.
11. Except as otherwise permitted herein, this Agreement may be modified
only by a written amendment signed by all the parties hereto, and no waiver of
any provision hereof shall be effective unless expressed in a writing signed by
the party to be charged.
12. The rights and remedies conferred upon the parties hereto shall be
cumulative, and the exercise or waiver of any such right or remedy shall not
preclude or inhibit the exercise of any additional rights or remedies. The
waiver of any right or remedy hereunder shall not preclude the subsequent
exercise of such right or remedy.
13. The invalidity, illegality or unenforceability of any provision of this
Agreement shall in no way affect the validity, legality or enforceability of any
other provision; and if any provision is held to be unenforceable as a matter of
law, the other provisions shall not be affected thereby and shall remain in full
force and effect.
14. This Agreement and the Merger Agreement shall constitute the entire
agreement of the parties with respect to the subject matter and supersedes all
prior oral or written agreements in regard thereto.
15. This Agreement shall terminate upon the distribution of all Escrow
Property by the Escrow Agent. The provisions of these Terms and Conditions
(including, without limitation, Article II, Sections 7 and 19) shall survive
termination of this Escrow Agreement and/or the resignation or removal of the
Escrow Agent.
16. No printed or other material in any language, including prospectuses,
notices, reports, and promotional material which mentions "The Bank of New York"
by name or the rights, powers, or duties of the Escrow Agent under this
Agreement shall be issued by any other parties hereto, or on such party's
behalf, without the prior written consent of the Escrow Agent.
17. The headings contained in this Agreement are for convenience of
reference only and shall have no effect on the interpretation or operation
hereof.
18. This Escrow Agreement may be executed by each of the parties hereto in
any number of counterparts, each of which counterpart, when so executed and
delivered, shall be deemed to be an original and all such counterparts shall
together constitute one and the same agreement.
19. The Escrow Agent does not have any interest in the Escrow Fund or the
FR Escrow Fund deposited hereunder but is serving as escrow holder only and
having only possession thereof. The Parties shall pay or reimburse the Escrow
Agent upon request for any transfer taxes or other taxes relating to the Escrow
Fund and the FR Escrow Fund (upon proof of payment of any such transfer taxes or
other taxes by the Escrow Agent) incurred in connection
10
herewith and shall indemnify and hold harmless the Escrow Agent any amounts that
it is obligated to pay in the way of such taxes. Any payments of income from
this Escrow Account shall be subject to withholding regulations then in force
with respect to United States taxes. The parties hereto will provide the Escrow
Agent with appropriate W-9 forms for tax identification number certifications.
It is understood that the Escrow Agent shall be responsible for income reporting
only with respect to income earned with respect to the Escrow Fund or the FR
Escrow Fund and is not responsible for any other reporting.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
WELLSFORD REAL PROPERTIES, INC., Parent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
Xxxxx Xxxxxxx, Stockholder
Representative
----------------------------------------
Xxxxxxxx Xxxxxxxx, Stockholder
Representative
THE BANK OF NEW YORK, as Escrow Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[Signature Page to Escrow Agreement]
Schedule A
Permitted Investments
1. Direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or
by any agency thereof to the extent such obligations are backed by the full
faith and credit of the United States of America), in each case maturing
within one year from the date of acquisition thereof.
2. Investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from Standard & Poor's Ratings Service or from
Xxxxx'x Investors Service, Inc.
3. Investments in certificates of deposit, banker's acceptances and time
deposits maturing within one year from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by the administrative agent or any domestic office of any
commercial bank organized under the laws of the United States of America or
any State thereof.
4. Repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered
into with any bank meeting the qualifications specified in clause (c)
above.
5. Investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (1) through (4)
above.
Schedule B
WELLSFORD REAL PROPERTIES, INC.
ESCROW ACCOUNTS
FEE SCHEDULE
OCTOBER 10, 0000
Xxxx xxxxxxxxxxx xx Xxx Xxxx xx Xxx Xxxx ("BNY") as Escrow Agent, Escrow Parties
shall be responsible for the payment of the fees, expenses and charges as set
forth in this Fee Schedule.
GENERAL FEES
ACCEPTANCE FEE - WAIVED
This one time charge is payable at the time of the closing and includes the
review and execution of the agreement and all documents submitted in support
thereof and establishment of accounts.
ANNUAL ADMINISTRATIVE FEE - $7,000 FOR BOTH ACCOUNTS
An annual fee will cover the duties and responsibilities related to account
administration and servicing, which may include maintenance of accounts on
various systems, custody and securities servicing, reporting, etc. This fee is
payable in advance for the year and shall not be prorated.
INVESTMENT COMPENSATION
With respect to investments in money market mutual funds for which BNY provides
shareholder services BNY (or its affiliates) may also receive and retain
additional fees from the mutual funds (or their affiliates) for shareholder
services as set forth in the Authorization and Direction to BNY to Invest Cash
Balances in Money Market Mutual Funds.
BNY will charge a $25.00 transaction fee for each purchase, sale, or redemption
of securities other than the aforementioned Money Market Mutual Funds.
DISBURSEMENT FEE (CHECK OR WIRE) PER TRANSACTION
A fee of $25.00 will be assessed for each disbursement.
COUNSEL FEES
If counsel is retained by BNY, a fee covering the fees and expenses of Counsel
for its services, including review of governing documents, communication with
members of the closing party (including representatives of the purchaser,
investment banker(s), attorney(s) and BNY), attendance at meetings and the
closing, and such other services as BNY may deem necessary. The Counsel fee will
be the actual amount of the fees and expenses charged by Counsel and is payable
at closing. Should closing not occur, you would still be responsible for payment
of Counsel fees and expenses.
MISCELLANEOUS FEES
The fees for performing extraordinary or other services not contemplated at the
time of the execution of the transaction or not specifically covered elsewhere
in this schedule will be commensurate with the service to be provided and will
be charged in BNY's sole discretion. These extraordinary services may include,
but are not
limited to: proxy dissemination/tabulation, customized reporting and/or
procedures, electronic account access, etc. Counsel, accountants, special agents
and others will be charged at the actual amount of fees and expenses billed.
OUT-OF-POCKET EXPENSES
Additional out-of-pocket expenses may include, but are not limited to,
telephone; facsimile; courier; copying; postage; supplies; expenses of foreign
depositaries; and expenses of BNY's representative(s) and Counsel for attending
special meetings. Fees and expenses of BNY's representatives and Counsel will be
charged at the actual amount of fees and expenses charged and all other expenses
will be charged at cost or in an amount equal to 5% of all expenses billed for
the year, in BNY's discretion, and BNY may charge certain expenses at cost and
others on a percentage basis.
TERMS AND DISCLOSURES
TERMS OF PROPOSAL
Final acceptance of the appointment as escrow agent under the escrow agreement
is subject to approval of authorized officers of BNY and full review and
execution of all documentation related hereto. Please note that if this
transaction does not close, you will be responsible for paying any expenses
incurred, including Counsel fees. We reserve the right to terminate this offer
if we do not enter into final written documents within three months from the
date this document is first transmitted to you. Fees may be subject to
adjustment during the life of the engagement.
MISCELLANEOUS
The terms of this Fee Schedule shall govern the matters set forth herein and
shall not be superseded or modified by the terms of the escrow agreement. This
Fee Schedule shall be governed by the laws of the State of New York without
reference to laws governing conflicts. BNY and the undersigned agree to
jurisdiction of the federal and state courts located in the City of New York,
State of New York
CUSTOMER NOTICE REQUIRED BY THE USA PATRIOT ACT
To help the US government fight the funding of terrorism and money laundering
activities, US Federal law requires all financial institutions to obtain,
verify, and record information that identifies each person (whether an
individual or organization) for which a relationship is established.
What this means to you: When you establish a relationship with BNY, we will ask
you to provide certain information (and documents) that will help us to identify
you. We will ask for your organization's name, physical address, tax
identification or other government registration number and other information
that will help us to identify you. We may also ask for a Certificate of
Incorporation or similar document or other pertinent identifying documentation
for your type of organization.
We thank you for your assistance.
ACCEPTED BY: FOR BNY:
Signature:
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Date:
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Name:
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Title:
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