FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
FIRST
AMENDMENT TO
This
First Amendment dated as of November 17, 2008 (this “Amendment”), to the
Agreement and Plan of Merger dated July 30, 2008 (the “Merger Agreement”),
is between Zones Acquisition Corp., a Washington corporation (“Zac”), and Zones,
Inc., a Washington corporation (the “Company”).
W I T N E
S S E T H:
WHEREAS,
Section 7.03 of the Merger Agreement provides that the Merger Agreement may be
amended in a writing signed by the parties thereto;
WHEREAS,
the Board of Directors, after considering the unanimous recommendation of the
Special Committee, has by unanimous action of those directors who voted (i)
determined that it is in the best interests of the Company and the shareholders
of the Company other than Xxxxx X. Xxxxx (”Xxxxx”), to enter
into this Amendment, (ii) approved the execution, delivery and performance by
the Company of and the consummation of the transactions contemplated by the
Merger Agreement, as amended by this Amendment, including the Merger (the Merger
as provided in the Merger Agreement and as so amended by this Amendment shall be
referred to as the “Merger”), and (iii) resolved and agreed to recommend
adoption of the Merger Agreement, as amended by this Amendment, by the
shareholders of the Company upon the terms and subject to the conditions set
forth in the Merger Agreement, as amended by this Amendment;
WHEREAS,
concurrently with the execution of this Amendment, Xxxxx and Xxxxx Xxxxx entered
into a Voting and Support Agreement with the Company (the “Voting and Support
Agreement”);
WHEREAS,
concurrently with the execution of this Amendment, Xxxxx entered into the
amended Limited Guarantee in favor of the Company in connection with the
obligations of Zac up to a maximum amount of $5,000,000 plus interest and other
collection costs and enforcement expenses ( the “Limited
Guarantee”);
WHEREAS,
concurrently with the execution of this Amendment, Xxxxx reaffirmed his
Commitment Letter dated July 30, 2008 with Zac (the “Xxxxx Commitment
Letter”); and
WHEREAS,
the parties hereto desire to amend the terms of the Merger Agreement and to
clarify certain understandings and agreements relating to the Merger Agreement
and the transactions contemplated thereby.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Amendment, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
(intending to be legally bound) hereby agree as follows:
1. AMENDMENT;
DEFINITIONS; COMPANY DISCLOSURE SCHEDULES
1.1 Amendment. The
Merger Agreement is amended as set forth in this Amendment. Except as
specifically provided for in this Amendment all of the terms and conditions of
the Merger Agreement shall remain in full force and effect. Each reference in
the Merger Agreement to “hereof,” “hereunder” and “this Agreement” shall, from
and after the date of this Amendment, refer to the Merger Agreement, as amended
by this Amendment. Any singular term in this Amendment shall be deemed to
include the plural, and any plural term the singular. Whenever the words
“include,” “includes” or “including” are used in this Amendment, they shall be
deemed followed by the words “without limitation.” Xxxxx and Xxxxx Xxxxx are
expressly acknowledged to be Affiliates of Zac. Any request or
approval by the Company provided for herein shall include any approval or
request made by the Special Committee of the Board of Directors of the
Company.
1.2 Definitions.
Capitalized terms used but not defined in this Amendment shall have the meanings
ascribed to them in the Merger Agreement.
1.3 Company
Disclosure Schedules. The Company Disclosure Schedule is hereby
supplemented in the manner set forth in the supplemental disclosure schedule
delivered by the Company to Zac immediately prior to the execution of this
Amendment (the “Supplemental Company
Disclosure Schedule”). Hereafter all references to the “Company
Disclosure Schedule” in the Agreement and this Amendment shall mean the Company
Disclosure Schedule as supplemented by the Supplemental Company Disclosure
Schedule.
2. AMENDMENTS
TO MERGER AGREEMENT
2.1 Amendment to
Recitals. The
first recital of the Merger Agreement is amended by deleting “$8.65” and
replacing such amount with “$7.00.” All references in the Merger Agreement to
the “Merger Consideration” shall refer to “$7.00” in cash.
2.2 Amendment to
Section 2.02(a). Article II,
Section 2.02(a) of the Merger Agreement is hereby amended and restated as
follows:
“(a) Paying
Agent. Prior to the
Effective Time, Zac shall appoint a bank or trust company that is reasonably
satisfactory to the Company to act as paying agent (the “Paying Agent”) for
the payment of the aggregate Merger Consideration and shall use its reasonable
best efforts to enter into a paying agent agreement with the Paying
Agent. Prior to the Effective Time, Zac shall deposit, or cause the
Surviving Corporation to deposit, with the Paying Agent, for the benefit (from
and after the Effective Time) of the holders of shares that will become
Converted Shares at the Effective Time (the “Selling
Shareholders”), cash in an amount not less than $35,000,000 (“Closing Payment”) and
on January 2, 2009, Zac shall deposit, or cause the Surviving Corporation to
deposit, with the Paying Agent cash sufficient to pay the full remaining amount
of the aggregate Merger Consideration required to be paid pursuant to Section
2.01(c) (the “Remainder Payment”).
All cash deposited with the Paying Agent pursuant to this Section 2.02(a) shall
hereinafter be referred to as the “Exchange
Fund”.
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2.3 Amendment to
Section 2.02(b). The second
sentence of Article II, Section 2.02(b) of the Merger Agreement is hereby
amended and restated as follows:
“Each
holder of record of one or more Certificates or Book Entry Shares shall, upon
surrender to the Paying Agent of such Certificate or Certificates or Book Entry
Shares, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, be entitled to
receive in exchange therefor the amount of cash to which such holder is entitled
pursuant to Section 2.01(c), and the Certificates or Book Entry Shares so
surrendered shall forthwith be canceled; provided, however, that, until the
Remainder Payment is delivered to the Paying Agent, each Selling Shareholder
shall only be entitled to their pro-rata share of the Merger Consideration that
has been received by the Paying Agent.”
2.4 Amendment to
Section 2.02(d). The first
sentence of Article II, Section 2.02(d) of the Merger Agreement is hereby
amended and restated as follows:
“Subject
to delivery of the Remainder Payment to the Paying Agent, the Merger
Consideration paid upon the surrender of Certificates (or affidavits in lieu
thereof) or Book Entry Shares in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Converted Shares.”
2.5 Amendment to
Section 2.02(e). Article II,
Section 2.02(e) of the Merger Agreement is hereby amended and restated as
follows:
“(e) Termination
of the Exchange Fund. Subject to delivery of the Remainder Payment to
the Paying Agent, any portion of the Exchange Fund which remains undistributed
to the Selling Shareholders for twelve months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any Selling
Shareholders who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation for payment of their claim for
the Merger Consideration in accordance with this Article II.”
2.6 Amendment to
Section 3.01(h).
The first sentence of Article III, Section 3.01(h) of the Merger Agreement is
hereby amended and restated as follows:
No
broker, investment banker, financial advisor or other Person, other than
Cascadia Capital and Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc.,
the fees and expenses of which will be paid by the Company, is entitled to any
broker’s, finder’s, financial advisor’s or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
2.7 Amendment to
Section 3.01(i).
Article III, Section 3.01(i) of the Merger Agreement is hereby deleted in its
entirety and replaced for convenience with the following:
“Intentionally
Omitted”
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2.8 Amendment to
Section 3.02(c). The first
sentence of Article III, Section 3.02(c) of the Merger Agreement is hereby
amended and restated as follows:
“As of
the date hereof, the authorized capital stock of Zac consists of 20,000,000
shares of common stock, without par value, and 10,000,000 shares of preferred
stock, without par value.”
2.9 Amendment to
Section 3.02(d).
Article III, Section 3.02(d) of the Merger Agreement is hereby amended and
restated in its entirety as follows:
“Financing. Zac
has delivered to the Company a true and complete copy, as of the date of this
Agreement, of an executed commitment letter or term sheet to provide equity and
debt financing to Zac in an aggregate amount set forth therein, subject to the
terms and conditions thereof (the “Financing
Commitments”), the proceeds of which are sufficient to fund the total
Merger Consideration for the Merger and shall be used to consummate the Merger
and the other transactions contemplated by this Agreement (the “Financing”). As
of the date of this Agreement, (i) the Financing Commitments are in full force
and effect and have not been withdrawn or terminated or otherwise amended or
modified in any respect and (ii) Zac is not in breach of any of the terms or
conditions set forth therein and no event has occurred which, with or without
notice, lapse of time or both, could reasonably be expected to constitute a
breach or failure to satisfy a condition precedent set forth in the Financing
Commitments. The Financing Commitments shall not be amended or
modified without the Company’s prior consent. The Financing Commitments contain
all of the conditions precedent to the obligations of the parties thereunder to
make the Financing available to Zac. As of the date of this
Agreement, subject to the accuracy of the representations and warranties of the
Company set forth in Section 3.01, Zac has no reason to believe that it will be
unable to satisfy on a timely basis any term or condition to be satisfied by it
contained in the Financing Commitments. Zac has fully paid any and
all commitment fees that have been incurred and are due and payable in
connection with the Financing Commitments prior to the date of this
Agreement. Subject to the accuracy of the representations and
warranties of the Company set forth in Section 3.01(c), the proceeds from the
Financing, when funded in accordance with the Financing Commitments, are
sufficient for the satisfaction of all of Zac’s obligations under this
Agreement, including the payment of the Merger Consideration and the
consideration in respect of the Company Stock Options and to pay all related
fees and expenses. Notwithstanding anything in this Agreement to the
contrary, the Financing Commitments may be superseded at the option of Zac after
the date of this Agreement but prior to the Effective Time by the New Financing
Commitments in accordance with Section 5.07. In such event, the term “Financing
Commitments” as used in this Agreement shall be deemed to include the New
Financing Commitments to the extent then in effect.”
2.10 Amendment to
Section 3.02(h).
The following shall be added to the end of Article III, Section 3.02(h) of the
Merger Agreement:
“Zac
acknowledges and agrees that the President, CEO and sole shareholder of Zac also
serves as the Chief Executive Officer of the Company and that the
representations and warranties contained in Section 3.01 must be read in such
context.”
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2.11 Amendment to
Section 4.01(a).
The first paragraph of Article IV, Section 4.01(a) of the Merger Agreement is
hereby amended and restated as follows:
“(a) During
the period from the date of this Agreement to the Effective Time, except as set
forth in Section 4.01(a) of the Company Disclosure Schedule or as contemplated
by this Agreement or as consented to in writing in advance by Zac (which consent
shall not unreasonably be withheld or delayed and shall be presumed if
authorized or approved by the Company’s Chief Executive Officer), the Company
shall, and shall cause each of its subsidiaries to, carry on its business in all
material respects in the ordinary course and, to the extent consistent
therewith, use all commercially reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers, key employees and consultants and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. In addition to and without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, except as otherwise set forth in Section 4.01(a) of the
Company Disclosure Schedule or as contemplated by this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to, without Zac’s prior
written consent (which consent shall not unreasonably be withheld or
delayed):”
2.12 Amendment to
Section 4.02(f).
The first paragraph of Article IV, Section 4.02(f) of the Merger Agreement is
hereby amended and restated as follows:
“(f) Notwithstanding
anything to the contrary contained in this Agreement, if, at any time prior to
obtaining the Company Shareholder Approvals, the Company receives a Takeover
Proposal which the independent members of the Board of Directors of the Company
conclude in good faith constitutes a Superior Proposal after giving effect to
all of the adjustments which may be offered by Zac pursuant to clause (ii)
below, the Board of Directors of the Company may (x) effect a Change in
Recommendation and/or (y) terminate this Agreement (in accordance with Section
7.01) to enter into a definitive agreement with respect to such Superior
Proposal if the independent members of the Board of Directors of the Company
determine in good faith, after consultation with outside counsel, that failure
to take such action would be inconsistent with the fulfillment of their
fiduciary duties to the shareholders of the Company under applicable Law; provided, however, that the
Board of Directors may not effect a Change in Recommendation pursuant to the
foregoing clause (x) or terminate this Agreement pursuant to the foregoing
clause (y) unless:”
2.13 Additional
Subsection to Section 4.02. The following
subsection shall be added to Article IV as Section 4.02(h) of the Merger
Agreement:
“(h) Notwithstanding
any other provision of the Merger Agreement to the contrary, during the period
beginning on November 17, 2008 and continuing until 11:59 p.m. Seattle,
Washington time on November 28, 2008 (the “Second No-Shop Period Start
Time”), the Company and its subsidiaries and their respective
Representatives shall have the right to: (i) initiate, solicit and encourage,
whether publicly or otherwise, Takeover Proposals, including by way of providing
access to non-public information pursuant to (but only pursuant to) one or more
Acceptable Confidentiality Agreements; provided that (A) the Company
shall promptly provide to Zac any material non-public information concerning the
Company or its subsidiaries that is provided to any Person given such access
which was not previously provided to Zac and (B) the Company shall not disclose
(and shall not permit any of its Representatives to disclose) the terms of the
Financing Commitments or the identities of any other potential financing sources
for the transactions contemplated by this Agreement to any Person, except to the
extent such terms are otherwise publicly available; and (ii) enter into and
maintain discussions or negotiations with respect to Takeover Proposals or
otherwise cooperate with or assist or participate in, or facilitate any such
inquiries, proposals, discussions or negotiations. The parties hereby
acknowledge and agree that the initial No-Shop Period Start Time commenced on
September 4, 2008 and continued until November 16, 2008 and that all references
in Sections 4.02(b) and (d) of the Merger Agreement to the No-Shop Period Start
Time shall hereinafter be deemed the Second No-Shop Period Start
Time.”
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2.14 Amendment to
Article V, Section 5.01(c). The first sentence of Article V, Section
5.01(c) of the Merger Agreement is hereby amended and restated as
follows:
“(c) The
parties shall endeavor to retain the existing record date of October 6, 2008 and
otherwise, use their best efforts, to establish, prior to December 1, 2008, a
new record date for, duly call, give notice of, convene and hold a meeting of
its shareholders (the “Shareholders’
Meeting”) for the purpose of obtaining the Company Shareholder Approvals;
provided, that such date may be extended to the extent reasonably necessary to
permit the Company to file and distribute any material amendment to the Proxy
Statement as is required by applicable law.”
2.15 Amendment to
Article V, Section 5.03(a). Article V, Section 5.03(a) of the Merger
Agreement is hereby amended and restated as follows:
“(a) Upon
the terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper and advisable to
consummate and make effective, as promptly as practicable, the Merger and the
other transactions contemplated by this Agreement, including using reasonable
best efforts to accomplish the following: (i) satisfy the conditions set forth
in Article VI, (ii) obtain all necessary actions or nonactions,
waivers, consents, clearances, and approvals from Governmental Entities and
non-governmental third parties and the making of all necessary registrations,
notices and filings (including filings with Governmental Entities) and
(iii) obtain all necessary consents, approvals or waivers from third
parties (other than the two landlord consents relating to the lease agreements
described in Section 3.01(d) of the Company Disclosure Schedules which consents
Zac has waived). The Company and Zac shall use reasonable
best efforts to defend and contest any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the Merger or the other transactions contemplated by this
Agreement, including seeking to have any stay, temporary restraining order, or
preliminary injunction entered by any Governmental Entity vacated or
reversed.”
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2.16 Amendment to
Article V, Section 5.04(a). The following sentence shall be added at the
end of Article V, Section 5.04(a) of the Merger Agreement:
“Zac
acknowledges and agrees that the Surviving Corporation shall also by operation
of law assume the obligations with respect to all rights to indemnification
provided in Section 5.09.”
2.17 Amendment to
Article V, Section 5.04(c). Article V, Section 5.04(c) of the Merger
Agreement is hereby amended and restated as follows:
“(c) For
six years after the Effective Time, the Surviving Corporation shall maintain
(directly or indirectly through the Company’s existing insurance programs) in
effect directors’ and officers’ liability insurance in respect of acts or
omissions occurring at or prior to the Effective Time, covering each person
currently covered by the directors’ and officers’ liability insurance policy
maintained by the Company or its subsidiaries on terms with respect to such
coverage and amounts comparable to the insurance maintained currently by the
Company or its subsidiaries, as applicable; provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not less advantageous to the
beneficiaries of the current policies and with carriers having an A.M. Best “key
rating” of A+ or better, provided that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Time, and provided, further, that the
Surviving Corporation shall first use its reasonable best efforts to obtain from
such carriers a so-called “tail” policy providing such coverage and being
effective for the full six year period referred to above, and shall be entitled
to obtain such coverage in annual policies from such carriers only if it is
unable, after exerting such efforts for a reasonable period of time, to obtain
such a “tail” policy; and provided, further, that the
Surviving Corporation shall not be required to pay an annual premium in excess
of 300% of the last annual premium paid by the Company prior to the date of this
Agreement as set forth in Section 5.04(c) of the Company Disclosure Schedule
(or, in the case of a “tail” policy obtained pursuant to the preceding proviso,
shall not be required to pay an aggregate premium therefor in excess of an
amount equal to six times 300% of such last annual premium) and, if the
Surviving Corporation is unable to obtain the insurance required by this Section
5.04(c), it shall obtain as much comparable insurance as possible for an annual
premium (or an aggregate premium, as the case may be) equal to such maximum
amount.”
2.18 Amendments to
Article V, Section 5.05(b). Article V, Section 5.05(b) of the Merger
Agreement is hereby deleted in its entirety and replaced for convenience with
the following:
“Intentionally
Omitted”
2.19 Amendments to
Article V, Section 5.05(c). Article V, Section 5.05(c) of the Merger
Agreement is hereby deleted in its entirety and replaced for convenience with
the following:
“Intentionally
Omitted”
2.20 Amendments to
Article V, Section 5.05(d). Article V, Section 5.05(d) of the Merger
Agreement is hereby amended and restated as follows:
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“In the
event that this Agreement is terminated by the Company pursuant to (i) Section
7.01(d) or (ii) Section 7.01(b)(i); and, at the time of such termination, the
conditions set forth in Section 6.01(a)(ii) and (b) and Section 6.02(b) have
been satisfied; and, in the case of termination by the Company pursuant to
Section 7.01(b)(i), the conditions set forth in Section 6.01(a)(ii) and (b) and
Section 6.02 (b) have been satisfied for at least three Business Days prior to
such termination, then Zac shall pay to the Company a fee of $5,000,000 (the
“Zac Termination
Fee”) by wire transfer in immediately available funds no later than two
Business Days after such termination by the Company. Contemporaneously with the
signing of this Agreement, Xxxxx is entering into a Limited Guarantee in favor
of the Company providing for, upon the terms and subject to the conditions set
forth in the Limited Guarantee, the guarantee of the payment obligations of Zac
under this Section 5.05(d) in an amount up to the Zac Termination Fee plus
related fees and expenses associated with enforcement
thereof. Neither Zac nor its Affiliates shall take any action for the
purpose of frustrating the Company’s ability to satisfy the conditions under
Section 6.01 or Section 6.02.”
2.21 Amendments to
Article V, Section 5.05(e). Article V, Section 5.05(e) of the Merger
Agreement is hereby amended and restated as follows:
“(e) The
Company and Zac acknowledge and agree that the agreements contained in this
Section 5.05 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Company and Zac would not
have entered into this Agreement; accordingly, if Zac fails to pay when due the
amount payable pursuant to this Section 5.05, and, in order to obtain such
payment, the Company commences a suit that results in a judgment against Zac for
the amounts set forth in this Section 5.05, Zac shall pay to the Company the
Company’s costs and expenses (including reasonable attorneys’ fees and expenses)
incurred in connection with such suit, together with interest on the terms set
forth in this Section 5.05, from the date such payment was required to be made
until the date of receipt by the owed party of immediately available funds in
such amount at the prime rate of US Bank, N.A., in effect on the date such
payment was required to be made.”
2.22 Amendments to
Article V, Section 5.05(f). Article V, Section 5.05(f) of the Merger
Agreement is hereby amended and restated as follows:
“(f) Each
of the parties hereto acknowledges that the agreements contained in this Section
5.05 are an integral part of the transactions contemplated by this Agreement and
that the Zac Termination Fee is not a penalty, but rather is liquidated damages
in a reasonable amount that will compensate the Company in the circumstances in
which such termination fee is payable for the efforts and resources expended and
opportunities foregone while negotiating this Agreement and in reliance on this
Agreement and on the expectation of the consummation of the transactions
contemplated hereby, which amount would otherwise be impossible to calculate
with precision. Notwithstanding anything to the contrary in this Agreement, the
Company’s right to receive payment of the Zac Termination Fee (plus the related
costs and expenses contemplated in Section 5.05(e) above) from Zac pursuant to
this Section 5.05 shall be the sole and exclusive remedy of the Company and its
subsidiaries against Zac hereunder, and any of its former, current or future
shareholders, directors, officers, Affiliates or agents for the loss suffered as
a result of the failure of the Merger to be consummated, and upon payment of
such amount, none of Zac or any of its former, current or future shareholders,
directors, officers, Affiliates or agents shall have any further liability or
obligation relating to or arising out of this Agreement or the transactions
contemplated hereby.”
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2.23 Amendments to
Section 5.07(a).
The following shall be added to the end of Article V, Section 5.07(a) of the
Merger Agreement:
“For the
avoidance of doubt, nothing in this Section 5.07 is meant to treat the Financing
as a condition to the obligation of Zac to effect the Merger.”
2.24 Additional
Covenant in Article V, Section 5.07(c). The following section shall be
added to Article V as Section 5.07(c) to the Merger Agreement:
“(c) Prior
to the Effective Time, Zac shall deposit the Closing Payment (consisting solely
of the proceeds from the Financing) with the Paying Agent. Xxxxx
Xxxxx shall enter into a limited guarantee in favor of the Shareholder
Representatives, on behalf of the Selling Shareholders, providing for, upon the
terms and conditions set forth therein, a guarantee of the payment and delivery
of the Remainder Payment to the Paying Agent (the “Remainder Payment
Guarantee.”)
2.25 Additional
Covenant in Article V, Section 5.08. The following section shall be added
to Article V as Section 5.08 to the Merger Agreement:
“Section 5.08
Additional Covenants.
(a) Zac
shall provide the Company with copies of the Voting and Support Agreement, the
Limited Guarantee, and the Xxxxx Commitment Letter contemporaneously with the
execution of this Agreement, and hereby acknowledges and agrees that, any breach
of those agreements (other than a breach by the Company) shall be deemed a
breach by Zac hereunder.”
2.26 Additional
Covenants in Article V, Section 5.09. The following section shall be
added to Article V as Section 5.09 to the Merger Agreement:
“Section 5.09 Shareholder
Representative.
(a) Upon
receipt of the Company Shareholder Approvals, and without further action, the
Shareholder Representative shall be appointed as the agent and the
attorney-in-fact for and on behalf of each and all of the Selling Shareholders,
to give and receive notices and communications, to authorize payment of costs
and expenses from the Special Expense Fund (defined below), to establish, manage
and maintain the Special Expense Account (defined below) and to authorize
deposits and withdrawals from the Special Expense Account, to enforce the
obligations of Zac, the Surviving Company and their respective Affiliates as
contemplated under this Agreement, including with respect to the Remainder
Payment Guarantee, and to engage agents and representatives (including
accountants and legal counsel). The foregoing authorization shall include
without limitation, with respect to each and all of the foregoing matters, the
authority to bring claims, to object to claims, to agree to, negotiate, enter
into settlements and compromises of, and comply with orders of courts with
respect to such claims, and to take all other actions that are
either: (i) necessary or appropriate in the sole judgment of the
Shareholder Representative for the accomplishment of the foregoing matters or
(ii) specifically mandated by the terms of this Agreement. “Shareholder
Representative” shall mean the current independent members of the
Company’s Board of Directors comprised of the following
individuals: Xxxx X. Xxxxx, Xxxxx Xxxxx, Xxxxxxx X. Xxxxxx, and
Xxxxxxx X. Xxxxxxxxxxx, acting as a committee and making decisions by majority
vote. In the event any individual Shareholder Representative is
unable or unwilling to continue to serve as Shareholder Representative, and the
individuals that comprised of the Shareholder Representative shall be less than
two, the remaining Shareholder Representatives shall appoint a new individual to
serve as Shareholder Representative.
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(b) The
Shareholder Representative, subject only to acting in good faith, shall not be
liable for any act done or omitted hereunder or with respect to any matters
arising out of or in connection with: (i) the acceptance or administration of
the Shareholder Representative’s duties under this Agreement, (ii) the Special
Expense Account or (iii) the Special Expense Fund. Zac and the
Surviving Corporation, jointly and severally, shall indemnify the Shareholder
Representative and hold the Shareholder Representative harmless against any
loss, liability or expense incurred without bad faith on the part of the
Shareholder Representative and arising out of or in connection with the
acceptance or administration of the Shareholder Representative’s duties under
this Agreement, including with respect to the Special Expense Account, the
Special Expense Fund, and costs incurred and the reasonable fees and expenses of
any legal counsel or advisors retained by the Shareholder
Representative. In the event the Remainder Payment is not deposited
with the Paying Agent by January 3, 2009, Zac, the Surviving Company and each
Shareholder Representative shall enter into an indemnification agreement
substantially in the form of the current indemnification agreement between the
Company and each director of the Company, and providing for Zac and the
Surviving Corporation to indemnify each person who comprises the Shareholder
Representative with respect to all aspects of their duties as Shareholder
Representative hereunder.
(c) Within
2 business days of obtaining the Company Shareholder Approvals, but in no event
later than December 30, 2008, Zac shall deposit $100,000 (the “Special Expense
Fund”) by wire transfer to an account with a bank selected by the
Shareholder Representative (the “Special Expense
Account”). The Special Expense Fund shall be available to the
Shareholder Representative for the purpose of paying the costs and expenses
(including legal and consultant fees) incurred by the Shareholder Representative
on behalf of the Selling Shareholders following the Closing Date with respect to
enforcement of the obligations of Zac, the Surviving Corporation or their
Affiliates under this Agreement and the Remainder Payment
Guarantee.
(d) The
Special Expense Account shall be held as a trust fund and shall not be subject
to any lien, attachment, trustee process or any other judicial process of any
creditor of any party and shall be held and disbursed solely for the purposes
and in accordance with the terms of this Agreement and as directed by the
Shareholder Representative. The Special Expense Fund shall be
disbursed to the Surviving Corporation as soon as practicable after receipt of
the Remainder Payment.
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(e) The
adoption of this Agreement and the approval of the Merger by the Company’s
Shareholders shall constitute approval of the arrangements described in this
Section 5.09 and all of the arrangements relating thereto, including without
limitation the creation of the Special Expense Account and the appointment of
the Shareholder Representative for the purposes described in this Amendment, and
the right of the Shareholder Representative to make deposits and withdrawals
from the Special Expense Account in accordance with this Agreement and in
connection with the performance of the Shareholder Representative’s duties under
this Agreement.”
2.27 Amendments to
Article VI, Section 6.02(a). The last sentence of Article VI, Section
6.02(a) of the Merger Agreement is hereby deleted.
2.28 Amendments to
Article VI, Section 6.02(b). The last sentence of Article VI, Section
6.02(b) of the Merger Agreement is hereby deleted.
2.29 Amendments to
Article VI, Section 6.02(c). Article VI, Section 6.02(c) of the Merger
Agreement is hereby amended and restated as follows:
“(c) Dissenter’s
Rights. The aggregate number of shares of Company Common Stock
at the Effective Time, the holders of which have properly exercised dissenter’s
rights under Chapter 23B.13 of the WBCA, shall not equal 20% or more of the
shares of Company Common Stock outstanding as of the record date for the Company
Shareholders Meeting.”
2.30 Amendments to
Article VI, Section 6.02(d). Article VI, Section 6.02(d) of the Merger
Agreement is hereby amended and restated as follows:
“(d) Company Stock
Options. The aggregate number of shares of Company Common
Stock subject to purchase upon the exercise of Company Stock Options outstanding
immediately prior the Effective Time, shall be less than 200,000 shares (such
number of shares being exclusive of any Company Stock Options: (i)
granted after July 30, 2008, (ii) held by Xxxxx, or (iii) held by any individual
who has served as an executive officer of the Company as described in the
Company’s proxy statement dated October 17, 2008, and also, exclusive of any
irrevocable election to exercise Company Stock Options delivered to the Company
at or prior to the Effective Time), subject to appropriate adjustment in the
case of stock splits, stock dividends and the like.”
2.31 Additional
Condition to Article VI, Section 6.03(c). The following paragraph shall
be added to Article VI of the Merger Agreement as Section 6.03(c):
“(c) Opinion of Financial
Advisors. The Company shall have received the opinion of
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc. to the effect that,
as of the date of such opinion, the Merger Consideration is fair, from a
financial point of view, to the holders of shares of Company Common Stock other
than Zac, Xxxxx Xxxxx Xxxxx Xxxxx, Xxxxxxx Xxxxx, The Xxxxx and Xxxxx Xxxxx
Foundation and their Affiliates.”
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2.32 Additional
Condition to Article VI, Section 6.03(d). The following paragraph shall
be added to Article VI of the Merger Agreement as Section 6.03(d):
“(d) Receipt of Closing Payment
and Remainder Payment Guarantee. The Paying Agent shall have
received the Closing Payment from Zac and the Company shall have received the
Remainder Payment Guarantee from Xxxxx Xxxxx.”
2.33 Amendments to
Article VI, Section 6.04. Article VI, Section 6.04 of the Merger
Agreement is hereby amended and restated as follows:
“Frustration of Closing
Conditions. Neither the Company nor Zac or its Affiliates may
rely on the failure of any condition set forth in Section 6.01, Section 6.02 or
Section 6.03, as the case may be, to be satisfied if such failure was caused by
such party’s failure to act in good faith or use its reasonable best efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 5.03.”
2.34 Amendments to
Article VII, Section 7.01(b)(i) and (ii). Article VII, Section 7.01(b)(i)
and (ii) of the Merger Agreement are hereby amended and restated as
follows:
“(i) if
the Merger shall not have been consummated on or before December 31, 2008, (the
“Outside
Date”); provided,
that in the event the Company receives a Superior Proposal the outside
date shall be extended to the earlier of February 28, 2009 or the date that the
Superior Proposal is terminated; provided, however, that the
right to terminate this Agreement under this Section 7.01(b)(i) shall not be
available to any party whose breach of a representation, warranty, covenant or
agreement in this Agreement has (directly or indirectly) in whole or in material
part been a cause of or resulted in the failure of the Merger to be consummated
on or before such date nor to any party who has not complied with that party’s
obligations under Section 6.04;”
“(ii) if
the Company Shareholder Approvals shall not have been obtained at the
Shareholders’ Meeting duly convened therefor or at any adjournment or
postponement thereof provided,
however, that the right to terminate this Agreement under this Section
7.01(b)(ii) shall not be available to any party whose breach of a
representation, warranty, covenant or agreement in this Agreement has (directly
or indirectly) in whole or in material part been a cause of or resulted in the
failure of the Merger to be consummated on or before such date or to any party
who has not complied with their obligations under Section 6.04; or”
2.35 Amendments to
Article VII, Section 7.01(c). Article VII, Section 7.01(c) of the Merger
Agreement is hereby amended and restated as follows:
“(c) by
Zac if the Company shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (i) would give rise to the failure
of any condition set forth in Section 6.02 and (ii) is uncured or incapable of
being cured by the Company prior to the earlier to occur of (A) 10 calendar days
following receipt of written notice of such breach or failure to perform from
Zac or (B) the Outside Date; provided, however, that Zac
shall not have the right to terminate this Agreement pursuant to this Section
7.01(c) if it is then in material breach of any representation, warranty,
covenant or other agreement contained in this Agreement that would cause any of
the conditions in Section 6.03 not to be satisfied;”
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2.36 Amendments to
Article VII, Section 7.01(d). Article VII, Section 7.01(d) of the Merger
Agreement is hereby amended and restated as follows:
“(d) by
the Company, if Zac shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (i) would give rise to the failure
of any condition set forth in Section 6.03 and (ii) is uncured or incapable of
being cured by Zac prior to the earlier to occur of (A) 10 calendar days
following receipt of written notice of such breach or failure to perform from
the Company or (B) the Outside Date; provided, however, that if
Zac shall fail to deliver the Closing Payment to the Paying Agent prior to the
Effective Time it shall be deemed a breach of Zac’s obligations under this
Agreement thereby entitling the Company to the Zac Termination Fee without
requiring any action by the Company, and provided further, that the
Company shall not have the right to terminate this Agreement pursuant to this
Section 7.01(d) if it is then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement that would
cause any of the conditions in Section 6.02 not to be satisfied;”
2.37 Amendments to
Article VII, Section 7.02. Article VII, Section 7.02 of the Merger
Agreement is hereby amended and restated as follows:
“Section
7.02 Effect of
Termination. In the event of termination of this Agreement by
either the Company or Zac as provided in Section 7.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Zac or the Company or their directors, officers or shareholders,
under this Agreement, other than the provisions of Section 5.05, this Section
7.02 and Article VIII, which provisions shall survive such termination; provided, however, that,
without limiting the right to receive any payment pursuant to Section 5.05, the
Company agrees that, to the extent it has incurred losses or damages in
connection with this Agreement, the maximum aggregate liability of Zac shall be
limited to an amount equal to $5,000,000, and in no event shall the Company seek
to recover any money damages in excess of such amount from Zac or any of their
respective Representatives or Affiliates hereunder; and provided, further, that
except as specifically provided in the first sentence of 5.05(f) of this
Agreement, nothing herein shall relieve the Company from liability for willful
and material breach of its covenants or agreements set forth in this Agreement
prior to such termination, in which case Zac and/or Zac shall be entitled to all
rights and remedies available at Law or in equity.”
2.38 Amendments to
Article VIII, Section 8.03(e). Article VIII, Section 8.03(e) of the
Merger Agreement is hereby amended and restated as follows:
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“(e) “Material Adverse
Change” or “Material Adverse
Effect” means any fact, circumstance, change, occurrence or effect that,
individually or in the aggregate with all other facts, circumstances,
changes, occurrences or effects, (1) is or would reasonably be expected to be
materially adverse to the business, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a whole and
have a financial impact of no less than $7.5 million to the Company or (2) that
prevents or materially delays or materially impairs the ability of the Company
to consummate the Merger, except for any such facts, circumstances, changes,
occurrences or effects arising out of or relating to (i) the announcement or the
existence of this Agreement and the transactions contemplated hereby or actions
by Zac or the Company required to be taken pursuant to this Agreement, (ii)
changes in general economic or political conditions or the financial markets
(including prevailing interest rates and stock market levels), (iii) changes in
applicable laws, rules, regulations or orders of any Governmental Entity or
interpretations thereof by any Governmental Entity or changes in accounting
rules or principles (so long as the Company or its subsidiaries are not
disproportionately affected thereby), (iv) changes affecting generally the
industries in which the Company or its subsidiaries conduct business; (v) any
outbreak or escalation of hostilities or war or any act of terrorism, or (vi)
any shareholder litigation instituted as a result of any amendment to this
Agreement;”
2.39 Amendments to
Article VIII, Section 8.07. The last sentence of Article VIII, Section
8.07 of the Merger Agreement is hereby amended and restated as
follows:
“Except
for (A) following the Effective Time, the rights of the Company’s shareholders
to receive the Merger Consideration in accordance with Section 2.01(c),
including their rights with respect to the Remainder Payment Guarantee and (B)
the provisions of Section 5.04 hereof, this Agreement (including the Schedules)
is not intended to and does not confer upon any Person other than the parties
hereto any legal or equitable rights or remedies.”
2.40 Amendments to
Article VIII, Section 8.10. Article VIII, Section 8.10 of the Merger
Agreement is hereby amended and restated as follows:
“Section
8.10 Enforcement; Consent to
Jurisdiction. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement to be performed
by the Company or any of its subsidiaries were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly
agreed that prior to the valid and effective termination of this Agreement in
accordance with Section 7.01 Zac shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement exclusively in any state or federal
court sitting in the State of Washington. The parties agree that a
breach of Zac’s covenants contained in Section 5.07 will cause irreparable
damage to the Company, that the Company has no adequate remedy at law in respect
of such breach and, as a consequence, that the covenants contained in Section
5.07 shall be specifically enforceable against Zac and Zac hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants. The parties acknowledge and agree that other than as provided in
the preceding sentence, neither the Company nor any of its subsidiaries shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the terms and provisions of this Agreement and their
sole and exclusive remedy with respect to any such breach shall be the monetary
damages set forth in Section 5.05(d). Each of the parties hereto (a)
irrevocably consents to submit itself to the personal jurisdiction of any state
or federal court sitting in the State of Washington in the event any dispute
arises out of this Agreement or the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or the transactions
contemplated by this Agreement in any court other than any state or federal
court sitting in the State of Washington. Any judgment from any such
court described above may, however, be enforced by any party in any other court
in any other jurisdiction.”
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3. ADDITIONAL
REPRESENTATIONS AND WARRANTIES
3.1 Additional
Representations and Warranties of the Company. The Company
hereby represents and warrants to Zac as follows:
(a) The
Company has requisite corporate power and authority to enter into this
Amendment, to perform its obligations under this Amendment and, subject to
receipt of the Company Shareholder Approval, to consummate the transactions
contemplated by the Merger Agreement, as amended by this Amendment. The
execution and delivery of this Amendment and the consummation of the
transactions contemplated by the Merger Agreement, as amended by this Amendment,
have been duly and validly authorized by the Board of Directors, and,
recommended unanimously by the Special Committee and no other corporate
proceedings on the part of the Company are necessary to authorize this Amendment
or the consummation of the transactions contemplated by the Merger Agreement, as
amended by this Amendment, subject in each case of the consummation of the
Merger, to the obtaining of the Company Shareholder Approvals. This Amendment
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery of this Amendment by Zac,
constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms except that such enforceability (i) may
be limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to the enforcement of creditors’ rights generally and (ii) is
subject to general principles of equity.
3.2 Additional
Representations and Warranties of Zac. Zac hereby represents
and warrants to the Company as follows:
(a) Zac
has all requisite corporate or other power and authority to enter into this
Amendment, to perform its obligations under this Amendment and to consummate the
transactions contemplated by the Merger Agreement, as amended by this Amendment.
The execution, delivery and performance of this Amendment by Zac and the
consummation by Zac of the transactions contemplated by the Merger Agreement, as
amended by this Amendment, have been duly and validly authorized by Xxxxx as the
sole shareholder of Zac, and no other corporate proceedings on the part of Zac
are necessary to authorize this Amendment or the consummation of the
transactions contemplated by the Merger Agreement, as amended by this Amendment.
This Amendment has been duly and validly executed and delivered by Zac and,
assuming the due authorization, execution and delivery of this Amendment by the
Company, this Amendment constitutes the valid and binding agreement of Zac,
enforceable against Zac in accordance with its terms except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors’ rights
generally and (ii) is subject to general principles of equity.
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(b) As
of the date of this Amendment, there are no contracts, undertakings,
commitments, agreements or obligations or understandings between Zac, any of its
Affiliates or any shareholder set forth on Schedule 2.01(c) to the Merger
Agreement on the one hand, and any member of the Company’s management or the
Board of Directors (other than Xxxxx), on the other hand, relating to any
payment of fees, compensation or other remuneration associated with a reduction
of the Merger Consideration from $8.65 to $7.00.
(c) Zac
hereby agrees and acknowledges that it has received, reviewed and accepted the
revised financial projections of the Company furnished in connection with the
Financing and this Amendment.
4. GENERAL
4.1. Effect of
Headings. The Section
headings are for convenience only and shall not affect the construction or
interpretation of this Agreement.
4.2 Counterparts. This Amendment
may be executed in two counterparts, each of which shall be an original, but all
of which together shall constitute one and the same agreement.
4.3 Governing
Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Washington, without giving effect to
the conflict of law principles that would require the application of the law of
another jurisdiction.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, each of the parties hereto has caused this First Amendment to
Agreement and Plan of Merger to be signed by its respective officers hereunto
duly authorized, all as of the date first written above.
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ZONES
ACQUISITION CORP.
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By:
/s/ Xxxxx X.
Xxxxx
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|
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Name:
Xxxxx X. Xxxxx
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Title: President
and Chief Executive Officer
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ZONES,
INC.
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By:
/s/ Xxxxxxx X.
Xxxxxx
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Name: Xxxxxxx
X. Xxxxxx
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Title: Chair,
Special Committee of the Board of
Directors
of Zones,
Inc.
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17
