PREFERRED STOCKHOLDER AGREEMENT
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PREFERRED STOCKHOLDER AGREEMENT (this "Agreement"), dated as of September
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4, 2003, by and among chinadotcom corporation, a company organized under the
laws of the Cayman Islands ("Parent"), Xxxx Systems, Inc., a Delaware
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corporation (the "Company"), and Xxxxxxxx X. Xxxxxxxx, III ("Preferred
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Stockholder").
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RECITALS
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Concurrently herewith, Parent, CDC Software Holdings, Inc., a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and the
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Company are entering into an Agreement and Plan of Merger as of the date hereof
(the "Merger Agreement"; capitalized terms used but not defined herein shall
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have the meanings set forth in the Merger Agreement), pursuant to which (and
subject to the terms and conditions set forth therein) Merger Sub will merge
with and into the Company (the "Merger"), and each outstanding share of common
stock, par value $.001 per share, of the Company (the "Common Stock") will be
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converted into the right to receive the Merger Consideration.
As of the date hereof, Preferred Stockholder beneficially owns 500,000
Preferred Shares (the "Owned Preferred Shares" and, together with any Preferred
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Shares acquired by Preferred Stockholder prior to the termination of this
Agreement, the "Covered Preferred Shares"), and 127,500 shares of Common Stock
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(the "Owned Common Shares"). An additional 25,000 shares of Common Stock (the
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"Trust Shares") are held by the Xxxxxxxx Family Charitable Foundation, Inc. The
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Owned Preferred Shares are convertible into 500,000 shares of Common Stock (the
Common Stock into which the Owned Preferred Shares are convertible, together
with the Owned Common Shares, the Trust Shares and any shares of Common Stock
acquired by Preferred Stockholder after the date hereof and prior to the
termination hereof, whether upon conversion of other convertible securities or
otherwise, collectively, referred to herein as the "Covered Shares", and the
Covered Shares and the Covered Preferred Shares collectively referred to as the
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"Securities").
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As a condition to their willingness to enter into the Merger Agreement,
Parent and Merger Sub have required that Preferred Stockholder agree, and
Preferred Stockholder has agreed, to enter into this Agreement.
AGREEMENT
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To implement the foregoing and in consideration of the mutual agreements
contained herein, the parties agree as follows:
1. Agreement to Convert and Vote; Proxy.
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1.1 Delivery of Documents. Preferred Stockholder hereby agrees to
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deliver to the Company, immediately prior to the Effective Time, (a) any
and all stock certificates representing the Covered Preferred Shares, and
(b) a validly executed notice of conversion, substantially in the form
attached hereto as Exhibit A, requesting the conversion of the Covered
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Preferred Shares into Common Stock (the "Conversion").
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1.2 Conversion. In accordance with Section 5 of the Certificate of
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Designations, the Company shall cause the Conversion to be effective immediately
prior to the Effective Time; provided, however, that if the Merger Agreement is
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terminated prior to the Effective Time in accordance with its terms, then, as
promptly as reasonably practicable after such termination, but in no event later
than five Business Days following such termination, the Company shall issue to
Preferred Stockholder a certificate or certificates representing the Covered
Preferred Shares without giving effect to the Conversion.
1.3 Voting. Except as set forth in Section 7.2 hereof, Preferred
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Stockholder hereby agrees that, prior to any termination of this Agreement, at
any meeting of the stockholders of the Company, however called, Preferred
Stockholder shall (a) vote (or cause to be voted) the Covered Preferred Shares
and any Covered Shares in favor of the Merger and any other matter necessary for
consummation of the Transactions, and (b) vote (or cause to be voted) the
Covered Preferred Shares and any Covered Shares against any proposal for any
recapitalization, reorganization, liquidation, merger, sale of assets or other
business combination between the Company and any other Person (other than the
Merger).
1.4 Proxy. Preferred Stockholder hereby grants to Parent a proxy to vote
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the Covered Preferred Shares and any Covered Shares as indicated in Section 1.3
above. Preferred Stockholder intends this proxy to be irrevocable and coupled
with an interest and will take such further action or execute such other
instruments as may be reasonably necessary to effectuate the intent of this
proxy and hereby revokes any proxy previously granted by him with respect to the
Covered Preferred Shares or any Covered Shares.
1.5 Except as set forth in Section 1.3 hereof, Preferred Stockholder shall
not be restricted from voting in favor of, against or abstaining with respect to
any matter presented to the stockholders of the Company. In addition, nothing in
this Agreement shall give Parent or Merger Sub the right to vote any Covered
Preferred Shares or any Covered Shares in connection with the election of
directors.
2. Expiration. This Agreement shall terminate on the Expiration Date. As
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used herein, the term "Expiration Date" means the first to occur of (a) the
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Effective Time, (b) termination of the Merger Agreement in accordance with its
terms, (c) Xxxxx 0, 0000, (x) written notice of termination of this Agreement by
Parent to Stockholder, or (e) the withdrawal or adverse modification by the
Board of its approval or recommendation of the Merger or the Merger Agreement.
3. Representations and Warranties.
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3.1 Representations and Warranties of Parent. Parent hereby represents
and warrants to Preferred Stockholder as follows:
(a) Due Authorization. The execution and delivery of this Agreement and the
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consummation of the transactions contemplated hereby have been duly and validly
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authorized by the Board of Directors of Parent, and no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against Parent 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 enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
(b) No Conflicts. Except for the applicable requirements of the
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Exchange Act (i) no filing with, and no permit, authorization, consent or
approval of, any state, federal or foreign governmental authority is necessary
on the part of Parent for the execution and delivery of this Agreement by Parent
and the consummation by Parent of the transactions contemplated hereby and (ii)
neither the execution and delivery of this Agreement by Parent nor the
consummation by Parent of the transactions contemplated hereby nor compliance by
Parent with any of the provisions hereof shall (A) conflict with or result in
any breach of any provision of the certificate of incorporation or by-laws (or
similar documents) of Parent, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which Parent is a party or by which it or any of its
properties or assets may be bound or (C) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent or any of its
properties or assets, except in the case of (B) or (C) for violations, breaches
or defaults which would not in the aggregate materially impair the ability of
Parent to perform its obligations hereunder.
(c) Valid Existence. Parent is a corporation duly organized and
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validly existing under the laws of the Cayman Islands and has all requisite
corporate power and authority to execute and deliver this Agreement.
3.2 Representations and Warranties of Preferred Stockholder. Preferred
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Stockholder hereby represents and warrants to Parent and Merger Sub as follows:
(a) Ownership of Securities. As of the date hereof, (i) the Owned
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Preferred Shares and the Owned Common Shares constitute all of the Securities
owned of record or beneficially by Preferred Stockholder, and (ii) Preferred
Stockholder has sole voting power and sole power of disposition with respect to
all such Owned Preferred Shares and Owned Common Shares, with no restrictions,
subject to applicable federal securities laws, on Preferred Stockholder's rights
of disposition pertaining thereto (other than as created by this Agreement, the
Merger Agreement, or the Certificate of Designations).
(b) Power; Binding Agreement. This Agreement has been duly and validly
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authorized, executed and delivered by Preferred Stockholder and constitutes a
valid and binding agreement of Preferred Stockholder, enforceable against
Preferred Stockholder 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 enforcement of creditor's rights generally
and (ii) is subject to general principles of equity.
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(c) No Conflicts. To the knowledge of Preferred Stockholder, except
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for the applicable requirements of the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any state, federal or foreign
governmental authority on the part of Preferred Stockholder is necessary for the
execution and delivery of this Agreement by Preferred Stockholder and the
consummation by Preferred Stockholder of the transactions contemplated hereby
and (ii) neither the execution and delivery of this Agreement by Preferred
Stockholder nor the consummation by Preferred Stockholder of the transactions
contemplated hereby nor compliance by Preferred Stockholder with any of the
provisions hereof shall (A) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which Preferred Stockholder is a party or by which it or any of
its properties or assets may be bound or (B) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Preferred
Stockholder or any of its properties or assets, except in the case of (A) or (B)
for violations, breaches or defaults which would not in the aggregate materially
impair the ability of Preferred Stockholder to perform his obligations
hereunder.
(d) Accredited Investor. Preferred Stockholder is an "accredited
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investor" (as defined under the Securities Act) and a sophisticated investor, is
capable of evaluating the merits and risks of its investments and has the
capacity to protect its own interests.
4. Certain Covenants of Preferred Stockholder. Except in accordance
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with the terms of this Agreement, Preferred Stockholder hereby covenants and
agrees as follows:
4.1 No Solicitation. Prior to any termination of this Agreement,
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subject to Section 7.2 hereof, Preferred Stockholder shall not, directly or
indirectly, solicit (including by way of furnishing information) any inquiries
or the making of any proposal by any Person or entity (other than Parent or any
affiliate of Parent) which constitutes, or would lead to, any Acquisition
Proposal. If Preferred Stockholder receives an inquiry or proposal with respect
to the sale of Securities, then Preferred Stockholder shall promptly inform
Parent of the terms and conditions, if any, of such inquiry or proposal and the
identity of the Person making it. Preferred Stockholder will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted prior to the date of this Agreement with respect to
any of the foregoing.
4.2 Restriction on Transfer, Proxies and Non-Interference. Except as
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set forth in Section 7.2 hereof, Preferred Stockholder hereby agrees, while this
Agreement is in effect, and except as contemplated hereby, not to (a) sell,
transfer, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the sale,
transfer, pledge, encumbrance, assignment or other disposition of, any of the
Securities; (b) grant any proxies, deposit any Securities into a voting trust or
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enter into a voting agreement with respect to any Securities; or (c) knowingly
take any action that would make any representation or warranty of Preferred
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling Preferred Stockholder from performing its obligations
under this Agreement.
5. Further Assurances. From time to time, at the other party's request
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and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective the transactions contemplated by
this Agreement.
6. Stop Transfer Order. In furtherance of this Agreement, concurrently
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herewith, Preferred Stockholder shall and hereby does authorize the Company's
counsel to notify the Company's transfer agent that there is a stop transfer
order with respect to all of the Securities (and that this Agreement places
limits on the voting and transfer of such Securities).
7. Miscellaneous.
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7.1 Entire Agreement; Assignment. This Agreement (a) constitutes the
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entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof, and (b) shall not
be assigned by operation of law or otherwise, provided that Parent may assign
its rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
7.2 Permitted Transfers. Notwithstanding anything in this Agreement to
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the contrary, Preferred Stockholder may transfer any or all of the Securities,
in accordance with provisions of applicable Law, to Preferred Stockholder's
spouse, ancestors, descendants or any trust for any of their benefits or to a
charitable trust; provided, however, that, prior to and as a condition to the
effectiveness of such transfer, each Person to which any of such Securities or
any interest in any of such Securities is or may be transferred shall have
executed and delivered to Parent and Merger Sub a counterpart of this Agreement
pursuant to which such Person shall be bound by all of the terms and provisions
of this Agreement, and shall have agreed in writing with Parent and Merger Sub
to hold such Securities or interest in such Securities subject to all of the
terms and provisions of this Agreement.
7.3 Amendments. This Agreement may not be modified, amended, altered
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or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
7.4 Notices. All notices, requests, claims, demands and other
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communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telecopy or
mail (registered or certified mail, postage prepaid, return receipt requested)
or by any courier service, such as United Parcel Service, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Preferred Stockholder:
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Copy to:
If to Parent:
chinadotcom corporation
00/X Xxxxxxxx Xxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx Xxx
Xxxx Xxxx
Telecopier No: 011-852-2237-7227
Attention: General Counsel
Copy to:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
If to the Company:
Xxxx Systems, Inc.
Xxx Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopier No: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Copy to:
King & Spalding LLP
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopier No: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
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7.5 Governing Law. This Agreement shall be governed by and construed
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in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
7.6 Specific Performance. Each of the parties hereto recognizes and
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acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
7.7 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same Agreement.
7.8 Descriptive Headings. The descriptive headings used herein are
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inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
7.9 Severability. Whenever possible, each provision or portion of any
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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 or rule 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 herein.
7.10 Non-survival of Representations and Warranties. The respective
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representations and warranties of Preferred Stockholder and Parent contained
herein shall not survive the closing of the transactions contemplated hereby and
by the Merger Agreement.
7.11 No Control. Nothing contained in this Agreement shall give Parent
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or Merger Sub the right to control or direct the Company or the Company's
operations.
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IN WITNESS WHEREOF, Parent, the Company and Preferred Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
CHINADOTCOM CORPORATION
By: /s/ Xxxxxx Xxxxxxxxxx
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Name: Xxxxxx Xxxxxxxxxx
Title: Chief Financial Officer
XXXX SYSTEMS, INC.
By:/s/ J. Xxxxxxx Xxxxxx
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Name: J. Xxxxxxx Xxxxxx
Title: Chief Executive Officer
/s/ Xxxxxxxx X. Xxxxxxxx, III
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Xxxxxxxx X. Xxxxxxxx, III
