SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER BY AND AMONG AFFINITY MEDIA INTERNATIONAL CORP. AFFINITY ACQUISITION SUBSIDIARY CORP. AND HOTELS AT HOME, INC. DATED AS OF MAY 7, 2008
Exhibit
2.1
SECOND
AMENDMENT TO
BY
AND AMONG
AFFINITY
MEDIA INTERNATIONAL CORP.
AFFINITY
ACQUISITION SUBSIDIARY CORP.
AND
HOTELS
AT HOME, INC.
DATED
AS OF MAY 7, 2008
SECOND
AMENDMENT
TO AGREEMENT AND PLAN OF MERGER
THIS
SECOND AMENDMENT (this “Second
Amendment”)
to the
Agreement and Plan of Merger dated as of July 24, 2007 (the “Initial
Merger Agreement”),
as
amended on January 14, 2008 (the “First
Amendment”,
and,
together with the Initial Merger Agreement, the “Amended
Merger Agreement”)
by and
among Hotels at Home, Inc., a Delaware corporation (the “Company”),
Xxxxx
Xxxx, in her capacity as a shareholder and representative of the shareholders
of
the Company (the “Stockholders’
Representative”),
Xxxxxxx Xxxx, a shareholder of the Company, Xxxxxxx Xxxxxx, a shareholder of
the
Company, Affinity Media International Corp., a Delaware corporation
(“Parent”),
and
Affinity Acquisition Subsidiary Corp., a Delaware corporation and wholly-owned
subsidiary of Parent (the “Merger
Subsidiary”),
is
entered into by the parties hereto as of May 7, 2008.
RECITALS:
A. Parent,
the Merger Subsidiary, the Company, Stockholders’ Representative, Xxxxxxx Xxxx,
Xxxxx Xxxx and Xxxxxxx Xxxxxx entered into the Initial Merger Agreement pursuant
to which Parent will acquire all of the issued and outstanding stock of the
Company as a result of the merger of the Company with and into the Merger
Subsidiary as a result of which the Merger Subsidiary will be the surviving
company and a direct, wholly-owned subsidiary of Parent.
B. Parent,
the Merger Subsidiary, the Company, Stockholders’ Representative, Xxxxxxx Xxxx,
Xxxxx Xxxx and Xxxxxxx Xxxxxx entered into the First Amendment, pursuant to
which the terms of the Initial Merger Agreement were amended and
modified.
C. Parent,
the Merger Subsidiary, the Company, Stockholders’ Representative, Xxxxxxx Xxxx,
Xxxxx Xxxx and Xxxxxxx Xxxxxx desire to amend and modify the Amended Merger
Agreement, as set forth in this Second Amendment.
D. The
boards of directors of each of Parent, the Merger Subsidiary and the Company
have determined that it is advisable and in the best interests of each of
Parent, the Merger Subsidiary and the Company, and their respective
shareholders, that the Amended Merger Agreement be amended and modified as
set
forth in this Second Amendment.
NOW,
THEREFORE, in consideration of the premises, the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1.
All
capitalized terms used and not defined herein shall have the meanings ascribed
thereto in the Amended Merger Agreement.
2. The
definition of “Earn-out
Shares”
in
Section 1.1 of the Amended Merger Agreement is hereby amended in its entirety
to
read as follows:
“Earn-out
Shares”
means
up to 2,250,000 shares of Parent Common Stock as determined in accordance with
Section 9.8 hereof.
3. The
definition of “Stock
Consideration”
in
Section 1.1 of the Amended Merger Agreement is hereby amended in its entirety
to
read as follows:
“Stock
Consideration”
shall
mean 2,281,571 shares of Parent Common Stock.
4. The
definition of “Cash
Consideration”
in
Section 1.1 of the Amended Merger Agreement is hereby amended in its entirety
to
read as follows:
“Cash
Consideration”
means
$15,000,000.
5. Section
3.1(f) is hereby deleted in its entirety.
6. Article
9
of the Amended Merger Agreement is hereby amended by restating Section 9.8
to
read in its entirety as follows:
9.8 Earn-out
Shares to the Stockholders.
In
the
event that the Surviving Company shall achieve Net Income for its fiscal years
ending December 31, 2008, 2009 and 2010 as set forth below, then the Surviving
Company shall deliver, on or before one hundred twenty (120) days after the
end
of each such fiscal year, to the Stockholders a number of shares of Parent
Common Stock, allocated to each Stockholder in accordance with the Allocation
Agreement as amended, equal to the applicable amount of the Earn-out Shares
as
set forth below:
|
Fiscal
Year Ending
|
Net
Income
|
Earn-out
Shares Payable
|
||
|
December
31, 2008
|
at
least $2,800,000
|
750,000
shares of Parent Common Stock
|
||
|
December
31, 2009
|
at
least $3,300,000 for fiscal year 2009 or at least $6,100,000 for
fiscal
years 2008 and 2009 on a cumulative basis
|
750,000
shares of Parent Common Stock1
|
||
|
December
31, 2010
|
at
least $3,900,000 for fiscal year 2010 or at least $10,000,000 for
fiscal
years 2008, 2009 and 2010 on a cumulative basis
|
750,000
shares of Parent Common Stock2
|
1
1,500,000 shares of Parent Common Stock, less any Earn Out Shares that have
been
issued to date, if Net Income is at least $6,100,000 for fiscal years 2008
and
2009 on a cumulative basis. In addition, if Net Income is at least $3.3 million
for the fiscal year ending December 31, 2009 (“Year 2”) and no Earn Out Shares
have been issued to date, then the Stockholders shall be entitled to a pro
rata
portion of the 2008 Earn-Out Shares, based upon the cumulative Net Income
earned
in the fiscal years ending December 31, 2008 (“Year 1”) and Year 2. For example,
if Year 1 Net Income is $2.4 million and Year 2 Net Income is $3.3 million,
then
the Stockholders would be entitled to 700,820 of the Year 1 Earn Out Shares
in
addition to the Year 2 Earn Out Shares.
2 2,250,000
shares of Parent Common Stock, less any Earn Out Shares that have been issued
to
date, if Net Income is at least $10,000,000 for fiscal years 2008, 2009 and
2010
on a cumulative basis. In addition, if Net Income is at least $3.9 million
for
the fiscal year ending December 31, 2010 (“Year 3”) and no Earn Out Shares have
been issued to date, then the Stockholders shall be entitled to a pro rata
portion of the 2008 and 2009 Earn-Out Shares, based upon the cumulative Net
Income earned in Year 1, Year 2 and Year 3. For example, if Year 1 Net Income
is
$2.4 million, Year 2 Net Income is $3.1 million and Year 3 Net Income is
$3.9
million, then the Stockholders would be entitled to 1,410,000 of the Year
1 and
Year 2 Earn Out Shares in addition to the Year 3 Earn Out
Shares.
7. Article
2(a) of each of the Employment Agreements of in the form of Exhibits B, C and
D
to the Initial Merger Agreement is hereby amended to provide that each
Employee
shall be paid a base
salary during the term at the rate of One Hundred Twenty Five Thousand Dollars
($125,000).
8. Article
2(c) of each of the Employment Agreements in the form of Exhibits B, C and
D to
the Initial Merger Agreement is hereby amended to provide that each Employee
shall be eligible to receive an annual performance bonus of up to 50.0% of
the
Base Salary for each year of the term of such Employment Agreement; provided,
however that the Board of Directors of Parent may, in its discretion, determine
to award an Employee an annual performance bonus in an amount in excess of
50.0%
of the Base Salary.
9. Article
2(g) of the Employment Agreement in the form of Exhibit D to the Initial Merger
Agreement is hereby amended to provide that the Warrants to which Employee
is
entitled shall have an exercise price of $5.60.
10. Parent
will enter into an amendment to the agreement with each of Messrs. Xxxxx, Xxxx
and Xxxxxxxxxx with respect to the incentive shares to which each are entitled
such that if,
at
any time within five years of the consummation of a business combination,
Parent’s publicly-traded common stock reaches a volume weighted average trading
price of $4.60 per share for each day during any five day period, Messrs. Xxxxx,
Xxxx and Xxxxxxxxxx will receive warrants allowing them to purchase an aggregate
of 200,000 shares of Parent’s common stock for $.10 per share. If, at any time
within five years of the consummation of a business combination, Parent’s
publicly-traded common stock reaches a volume weighted average trading price
of
$5.60 per share for each day during any five day period, these same persons
will
receive warrants allowing them to purchase an additional 227,000 shares in
the
aggregate of our common stock, also for $.10 per share. All such warrants will
be exercisable for a period of five years from the date on which they are
granted.
11. Parent
shall cause, on or before the Closing, the below-named stockholders of Parent
to
forfeit the following number of shares of common stock to Parent:
|
Stockholder
|
Number
of Shares
|
|||
|
Xxxxx
Xxxxx
|
341,666
|
|||
|
Xxxxxx
Xxxx
|
200,000
|
|||
|
Xxxxxxx
Family Trust
|
41,667
|
|||
|
Xxxxx
Xxxxx
|
41,667
|
|||
|
Total
|
625,000
|
|||
12. Parent
has obtained the consent of Maxim to convert $400,000 of the contingent
underwriting compensation to which it is entitled upon the consummation of
the
business combination into shares of Parent common stock at a price per share
of
$ $5.70, or 70,175 shares.
13. Parent
has obtained the consent of PFK Development Group to waive any and all of its
fees, including the $214,260 cash and $185,740 stock fees, to which it is
entitled upon the consummation of a business combination pursuant to that
certain advisory agreement dated July 2, 2007.
14. The
Board
of Directors of Parent has authorized and approved, subject to the
execution of this Second Amendment, a distribution in the form of cash and
stock
to be distributed to stockholders of Parent as of the record date of June 16,
2008 as follows:
A. 800,000
shares of Parent common stock shall be distributed to all stockholders of
record, pro rata; and
B. $2.6
million in cash shall be distributed (the “Cash Distribution”) to all
stockholders of record, pro rata; provided, however, that the Cash Distribution
shall not be distributed with respect to the 625,000 of
shares
(the “Founding Shares”) held by the founding stockholders of Parent, which were
purchased in August 2005 for an aggregate amount of $25,000 in cash, at an
average purchase price of approximately $0.04 per share, and the stock dividend
of .2 shares of common stock declared for each Founding Share.
Notwithstanding
the foregoing, the Stockholders hereby waive, and shall not be entitled to,
receive any shares or cash in connection with the foregoing
distributions.
15. Parent
has agreed, if the Amended Merger Agreement is approved, to extend the date
upon
which the warrants issued in the IPO expire by one year, to June 4,
2011.
16. The
parties hereto hereby ratify and reaffirm the Amended Merger Agreement, as
amended and modified by this Second Amendment.
17. The
parties hereto agree that all of the provisions of Article 10 - General
Provisions of the Initial Merger Agreement are hereby incorporated by reference
into this Second Amendment and shall fully apply to this Second Amendment as
if
such provisions were set forth in this Second Amendment.
*
* *
*
[Remainder
of Page Left Blank - Signature Page Follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Second Amendment as
of
the date first above-written.
|
COMPANY:
|
|||
|
Hotels
At Home, Inc.
|
|||
|
By:
|
/s/
Xxxxxxx Xxxx
|
||
|
Name:
Xxxxxxx Xxxx
|
|||
|
Title:
President
|
|||
|
STOCKHOLDERS’
REPRESENTATIVE:
|
|||
|
/s/
Xxxxx Xxxx
|
|||
|
Xxxxx
Xxxx
|
|||
|
STOCKHOLDERS:
|
|||
|
/s/
Xxxxx Xxxx
|
|||
|
Xxxxx
Xxxx
|
|||
|
/s
Xxxxxxx Xxxx
|
|||
|
Xxxxxxx
Xxxx
|
|||
|
/s/
Xxxxxxx Xxxxxx
|
|||
|
Xxxxxxx
Xxxxxx
|
|||
[Signature
Page to Second Amendment to Agreement and Plan of Merger]
|
PARENT:
|
|||
|
Affinity
Media International Corp.
|
|||
|
By:
|
/s/
Xxxxx Xxxxx
|
||
|
Name:
Xxxxx Xxxxx
|
|||
|
Title:
Chief Executive Officer
|
|||
|
MERGER
SUBSIDIARY:
|
|||
|
Affinity
Acquisition Subsidiary Corp.
|
|||
|
By:
|
/s/
Xxxxxx Xxxx
|
||
|
Name:
Xxxxxx Xxxx
|
|||
|
Title:
President
|
|||
The
undersigned hereby acknowledge and agree to the provisions of Article 11 of
the
foregoing Second Amendment:
|
/s/
Xxxxx Xxxxx
|
/s/
Xxxxx Xxxxx
|
|||
|
Xxxxx
Xxxxx
|
Xxxxx
Xxxxx
|
|||
|
/s/
Xxxxxx Xxxx
|
Xxxxxxx
Family Trust
|
|||
|
Xxxxxx
Xxxx
|
||||
|
By:
|
/s/
Xxxx Xxxxxxx
|
|||
|
Name:
Xxxx Xxxxxxx
|
||||
|
Title:
Trustee
|
||||
[Signature
Page to Second Amendment to Agreement and Plan of Merger]
