EXECUTION COPY
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
By and among
AUTO DATA NETWORK INC.,
CAR PARTS TECHNOLOGIES ACQUISITION INC.,
and
CARPARTS TECHNOLOGIES, INC.
Dated as of August 2, 2004
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
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SECTION 1.01 Definitions.......................................................................1
ARTICLE II THE MERGER 7
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SECTION 2.01 The Merger........................................................................7
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SECTION 2.02 Effective Time; Closing...........................................................7
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SECTION 2.03 Effect of the Merger..............................................................7
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SECTION 2.04 Certificate of Incorporation; By-laws.............................................8
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SECTION 2.05 Directors and Officers............................................................8
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SECTION 2.06 Conversion of Securities..........................................................8
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SECTION 2.07 [INTENTIONALLY OMITTED]..........................................................10
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SECTION 2.08 Employee Stock Options, Company Warrants, Company Preferred Stock and
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Other Securities.................................................................10
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SECTION 2.09 Exchange of Certificates; Escrow.................................................11
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SECTION 2.10 Appraisal Rights.................................................................12
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SECTION 2.11 Stock Transfer Books.............................................................13
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................13
SECTION 3.01 Organization and Qualification; Subsidiaries.....................................13
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SECTION 3.02 Certificate of Incorporation and By-laws.........................................14
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SECTION 3.03 Capitalization...................................................................14
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SECTION 3.04 Authority Relative to this Agreement.............................................15
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SECTION 3.05 No Conflict; Required Filings and Consents.......................................15
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SECTION 3.06 Permits; Compliance..............................................................16
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SECTION 3.07 Financial Statements; Absence of Certain Changes.................................16
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SECTION 3.08 Absence of Litigation............................................................17
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SECTION 3.09 Property and Leases..............................................................17
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SECTION 3.10 Intellectual Property............................................................18
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SECTION 3.11 Taxes............................................................................19
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SECTION 3.12 Environmental Matters............................................................20
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SECTION 3.13 Insurance........................................................................20
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SECTION 3.14 Related Party Transactions.......................................................20
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SECTION 3.15 Company Material Contracts.......................................................20
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SECTION 3.16 Brokers..........................................................................21
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SECTION 3.17 Employee Benefit Plans...........................................................21
SECTION 3.18 Labor Matters....................................................................23
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT.............................................................24
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SECTION 4.01 Corporate Organization...........................................................24
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SECTION 4.02 Certificate of Incorporation and By-laws.........................................25
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SECTION 4.03 Capitalization...................................................................25
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SECTION 4.04 Authority Relative to this Agreement.............................................25
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SECTION 4.05 No Conflict; Required Filings and Consents.......................................26
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SECTION 4.06 Permits; Compliance..............................................................26
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SECTION 4.07 SEC Filings; Financial Statements................................................27
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SECTION 4.08 Absence of Litigation............................................................28
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SECTION 4.09 Property and Leases..............................................................28
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SECTION 4.10 Intellectual Property............................................................28
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SECTION 4.11 Taxes............................................................................29
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ARTICLE V ADDITIONAL AGREEMENTS.................................................................................30
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SECTION 5.01 Registration Statement...........................................................30
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SECTION 5.02 Proxy Statement..................................................................33
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SECTION 5.03 Appropriate Action; Consents; Filings............................................33
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SECTION 5.04 Access to Information; Confidentiality...........................................34
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SECTION 5.05 Indemnification and Insurance....................................................34
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SECTION 5.06 Notification of Certain Matters..................................................36
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SECTION 5.07 Claims for Parent Damages........................................................36
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SECTION 5.08 Listing Requirements.............................................................36
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SECTION 5.09 Authorized Capital Stock.........................................................37
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SECTION 5.10 Employee Carveout Plan...........................................................38
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ARTICLE VI TERMINATION, AMENDMENT AND WAIVER....................................................................38
SECTION 6.01 Termination......................................................................38
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SECTION 6.02 Effect of Termination............................................................38
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SECTION 6.03 Amendment........................................................................39
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SECTION 6.04 Waiver...........................................................................39
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SECTION 6.05 Sole Remedy......................................................................39
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ARTICLE VII GENERAL PROVISIONS..................................................................................39
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SECTION 7.01 Survival of Representations and Warranties.......................................39
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SECTION 7.02 Notices..........................................................................39
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SECTION 7.03 Severability.....................................................................40
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SECTION 7.04 Entire Agreement; Assignment.....................................................40
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SECTION 7.05 Parties in Interest..............................................................40
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SECTION 7.06 Specific Performance.............................................................40
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SECTION 7.07 Governing Law....................................................................40
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SECTION 7.08 Waiver of Jury Trial.............................................................41
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SECTION 7.09 Headings.........................................................................41
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SECTION 7.10 Counterparts.....................................................................41
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SECTION 7.11 Transaction Fees.................................................................41
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SECTION 7.12 Closing Efforts..................................................................41
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ii
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of August 2,
2004 (this "Agreement"), by and among Auto Data Network Inc., a Delaware
corporation ("Parent"), Car Parts Technologies Acquisition Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and CarParts
Technologies, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto desire to effectuate a transaction pursuant to
which the Company shall merge with and into Merger Sub and Merger Sub shall
continue as the surviving corporation (the "Merger") in accordance with the
General Corporation Law of the State of Delaware ("Delaware Law");
WHEREAS, the Board of Directors of the Company (the "Board") has (i)
determined that the Merger is fair to the holders of Shares (as defined in
Section 2.06(a)) and is in the best interests of such stockholders and (ii)
approved this Agreement and the transactions contemplated hereby and unanimously
has recommended that the stockholders of the Company adopt this Agreement;
WHEREAS, the Board of Directors of each of Parent and Merger Sub has
approved and adopted this Agreement and the transactions contemplated hereby;
WHEREAS, as an inducement to Parent and Merger Sub to enter into this
Agreement, the Sellers identified on the Schedule I hereto have entered into an
Escrow Agreement with Parent, the Merger Sub, the Company and The Bank of New
York, as escrow agent (the "Escrow Agent"), dated as of August 6, 2004 (the
"Escrow Agreement"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. (a) For purposes of this Agreement:
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"Agreement" shall have the meaning set forth in the Preamble.
"Balance Sheet" shall have the meaning set forth in Section
3.07(b).
"Board" shall have the meaning set forth in the Recitals.
"Capital Stock Penalty Warrant" shall have the meaning set
forth in Section 5.09.
"Capital Stock Warrant Issuance Trigger Date" shall have the
meaning set forth in Section 5.09.
"Cash Payment" shall have the meaning set forth in Section
2.06(f).
"Certificate of Merger" shall have the meaning set forth in
Section 2.02.
"Certificates" shall have the meaning set forth in Section
2.09(a).
"Claim Certificate" shall have the meaning set forth in
Section 5.07(c).
"Claim Dispute" shall have the meaning set forth in Section
5.07(b).
"Claim Notice" shall have the meaning set forth in Section
5.07(a).
"Closing Date" shall have the meaning set forth in Section
2.02.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Action" shall have the meaning set forth in Section
3.08.
"Company Audited Financial Statements" means the consolidated income
statements of the Company and its Subsidiaries, if any, for the fiscal years
ended December 31, 2003 and December 31, 2002, and the consolidated balance
sheets of the Company and its Subsidiaries, if any, as at the end of each such
period, in each case prepared by the Company and its Subsidiaries, which have
been audited and reported upon by the Company's independent certified public
accountants. The Company Audited Financial Statements shall have been prepared
by the Company on the basis of the books and records maintained by the Company
and its subsidiaries in the ordinary course of business in a manner consistently
used and applied throughout the period involved. The Company Audited Financial
Statements shall have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto), and each shall fairly present, in all material respects, the
consolidated financial position and results of operations of the Company and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein. By delivering financial statements to
Parent and designating them Company Audited Financial Statements, Company shall
be deemed to represent that the same constitute the Company Audited Financial
Statements as defined herein.
"Company Common Stock" shall have the meaning set forth in Section
2.06(a).
"Company Disclosure Schedules" means the disclosure schedules referred to
herein and delivered by the Company to Parent on the date hereof.
"Company Indemnified Parties" shall have the meaning set forth in Section
5.05(a).
"Company Intellectual Property" shall mean any Intellectual Property that
was conceived or developed by an employee of the Company during his/her term of
employment with the Company or is otherwise owned by the Company.
"Company Material Contracts" shall have the meaning set forth in Section
3.15(b).
"Company Permits" shall have the meaning set forth in Section 3.06.
"Company Preferred Stock" shall have the meaning set forth in Section
2.06(a).
"Company Required Approvals" shall have the meaning set forth in Section
3.05(b).
"Company Stock Option Plans" shall have the meaning set forth in Section
2.08(a).
"Company Warrants" shall have the meaning set forth in Section 2.08(c).
"Confidentiality Agreement" shall have the meaning set forth in Section
5.04(b).
2
"control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"CORE Carveout Payment" shall mean $88,250.
"Delaware Law" shall have the meaning set forth in the Recitals.
"Effective Time" shall have the meaning set forth in Section 2.02.
"Employee Carveout Payment" shall mean $176,500.
"Employee Carveout Plan" shall mean that certain plan to be adopted by the
Company, which shall be reasonably acceptable to the participants thereunder.
"Environmental Laws" means any United States federal, state, local or
non-United States laws or regulations in effect as of the date hereof relating
to (i) releases or threatened releases of Hazardous Substances or materials
containing Hazardous Substances; (ii) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials containing
Hazardous Substances; or (iii) pollution or protection of the environment,
health or natural resources.
"Environmental Permits" shall have the meaning set forth in Section 3.12.
"Escrow Agent" shall have the meaning set forth in the Recitals.
"Escrow Agreement" shall have the meaning set forth in the Recitals.
"Escrow Amounts" shall have the meaning set forth in Section 2.09(g).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Extension Period" shall have the meaning set forth in Section
5.01(a)(1).
"Financial Statements" shall have the meaning set forth in Section
3.07(a).
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means any: (i) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or
other government; (iii) governmental or quasi governmental authority of any
nature (including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality, officer,
official, representative, organization, unit, body or entity and any court or
other tribunal); (iv) multinational organization or body; or (v) individual,
entity or body exercising, or entitled to exercise, any executive, legislative,
judicial, administrative, regulatory, police, military or taxing authority or
power of any nature.
"Hazardous Substances" means (i) those substances defined in or regulated
as hazardous or toxic substances, materials or wastes under any applicable
Environmental Law; (ii) petroleum and petroleum products, including crude oil
and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures
thereof; (iv) polychlorinated biphenyls, asbestos and radon; and (v) any other
contaminant.
3
"Indemnified Parties" means, collectively, the Company Indemnified Parties
and the Parent Indemnified Parties.
"Initial Certificate of Designations" means the Certificate of
Designations, Preferences and Rights of Series D-1 Convertible Preferred Stock
of Parent substantially in the form attached hereto as Exhibit A-1, which shall
set forth the rights, preferences and privileges of the Initial Junior Preferred
Stock.
"Initial Junior Preferred Stock" means the capital stock of Parent
designated as Series D-1 Convertible Preferred Stock of Parent in the Initial
Certificate of Designations.
"Initial Merger Consideration Payment" shall have the meaning set forth in
Section 2.06(b).
"Initial Valuation Amount" shall have the meaning set forth in Section
2.06(b).
"Intellectual Property" shall mean each of the following, and all of the
following, and all rights in, arising out of, or associated therewith: (A) all
United States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (B) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists; (C) all copyrights,
copyright registrations and applications therefor and all other rights
corresponding thereto throughout the world; (D) all industrial designs and any
registrations and applications therefor throughout the world; (E) all trade
names, logos, common law trademarks and service marks; trademark and service
xxxx registrations and applications therefor and all goodwill associated
therewith throughout the world; (F) all computer software including all source
code, object code, firmware, development tools, files records and data, all
media on which any of the foregoing is recorded; and (H) all internet addresses,
sites and domain names.
"knowledge of the Company" means the actual knowledge of the Company and
the actual knowledge of the Company's executive officers, and the knowledge such
executive officers should reasonably have after due inquiry.
"Laws" means any United States or non-United States statute, law,
ordinance, regulation, rule, code, executive order, injunction, judgment, decree
or other order.
"Liens" shall have the meaning set forth in Section 3.01(b).
"Loan and Security Agreement" shall mean that certain Loan and Security
Agreement of even date herewith by and between Parent, the Company and certain
of its Subsidiaries.
"material adverse change" or "material adverse effect" shall have the
meaning set forth in Section 3.01(a).
"Merger" shall have the meaning set forth in the Recitals. "Merger
Consideration" shall have the meaning set forth in Section 2.06(a).
"Merger Consideration Setoff" shall have the meaning set forth in Section
5.07(c).
4
"Merger Notes" shall have the meaning set forth in Section 2.06(c).
"Merger Shares" means the shares of Parent's securities issued or issuable
as the Merger Consideration in accordance with Sections 2.06(a), (b) and (c)
herein.
"Merger Sub" shall have the meaning set forth in the Preamble.
"Note(s)" shall mean (i) the Note or Notes issued by the Company to Parent
to reflect borrowings under the Loan and Security Agreement and (ii)) the
Amended and Restated Loan Agreement dated April 29, 2004 by and between the
Company and Parent.
"Original Agreement" shall have the meaning set forth in Section 6.01(a).
"Outstanding Loan Amount" shall equal any amount of principal outstanding
on the Note(s) at the Effective Time.
"Parent" shall have the meaning set forth in the Preamble.
"Parent Action" shall have the meaning set forth in Section 4.08.
"Parent Capital Increase Amendment" shall have the meaning set forth in
Section 5.09.
"Parent Capital Increase Extension Period" shall have the meaning set
forth in Section 5.09.
"Parent Common Stock" means the common stock, $0.01 par value per share,
of Parent.
"Parent Damages" shall have the meaning set forth in Section 5.05(b).
"Parent Disclosure Schedules" means the disclosure schedules referred to
herein and delivered by Parent to the Company on the date hereof.
"Parent Indemnified Parties" shall have the meaning set forth in Section
5.05(b).
"Parent Junior Preferred Stock" means, collectively, the Initial Junior
Preferred Stock and the Subsequent Junior Preferred Stock.
"Parent Proxy Statement" shall have the meaning set forth in Section 5.02.
"Parent Permits" shall have the meaning set forth in Section 4.06.
"Parent Registered Intellectual Property" shall have the meaning set forth
in Section 4.10(a)(i).
"Parent SEC Reports" shall have the meaning set forth in Section 4.07(a).
"Penalty Warrant" shall have the meaning set forth in Section 5.01(a)(3).
"Permitted Liens" shall have the meaning set forth in Section 3.09(a).
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
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"Registered Intellectual Property" means any Intellectual Property that is
the subject of an application, certificate, filing or registration issued by,
filed with, or recorded by, any state, government or other public legal
authority, including all United States, international and foreign: (A) patents,
patent applications (including provisional applications); (B) registered
trademarks, applications to register trademarks, intent-to-use applications, or
other registrations or applications related to trademarks; and (C) registered
copyrights and applications for copyright registration.
"Registrable Securities" shall have the meaning set forth in Section
5.01(a)(1).
"Registration Effectiveness Extension Period" shall have the meaning set
forth in Section 5.01(a)(2).
"Registration Statement" shall have the meaning set forth in Section
5.01(a)(1).
"SEC" means the United States Securities and Exchange Commission. ---
"Second Merger Consideration Payment" shall have the meaning set forth in
Section 2.06(c).
"Second Valuation Amount" shall have the meaning set forth in Section
2.06(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" shall have the meaning set forth in Section 5.01(b).
"Sellers' Representative" shall mean Rho Management Trust I, as
representative for the Sellers, to take any action required to be taken by such
Sellers under this Agreement, including, without limitation, receiving of any
notices and the right to waive, modify or amend any and all actions taken by the
Sellers' Representative on each such holder's behalf.
"Settlement Agreement" shall have the meaning set forth in Section
2.06(a)(A)(ii).
"Shares" shall have the meaning set forth in Section 2.06(a).
"Subsequent Certificate of Designations" means the Certificate of
Designations, Preferences and Rights of Series D-2 Convertible Preferred Stock
of Parent substantially in the form attached hereto as Exhibit A-2, which shall
set forth the rights, preferences and privileges of the Subsequent Junior
Preferred Stock.
"Subsequent Junior Preferred Stock" means the capital stock of Parent
designated as Series D-2 Convertible Preferred Stock of Parent in the Subsequent
Certificate of Designations.
"Subsidiary" or "Subsidiaries" of the Company, the Surviving Corporation,
Parent or any other person means an entity controlled by such person, directly
or indirectly, through one or more intermediaries.
"Surviving Corporation" shall have the meaning set forth in Section 2.01.
"Tail Policy Deduction" shall have the meaning set forth in Section
5.05(e).
6
"Tax" or "Taxes" means (i) means all taxes, however, denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state or local
government or any agency or political subdivision of any such government, which
taxes shall include, without limiting the generality of the foregoing, all
income or profits taxes (including, but not limited to, federal income taxes and
state income taxes), payroll and employee withholding taxes, unemployment
insurance, social security taxes, sales and use taxes, ad valorem taxes, excise
taxes, franchise taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation, and other obligations of the same or of a
similar nature to any of the foregoing, which are required to be paid, withheld
or collected, (ii) any liability for payment of amounts described in clause (i)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (iii) any liability for the payment of amounts described
in clauses (i) or (ii) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person.
"Tax Returns" means all reports, estimates, declarations of estimated Tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
"Transaction Fees" shall have the meaning set forth in Section 7.11.
"Warrant Issuance Trigger Date" shall have the meaning set forth in
Section 5.01(a)(3).
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. In accordance with Delaware Law and subject to
and upon the terms and conditions of this Agreement, at the Effective Time (as
hereinafter defined), the Company shall be merged with and into Merger Sub. As a
result of the Merger, the separate corporate existence of the Company shall
cease and Merger Sub shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 2.02 Effective Time; Closing. On the Closing Date (as defined
below), the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as is required by, and executed in
accordance with, the relevant provisions of Delaware Law (the date and time of
such filing being the "Effective Time"). Unless mutually agreed to by the
parties hereto, the closing shall occur on August 6, 2004 (the "Closing Date"),
at the offices designated by Parent.
SECTION 2.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of the Company and Merger Sub shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
7
SECTION 2.04 Certificate of Incorporation; By-laws.
(a) At the Effective Time, the certificate of incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such certificate of incorporation.
(b) At the Effective Time, the by-laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation until thereafter amended as provided by Delaware Law, the
certificate of incorporation of the Surviving Corporation and such by-laws.
SECTION 2.05 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until their earlier death,
resignation or dismissal. The Company shall cause the officers and directors of
the Company to submit their resignations to the Surviving Corporation as of the
Effective Time.
SECTION 2.06 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of their respective securities:
(a) Subject to Section 2.09, each share of Company Common Stock, par
value $0.01 per share (the "Company Common Stock" or the "Shares"), issued and
outstanding at the Effective Time (other than shares canceled pursuant to
Section 2.06(d), if any), assuming full conversion of all of the issued and
outstanding shares of preferred stock of the Company, par value $0.01 per share
("Company Preferred Stock") immediately prior to the Effective Time, including
all accrued and unpaid dividends thereon, shall be exchanged and converted
automatically into the right to receive the "Merger Consideration." The "Merger
Consideration" shall mean that number of shares of Parent Initial Junior
Preferred Stock and Parent Subsequent Junior Preferred Stock equal to the value
obtained by use of the following ratio:
(A) the numerator being Twelve Million Six Hundred Fifty Thousand
Dollars ($12,650,000) minus the sum of
(i) the Outstanding Loan Amount,
(ii) any payments made by the Parent in connection with the Guaranty
Agreement, dated as of June 27, 2003, whereby Parent has guaranteed
certain payment obligations of the Company's Subsidiary named in the
Amended and Restated Settlement Agreement and Release, dated as of
June 27, 2003, as amended to date (the "Settlement Agreement"),
excluding payments of principal and interest which would otherwise
be payable by the Company in connection with the Guaranty Agreement
after the Closing Date,
(iii) the payment obligations of the Company in the amount of One
Million Dollars ($1,000,000) pursuant to the Settlement Agreement,
as amended to date, to fully satisfy such obligations to the former
stockholders of Xxxxxxxx BDG Corporation,
8
(iv) the CORE Carveout Payment,
(v) the Employee Carveout Payment,
(vi) the Cash Payment (as defined in Section 2.06(f) below),
(vii) to the extent applicable, the Tail Policy Deduction (as
defined in Section 5.05(b) herein), and
(viii) to the extent applicable, the Transaction Fees (as defined in
Section 7.11 herein).
(B) the denominator being the number of outstanding shares of
Company Common Stock on the Closing Date. For purposes of this Section 2.06,
Company Common Stock shall include all shares of Company Common Stock into which
Company Preferred Stock may be converted as of the Closing Date. The Company
hereby agrees that all outstanding shares of Company Preferred Stock shall be
converted into Company Common Stock at or prior to the Effective Time.
Notwithstanding anything to the contrary set forth in this Section 2.06(a), to
the extent the Company has not fully paid, as of the Closing Date, (i) the ADN
Carveout (as defined in the Settlement Agreement) to the stockholders of
Xxxxxxxx BDG pursuant to the Settlement Agreement or (ii) the CORE Carveout
Payments, all amounts necessary to fully satisfy each such obligation shall be
paid by Parent such that (i) the ADN Carveout shall be paid by Parent on
February 28, 2005, in cash or shares of tradeable Parent Common Stock having a
value equal to the closing price of Parent Common Stock on its principal trading
market on the immediately preceding day, the form of which payment shall be at
Parent's sole discretion, and (ii) the CORE Carveout Payments shall be paid by
Parent in two (2) installments on the Closing Date and February 28, 2005 in
accordance with Sections 2.06(b) and (c) below.
The Employee Carveout Payment shall be paid by Parent on February 28, 2005
pursuant to the terms and conditions of the Employee Carveout Plan; provided
that Parent shall have the absolute and sole discretion to make such payment in
cash or Parent Common Stock (based upon the Second Valuation Amount). In no
event shall Parent or Merger Sub make payments of the ADN Carveout, the CORE
Carveout Payments, the Employee Carveout Payments, the Initial Merger
Consideration Payment (as hereafter defined), and the Second Merger
Consideration Payment (as hereafter defined) in excess 9,799,955.
(b) At the Effective Time, fifty-five percent (55%) of the Merger
Consideration (the "Initial Merger Consideration Payment") shall be paid in
shares of Initial Parent Junior Preferred Stock with each share of Parent Junior
Preferred Stock having a value (the "Initial Valuation Amount") equal to the
30-day trailing average of the closing stock price of the Parent Common Stock
prior to the Effective Time on its principal trading market; provided that such
Initial Valuation Amount shall in no event exceed $3.70 or be less than $1.90.
(c) Subject to Section 5.07(c), on February 28, 2005, the remaining
forty-five percent (45%) of the Merger Consideration (the "Second Merger
Consideration Payment") shall be paid in shares of Subsequent Parent Junior
Preferred Stock having a value (the "Second Valuation Amount") equal to the
30-day trailing average of the closing stock price of Parent Common Stock prior
to February 28, 2005 on its principal trading market; provided, that the Second
Valuation Amount shall in no event exceed $3.70 or be less than $1.90.
Notwithstanding anything to the contrary set forth herein, any of the holders of
the Shares shall have the right, upon prior written notice delivered to the
Company or Parent no later than two (2) days before the Closing Date, to elect
to receive the Second Merger Consideration Payment on the Closing Date as an
unsecured convertible promissory note (the "Merger Notes"), in the form attached
hereto as Exhibit B.
9
(d) Each share of capital stock held in the treasury of the Company and
each share of capital stock otherwise owned by any Subsidiary of the Company
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, shall be canceled without any
conversion thereof and no payment or distribution shall be made with respect
thereto.
(e) Each share of common stock, par value $0.01 per share, of Merger Sub
issued and 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
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(f) Notwithstanding anything to the contrary set forth herein, the persons
listed on Exhibit C hereto, shall receive a cash payment (the "Cash Payment") on
the Effective Time in lieu of their respective portion of the Merger
Consideration, equal to the value of the Shares held by each such person based
upon the Initial Valuation Amount.
SECTION 2.07 [INTENTIONALLY OMITTED].
SECTION 2.08 Employee Stock Options, Company Warrants, Company Preferred
Stock and Other Securities.
(a) At the Effective Time, each outstanding option to purchase Shares
under any Company stock option, stock purchase, restricted stock, phantom stock
or similar plan (the "Company Stock Option Plans") that is not exercised on or
prior to the Closing Date, will terminate. Prior to the Closing Date, the
Company shall take any corporate action necessary to effectuate the foregoing
and the Company shall give any required notice to participants in the Company
Stock Option Plans of the cancellation of the plan, and that each participant
shall have the right to exercise his or her outstanding option(s) under the plan
in full.
(b) On or prior to the Effective Time, the Company shall take all action
that may be necessary (under the plans pursuant to which Company Options are
outstanding and otherwise) to effectuate the provisions of this Section 2.08 and
to ensure that, from and after the Effective Time, holders of Company Options
have no rights in connection with the Merger with respect thereto other than
those specifically provided in this Section 2.08.
(c) Except as set forth in Schedule 2.08 attached hereto, at the Effective
Time, each outstanding option to purchase Shares under any warrant (the "Company
Warrants") that is not exercised on or prior to the Closing Date, will
terminate. Prior to the Closing Date, the Company shall take any corporate
action necessary to effectuate the foregoing and the Company shall give any
required notice to holders of Company Warrants of the cancellation of such
Company Warrants, and each holder shall have the right to exercise his or her
Company Warrant in full.
(d) Except as set forth on Schedule 2.08 hereto, on or prior to the
Effective Time, the Company shall take any and all corporate action necessary to
cause each outstanding share of Company Preferred Stock, and any other security,
right or other instrument or agreement to acquire, directly or indirectly, any
security of the Company, whether by acquisition, exchange, exercise, conversion
or otherwise, which has not converted into shares of the Company Common Stock on
or prior to the Closing Date, to terminate or otherwise cease to be outstanding,
without any monetary or other claim against the Company or its assets or Parent
or Merger Sub, as of the Closing Date.
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SECTION 2.09 Exchange of Certificates; Escrow.
(a) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent shall cause the Escrow Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
Parent, and shall be in customary form) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the right to receive
the Merger Consideration or Cash Payment, as the case may be. Upon surrender to
the Escrow Agent of a Certificate for cancellation, together with such letter of
transmittal, duly executed, and such other documents as may be reasonably
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration or Cash
Payment, as the case may be, in accordance with Section 2.06(b), (c) and (f),
which such holder has the right to receive in respect of the Shares formerly
represented by such Certificate (after taking into account all Shares then held
by such holder), cash in lieu of fractional Merger Shares to which such holder
is entitled pursuant to Section 2.09(d) and any dividends or other distributions
to which such holder is entitled pursuant to Section 2.09(b), and the
Certificate so surrendered shall forthwith be cancelled; provided, however, that
Merger Consideration or Cash Payment, as the case may be, shall be deemed to
have been deposited in escrow by such holder with the Escrow Agent, and shall be
held in escrow by the Escrow Agent and shall be released only upon the terms set
forth in the Escrow Agreement. In the event of a transfer of ownership of Shares
that is not registered in the transfer records of the Company, the Merger
Consideration or Cash Payment, as the case may be, such holder has the right to
receive in respect of the Shares, cash in lieu of any fractional Merger Shares
to which such holder is entitled pursuant to Section 2.09(d) and any dividends
or other distributions which such holder is entitled pursuant to Section
2.09(b), may be issued/distributed to a transferee if the Certificate
representing such Shares is presented to Parent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.09, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration or Cash Payment, as the case may be, which
such holder has the right to receive in respect of the Shares formerly
represented by such Certificate, cash in lieu of any fractional Merger Shares to
which such holder is entitled pursuant to Section 2.09(d) and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.09(b).
(b) Distributions with Respect to Unexchanged Shares of Parent Securities.
No dividends or other distributions declared or made after the Effective Time
with respect to Merger Shares with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to Merger
Shares represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.09(d), until the holder
of such Certificate shall surrender such Certificate. Subject to the effect of
escheat, Tax or other applicable Laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates representing
whole shares of Merger Shares issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional share of
Merger Shares to which such holder is entitled pursuant to Section 2.09(d) and
the amount of dividends or other distributions with a record date after the
Effective Time and theretofor paid with respect to such whole shares of Merger
Shares, and (ii) at the appropriate payment date, the amount of dividends or
other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Merger Shares.
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(c) No Further Rights in Company Common Stock. All Merger Shares issued
upon conversion of the Shares (including any cash paid pursuant to Section
2.09(b) or (d)) and Cash Payments made shall be deemed to have been issued in
full satisfaction of all rights pertaining to such Shares.
(d) No Fractional Shares. No certificates or scrip representing fractional
shares of Merger Shares shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Parent. Each holder
of a fractional share interest shall be paid an amount in cash equal to the
product obtained by multiplying (i) such fractional share interest to which such
holder (after taking into account all fractional share interests then held by
such holder) would otherwise be entitled by (ii) the Initial Valuation Amount or
the Second Valuation Amounts, as applicable. From time to time after the
Effective Time, as promptly as practicable after the determination of the amount
of cash, if any, to be paid to any holders of fractional share interests who
have surrendered Certificates to Parent, Parent shall forward payments to such
holder of fractional share interests subject to and in accordance with the terms
of Sections 2.09(b) and (d).
(e) No Liability. Neither Parent nor the Company shall be liable to any
holder of Shares for any such Shares (or dividends or distributions with respect
hereto), or cash delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
(f) Withholding Rights. Each of Surviving Corporation and Parent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign Tax Law. To the extent
that amounts are so withheld by the Surviving Corporation or Parent, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Surviving Corporation or Parent,
as the case may be.
(g) Escrow. Immediately after the Effective Time, Parent shall deliver to
the Escrow Agent the Initial Merger Consideration, the Cash Payment, the Merger
Notes, and fifty-five percent (55%) of the CORE Carveout Payment (collectively,
the "Escrow Amounts"). The Escrow Amounts shall be held by the Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement. The Escrow Amounts
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 the Escrow Agreement. The Escrow Amounts shall be released pursuant to
the terms and conditions of the Escrow Agreement upon delivery to Parent of the
Company Audited Financial Statements. The adoption of this Agreement and the
approval of the Merger by the stockholders of the Company shall constitute (i)
approval of the Escrow Agreement and of all of the arrangements relating
thereto, including the placement of the Escrow Amounts in escrow and the
appointment of the Sellers' Representative and the (ii) agreement of such
stockholders to indemnify the Sellers' Representative in respect of, and hold it
harmless against, any and all costs, expenses, claims, losses and damages
incurred or suffered by the Sellers' Representative or any of its affiliates
resulting from or relating to any actions taken or omissions in its capacity as
Sellers' Representative.
SECTION 2.10 Appraisal Rights. To the extent holders of Shares exercise
appraisal rights pursuant to the applicable provisions of Delaware Law, the
Shares of such holder shall not be converted into the right to receive the
Merger Consideration, but the applicable amount of Merger Consideration shall be
held by Parent subject to the provisions of Delaware Law. If any such holder
fails to protect or withdraws or loses its appraisal rights, such Shares shall
then be treated as if they had been converted as of the Effective Time into a
right to receive the Merger Consideration.
12
SECTION 2.11 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates shall cease to
have any rights with respect to such Shares except as otherwise provided herein
or by any Laws. On or after the Effective Time, any Certificates presented to
Parent for any reason shall be converted into shares of Merger Shares, any cash
in lieu of fractional shares of Merger Shares to which the holders thereof are
entitled pursuant to Section 2.09(d), any cash to which the holders thereof are
entitled pursuant to Section 2.09(f) and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 2.09(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that the statements
contained in this Article III are true and correct, except as set forth in the
Company Disclosure Schedules. The Company Disclosure Schedules shall be arranged
in paragraphs corresponding to numbered and lettered sections contained in this
Article III, and the disclosures in any paragraph of the Company Disclosure
Schedules shall qualify other sections in this Article III to the extent it is
reasonably and readily apparent from a reading of the disclosure that such
disclosure is applicable to such other sections. Neither the Company nor its
Subsidiaries has made or shall be deemed to have made any representation or
warranty to Parent or Merger Sub other than as set forth in this Article III and
the Company Disclosure Schedules.
SECTION 3.01 Organization and Qualification; Subsidiaries.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and, to the extent applicable, in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power and
authority would not, individually or in the aggregate, have a material adverse
effect on the Company. As used in this Agreement, the terms "material adverse
change" or "material adverse effect" means, when used in reference to a person
or entity, any change, effect, event, circumstance, occurrence or state of facts
that is, or which reasonably could be expected to be, materially adverse to the
business, assets, liabilities, condition (financial or otherwise), cash flows or
results of operations of such party and its subsidiaries, considered as an
entirety; provided, however, that the following shall not be taken into account
or given effect, either individually or in the aggregate, in determining whether
there has occurred or there reasonably could be expected to occur, or whether
there exists a change, effect, event, circumstance, occurrence or state of facts
that is or which reasonably could be expected to be, a material adverse change
or a material adverse effect: (i) any change, effect, event, circumstance,
occurrence or state of facts relating to the United States economy or financial
or securities markets in general (but only to the extent not constituting or
arising from a banking moratorium or general suspension of trading for more than
10 consecutive trading days on any national securities exchange or U.S.
inter-dealer quotation system of a registered national securities association or
not otherwise involving a decline in the Dow Xxxxx Industrial Average of more
than 35% measured over any five AMEX-trading day period), (ii) any adverse
change, effect, event, circumstance, occurrence or state of facts relating to
the automotive industry to the extent not affecting the referent person to a
disproportionately greater extent than other persons in industries in which the
referent person competes are or could reasonably be expected to be affected, or
(iii) any change, effect, event, circumstance, occurrence or state of facts
directly relating to and arising out of the public announcement or performance
of this Agreement and the transactions contemplated hereby. Except as set forth
in Schedule 3.01(a) of the Company Disclosure Schedules, the Company and its
Subsidiaries are duly qualified or licensed as a foreign corporation to do
business, and are in good standing, in each jurisdiction listed in the Company
Disclosure Schedules, where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not have a material adverse effect on the
Company.
13
(b) Section 3.01(b) of the Company Disclosure Schedules lists the names
and jurisdiction of incorporation or organization of all the Subsidiaries of the
Company, whether consolidated or unconsolidated. The outstanding securities of
the Subsidiaries of the Company are set forth in Section 3.01(b) of the Company
Disclosure Schedules and all outstanding shares of capital stock of, or other
equity interests in, each such Subsidiary: (i) have been duly authorized,
validly issued and are fully paid and nonassessable; (ii) are owned directly or
indirectly by the Company, free and clear of all pledges, claims, liens,
charges, encumbrances, adverse claims, mortgages and security interests of any
kind or nature whatsoever (collectively, "Liens"); and (iii) are free of all
other restrictions (including restrictions on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests) that would
prevent the operation by the Parent or Merger Sub of such Subsidiary's business
as presently conducted. Except as set forth above or in Section 3.01(b) of the
Company Disclosure Schedules, the Company does not own, directly or indirectly,
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
SECTION 3.02 Certificate of Incorporation and By-laws. The Company has
heretofor made available to Parent a complete and correct copy of the
certificate of incorporation and the by-laws or equivalent organizational
documents, each as amended to date, of the Company and its Subsidiaries. Except
as set forth in Schedule 3.02 of the Company Disclosure Schedules, such
certificate of incorporation, by-laws or equivalent organizational documents (i)
are in full force and effect as set forth in such copies and have not be amended
and (ii) shall be delivered by the Company to Parent upon the request of Parent;
provided, that such delivery requirement shall under no circumstances delay the
Effective Time or the closing of the transactions contemplated hereby. Neither
the Company nor any of its Subsidiaries is in violation of any of the provisions
of its certificate of incorporation, by-laws or equivalent organizational
documents.
SECTION 3.03 Capitalization. The authorized capital stock of the Company
consists of 500,000 shares of Company Common Stock and 500,000 shares of Company
Preferred Stock. As of the date hereof, (a) (i) 77,971 shares of Company Common
Stock and (ii) 302,487 shares of Company Preferred Stock are issued and
outstanding all of which are validly issued, fully paid and nonassessable, (b)
60 shares of Company Common Stock and no shares of Company Preferred Stock are
held in the treasury of the Company, (c) no shares of Company Common Stock or
Company Preferred Stock are held by the Subsidiaries of the Company, and (d)
four shares of Company Common Stock are reserved for future issuance pursuant to
outstanding employee stock options or stock incentive rights granted pursuant to
the Company Stock Option Plans. As of the date hereof, there are Company
Warrants exercisable for six shares of Company Common Stock outstanding. Such
copies of the Company Stock Option Plans and the Company Warrants shall be
delivered by the Company to Parent upon the request of Parent; provided, that
such delivery requirement shall under no circumstances delay the Effective Time
or the closing of the transactions contemplated hereby. Except as set forth on
Schedule 3.03 of the Company Disclosure Schedules, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or its
Subsidiaries or obligating the Company or its Subsidiaries to issue or sell any
shares of capital stock of, or other equity interests in, the Company or its
Subsidiaries. Except as set forth on Schedule 3.03 of the Company Disclosure
Schedules, there are no outstanding contractual obligations of the Company or
its Subsidiaries to repurchase, redeem or otherwise acquire any Company Common
Stock or Company Preferred Stock or any capital stock of its Subsidiaries or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, its Subsidiaries or any other person. Except as
set forth on Schedule 3.03 of the Company Disclosure Schedules, each outstanding
share of capital stock of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and each such share is owned by the
Company free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the Company's or
its Subsidiaries' voting rights, charges and other encumbrances of any nature
whatsoever. As of the Closing Date, there will be no options, warrants or other
rights, agreements, arrangements or commitments of any character related to the
issued or unissued capital stock of the Company or its Subsidiaries or
obligating the Company or its Subsidiaries to sell any shares of capital stock
or, or other equity interests in, the Company or its Subsidiaries. As of the
Closing Date, there will be no outstanding contractual obligations of the
Company or its Subsidiaries to repurchase, redeem or otherwise acquire any
Company Common Stock or Company Preferred Stock or any capital stock of its
Subsidiaries or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, its Subsidiaries or any other
person. As of the Closing Date, each outstanding share of capital stock of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and each such share is owned by the Company free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or its Subsidiaries' voting rights,
charges and other encumbrances of any nature whatsoever.
14
SECTION 3.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Merger (other
than the filing and recordation of appropriate merger documents as required by
Delaware Law). This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
SECTION 3.05 No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 3.05 of the Company Disclosure
Schedules, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the certificate of incorporation or by-laws or equivalent
organizational documents of the Company or its Subsidiaries, (ii) subject to
obtaining the Company Required Approvals (as defined below), if any, conflict
with or violate any Law applicable to the Company or its Subsidiaries or by
which any property or asset of the Company or its Subsidiaries is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company or its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
would not prevent or materially delay consummation of the Merger and would not
have a material adverse effect on the Company. The Company hereby represents and
warrants to Parent that the terms of Section 5.05 of this Agreement, including,
without limitation, the limitation set forth in Section 5.05(a), do not conflict
with any agreement between the Company and any Company Indemnified Party, and
are binding upon every Company Indemnified Party.
15
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) for filing and recordation of
appropriate merger documents as required by Delaware Law (the "Company Required
Approvals"), which shall be filed and recorded at the Effective Time, and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would neither prevent or materially
delay consummation of the Merger and would not have a material adverse effect on
the Company.
SECTION 3.06 Permits; Compliance. Each of the Company and its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of the Company or its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not prevent or materially delay consummation of the Merger and
would not have a material adverse effect on the Company. As of the date hereof,
no suspension or cancellation of any of the Company Permits is pending or, to
the knowledge of the Company, threatened, except where the failure to have, or
the suspension or cancellation of, any of the Company Permits would not prevent
or materially delay consummation of the Merger and would not have a material
adverse effect on the Company. Neither the Company nor any of its Subsidiaries
is in conflict with, or in default, breach or violation of, (a) any Law
applicable to the Company or its Subsidiaries or by which any property or asset
of the Company or its Subsidiaries is bound or affected, or (b) any note, bond,
mortgage, indenture, contract, agreement, lease, license, Company Permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any property or asset of the Company or any of its Subsidiaries is bound, except
for any such conflicts, defaults, breaches or violations that would not prevent
or materially delay consummation of the Merger and would not have a material
adverse effect on the Company.
SECTION 3.07 Financial Statements; Absence of Certain Changes.
(a) The Company has furnished to Parent true, correct and complete copies
of: (i) its unaudited financial statements for the fiscal years ended December
31,
2003 and December 31, 2002 and its unaudited financial statements as of June 30,
2004 (the "Financial Statements"). The Financial Statements have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each fairly
present, in all material respects, the consolidated financial position and
results of operations of the Company and its consolidated Subsidiaries as at the
respective dates thereof and for the respective periods indicated therein.
(b) Except as and to the extent set forth on the unaudited balance sheet
of the Company and its consolidated Subsidiaries as of June 30, 2004 (the
"Balance Sheet") attached hereto as Schedule 3.07 of the Company Disclosure
Schedules, neither the Company nor any of its Subsidiaries has any liability or
obligation of any nature that would require disclosure in accordance with GAAP
(whether accrued, absolute, contingent or otherwise), except for liabilities and
obligations, incurred in the ordinary course of business consistent with past
practice since June 30, 2004, which would not have a material adverse effect on
the Company and are not in excess of $25,000 individually, or $50,000 in the
aggregate.
(c) Except for liabilities incurred in connection with this Agreement or
the transactions contemplated hereby, and except as set forth in Schedule 3.07
of the Company Disclosure Schedules, since December 31, 2003, (i) there has not
been any material adverse change in the Company or any event which either
individually or when aggregated with other event(s) has or reasonably would be
expected to have a material adverse effect on the Company and (ii) there are
not, to the Company's knowledge, any facts, circumstances or events that make it
reasonably likely that the Company will not be able to fulfill its obligations
under this Agreement in all material respects.
16
SECTION 3.08 Absence of Litigation. Except as set forth in Schedule
3.08(i) of the Company Disclosure Schedules, there is no litigation, suit,
claim, action, proceeding or investigation (a "Company Action") pending or, to
the knowledge of the Company, threatened against the Company or its
Subsidiaries, or any property or asset of the Company or its Subsidiaries,
before any Governmental Authority. Except as set forth in Schedule 3.08(ii) of
the Company Disclosure Schedules, there is no Company Action pending or, to the
knowledge of the Company, threatened against the Company or its Subsidiaries, or
any property or asset of the Company or its Subsidiaries, that (a) would have a
material adverse effect on the Company or (b) seeks to materially delay or
prevent the consummation of the Merger. Except as set forth in Schedule
3.08(iii) of the Company Disclosure Schedules, neither the Company nor any of
its Subsidiaries nor any property or asset of the Company or any of its
Subsidiaries is subject to any continuing order of, consent decree, settlement
agreement or similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that would prevent or materially delay consummation of the Merger or
would have a material adverse effect on the Company. SECTION 3.09 Property and
Leases.
(a) Except as would not have a material adverse effect on the Company and
except as set forth in Schedule 3.09 of the Company Disclosure Schedules, the
property and assets owned, leased or used by the Company or any of its
Subsidiaries are, in the aggregate, sufficient and adequate to carry on their
respective businesses in all material respects as presently conducted and are,
in the aggregate and in all material respects, in good operating condition and
repair, normal wear and tear excepted, and the Company and its Subsidiaries are
in possession of, and have good title to, or valid leasehold interests in or
valid rights under contract to use, the said property and assets which are
material to the Company and its Subsidiaries, taken as a whole, free and clear
of all Liens, other than Permitted Liens. As used in this Agreement, the term
"Permitted Liens" shall mean: (i) Liens for taxes not yet due or delinquent or
as to which there is a good faith dispute and for which there are adequate
provisions on the books and records of the Company in accordance with GAAP, (ii)
with respect to real property, any Lien, encumbrance or other title defect which
is not in a liquidated amount (whether material or immaterial) and which does
not, individually or in the aggregate, interfere materially with the current use
or materially detract from the value or marketability of such property or assets
(assuming it's continued use in the manner in which it is currently used) and
(iii) inchoate materialmen's, mechanics', carriers', workmen's and repairmen's
liens arising in the ordinary course and not past due and payable or the payment
of which is being contested in good faith by appropriate proceedings.
(b) Neither the Company nor any Subsidiary owns any real property. Neither
the Company nor any Subsidiary leases any real property except as set forth on
Schedule 3.09 of the Company Disclosure Schedules, and true and correct copies
of each such lease, with all amendments and modifications thereto, have been
made available to the Parent. Such leases shall be delivered by the Company to
Parent upon the request of Parent; provided, that such delivery requirement
shall under no circumstances delay the Effective Time or the closing of the
transactions contemplated hereby.
(c) Except as set forth in Schedule 3.09 of the Company Disclosure
Schedules, all leases of real property leased for the use or benefit of the
Company or its Subsidiaries to which the Company or any of its Subsidiaries is a
party, and all amendments and modifications thereto, are in full force and
effect, and there exists no default under any such lease by the Company, any of
its Subsidiaries or, to the knowledge of the Company, any landlord under such
leases, nor any event which, with notice or lapse of time or both, would
constitute a default thereunder by the Company, any of its Subsidiaries or, to
the knowledge of the Company, any landlord under such leases, except as would
not prevent or materially delay consummation of the Merger and would not have a
material adverse effect on the Company. None of the leased real property has
been assigned or sublet to a third party.
17
(d) Except as set forth in Schedule 3.09 of the Company Disclosure
Schedules, no officer, director or employee of the Company or any of its
Subsidiaries, nor any holder of five percent (5%) or more of the Company's
securities, or any other person or entity which may be deemed to be an affiliate
of the Company, has any interest in any property or assets owned, leased or used
by the Company or any Subsidiary in their respective businesses.
SECTION 3.10 Intellectual Property.
(a) Schedule 3.10 of the Company Disclosure Schedules lists all Registered
Intellectual Property owned by the Company, the jurisdiction, office and nature
of such registration, and the date of expiration of such registration (in the
absence of additional filings or extensions).
(b) Schedule 3.10 of the Company Disclosure Schedules lists all Registered
Intellectual Property licensed by the Company, the jurisdiction, office and
nature of such registration, and the date of expiration of such registration (in
the absence of additional filings or extensions), the owner of such Registered
Intellectual Property, the field of use and territorial scope of the license,
and the period within which the license is effective.
(c) Neither the Company nor any Subsidiary uses any Intellectual Property,
including, without limitation, any Registered Intellectual Property, other than
Intellectual Property which the Company either owns or licenses from third
parties pursuant to valid licenses which are in full force and effect and which
will survive the Closing pursuant to this Agreement, or Intellectual Property
the loss of which would not result in a material adverse effect on the Company.
(d) No officer, director or employee of the Company or any of its
Subsidiaries, nor any holder of five percent (5%) or more of the Company's
securities, or any other person or entity which may be deemed to be an affiliate
of the Company, has any interest in any Intellectual Property owned, licensed or
used by the Company or any Subsidiary in their respective businesses, except for
any Intellectual Property the loss of which would not result in a material
adverse effect on the Company.
(e) Except as set forth in Schedule 3.10 of the Company Disclosure
Schedules, all Company Intellectual Property is owned by the Company free and
clear of any Liens, except for Permitted Liens, and the Company's rights in all
other Intellectual Property are owned by the Company free and clear of any
Liens, except for Permitted Liens, and the rights of the parties, if any, from
whom the Company licenses any such Intellectual Property.
(f) Schedule 3.10 of the Company Disclosure Schedules lists any
proceedings or actions before any court or tribunal (including interferences
before the United States Patent and Trademark Office) related to any of the
Company Registered Intellectual Property. There is no pending or, to the
Company's knowledge, threatened opposition, interference, invalidation or
cancellation proceeding before any court or registration authority in any
jurisdiction against the Company Registered Intellectual Property, except as set
forth on Schedule 3.10. None of those proceedings or actions could result in a
material adverse effect on the Company, except as set forth on Schedule 3.10 of
the Company Disclosure Schedules.
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(g) Except as set forth in Schedule 3.10 of the Company Disclosure
Schedules, the conduct of the Company's and its Subsidiaries' business as
currently conducted or planned by the Company to be conducted does not, in any
material respect, infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe), misappropriate or
otherwise violate any Intellectual Property owned or controlled by any third
party.
(h) To the Company's knowledge, no third party is misappropriating,
infringing, diluting, or violating any Intellectual Property owned by or
licensed to or by the Company or its Subsidiaries and no such claims have been
made against a third party by the Company or its Subsidiaries.
(i) To the extent that any Company Registered Intellectual Property have
been developed or created by any Person other than the Company for which the
Company has, directly or indirectly, paid, the Company has a written agreement
with such Person with respect thereto and the Company thereby has obtained
ownership thereof, or has obtained licenses thereto sufficient for the conduct
of the Company's business as currently conducted and planned to be conducted,
except where such failure would not have a material adverse effect on the
Company. To the extent that any Company Intellectual Property exists that does
not fall within the definition of Company Registered Intellectual Property, the
Company has a written agreement with its employees requiring them to assign such
Intellectual Property to the Company and the Company has obtained ownership
thereof, except where the failure to do so would not have a material adverse
effect on the Company.
(j) As of the Closing Date, all necessary registration, maintenance and
renewal fees in connection with the Company Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
the Company Registered Intellectual Property have been filed with the relevant
patent, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Company
Registered Intellectual Property, except where the failure to do so would not
have a material adverse effect on the Company.
(k) There are no contracts, licenses or agreements between the Company and
any other Person with respect to Company Intellectual Property under which there
is any dispute known to the Company likely to result in a material adverse
effect on the Company regarding the scope of or performance under such contract,
license or agreement, including with respect to any payments to be made or
received by the Company thereunder.
(l) To the knowledge of the Company, the Company has taken all
commercially reasonable steps to protect the Company's rights in confidential
information and trade secrets of the Company or provided by any other Person to
the Company, the loss of which would cause a material adverse effect on the
Company.
SECTION 3.11 Taxes. (i) Except as set forth in Schedule 3.11 of the
Company Disclosure Schedules, all Tax Returns required to be filed by or on
behalf of the Company have been duly filed on a timely basis and such Tax
Returns are true, complete and correct, except where such failure to do so would
not have a material adverse effect on the Company; (ii) all Taxes shown to be
payable on the Tax Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, and no other Taxes are payable by the
Company with respect to items or periods covered by such Tax Returns (whether or
not shown on or reportable on such Tax Returns) or are otherwise due prior to
the Closing Date, except where such failure to do so would not have a material
adverse effect on the Company; (iii) the Company has withheld and paid over all
Taxes required to have been withheld and paid over, and in all respects has
complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other third party, except where such failure to do so would not have a material
adverse effect on the Company; and (iv) the Company is not currently the
beneficiary of any extension of time within which to file any Tax Return.
19
SECTION 3.12 Environmental Matters. Except for such non-compliance as
would not have a material adverse effect on the Company, the Company is in
compliance with all applicable Environmental Laws. To the knowledge of the
Company, none of the properties currently or formerly owned, leased or operated
by the Company (including, without limitation, soils and surface and ground
waters) are contaminated with any Hazardous Substance in violation of any
applicable Environmental Laws. The Company has not received any written notice
that it is liable for any contamination by Hazardous Substances. To the
knowledge of the Company, the Company is not actually, potentially or allegedly
liable under any Environmental Law (including, without limitation, pending or
threatened liens). The Company is in compliance with all permits, licenses and
other authorizations required under any Environmental Law ("Environmental
Permits"). Neither the execution of this Agreement nor the consummation of the
Merger will require any investigation, remediation or other action with respect
to Hazardous Substances, or any notice to or consent of Governmental Authorities
or third parties, pursuant to any applicable Environmental Law or Environmental
Permit.
SECTION 3.13 Insurance. Except as set forth in Schedule 3.13 of the
Company Disclosure Schedules, the Company and its Subsidiaries have all material
primary insurance providing insurance coverage that is customary in amount and
scope for other companies in the industry in which the Company and its
Subsidiaries operate. All such primary insurance is placed with nationally
reputable insurance carriers. Neither the Company nor any Subsidiary
self-insure, except in amount and scope which is customary for other companies
in the industry in which the Company and its Subsidiaries operate and as to
which the absence of third party insurance coverage could not have a material
adverse effect on the Company. All such policies are in full force and effect,
all premiums due and payable thereon have been paid and no written or oral
notice of cancellation or termination has been received and is outstanding.
SECTION 3.14 Related Party Transactions. Except as set forth in Schedule
3.14 of the Company Disclosure Schedules, there are no outstanding amounts
payable to or receivable from, or advances by the Company or any of its
Subsidiaries to, and neither the Company nor any of its Subsidiaries is
otherwise a creditor of or debtor to, any stockholder, director, employee or
affiliate of the Company or any of its Subsidiaries, other than as part of the
normal and customary terms of such persons' employment or service as a director
with the Company or any of its Subsidiaries. Neither the Company nor any
Subsidiary of the Company is a party to any transaction or agreement with any
affiliate, stockholder, director or executive officer of the Company or any of
its Subsidiaries or any material transaction or agreement with any employee
other than executive officers or as listed on Schedule 3.15 to the Company
Disclosure Schedules.
SECTION 3.15 Company Material Contracts.
(a) Except as set forth in Schedule 3.15 of the Company Disclosure
Schedules, each Company Material Contract (as such term is hereafter defined) is
valid and binding on and enforceable against the Company (or, to the extent a
Subsidiary of the Company is a party, such Subsidiary) and, to the knowledge of
the Company, each other party thereto and is in full force and effect. Except as
set forth in Schedule 3.15 of the Company Disclosure Schedules, neither the
Company nor any of its Subsidiaries is in breach or default under any Company
Material Contract. Neither the Company nor any Subsidiary of the Company knows
of, or has received notice of, any violation or default under (nor, to the
knowledge of the Company, does there exist any condition which with the passage
of time or the giving of notice or both would result in such a violation or
default under) any Company Material Contract by any other party thereto. Prior
to the date hereof, the Company has made available to Parent true and complete
copies of all Company Material Contracts, as the same are in full force and
effect. Such material contracts shall be delivered by the Company to Parent upon
the request of Parent; provided, that such delivery requirement shall under no
circumstances delay the Effective Time or the closing of the transactions
contemplated hereby.
20
(b) As used in this Agreement, "Company Material Contracts" shall mean any
contract, license agreement, commitment, lease, or restriction of any kind to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the Company's or any of
its Subsidiaries' assets are subject which (i) involve payments to and from the
Company or liabilities of the Company of at least $50,000; (ii) contain
restrictive covenants applicable to the Company or any Subsidiary or their
respective property or officers or employees; (iii) are with officers, directors
or employees of the Company or any Subsidiary; or (iv) are otherwise material to
the Company.
SECTION 3.16 Brokers. No broker, investment banker, financial advisor,
finder, consultant or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee, compensation or commission, however
and whenever payable, in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company, any
Subsidiary, or any of their respective officers, directors, employees or
shareholders.
SECTION 3.17 Employee Benefit Plans.
(a) Schedule 3.17 of the Company Disclosure Schedules contains a true and
complete list of all of Company's and its Subsidiaries' employee plans. Schedule
3.17 of the Company Disclosure Schedules identifies and includes but is not
limited to, each of the employee plans that is subject to Section 302 or Title
IV of ERISA or Section 412 of the Code. Neither Company nor any ERISA Affiliate
of Company has any commitment or formal plan, whether or not legally binding, to
create any additional employee benefit plan or modify or change any existing
employee plan other than as may be required by the express terms of such
employee plan or applicable law.
(b) With respect to each employee plan that has been qualified or is
intended to be qualified under the Code or that is an "Employee Benefit Plan"
within the meaning of Section 3.3 of ERISA, such employee plan has been duly
approved and adopted by all necessary and appropriate action of the Board of
Directors of Parent (or a duly constituted committee thereof).
(c) With respect to the employee plans, all required contributions for all
periods ending before the Closing Date have been or will be paid in full by the
Closing Date. Subject only to normal retrospective adjustments in the ordinary
course, all required insurance premiums have been or will be paid in full with
regard to such employee plans for policy years or other applicable policy
periods ending on or before the Closing Date by the Closing Date. None of the
employee plans has unfunded benefit liabilities, as defined in Section
4001(a)(16) of ERISA.
(d) The Company does not have any Multi-Employer Plans, nor has it ever
had such plan.
(e) With respect to each employee plan (i) no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code have occurred or are
expected to occur as a result of the Merger or the transactions contemplated by
this Agreement, (ii) no action, suit, grievance, arbitration or other type of
litigation, or claim with respect to the assets of any employee plan (other than
routine claims for benefits made in the ordinary course of plan administration
for which plan administrative review procedures have not been exhausted) is
pending or, to the knowledge of Company, threatened or imminent against Company,
any ERISA Affiliate or any Fiduciary, including, but not limited to, any action,
suit, grievance, arbitration or other type of litigation, or claim regarding
conduct that allegedly interferes with the attainment of rights under any
employee plan and (iii) Company has no knowledge of any facts which would give
rise to or could give rise to any such actions, suits, grievances, arbitration
or other type of litigation, or claims with respect to any employee plan. To the
knowledge of Company, neither Company, nor its directors, officers, employees or
any Fiduciary has any liability for failure to comply with ERISA or the Code for
any action or failure to act in connection with the administration or investment
of such plan. None of the employee plans is subject to any pending
investigations or, to the knowledge of Company, threatened investigations from
any Governmental Agencies who enforce applicable laws under ERISA and the Code.
21
(f) Each of the employee plans is, and has been, operated in accordance
with its terms and each of the employee plans, and administration thereof, is,
and has been, in all material respects in compliance with the requirements of
any and all applicable statutes, orders or governmental rules or regulations
currently in effect, including, but not limited to, ERISA and the Code. All
required reports and descriptions of the employee plans (including but not
limited to Form 5500 Annual Reports, Form 1024 Application for Recognition of
Exemption Under Section 501(a), Summary Annual Reports and Summary Plan
Descriptions) have been timely filed and distributed as required by ERISA and
the Code. Any notices required by ERISA or the Code or any other state or
federal law or any ruling or regulation of any state or federal administrative
agency with respect to the employee plans, including but not limited to any
notices required by Section 204(h), Section 606 or Section 4043 of ERISA or
Section 4980B of the Code, have been appropriately given.
(g) The IRS has issued a favorable determination letter with respect to
each employee plan intended to be "qualified" within the meaning of Section
401(a) of the Code that has not been revoked and, to the knowledge of the
Company, no circumstances exist that could adversely affect the qualified status
of any such plan and the exemption under Section 501(a) of the Code of the trust
maintained thereunder. Each employee plan intended to satisfy the requirements
of Section 125, 501(c)(9) or 501(c)(17) of the Code has satisfied such
requirements in all material respects.
(h) With respect to each employee plan to which Company or any ERISA
Affiliate made, or was required to make, contributions on behalf of any employee
during the five-year period ending on the last day of the most recent plan year
end prior to the Closing Date, (i) no liability under Title IV or Section 302 of
ERISA has been incurred by Company or any ERISA Affiliate that has not been
satisfied in full, and (ii) to the knowledge of Company, no condition exists
that presents a material risk to Company or any ERISA Affiliate of incurring any
such liability and (iii) the present value of accrued benefits under such plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such plan's actuary with respect to such
plan did not exceed, as of its latest valuation date, the then current value of
the assets of such plan allocable to such accrued benefits. No employee plan or
any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recently ended fiscal
year.
(i) No employee plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees for periods extending
beyond their retirement or other termination of service, other than (i) coverage
mandated by Section 4980B of the Code, Section 601 of ERISA or other applicable
law, (ii) death benefits under any "pension plan," (iii) benefits the full cost
of which is borne by the employee (or his beneficiary) or (iv) employee plans
that can be amended or terminated by Company without consent. Company does not
have any current or projected liability with respect to post-employment or
post-retirement welfare benefits for retired, former, or current employees of
Company.
22
(j) No material amounts payable under the employee plans will fail to be
deductible for Federal income tax purposes by virtue of Section 162(m) of the
Code.
(k) To the extent that Company or any of its Subsidiaries is deemed to be
a fiduciary with respect to any plan that is subject to ERISA, Company or such
Subsidiary, as the case may be, (i) during the past five years has complied with
the requirements of ERISA and the Code in the performance of its duties and
responsibilities with respect to such employee benefit plan and (ii) has not
knowingly caused any of the trusts for which it serves as an investment manager,
as defined in Section 3(38) of ERISA, to enter into any transaction that would
constitute a "prohibited transaction" under Section 406 of ERISA or Section 4975
of the Code, with respect to any such trusts, except for transactions that are
the subject of a statutory or administrative exemption.
(l) No person will be entitled to a "gross up" or other similar payment in
respect of excise taxes under Section 4999 of the Code with respect to the
transactions contemplated by this Agreement.
(m) None of the employee plans have been completely or partially
terminated and none has been the subject of a "reportable event" as that term is
defined in Section 4043 of ERISA. No amendment has been adopted which would
require Company or any ERISA Affiliate to provide security pursuant to Section
307 of ERISA or Section 401(a)(29) of the Code.
SECTION 3.18 Labor Matters.
(a) With respect to employees of Company and its Subsidiaries: (i) to the
knowledge of Company, no senior executive or key employee has any plans to
terminate employment with Company or any of its Subsidiaries; (ii) there is no
unfair labor practice charge or complaint against Company or any of its
Subsidiaries pending or, to the knowledge of Company or any of its Subsidiaries,
threatened before the National Labor Relations Board or any other comparable
Governmental Entity; (iii) there is no demand for recognition made by any labor
organization or petition for election filed with the National Labor Relations
Board or any other comparable Governmental Entity; (iv) no grievance or any
arbitration proceeding arising out of or under collective bargaining agreements
is pending and, to the knowledge of Company or any of its Subsidiaries, no
claims therefor have been threatened other than grievances or arbitrations
incurred in the ordinary course of business; (v) the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
thereby will not give rise to termination of any existing collective bargaining
agreement or permit any labor organization to commence or initiate any
negotiations in respect of wages, hours, benefits, severance or working
conditions under any such existing collective bargaining agreements; and (vi)
there is no litigation, arbitration proceeding, governmental investigation,
administrative charge, citation or action of any kind pending or, to the
knowledge of Company, proposed or threatened against Company relating to
employment, employment practices, terms and conditions of employment or wages,
benefits, severance and hours.
(b) Schedule 3.18(b) of the Company Disclosure Schedules lists the name,
title, date of employment and current annual salary of each current salaried
employee, if any, whose total annual compensation exceeds $100,000. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby will not (i) result in any
payment (including severance, unemployment compensation, tax gross-up, bonus or
otherwise) becoming due to any current or former director, employee or
independent contractor of Company or any of its Subsidiaries, from Company or
any of its Subsidiaries under any plan or otherwise, (ii) materially increase
any benefits otherwise payable under any plan or agreement, or (iii) result in
the acceleration of the time of payment, exercise or vesting of any such
benefits.
23
(c) Schedule 3.18(c) of the Company Disclosure Schedules sets forth all
contracts, agreements, plans or arrangements covering any employee of Company or
its Subsidiaries containing "change of control," "stay-put," transition,
retention, severance or similar provisions, and sets forth the names and titles
of all such employees, the amounts payable under such provisions, whether such
provisions would become payable as a result of the Merger and the transactions
contemplated by this Agreement, and when such amounts would be payable to such
employees, all of which are in writing, have heretofore been duly approved by
the Company's Board of Directors, and true and complete copies of all of which
have heretofore been made available to Parent. Such contracts, agreements, plans
or arrangements shall be delivered by the Company to Parent upon the request of
Parent; provided, that such delivery requirement shall under no circumstances
delay the Effective Time or the closing of the transactions contemplated hereby.
There is no contract, agreement, plan or arrangement (oral or written) covering
any employee of Company that individually or collectively could give rise to the
payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that the statements
contained in this Article IV are true and correct, except as set forth in the
Parent Disclosure Schedules. The Parent Disclosure Schedules shall be arranged
in paragraphs corresponding to numbered and lettered sections contained in this
Article IV, and the disclosures in any paragraph of the Parent Disclosure
Schedules shall qualify other sections in this Article IV to the extent it is
reasonably and readily apparent from a reading of the disclosure that such
disclosure is applicable to such other sections. Neither Parent nor any of its
Subsidiaries has made or shall be deemed to have made any representation or
warranty to the Company other than as set forth in this Article IV or the Parent
Disclosure Schedules.
SECTION 4.01 Corporate Organization.
(a) Each of Parent and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a material adverse
effect on Parent and its Subsidiaries, taken as a whole. The Parent and its
Subsidiaries are duly qualified or licensed as a foreign corporation to do
business, and are in good standing, in each jurisdiction listed in the Parent
Disclosure Schedules, where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not have a material adverse effect on the
Parent.
(b) Schedule 4.01(b) of the Parent Disclosure Schedules lists the names
and jurisdiction of incorporation or organization of all the Subsidiaries of the
Parent as of the date of this Agreement, whether consolidated or unconsolidated.
The outstanding securities of the Subsidiaries of the Parent are set forth in
Section 4.01(c) of the Parent Disclosure Schedules and all outstanding shares of
capital stock of, or other equity interests in, each such Subsidiary: (i) have
been duly authorized, validly issued and are fully paid and nonassessable; (ii)
are owned directly or indirectly by the Parent, free and clear of all Liens; and
(iii) are free of all other restrictions (including restrictions on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests) that would prevent the operation by the Parent of such Subsidiary's
business as presently conducted. Except as set forth above, in Section 3.01(c)
of the Parent Disclosure Schedules, or in the Parent SEC Reports, as of the date
of this Agreement the Parent does not own, directly or indirectly, any equity or
similar interest in, or any interest convertible into or exchangeable for any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
24
SECTION 4.02 Certificate of Incorporation and By-laws. Parent has
heretofor made available to the Company a complete and correct copy of the
certificate of incorporation and the by-laws or equivalent organizational
documents, each as amended to date, of Parent and each of its Subsidiaries. Such
certificate of incorporation, by-laws or equivalent organizational documents (i)
are in full force and effect as set forth in such copies and have not be amended
and (ii) shall be delivered by Parent to the Company upon the request of the
Company; provided, that such delivery requirement shall under no circumstances
delay the Effective Time or the closing of the transactions contemplated hereby.
Neither Parent nor any of its Subsidiaries is in violation of any provision of
its certificate of incorporation or by-laws.
SECTION 4.03 Capitalization. As of the date of this Agreement, the
authorized capital stock of Parent consists of 50,000,000 shares of Parent
Common Stock and 25,000,000 shares of preferred stock. As of the date of this
Agreement, 28,540,114 shares of Parent Common Stock, 2,101,900 shares of Series
A-1 and A-2 Preferred Stock and 5,370,907 shares of Series B and B-2 Preferred
Stock were issued and outstanding. As of the date of this Agreement, all of the
outstanding shares of Parent Common Stock and preferred stock have been duly
authorized and validly issued, and are fully paid and nonassessable. As of the
date of this Agreement, 2,100,000 shares of Parent Common Stock were reserved
for future issuance pursuant to outstanding stock options granted pursuant to
Parent's employee stock option plans. As of the date of this Agreement, except
as disclosed in the Parent SEC Reports, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of Parent or any of its Subsidiaries,
obligating any of them to issue or sell any shares of capital stock of Parent or
any of its Subsidiaries. Except as disclosed in the Parent SEC Reports, as of
the date of this Agreement, there are no outstanding contractual obligations of
Parent to repurchase, redeem or otherwise acquire any shares of Parent Common
Stock. Upon amendment of Parent's certificate of incorporation to increase the
authorized capital stock of Parent, the shares of Parent Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights (except for the
rights of the holders of the Series A-1 Preferred Stock and Series A-2 Preferred
Stock) created by statute, Parent's certificate of incorporation or by-laws or
any agreement to which Parent is a party or by which Parent is bound and will,
when issued, be registered or exempt from registration under the Securities Act
and applicable Blue Sky Laws.
SECTION 4.04 Authority Relative to this Agreement. Parent has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger. The execution
and delivery of this Agreement by Parent and the consummation by Parent of the
Merger have been duly and validly authorized by all necessary corporate action,
and no other corporate proceedings on the part of Parent are necessary to
authorize this Agreement or to consummate the Merger (other than, with respect
to the Merger, the filing and recordation of appropriate merger documents as
required by Delaware Law). Notwithstanding the preceding two sentences, which
are qualified hereby, Parent must amend its certificate of incorporation to
increase its authorized capital stock in order for there to be at least
sufficient Common Stock to permit the conversion of the Initial Preferred Stock
and the Subsequent Preferred Stock. This Agreement has been duly and validly
executed and delivered by Parent and, assuming due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
Parent enforceable against Parent in accordance with its terms.
25
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent do not, and the
performance of this Agreement by Parent will not, (i) conflict with or violate
the certificate of incorporation or by-laws of Parent (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
4.05(b) have been obtained and all filings and obligations described in Section
4.05(b) have been made and, subject to obtaining approval of the stockholders,
if required, conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to Parent or by which any property or asset of Parent is
bound or affected, or (iii) result in any breach of, or constitute a default (or
an event which, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent is a party or by which Parent or any property or
asset of Parent is bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or materially delay consummation of the
Merger or otherwise prevent Parent from performing any of their material
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent do not, and the
performance of this Agreement by Parent will not, require any consent, approval,
authorization or permit of, or filing with, or notification to, any Governmental
Authority, including, without limitation, applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, the NASD OTC rules and
regulations, state takeover laws, except (i) the filing and recordation of
appropriate merger documents as required by Delaware Law, (ii) the amendment of
Parent's certificate of incorporation to increase its capital stock at least as
much as is required in order to permit the Initial Preferred Stock and the
Subsequent Preferred Stock to be converted into Common Stock (including an
information statement on Form 14C in connection therewith), and (iii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent Parent from performing their
material obligations under this Agreement; provided, that (x) if Parent's
listing application with The American Stock Exchange is approved and effective
prior to the Merger, it is possible that the performance of this Agreement will
require filing with The American Stock Exchange; (y) Parent will be required to
make such filings disclosing this Agreement and the Merger as are necessary and
appropriate for public companies to make under applicable securities law, rules
and regulations; and (z) Parent's issuance of securities in the Merger is
subject to reliance upon an exemption from registration thereof under applicable
securities laws, and compliance with any such exemption may involve notice
filings (such as a Form D) with applicable securities authorities.
SECTION 4.06 Permits; Compliance. Each of Parent and its Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of Parent or its Subsidiaries
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Parent Permits"), except where the failure to have, or
the suspension or cancellation of, any of the Parent Permits would not prevent
or materially delay consummation of the Merger and would not have a material
adverse effect on the Company. As of the date hereof, no suspension or
cancellation of any of the Parent Permits is pending or, to the knowledge of
Parent, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits would not prevent or materially delay
consummation of the Merger and would not have a material adverse effect on
Parent. Neither Parent nor any of its Subsidiaries is in conflict with, or in
default, breach or violation of, (a) any Law applicable to Parent or its
Subsidiaries or by which any property or asset of Parent or its Subsidiaries is
bound or affected, or (b) any note, bond, mortgage, indenture, contract,
agreement, lease, license, Parent Permit, franchise or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any property or asset of Parent or any of
its Subsidiaries is bound, except for any such conflicts, defaults, breaches or
violations that would not prevent or materially delay consummation of the Merger
and would not have a material adverse effect on Parent.
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SECTION 4.07 SEC Filings; Financial Statements.
(a) As of the date of this Agreement, Parent has filed all forms, reports
and documents required to be filed by it with the SEC since February 28, 2003
and has heretofore made available to the Company, in the form filed with the
SEC, (i) its Annual Reports on Form 10-KSB for the fiscal years ended February
28, 2002 and 2003, and February 29, 2004, respectively, (ii) its Quarterly
Reports on Form 10-QSB for the periods ended May 31, August 30 and November 30,
2002 and 2003 and (iii) all other forms, reports and other registration
statements filed by Parent with the SEC since January 1, 2003 and prior to the
date hereof. Such forms, reports and documents shall be delivered by Parent to
the Company upon request of the Company; provided, that such delivery
requirement shall under no circumstances delay the Effective Time or the closing
of the transactions contemplated hereby. The forms, reports, and other documents
referred to in clauses (i), (ii) and (iii) of the preceding sentence are
sometimes hereinafter collectively referred to as the "Parent SEC Reports". The
term "Parent SEC Reports" shall also include such filings as Parent may make
under the Exchange Act during the period from the date of this Agreement through
the Effective Time. The Parent SEC Reports (A) complied, at the time they were
filed, as to form in all material respects with the applicable requirements of
the Securities Act and the Exchange Act, as the case may be, and the applicable
rules and regulations thereunder, and (B) did not, at the time they were filed,
or, if amended, as of the date of such amendment, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. None of
Parent's Subsidiaries is required to file any form, report or other document
with the SEC.
(b) No executive officer of Parent has failed in any respect to make the
certifications required of him or her under (i) Section 906 of the
Xxxxxxxx-Xxxxx Act of 2002 with respect to any periodic report filed by Parent
with the SEC since the enactment of the Xxxxxxxx-Xxxxx Act of 2002 or (ii)
Section 302 of the Xxxxxxxx-Xxxxx Act of 2002 with respect to any periodic
report filed by Parent with the SEC since August 29, 2002 (in each case,
excluding any failure to make such certifications occurring after the date of
this Agreement that is inadvertent but promptly corrected by filing the
requisite certification or is attributable to the physical incapacity of an
officer required to make such a certification).
(c) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Parent SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each fairly
presented, in all material respects, the consolidated financial position,
results of operations and cash flows of Parent and its consolidated Subsidiaries
as of the respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments that were not and are not expected, individually or in the
aggregate, to have a material adverse effect on the Parent).
(d) Except as and to the extent set forth on the consolidated balance
sheet of Parent and its Subsidiaries as of February 29, 2004, including the
notes thereto, and except as otherwise disclosed in this Agreement, neither
Parent, nor its Subsidiaries has any liability or obligation of any nature that
would require disclosure in accordance with GAAP (whether accrued, absolute,
contingent or otherwise), except for liabilities and obligations, incurred in
the ordinary course of business consistent with past practice since February 29,
2004 except those which would not have a material adverse effect on Parent.
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(e) Parent has heretofore furnished to the Company complete and correct
copies of all amendments and modifications that have not been filed by Parent
with the SEC to all agreements, documents and other instruments that previously
had been filed by Parent with the SEC and are currently in effect.
SECTION 4.08 Absence of Litigation. There is no litigation, suit, claim,
action, proceeding or investigation (a "Parent Action") pending or, to the
knowledge of Parent, threatened against Parent or its Subsidiaries, or any
property or asset of Parent or its Subsidiaries, before any Governmental
Authority that (a) would be required to be disclosed in any subsequent SEC
Reports or that would otherwise have a material adverse effect or (b) seeks to
materially delay or prevent the consummation of the Merger. Neither Parent nor
any of its Subsidiaries nor any property or asset of Parent or any of its
Subsidiaries is subject to any continuing order of, consent decree, settlement
agreement or similar written agreement with, or, to the knowledge of Parent,
continuing investigation by, any Governmental Authority, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority that would prevent or materially delay consummation of the Merger or
would have a material adverse effect. Neither Parent nor any of its Subsidiaries
is subject to any settlement agreement with any employee of Parent or its
Subsidiaries.
SECTION 4.09 Property and Leases.
(a) Parent and its Subsidiaries have sufficient title to all their
properties and assets to conduct their respective businesses as currently
conducted, with only such exceptions as would not have a material adverse
effect.
(b) Parent does not own any real property.
(c) All leases of real property leased for the use or benefit of Parent or
its Subsidiaries to which Parent or any of its Subsidiaries is a party, and all
amendments and modifications thereto, are in full force and effect and have not
been modified or amended, and there exists no default under any such lease by
Parent, any of its Subsidiaries or, to the knowledge of Parent, any landlord
under such leases, nor any event which, with notice or lapse of time or both,
would constitute a default thereunder by Parent, any of its Subsidiaries or, to
the knowledge of Parent, any landlord under such leases, except as would not
prevent or materially delay consummation of the Merger and would not have a
material adverse effect. None of the leased real property has been assigned or
sublet to a third party, except that it is Parent's intention to assign or
sublet a portion of its premises at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
SECTION 4.10 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
(i) "Parent Registered Intellectual Property" shall mean any
Registered Intellectual Property of Parent.
(b) Schedule 4.10(b) of the Parent Disclosure Schedule lists any
proceedings or actions before any court or tribunal (including interferences
before the United States Patent and Trademark Office) related to any of Parent
Registered Intellectual Property, which could result in a material adverse
effect.
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(c) All Parent Registered Intellectual Property, are, to the knowledge of
Parent, free and clear of any Liens or encumbrances.
(d) As of the Closing Date, all necessary registration, maintenance and
renewal fees in connection with Parent Registered Intellectual Property have
been paid and all necessary documents and certificates in connection with Parent
Registered Intellectual Property have been filed with the relevant patent,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Parent Registered
Intellectual Property, except where the failure to do so would not have a
material adverse effect on Parent.
(e) There are no contracts, licenses or agreements between the Company and
any other Person with respect to Parent Registered Intellectual Property under
which there is any dispute known to Parent likely to result in a material
adverse effect regarding the scope of or performance under such contract,
license or agreement including with respect to any payments to be made or
received by the Parent thereunder.
(f) To the knowledge of Parent, Parent has taken all commercially
reasonable steps to protect Parent's rights in confidential information and
trade secrets of Parent or provided by any other Person to Parent, the loss of
which would cause a material adverse effect.
(g) Parent does not use any Intellectual Property, including, without
limitation, any Parent Registered Intellectual Property, other than Intellectual
Property which Parent either owns or licenses from third parties pursuant to
valid licenses which are in full force and effect and which will survive the
Closing pursuant to this Agreement, or Intellectual Property the loss of which
would not result in a material adverse effect on Parent.
SECTION 4.11 Taxes.
(i) All Tax Returns required to be filed by or on behalf of Parent
have been duly filed on a timely basis and such Tax Returns are true, complete
and correct, except where such failure to do so would not have a material
adverse effect on Parent; (ii) all Taxes shown to be payable on the Tax Returns
or on subsequent assessments with respect thereto have been paid in full on a
timely basis, and no other Taxes are payable by Parent with respect to items or
periods covered by such Tax Returns (whether or not shown on or reportable on
such Tax Returns) or are otherwise due prior to the Closing Date, except where
such failure to do so would not have a material adverse effect on Parent; (iii)
Parent has withheld and paid over all Taxes required to have been withheld and
paid over, and in all respects has complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party, except where such
failure to do so would not have a material adverse effect on Parent; and (iv)
Parent is not currently the beneficiary of any extension of time within which to
file any Tax Return.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Registration Statement.
(a) (1) As soon as practicable but in no event later than seventy-five
(75) days after the Effective Time (except as provided in the next succeeding
sentence), Parent shall use its best efforts to cause to have been filed a
registration statement on Form SB-2 or other applicable Form if Form SB-2 is not
available or has been rescinded or replaced (the "Registration Statement") with
the SEC covering all "Registrable Securities," as such term is hereinafter
defined. The seventy-five (75) day period referred to in the preceding sentence
shall be extended for a period (the "Filing Extension Period") equal to one day
for each day in which Parent has not received all of the items required to be
delivered pursuant to Section 5.01(h) of this Agreement within the sixty (60)
day period set forth in such Section. The term "Registrable Securities" shall
mean the Parent Common Stock issuable upon conversion of the Parent Junior
Preferred Stock and any other shares of Parent Common Stock issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of such securities. At ADN's election, the
Registration Statement may also cover the shares of Parent Common Stock issued
by the Parent after the Parent's Series B-2 Preferred Stock primarily to finance
the Parent's acquisition of the balance of DCS Automotive Ltd. not already owned
by the Parent.
(2) Parent shall use its best efforts to cause such Registration Statement
to become effective under the Securities Act within one hundred five (105) days
after the Effective Date. The one hundred five (105) day period referred to in
the preceding sentence shall be extended for a period (the "Registration
Effectiveness Extension Period") equal to one day for each day in which Parent
has not received all of the items required to be delivered pursuant to Section
5.01(h) of this Agreement within the sixty (60) day period set forth in such
Section.
(3) If Parent has not (i) filed the Registration Statement within
seventy-five (75) days after the Effective Date (plus any applicable Filing
Extension Period), or (ii) caused such Registration Statement to be declared
effective within one hundred five (105) days of the Effective Date (plus any
applicable Registration Effectiveness Extension Period), the date upon which the
Parent fails to satisfy either condition shall be a "Warrant Issuance Trigger
Date". Upon any Warrant Issuance Trigger Date, Parent shall forthwith, and in no
event later than five (5) business days thereafter, issue to each of the holders
of Initial Junior Preferred Stock a warrant (the "Penalty Warrant"), in the form
attached hereto as Exhibit D, exercisable into such number of shares of Initial
Junior Preferred Stock that equal two percent (2%) of the Initial Junior
Preferred Stock held by each such holder at an exercise price of $1.90 per
share; provided that there shall be no doubling up of penalties in the event
that Parent fails to satisfy both conditions. In addition, if, for the
subsequent thirty (30) day period, or for any thirty (30) day period subsequent
to such period, Parent fails to satisfy either of the aforesaid conditions, and
such failure would result in a Warrant Issuance Trigger Date upon the conclusion
of such thirty (30) day period, Parent, promptly (and in no event later than
five (5) business days) after the expiration of each such additional thirty (30)
day period, shall issue an additional Penalty Warrant to each of the holders of
the Initial Junior Preferred Stock exercisable into such number of shares of
Initial Junior Preferred Stock that equal two percent (2%) of the Initial Junior
Preferred Stock held by each such holder at an exercise price of $1.90 per
share; provided, that there shall be no doubling up of penalties in the event
that Parent fails to satisfy both conditions during each such additional thirty
(30) day period. Notwithstanding the foregoing, in no event shall Parent be
obligated to issue Penalty Warrants which, in the aggregate, would equal or
exceed that number of Penalty Warrants which would entitle the holders of the
Registrable Securities, in the aggregate, to purchase shares of Parent Junior
Preferred Stock convertible into shares of Parent Common Stock equal to more
than 24% of the Parent Common Stock into which such Registrable Securities are
initially convertible (subject to adjustments for stock splits, reclassification
of shares, etc.). Each Penalty Warrant shall be exercisable for five (5) years
after the date of issuance, except for earlier expiration ten (10) business days
after delivery of written notice by Parent to each holder of such Warrants that
the average of the market price of the Parent Common Stock underlying the Parent
Junior Preferred Stock has traded for a period of thirty consecutive trading
days at a value equal to or greater than Four Hundred Percent (400%) of the
then-applicable Penalty Warrant exercise price.
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(b) Each of the holders of the Registrable Securities (the "Sellers")
shall provide promptly such information concerning their business, holdings,
financial statements and affairs as may be reasonably required by Parent for
inclusion of Sellers' Registrable Securities in the Registration Statement, or
in any amendments or supplements thereto. Notwithstanding anything to the
contrary contained in this Agreement, Parent shall not be obligated to include
in the Registration Statement the Registrable Securities of any Seller who does
not furnish such information to Parent promptly upon request. Parent shall
promptly provide to Sellers' Representative copies of, consult with Sellers'
Representative regarding and prepare in consultation with Sellers'
Representative written responses with respect to any written comments received
from the SEC with respect to the Registration Statement, and shall advise
Sellers' Representative of any oral SEC comments. The Registration Statement
shall comply as to form in all material respects with the Securities Act.
(c) Parent shall use best commercial efforts to cause the Registration
Statement to remain effective under the Securities Act for a period ending on
the later of (i) one year after the Registration Statement first becomes
effective plus whatever period of time as shall equal any period, if any, during
such one year period in which Parent was not current with its reporting
requirements under the Exchange Act or (ii) such time as all of the Registrable
Securities covered by the Registration Statement may be freely sold pursuant to
Rule 144(k) of the Securities Act by non-affiliates. Parent shall advise the
Sellers' Representative, promptly after receipt of notice thereof, of the time
of the effectiveness of the Registration Statement, the filing of any supplement
or amendment thereto, the issuance of any stop order relating thereto, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
SEC request for amendment to the Registration Statement, SEC comments thereon
and each party's responses thereto or SEC request for additional information. No
amendment or supplement to the Registration Statement shall be filed without
consultation by Parent with the Sellers' Representative.
(d) Parent shall use its best efforts to register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such Seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Seller and to keep each such registration or
qualification (or exemption therefrom) effective during the period which the
Registration Statement is required to be kept effective (provided, that Parent
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subparagraph,
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction).
(e) Parent shall furnish such number of prospectuses or other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Seller from time to time may reasonably request.
(f) Each of the parties shall enter into such customary agreements
(including underwriting agreements in customary form) and take all such other
actions reasonably necessary in order to expedite or facilitate the disposition
of such Registrable Securities, including causing its officers to participate in
"road shows" and other information meetings organized by an underwriter.
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(g) All expenses incident to Parent's performance of or compliance with
this Agreement including, without limitation, all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for Parent and all independent certified public accountants, underwriters
(excluding discounts and commissions, which will be paid by the Sellers of
Registrable Securities) and other persons retained by Parent will be borne by
Parent, and Parent will pay its internal expenses (including, without
limitation, all salaries and expenses of its employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by Parent are then listed or on The Nasdaq National Market,
Nasdaq SmallCap Market or the OTC Bulletin Board trading system. Without
limitation, the foregoing shall include, with respect to each Registration
Statement hereunder, the fees, charges and disbursements up to $25,000 of one
counsel to the Sellers (which shall be designated by the Sellers'
Representative); provided, however, that Parent shall have no obligation to pay
any underwriting discounts or commissions attributable to the sale of
Registrable Securities and any of the expenses incurred by such Sellers which
are not payable by Parent, such costs to be borne by such Sellers.
(h) Parent shall have received, within sixty (60) days after the date of
this Agreement, the Company Audited Financial Statements of the Company, along
with consents by such accountants for inclusion of, and reliance upon, such
Company Audited Financial Statements and reports in the financial statements
which Parent determines must be filed either pursuant to this Agreement or with
the SEC pursuant to applicable law. In connection therewith, Parent or its
accountants also shall have received, within such sixty (60) day period, such
workpapers and other supporting documents of Company's accountants, or access to
and an opportunity to review such workpapers and other supporting documents, as
Parent or its accountants may reasonably request.
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SECTION 5.02 Proxy Statement. To the extent required or advisable, if at
all, under applicable laws and regulations in the opinion of Parent and its
counsel, Parent and the Company shall prepare and file a proxy statement or an
information statement (the "Parent Proxy Statement") following the execution of
this Agreement and at such time prior to the Effective Time as is reasonably
necessary to consummate the transactions contemplated hereunder on the Effective
Time. Each of Parent and the Company shall provide promptly to the other such
information concerning its business and financial statements and affairs as, in
the reasonable judgment of Parent or its counsel, may be required or appropriate
for inclusion in the Parent Proxy Statement, or in any amendments or supplements
thereto, and to cause its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of the Parent Proxy Statement. If the
Parent Proxy Statement pertains to approval of the Merger itself as opposed to
any amendment of Parent's certificate of incorporation in order to authorize
additional securities, it shall include the recommendation of the Board of
Directors of the Parent in favor of approval and adoption of this Agreement and
the Merger. Parent shall use best efforts to cause the Parent Proxy Statement to
be mailed to Parent stockholders as promptly as practicable mailing is
permissible under applicable securities laws and regulations. Parent and the
Company shall promptly provide to each other copies of, consult with each other
regarding and together prepare written responses with respect to any written
comments received from the SEC with respect to the Parent Proxy Statement and
shall advise each other of any oral SEC comments. The Parent Proxy Statement
shall comply as to form in all material respects with the Securities Act.
SECTION 5.03 Appropriate Action; Consents; Filings.
(a) Subject to the terms and conditions of this Agreement, the Company and
Parent shall use their best efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective the
Merger as promptly as practicable, (ii) obtain and maintain all consents and
other authorizations required to be obtained from any stockholder of the Company
and Parent that may be necessary, proper or advisable to consummate the Merger
and the transactions contemplated by this Agreement from any Governmental
Authorities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Parent or the Company or any of
their Subsidiaries in connection with the authorization, execution and delivery
of this Agreement and the consummation of the Merger, and (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities Laws
and (B) any other applicable Law; provided, that Parent and the Company shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing, and, if requested, to accept all reasonable additions,
deletions or changes suggested by the other party in connection therewith. The
Company and Parent shall furnish to each other all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable Law (including all information required to be included in the
Registration Statement) in connection with the transactions contemplated by this
Agreement.
(b) (i) Each of Parent and the Company shall give (or shall cause its
respective Subsidiaries to give) any notices to third parties, and use, and
cause its respective Subsidiaries to use, their commercially reasonable efforts
to obtain any third party consents, (A) necessary, proper or advisable to
consummate the transactions contemplated in this Agreement, or (B) required to
prevent a material adverse effect of the Company or Parent from occurring prior
to or after the Effective Time.
(ii) In the event that Parent or the Company shall fail to obtain
any third party consent described in subsection (b)(i) above, it shall use its
commercially reasonable efforts, and shall take any such actions reasonably
requested by the other party, to minimize any adverse effect upon the Company
and Parent, their respective Subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the Effective
Time, from the failure to obtain such consent.
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(c) From the date of this Agreement until the Effective Time, each party
shall promptly notify the other party in writing of any pending or, to the
knowledge of the first party, threatened action, proceeding or investigation by
any Governmental Authority or any other person (i) challenging or seeking
material damages in connection with the Merger or the conversion of the Company
Common Stock into the Merger Consideration pursuant to the Merger or (ii)
seeking to restrain or prohibit the consummation of the Merger or otherwise
limit the right of Parent or, to the knowledge of such party, Parent's
Subsidiaries to own or operate all or any portion of the businesses or assets of
the Company or its Subsidiaries, which in either case is reasonably likely to
have a material adverse effect on the Company or Parent prior to or after the
Effective Time.
(d) Prior to the Effective Time, Parent shall (i) cause the legal and
valid formation of Merger Sub by filing a certificate of incorporation with the
Secretary of State of the State of Delaware; (ii) shall file the Certificate of
Incorporation with the Secretary of State of the State of Delaware; and (iii)
shall cause its certificate of incorporation to be amended as necessary to
increase its authorized capital stock at least as much as is required in order
to permit the issuance of the shares of Parent Common Stock underlying the
Initial Junior Preferred Stock and the Subsequent Junior Preferred Stock.
(e) Prior to the Effective Time, Company shall cause each shareholder of
Company to furnish to Parent in writing such information, representations,
warranties and undertakings to Parent as Parent may reasonably request, in such
customary form as Parent may reasonably request, in order to substantiate that
each such shareholder is an "accredited investor" and that Parent may issue
shares to such persons in the Merger in reliance upon an exemption from
registration under the Securities Act. Such writing is sometimes hereafter
referred to as the "accredited investor representation".
SECTION 5.04 Access to Information; Confidentiality.
(a) From the date hereof until the Effective Time, to the extent permitted
by applicable Law, the Company shall, and shall cause its Subsidiaries and its
officers, directors, employees, auditors and agents of the Company and its
Subsidiaries to, afford the officers, employees and agents of the Parent
complete access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and its Subsidiaries, and shall furnish Parent with such financial,
operating and other data and information as Parent through its officers,
employees or agents, may reasonably request. Any investigation pursuant to this
Section shall be conducted in a manner as not to interfere unreasonably with the
conduct of the business of the Company or any of its Subsidiaries.
(b) Parent and the Company shall continue to be bound by the Letter
Agreement re: Confidentiality dated December 23, 2002 (the "Confidentiality
Agreement"). SECTION 5.05 Indemnification and Insurance.
(a) From and after the Effective Time, Parent and the Surviving
Corporation shall jointly and severally, to the fullest extent permitted under
applicable law, indemnify, defend and hold harmless, each present and former
director, stockholder, officer or employee of the Company and its Subsidiary
(collectively, the "Company Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, with respect to any acts or
omissions occurring at or prior to the Effective Time, to the same extent as
provided in the Company's certificate of incorporation or by-laws or any
applicable contract or agreement as in effect on the date hereof, accurate and
complete copies of which contracts and agreements have been provided to the
Parent prior to the date hereof, in each case for a period of six years after
the date hereof; provided, that in no event shall Parent and the Surviving
Corporation's aggregate liability under this Section 5.05(a) exceed $500,000;
provided, further, that this provision shall not operate to extend the term of
any indemnification provided under any applicable contract or agreement;
provided, further, that to the extent this Section 5.05 conflicts with any other
agreement between the Company and any Company Indemnified Party, the terms of
this Agreement shall control and such prior agreement shall be deemed to have
been superseded. In the event that any claim for indemnification is asserted or
made within such six-year period, all rights to indemnification in respect of
such claim shall continue until the disposition of such claim.
34
(b) The former holders of the Company Common Stock and Company Preferred
Stock shall jointly and not severally, to the fullest extent permitted under
applicable law, indemnify and hold harmless Parent and each of its Subsidiaries
(including the Surviving Corporation after the Closing Date), and their
respective directors, officers, employees and representatives, and their
respective successors and assigns (collectively, the "Parent Indemnified
Parties"), from all losses, liabilities, damages, deficiencies, demands, claims,
actions, judgments or causes of action, assessments, costs or expenses
(including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements) ("Parent Damages") based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or any breach of any
representation or warranty of the Company contained in this Agreement (including
the Schedules attached thereto), or (ii) any breach by the Company on or prior
to the Closing Date of any covenant or agreement in this Agreement required to
be performed by the Company on or prior to the Closing Date, or (iii) any breach
of any accredited person representation; provided, that in no event shall the
former holders' of the Company Common Stock and Company Preferred Stock
aggregate liability under this Section 5.05(b) exceed the Merger Consideration
Setoff.
(c) Prior to the Closing Date and upon the election of the majority
holders of the Company Preferred Stock, the Surviving Corporation, or the
Company shall purchase a "tail" policy under the Company's existing directors'
and officers' insurance policy that (i) has an effective term of six years from
the Effective Time, (ii) covers those Persons who are currently covered, or will
be covered on or prior to the Effective Time, by the Company's directors' and
officers' insurance policies in effect on the date hereof with respect to
matters occurring on or prior to the Effective Time and (iii) contains terms and
conditions (including without limitation coverage amounts) that are not
materially less favorable in the aggregate as the terms and conditions of the
Company's directors' and officers' insurance policies in effect on the date
hereof; provided, however, Parent, Surviving Corporation or Company (with the
prior written consent of the Parent), as the case may be, shall be entitled to
reduce the term of coverage, if necessary, to a term of coverage that can be
obtained for an aggregate premium equal to $200,000 plus any unearned premium
actually refunded or credited to the Surviving Corporation or Parent with
respect to the Company's existing directors' and officers' insurance policies.
In the event that Parent or Surviving Corporation obtains insurance hereunder
from a carrier or carriers other than the Company's existing carriers, such
carrier or carriers shall be reasonably comparable to the Company's existing
carriers in all material respects. Notwithstanding the foregoing, the Surviving
Corporation or Parent, as the case may be, shall not be liable for any negative
change in such coverage that is attributable to a market change in the types of
coverage or levels of coverage generally available for similarly situated
insureds. To the extent the holders of a majority of the Company Preferred Stock
request the purchase of a "tail" policy, 50% of the actual amount of the
purchase price of the "tail" policy shall be the "Tail Policy Deduction" and
deducted from the Merger Consideration in accordance with Section 2.06(a)
herein.
(d) In the event Parent or the Surviving Corporation or any of their
respective 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, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.05.
35
(e) The rights of each Indemnified Party under this Section 5.05 shall be
enforceable by, and are intended to benefit, each Indemnified Party.
SECTION 5.06 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which reasonably could be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (b) any failure of the Company, Parent or
Merger Sub, as the case may be, to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.06 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 5.07 Claims for Parent Damages
(a) In the event that Parent has incurred or paid or has properly accrued
(in accordance with GAAP) Parent Damages (as defined in Section 5.05(b) herein),
Parent shall provide written notice (the "Claim Notice") to the Sellers'
Representative setting forth in reasonable detail the individual item(s) of
Parent Damages which shall include the amount of such damages, the date such
damages were incurred, paid or properly accrued (in accordance with GAAP), or
the basis for such anticipated liability and the specific nature of the breach
to which such item is related.
(b) Within fifteen (15) days from receipt of the Claim Notice, the
Sellers' Representative shall have the right to contest the Parent Damages and
shall so notify Parent in writing ("Claim Dispute"). Within five (5) days of
receipt by Parent of the Claim Dispute, the parties shall in good faith agree
upon the rights of the respective parties with respect to each of such claims.
If no agreement can be reached after good faith negotiation within fifteen (15)
days of receipt by Parent of the Claim Dispute, then the parties shall mutually
appoint an arbitrator and the decision by such arbitrator shall be final and
binding on the parties. Any such arbitration shall be held in New York, New York
under the commercial rules then in effect of the American Arbitration
Association. All costs and expenses incurred by either party in connection with
such arbitration, including fees to be paid to the arbitrator, shall be borne by
the non-prevailing party.
(c) Upon execution and delivery of a certificate ("Claim Certificate")
which is (a) signed either by (i) both the chief financial officer of Parent and
the Sellers' Representative or (ii) by the aforesaid arbitrator, and (b) which
states that Parent is entitled to a claim for an amount set forth in such Claim
Certificate, the Parent shall be entitled to reduce the Second Merger
Consideration Payment by such number of Shares as is necessary to indemnify
Parent for such Parent Damages ("Merger Consideration Setoff"). Notwithstanding
anything to the contrary herein, the Merger Consideration Setoff shall in no
event exceed an amount equal to ten percent (10%) of the Second Merger
Consideration Payment based upon the Second Valuation Amount, provided that such
Second Valuation Amount shall in no event exceed $3.70 or be less than $1.90.
SECTION 5.08 Listing Requirements. Parent has already applied to list the
securities of Parent on The American Stock Exchange. Parent shall not, without
the prior written consent of the Sellers' Representative, take any other action,
including without limitation applying for listing on the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market, or any other
exchange or over-the-counter market, that would require or otherwise subject the
approval of the Merger to a vote of the stockholders of Parent.
36
SECTION 5.09 Authorized Capital Stock. To the extent necessary, Parent
shall amend ("Parent Capital Increase Amendment") its certificate of
incorporation as soon as practicable after the Effective Time (but in no event
more than forty five (45) days thereafter) to increase its authorized capital
stock in order to permit the conversion of the Initial Junior Preferred Stock
and Subsequent Junior Preferred Stock into shares of Parent Common Stock. In the
event that at the Effective Time, Parent should not reserve sufficient shares of
its Parent Common Stock to cover the conversion of shares of Parent Junior
Preferred Stock into Parent Common Stock, and Parent should not have increased
its authorized capital stock within forty-five (45) days after the Effective
Time sufficiently for Parent to so reserve such stock (and Parent shall not have
so reserved such stock), the date upon which the Parent fails to satisfy either
condition shall be a "Capital Stock Warrant Issuance Trigger Date". In the event
that Parent shall need to include Company financial information in its proxy
materials to effect the Parent Capital Increase Amendment or otherwise furnish
the same to the SEC, then the forty-five (45) day period referred to in the
preceding sentence shall be extended for a period (the "Parent Capital Increase
Extension Period") equal to one day for each day after the date hereof on which
Parent has not received all of the items to be furnished to Parent pursuant to
Section 5.01(h)) of this Agreement. Provided that each of the parties listed on
Schedule 5.09 shall have voted all of their shares of Parent securities to
approve the Parent Capital Increase Amendment then, upon any Capital Stock
Warrant Issuance Trigger Date, Parent shall forthwith, and in no event later
than five (5) business days thereafter, issue to each of the holders of Initial
Junior Preferred Stock a warrant (the "Capital Stock Penalty Warrant")
exercisable into such number of shares of Initial Junior Preferred Stock that
equal four percent (4%) of the Initial Junior Preferred Stock held by each such
holder at an exercise price of $1.90 per share. In addition, if, for the
subsequent thirty (30) day period, or for any thirty (30) day period subsequent
to such period, Parent fails to effect the Parent Capital Increase Amendment,
and such failure would result in a Capital Stock Warrant Issuance Trigger Date
upon the conclusion of such thirty (30) day period, Parent, promptly (and in no
event later than five (5) business days) after the expiration of each such
additional thirty (30) day period, shall issue an additional Capital Stock
Penalty Warrant to each of the holders of the Initial Junior Preferred Stock
exercisable into such number of shares of Initial Junior Preferred Stock that
equal four percent (4%) of the Initial Junior Preferred Stock held by each such
holder at an exercise price of $1.90 per share. Notwithstanding the foregoing,
in no event shall Parent be obligated to issue Capital Stock Penalty Warrants
which, in the aggregate, would equal or exceed either of the following numbers
of Capital Stock Penalty Warrants: (A) that number of Capital Stock Penalty
Warrants which would entitle the holders of the Registrable Securities, in the
aggregate, to purchase shares of Parent Junior Preferred Stock convertible into
shares of Parent Common Stock equal to more than 30% of the Parent Common Stock
into which such Registrable Securities are initially convertible (subject to
adjustments for stock splits, reclassification of shares, etc.) or (B) that
number of Capital Stock Penalty Warrants which would entitle the holders of
Registrable Securities, in the aggregate, to purchase so many shares of Parent
Junior Preferred Stock or Parent Common Stock as to require shareholder approval
for such issuance or for the offering of the same, as a whole, either under
applicable securities or corporate law, Parent's certificate of incorporation or
bylaws, or the rules of any exchange or other trading market on which the
Company's securities are now or hereafter traded. Each Capital Stock Penalty
Warrant shall be exercisable for five (5) years after the date of issuance,
except for earlier expiration upon ten business days after delivery of written
notice by Parent to each holder of such Warrants that the average of the market
price of the Parent Common Stock underlying the Parent Junior Preferred Stock
has traded for a period of thirty consecutive trading days at a value equal to
or greater than Four Hundred Percent (400%) of the then-applicable Capital Stock
Penalty Warrant exercise price. Notwithstanding anything to the contrary set
forth above, Parent shall not be deemed to be in breach of its obligations under
this Section 5.09 (or similar provisions in any other ancillary document) in the
event that Parent has not filed the Parent Capital Stock Increase Amendment
within ninety (90) days after the Effective Time, provided that the foregoing
shall in no event affect Parent's obligations with respect to the issuance of
the Capital Stock Penalty Warrants within the time frames prescribed and as
otherwise set forth herein.
37
SECTION 5.10 Employee Carveout Plan. The Board of the Company shall adopt
an Employee Carveout Plan within seven (7) Business Days as of the Effective
Time. Such an Employee Carveout Plan shall be delivered to Parent within such
seven (7) Business Days.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company:
(a) by Parent or the Company if (i) the Effective Time shall not have
occurred on or before August 30, 2004; provided, that the right to terminate
this Agreement under this Section 6.01(a)(i) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date; or (ii) (w) there shall be any Law that makes consummation of the Merger
illegal or otherwise prohibited, (x) if any court of competent jurisdiction or
Governmental Authority shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable
or (y) if any Governmental Authority shall bring a criminal indictment against
either Parent or the Company which is reasonably likely to have a material
adverse effect on Parent or a material adverse effect on the Company, as the
case may be;
(b) by Parent or the Company as a result of either party's bankruptcy,
liquidation, dissolution or insolvency prior to the earlier of: (i) the Closing
Date or (ii) the Effective Time;
(c) by Parent if Parent shall not have received the accredited investor
representations, reasonably satisfactory to Parent in form and in substance,
from each shareholder of Company to whom Parent is obligated to issue any Merger
Consideration (other than the Cash Payment, the Employee Carveout Payment, or
the ADN Carveout (as defined in the Settlement Agreement)) hereunder prior to
the Closing; or
(d) by the mutual written consent of the Company and Parent.
SECTION 6.02 Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 6.01, this Agreement shall forthwith be
terminated, there shall be no liability under this Agreement on the part of
Parent, Merger Sub or the Company or any of their respective officers or
directors and all rights and obligations of any party hereto shall cease;
provided, however, if such termination shall result from the willful (i) failure
of either party to fulfill a condition to the performance of the obligations of
the other party or (ii) failure of either party to perform a covenant hereof,
such party shall be fully liable for any and all liabilities and damages,
incurred or suffered by the other party as a result of such failure; provided,
further, that in the event of such a termination, the parties hereto agree to be
governed by the terms and conditions of the Agreement and Plan of Merger
Agreement, dated as of June 27, 2003, by and between Parent and the Company (the
"Original Agreement") and that such Original Agreement shall be deemed to be in
full force and effect with respect to the parties. The provisions of this
Section 6.02, 7.07 and 7.08 of this Agreement shall survive any termination.
38
SECTION 6.03 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, that after the adoption of
this Agreement by the stockholders of the Company, no amendment may be made
which would reduce the amount or change the type of consideration to be received
by the stockholders of the Company pursuant to the Merger absent any required
stockholder approval. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 6.04 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of the other party contained herein or in any document delivered
by the other party pursuant hereto and (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 6.05 Sole Remedy. The Merger Consideration Setoff shall be the
sole and exclusive remedy by Parent under this Agreement, apart from actions for
fraud and the rights of Parent to terminate this Agreement.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01 Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate on February 28, 2005. This Section
7.01 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time or earlier termination.
SECTION 7.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 7.02):
if to Parent:
Auto Data Network Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxxx, CEO
with a copy to:
Auto Data Network Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
39
if to the Company:
CarParts Technologies, Inc.
00000 Xxxxxx Xxxxxxxxxx
Xxxxx 000
Xxx Xxxx Xxxxxxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxxx XxXxxx
with a copy to:
Pillsbury Winthrop LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
SECTION 7.03 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 the Merger 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
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 7.04 Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof,
including without limitation the Agreement and Plan of Merger dated June 27,
2003 by and between the Company and Parent. This Agreement shall not be assigned
(whether pursuant to a merger, by operation of law or otherwise), except that
Parent may assign all or any of their rights and obligations hereunder to any
Subsidiary of Parent, provided, that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 7.05 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Indemnified Parties under Section 5.05 (which is intended
to be for the benefit of the persons covered thereby and may be enforced by such
persons).
SECTION 7.06 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 7.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State without giving effect to
laws that might otherwise govern under applicable principles of conflicts of
laws. All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in any court within the State of New York. The
parties hereto hereby (a) submit to the exclusive jurisdiction of any state or
federal court sitting within the State of New York for the purpose of any action
arising out of or relating to this Agreement brought by any party hereto, and
(b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the action is brought in an
inconvenient forum, that the venue of the action is improper, or that this
Agreement or the Merger may not be enforced in or by any of the above-named
courts.
40
SECTION 7.08 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Merger. Each of the
parties hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other hereto have been induced to enter into this
Agreement and the Merger, as applicable, by, among other things, the mutual
waivers and certifications in this Section 7.08.
SECTION 7.09 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.
SECTION 7.10 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 executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 7.11 Transaction Fees. Parent shall be responsible for all fees
and expenses incurred by it or Merger Sub, and, if the Merger is consummated,
the reasonable fees and expenses of counsel to the Company (provided, that
invoices from such counsel are received by Parent prior to the Closing Date),
incurred in connection with the consummation of the transactions contemplated
hereunder (the "Transaction Fees"). Any fees and expenses paid by Parent in
excess of Forty Thousand Dollars ($40,000) shall be deemed to be Transaction
Fees for purposes of Section 2.06 above. In the event that the Merger is not
consummated, the Company shall be responsible for all fees and expenses of its
counsel.
SECTION 7.12 Closing Efforts. The Parent and the Company each shall use
their reasonable best efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, including using their reasonable best efforts to ensure that (i)
its representations and warranties remain true and correct in all material
respects through the Closing Date and (ii) its covenants and obligations are
satisfied in accordance with the terms of this Agreement.
[Signature page to follow]
41
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
AUTO DATA NETWORK INC.
By /s/ Xxx Xxxx
---------------------------------------------
Name: Xxx Xxxx
Title:
CARPARTS TECHNOLOGIES, INC.
By /s/ Xxxxx XxXxxx
---------------------------------------------
Name: Xxxxx XxXxxx
Title: President and Chief Executive Officer
CAR PARTS TECHNOLOGIES ACQUISITION INC.
By /s/ Xxx Xxxx
---------------------------------------------
Name: Xxx Xxxx
Title:
EXHIBIT A-1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D-1 CONVERTIBLE PREFERRED STOCK
OF
AUTO DATA NETWORK, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
------------------------------------
Auto Data Network, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company"), hereby certifies that, pursuant
to the authority vested in the Board of Directors of the Company (the "Board")
by the Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), as amended, the following resolution was adopted as of August
2, 2004 by the Board pursuant to Section 141 of the Delaware General Corporation
Law:
RESOLVED, that pursuant to the authority granted to and vested in the
Board in accordance with the provisions of the Certificate of Incorporation, as
amended, there shall be created a series of Preferred Stock, $0.001 par value,
which series shall have the following designations and number thereof, powers,
preferences, rights, qualifications, limitations and restrictions:
1. Designation and Number of Shares. There shall hereby be created and
established a series of Preferred Stock designated as "Series D-1 Convertible
Preferred Stock" (the "Series D-1_Preferred Stock"). Subject to the following
sentence, the authorized number of shares of Series D-1 Preferred Stock shall be
2,800,000. Whatever number of shares of Series D-1 Preferred Stock are not
issued pursuant to the merger of Carparts Technologies, Inc. with and into Car
Parts Technologies Acquisition Inc., pursuant to the Amended and Restated
Agreement and Plan of Merger by and among Auto Data Network Inc., Car Parts
Technologies Acquisition Inc. and CarParts Technologies, Inc. dated as of August
2, 2004 (the "Merger Agreement"), or thereafter utilized to satisfy the
preemptive rights of the holders of the Company's Series A-1 Preferred Stock and
Series A-2 Preferred Stock in respect of the issuance of the Series D-1
Preferred Stock, shall be cancelled, retired and eliminated by the Company from
the shares of Series D-1 Preferred Stock, as applicable, which the Company shall
be authorized to issue. Any such shares of Series D-1 Preferred Stock so
cancelled, retired and eliminated shall have the status of authorized and
unissued shares of Preferred Stock issuable in undesignated Series and may be
redesignated and reissued in any series other than as Series D-1 Preferred
Stock.
2. Conversion.
(a) Right to Convert. Each share of Series D-1 Preferred Stock shall be
convertible into a number of shares of Common Stock equal to the applicable
Liquidation Amount (as defined in Section 5 herein) divided by the then
applicable Conversion Price (as defined herein) upon the earlier to occur of (i)
the election of the holder to convert (an "Optional Conversion"), in whole or in
part, at any time, or from time to time, commencing with date of the issuance of
Series D-1 Preferred Stock (the "Issuance Date") or (ii) the earliest to occur
of the following dates (an "Automatic Conversion"): (A) the date, at any time
after the one year anniversary of the Issuance Date, upon which both (x) the
average of the Market Price (as defined herein) for a share of Common Stock for
thirty consecutive Trading Days (as defined herein) exceeds $8.85818182 (subject
to adjustment in the event of stock splits, reverse stock splits, stock
dividends, recapitalizations or similar events) and (y) the average of the
trading volume for the Common Stock during such period exceeds 150,000 shares
per day (subject to adjustment in the event of stock splits, reverse stock
splits, stock dividends, recapitalizations or similar events) shares per Trading
Day; or (B) upon the affirmative vote of the holders of a majority of the then
outstanding shares of Series D-1 Preferred Stock.
(b) As used herein, "Market Price" means, with respect to the shares of
Common Stock, (i) if the shares are listed or admitted for trading on any
national securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market, the last reported sales price as reported on such exchange or
market; (ii) if the shares are not listed or admitted for trading on any
national securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market, the average of the last reported closing bid and asked
quotation for the shares as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or a similar service if NASDAQ is
not reporting such information; or (iii) if the shares are not listed or
admitted for trading on any national securities exchange or included in The
Nasdaq National Market or Nasdaq SmallCap Market or quoted by NASDAQ or a
similar service, the average of the last reported bid and asked quotation for
the shares as quoted by a market maker in the shares (or if there is more than
one market maker, the bid and asked quotation shall be obtained from two market
makers and the average of the lowest bid and highest asked quotation) (such
applicable trading market to be referred to the "Trading Market"). In the
absence of any available public quotations for the Common Stock, the Board shall
determine in good faith the fair value of the Common Stock, which determination
shall be set forth in a certificate by the Secretary of the Company.
As used herein, "Trading Day" means a day on which the principal Trading
Market with respect to the Common Stock is open for the transaction of business.
(c) Effecting a Conversion. Immediately upon the occurrence of an
Automatic Conversion, each holder's shares of Series D-1 Preferred Stock, shall
be deemed to have been converted into the applicable number of shares of the
Company's Common Stock in accordance with the then applicable Conversion Price,
and certificates evidencing such shares of Common Stock shall be issued to such
holder within five business days after receipt of the applicable certificates
evidencing such holder's shares of Series D-1 Preferred Stock, together with
other customary documentation (including delivery instructions). The holder
shall effect any Optional Conversion by surrendering the certificate or
certificates representing the shares of Series D-1 Preferred Stock, to be
converted to the Company, together with written notice of its election to
convert and specifying the name or names (with address) in which a certificate
or certificates for shares of Common Stock are to be issued (a "Stockholder
Conversion Notice"). Each Stockholder Conversion Notice shall specify the number
of shares of Series D-1 Preferred Stock to be converted and the date on which
such conversion is to be effected, which date may be neither prior to, nor more
than 10 days after, the date the holder delivers such Stockholder Conversion
Notice. If no conversion date is specified in a Stockholder Conversion Notice,
the conversion date shall be the date that the Stockholder Conversion Notice is
delivered. Each Stockholder Conversion Notice, once given, shall be irrevocable.
A holder of Series D-1 Preferred Stock may only convert shares of Series D-1
Preferred Stock in blocks equal to not less than the lesser of (i) the number of
shares of Series D-1 Preferred Stock, as applicable, convertible into 5,000
shares of Common Stock and (ii) all shares of Series D-1 Preferred Stock then
held by the stockholder. If the holder is converting less than all shares of
Series D-1 Preferred Stock, as applicable, represented by the certificate or
certificates tendered by the holder with the Stockholder Conversion Notice, the
Company shall convert the number of shares of Series D-1 Preferred Stock so
specified and shall promptly deliver (but not more than fifteen business days
later) to such holder a certificate for such number of shares as have not been
converted. Upon an Automatic Conversion, the Company shall notify each holder
thereof and each holder shall surrender the certificate or certificates
representing all of the shares of Series D-1 Preferred Stock owned by such
holder and each holder of shares of Series D-1 Preferred Stock shall be deemed
to be the holder of record of the Common Stock issued upon such Automatic
Conversion. All fractional shares resulting from the conversion of the Series
D-1 Preferred Stock shall be rounded up to the next highest whole share. All
certificates representing shares of Series D-1 Preferred Stock surrendered for
conversion shall be delivered to the Company for cancellation and canceled by
it. As promptly as practicable (but no more than five business days) after the
surrender of any shares of Series D-1 Preferred Stock, the Company shall
(subject to compliance with the applicable provisions of federal and state
securities laws) deliver to the holder of such shares so surrendered
certificate(s) representing the number of fully paid and nonassessable shares of
Common Stock into which such shares are entitled to be converted. Upon a
conversion, any accrued and unpaid dividends shall be paid either in cash, to
the extent funds are legally available therefor, or shares of Common Stock
valued at the Market Price, in the sole discretion of the Company.
3
(d) Conversion Price. The initial conversion price per share of the Series
D-1 Preferred Stock, as applicable (the "Conversion Price"), shall be equal to
$2.214545455 per share of Common Stock into which such number of share of Series
D-1 Preferred Stock is convertible, subject to adjustment as provided in Section
3.
(e) Reservation of Shares. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued Common Stock
solely for the purpose of issuance upon conversion of Series D-1 Preferred
Stock, as herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the rights of the holders of
the Series A-1 and Series A-2 Preferred Stock and any corresponding rights that
may be granted to the holders of the Series C Preferred Stock, and the rights of
the holders of the Series D-1 Preferred Stock pursuant to this clause, not less
than such number of shares of Common Stock as shall be issuable upon the
conversion of all outstanding shares of Series D-1 Preferred Stock; provided,
that enforcement of the covenant to reserve shares shall be subject to such
grace period as is reflected in the Merger Agreement. The Company covenants that
all shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized, issued and fully paid, nonassessable and freely
tradeable.
If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of Series D-1 Preferred Stock, in addition to such other remedies as
shall be available to the holders of such Series D-1 Preferred Stock the Company
will take such corporate action necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
(f) Issue Taxes. The Company shall pay all issue taxes, if any, incurred
in respect of the issue of shares of Common Stock on conversion. If a holder of
shares of Series D-1 Preferred Stock specifies that the shares of Common Stock
to be issued on Automatic Conversion are to be issued in a name or names other
than the name or names in which such Series D-1 Preferred Stock stand or the
names of affiliates of the initial holder of such shares, then the Company shall
not be required to pay any additional transfer or other taxes incurred by reason
of the issuance of such shares of Common Stock to the name of another, and if
the appropriate transfer taxes shall not have been paid to the Company or the
transfer agent for the Series D-1 Preferred Stock, as applicable, at the time of
Automatic Conversion of the Series D-1 Preferred Stock, as applicable, the
shares of Common Stock issued upon conversion thereof may be registered in the
name or names in which the Series D-1 Preferred Stock, as applicable, were
registered, despite the instructions to the contrary.
3. Adjustment of Conversion Price.
(a) Definition of Additional Stock. For purposes of this Section 3,
"Additional Shares of Common Stock" includes all shares of Common Stock issued
by the Company after the Issuance Date, other than:
4
(i) The shares of Series D-1 Preferred Stock or shares of the
Company's Series D-2 Preferred Stock, or the shares of Common Stock issued upon
conversion of shares of the Company's Series A-1 Preferred Stock, the Company's
Series A-2 Preferred Stock, the Company's Series B Preferred Stock, the
Company's Series B-2 Preferred Stock, the Company's Series D-1 Preferred Stock,
or the Company's Series D-2 Preferred Stock;
(ii) Shares of Common Stock (subject to appropriate adjustment for
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares) issuable or issued to the Company's employees, directors
or consultants pursuant to a stock option plan or restricted stock plan approved
by the Board;
(iii) Shares of Common Stock issued or issuable pursuant to
subsection 3(d) below;
(iv) Shares of Common Stock or Preferred Stock issuable upon
exercise of options, warrants or upon conversion of convertible securities or
other rights outstanding as of the Issuance Date; and
(v) Shares of capital stock or options or warrants to purchase
capital stock issued (a) to financial institutions or lessors in connections
with commercial credit agreements, equipment financings or similar transactions
or (b) to other corporations, persons or entities in connection with
acquisitions, mergers or similar business combinations, partnership
arrangements, strategic alliances, licensing arrangements or similar non-capital
raising transactions approved by the Board, including within this exception
shares issued to raise capital provided that the use of proceeds is to
consummate such non-capital raising transactions.
The number and kind of securities issuable upon the conversion of the
Series D-1 Preferred Stock and the Conversion Price shall be subject to
adjustment from time to time in accordance with the following provisions:
(b) Subdivision or Combination of Shares. In the event that the Company
shall at any time or from time to time, prior to conversion of shares of Series
D-1 Preferred Stock (x) subdivide the outstanding shares of Common Stock into a
larger number of shares or (y) combine the outstanding shares of Common Stock
into a smaller number of shares, then, and in each such case, the Conversion
Price in effect immediately prior to such event shall be adjusted (and any other
appropriate actions shall be taken by the Company) so that the holder of any
share of Series D-1 Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock or other securities
of the Company that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series D-1 Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 3(b) shall become
effective retroactively in the case of any such subdivision or combination, to
the close of business on the day upon which such corporate action becomes
effective.
(c) Stock Dividends. In case Additional Shares of Common Stock are issued
as a dividend or other distribution on the Common Stock (or such dividend is
declared), the Conversion Price shall be reduced, as of the date a record is
taken of the holders of Common Stock for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as at the earliest of the
date of such declaration, payment or other distribution), to the Conversion
Price determined by multiplying the Conversion Price in effect immediately prior
to such declaration, payment or other distribution by a fraction (i) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the declaration or payment of such dividend or other
distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after the declaration or payment
of such dividend or other distribution. In the event that the Company shall
declare or pay any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Company shall be deemed to have made
a dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.
5
(d) Recapitalization or Reclassification of Common Stock. In case of any
(i) capital reorganization or any reclassification (other than a change in par
value) of the capital stock of the Company, or (ii) exchange or conversion of
the Common Stock for or into securities of another corporation or other entity,
or (iii) consolidation or merger of the Company with or into any other person
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock) or (iv) sale,
lease or other conveyance of all or substantially all of the assets of the
Company, then in each instance referred to in the preceding clauses (i) through
(iv), except in the case of a "Change in Control Transaction" (as such term is
hereinafter defined in Section 11), the Board and the person formed by such
consolidation or resulting from such capital reorganization, reclassification or
merger or which acquires (by sale, lease or other conveyance) such assets, as
the case may be, shall make provision such that the Series D-1 Preferred Stock
shall thereafter be convertible for the kind and amount of shares of stock,
other securities, cash and other property receivable upon such capital
reorganization, reclassification, consolidation, merger, sale, lease or other
conveyance, as the case may be, by a holder of shares of Common Stock equal to
the number of shares of Common Stock underlying the Series D-1 Preferred Stock,
as applicable, issuable upon the conversion of the Series D-1 Preferred Stock
immediately prior to the effective date of such capital reorganization,
reclassification, merger, consolidation, sale, lease or other conveyance and, in
each instance referred to in the preceding clauses (i) through (iv) (each, a
"Transaction"), appropriate adjustment (as reasonably determined in good faith
by the Board) shall be made in the application of the provisions herein set
forth with respect to rights and interests thereafter of the holders of the
Series D-1 Preferred Stock, to the end that the provisions set forth herein
(including the specified changes in and other adjustments of the number of
shares underlying the Series D-1 Preferred Stock) shall thereafter be
applicable, as near as reasonably may be, in relation to any such shares of
stock or other securities or other property thereafter deliverable upon
conversion of the Series D-1 Preferred Stock. The Company shall not enter into
any Transaction unless effective provision shall be made so as to give effect to
the provisions set forth in this subsection (d).
The Company shall not effect any transaction described in this subsection
3(d) unless (i) it first gives twenty (20) days' prior written notice of such
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event or sale of assets (during which time the holders of Series
D-1 Preferred Stock shall be entitled to convert the Series D-1 Preferred Stock)
and (ii) the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligations of this subsection 3(d). The
provisions of this subsection 3(d) shall similarly apply to successive
consolidations, reorganizations, reclassifications, exchanges, conversions,
mergers, sales, leases and other conveyances.
(e) Issuance of Stock at Less than Conversion Price. If the Company shall
issue any Additional Shares of Common Stock after the Issuance Date (other than
as provided in the foregoing subsections 3(b) through 3(d)), for no
consideration or for a consideration per share less than the Conversion Price in
effect on the date of and immediately prior to such issue, then in such event,
the Conversion Price shall be reduced, concurrently with such issue, to a price
equal to the quotient obtained by dividing:
(i) an amount equal to (x) the total number of shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price in effect immediately prior to such issuance or sale, plus (y)
the Aggregate Consideration Received (as such term is defined in subsection
3(g)(v)) or deemed to be received by the Company upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
6
(f) Issuance of Options and Convertible Securities Deemed Issuance of
Additional Shares of Common Stock. If the Company, at any time or from time to
time after the Issuance Date, shall issue any options, warrants or rights to
purchase Common Stock (collectively, "Options") or securities that, by their
terms, directly or indirectly, are convertible into or exchangeable for shares
of Common Stock ("Convertible Securities") or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued under this
Certificate as of the time of such issue or, in case such a record date shall
have been fixed, as of the close of business on such record date, provided that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(i) no further adjustment in the Conversion Price shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or exchange of such Convertible
Securities and, upon the expiration of any such Option or the termination of any
such right to convert or exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be increased to the Conversion
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued, and the
Common Stock issuable thereunder shall no longer be deemed to be outstanding;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities, provided that no readjustment pursuant to this clause
(B) shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(iii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Company, or increase in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such decrease or increase becoming
effective, be recomputed to reflect such decrease or increase insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities, provided that no readjustment pursuant to this clause
(C) shall have the effect of decreasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
(g) Other Provisions Applicable to Adjustment Under this Section 3. The
following provisions shall be applicable to the adjustments in the Conversion
Price as provided in this Section 3.
7
(i) Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Company.
(ii) Other Action Affecting Common Stock. If the Company shall take
any action affecting the outstanding number of shares of Common Stock other than
an action described in any of the foregoing subsections 3(b) through 3(f)
hereof, inclusive, which would have an inequitable effect on the holders of the
Series D-1 Preferred Stock, then the Conversion Price shall be adjusted in such
manner and at such times as the Board on the advice of the Company's independent
public accountants may in good faith determine to be equitable in the
circumstances.
(iii) Minimum Adjustment. No adjustment of the Conversion Price
shall be made if the amount of any such adjustment would be an amount less than
one percent (1%) of the Conversion Price then in effect, but any such amount
shall be carried forward and an adjustment in respect thereof shall be made at
the time of and together with any subsequent adjustment which, together with
such amount and any other amount or amounts so carried forward, shall aggregate
an increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The Conversion Price shall not be adjusted
upward except in the event of a combination of the outstanding shares of Common
Stock into a smaller number of shares of Common Stock.
(v) Determination of Consideration.
(A) For purposes of subsection 3(e), the "Effective Price" of
Additional Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold, by the Corporation under subsection 3(e), into the
Aggregate Consideration Received, or deemed to have been received, by the
Company under this subsection 3(e), for the issue of such Additional Shares of
Common Stock
(B) For purposes of this Subsection 3(f), the Aggregate
Consideration Received by the Company for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate gross
amount of cash received by the
Company before deduction of any
underwriting or similar commissions,
compensation or concessions paid or
allowed by the Company in connection
with such issue or sale and without
deduction of any expenses payable by
the Company and excluding amounts
paid or payable for accrued interest
or accrued dividends;
(2) insofar as it consists of property
other than cash, be computed at the
fair market value thereof at the
time of such issue, as determined in
good faith by the Board; and
in the event Additional Shares of Common Stock are issued together with other
shares or securities or other assets of the Company for consideration which
covers both, be the proportion of such consideration so received, computed as
provided in clauses (1) and (2) above, as determined in good faith by the Board.
8
(B) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to subsection 3(f)(ii), relating to Options and
Convertible Securities, shall be determined by dividing
(1) the total amount, if any, received
or receivable by the Company as
consideration for the issue of such
Options or Convertible Securities,
plus the minimum aggregate amount of
additional consideration (as set
forth in the instruments relating
thereto, without regard to any
provision contained therein for a
subsequent adjustment of such
consideration) payable to the
Company upon the exercise of such
Options or the conversion or
exchange of such Convertible
Securities, or in the case of
Options for Convertible Securities,
the exercise of such Options for
Convertible Securities and the
conversion or exchange of such
Convertible Securities, by
(2) the maximum number of shares of
Common Stock (as set forth in the
instruments relating thereto,
without regard to any provision
contained therein for a subsequent
adjustment of such number) issuable
upon the exercise of such Options or
the conversion or exchange of such
Convertible Securities.
(i) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of Section
3 and in the taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the holders of the Series D-1
Preferred Stock against impairment.
(j) Notices of Adjustments. Whenever the Conversion Price is
adjusted as herein provided, the Chief Financial Officer (or other senior
executive officer in the absence of such person) of the Company shall, in good
faith, compute the adjusted Conversion Price in accordance with the foregoing
provisions and shall prepare a written certificate setting forth such adjusted
Conversion Price and showing in detail the facts upon which such adjustment is
based, and such written instrument shall promptly be delivered to each record
holder of the Series D-1 Preferred Stock.
4. Ranking.
The Series D-1 Preferred Stock shall rank, as to dividends, rights upon
liquidation, dissolution or winding up, junior to the Company's Series A-1,
Series A-2, Series B and Series B-2 Preferred Stock, and shall rank senior and
prior to (i) the Common Stock and (ii) each other class or series of capital
stock of the Company hereafter created which does not expressly rank pari passu
with or senior to the Series D-1 Preferred Stock, except (x) as otherwise
approved by the affirmative vote or consent of the holders of a majority of the
outstanding shares of Series D-1 Preferred Stock pursuant to Section 9 hereof,
(y) the Series D-2 Preferred Stock (the "Subsequent Junior Preferred Stock") to
be issued pursuant to the transaction in which this Series D-1 Preferred Stock
is issued, which will rank pari passu with the Series D-1 Preferred Stock, and
(z) the Series C Preferred Stock (the "DCS Transaction Preferred Stock"), which
will rank senior to the Series D-1 Preferred Stock and the Series D-2 Preferred
Stock and may be ranked senior to other series of the Company's preferred stock,
and which the Company anticipates issuing in connection with the financing in
which the Company is engaged as of the date of issuance of this Series D-1
Preferred Stock, principally for the purpose of raising sufficient funds to
complete the Company's acquisition of DCS Automotive Ltd.. (All equity
securities of the Company to which the Series D-1 Preferred Stock ranks senior
to, whether with respect to dividends, rights upon liquidation, dissolution,
winding up or otherwise, including the Common Stock, are collectively referred
to herein as "Junior Securities," all equity securities of the Company to which
the Series D-1 Preferred Stock ranks on a parity with, whether with respect to
dividends or upon liquidation, dissolution, winding up or otherwise, are
collectively referred to herein as "Parity Securities" and all equity securities
of the Company to which the Series D-1 Preferred Stock ranks junior, whether
with respect to dividends or upon liquidation, dissolution, winding up or
otherwise are collectively referred to herein as "Senior Securities").
9
5. Liquidation Rights.
SECTION 7.13 Liquidation Preference. Upon a voluntary or involuntary
liquidation, under applicable bankruptcy or reorganization legislation, or
dissolution or winding up of the Company (each a "Liquidation"), before any
distribution of assets shall be made to the holders of Junior Securities, the
holder of each share of Series D-1 Preferred Stock then outstanding shall be
paid out of the assets of the Company legally available for distribution to its
stockholders (the "Available Assets") an amount per share equal to the
"Liquidation Amount." For purposes of a Liquidation, the Liquidation Amount
shall mean the original issue price per share of the Series D-1 Preferred Stock
($2.214545455, as adjusted for stock splits, dividends, combinations or other
recapitalization of the Series D-1 Preferred Stock) plus all dividends accrued
but unpaid on such share (whether or not declared) up to the date of the
Liquidation (the "Liquidation Preference"). Upon the completion of the
distribution required by this subsection 4(a), and any other distribution to any
other class or series of Senior Securities, if assets remain in the Company, the
remaining assets of the Company available for distribution to stockholders shall
be distributed among the holders of shares of any other series of preferred
stock in accordance with their respective terms, then to the holders of Common
Stock pro rata based on the number of shares of the Common Stock actually
outstanding and held by holders of shares of Common Stock.
SECTION 7.14 Priority. If the Available Assets are insufficient to pay the
holders of Series D-1 Preferred Stock the full amount of the Liquidation Amount,
the holders of Series D-1 Preferred Stock, in the aggregate, will share ratably
in the distribution of the Available Assets in proportion to the respective
amounts that would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
SECTION 7.15 Notice. The Company will send a written notice of a
Liquidation to the holders of record of the Series D-1 Preferred Stock, stating
a payment date, the Liquidation Amount and the place where the Liquidation
Amount will be paid, using any of the following delivery methods: (i) in person;
(ii) mailed by certified or registered mail, return receipt requested; or (iii)
sent by national courier, not less than 25 days prior to the payment date stated
therein. The notice will be addressed to each holder at its address as shown by
the records of the Company.
6. Appraisal. If a majority in interest of the holders of the Series D-1
Preferred Stock, in the aggregate, reasonably disagrees with any of the Board's
determinations referred to in Section 2, Section 3 or Section 5 above (each, a
"Determination"), then the Company and a majority in interest of such holders
(the "Series D-1 Representative") shall use good faith efforts to mutually agree
upon the designation of a single Qualified Appraiser (as defined below) within
seven (7) business days of such event requiring a Determination. The date of
such event requiring a Determination shall be referred to as the "Determination
Date." If such a single Qualified Appraiser is designated, that person shall
make a Determination. If the Company and the Series D-1 Representative do not so
agree upon the designation of a single Qualified Appraiser within such period,
then within five (5) business days following the end of such period, each of the
Company and the Series D-1 Representative by written notice to the other shall
designate a Qualified Appraiser (or if any party fails to select a Qualified
Appraiser within the time period specified, the person selected by the other
party shall be the Qualified Appraiser) and the two Qualified Appraisers so
designated shall within ten (10) business days of their designation jointly
designate a third Qualified Appraiser and solely such third Qualified Appraiser
so designated shall independently make a Determination. If there is only a
single Qualified Appraiser, the fees and expenses of the Qualified Appraiser
shall be paid equally by the Company and the Series D-1 Representative. If three
Qualified Appraisers are appointed, the Company shall pay the fees and expenses
of the Qualified Appraiser which it appoints, the Series D-1 Representative
shall pay the fees and expenses of the Qualified Appraiser which it appoints,
and the fees and expenses of the third Qualified Appraiser shall be shared
equally by the Company and the Series D-1 Representative. The designated
Qualified Appraiser shall make the Determination not later than ten (10)
business days following the Determination Date. The Determination made by the
Qualified Appraiser shall be final, conclusive and binding on the parties
hereto. None of the Qualified Appraisers shall be affiliated with any of the
Company, the Series D-1 Representative or another Qualified Appraiser. For the
purposes of this Agreement, "Qualified Appraiser" shall mean an individual who
is engaged on a regular basis (although not necessarily full time) in valuing
securities or arrangements similar to this Agreement, as the case may be, and
may include (but shall not be limited to) professional business appraisers,
investment bankers or accountants.
10
7. Dividends.
Dividends shall accrue on each outstanding share of Series D-1 Preferred
Stock and on each outstanding share of Series D-1 Preferred Stock at the rate
equal to 5% per annum (pro rated in the first annual period if the initial
Issuance Date is after the commencement of the initial quarterly payment period)
of the initial Liquidation Preference per share of Series D-1 Preferred Stock,
as applicable, whether or not declared by the Board. Such dividends shall accrue
and, if declared, shall be payable quarterly in arrears on the 30th day of July,
October, January and April of each year (each such date, a "Dividend Payment
Date"). Dividends shall begin to accrue on the Series D-1 Preferred Stock as of
the Issuance Date, provided that the dividends due in respect of the initial
quarterly period shall be pro rated if such Issuance Date is after the
commencement of such quarterly period. Dividends payable on shares of Series D-1
Preferred Stock shall be cumulative; therefore, if a full or partial dividend on
the shares of Series D-1 Preferred Stock with respect to any quarter is not
declared by the Board, the Company shall remain obligated to pay a full dividend
with respect to that quarter, provided, however, that any unpaid dividends shall
not bear interest. At the election of the Company, any accrued but unpaid
dividends may be paid in cash at any time.
At the election of the Company, each dividend on the Series D-1 Preferred
Stock may be paid in shares of Common Stock. Dividends paid in shares of Common
Stock shall be paid in full shares only, with a cash payment equal to the value
of any fractional shares. The issuance of such shares of Common Stock shall be
valued at the average of the per share Market Price for the ten Trading Day
period immediately preceding the date on which the dividend becomes due. Each
dividend paid in capital stock shall be mailed to the holders of record of the
Series D-1 Preferred Stock as their names and addresses appear on the share
register of the Company or at the office of the transfer agent on the
corresponding dividend payment date. Holders of Series D-1 Preferred Stock will
receive written notification from the Company or the transfer agent if a
dividend is paid in kind, which notification will specify the number of shares
of Common Stock paid as a dividend. All holders of shares of Common Stock issued
as dividends shall be entitled to all of the rights and benefits relating to
shares of Common Stock as set forth in the Company's Certificate of
Incorporation.
After payment of setting aside of the payment of dividends described in
this Section 7, any additional dividends (other dividends on Common Stock
payable solely in Common Stock) declared or paid in any fiscal year shall be
declared or paid among the holders of Series D-1 Preferred Stock, and Common
Stock then outstanding in proportion to the nearest whole number of shares of
Common Stock which would be held by each such holder if all holders of Series
D-1 Preferred Stock were converted at the then-effective Conversion Rate.
8. Voting Rights.
Each holder of outstanding shares of Series D-1 Preferred Stock is
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Series D-1 Preferred Stock held of record by such
holder are convertible at each meeting of stockholders of the Company (and
written actions of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders of the Company for their action or
consideration. Except as provided by law and by the provisions of Section 9
below, the holders of shares of Series D-1 Preferred Stock shall vote together
with the holders of Common Stock as a single class.
11
Notwithstanding the above, the Company shall provide each holder of Series
D-1 Preferred Stock with prior written notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders). In the event of any undertaking by the Company of a record of its
stockholders for the purpose of determining stockholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining stockholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Company, or any proposed
liquidation, dissolution or winding up of the Company, the Company shall mail a
notice to each holder, at least ten (10) days prior to the record date specified
therein (or twenty (20) days prior to the consummation of any transaction or
event, whichever is earlier), of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under the Delaware General Corporation Law ("DGCL") the
vote of the holders of the Series D-1 Preferred Stock, voting separately as a
class or series as applicable, is required to authorize a given action of the
Company, the affirmative vote or consent of the holders of at least a majority
of the shares of the Series D-1 Preferred Stock, voting together in the
aggregate and not in separate series unless required under the DGCL, represented
at a duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series D-1 Preferred Stock (except as otherwise may be
required under the DGCL), voting together in the aggregate and not in separate
series unless required under the DGCL, shall constitute the approval of such
action by the class or by both series, as applicable. To the extent that under
the DGCL holders of the Series D-1 Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series D-1 Preferred Stock shall entitle the holder thereof to cast that a
number of votes per share as is equal to the number of shares of Common Stock
into which it is then convertible using the record date for determining the
stockholders of the Company eligible to vote on such matters as the date as of
which the Conversion Price is calculated. Holders of the Series D-1 Preferred
Stock shall be entitled to written notice of all stockholder meetings or written
consents (and copies of proxy materials and other information sent to
stockholders) with respect to which they would be entitled by vote, which notice
would be provided pursuant to the Company's bylaws and the DGCL).
9. Protective Provisions.
(a) So long as the shares of Series D-1 Preferred Stock are outstanding,
the Company shall not, take, approve or otherwise ratify any of the following
actions without the consent of at least a majority of the then outstanding
shares of Series D-1 Preferred Stock, voting as a separate series:
(i) authorize, issue or agree to authorize or issue any new class or
series of Senior Securities or Parity Securities or securities or rights of any
kind convertible into or exercisable or exchangeable for any such Senior
Securities or Parity Securities, or offer, sell or issue any Senior Securities
or Parity Securities or securities or rights of any kind convertible into or
exercisable or exchangeable for any such Senior Securities or Parity Securities,
other than the Subsequent Junior Preferred Stock and the DCS Transaction
Preferred Stock;
(ii) purchase, repurchase or redeem shares of (i) Common Stock, (ii)
securities or rights of any kind convertible into or exercisable or exchangeable
for Common Stock or (iii) other securities of the Company, (except in the case
of a termination of an employee, at which the Company may repurchase or redeem
such shares of Common Stock at cost and pursuant to any agreement under which
such shares of Common Stock were issued);
12
(iii) declare or pay dividends or any other distribution on shares
of Common Stock or any other capital stock of the Company except as contemplated
herein; or
(iv) increase the authorized number of shares of Series D-1
Preferred Stock; or
(v) amend the Certificate of Incorporation or Bylaws of the Company
or alter or change the rights, preferences or privileges of the Series D-1
Preferred Stock or any Parity Securities or Senior Securities in each case so as
to affect adversely the rights, preferences or privileges of the Series D-1
Preferred Stock other than to permit the issuance of the Subsequent Junior
Preferred Stock or the DCS Transaction Preferred Stock.
10. Preemptive Right.
(a) The Company shall not issue or sell any shares of Common Stock or
securities convertible into or exercisable or exchangeable for shares of Common
Stock (the securities issued in such transactions being referred to as the
"Newly Issued Securities"), other than any such issuance or sale which is
excluded from the definition of "Newly Issued Securities" pursuant to Section
10(d), unless prior to the issuance or sale of such Newly Issued Securities the
Company shall have set aside such additional securities as shall be necessary to
enable each holder of Series D-1 Preferred Stock to have the opportunity (such
opportunity being herein referred to as the "Preemptive Right") to purchase (on
the same terms as such Newly Issued Securities are sold) the same proportion of
such Newly Issued Securities sold by the Company as (x) the number of shares of
Common Stock (calculated solely on account of outstanding Series D-1 Preferred
Stock on an as converted basis) held by such holder on the day preceding the
issuance and sale of such Newly Issued Securities bears to (y) the total number
of shares of Common Stock (calculated on a fully diluted basis with respect to
the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series B-2 Preferred Stock and Series D-1 Preferred Stock, and any other
Common Stock equivalents which are "in the money") outstanding on the day
preceding the date of the issuance and sale of such Newly Issued Securities.
(b) Promptly after the issuance and sale by the Company of any Newly
Issued Securities, the Company shall give written notice thereof (the
"Preemptive Notice") to each holder of Series D-1 Preferred Stock. The
Preemptive Notice shall specify (i) the number of such Newly Issued Securities
issued or sold, (ii) the price and other terms of their proposed issuance or
sale, (iii) the number of such Newly Issued Securities which such holder is
entitled to purchase (determined as provided in subsection (a) above), and (iv)
the period during which such holder may elect to purchase such Newly Issued
Securities, which period shall extend for at least thirty (30) days following
the receipt by such holder of the Preemptive Notice (the "Preemptive Acceptance
Period"). Each holder of Series D-1 Preferred Stock who desires to purchase
Newly Issued Securities shall notify the Company within the Preemptive
Acceptance Period of the number of Newly Issued Securities such holder wishes to
purchase, as well as the number, if any, of additional Newly Issued Securities
such holder would be willing to purchase in the event that all of the Newly
Issued Securities subject to the Preemptive Right are not subscribed for by the
other holders of Series D-1 Preferred Stock, by completing, executing and
delivering to the Company the form of Preemptive Acceptance Election Notice
furnished by the Company with the Preemptive Notice, and depositing sufficient
cash, in accordance with the terms set forth in the Preemptive Acceptance
Election Notice, to consummate the purchase of the purchase of all the
securities such holder has so indicated such holder is willing to purchase. The
Company, in its sole and absolute discretion, may agree to payment deposit
arrangements other than those set forth in the Preemptive Acceptance Election
Notice, or may decline to accept alternative arrangements for any reason or
without reason.
13
(c) After the conclusion of the Preemptive Acceptance Period, the Company
shall promptly take such steps to issue and deliver securities to holders of
Series D-1 Preferred Stock, accept purchase price deposits and return unused
deposits (without interest and less any payment transfer charges as may apply)
as may be necessary or appropriate to consummate the exercise of Preemptive
Rights in accordance with this Section 10.
(d) The term "Newly Issued Securities" shall not include:
(i) Shares of Common Stock issued upon conversion of shares of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series B-2 Preferred Stock, Series D-1 Preferred Stock, Subsequent Junior
Preferred Stock or DCS Transaction Preferred Stock;
(ii) Shares of Common Stock (subject to appropriate adjustment for
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares) issuable or issued to the Company's employees, directors
or consultants pursuant to a stock option plan or restricted stock plan approved
by the Board;
(iii) Shares of Common Stock issued or issuable pursuant to
subsection 3(d);
(iv) Shares of Common Stock or Preferred Stock issuable upon
exercise of options, warrants or upon conversion of convertible securities or
other rights outstanding as of the Issuance Date;
(v) Shares of capital stock or options or warrants to purchase
capital stock, issued to financial institutions or lessors in connections with
commercial credit agreements, equipment financings or similar transactions or to
other corporations, persons or entities in connection with acquisitions, mergers
or similar business combinations, partnership arrangements, strategic alliances,
licensing arrangements or similar non-capital raising transactions approved by
the Board, including within this exception from the definition of the term
"Newly Issued Securities" shares issued to raise capital provided that the use
of proceeds is to consummate such non-capital raising transactions;
(vi) Shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization of the Company;
(vii) Securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act;
(viii) shares issued in exchange, at fair market value, for assets
or equipment to be used by the Company in the ordinary course of business;
(ix) shares issued pursuant to any of the Series D-1 Preferred Stock
purchase agreements or any of the other documents executed, filed or delivered
in connection therewith; and
(x) shares of Subsequent Junior Preferred Stock or DCS Transaction
Preferred Stock.
11. Mandatory Redemption
(a) On the date which is five (5) years after the Issuance Date (such
fifth anniversary, the "Mandatory Redemption Date"), the Company shall redeem
each then outstanding share of the Series D-1 Preferred Stock for an amount per
share equal to the Liquidation Amount.
14
(b) Upon a Change of Control Redemption Event, the Company shall redeem
each then outstanding share of the Series D-1 Preferred Stock for an amount per
share equal to either (x) the Liquidation Amount or (y) the property, rights or
securities which the holder of the shares of Common Stock into which such share
of Series D-1 Preferred Stock could have been converted would have received,
whichever is elected by the holder. For purposes of this Section 11, a "Change
of Control Redemption Event" shall be deemed to have occurred upon a merger,
combination or reorganization of the Company in which more than 50% of the
voting power of the Company is disposed of, or in which the stockholders of the
Company immediately prior to such merger, reorganization or consolidation own
less than 50% of the Company's voting power immediately after, unless a majority
of the holders of the Series D-1 Preferred Stock, voting as a separate series,
shall have approved of the transaction.
(b) From and after the latest to occur of (i) the Mandatory Redemption
Date or a Change of Control Redemption Event, and (ii) the date upon which the
Company irrevocably deposits the aggregate Liquidation Amount or the property,
rights or securities which the holder of the shares of Common Stock into which
such share of Series D-1 Preferred Stock could have been converted would have
received, whichever is elected by the applicable holder within the applicable
time period (or the Liquidation Amount if no such election is made within the
applicable time period), in respect of the shares of Series D-1 Preferred Stock
being redeemed in an account for disbursement to holders of shares of Series D-1
Preferred Stock, as applicable, upon receipt of certificates evidencing their
respective shares and other customary documentation for such redemption, no
holder of such Series D-1 Preferred Stock shall have any rights in respect of
such shares other than to receive the applicable Liquidation Amount per share in
respect of such holder's shares.
12. No Reissuance of Series D-1 Preferred Stock.
No share or shares of Series D-1 Preferred Stock acquired by the Company
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares of Series D-1 Preferred Stock shall be cancelled, retired
and eliminated from the shares of Series D-1 Preferred Stock, as applicable,
which the Company shall be authorized to issue. Any such shares of Series D-1
Preferred Stock acquired by the Company shall have the status of authorized and
unissued shares of Preferred Stock issuable in undesignated Series and may be
redesignated and reissued in any series other than as Series D-1 Preferred
Stock.
13. Registered Holders.
A holder of Series D-1 Preferred Stock registered on the Company's stock
transfer books as the owner of shares of Series D-1 Preferred Stock, as
applicable, shall be treated as the owner of such shares of all purposes. All
notices and all payments required to be mailed to a holder of shares of Series
D-1 Preferred Stock shall be mailed to such holder's registered address on the
Company's stock transfer books, and all dividends and redemption payments to a
holder of Series D-1 Preferred Stock made hereunder shall be deemed to be paid
in compliance hereof on the date such payments are deposited into the mail
addressed to such holder at such holder's registered address on the Company's
stock transfer books.
14. Certain Remedies.
Any registered holder of shares of Series D-1 Preferred Stock shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Certificate of Designations and to enforce specifically the terms and
provisions of this Certificate of Designations in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
remedy to which such holder may be entitled at law or in equity.
15
15. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
16. Severability of Provisions.
If any right, preference or limitation of the Series D-1 Preferred Stock
set forth herein (as may be amended) from time to time is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, such
right, preference or limitation (including, without limitation, the dividend
rate) shall be enforced to the maximum extent permitted by law and all other
rights, preferences and limitations set forth herein (as so amended) which can
be given effect without the invalid, unlawful or unenforceable right, preference
or limitation herein set forth shall be deemed dependent upon any other such
right, preference or limitation unless so expressed herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
16
IN WITNESS WHEREOF, the undersigned, being the Chief Financial Officer of
the Company, has executed this Certificate of Designations as of August 6, 2004.
AUTO DATA NETWORK, INC.
By: Xxx Xxxx
-------------------------------------
Name: Xxx Xxxx
Title: Chief Financial Officer
17
EXHIBIT A-2
FORM OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D-2 CONVERTIBLE PREFERRED STOCK
OF
AUTO DATA NETWORK, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
[CERTIFICATE OF DESIGNATIONS FOR SUBSEQUENT PREFERRED STOCK---STOCK TO BE
ISSUED ON FEBRUARY 28, 2004]
18
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF,
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED UNLESS COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OR
REGULATION S OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM
SUCH REGISTRATION.
AUTO DATA NETWORK INC.
UNSECURED CONVERTIBLE PROMISSORY NOTE
$_______________ [Date]
New York, New York
ARTICLE VIII PRINCIPAL.
SECTION 8.01 Auto Data Network Inc., a Delaware Corporation (the
"Company"), for value received, hereby promises to pay to the order of
[Noteholder] or his, her, their or its assigns (the "Investor" or the "Holder")
the amount of _______________________ dollars ($_________), as set forth
hereinafter. All capitalized terms used and not otherwise defined herein shall
have the meaning ascribed to such terms in that certain Amended and Restated
Agreement and Plan of Merger, dated as of August 2, 2004, by and among the
Company, Car Parts Technologies Acquisition, a Delaware corporation and a
wholly-owned subsidiary of the Company and CarParts Technologies, Inc., a
Delaware corporation (the "Merger Agreement").
SECTION 8.02 This Convertible Promissory Note (the "Note") shall bear no
interest. This Note shall be due and payable on Holder's written demand which
may be made on or after February 28, 2005 (the "Termination Date"), unless this
Note is automatically converted into shares of the Company's capital stock
pursuant to Section ySECTION 8.03 and Section 3 hereof. Commencing on the
Termination Date, all principal hereunder shall be payable upon demand.
SECTION 8.03 Upon conversion of the principal hereunder into the Company's
capital stock pursuant to Section 3 hereof, this Note shall be surrendered to
the Company for cancellation.
SECTION 8.04 Payments are to be made at the address of the Holder set
forth in Section 8 below or at such other place in the United States as the
Holder shall designate to the Company in writing, in lawful money of the United
States of America.
SECTION 8.05 This Note is issued pursuant to the Merger Agreement. The
provisions of this Note are a statement of the rights of the Holder and the
conditions to which this Note is subject and to which the Holder, by the
acceptance of this Note, agrees.
ARTICLE IX PREPAYMENT. NOTWITHSTANDING ANYTHING ELSE SET FORTH HEREIN, THE
COMPANY MAY NOT PRE-PAY THIS NOTE IN WHOLE OR IN PART.
19
ARTICLE X CONVERSION.
SECTION 10.01 Automatic Conversion of Outstanding Principal. On February
28, 2005, the entire outstanding principal balance hereunder shall be
automatically converted into a number of fully paid and nonassessable whole
shares of Subsequent Junior Preferred Stock, determined in accordance with
Section ySECTION 10.02. Upon conversion, this Note shall be canceled and no
further amounts shall be due hereunder.
SECTION 10.02 Shares Issuable. The number of whole shares of Subsequent
Junior Preferred Stock (as defined in the Merger Agreement) into which this Note
may be converted ("Conversion Shares") shall be determined by dividing the
aggregate principal amount outstanding hereunder by the Second Valuation Amount
(as defined in the Merger Agreement).
SECTION 10.03 Delivery of Stock Certificates. Upon the conversion of this
Note and return of the original Note to the Company, the Company, at its
expense, will issue and deliver to the Holder of this Note a certificate or
certificates (bearing such legends as are required by applicable state and
federal securities laws in the opinion of counsel to the Company) for the number
of full shares of Subsequent Junior Preferred Stock issuable upon such
conversion and the person or persons entitled to receive the shares of the
Subsequent Junior Preferred Stock issuable upon such conversion shall be treated
for all purposes as the record holders of such shares on such date.
SECTION 10.04 No Fractional Shares. No fractional shares shall be issued
upon conversion of this Note. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Note, the Company shall pay to
the Holder an amount equal to such fraction multiplied by the fair market value
of the Common Stock underlying such shares as determined by the Board of
Directors in accordance with the Merger Agreement.
SECTION 10.05 No Rights as Shareholder. This Note does not entitle the
Holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the conversion hereof.
ARTICLE XI RESERVATION OF STOCK ISSUABLE UPON CONVERSION. THE COMPANY
SHALL AT ALL TIMES RESERVE AND KEEP AVAILABLE OUT OF ITS AUTHORIZED BUT UNISSUED
SHARES OF CAPITAL STOCK, SOLELY FOR THE PURPOSE OF EFFECTING THE CONVERSION OF
THE NOTE, SUCH NUMBER OF ITS SHARES OF SUBSEQUENT JUNIOR PREFERRED STOCK (AND
SHARES OF ITS COMMON STOCK FOR ISSUANCE ON CONVERSION OF SUCH SUBSEQUENT JUNIOR
PREFERRED STOCK) AS SHALL FROM TIME TO TIME BE SUFFICIENT TO EFFECT THE
CONVERSION OF THE NOTE; AND IF AT ANY TIME THE NUMBER OF AUTHORIZED BUT UNISSUED
SHARES OF SUBSEQUENT JUNIOR PREFERRED STOCK (AND SHARES OF ITS COMMON STOCK FOR
ISSUANCE ON CONVERSION OF SUCH SUBSEQUENT JUNIOR PREFERRED STOCK) SHALL NOT BE
SUFFICIENT TO EFFECT THE CONVERSION OF THE ENTIRE OUTSTANDING PRINCIPAL AMOUNT
OF THIS NOTE, IN ADDITION TO SUCH OTHER REMEDIES AS SHALL BE AVAILABLE TO THE
HOLDER OF THIS NOTE, THE COMPANY WILL USE ITS BEST EFFORTS TO TAKE SUCH
CORPORATE ACTION AS MAY, IN THE OPINION OF ITS COUNSEL, BE NECESSARY TO INCREASE
ITS AUTHORIZED BUT UNISSUED SHARES OF SUBSEQUENT JUNIOR PREFERRED STOCK (AND
SHARES OF ITS COMMON STOCK FOR ISSUANCE ON CONVERSION OF SUCH SUBSEQUENT JUNIOR
PREFERRED STOCK) TO SUCH NUMBER OF SHARES AS SHALL BE SUFFICIENT FOR SUCH
PURPOSES.
ARTICLE XII ASSIGNMENT. SUBJECT TO THE RESTRICTIONS ON TRANSFER DESCRIBED
IN SECTION 7 HEREOF, THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER OF
THIS NOTE SHALL BE BINDING UPON AND BENEFIT THE SUCCESSORS, ASSIGNS, HEIRS,
ADMINISTRATORS AND TRANSFEREES OF THE PARTIES. EFFECTIVE UPON ANY SUCH
ASSIGNMENT, THE PERSON OR ENTITY TO WHOM SUCH RIGHTS, INTERESTS AND OBLIGATIONS
WERE ASSIGNED SHALL HAVE AND EXERCISE ALL OF THE HOLDER'S RIGHTS, INTERESTS AND
OBLIGATIONS HEREUNDER AS IF SUCH PERSON OR ENTITY WERE THE ORIGINAL HOLDER OF
THIS NOTE.
20
ARTICLE XIII WAIVER AND AMENDMENT. ANY PROVISION OF THIS NOTE MAY BE
AMENDED, WAIVED OR MODIFIED (EITHER GENERALLY OR IN A PARTICULAR INSTANCE,
EITHER RETROACTIVELY OR PROSPECTIVELY, AND EITHER FOR A SPECIFIED PERIOD OF TIME
OR INDEFINITELY), UPON THE WRITTEN CONSENT OF THE COMPANY AND OF THE HOLDER.
ARTICLE XIV TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION
HEREOF. WITH RESPECT TO ANY OFFER, SALE OR OTHER DISPOSITION OF THIS NOTE OR
SECURITIES INTO WHICH THIS NOTE MAY BE CONVERTED, THE HOLDER WILL GIVE WRITTEN
NOTICE TO THE COMPANY PRIOR THERETO, DESCRIBING BRIEFLY THE MANNER THEREOF.
UNLESS THE COMPANY REASONABLY DETERMINES THAT SUCH TRANSFER WOULD VIOLATE
APPLICABLE SECURITIES LAWS, OR THAT SUCH TRANSFER WOULD ADVERSELY AFFECT THE
COMPANY'S ABILITY TO ACCOUNT FOR FUTURE TRANSACTIONS TO WHICH IT IS A PARTY AS A
POOLING OF INTERESTS, AND NOTIFIES THE HOLDER THEREOF WITHIN TEN (10) BUSINESS
DAYS AFTER RECEIVING NOTICE OF THE TRANSFER, THE HOLDER MAY EFFECT SUCH
TRANSFER. EACH NOTE THUS TRANSFERRED AND EACH CERTIFICATE REPRESENTING THE
SECURITIES THUS TRANSFERRED SHALL BEAR A LEGEND AS TO THE APPLICABLE
RESTRICTIONS ON TRANSFERABILITY IN ORDER TO ENSURE COMPLIANCE WITH THE
SECURITIES ACT, UNLESS IN THE OPINION OF COUNSEL FOR THE COMPANY SUCH LEGEND IS
NOT REQUIRED IN ORDER TO ENSURE COMPLIANCE WITH THE SECURITIES ACT. THE COMPANY
MAY ISSUE STOP TRANSFER INSTRUCTIONS TO ITS TRANSFER AGENT IN CONNECTION WITH
SUCH RESTRICTIONS.
ARTICLE XV NOTICES. ANY NOTICE, REQUEST, OTHER COMMUNICATION OR PAYMENT
REQUIRED OR PERMITTED HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE
BEEN GIVEN UPON DELIVERY IF PERSONALLY DELIVERED, OR FIVE (5) BUSINESS DAYS
AFTER DEPOSIT IF DEPOSITED IN THE UNITED STATES MAIL FOR MAILING BY CERTIFIED
MAIL, POSTAGE PREPAID, AND ADDRESSED AS FOLLOWS:
If to Investor: at the address indicated on the signature page hereto.
If to Company: Auto Data Network Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxxx, CEO
With a copy to: Auto Data Network Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
21
Each of the above addressees may change its address for purposes of this Section
8 by giving to the other addressee notice of such new address in conformance
with this Section 8.
ARTICLE XVI LOSS, THEFT OR DESTRUCTION OF NOTE. UPON RECEIPT BY THE
COMPANY OF EVIDENCE REASONABLY SATISFACTORY TO IT OF THE LOSS, THEFT OR
DESTRUCTION OF THIS NOTE AND OF INDEMNITY OR SECURITY REASONABLY SATISFACTORY TO
IT, THE COMPANY WILL MAKE AND DELIVER A NEW NOTE WHICH SHALL CARRY THE SAME
RIGHTS CARRIED BY THIS NOTE, STATING THAT SUCH NOTE IS ISSUED IN REPLACEMENT OF
THIS NOTE, MAKING REFERENCE TO THE ORIGINAL DATE OF ISSUANCE OF THIS NOTE (AND
ANY SUCCESSORS HERETO) AND DATED AS OF SUCH CANCELLATION, IN LIEU OF THIS NOTE.
ARTICLE XVII ACCREDITED INVESTOR. THE HOLDER REPRESENTS AND WARRANTS THAT
HE/SHE/IT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF THE SECURITIES AND
EXCHANGE RULE 501 OF REGULATION D, AS PRESENTLY IN EFFECT.
ARTICLE XVIII GOVERNING LAW. THIS NOTE IS BEING DELIVERED IN AND FOR ALL
PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF.
ARTICLE XIX WAIVER BY THE COMPANY. THE COMPANY HEREBY WAIVES DEMAND,
NOTICE, PRESENTMENT, PROTEST AND NOTICE OF DISHONOR.
ARTICLE XX DELAYS. NO DELAY BY THE HOLDER IN EXERCISING ANY POWER OR RIGHT
HEREUNDER SHALL OPERATE AS A WAIVER OF ANY POWER OR RIGHT.
ARTICLE XXI SEVERABILITY. IF ONE OR MORE PROVISIONS OF THIS NOTE ARE HELD
TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE EXCLUDED FROM
THIS NOTE AND THE BALANCE OF THE NOTE SHALL BE INTERPRETED AS IF SUCH PROVISION
WERE SO EXCLUDED AND SHALL BE ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.
ARTICLE XXII NO IMPAIRMENT. THE COMPANY WILL NOT, BY ANY VOLUNTARY ACTION,
AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF THE TERMS TO BE
OBSERVED OR PERFORMED HEREUNDER BY THE COMPANY, BUT WILL AT ALL TIMES IN GOOD
FAITH ASSIST IN THE CARRYING OUT OF ALL THE PROVISIONS OF THIS NOTE AND IN THE
TAKING OF ALL SUCH ACTION AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO PROTECT
THE RIGHTS OF THE HOLDER OF THIS NOTE AGAINST IMPAIRMENT.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
22
IN WITNESS WHEREOF, Auto Data Network Inc. has caused this Note to be
executed in its corporate name and this Note to be dated, issued and delivered,
all on the date first above written.
AUTO DATA NETWORK INC.
a Delaware corporation
By __________________
Print Name _________
Title __________________
Accepted and Agreed to:
INITIAL HOLDER:
--------------------------
Print Name of Holder
By _________________
(Signature)
------------------------------------------
(Print Name, if signing on behalf of entity)
________________________________________ THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A TRANSFER
MEETING THE REQUIREMENTS OF RULE 144 OR REGULATION S OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
AUTO DATA NETWORK INC.
UNSECURED CONVERTIBLE PROMISSORY NOTE
$_______________ [Date]
New York, New York
23
ARTICLE XXIII PRINCIPAL.
SECTION 23.01 Auto Data Network Inc., a Delaware Corporation (the
"Company"), for value received, hereby promises to pay to the order of
[Noteholder] or his, her, their or its assigns (the "Investor" or the "Holder")
the amount of _______________________ dollars ($_________), as set forth
hereinafter. All capitalized terms used and not otherwise defined herein shall
have the meaning ascribed to such terms in that certain Amended and Restated
Agreement and Plan of Merger, dated as of August 2, 2004, by and among the
Company, Car Parts Technologies Acquisition, a Delaware corporation and a
wholly-owned subsidiary of the Company and CarParts Technologies, Inc., a
Delaware corporation (the "Merger Agreement").
SECTION 23.02 This Convertible Promissory Note (the "Note") shall bear no
interest. This Note shall be due and payable on Holder's written demand which
may be made on or after February 28, 2005 (the "Termination Date"), unless this
Note is automatically converted into shares of the Company's capital stock
pursuant to Section ySECTION 8.03 and Section 3 hereof. Commencing on the
Termination Date, all principal hereunder shall be payable upon demand.
SECTION 23.03 Upon conversion of the principal hereunder into the
Company's capital stock pursuant to Section 3 hereof, this Note shall be
surrendered to the Company for cancellation.
SECTION 23.04 Payments are to be made at the address of the Holder set
forth in Section 8 below or at such other place in the United States as the
Holder shall designate to the Company in writing, in lawful money of the United
States of America.
SECTION 23.05 This Note is issued pursuant to the Merger Agreement. The
provisions of this Note are a statement of the rights of the Holder and the
conditions to which this Note is subject and to which the Holder, by the
acceptance of this Note, agrees.
ARTICLE XXIV PREPAYMENT. NOTWITHSTANDING ANYTHING ELSE SET FORTH HEREIN,
THE COMPANY MAY NOT PRE-PAY THIS NOTE IN WHOLE OR IN PART.
ARTICLE XXV CONVERSION.
SECTION 25.01 Automatic Conversion of Outstanding Principal. On February
28, 2005, the entire outstanding principal balance hereunder shall be
automatically converted into a number of fully paid and nonassessable whole
shares of Subsequent Junior Preferred Stock, determined in accordance with
Section ySECTION 10.02. Upon conversion, this Note shall be canceled and no
further amounts shall be due hereunder.
SECTION 25.02 Shares Issuable. The number of whole shares of Subsequent
Junior Preferred Stock (as defined in the Merger Agreement) into which this Note
may be converted ("Conversion Shares") shall be determined by dividing the
aggregate principal amount outstanding hereunder by the Second Valuation Amount
(as defined in the Merger Agreement).
SECTION 25.03 Delivery of Stock Certificates. Upon the conversion of this
Note and return of the original Note to the Company, the Company, at its
expense, will issue and deliver to the Holder of this Note a certificate or
certificates (bearing such legends as are required by applicable state and
federal securities laws in the opinion of counsel to the Company) for the number
of full shares of Subsequent Junior Preferred Stock issuable upon such
conversion and the person or persons entitled to receive the shares of the
Subsequent Junior Preferred Stock issuable upon such conversion shall be treated
for all purposes as the record holders of such shares on such date.
24
SECTION 25.04 No Fractional Shares. No fractional shares shall be issued
upon conversion of this Note. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Note, the Company shall pay to
the Holder an amount equal to such fraction multiplied by the fair market value
of the Common Stock underlying such shares as determined by the Board of
Directors in accordance with the Merger Agreement.
SECTION 25.05 No Rights as Shareholder. This Note does not entitle the
Holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the conversion hereof.
ARTICLE XXVI RESERVATION OF STOCK ISSUABLE UPON CONVERSION. THE COMPANY
SHALL AT ALL TIMES RESERVE AND KEEP AVAILABLE OUT OF ITS AUTHORIZED BUT UNISSUED
SHARES OF CAPITAL STOCK, SOLELY FOR THE PURPOSE OF EFFECTING THE CONVERSION OF
THE NOTE, SUCH NUMBER OF ITS SHARES OF SUBSEQUENT JUNIOR PREFERRED STOCK (AND
SHARES OF ITS COMMON STOCK FOR ISSUANCE ON CONVERSION OF SUCH SUBSEQUENT JUNIOR
PREFERRED STOCK) AS SHALL FROM TIME TO TIME BE SUFFICIENT TO EFFECT THE
CONVERSION OF THE NOTE; AND IF AT ANY TIME THE NUMBER OF AUTHORIZED BUT UNISSUED
SHARES OF SUBSEQUENT JUNIOR PREFERRED STOCK (AND SHARES OF ITS COMMON STOCK FOR
ISSUANCE ON CONVERSION OF SUCH SUBSEQUENT JUNIOR PREFERRED STOCK) SHALL NOT BE
SUFFICIENT TO EFFECT THE CONVERSION OF THE ENTIRE OUTSTANDING PRINCIPAL AMOUNT
OF THIS NOTE, IN ADDITION TO SUCH OTHER REMEDIES AS SHALL BE AVAILABLE TO THE
HOLDER OF THIS NOTE, THE COMPANY WILL USE ITS BEST EFFORTS TO TAKE SUCH
CORPORATE ACTION AS MAY, IN THE OPINION OF ITS COUNSEL, BE NECESSARY TO INCREASE
ITS AUTHORIZED BUT UNISSUED SHARES OF SUBSEQUENT JUNIOR PREFERRED STOCK (AND
SHARES OF ITS COMMON STOCK FOR ISSUANCE ON CONVERSION OF SUCH SUBSEQUENT JUNIOR
PREFERRED STOCK) TO SUCH NUMBER OF SHARES AS SHALL BE SUFFICIENT FOR SUCH
PURPOSES.
ARTICLE XXVII ASSIGNMENT. SUBJECT TO THE RESTRICTIONS ON TRANSFER
DESCRIBED IN SECTION 7 HEREOF, THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE
HOLDER OF THIS NOTE SHALL BE BINDING UPON AND BENEFIT THE SUCCESSORS, ASSIGNS,
HEIRS, ADMINISTRATORS AND TRANSFEREES OF THE PARTIES. EFFECTIVE UPON ANY SUCH
ASSIGNMENT, THE PERSON OR ENTITY TO WHOM SUCH RIGHTS, INTERESTS AND OBLIGATIONS
WERE ASSIGNED SHALL HAVE AND EXERCISE ALL OF THE HOLDER'S RIGHTS, INTERESTS AND
OBLIGATIONS HEREUNDER AS IF SUCH PERSON OR ENTITY WERE THE ORIGINAL HOLDER OF
THIS NOTE.
ARTICLE XXVIII WAIVER AND AMENDMENT. ANY PROVISION OF THIS NOTE MAY BE
AMENDED, WAIVED OR MODIFIED (EITHER GENERALLY OR IN A PARTICULAR INSTANCE,
EITHER RETROACTIVELY OR PROSPECTIVELY, AND EITHER FOR A SPECIFIED PERIOD OF TIME
OR INDEFINITELY), UPON THE WRITTEN CONSENT OF THE COMPANY AND OF THE HOLDER.
ARTICLE XXIX TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION
HEREOF. WITH RESPECT TO ANY OFFER, SALE OR OTHER DISPOSITION OF THIS NOTE OR
SECURITIES INTO WHICH THIS NOTE MAY BE CONVERTED, THE HOLDER WILL GIVE WRITTEN
NOTICE TO THE COMPANY PRIOR THERETO, DESCRIBING BRIEFLY THE MANNER THEREOF.
UNLESS THE COMPANY REASONABLY DETERMINES THAT SUCH TRANSFER WOULD VIOLATE
APPLICABLE SECURITIES LAWS, OR THAT SUCH TRANSFER WOULD ADVERSELY AFFECT THE
COMPANY'S ABILITY TO ACCOUNT FOR FUTURE TRANSACTIONS TO WHICH IT IS A PARTY AS A
POOLING OF INTERESTS, AND NOTIFIES THE HOLDER THEREOF WITHIN TEN (10) BUSINESS
DAYS AFTER RECEIVING NOTICE OF THE TRANSFER, THE HOLDER MAY EFFECT SUCH
TRANSFER. EACH NOTE THUS TRANSFERRED AND EACH CERTIFICATE REPRESENTING THE
SECURITIES THUS TRANSFERRED SHALL BEAR A LEGEND AS TO THE APPLICABLE
RESTRICTIONS ON TRANSFERABILITY IN ORDER TO ENSURE COMPLIANCE WITH THE
SECURITIES ACT, UNLESS IN THE OPINION OF COUNSEL FOR THE COMPANY SUCH LEGEND IS
NOT REQUIRED IN ORDER TO ENSURE COMPLIANCE WITH THE SECURITIES ACT. THE COMPANY
MAY ISSUE STOP TRANSFER INSTRUCTIONS TO ITS TRANSFER AGENT IN CONNECTION WITH
SUCH RESTRICTIONS.
25
ARTICLE XXX NOTICES. ANY NOTICE, REQUEST, OTHER COMMUNICATION OR PAYMENT
REQUIRED OR PERMITTED HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE
BEEN GIVEN UPON DELIVERY IF PERSONALLY DELIVERED, OR FIVE (5) BUSINESS DAYS
AFTER DEPOSIT IF DEPOSITED IN THE UNITED STATES MAIL FOR MAILING BY CERTIFIED
MAIL, POSTAGE PREPAID, AND ADDRESSED AS FOLLOWS:
If to Investor: at the address indicated on the signature page hereto.
If to Company: Auto Data Network Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxxx, CEO
With a copy to: Auto Data Network Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Each of the above addressees may change its address for purposes of this Section
8 by giving to the other addressee notice of such new address in conformance
with this Section 8.
ARTICLE XXXI LOSS, THEFT OR DESTRUCTION OF NOTE. UPON RECEIPT BY THE
COMPANY OF EVIDENCE REASONABLY SATISFACTORY TO IT OF THE LOSS, THEFT OR
DESTRUCTION OF THIS NOTE AND OF INDEMNITY OR SECURITY REASONABLY SATISFACTORY TO
IT, THE COMPANY WILL MAKE AND DELIVER A NEW NOTE WHICH SHALL CARRY THE SAME
RIGHTS CARRIED BY THIS NOTE, STATING THAT SUCH NOTE IS ISSUED IN REPLACEMENT OF
THIS NOTE, MAKING REFERENCE TO THE ORIGINAL DATE OF ISSUANCE OF THIS NOTE (AND
ANY SUCCESSORS HERETO) AND DATED AS OF SUCH CANCELLATION, IN LIEU OF THIS NOTE.
ARTICLE XXXII ACCREDITED INVESTOR. THE HOLDER REPRESENTS AND WARRANTS THAT
HE/SHE/IT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF THE SECURITIES AND
EXCHANGE RULE 501 OF REGULATION D, AS PRESENTLY IN EFFECT.
26
ARTICLE XXXIII GOVERNING LAW. THIS NOTE IS BEING DELIVERED IN AND FOR ALL
PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF.
ARTICLE XXXIV WAIVER BY THE COMPANY. THE COMPANY HEREBY WAIVES DEMAND,
NOTICE, PRESENTMENT, PROTEST AND NOTICE OF DISHONOR.
ARTICLE XXXV DELAYS. NO DELAY BY THE HOLDER IN EXERCISING ANY POWER OR
RIGHT HEREUNDER SHALL OPERATE AS A WAIVER OF ANY POWER OR RIGHT.
ARTICLE XXXVI SEVERABILITY. IF ONE OR MORE PROVISIONS OF THIS NOTE ARE
HELD TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE EXCLUDED
FROM THIS NOTE AND THE BALANCE OF THE NOTE SHALL BE INTERPRETED AS IF SUCH
PROVISION WERE SO EXCLUDED AND SHALL BE ENFORCEABLE IN ACCORDANCE WITH ITS
TERMS.
ARTICLE XXXVII NO IMPAIRMENT. THE COMPANY WILL NOT, BY ANY VOLUNTARY
ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF THE TERMS
TO BE OBSERVED OR PERFORMED HEREUNDER BY THE COMPANY, BUT WILL AT ALL TIMES IN
GOOD FAITH ASSIST IN THE CARRYING OUT OF ALL THE PROVISIONS OF THIS NOTE AND IN
THE TAKING OF ALL SUCH ACTION AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO
PROTECT THE RIGHTS OF THE HOLDER OF THIS NOTE AGAINST IMPAIRMENT.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
27
IN WITNESS WHEREOF, Auto Data Network Inc. has caused this Note to be
executed in its corporate name and this Note to be dated, issued and delivered,
all on the date first above written.
AUTO DATA NETWORK INC.
a Delaware corporation
By _____________________
Print Name __________________
Title ____________________
Accepted and Agreed to:
INITIAL HOLDER:
----------------------------------------------
Print Name of Holder
By _______________________________________
(Signature)
-------------------------------------------
(Print Name, if signing on behalf of entity)
__________________________________
Title (if applicable)
Address: __________________________________
__________________________________
__________________________________
28
ASSIGNMENT FORM
(To Assign the foregoing Note, execute
this form and supply required information.
Do not use this form to convert the Note.)
FOR VALUE RECEIVED, an interest corresponding to the unpaid principal
amount of the foregoing Note and all rights evidenced thereby are hereby
assigned to
--------------------------------------------------------------------------------
(Please Print)
whose address is
-------------------------------------------------------
--------------------------------------------------------------------------------
Dated:
--------------------------------------
Holder's Signature:
--------------------------------------------
Holder's Address:
--------------------------------------------
Signature Guaranteed:
--------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the
name as it appears on the face of the Note, without alteration
or enlargement or any change whatever, and must be guaranteed
by a bank or trust company. Officers of corporations and those
acting in a fiduciary or other representative capacity should
file proper evidence of authority to assign the foregoing
Note.
Title (if applicable)
Address: ____________________
_____________
_____________
29
ASSIGNMENT FORM
(To Assign the foregoing Note, execute
this form and supply required information.
Do not use this form to convert the Note.)
FOR VALUE RECEIVED, an interest corresponding to the unpaid principal
amount of the foregoing Note and all rights evidenced thereby are hereby
assigned to
--------------------------------------------------------------------------------
(Please Print)
whose address is
-------------------------------------------------------
Dated:
--------------------------------------
Holder's Signature:
--------------------------------------------
Holder's Address:
--------------------------------------------
Signature Guaranteed:
--------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the
name as it appears on the face of the Note, without alteration
or enlargement or any change whatever, and must be guaranteed
by a bank or trust company. Officers of corporations and those
acting in a fiduciary or other representative capacity should
file proper evidence of authority to assign the foregoing
Note.
EXHIBIT C
XXXXXXX, XXXX $ 990.12
XXXXXX, XXXX 22.50
CALPURNIA CAPITAL PARTNERS, LLC 22.50
XXXXXXX, XXXXX 45.01
XXXXXXX, XXXXX 22.50
XXXXXXXXX, XXX 67.51
XXXXXXX, XXXXXX 22.50
XXXXXX, XXXX 22.50
XXXXXXX, XXXXXXX 22.50
XXXXX, XXXXXXX 22.50
XXXXXXX, XXXXXXX 22.50
XXXXXXX, XXXXX 22.50
STOCKLAND & XXXXXXXX P.A. 45.01
STOCKLAND & XXXXXXXX P.A. 67.51
XXXXXXXXXX, XXXXXX 112.51
XXXXX, XXXXXX 22.50
XXX, XXXXX 22.50
XXXXXX, XXXXXX X. 22.50
XXXXXX, XXXXXXXX X. 22.50
XXXXXXXXX, XXXX 22.50
MEANS, XXXXXXX 22.50
XXXXXXXX, XXXXX 22.50
TONGA PARTNERS LP 22.50
CUTTYHUNK FUND LIMITED 22.50
XXXXX, XXXX 22.50
XXXX, XXXX 22.50
XXXXXX, XXXX 22.50
XXXXXX, XXXXXX X. 22.50
XXXXXXXXX, XXXXX 22.50
XXXXXXXXX, XXXXX 22.50
XXXXX, XXXXXX 22.50
XXXXXXX, XXXXXXXX 22.50
XXXXXX, RIED & PRIEST LLP 22.50
EMBASSY & CO. 225.03
XXXXX, XXXXXX D 22.50
XXXX, XXXXXX A 22.50
AMIR, NIRAN 22.50
XXXXXXXX, XXXXXXX 22.50
XXXXXXXXXX, XXXXX 22.50
XXXXXXXXX, XXXXXXX 22.50
XXXXXX, XXXXX 22.50
CHEW, XXXX XXXX 22.50
2
XXX, XXXXXX 22.50
XXXX, XXXXXXXXX 22.50
DAY, XXXXX 22.50
XXXXXXX, XXXX X 22.50
XXX, XXXX 22.50
XXXXXXXX, XXXX X. 22.50
XXXXXX, XXXXXXXXXXX 22.50
XXXXXX, XXXXXX 22.50
XXXXXXX, XXXXX XXXX 22.50
XXXXX, XXXXXX P 22.50
XXXXXXX, XXXXXX 22.50
XXXXXX, XXX 22.50
HASEGAWA, XXXXX X. 22.50
XXXX, XXXX 22.50
XXXXXXX, XXXXXXX 22.50
XXXXXX, XXX J 22.50
XXXXX, XXXXXXX 22.50
XXXXXX, XXXXXXX 22.50
XXXXXXXXX, XXXXXX 22.50
XXXXX, XXXXX 22.50
XXX, XXXX 22.50
XXXXX, XXXXX X. 22.50
XXXXXX, XXXXX 22.50
XXXXXXXX, XXXXXXXXX 22.50
MAX, XXXXXXX 22.50
XXXXX, XXXX L 22.50
XXXXX, XXXXX 22.50
XXXXXXX II, XXXX L 22.50
XXXXXXX, XXXXXXX 22.50
XXXXXXX, XXXXXXX 22.50
PARK, XXXX XX 22.50
XXXXXX, XXXXXXXXX XXXXXXX 22.50
XXXXX XXXXXXXXXX, XXXXXXXX 22.50
REBULTAN, XXXXXXX XXXXXXXX 22.50
XXXXXXXX, XXXXXXX 22.50
ROUZA, XXXXX X. 22.50
XXXXXX, XXXXXX 22.50
XXXX, XXXXX S 22.50
XXXXXXX, XXXXXXX 22.50
XXXXXXXX, XXXX 22.50
XXXXXXXX, XXX 22.50
XXX, XXXXXXX 22.50
XXXXXX, XXX 22.50
XXXXXXXXX, XXXX 22.50
XXXX, XXXX 45.01
3
XXXXX, XXXXXXX 22.50
XXXXX, XXXXXX 22.50
XX, XXX 22.50
XXXXXX, XXXXXX XXX 22.50
XXXXX X XXXXXXX REVOCABLE TRUST 22.50
MACDONALD COMPUTER SYSTEMS 22.50
XXXXXXXX.XXX INVESTORS 180.02
COVESTCO 360.04
ENTHUSIAST XXXXXXXX.XXX, INC. 202.73
------
TOTAL CASH PAYMENT $4,253.00
---------
4
EXHIBIT D
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE ASSIGNED UNLESS SO REGISTERED OR AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT IS AVAILABLE. THIS LEGEND SHALL BE ENDORSED UPON ANY
WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT.
WARRANT AGREEMENT
FOR JUNIOR PREFERRED STOCK OF
AUTO DATA NETWORK, INC.
Warrant No. ____
Date of Issuance: ____ __, 0000 Xxxxxxx to purchase an aggregate of
______shares of Junior Preferred Stock
THIS CERTIFIES that, for value received, [_________________________], or
his/her/its permitted transferees, successors or assigns (collectively, the
"Holder"), is entitled to purchase from AUTO DATA NETWORK, INC., a Delaware
corporation (the "Company"), at any time, and from time to time, during the
exercise period referred to in Section 1 hereof, [__________________________]
([____________]) fully paid, validly issued and nonassessable shares (the
"Warrant Shares") of Junior Preferred stock of the Company, par value $0.00l per
share (the "Junior Preferred Stock"), at the exercise price of One Dollar and
Ninety Cents ($1.90) per share (the "Warrant Share Price"). Securities issuable
upon exercise of this Warrant and the Warrant Share Price payable therefor are
subject to adjustment from time to time as hereinafter set forth. As used
herein, the term "Warrant" shall include any warrant or warrants hereafter
issued in consequence of the exercise of this Warrant Agreement in part or
transfer of this Warrant in whole or in part. Capitalized terms used herein and
not defined have the respective meanings given to them in that certain Amended
and Restated Agreement and Plan of Merger, dated as of August 2, 2004, by and
among the Company, the Holder and the other parties named therein (the "Merger
Agreement").
The Company shall register this Warrant, upon records to be maintained by
the Company for that purpose (the "Warrant Register"), in the name of the record
Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
and the Company shall not be affected by notice to the contrary.
5
Subject to Section 4 of this Warrant and the applicable provisions of the
Merger Agreement and applicable law, the Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Transfer Agent (as defined in Section 1.(a) herein) or to the Company.
Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant. Any transfer or assignment of this Warrant and Warrant Shares
obtained by the Holder in exercise of this Warrant is subject to any applicable
restrictions under the Merger Agreement, if any, and the requirements that such
securities be registered under the Securities Act and applicable state
securities laws or exempt from registration under such laws.
EXERCISE; PAYMENT FOR OWNERSHIP INTEREST.
(a) Upon the terms and subject to the conditions set forth herein, this
Warrant may be exercised in whole or in part by the Holder hereof at any time,
or from time to time, on or after the date hereof and on or prior to 5 p.m. New
York local time on the earliest date to occur (the "Expiration Date")of (x)
[INSERT FIVE YEAR ANNIVERSARY OF ISSUANCE DATE] (the "Expiration Maturity Date")
and (y) the Early Expiration Date, as such term is defined herein, by
presentation and surrender of this Warrant to the principal offices of the
Company, or at the office of its Transfer Agent (the "Transfer Agent"), if any,
together with the Purchase Form annexed hereto, duly executed, and accompanied
by payment to the Company of an amount equal to the Warrant Share Price
multiplied by the number of Warrant Shares as to which this Warrant is then
being exercised in U.S. dollars by certified or official bank check or wire
transfer of immediately available funds of the cash purchase price; provided,
however, that in each case, the minimum number of Warrant Shares as to which
this Warrant is being exercised shall be the lesser of (i) 1,000 Warrant Shares
or (ii) all Warrant Shares then held by the Holder on an as exercised basis;
provided, further, that in the event of any merger, consolidation or sale, lease
or transfer of all or substantially all of the assets of the Company, prior to
the Expiration Date, the Holder shall have the right to exercise this Warrant
commencing at such time through the Expiration Date into the kind and amount of
shares of stock and other securities and property (including cash) receivable by
a holder of the number of shares of Common Stock into which this Warrant might
have been exercisable immediately prior thereto. Any transfer of Warrant Shares
obtained by the Holder in exercise of this Warrant is subject to the requirement
that such transfer be in compliance with the applicable provisions of the Merger
Agreement, if any, and that such securities be registered under the Securities
Act, and applicable state securities laws or exempt from registration under such
laws. The Holder of this Warrant shall be deemed to be a stockholder of the
Warrant Shares as to which this Warrant is exercised in accordance herewith
effective immediately after the close of business on the date on which the
Holder shall have delivered to the Company this Warrant in proper form for
exercise and payment in U.S. dollars by certified or official bank check or wire
transfer of immediately available funds of the cash purchase price for the
number of Warrant Shares as to which the exercise is being made, notwithstanding
that the stock transfer books of the Company shall be then closed or that
certificates representing such Warrant Shares shall not then be physically
delivered to the Holder. The Company shall not enter into any merger,
consolidation or sale, lease or transfer of all or substantially all of the
assets of the Company unless effective provision shall be made so as to give
effect to the provisions set forth in this subsection (a).
(i) As used herein, "Early Expiration Date" means ten (10) business
days after delivery of written notice by the Company to the Holder
that the average of the Market Price (as defined herein) for a share
of Company Common Stock underlying the Junior Preferred Stock for
thirty consecutive trading days was equal to or greater than Four
Hundred Percent (400%) of the then-applicable Warrant Share Price.
Notwithstanding the foregoing, there can be no "Early Expiration
Date" if the Warrant Shares are not either covered by an effective
registration statement under the Securities Act or an applicable
exemption from registration under the Securities Act;
6
(ii) As used herein, "Market Price" means, with respect to the
shares of Common Stock, (i) if the shares are listed or admitted for
trading on any national securities exchange or included in The
Nasdaq National Market or Nasdaq SmallCap Market, the last reported
sales price as reported on such exchange or market; (ii) if the
shares are not listed or admitted for trading on any national
securities exchange or included in The Nasdaq National Market or
Nasdaq SmallCap Market, the average of the last reported closing bid
and asked quotation for the shares as reported on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or a similar service if NASDAQ is not reporting such
information; or (iii) if the shares are not listed or admitted for
trading on any national securities exchange or included in The
Nasdaq National Market or Nasdaq SmallCap Market or quoted by NASDAQ
or a similar service, the average of the last reported bid and asked
quotation for the shares as quoted by a market maker in the shares
(or if there is more than one market maker, the bid and asked
quotation shall be obtained from two market makers and the average
of the lowest bid and highest asked quotation) (such applicable
trading market to be referred to as the "Trading Market"). In the
absence of any available public quotations for the Common Stock, the
Board shall determine in good faith the fair value of the Common
Stock, which determination shall be set forth in a certificate by
the Secretary of the Company.
(iii) As used herein, "Trading Day" means a day on which the
principal Trading Market with respect to the Common Stock is open
for the transaction of business.
(b) If this Warrant shall be exercised in part only, the Company, upon
surrender of this Warrant for cancellation, shall execute and deliver, promptly
(but in no event more than ten business days after such surrender), a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder as to which the Warrant has not been
exercised. If this Warrant is exercised in part, such exercise shall be for a
whole number of Warrant Shares. Upon any exercise and surrender of this Warrant,
the Company (i) will issue and deliver to the Holder a certificate or
certificates in the name of the Holder for the largest whole number of Warrant
Shares to which the Holder shall be entitled and, if this Warrant is exercised
in whole, in lieu of any fractional Warrant Share to which the Holder otherwise
might be entitled, cash in an amount equal to the fair value of such fractional
Warrant Share (determined in such reasonable and equitable manner as the Board
of Directors of the Company (the "Board") shall in good faith determine), and
(ii) will deliver promptly thereafter (but in no event more than ten business
days thereafter) to the Holder such other securities, properties and cash which
the Holder may be entitled to receive upon such exercise, or the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant.
(c) This Warrant may be exercised by means of a "cashless exercise" in
which the Holder shall tender to the Company the Warrant for the amount of
Warrant Shares for which it is being exercised, along with the written notice of
exercise, and the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)]
by (A), where:
7
(A) = the Market Price on the Trading Day immediately preceding the
date of such election;
(B) = the Warrant Share Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means of a cash exercise
rather than a cashless exercise.
ARTICLE XXXVIII ANTI-DILUTION PROVISIONS. THE WARRANT SHARE PRICE IN
EFFECT AT ANY TIME AND THE NUMBER AND KIND OF SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT SHALL BE SUBJECT TO ADJUSTMENT FROM TIME TO TIME UPON THE
HAPPENING OF CERTAIN EVENTS AS FOLLOWS:
Adjustments.
(a) Definition of Additional Stock. The term "Additional Shares of Common
Stock" includes all shares of Common Stock issued by the Company after the Date
of Issuance, other than:
(i) Shares of Common Stock (subject to appropriate adjustment for
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares) issuable or issued to the Company's employees, directors
or consultants pursuant to a stock option plan or restricted stock plan or other
compensation plan approved by the Board;
(ii) Shares of Common Stock issued or issuable pursuant to
securities outstanding at the Date of Issuance or agreements to issue such
securities or underlying shares of Common Stock which agreements are outstanding
at the Date of Issuance;
(iii) Shares of Common Stock issued or issuable pursuant to
subsection 2.1(b)(iv) below;
(iv) Shares of Common Stock issuable upon exercise of options or
warrants, or upon conversion of convertible securities or other rights,
outstanding as of the Date of Issuance; and
(v) Shares of capital stock or options or warrants to purchase
capital stock issued to financial institutions or lessors in connections with
commercial credit agreements, equipment financings or similar transactions or to
other corporations, persons or entities in connection with acquisitions, mergers
or similar business combinations, partnership arrangements, strategic alliances,
licensing arrangements or similar non-capital raising transactions approved by
the Board, including within this exception shares issued to raise capital
provided that the use of proceeds is to consummate such non-capital raising
transactions.
(b) Dividend, Subdivision, Combination or Reclassification of Common
Stock. In the event that the Company shall at any time or from time to time
after the issuance of this Warrant but prior to the exercise hereof:
(i) make a dividend or distribution on the outstanding shares of
Common Stock payable in capital stock;
(ii) subdivide or reclassify or reorganize its outstanding shares of
Common Stock into a greater number of shares;
(iii) combine or reclassify or reorganize its outstanding shares of
Common Stock into a smaller number of shares; or
8
(iv) issue, by reclassification of its Common Stock or other
reorganization, any Additional Shares of Common Stock;
then the number and kind of Warrant Shares purchasable upon exercise of this
Warrant shall be adjusted so that the Holder upon exercise hereof shall be
entitled to receive the kind and number of Warrant Shares or other securities of
the Company that the Holder would have owned or have been entitled to receive
after the happening of any of the events described above had this Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Whenever the number of Warrant Shares purchasable upon
exercise hereof is adjusted as herein provided, the Warrant Price shall be
adjusted by multiplying the Warrant Price by a fraction, the numerator of which
is equal to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which is equal to the number of shares of
Common Stock purchasable after the adjustment. An adjustment made pursuant to
this Section 2.1(b) shall become effective immediately after the record date in
the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or issuance.
If, as a result of an adjustment made pursuant to this Section 2.1(b), the
Holder of this Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and any other class of capital stock of the Company, the Board (whose good
faith determination shall be applied fairly and ratably to all holders of
Warrants and shall be conclusive and shall be described in a written notice to
all holders of Warrants promptly after such adjustment) shall determine in good
faith the allocation of the adjusted Warrant Share Price between or among the
shares of such classes of capital stock or shares of Common Stock and such other
class of capital stock.
The adjustment to the number of Warrant Shares purchasable upon the
exercise of this Warrant described in this Section 2.1(b) shall be made each
time any event listed in paragraphs (i) through (iv) of this Section 2.1(b)
occurs.
(c) Issuance of Common Stock Below Warrant Share Price. If the Company
shall issue any Additional Shares of Common Stock after the date hereof
(excluding any such issuance for which an adjustment is made under the foregoing
subsection (b)), for no consideration or for a consideration per share less than
the Warrant Share Price in effect on the date of and immediately prior to such
issue, then in such event, the Warrant Share Price shall be reduced,
concurrently with such issue, to a price equal to the quotient obtained by
dividing:
(A) an amount equal to (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale multiplied
by the Market Price in effect immediately prior to such issuance or sale, plus
(y) the aggregate consideration received or deemed to be received by the Company
upon such issuance or sale, by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
9
(d) Issuance of Options and Convertible Securities Deemed Issuance of
Additional Shares of Common Stock. If the Company, at any time or from time to
time after the Date of Issuance, shall issue any options, warrants or other
rights to purchase Common Stock (collectively, "Options") or securities that, by
their terms, directly or indirectly, are convertible into or exchangeable for
shares of Common Stock ("Convertible Securities") or shall fix a record date for
the determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares of
Common Stock (as set forth in the instrument relating thereto without regard to
any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued pursuant to this
Section 2.1(d):
(i) no further adjustment in the Warrant Share Price shall be made
upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities and, upon the expiration of
any such Option or the termination of any such right to convert or
exchange such Convertible Securities, the Warrant Share Price then
in effect hereunder shall forthwith be increased to the Warrant
Share Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number
of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Warrant Share Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options
or the rights of conversion or exchange under such Convertible
Securities, provided that no readjustment pursuant to this clause
(ii) shall have the effect of increasing the Warrant Share Price to
an amount which exceeds the lower of (A) the Warrant Share Price on
the original adjustment date, or (B) the Warrant Share Price that
would have resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such readjustment
date;
(iii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any decrease in
the consideration payable to the Company, or increase in the number
of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Warrant Share Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon
any such decrease or increase becoming effective, be recomputed to
reflect such decrease or increase insofar as it affects such Options
or the rights of conversion or exchange under such Convertible
Securities, provided that no readjustment pursuant to this clause
(iii) shall have the effect of decreasing the Warrant Share Price to
an amount which exceeds the lower of (A) the Warrant Share Price on
the original adjustment date, or (B) the Warrant Share Price that
would have resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such readjustment
date; and
(iv) if such Options or Convertible Securities cover shares which
are excluded from the definition of Additional Shares of Common
Stock by Section 2.1(a), then this Section 2.1(d) shall not apply to
those underlying shares.
10
(iv) Determination of Consideration. For purposes of this Subsection
2.1(d), the consideration received by the Company for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate of cash
received by the Company, excluding
amounts paid or payable for accrued
interest or accrued dividends;
(2) insofar as it consists of property
other than cash, be computed at the
fair market value thereof at the
time of such issue, as determined in
good faith by the Board; and
in the event Additional Shares of Common Stock are issued together with other
shares or securities or other assets of the Company for consideration which
covers both, be the proportion of such consideration so received, computed as
provided in clauses (1) and (2) above, as determined in good faith by the Board.
(B) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Subsection 2.1(d)(ii), relating to Options and
Convertible Securities, shall be determined by dividing
(1) the total amount, if any, received
or receivable by the Company as
consideration for the issue of such
Options or Convertible Securities,
plus the minimum aggregate amount of
additional consideration (as set
forth in the instruments relating
thereto, without regard to any
provision contained therein for a
subsequent adjustment of such
consideration) payable to the
Company upon the exercise of such
Options or the conversion or
exchange of such Convertible
Securities, or in the case of
Options for Convertible Securities,
the exercise of such Options for
Convertible Securities and the
conversion or exchange of such
Convertible Securities, by
(2) the maximum number of shares of
Common Stock (as set forth in the
instruments relating thereto,
without regard to any provision
contained therein for a subsequent
adjustment of such number) issuable
upon the exercise of such Options or
the conversion or exchange of such
Convertible Securities.
In the event that at any time, as a result of an adjustment made pursuant
to this Section 2.1, the Holder of this Warrant thereafter shall become entitled
to receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained herein.
11
Extraordinary Distributions. In case the Company shall at any time
or from time to time, after the issuance of the Warrant but prior to the
exercise hereof, distribute to all holders of its Common Stock (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness, securities or other
property or assets (excluding any such event for which adjustment is made under
Section 2) or rights or warrants to subscribe for or purchase any of the
foregoing, then, and in each such case, the Holder shall be entitled to
participate in any such distribution based on the number of shares of Common
Stock it would have been entitled to receive had the Warrant been exercised
immediately prior to the occurrence of such distribution, as if the Holder were
the owner of such shares of Common Stock at the time of such distribution.
Notwithstanding the foregoing, this Section 2.1(e) shall be of no force or
effect until and unless such time as the Company shall grant a similar right to
holders of warrants issued after the date hereof, at which time the Holders
shall be entitled to the same protection for extraordinary dividends as granted
to such future holders of warrants, if any.
SECTION 38.02 Other Action Affecting Warrant Shares. If the Company takes
any action affecting its shares of Common Stock after the date hereof, that
would be covered by Section 2.1 but for the manner in which such action is taken
or structured, which would in any way diminish the value of this Warrant, then
the Warrant Share Price shall be adjusted in such manner as the Board shall in
good faith determine to be equitable under the circumstances.
SECTION 38.03 Notice of Adjustments. Upon the occurrence of each
adjustment or readjustment of the Warrant Share Price pursuant to this Section
2, the Company at its expense will as promptly as possible, but in any event
within ten (10) business days, compute such adjustment or readjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment or readjustment, including a statement of the adjusted
Warrant Share Price or adjusted number of shares of Common Stock, if any,
issuable upon exercise of each Warrant, describing in reasonable detail the
transaction giving rise to such adjustments and showing in detail the facts upon
which such adjustment or readjustment is based. The Company will forthwith mail,
by first class mail, postage prepaid, a copy of each such certificate to the
Holder of this Warrant at the address of such Holder as shown on the books of
the Company, and to its Transfer Agent.
SECTION 38.04 Other Notices. If at any time:
the Company shall (i) offer for subscription pro rata to the holders of
shares of the Common Stock any additional equity in the Company or other rights;
or (ii) pay a dividend in additional shares of the Common Stock or distribute
securities or other property or assets to the holders of shares of the Common
Stock (including, without limitation, cash, evidences of indebtedness and equity
and debt securities);
(a) there shall be any capital reorganization or reclassification or
consolidation or merger of the Company with, or sale, transfer or lease of all
or substantially all of its assets to, another entity; or
(b) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, (x) at least 10 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such subscription rights, dividend, distribution or issuance;
provided that such ten (10) day period shall be increased to thirty (30) days in
the case of Section 2.4(a)(ii), and (y) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 10 days' prior written notice of the date when the same
shall take place if no stockholder vote is required and at least 10 days' prior
written notice of the record date for stockholders entitled to vote upon such
matter if a stockholder vote is required. Such notice in accordance with the
foregoing clause (x) shall also specify, in the case of any such subscription
rights, the date on which the holders of shares of Common Stock shall be
entitled to exercise their rights with respect thereto, and such notice in
accordance with the foregoing clause (y) shall also specify the date on which
the holders of shares of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
12
SECTION 38.05 Adjustment Calculations. No adjustment in the Warrant Share
Price shall be required unless such adjustment would require an increase or
decrease of at least one cent ($0.01) in such price; provided, however, that any
adjustments which by reason of this Section 2.5 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 2 shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be.
2.6 Appraisal. If a majority in interest of the Holders reasonably
disagrees with any of the Board's determinations referred to in this Section 2
(each, a "Determination"), and such majority of Holders shall notify the Company
of its disagreement by furnishing to the Company a written notice setting forth
in reasonable detail the fact of such dispute, the basis for such dispute, and
such Holders' alternative calculation (such notice, a "Determination Dispute
Notice"), and such Determination Dispute Notice is received by the Company
within seven (7) days of the Company having given notice of the Determination to
the Holders, then the Company and a majority in interest of such Holders (the
"Warrant Representative") shall resolve such Determination Dispute in accordance
with the terms and provisions of this Section 2.6. The Holders agree that this
Section 2.6 sets forth the exclusive mechanism for the Holders to make any such
dispute and to resolve the same, and shall not be entitled to make any such
dispute in any other manner. The Company and the Warrant Representative shall
use good faith efforts to mutually agree upon the designation of a single
Qualified Appraiser (as defined below) within seven (7) business days of the
receipt by the Company of a valid Determination Dispute Notice received by the
Company in within the time period set forth above in this Section 2.6. If such a
single Qualified Appraiser is designated, that person shall make a
Determination. If the Company and the Warrant Representative do not so agree
upon the designation of a single Qualified Appraiser within such period, then
within five (5) business days following the end of such period, each of the
Company and the Warrant Representative by written notice to the other shall
designate a Qualified Appraiser (or if any party fails to so select a Qualified
Appraiser within the time period specified, the Person selected by the other
party shall be the Qualified Appraiser) and the two Qualified Appraisers so
designated shall within ten (10) business days of their designation jointly
designate a third Qualified Appraiser, and such third Qualified Appraiser so
designated, solely, shall independently make a Determination. The parties may
submit the basis for their respective views to the Appraiser in writing. In such
event, each party shall furnish its submission to the other party at the same
time as the submission is furnished to the Qualified Appraiser, and the other
party shall have two (2) business days within which to furnish a single rebuttal
to such original submission. The Qualified Appraiser may consider such
submissions in reaching the Determination. If there is only a single Qualified
Appraiser, the fees and expenses of the Qualified Appraiser shall be paid
equally by the Company and the Warrant Representative. If three Qualified
Appraisers are appointed, the Company shall pay the fees and expenses of the
Qualified Appraiser which it appoints, the Warrant Representative shall pay the
fees and expenses of the Qualified Appraiser which it appoints, and the fees and
expenses of the third Qualified Appraiser shall be shared equally by the Company
and the Warrant Representative. The designated Qualified Appraiser shall make
the Determination not later than ten (10) business days following the
appointment of the Qualified Appraiser making the Determination. The
Determination made by the applicable Qualified Appraiser shall be final,
conclusive and binding on the parties hereto. None of the Qualified Appraisers
shall be affiliated with any of the Company, the Warrant Representative or
another Qualified Appraiser. For the purposes of this Agreement, "Qualified
Appraiser" shall mean an individual who is engaged on a regular basis (although
not necessarily full time) in valuing securities or arrangements similar to this
Agreement, as the case may be, and may include (but shall not be limited to)
professional business appraisers, investment bankers or accountants.
13
ARTICLE XXXIX NO VOTING RIGHTS AS STOCKHOLDERS OR LIABILITIES. EXCEPT AS
OTHERWISE PROVIDED HEREIN, THIS WARRANT SHALL NOT BE DEEMED TO CONFER UPON THE
HOLDER ANY RIGHT TO VOTE OR TO CONSENT TO OR RECEIVE NOTICE AS A STOCKHOLDER OF
THE COMPANY, AS SUCH, IN RESPECT OF ANY MATTERS WHATSOEVER, OR ANY OTHER RIGHTS
OR LIABILITIES AS A STOCKHOLDER, PRIOR TO THE EXERCISE HEREOF. NOTHING CONTAINED
IN THIS WARRANT SHALL BE DEEMED AS IMPOSING ANY LIABILITIES ON THE HOLDER TO
PURCHASE ANY SECURITIES WHETHER SUCH LIABILITIES ARE ASSERTED BY THE COMPANY OR
BY CREDITORS OR STOCKHOLDERS OF THE COMPANY OR OTHERWISE.
ARTICLE XL WARRANTS TRANSFERABLE. SUBJECT TO THE TERMS HEREOF, THIS
WARRANT AND ALL RIGHTS HEREUNDER ARE TRANSFERABLE, SUBJECT TO THE APPLICABLE
TERMS OF THE MERGER AGREEMENT, IF ANY, AND APPLICABLE LAW, IN WHOLE OR IN PART,
UPON SURRENDER OF THIS WARRANT WITH A PROPERLY EXECUTED FORM OF ASSIGNMENT AT
THE PRINCIPAL OFFICES OF THE COMPANY. THIS WARRANT AND THE UNDERLYING SHARES OF
COMMON STOCK MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH
THE APPLICABLE TERMS OF THE MERGER AGREEMENT, IF ANY, AND THE SECURITIES ACT,
AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXCEPTION THEREFROM, AND THEN
ONLY AGAINST RECEIPT OF AN AGREEMENT OF THE PERSON TO WHOM SUCH OFFER OR SALE OR
TRANSFER IS MADE TO COMPLY WITH THE PROVISIONS OF THIS WARRANT WITH RESPECT TO
ANY RESALE OR OTHER DISPOSITION OF SUCH SECURITIES; PROVIDED THAT NO SUCH
AGREEMENT SHALL BE REQUIRED FROM ANY PERSON PURCHASING THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE
UNDER THE SECURITIES ACT. NO SUCH DISPOSITION SHALL OCCUR WITHOUT AN OPINION OF
SUCH HOLDER'S COUNSEL, WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY'S COUNSEL.
ARTICLE XLI WARRANTS EXCHANGEABLE; ASSIGNMENT; LOSS, THEFT, DESTRUCTION,
ETC. THIS WARRANT IS EXCHANGEABLE, WITHOUT EXPENSE, UPON SURRENDER HEREOF BY THE
HOLDER HEREOF AT THE PRINCIPAL OFFICES OF THE COMPANY, OR AT THE OFFICE OF ITS
TRANSFER AGENT, IF ANY, FOR NEW WARRANTS OF LIKE TENOR REPRESENTING IN THE
AGGREGATE THE RIGHT TO SUBSCRIBE FOR AND PURCHASE THE WARRANT SHARES WHICH MAY
BE SUBSCRIBED FOR AND PURCHASED HEREUNDER, EACH SUCH NEW WARRANT TO REPRESENT
THE RIGHT TO SUBSCRIBE FOR AND PURCHASE SUCH WARRANT SHARES AS SHALL BE
DESIGNATED BY SUCH HOLDER HEREOF AT THE TIME OF SUCH SURRENDER. UPON SURRENDER
OF THIS WARRANT TO THE COMPANY AT ITS PRINCIPAL OFFICE, OR AT THE OFFICE OF ITS
TRANSFER AGENT, IF ANY, WITH AN INSTRUMENT OF ASSIGNMENT DULY EXECUTED AND FUNDS
SUFFICIENT TO PAY ANY TRANSFER TAX, THE COMPANY SHALL, WITHOUT CHARGE, EXECUTE
AND DELIVER A NEW WARRANT IN THE NAME OF THE ASSIGNEE NAMED IN SUCH INSTRUMENT
OF ASSIGNMENT AND THIS WARRANT SHALL PROMPTLY BE CANCELLED. THIS WARRANT MAY BE
DIVIDED OR COMBINED WITH OTHER WARRANTS WHICH CARRY THE SAME RIGHTS UPON
PRESENTATION HEREOF AT THE PRINCIPAL OFFICE OF THE COMPANY, OR AT THE OFFICE OF
ITS TRANSFER AGENT, IF ANY, TOGETHER WITH A WRITTEN NOTICE SPECIFYING THE NAMES
AND DENOMINATIONS IN WHICH NEW WARRANTS ARE TO BE ISSUED AND SIGNED BY THE
HOLDER HEREOF. THE TERM "WARRANT" AS USED HEREIN INCLUDES ANY WARRANTS INTO
WHICH THIS WARRANT MAY BE DIVIDED OR EXCHANGED. UPON RECEIPT OF EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY OF THE LOSS, THEFT, DESTRUCTION OR
MUTILATION OF THIS WARRANT AND, IN THE CASE OF ANY SUCH LOSS, THEFT OR
DESTRUCTION, UPON DELIVERY OF INDEMNITY REASONABLY SATISFACTORY TO THE COMPANY,
OR, IN THE CASE OF ANY SUCH MUTILATION, UPON SURRENDER OR CANCELLATION OF THIS
WARRANT, THE COMPANY WILL ISSUE TO THE HOLDER HEREOF A NEW WARRANT OF LIKE
TENOR, IN LIEU OF THIS WARRANT, REPRESENTING THE RIGHT TO SUBSCRIBE FOR AND
PURCHASE THE WARRANT SHARES WHICH MAY BE SUBSCRIBED FOR AND PURCHASED HEREUNDER.
ANY SUCH NEW WARRANT EXECUTED AND DELIVERED SHALL CONSTITUTE AN ADDITIONAL
CONTRACTUAL OBLIGATION OF THE COMPANY, WHETHER OR NOT THIS WARRANT SO LOST,
STOLEN, DESTROYED, OR MUTILATED SHALL BE AT ANY TIME ENFORCEABLE BY ANYONE.
14
ARTICLE XLII LEGENDS; INVESTMENT REPRESENTATIONS. ANY CERTIFICATE
EVIDENCING THE SECURITIES ISSUED UPON EXERCISE OF THIS WARRANT SHALL BEAR A
LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY OTHER SECURITIES LAWS, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED UNLESS SO REGISTERED OR
AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY OTHER APPLICABLE
SECURITIES LAWS IS AVAILABLE.
ARTICLE XLIII MODIFICATIONS AND WAIVERS. THE HOLDER OF THIS WARRANT
ACKNOWLEDGES AND AGREES THAT THE TERMS OF THIS WARRANT MAY BE AMENDED, MODIFIED
OR WAIVED ONLY BY THE WRITTEN AGREEMENT BETWEEN THE HOLDER AND THE COMPANY.
ARTICLE XLIV EXPENSES. THE COMPANY SHALL PAY ALL EXPENSES AND OTHER
CHARGES PAYABLE IN CONNECTION WITH THE PREPARATION, ISSUANCE AND DELIVERY OF
THIS WARRANT AND ALL SUBSTITUTE WARRANTS. THE HOLDER SHALL PAY ALL TAXES IN
CONNECTION WITH ANY SALE, ASSIGNMENT OR OTHER TRANSFER OF THIS WARRANT.
ARTICLE XLV BOOKS. THE COMPANY SHALL MAINTAIN, AT THE OFFICE OR AGENCY OF
THE COMPANY MAINTAINED BY THE COMPANY, BOOKS FOR THE REGISTRATION AND TRANSFER
OF THE WARRANT.
ARTICLE XLVI RESERVATION OF WARRANT SHARES. THE COMPANY OR, IF APPOINTED,
THE TRANSFER AGENT FOR THE COMMON STOCK, AND EVERY SUBSEQUENT TRANSFER AGENT FOR
ANY SHARES OF THE COMPANY'S CAPITAL STOCK ISSUABLE UPON THE EXERCISE OF ANY OF
THE RIGHTS OF PURCHASE AFORESAID WILL BE IRREVOCABLY AUTHORIZED AND DIRECTED AT
ALL TIMES TO RESERVE SUCH NUMBER OF AUTHORIZED SHARES AS SHALL BE REQUIRED FOR
SUCH PURPOSE. THE COMPANY WILL KEEP A COPY OF THIS WARRANT ON FILE WITH THE
TRANSFER AGENT AND WITH EVERY SUBSEQUENT TRANSFER AGENT FOR ANY SHARES OF THE
COMPANY'S CAPITAL STOCK ISSUABLE UPON THE EXERCISE OF THE RIGHTS OF PURCHASE
REPRESENTED BY THIS WARRANT. THE COMPANY WILL FURNISH SUCH TRANSFER AGENT A COPY
OF ALL NOTICES OF ADJUSTMENTS AND CERTIFICATES RELATED THERETO TRANSMITTED TO
THE HOLDER PURSUANT TO SECTION 2.5 HEREOF.
15
ARTICLE XLVII [INTENTIONALLY OMITTED]
ARTICLE XLVIII LISTING ON SECURITIES EXCHANGES; REGISTRATION. IF, AND SO
LONG AS, ANY CLASS OF THE COMPANY'S COMMON STOCK SHALL BE LISTED ON ANY NATIONAL
SECURITIES EXCHANGE (AS DEFINED IN THE EXCHANGE ACT) OR NASDAQ, THE COMPANY
SHALL USE ITS REASONABLE BEST EFFORTS TO, AT ITS EXPENSE, OBTAIN AND MAINTAIN
THE APPROVAL FOR LISTING UPON OFFICIAL NOTICE OF ISSUANCE OF ALL SHARES OF THE
COMPANY'S COMMON STOCK WHICH MAY BE ACQUIRED UPON CONVERSION OF THE THEN
OUTSTANDING WARRANT SHARES AND MAINTAIN THE LISTING OF WARRANT SHARES AFTER
THEIR ISSUANCE; AND THE COMPANY WILL SO LIST ON SUCH NATIONAL SECURITIES
EXCHANGE OR NASDAQ, IF APPLICABLE, WILL REGISTER UNDER THE EXCHANGE ACT (OR ANY
SIMILAR STATUTE THEN IN EFFECT), AND WILL MAINTAIN SUCH LISTING OF, ANY OTHER
SECURITIES THAT AT ANY TIME ARE ISSUABLE UPON EXERCISE OF THIS WARRANT IF AND AT
THE TIME ANY SECURITIES OF THE SAME CLASS SHALL BE LISTED ON SUCH NATIONAL
SECURITIES EXCHANGE OR NASDAQ BY THE COMPANY.
ARTICLE XLIX NO DILUTION OR IMPAIRMENT. THE COMPANY WILL NOT ACT FOR THE
PURPOSE OF AVOIDING OR SEEKING TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF
THE TERMS OF THIS WARRANT, BY AMENDMENT OF ITS CERTIFICATE OR ARTICLES OF
INCORPORATION OR OTHER ORGANIZATIONAL DOCUMENTS OR THROUGH ANY REORGANIZATION,
TRANSFER OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ISSUE OR SALE OF
SECURITIES OR ANY OTHER ACTION, BUT WILL, AT ALL TIMES, IN GOOD FAITH, ASSIST IN
THE CARRYING OUT OF ALL SUCH TERMS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE COMPANY WILL NOT INCREASE THE PAR VALUE OF ANY SHARES OF STOCK
RECEIVABLE ON THE EXERCISE OF THIS WARRANT ABOVE THE AMOUNT PAYABLE THEREFOR ON
SUCH EXERCISE.
ARTICLE L MISCELLANEOUS.
SECTION 50.01 Notices. All notices and other communications shall be
mailed by first-class certified or registered mail, postage prepaid, sent by
reputable overnight delivery, delivered by hand or sent by facsimile as follows:
If to the Company:
Auto Data Network, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Telephone: (000)000-0000
16
and with a copy to:
Auto Data Network, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: (000)000-0000
If to the Holder: The address and/or facsimile
furnished to the Company
in writing by the last registered
Holder of this Warrant who shall
have furnished an address and/or
facsimile to the Company in writing.
except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph. Any notices, requests or consents
hereunder shall be deemed given, and any instruments delivered, five days after
they have been mailed by first-class certified or registered mail, postage
prepaid, or upon receipt if delivered by a reputable overnight courier or if
delivered personally or by facsimile transmission.
SECTION 50.02 Entire Agreement. This Warrant, including the exhibits and
documents referred to herein which are a part hereof, contain the entire
understanding of the parties hereto with respect to the subject matter and may
be amended only by a written instrument executed by the parties hereto or their
successors or assigns. Any paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Warrant.
SECTION 50.03 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York with respect to
contracts made and to be fully performed therein, without regard to the
conflicts of laws principles thereof. The parties hereto hereby agree that any
suit or proceeding arising under this Warrant, or in connection with the
consummation of the transactions contemplated hereby, shall be brought solely in
a federal or state court located in the County of New York and State of New
York. By its execution hereof, both the Company and the undersigned hereby
consent and irrevocably submit to the in personam jurisdiction of the federal
and state courts located in the County of New York and State of New York and
agree that any process in any suit or proceeding commenced in such courts under
this Warrant may be served upon it personally or by certified or registered
mail, return receipt requested, or by Federal Express or other courier service,
with the same force and effect as if personally served upon the applicable party
in New York and in the city or county in which such other court is located. The
parties hereto each waive any claim that any such jurisdiction is not a
convenient forum for any such suit or proceeding and any defense of lack of in
personam jurisdiction with respect thereto.
SECTION 50.04 Headings. The headings of this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
17
IN WITNESS WHEREOF, this Warrant Agreement has been executed as of the
date first written above.
AUTO DATA NETWORK, INC.
By:
-------------------------------------
Name:
Title:
18
PURCHASE FORM
Dated: __________
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _____ Warrant Shares and hereby makes full cash
payment of $_____________ in payment of the exercise price thereof.
The undersigned has had the opportunity to ask questions of and receive
answers from the officers of the Company regarding the affairs of the Company
and related matters, and has had the opportunity to obtain additional
information necessary to verify the accuracy of all information so obtained.
[The undersigned understands that the shares have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
other jurisdiction, and hereby represents to the Company that the undersigned is
acquiring the shares for its own account, for investment, and not with a view
to, or for sale in connection with, the distribution of any such shares.] [THIS
MAY NOT APPLY DEPENDING UPON WHETHER A REGISTRATION STATEMENT IS EFFECTIVE.]
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(Signature)
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(Print or type name)
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(Address)
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NOTICE: The signature of this Purchase Form must correspond with the name
as written upon the face of the within Warrant, or upon the assignment thereof,
if applicable, in every particular, without alteration, enlargement or any
change whatsoever.
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________ the right represented by the within Warrant to
purchase ________ shares of Common Stock of _____________ to which the within
Warrant relates and appoints _____________ attorney to transfer said right on
the books of ___________________ with full power of substitution in the
premises.
Dated: _________ ___, 200__
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(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
Address of Transferee:
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In the presence of:
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CONSENT OF ASSIGNEE
I HEREBY CONSENT to abide by the terms and conditions of the within
Warrant.
Dated:
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(Signature of Assignee)
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(Print or type name)
