AMENDMENT NO. 1 TO
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AGREEMENT AND PLAN OF MERGER
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This Amendment No. 1 to Agreement and Plan of Merger is entered into as of
the 2nd day of September, 1998, by and among Articulate Systems, Inc., a
Delaware corporation ("Target"), fonix corporation, a Delaware corporation
("Buyer"), and ASI Acquisition Corporation, a Utah corporation and wholly-owned
subsidiary of fonix corporation ("Merger Sub"). Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Merger
Agreement.
WHEREAS, Buyer, Merger Sub and Target have entered into a certain Agreement
and Plan of Merger (the "Merger Agreement") dated as of July 31, 1998, pursuant
to which Merger Sub will merge with and into Target and continue thereafter as
the surviving corporation (the "Merger");
WHEREAS, as set forth in Section 2.4(r) of the Merger Agreement, it is
intended by the parties that the Merger shall constitute a tax-free
reorganization within the meaning of Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended, and consistent with that intention, the
parties desire to amend the Merger Agreement to provide that additional shares
of capital stock of Buyer (in addition to that required under Section 2.4(e) of
the Merger Agreement) will be issued upon the conversion of the Target Shares in
the Merger;
WHEREAS, Section 9.10 of the Merger Agreement permits the parties thereto,
with the prior authorization of their respective Boards of Directors, to
mutually amend any provision of the Merger Agreement prior to the Effective
Time; and
WHEREAS, the Board of Directors of each of Buyer, Merger Sub and Target
have authorized such party to enter into this Amendment No. 1 to Agreement and
Plan of Merger.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 2.4(e) of the Merger Agreement is amended in its entirety as
follows:
"(e) Conversion of Target Shares.
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(i) At and as of the Effective Time, and without any further
action by any of the Target Stockholders, subject to Section
2.4(f), each outstanding Target Share shall be converted into
the right to receive: (i) that number of validly issued,
fully paid and nonassessable unregistered Buyer Shares
("Merger Shares") which equals the amount obtained by
dividing (A) the quotient of (a) $11,800,000 divided by (b)
the Closing Price, by (B) 2,916,093 (the "Exchange Ratio"),
(ii) cash in the amount of
$13,200,000 divided by 2,916,093 (the "Cash Payment"), and (iii) .7057
additional unregistered Buyer Shares (the "Additional Merger Shares").
"Closing Price" shall mean $3.5427. No Target Share shall be deemed to
be outstanding or to have any rights other than those rights set forth
in this Section 2.4 after the Effective Time.
(ii) At Closing, Buyer shall cause to be distributed to T. Xxxx Xxxxxx, as
agent for the Target Stockholders (the "Agent"), a certificate or
certificates representing all Additional Merger Shares. Such shares
shall be beneficially owned pro rata by the Target Stockholders who
receive Merger Consideration. Any cash dividends, dividends paid in
stock declared with respect to the Additional Merger Shares, dividends
payable in any other security or other distributions of any kind made
in respect of the Additional Merger Shares shall be delivered to the
Target Stockholders on a pro rata basis. Each Target Stockholder shall
have voting rights with respect to the Additional Merger Shares held
by the Agent, and the Target Stockholders by their approval of the
Merger Agreement constitute and appoint the Agent, with full power of
substitution, and authorize the Agent to represent and to vote the
Additional Merger Shares in the Agent's reasonable discretion at any
meeting of the stockholders of Buyer.
(iii) During the ninety (90) day period following the Effective Date, Buyer
upon written notice to the Agent shall be entitled to require the
Additional Merger Shares to be exchanged (the "Exchange") for an equal
number of shares of a new class of common stock of Buyer to be
designated Class B Common Stock (the "Exchange Shares") as set forth
in an amendment to Buyer's Certificate of Incorporation, the form of
which is attached hereto Exhibit F (the "Charter Amendment"), provided
that Buyer shall have obtained all requisite stockholder approval for
the authorization and issuance of such Class B Common Stock, after
which the Charter Amendment will be filed by Buyer with the Secretary
of State of Delaware. Except as set forth in the Charter Amendment,
the Class B Common Stock shall be identical in all respects to the
Buyer Shares, which shall be redesignated along with all other
outstanding shares of common stock of Buyer as Class A Common Stock
under the Charter Amendment. In the Exchange, Buyer shall distribute
the Exchange Shares directly to the Target Stockholders and the agency
described above shall terminate. If Buyer shall not have obtained the
requisite stockholder approvals and required the Exchange within the
ninety (90) day period referenced above, then the Agent, at the sole
cost and expense of
Buyer, shall immediately distribute the Additional Merger Shares
to the Target Stockholders on a pro rata basis.
(iv) Buyer agrees to indemnify and hold the Agent harmless from and
against any and all losses, damages, taxes, liabilities and
expenses that may be incurred, directly or indirectly, by the
Agent, arising out of or in connection with its acceptance of
appointment as the Agent hereunder and/or the performance of its
duties pursuant to this Agreement, including, but not limited to,
all legal costs and expenses of the Agent incurred defending
itself against any claim or liability in connection with its
performances hereunder and the costs of recovery of amounts
pursuant to this Section 2.4(e)(iv), except for those arising out
of the willful misconduct or gross negligence of the Agent. Agent
shall be deemed a third party beneficiary of this Agreement with
respect to Section 2.4(e)(iv)."
2. This Amendment No. 1 embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof
and supersedes all other agreements and understandings related to such
subject matter.
3. This Amendment No. 1 may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by mutual written
consent of each of the parties hereto.
4. This Amendment No. 1 may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which shall be
one and the same document.
5. The invalidity or unenforceability of any provision of this Amendment
No. 1 shall not affect the validity or enforceability of any other
provision hereof.
6. Except to the extent specifically and expressly amended hereby, the
terms and conditions of the Merger Agreement shall be unaffected
hereby and shall continue in full force and effect.
Executed as of the date first set forth above.
BUYER
fonix corporation
By: /s/ Xxxxxx X. Xxxxxxx
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Name:
Title:
MERGER SUB
ASI ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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Name:
Title:
TARGET
ARTICULATE SYSTEMS, INC.
By: /s/ Xxxx Xxxxxx
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Name:
Title:
EXHIBIT "A"
TO
CERTIFICATE OF AMENDMENT
Amendment to Certificate of Incorporation
Article FOURTH of the Certificate of Incorporation of fonix Corporation is
hereby amended in its entirety so that, as amended, said FOURTH Article shall
read as follows:
"FOURTH: The total number of shares of stock which the Company shall have
authority to issue is ONE HUNDRED FIFTY MILLION (150,000,000) shares of Common
Stock and TWENTY MILLION (20,000,000) shares of Preferred Stock. All shares of
stock authorized hereunder shall have a par value of 1/100th of one cent
($.0001) per share.
A. Common Stock. The Common Stock shall be of two classes, each without
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cumulative voting rights and without any preemptive rights, which classes shall
be designated as Class A Common Stock and Class B Common Stock.
1. Dividend and Other Rights of Common Stock.
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a. Ratable Treatment. Except as specifically otherwise
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provided herein, all shares of Common Stock shall be identical and shall entitle
the holders thereof to the same rights and privileges. The Company shall not
subdivide or combine any shares of Common Stock, or pay any dividend or retire
any share or make any other distribution on any share of Common Stock or accord
any other payment, benefit or preference to any share of Common Stock, except by
extending such subdivision, combination, distribution, payment, benefit or
preference equally to all shares of Common Stock. If dividends are declared
which are payable in shares of Common Stock, such dividends shall be payable in
shares of Class A Common Stock to holders of Class A Common Stock and in shares
of Class B Common Stock to holders of Class B Common Stock.
b. Dividends. Subject to the rights of the holders of
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Preferred Stock, the holders of Common Stock shall be entitled to dividends out
of funds legally available therefor, when declared by the Board of Directors in
respect of Common Stock, and, upon any liquidation of the Company, to share
ratably in the assets of the Company available for distribution to the holders
of Common Stock.
2. Voting Rights of Common Stock.
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a. Class A Common Stock. Except as otherwise provided by law,
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the holders of Class A Common Stock shall have full voting rights and powers to
vote on all matters submitted to stockholders of the Company for vote, consent
or approval, and each holder of Class A Common Stock shall be entitled to one
vote for each share of Class A Common Stock held of record by such holder.
b. Class B Common Stock. Except as otherwise provided by law,
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the holders of Class B Common Stock shall have no right to vote on any matter
submitted to stockholders of the Company for vote, consent or approval, and the
Class B Common Stock shall not be included in determining the number of shares
voting or entitled to vote on such matters.
3. Redemption.
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a. Class A Common Stock. Except as otherwise provided by law,
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the Company shall have no right or obligation to redeem the Class A Common
Stock.
b. Class B Common Stock. At any time after September 2, 2003,
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the Company shall have the right, exercisable at any time, to redeem from funds
legally available therefor all or any portion of the then outstanding shares of
Class B Common Stock at a per share price equal to the Redemption Price (as
herein defined); provided that such redemption is made on a pro rata basis with
respect to all holders of Class B Common Stock. Any redemption of the Class B
Common Stock shall be effected by the delivery of a notice to each holder of
Class B Common Stock, which notice shall indicate the number of shares of Class
B Common Stock of each holder to be redeemed and the date that such redemption
is to be effected, which shall be the date (the "Redemption Date") which is five
(5) business days after the date such notice is delivered. All redeemed shares
of Class B Common Stock shall cease to be outstanding and shall have the status
of authorized but undesignated stock, but may not be reissued as Class B Common
Stock. The entire Redemption Price payable to any holder shall be paid in cash
by the Redemption Date.
c. Definitions.
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(i) "Redemption Price" shall be (i) during the period
between September 2, 2003 and that date sixty (60) days thereafter, two and
75/100 dollars ($2.75) per share of Class B Common Stock redeemed, and (ii) at
any time after the sixty-first (61/st/) day following September 2, 2003, the
Fair Market Value (as defined herein) of the Class A Common Stock on the
Redemption Date.
(ii) "Fair Market Value" shall mean, on any particular date
(a) the closing bid price per share of the Class A Common Stock on the last
trading day immediately prior to such date on the Nasdaq SmallCap Market or
other principal stock exchange or quotation system on which the Class A Common
Stock is then listed or quoted or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (b) if the Class A Common Stock is not listed then on
the Nasdaq SmallCap Market or any stock exchange or quotation system, the
closing bid price for a share of Class A Common Stock in the over-the-counter
market, as reported by the Nasdaq Stock Market or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices at the close of business on such date, or (c) if
the Class A Common Stock is not then reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices, then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the holder, or (d) if the
Class A Common Stock is not then publicly traded the fair market value of a
share of Class A Common Stock as determined by an appraiser selected in good
faith by the Company.
B. Preferred Stock. The Preferred Stock shall be issued from time to
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time in one or more series, with such distinctive serial designations as shall
be stated and expressed in the resolution or resolutions providing for the
issuance of such shares as are from time to time adopted by the Board of
Directors. In such resolution or resolutions providing for the issuance of
shares of each particular series of Preferred Stock, the Board of Directors is
expressly authorized, without further vote or action of the stockholders of the
Company and to the fullest extent allowed under Delaware law, to fix the rights,
preferences, privileges, and restrictions of such series of Preferred Stock,
including the annual rate or rates of dividends for the particular series and
whether such dividends shall be cumulative or noncumulative; the redemption
price or prices for the particular series; the rights, if any, of holders of the
shares of the particular series to convert the same into shares of any other
series or class or other securities of the Company or any other corporation,
with any provisions for the subsequent adjustment of
such conversion rights; the voting rights; anti-dilution rights; terms of
redemption (including sinking fund provisions); the number of shares
constituting any series, and the designation of such series; and to classify or
reclassify any unissued Preferred Stock by fixing or altering from time to time
any of the foregoing rights, privileges and qualifications. If pursuant to this
Article FOURTH, the Company's Board of Directors shall authorize the issuance of
any class or series of Preferred Stock, (i) such class or series of Preferred
Stock may be granted the right to elect one or more of the Company's directors,
as the Board of Directors shall prescribe, and said directors shall have voting
rights identical to the other directors of the Company and shall serve until
such time as their successors are elected or until the class or series of
Preferred Stock entitled to elect them shall cease to be outstanding; and (ii)
such class or series of Preferred Stock may be granted preemptive rights to
acquire additional issues of such Preferred Stock or any other class or series
of stock issued by the Company."
