EXHIBIT 2.2
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF ACQUISITION AND ARRANGEMENT
This First Amendment to Agreement and Plan of Acquisition and Arrangement,
dated as of October 13, 1999 (the "Amendment"), is entered into by and between
XxxxXxxxx.xxx, Inc., a Delaware corporation ("Parent") and INEX Corporation, an
Ontario company (the "Company").
Witnesseth:
Whereas Parent and the Company have entered into the Agreement and Plan of
Acquisition and Arrangement, dated as of August 13, 1999 (the "Agreement"),
providing for Parent to acquire control of the Company through a statutory
arrangement involving the exchange of all of the issued and outstanding shares
of the Company for shares in Parent or an indirect wholly owned subsidiary of
Parent (the "Acquisition Sub") upon the terms and conditions set forth therein
(the "Arrangement"); and
Whereas, in connection with approval of the Plan of Arrangement, certain
claims have been made by and on behalf of Sasswood Holdings Limited ("Sasswood")
and filed with the Ontario Superior Court of Justice (Court file No. 99-CV-
176897) in a Statement of Claim (the "Sasswood Claims"), and the parties hereto
wish to provide for certain contingencies related to the Sasswood Claims.
AGREEMENT
The parties, intending to be legally bound, agree to amend the Agreement as
follows:
1. Definitions. For purposes of this Amendment, capitalized terms and not
otherwise defined here in shall have the meanings specified or ascribed to them
in the Agreement.
2. Amendment of Section 9.1(f). Section 9.1(f) of the Agreement is hereby
amended in its entirety to read as follows:
"(f) by either Parent or the Company if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before October
15, 1999, or such later date as the parties may agree upon."
3. Amendment of Article 10. Article 10 of the Agreement is hereby amended
in its entirety to read as follows:
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"10. Escrow Funds
10.1 Escrow Shares
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(a) General Escrow. As soon as practicable after the Effective
Time, (i) 5% of the Exchangeable Shares and (ii) 5% of the Parent Common Shares
issuable to (a) the holders of Preferred Shares and (b) the holders of Common
Shares who elect to receive Parent Common Shares at the Effective Time in lieu
of Exchangeable Shares, pursuant to the Plan of Arrangement (collectively the
"General Escrow Shares") shall be registered in the name of, and be deposited
with Montreal Trust Company of Canada (or other institution selected by Parent
with the reasonable consent of the Company) as escrow agent (the "Escrow
Agent"), such deposit to constitute the General Escrow Fund and to be governed
by the terms set forth herein and in the Escrow Agreement attached hereto as
Exhibit 10.1 (the "Escrow Agreement"). The General Escrow Fund (but only up to a
maximum of the value of the General Escrow Shares) shall be available to
compensate Parent or a Subsidiary of Parent, including the Company, for any
loss, liability, claim, damage (including incidental and consequential damages),
expense (including costs of investigation and defense, reasonable legal fees and
indemnification of directors and officers) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(i) any Breach of any representation or warranty made by
the Company in this Agreement as if such representation or warranty were made on
and as of the Closing Date, other than any such Breach that is disclosed in a
supplement to the Disclosure Letter; or
(ii) any Breach by the Company of any covenant or
obligation of the Company in this Agreement that is not waived on or prior to
Closing.
Such Damages described in this Section 10.1(a) are referred to herein as
"General Damages."
(b) Sasswood Escrow. As soon as practicable after the Effective
Time, an additional (i) 15% of the Exchangeable Shares, and (ii) 15% of the
Parent Common Shares issuable to (a) the holders of Preferred Shares and (b) the
holders of Common Shares who elect to receive Parent Common Shares at the
Effective Time in lieu of Exchangeable Shares, pursuant to the Plan of
Arrangement (collectively the "Sasswood Escrow Shares" and together with the
General Escrow Shares, the "Escrow Shares") shall be registered in the name of
and be deposited with the Escrow Agent, such deposit to constitute the Sasswood
Escrow Fund (together with the General Escrow Fund, the "Escrow Funds" and each
separately, an "Escrow Fund") and to be governed by the terms set forth herein
and in the Escrow Agreement. The Sasswood Escrow Fund shall be available to
compensate Parent or a subsidiary of Parent, including the Company, for Damages
arising, directly or indirectly, from or in connection with the settlement,
disposition or other satisfaction of any Proceeding arising out of the Sasswood
Claims (the "Sasswood Damages"). "Sasswood Damages" shall include any Damages or
any other amount incurred or paid by Parent or a Subsidiary of Parent, including
the Company, to acquire, eliminate or terminate by means of any form of
corporate action or reorganization whatsoever or otherwise (and all expenses
incurred in connection therewith) all
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shares or rights to acquire shares in the Company that Sasswood Holdings Limited
is declared to have or is granted or otherwise acquires pursuant to a court
order in any Proceeding arising out of the Sasswood Claims (the "Sasswood
Proprietary Remedies").
(c) Mitigation. Parent and its affiliates shall act in good
faith and in a commercially reasonable manner to mitigate any General Damages or
Sasswood Damages they may suffer. Any claim for indemnification for General
Damages or Sasswood Damages hereunder shall be offset or reduced by (i) any tax
benefit received by Parent or its affiliates as a result of such damages and
(ii) in the case of third-party claims, by any amount actually recovered by
Parent or its affiliates pursuant to counterclaims made by any of them directly
relating to the facts giving rise to such third-party claims.
Parent and Company each acknowledge that the General Damages and Sasswood
Damages, if any, would relate to unresolved contingencies existing at the
Closing which, if resolved at the Closing, would have led to a reduction in the
total number of Acquisition Shares Parent would have agreed to issue in
connection with the Contemplated Transactions. Resort to the Escrow Funds shall
be the exclusive remedy of Parent after the Closing for any such General Damages
or Sasswood Damages.
10.2 Damage Threshold for General Escrow Fund
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Notwithstanding the foregoing, Parent may not receive any shares from the
General Escrow Fund unless and until an Officer's Certificate or Certificates
(as defined in Section 10.4(a) below) identifying General Damages the aggregate
amount of which exceeds $100,000 has been delivered to the Escrow Agent as
provided in Section 10.4(a) below and such amount is determined pursuant to this
Article 10 to be payable, in which case Parent shall receive shares equal in
value to the full amount of such General Damages; provided, however, that in no
event shall Parent receive more than the General Escrow Shares in connection
with General Damages.
10.3 Escrow Periods
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(a) General Escrow. The General Escrow Period shall terminate
with respect to the General Escrow Shares upon the earlier to occur of: (i) the
first anniversary of the Closing Date, or (ii) the issuance of Parent's audited
financial statements for the year ending December 31, 1999, which include the
results of the Company; provided, however, that a portion of the General Escrow
Shares, which, in the reasonable judgment of Parent, subject to the objection of
the Company Agent (as defined in Section 10.7 below) and the subsequent
arbitration of the matter in the manner provided in Section 10.6 hereof, are
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate theretofore delivered to the Escrow Agent prior to termination of
the General Escrow Period with respect to the facts and circumstances existing
prior to expiration of the General Escrow Period, shall remain in the General
Escrow Fund until such claims have been resolved.
(b) Sasswood Escrow. The Sasswood Escrow Period shall terminate
with respect to the Sasswood Escrow Shares thirty (30) days following the full
and final settlement or disposition of any Proceedings against the Company (or
Parent or a Subsidiary of the Parent) in
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connection with the Sasswood Claims; provided, however, that the Sasswood Claims
shall be deemed to remain unsatisfied (and the Sasswood Escrow Period shall not
terminate) so long as any Sasswood Proprietary Remedies have not been acquired
by Parent, a Subsidiary of Parent or the Company or have not been otherwise
eliminated or terminated.
(c) Any and all distributions of Escrow Shares upon termination
of the General Escrow Period or Sasswood Escrow Period shall be made to the
Company shareholders on a pro rata basis according to such shareholder's
ownership of Shares at the Closing Date. Such delivery will be in the form of
stock certificate(s) representing such Shares.
10.4 Claims upon Escrow Funds
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(a) General Escrow. Upon receipt by the Escrow Agent on or
before the last day of the General Escrow Period of a certificate signed by the
Chief Executive Officer, the President, the Chief Financial Officer or the
General Counsel of Parent (an "Officer's Certificate"):
(i) stating that General Damages exist in an aggregate
amount greater than $100,000, and
(ii) specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such item was
paid, or properly accrued or arose, the nature of the misrepresentation, breach
of warranty or claim to which such item is related (if applicable), the Escrow
Agent shall, subject to the provisions of Article 10 hereof, deliver to Parent
or as Parent directs out of the General Escrow Fund, as promptly as practicable,
Exchangeable Shares or Parent Common Shares, the value of which is equal to the
amount of the General Damages.
(b) Sasswood Escrow. Upon receipt by the Escrow Agent of an
Officer's Certificate:
(i) stating that Sasswood Damages exist by virtue of the
settlement, disposition or other satisfaction of the Sasswood Claims, and
(ii) specifying in reasonable detail the individual items
of such Sasswood Damages included in the amount so stated, the date each such
item was paid, or properly accrued or arose, the Escrow Agent shall, subject to
the provisions of Article 10 hereof, deliver to Parent or as Parent directs out
of the Sasswood Escrow Fund, as promptly as practicable, Exchangeable Shares or
Parent Common Shares, the value of which is equal to the amount of the Sasswood
Damages.
(c) For the purpose of compensating Parent for its General
Damages or Sasswood Damages pursuant to this Agreement, the Exchangeable Shares
or Parent Common Shares in the Escrow Funds shall be valued at a price per share
equal to the closing price of one Parent Common Share on the date immediately
prior to the Closing Date (as adjusted for stock splits, reverse stock splits
and similar events).
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10.5 Objections to Claims
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At the time of delivery of any Officer's Certificate to the Escrow Agent, a
duplicate copy of such Officer's Certificate shall be delivered to the Company
Agent (defined in Section 10.7 below) and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery of Escrow Shares pursuant
to Section 10.4 hereof unless the Escrow Agent shall have received written
authorization from the Company Agent to make such delivery. After the
expiration of such thirty (30) day period, the Escrow Agent shall make delivery
of the Escrow Shares in accordance with Section 10.4 hereof, provided that no
such payment or delivery may be made if the Company Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent and to Parent prior to
the expiration of such thirty (30) day period.
10.6 Resolution of Conflicts; Arbitration
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(a) In case the Company Agent shall so object in writing to any
claim or claims by Parent made in any Officer's Certificate, Parent shall have
forty-five (45) days to respond in a written statement to the objection of the
Company Agent. If after such forty-five (45) day period there remains a dispute
as to any claims, the Company Agent and Parent shall attempt in good faith for
sixty (60) days to agree upon the rights of the respective parties with respect
to each of such claims. If the Company Agent and Parent should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum and shall distribute the Escrow Shares
from the Escrow Funds in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Company Agent may, by written notice to the
other, demand arbitration of the matter unless the amount of the damage or loss
is at issue in pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within fifteen (15) days after such written
notice is sent, Parent and the Company Agent shall each select one arbitrator,
and the two arbitrators so selected shall select a third arbitrator. The
decision of the arbitrators as to the validity and amount of any claim in such
Officer's Certificate shall be binding and conclusive upon the parties to this
Agreement, and notwithstanding anything in Section 10.6 hereof, the Escrow Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Funds in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
King County, Washington under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 10.6(c), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Parent shall be deemed to be the Non-
Prevailing Party unless the arbitrators award Parent more than one-half (1/2) of
the amount in dispute, plus any amounts not in dispute; otherwise, the Company
shareholders for whom the Escrow Shares otherwise issuable to
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them have been deposited in the Escrow Funds shall be deemed to be the Non-
Prevailing Party. The Non-Prevailing Party to an arbitration shall pay its own
expenses, the fees of each arbitrator, the administrative fee of the American
Arbitration Association, and the expenses, including without limitation,
attorneys' fees and costs, reasonably incurred by the other party to the
arbitration.
10.7 Company Agent
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(a) Xxxxxxxx Xxxxxxx shall be constituted and appointed as agent
("Company Agent") for and on behalf of the Company shareholders to give and
receive notices and communications, to authorize delivery to Parent of the
Escrow Shares in satisfaction of claims by Parent, to object to such deliveries,
to agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Company Agent for the accomplishment of the foregoing. Such
agency may be changed by the holders of a majority in interest of the Escrow
Funds from time to time upon not less than 10 days' prior written notice to
Parent. No bond shall be required of the Company Agent. Notices or
communications to or from the Company Agent shall constitute notice to or from
each of the Company's shareholders.
(b) The Company Agent shall not be liable for any act done or
omitted hereunder as the Company Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Company
shareholders shall severally indemnify the Company Agent and hold him harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Company Agent and arising out of or in connection with
the acceptance or administration of his duties hereunder.
(c) The Company Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's and
Acquisition Sub's officers and employees for purposes of performing its duties
and exercising its rights hereunder, provided that the Company Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
10.8 Actions of the Company Agent
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A decision, act, consent or instruction of the Company Agent shall
constitute a decision of all Company shareholders for whom Escrow Shares
otherwise issuable to them are deposited in the Escrow Funds and shall be final,
binding and conclusive upon each such Company shareholder, and the Escrow Agent
and Parent may rely upon any decision, act, consent or instruction of the
Company Agent as being the decision, act, consent or instruction of each and
every such Company shareholder. The Escrow Agent and Parent are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Company Agent.
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10.9 Third-Party Claims
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In the event Parent becomes aware of a third-party claim which Parent
believes may result in a demand against an Escrow Fund, Parent shall notify the
Company Agent of such claim, and the Company Agent and the Company shareholders
for whom Escrow Shares otherwise issuable to them are deposited in the Escrow
Funds shall be entitled, at their expense, to participate in any defense of such
claim. Parent shall have the right in its sole discretion to settle any such
claim; provided, however, that Parent may not affect the settlement of any such
claim without the consent of the Company Agent, which consent shall not be
unreasonably withheld. In the event that the Company Agent has consented to any
such settlement, the Company Agent shall have no power or authority to object
under Section 10.5 or any other provision of this Article X to the amount of any
claim by Parent against the Escrow Funds for indemnity with respect to such
settlement."
4. General Provisions
The general provisions of Article XI of the Agreement are hereby
incorporated into and made a part of this Amendment, except that Section 11.8 is
hereby amended to read as follows.
"11.8 Entire Agreement and Modification.
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This Agreement, as amended by the First Amendment to Agreement and Plan of
Acquisition and Arrangement, dated as of October 13, 1999, by and between the
parties hereto, supersedes all prior agreements between the parties with respect
to its subject matter and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement, as
amended by the First Amendment, may not be further amended except by a written
agreement executed by the party to be charged with the amendment."
5. No Further Amendments. Except as expressly amended as set forth above
and as may be necessary to amend the Escrow Agreement attached to the Agreement
as Exhibit 10.1 to give effect to this Amendment, the Agreement shall remain in
full force and effect in accordance with its terms.
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6. Shareholder Approval. Subject to any directions given by the Court in
approving the Plan of Arrangement or in connection therewith, as soon as
practicable following the execution of this Amendment, the Company shall (i)
call a special meeting of its shareholders for the purpose of seeking approval
of this Amendment or (ii) circulate a shareholder consent for purposes of
approving the this Amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of the date first written above.
PARENT
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Senior Vice President, Legal and
Business Affairs
COMPANY
By: /s/ Xxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxxxx
Title: Chairman
