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FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (the
"Amendment") is made and entered into this 10th day of March, 1998, by and among
MemberWorks Incorporated, a Delaware corporation ("MemberWorks"), MW Acquisition
Corp., a Georgia corporation and a newly-formed, wholly-owned subsidiary of
MemberWorks ("Newco"), Xxxxxxxxx & Company, Inc., a Georgia corporation (the
"Company"), and those stockholders of the Company named on the signature pages
of this Amendment (each a "Stockholder" and collectively, the "Stockholders").
BACKGROUND
A. MemberWorks, Newco, the Company, and the Stockholders executed that
certain Agreement and Plan of Reorganization dated as of March 4, 1998, as
amended by letter agreement dated March 6, 1998 (collectively, the "Agreement"),
whereby the parties agreed to the terms and conditions upon which Newco would
merge with and into the Company. Capitalized terms used but not otherwise
defined in this Amendment shall have the meaning as set forth in the Agreement.
B. The parties hereto desire to amend the Agreement in the manner set
forth herein.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. The last sentence of Section 1.3(a) of the Agreement shall be
amended by deleting it in its entirety and substituting the following language
in lieu thereof:
If the closing price per share of the MemberWorks Common Stock at the
close of the market on the last trading day before the Closing as
reported by NASDAQ is greater than $35 per share, the number of shares
of MemberWorks Common Stock to be delivered as Stock Consideration
shall be reduced so that the value of the Stock Consideration is equal
to $16,250,000, less the Value of the Company Options.
2. Section 1.3(b) of the Agreement shall be amended by deleting it in
its entirety and substituting the following language in lieu thereof:
(b) For purposes of this Agreement, the "Value" of the Company Options
shall be equal to the lesser of (i) $1,213,627, or (ii) the amount
determined under the following formula:
(((A + B + C) / D) x E) - C, where
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A = is the Cash Consideration;
B = is (i) $13,000,000, if the MemberWorks
Stock Price at the close of the market on
the last trading day before the Closing as
reported by NASDAQ (the "MemberWorks Closing
Price") is $28.00 per share or less, or (ii)
464,286, multiplied by the MemberWorks
Closing Price, if the MemberWorks Closing
Price is greater than $28.00 per share (this
number is also called the "Market Value
Stock Consideration");
C = is $1,943,726, which is the total proceeds
that would have been received by the Company
had all of the Company Options been
exercised for cash at an exercise price of
$15.1685 per share (this number is also
called the "Xxxxxxxxx Exercise Proceeds",
and for purposes of this Agreement, the sum
of the Cash Consideration, the Market Value
Stock Consideration, and the Xxxxxxxxx
Exercise Proceeds is the "Fair Value of the
Company");
D = is 860,153, which is the number of issued
and outstanding shares of Company Common
Stock, plus the number of Company Options
("Xxxxxxxxx Stock Equivalents"); and
E = is 128,142, which is the total number of
Company Options outstanding ("Outstanding
Company Options").
Therefore, for example, if the MemberWorks Closing Price is $28.00 per
share, then the Value of the Company Options shall be $729,456,
determined as follows:
((($3,000,000 + $13,000,000 + $1,943,726) / 860,153) x 128,142) -
$1,943,726 = $729,456
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Schedule 1.3(b) attached hereto sets forth the Value of the Company
Options (computed as a result of the application of the formula set
forth above) if the MemberWorks Closing Price is between $28.00 and
$35.00.
3. Section 6.1 of the Agreement shall be amended by deleting it in its
entirety and substituting the following language in lieu thereof:
6.1 COMPANY STOCK OPTIONS. Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxx
have elected not to exercise their Options to purchase the Company's
stock owned by them ("Company Options") prior to the Closing but rather
to convert them into options for MemberWorks Common Stock, which shall
be issued in full substitution for the Company Options. At the Closing,
the Outstanding Company Options shall be converted (the "Conversion")
into that number of options exercisable for MemberWorks common shares
("MemberWorks Conversion Options"), determined as follows: the Fair
Value of the Company is divided by the Xxxxxxxxx Stock Equivalents, to
establish the "Fair Value Per Share of the Company." The Fair Value per
Share of the Company is
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then multiplied by the Outstanding Company Options, and this product is
then divided by the MemberWorks Closing Price to determine the number
of MemberWorks Conversion Options to be issued. The exercise price of
the MemberWorks Conversion Options is then determined by dividing the
Xxxxxxxxx Exercise Proceeds by the number of MemberWorks Conversion
Options to be issued. Schedule 6.1 attached hereto sets forth the
number of MemberWorks Conversion Options, and the exercise price
therefor, for MemberWorks Closing Prices between $14.00 and $42.00.
Upon the Conversion, Messrs. Xxxxxxx and Xxxxx shall become
participants in the MemberWorks Incorporated 1996 Stock Option Plan
(the "Incentive Plan"), and the MemberWorks Conversion Options will be
issued under the Incentive Plan. The MemberWorks Conversion Options
shall be fully vested and shall be for a term of at least ten years
from the Closing.
4. Except as specifically amended herein, the Agreement shall remain in
remain in full force and effect.
[signatures on next page]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first above written.
MEMBERWORKS INCORPORATED
By: /s/ Xxxxx X. Xxxxx
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MW ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxx
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President
STOCKHOLDERS:
/s/ Xxxxx Xxx /s/ Xxxx Xxxxxxxxx
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Witness Xxxx Xxxxxxxxx
/s/ Xxxxx Xxx /s/ Xxxx Xxxxxxxxx, as Power of Attorney
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Witness Xxxxx Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
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Witness Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxx
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Witness Xxxxxxx X. Xxxxx
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Trust u/w of Xxxxx X. Xxxxxxxxx
/s/ Xxxxx Xxx
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Witness By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx
Trustee
By: /s/ Xxxx X. Xxxxxxxxx, as Power of Attorney
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Xxxxx X. Xxxxxxxxx
Trustee
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SCHEDULES*:
Schedule 1.3(b) Value of Company Options
Schedule 6.1 Number of MemberWorks Conversion Options
* The following schedules have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon request
in accordance with Item 601(b)(2) of Regulation S-K.
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