EXHIBIT 10.2
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") is entered into as of this
18th day of February, 2000 by and between XxxXxxxxxx.Xxx, Inc. a Delaware
corporation ("Tek"), and the undersigned stockholder ("Stockholder") of DATA
SYSTEMS NETWORK CORPORATION, a Michigan corporation ("DSNC").
This Agreement is entered into in connection with that certain
Agreement and Plan of Merger, dated as of February 18, 2000 (the "Merger
Agreement"), among Tek, Astratek, Inc., a New York corporation and a
wholly-owned subsidiary of Tek ("Merger Sub"), and DSNC. The Merger Agreement
provides for the merger (the "Merger") of DSNC with and into Merger Sub in a
transaction in which issued and outstanding shares of common stock, $.01 par
value per share, of DSNC (the "DSNC Common Stock") will be converted into shares
of preferred stock, $.0001 par value per share, of Tek (the "Tek Preferred
Stock") on the terms and conditions set forth in the Merger Agreement.
Capitalized terms used herein and not defined herein shall have their defined
meanings as set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants set forth herein, the parties agree as
follows:
1. Tax and Accounting Treatment. Each Stockholder understands and
agrees that it is intended that the Merger will be treated as a "reorganization"
for federal income tax purposes. Stockholder further understands and agrees that
Stockholder may be deemed to be an "Affiliate" of DSNC within the meaning of
Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), although nothing contained herein should be construed as
an admission of either such fact.
2. Reliance upon Representations, Warranties and Covenant. Stockholder
has been informed that a reorganization for federal income tax purposes requires
that a sufficient number of former stockholders of DSNC maintain a meaningful
continuing equity ownership interest in Tek after the Merger. Each Stockholder
understands that the representations and warranties and covenants set forth
herein will be relied upon by Tek, DSNC, their respective counsel and accounting
firms and other stockholders of DSNC.
3. Representations, Warranties and Covenants of each Stockholder. Each
Stockholder represents, warrants and covenants as follows:
(a) Such Stockholder has full power and authority to execute
this Agreement, to make the representations, warranties and covenants herein
contained and to perform such Stockholder's obligations hereunder.
(b) Appendix A attached hereto sets forth all shares of DSNC
Common Stock owned by such Stockholder, including all DSNC Common Stock as to
which such Stockholder bas sole or shared voting or investment power and all
rights and options to acquire DSNC Common Stock.
(c) Such Stockholder will not sell, transfer, exchange,
pledge, or otherwise dispose of, or make any offer or agreement relating to any
of the foregoing with respect to, any shares of Tek Preferred Stock that such
Stockholder may acquire in connection with the Merger or acquire upon exercise
of any option or right to acquire Tek Preferred Stock, which option or right is
acquired in connection with the Merger, or any securities that may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and other
securities of Tek being herein sometimes collectively referred to as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities, unless (i) such transaction is permitted pursuant to Rule
145(c) and 145(d) under the Securities Act (as described in Section 6 below), or
(ii) counsel representing such Stockholder shall have advised Tek in a written
opinion letter satisfactory to Tek and Tek's legal counsel, and upon which Tek
and its legal counsel may rely, that no registration under the Securities Act
would be required in connection with the proposed sale, transfer or other
disposition, or (iii) a registration statement under the Securities Act covering
the Tek Preferred Stock proposed to be sold, transferred or otherwise disposed
of, describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, shall have been filed with the
SEC and made effective under the Securities Act, or (iv) an authorized
representative of the SEC shall have rendered written advice to such Stockholder
(sought by such Stockholder or counsel to such Stockholder, with a copy thereof
and all other related communications delivered to Tek) to the effect that the
SEC would take no action, or that the staff' of the SEC would not recommend that
the SEC take action, with respect to the proposed disposition if consummated.
(d) Notwithstanding any other provision of this Agreement to
the contrary, such Stockholder will not sell, transfer, exchange, pledge or
otherwise dispose of, or in any other way reduce such Stockholder's risk of
ownership or investment in, or make any offer or agreement relating to any of
the foregoing with respect to any DSNC Common Stock or any rights, options or
warrants to purchase DSNC Common Stock, or any Restricted Securities or other
securities of Tek (i) during the 30-day period immediately preceding the
Effective Time of the Merger and (ii) until such time after the Effective Time
of the Merger as Tek has publicly released a report including the combined
financial results of Tek and DSNC for a period of at least 30 days of combined
operations of Tek and DSNC within the meaning of Accounting Series Release No.
130, as amended, of the SEC. Tek agrees to publish such financial results
expeditiously in a manner consistent with its prior practices; provided, that
nothing contained herein shall obligate Tek to publish its financial results
other than on a quarterly basis.
(e) Each Stockholder has, and as of the Effective Time of the
Merger will have, no present plan or intention (a "Plan") to sell, transfer,
exchange, pledge (other than in a pre-existing bona fide margin account) or
otherwise dispose of, including a distribution by a partnership to its partners,
or a corporation to its stockholders, or any other transaction which results in
a reduction in the risk of ownership (any of the foregoing, a "Sale") of more
than 50% of the shares of Tek Preferred Stock that Stockholder may acquire in
connection with the Merger, or any securities that may be paid as a dividend or
otherwise distributed thereof or with respect thereto or issued or delivered in
exchange or substitution therefor. For purposes of the preceding sentence,
shares of DSNC Common Stock (or the portion thereof, (i) with respect to which
any applicable dissenters' rights are exercised, (ii) which are exchanged for
cash in lieu of fractional shares of Tek Preferred Stock, or (iii) with respect
to which a Sale (A) in a Related Transaction (as defined below) or (B) will
occur prior to the Merger, shall be considered to be shares of DSNC Common Stock
that are exchanged for Tek stock in the Merger and then disposed of pursuant to
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a Plan. Stockholder is not aware of, or participating in, any Plan on the part
of DSNC stockholders to engage in Sales of the shares of Tek Preferred Stock to
be issued in the Merger such that the aggregate fair market value, as of the
Effective Time of the Merger, of the shares subject to such Sales would exceed
50% of the aggregate fair market value of all shares of outstanding DSNC Common
Stock immediately prior to the Merger. For purposes of the preceding sentence,
shares of DSNC Common Stock (i) with respect to which any applicable dissenters'
rights are exercised, (ii) which are exchanged for cash in lieu of fractional
shares of Tek Preferred Stock or (iii) with respect to which a pre-Merger Sale
occurs in a Related Transaction, shall be considered to be shares of DSNC
Preferred Stock that are exchanged for Tek Preferred Stock in the Merger and
then disposed of pursuant to a Plan. A Sale of Tek Preferred Stock shall be
considered to have occurred pursuant to a Plan if, among other things, such Sale
occurs in a Related Transaction. For purposes of this Section 3(e), a "Related
Transaction" shall mean a transaction that is in contemplation of, or related or
pursuant to, the Merger or the Merger Agreement. If any of such Stockholder's
representations in this Section 3(e) ceases to be true at any time prior to the
Effective Time of the Merger, such Stockholder shall deliver to each of DSNC and
Tek, prior to the Effective Time of the Merger, a written statement to that
effect, signed by such Stockholder.
4. Rule 144 and 145. From and after the Effective Time of the Merger
and for so long as is necessary in order to permit Stockholder to sell the Tek
Preferred Stock held by and pursuant to Rule 145 and, to the extent applicable,
Rule 144 under the Securities Act, Tek will use its reasonable best efforts to
file on a timely basis all reports required to be filed by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), referred to in paragraph (c)(1) of Rule 144 under the Securities Act, in
order to permit Stockholder to sell the Tek Preferred Stock held by it pursuant
to the terms and conditions of Rule 145 and the applicable provisions of Rule
144. Any future disposition by Stockholder of Tek Preferred Stock will be
accomplished in compliance with all applicable securities laws. Stockholder
understands that Tek is under no obligation to register the sale, transfer or
other disposition of any Restricted Securities by or on behalf of such
Stockholder or to take any other action necessary in order to make compliance
with an exemption from registration available.
5. Legend. Each Stockholder agrees that the following legend be placed
upon the certificate evidencing ownership of Tek Preferred Stock:
THESE SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
AS SET FORTH IN RULES 144 AND 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, HYPOTHECATED, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO THE PROCEDURES DESCRIBED
THEREIN.
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6. Limited Resales. Each Stockholder understands that, in addition to
the restrictions imposed under Section 3 of this Agreement, the provisions of
Rule 145 limit such Stockholder's public resales of Restricted Securities, in
the manner set forth in subsections (a), (b) and (c) below, until such time as
such Stockholder has beneficially owned, within the meaning of Rule 144(d), the
Restricted Securities for a period of at least one year (or in some cases two
years) after the date of the Merger, and thereafter if and for so long as such
Stockholder remains an Tek affiliate:
(a) Unless and until the restriction "cut-off" provisions of
Rule 145(d)(2) or Rule 145(d)(3) set forth below become available, public
resales of Restricted Securities may only be made by such Stockholder in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1) permits such
resales only (i) while Tek meets the public information requirements of Rule
144(c), (ii) in "brokers' transactions" or in transactions with a "market maker"
in accordance with Rule 144(f) and Rule 144(g) and (iii) where the aggregate
number of Restricted Securities sold at any time together with all sales of Tek
Preferred Stock sold for such Stockholder's account during the preceding
three-month period does not exceed the greater of (x) 1% of the Tek Preferred
Stock outstanding, (y) the average weekly volume of trading in Tek Preferred
Stock on all national securities exchanges and/or reported through the automated
quotation system of a registered securities association during the four calendar
weeks preceding the date of receipt of the order to execute the sale or (z) the
average weekly volume of trading in Tek Preferred Stock reported through the
consolidated transaction reporting system contemplated by Rule llAa3-1 under the
Exchange Act during the four-week period specified in subsection (y) above.
(b) Each Stockholder may make unrestricted resales of
Restricted Securities pursuant to Rule 145(d)(2) if (i) such Stockholder has
beneficially owned (within the meaning of Rule 144(d) under the Securities Act)
the Restricted Securities for at least one year after the Effective Time of the
Merger, (ii) such Stockholder is not an affiliate of Tek and (iii) Tek meets the
public information requirements of Rule 144(c).
(c) Each Stockholder may make unrestricted resales of
Restricted Securities pursuant to Rule 145(d)(3) if such Stockholder (i) has
beneficially owned (within the meaning of Rule 144(d) under the Securities Act)
the Restricted Securities for at least two years and (ii) is not and has not
been for at least three months, an affiliate of Tek.
(d) Tek acknowledges that the provisions of Section 3(c) of
this Agreement will be satisfied as to any sale by the undersigned of the
Restricted Securities pursuant to Rule 145(d) by delivery to Tek of a broker's
letter and a letter from the undersigned with respect to that sale stating that
each of the above-described requirements of Rule 145(d)(1) has been met or is
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3); provided, that Tek
has no reasonable basis to believe such sales were not made in compliance with
such provisions of Rule 145(d).
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7. Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given upon receipt, if
delivered by hand, by telecopy or telegram, or three days after deposit in the
United States mail, postage prepaid, addressed to a party as follows:
If to Tek: XxxXxxxxxx.Xxx, Inc.
0 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxxx Xxxxxxxx,
Chief Technology Officer
With a copy to: Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
If to Stockholder: At the address set forth beneath such Stockholder's
signature;
or to such other address as any party may designate for itself by notice given
as provided in this Agreement.
8. Termination. This Agreement shall be terminated and shall be of no
further force and effect upon the termination of the Merger Agreement pursuant
to Article VII thereof.
9. Binding Agreement. This Agreement will inure to the benefit of and
be binding upon and enforceable against the parties and their successors and
assigns, including administrators, executors, representatives, heirs, legatees
and devises of each Stockholder and any pledgee holding Restricted Securities as
collateral.
10. Waiver. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing
and signed by each party hereto. each party hereto.
11. Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of New York
without giving effect to principles of conflicts of laws.
12. Attorneys' Fees. In the event of any legal action or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results in
a final judgment.
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13. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of its Agreement.
14. Third Party Reliance. Counsel to and accountants for the parties
shall be entitled to rely upon the representations, warranties and covenants
contained in this Agreement.
15. Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxxxxx Xxxxxxxx
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Name: Xxxxxxxxx Xxxxxxxx
Title: Chief Technology Officer
STOCKHOLDERS:
/s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
DIRECTORS:
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OFFICERS:
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APPENDIX A
DSNC SECURITIES
Shareholder: Number of Shares
----------------
Xxxxxxx X. Xxxxxxx 707,500
DSNC Common Stock 707,500
Options to Purchase DSNC Common Stock
June 1997 $8.75 8,000
October 1994 $4.75 10,000
Total Options to Purchase DSNC Common Stock - 18,000
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DSNC SECURITIES
Shareholder Number of Shares
----------------
Xxxxxxx X. Xxxxxxxx 140,625
DSNC Common Stock 140,625
Options to Purchase DSNC Common Stock
May 1997 $9.38 1,000
May 1996 $4.00 1,000
May 1995 $3.00 1,000
Total Options to Purchase DSNC Common Stock - 3,000
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DSNC SECURITIES
Shareholder Number of Shares
----------------
Xxxxxxx X. Xxxxx 361,250
DSNC Common Stock 361,250
Options to Purchase DSNC Common Stock
October 1997 $13.25 6,250
July 1997 $12.00 5,000
September 1996 $4.00 15,000
October 1994 $4.75 7,500
Total Options to Purchase DSNC Common Stock- 33,750
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