19.9% Option Agreement
This 19.9% Option Agreement (this "Agreement") is entered into as of June
29, 2001, between RadiSys Corporation, an Oregon corporation ("Parent"), and
Microware Systems Corporation, an Iowa corporation (the "Company").
Recitals
A. Contemporaneously with the execution and delivery of this Agreement,
Parent, Drake Merger Sub, Inc., an Iowa corporation and a wholly owned
subsidiary of Parent ("Newco"), and the Company are entering into an Agreement
and Plan of Merger, dated as of the date of this Agreement (the "Merger
Agreement"), which provides, among other things, for the merger of Newco with
and into the Company (the "Merger").
B. As a condition to their willingness to enter into the Merger Agreement,
Parent and Newco have requested that the Company grant to Parent an option to
purchase shares of Common Stock, without par value, of the Company (the "Common
Stock"), upon the terms and subject to the conditions of this Agreement.
C. To induce Parent and Newco to enter into the Merger Agreement, the
Company is willing to grant Parent the requested option and the board of
directors of the Company has approved the granting of the option and authorized
the Company to enter into this Agreement.
Agreement
1. The Option; Exercise; Adjustments; Payment of Spread.
1.1. On the terms and subject to the conditions set forth in this
Agreement, the Company grants to Parent an irrevocable option (the
"Option") to purchase up to 3,814,462 shares of Common Stock (the
"Shares") at a price per Share equal to $0.48 (the "Purchase Price").
Provided that Parent is not then in material breach of any
representation, warranty, covenant or agreement contained in the
Merger Agreement, the Option may be exercised by Parent, in whole or
in part, at any time, or from time to time, following the termination
by Parent of the Merger Agreement in any of the circumstances set
forth in Sections 7.1.3(a), 7.1.4, 7.1.5, 7.1.6 and, subject to
Section 10 of this Agreement, Section 7.1.8 of the Merger Agreement,
and before the termination of the Option in accordance with the terms
of this Agreement.
1.2. The number of Shares purchasable upon exercise of the Option and the
Purchase Price are subject to adjustment as set forth in this
Agreement.
1.3. If Parent wishes to exercise the Option, Parent shall send a written
notice to the Company (the "Stock Exercise Notice") specifying a date
for the closing of the purchase (subject to the HSR Act (as defined
below) and obtaining other applicable regulatory approvals) not
earlier than two business days
following the date the Stock Exercise Notice is given. In the event of
any change in the number of issued and outstanding shares of Common
Stock by reason of any stock dividend, stock split, split-up,
recapitalization, merger or other change in the corporate or capital
structure of the Company, the number of Shares subject to this Option
and the Purchase Price shall be appropriately adjusted to restore
Parent to its rights under this Agreement, including its right to
purchase Shares representing 19.9% of the capital stock of the
Company.
1.4. At any time after the Option is exercisable pursuant to the terms of
Section 1.1 of this Agreement, Parent may elect, in lieu of purchasing
the Shares under this Agreement, to receive from the Company an amount
in cash (the "Cash Amount") equal to the Spread (as defined below)
multiplied by all or the portion of the Shares subject to the Option
that Parent shall specify in a written notice to the Company (the
"Cash Exercise Notice") specifying a date not later than 20 business
days and not earlier than five business days following the date the
Cash Exercise Notice is given on which the Company shall pay to Parent
the Cash Amount. As used in this Agreement, "Spread" shall mean the
excess, if any, over the Purchase Price of the higher of (x) if
applicable, the highest price per share of Common Stock (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid or proposed to be paid by any person pursuant to a Company
Takeover Proposal (as defined in the Merger Agreement) (the
"Alternative Purchase Price") and (y) the closing price of the shares
of Common Stock as quoted on the Nasdaq Stock Market and reported in
The Wall Street Journal on the last trading day before the date of the
Cash Exercise Notice (the "Closing Price"). If the Alternative
Purchase Price can be calculated by reference only to a cash amount
paid or proposed to be paid for any shares of Common Stock
outstanding, that cash amount shall be deemed to be the Alternative
Purchase Price; if, in the case of clause (x) above, no shares of
Common Stock will be purchased only for cash, the Alternative Purchase
Price shall be the sum of (i) the fixed cash amount, if any, included
in the Alternative Purchase Price plus (ii) the fair market value of
the property other than cash included in the Alternative Purchase
Price. If, in the case of clause (x) above, the other property
consists of securities with an existing public trading market, the
average of the closing prices (or the average of the closing bid and
asked prices if closing prices are unavailable) for those securities
in their principal public trading market on the five trading days
ending one day before the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of the property. If the other
property consists of something other than cash or securities with an
existing public trading market and, as of the payment date for the
Spread, agreement by the parties to this Agreement on the value of the
other property has not been reached, the Alternative Purchase Price
shall be deemed to equal the Closing Price. Upon Parent's receipt of
the Cash
2
Amount, Parent shall not have the right to receive the Shares for
which Parent shall have elected to be paid the Spread.
2. Conditions to Delivery of Shares. The Company's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
2.1. No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
2.2. Any applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act") (as defined in
the Merger Agreement) shall have expired or been terminated.
3. The Closing.
3.1. Any closing under this Agreement shall take place on the date
specified by Parent in its Stock Exercise Notice or Cash Exercise
Notice, as the case may be, at 9:00 A.M., local time, at the offices
of Stoel Rives LLP, 000 XX Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx
00000, or, if Shares are to be delivered and the conditions set forth
in Section 2.1 or Section 2.2 have not then been satisfied, on the
second business day following the satisfaction of those conditions, or
at any other time and place to which the parties to this Agreement may
agree in writing (the "Closing Date"). On the Closing Date, (i) in the
event of a closing pursuant to Section 1.2 of this Agreement, the
Company shall deliver to Parent a certificate or certificates,
representing the Shares in the denominations designated by Parent in
its Stock Exercise Notice and Parent shall purchase those Shares from
the Company at the Purchase Price or (ii) in the event of a closing
pursuant to Section 1.3 of this Agreement, the Company shall deliver
to Parent the Cash Amount. Any payment made by Parent to the Company,
or by the Company to Parent, pursuant to this Agreement shall be made
by certified or official bank check or by wire transfer of federal
funds to a bank designated by the party receiving such funds.
3.2. The certificates representing the Shares shall bear an appropriate
legend relating to the fact that the Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Company. The Company represents
and warrants to Parent that (a) the Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Iowa and
has the requisite corporate power and authority to enter into and perform this
Agreement; (b) the execution and delivery of this Agreement by the Company and
the completion by it of the transactions contemplated by this Agreement have
been duly authorized by the board of directors of the Company and this Agreement
has been duly executed and delivered by a duly authorized officer of the Company
3
and constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Company has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option, and the Shares, when issued and
delivered by the Company upon exercise of the Option and paid for by Parent as
contemplated by this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights; (d) except as otherwise
may be required by the HSR Act, the execution and delivery of this Agreement by
the Company and the completion by it of the transactions contemplated by this
Agreement do not require the consent, waiver, approval or authorization of or
any filing with any person or public authority and will not violate, result in a
breach of or the acceleration of any obligation under, or constitute a default
under, any provision of the Company's articles of incorporation or bylaws, or
any indenture, mortgage, lien, lease, agreement, contract, instrument, order,
law, rule, regulation, judgment, ordinance, or decree, or restriction by which
the Company or any of its subsidiaries or any of their respective properties or
assets is bound; and (e) no restrictive provision of any "fair price",
"moratorium", "control share acquisition", or other form of antitakeover statute
or regulation, including, without limitation, the provisions of Section 490.1110
of the Iowa Business Corporation Act, or similar provision contained in the
articles of incorporation or bylaws of the Company, is or shall be applicable to
the acquisition of Shares by Parent pursuant to this Agreement.
5. Representations and Warranties of Parent. Parent represents and warrants
to the Company that Parent is acquiring the Option and, if and when it exercises
the Option, will be acquiring the Shares issuable upon the exercise of the
Option for its own account and not with a view to distribution or resale in any
manner which would be in violation of the Securities Act.
6. Listing of Shares; Filings; Governmental Consents. Subject to applicable
law and the rules and regulations of the Nasdaq Stock Market, the Company shall
promptly after receipt of the Stock Exercise Notice file a notification form for
listing of additional shares to list the Shares on the Nasdaq Stock Market and
shall use its best efforts to obtain approval of the listing and to effect all
necessary filings by the Company under the HSR Act; provided, however, that if
the Company is unable to effect the listing on the Nasdaq Stock Market by the
Closing Date, the Company shall nevertheless be obligated to deliver the Shares
upon the Closing Date and to continue diligently to pursue listing of the Shares
on the Nasdaq Stock Market. Each of the parties to this Agreement shall use its
best efforts to obtain consents of all third parties and governmental
authorities necessary to the completion of the transactions contemplated.
7. Sale of Shares. At any time before the one year anniversary of the date
the Merger Agreement is terminated pursuant to its terms (the "Merger
Termination Date"), Parent shall have the right to sell (the "Sale Right") to
the Company all or any portion of the Shares at the greater of (i) the Purchase
Price, or (ii) the average of the last closing prices for shares of Common Stock
on the last five trading days before the date Parent gives written notice of its
intention to exercise the Sale Right. If Parent does not exercise the Sale Right
before the one year anniversary of the Merger Termination Date, the Sale Right
shall terminate. In the event Parent wishes to exercise the Sale Right, Parent
shall send a written notice to the Company
4
specifying a date not later than 20 business days and not earlier than 5
business days following the date the notice is given for the closing of the
sale.
8. Registration Rights.
8.1. If, within three years after Parent's purchase of the Shares pursuant
to this Agreement, the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders
other than Parent) any of its Common Stock under the Securities Act in
connection with the public offering of the Common Stock (other than a
registration relating solely to the sale of securities to participants
in a Company stock plan), the Company shall, at that time, promptly
give Parent written notice of the registration. Upon the written
request of Parent given within 20 days after the giving of the notice
by the Company in accordance with Section 12 of this Agreement, the
Company shall include in the registration statement all of the Shares
that Parent has requested to be registered.
8.2. If the Common Stock is registered pursuant to the provisions of this
Section 8, the Company agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares
covered by the registration statement and the prospectus in the
numbers the Parent may from time to time reasonably request and (ii)
if any event shall occur as a result of which it becomes necessary to
amend or supplement any registration statement or prospectus, to
prepare and file under the applicable securities laws the amendments
and supplements that may be necessary to keep available for at least
90 days a prospectus covering the Common Stock meeting the
requirements of the securities laws, and to furnish Parent the number
of copies of the registration statement and prospectus as amended or
supplemented that may reasonably be requested. The Company shall bear
the cost of the registration, including all registration and filing
fees, printing expenses, and fees and disbursements of counsel and
accountants for the Company, except that Parent shall pay the fees and
disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by Parent.
Company shall indemnify and hold harmless (i) Parent, its affiliates
and its officers and directors and (ii) each underwriter and each
person who controls any underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended
(collectively, the "Underwriters") ((i) and (ii) being referred to as
"Indemnified Parties"), against any losses, claims, damages,
liabilities or expenses, to which the Indemnified Parties may become
subject, insofar as such losses, claims, damages, liabilities (or
actions in respect of the losses, claim, damages and liabilities) and
expenses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement filed pursuant
to this paragraph, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein
5
or necessary to make the statements therein not misleading; provided,
however, that the Company shall not be liable in any case to the
extent that any loss, liability, claim, damage or expense arises out
of or is based upon an untrue statement or alleged untrue statement in
or omission or alleged omission from any of those documents in
reliance upon and in conformity with written information furnished to
the Company by the Indemnified Parties expressly for use or
incorporation by reference in those documents. As used in this
Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
8.3. Parent and the Underwriters shall indemnify and hold harmless the
Company, its affiliates and its officers and directors against any
losses, claims, damages, liabilities or expenses to which the Company,
its affiliates and its officers and directors may become subject,
insofar as those losses, claims, damages, liabilities (or actions in
respect of those losses, claims, damages and liabilities) and expenses
arise out of or are based upon any untrue statement of any material
fact contained or incorporated by reference in any registration
statement filed pursuant to this paragraph, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by
Parent or the Underwriters, as applicable, specifically for use or
incorporation by reference in the registration statement.
9. Expenses. Each party to this Agreement shall pay its own expenses
incurred in connection with this Agreement, except as otherwise specifically
provided in this Agreement or in the Merger Agreement.
10. Limitation on Profit.
10.1. Notwithstanding any other provision of this Agreement, in no event
shall the Total Profit (as defined below) plus any Liquidation Amount
(as defined below) exceed in the aggregate $775,000 and, if it
otherwise would exceed this amount, Parent, at its sole election,
shall either (i) reduce the number of Shares subject to the Option,
(ii) deliver to the Company for cancellation Shares previously
purchased by Parent pursuant to the Option, (iii) pay to the Company
cash or refund in cash Liquidation Amounts previously paid or reduce
or waive the amount of any Liquidation Amount payable pursuant to
Section 8.7 of the Merger Agreement, or (iv) any combination of the
above, so that Parent's realized Total Profit, when aggregated with
any Liquidation Amounts so paid or payable to Parent, shall not exceed
$775,000 after taking into account the foregoing actions.
6
10.2. The term "Liquidation Amounts" means the aggregate amount of any
termination fee payable or paid to Parent pursuant to Section 8.7 of
the Merger Agreement (and not repaid or refunded to the Company
pursuant to this Section 10 or otherwise).
10.3. As used in this Agreement, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: the total amount of
(i) any Cash Amounts received by Parent pursuant to Section 1.3 of
this Agreement and (ii) any amounts received by Parent pursuant to
Section 7 of this Agreement upon the Company's repurchase of the
Shares pursuant to Section 7, less (iii) in the case of the Company's
repurchase of Shares pursuant to Section 7 of this Agreement, the
total amounts paid by Parent for all of those Shares.
11. Specific Performance. The Company acknowledges that if the Company
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to Parent for which money damages
would not be an adequate remedy. In that event, the Company agrees that Parent
shall have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if Parent should institute an action
or proceeding seeking specific enforcement of the provisions of this Agreement,
the Company waives the claim or defense that Parent has an adequate remedy at
law and agrees not to assert in any action or proceeding the claim or defense
that a remedy at law exists. The Company further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any equitable relief.
12. Notice. All notices or other communications under this Agreement shall
be in writing and shall be deemed duly given, effective (i) three business days
later, if sent by registered or certified mail, return receipt requested,
postage prepaid, (ii) when sent, if sent by telecopier or fax, provided that the
telecopy or fax is promptly confirmed by telephone confirmation, (iii) when
served, if delivered personally to the intended recipient, and (iv) one business
day later, if sent by overnight delivery via a national courier service, and in
each case, addressed to the intended recipient at the address set forth below.
Any party may change the address to which notices or other communications under
this Agreement are to be delivered by giving the other party notice in the
manner set forth in this Section 12:
If to Parent:
RadiSys Corporation
0000 XX Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxx 00000
Attn: Xx. Xxxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
7
With a copy to:
Stoel Rives LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000,
Attn: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
If to the Company:
Microware Systems Corporation
0000 XX 000xx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
With a copy to:
X'Xxxxxx & Xxxxxx LLC
000 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xx. Xxxxxx Don
Telecopy: (000) 000-0000
13. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named in this Agreement and their respective
successors and assigns; provided, however, that the successor in interest or
assigns shall agree to be bound by the provisions of this Agreement. Nothing in
this Agreement, express or implied, is intended to confer upon any person other
than the Company or Parent, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the Merger
Agreement and the other documents referred to in the Merger Agreement, contains
the entire agreement between the parties to this Agreement with respect to the
subject matter of this Agreement and supersedes all prior and contemporaneous
agreements and understandings, oral or written, with respect to those
transactions. This Agreement may not be changed, amended or modified orally, but
may be changed only by an agreement in writing signed by the party against whom
any waiver, change, amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party to this Agreement, except that Parent may assign its rights and
obligations under this Agreement to any of its direct or indirect wholly owned
subsidiaries (including Newco), but no such transfer shall relieve Parent of its
obligations under this Agreement if the transferee does not perform the
obligations.
8
16. Headings. The section headings in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon (regardless of the laws that
might otherwise govern under applicable Oregon principles of conflicts of law).
19. Termination. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earlier of (i) the Effective Time (as defined
in the Merger Agreement); and (ii) 180 days after the Merger Termination Date
(the date referred to in clause (ii) being hereinafter referred to as the
"Option Termination Date"); provided that, if the Option cannot be exercised or
the Shares cannot be delivered to Parent upon exercise of the Option because the
conditions set forth in Section 2.1 or Section 2.2 of this Agreement have not
yet been satisfied, the Option Termination Date shall be extended until thirty
days after the impediment to exercise or delivery has been removed. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares.
20. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions of this Agreement.
If any provision of this Agreement, or the application of the provision to any
person or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted for that provision in order to carry
out, so far as may be valid and enforceable, the intent and purpose of the
invalid or unenforceable provision and (b) the remainder of this Agreement and
the application of the provision to other persons or circumstances shall not be
affected by the invalidity or unenforceability, nor shall the invalidity or
unenforceability affect the validity or enforceability of the provision, or the
application of the provision, in any other jurisdiction.
21. Public Announcement. Parent shall consult with the Company and the
Company shall consult with Parent before issuing any press release with respect
to the initial announcement of this Agreement, the Option, the Merger Agreement
or the transactions contemplated by this Agreement and neither party shall issue
any press release before that consultation except as may be required by law or
the applicable rules and regulations of the Nasdaq Stock Market or any listing
agreement with the NASD.
[Signature page follows.]
9
In witness whereof, the parties to this 19.9% Option Agreement have
executed this Agreement as of the day and year first above written.
Microware Systems Corporation
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
RadiSys Corporation
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------
Xxxxxxxx X. Xxxxx
Chief Executive Officer