Common use of Conversion of Shares; Merger Consideration Clause in Contracts

Conversion of Shares; Merger Consideration. Subject to Sections 1.6(b), 1.6(c), 1.6(d), 1.6(e) and 1.7, at the Effective Time, the following events shall occur by virtue of the Merger and without any action on the part of Acquisition Sub, SSI or the holder of any of the following securities: (i) Each share of common stock, par value $0.001 per share, of SSI (the "SSI Common Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (ii) Each share of Series A Preferred Stock, par value $0.001 per share, of SSI (the "Series A Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (iii) Each share of Series B Preferred Stock, par value $0.001 per share, of SSI (the "Series B Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (iv) Each share of Series C Preferred Stock, par value $0.001 per share, of SSI (the "Series C Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished and be converted into and become a right to receive a pro-rata portion of $827,136 (subject to reduction pursuant to Sections 1.6(b), 1.6(c),1.6(d) and 1.6(e) below) in cash without interest (the "Series C Preferred Stock Consideration"); (v) Each share of Series D Preferred Stock, par value $0.001 per share, of SSI (the "Series D Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished and be converted into and become a right to receive a pro-rata portion of $2,403,864 in cash (subject to reduction pursuant to Sections 1.6(b), 1.6(c), 1.6(d) and 1.6(e) below) without interest (the "Series D Preferred Stock Consideration" and, together with the Series C Preferred Stock Consideration, the "Merger Consideration"); and (vi) Each share of Acquisition Sub common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become one validly issued, fully paid and non-assessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation.

Conversion of Shares; Merger Consideration. Subject to Sections 1.6(b)At the Merger Date, 1.6(c), 1.6(d), 1.6(e) and 1.7, at the Effective Time, the following events shall occur by virtue of the Merger and without any action on the part of Acquisition Sub, SSI any Party or the holder of any of the following securitiesthereof: (ia) Each share The 100 shares of common stock, $1.00 par value $0.001 per share, of SSI CORNERSTONE (the "SSI Common StockCORNERSTONE Shares") issued and outstanding immediately prior to the Effective Time shallMerger Date, without any action on the part of the holders thereofwhich are 100% owned by SHAREHOLDER, automatically be canceled and extinguished; (ii) Each share of Series A Preferred Stock, par value $0.001 per share, of SSI (the "Series A Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (iii) Each share of Series B Preferred Stock, par value $0.001 per share, of SSI (the "Series B Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (iv) Each share of Series C Preferred Stock, par value $0.001 per share, of SSI (the "Series C Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished and shall be converted into and become a represent the right to receive a pro-rata portion all of the following (collectively, the "Merger Consideration"): (i) cash (via certified check or wire transfer of immediately available funds) of $827,136 (subject to reduction pursuant to Sections 1.6(b), 1.6(c),1.6(d) and 1.6(e) below) in cash without interest 1,700,000 (the "Series C Preferred Stock Cash Consideration"); (vii) Each share a promissory note issued by NEWCO in the original principal amount of Series D Preferred Stock$2,000,000, par value convertible into HSOA Common Stock (defined below) at $0.001 1.65 per share, of SSI unsecured, bearing interest at 7.0% per annum, with interest paid quarterly and principal paid in a single installment on March 31, 2010, in the form attached hereto as Exhibit A-1 (the "Series D Preferred StockFirst Note"); (iii) a promissory note issued by NEWCO in the original principal amount of $2,300,000, unsecured, bearing interest at 7.0% per annum, with interest and outstanding immediately prior to the Effective Time shall, without any action principal due in a single installment on the part of 30th day following the holders thereofClosing, automatically be canceled and extinguished and be converted into and become a right to receive a pro-rata portion of $2,403,864 in cash (subject to reduction pursuant to Sections 1.6(b), 1.6(c), 1.6(d) and 1.6(e) below) without interest the form attached hereto as Exhibit A-2 (the "Series D Preferred Stock Consideration" and, together with Second Note"); each of the Series C Preferred Stock Consideration, First Note and the Second Note shall be guaranteed by HSOA pursuant to a guaranty in the form attached hereto as Exhibit B (the "Merger ConsiderationGuaranty"); and (viiv) Each share 2,470,588 shares (the "HSOA Shares") of Acquisition Sub common stock, $.001 par value $0.01 per share, issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become one validly issued, fully paid and non-assessable share of Common Stock, par value $0.01 per share, of HSOA ("HSOA Common Stock"), which is equal to $4,200,000 divided by $1.70 (the Surviving Corporation"HSOA Share Price"). SHAREHOLDER shall receive piggy-back registration rights for the HSOA Shares (any shares of HSOA Common Stock received by SHAREHOLDER under Section 1.4), whereby the HSOA Shares would be registered in the next registration statement filed by HSOA, or, if the HSOA Shares are not registered prior to December 31, 2005, SHAREHOLDER have a one-time right to demand registration of the HSOA Shares, pursuant to a Registration Rights Agreement (so called herein) in the form attached hereto as Exhibit C. (b) SHAREHOLDER shall be entitled to receive all of the consideration set forth in Section 1.2(a) at Closing. II. Section 1.3

Conversion of Shares; Merger Consideration. Subject to Sections 1.6(b), 1.6(c), 1.6(d), 1.6(e) and 1.7, at At the Effective Time, the following events shall occur ------------------------------------------ by virtue of the Merger and without any action on the part of Acquisition Subany holder thereof: (a) subject - to Sections 1.8 and 1.9, SSI or the holder of any each share of the following securities: (i) Each share of common stockCompany Common Stock, par value $0.001 .01 per share, of SSI share (the "SSI Company Common Stock" and the shares of Company Common Stock -------------------- hereinafter referred to as the ") Shares"), issued and outstanding immediately ------ prior to the Effective Time shall, without any action on the part of the holders thereof, automatically (other than Shares to be canceled pursuant to clause (b) below and extinguished; other than Dissenting Shares) shall be converted into the right to receive (i) $25.00 in cash, payable to the holder thereof (the "Cash Merger ----------- Consideration") or (ii) Each share 4.49 shares of Series A Preferred StockCommon Stock of Parent, par value $0.001 .01 ------------- per share, of SSI share (the "Series A Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (iii) Each share of Series B Preferred Stock, par value $0.001 per share, of SSI (the "Series B Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished; (iv) Each share of Series C Preferred Stock, par value $0.001 per share, of SSI (the "Series C Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished and be converted into and become a right to receive a pro-rata portion of $827,136 (subject to reduction pursuant to Sections 1.6(b), 1.6(c),1.6(d) and 1.6(e) below) in cash without interest (the "Series C Preferred Stock Consideration"); (v) Each share of Series D Preferred Stock, par value $0.001 per share, of SSI (the "Series D Preferred Stock") issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holders thereof, automatically be canceled and extinguished and be converted into and become a right to receive a pro-rata portion of $2,403,864 in cash (subject to reduction pursuant to Sections 1.6(b), 1.6(c), 1.6(d) and 1.6(e) below) without interest (the "Series D Preferred Stock Merger Consideration" and, and together with the Series C Preferred Stock Cash Merger -------------------------- Consideration, the "Merger Consideration"), in each case subject to any required -------------------- withholding of Taxes and without interest; and (vib) Each share each Share owned by Parent, MergerCo or any other direct or indirect subsidiary of Acquisition Sub common stockParent, par value $0.01 per shareor held in the treasury of the Company, issued and outstanding immediately prior to the Effective Time Time, shall automatically be converted into canceled and become one validly issuedextinguished, fully paid and non-assessable share no payment will be made with respect to those Shares; and (c) all shares of Common Stockcommon stock of MergerCo, par value $0.01 .01 per share, then issued and outstanding shall be converted into an equal number of shares of common stock of the Surviving Corporation. Except as set forth in Section 1.5, in the Merger, each Eligible Stockholder who has executed and delivered to Purchaser and the Company a Stock Election Agreement, a form of which is attached hereto as Exhibit A (each a "Stock Election Agreement"), on or ------------------------ prior to 5:00 p.m. California time on February 29, 2000 shall be entitled, subject to Sections 1.8 and 1.9, to receive in respect of Shares owned by such Stockholder the mix of Cash Merger Consideration and Stock Merger Consideration elected by such Eligible Stockholder in its Stock Election Agreement, and each Stockholder who has not so executed and delivered a Stock Election Agreement or who is not an Eligible Stockholder shall be entitled to receive Cash Merger Consideration in respect of all Shares owed by it. The Company shall deliver promptly after the date hereof a form of Stock Election Agreement to each holder of Company Common Stock.