Common use of Effect of the Merger on the Capital Stock of the Constituent Corporations Exchange of Certificates Clause in Contracts

Effect of the Merger on the Capital Stock of the Constituent Corporations Exchange of Certificates. 2.1. TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK (a) PAYMENT OF CONSIDERATION. The entire consideration payable by Parent with respect to all outstanding shares of capital stock of the Company and for all options, warrants, rights, calls, commitments, agreements or arrangements of any character to which the Company is a party or by which it is bound calling for the issuance of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for, or representing the right to purchase or otherwise receive, directly or indirectly, any such capital stock, or other arrangement to acquire, at any time or under any circumstance, capital stock of the Company or any such other securities (such options, warrants, rights, calls, commitments, agreements and arrangements being sometimes hereinafter collectively referred to as "Equity Rights"; and the Equity Rights, together with all such outstanding shares of capital stock of the Company being sometimes hereinafter collectively referred to as the "Fully Diluted Company Shares"), shall, subject to Section 7.3, be an aggregate consideration payable as follows: (i) An aggregate of $15,000 in cash (the "Aggregate Cash Consideration"); and (ii) A number of shares of Parent Common Stock equal to $235,000 divided by the Average Parent Trading Price (the "Total Parent Share Amount" and, together with the Aggregate Cash Consideration, the "Aggregate Purchase Price"). The Aggregate Purchase Price is subject to adjustment prior to the Closing pursuant to Section 7.3 hereof. For purposes of this Agreement and the Agreement of Merger, the Average Parent Trading Price shall mean the average closing price per share of Parent Common Stock on The NASDAQ Stock Market (as reported in The Wall Street Journal, or, if not reported therein, any other authoritative source) for the twenty (20) consecutive trading days ending one (1) trading day preceding the Effective Time.

Effect of the Merger on the Capital Stock of the Constituent Corporations Exchange of Certificates. 2.1. TOTAL CONSIDERATION2.1 Total Consideration; EFFECT ON CAPITAL STOCK (a) PAYMENT OF CONSIDERATIONEffect on Capital Stock. The entire consideration (the "Aggregate Consideration") payable by Parent Alloy with respect to all outstanding shares of Company Common Stock (other than shares canceled pursuant to Section 2.1(b), if any) (the "Outstanding Shares") shall be an aggregate of (i) the number of shares of Alloy Common Stock (subject to adjustment as hereinafter provided) (the "Total Alloy Share Amount") as is obtained by dividing (A) twelve million dollars ($12,000,000) by (B) $9.13 (the "Stipulated Price"); (ii) five million dollars ($5,000,000) in cash payable on the Closing Date (the "Closing Cash Payment"); (iii) four (4) quarterly cash payments of seven hundred thousand dollars ($700,000) each, commencing on the first day of the fourth calendar month following the Closing Date and continuing on the first day of each third calendar month thereafter until all such quarterly payments have been made in full (each, a "Quarterly Cash Payment"); and (iv) one or more warrants by Alloy to purchase additional shares of Alloy Common Stock, on the terms and conditions and in an aggregate amount (the "Total Warrant Share Amount") set forth in the form of Warrant attached as Exhibit A hereto (collectively, the "Warrants"). Notwithstanding the foregoing, and notwithstanding Section 1.6 of this Agreement, Alloy shall have the option, in its sole discretion, to redeem for cash all or a portion of the Warrants at any time. In addition, at any time that the Warrants are exercisable, each Stockholder shall have the option, in their sole discretion, to put to Alloy for cash all or a portion of the Warrant(s) then held by such Stockholder, provided that no such put would disqualify the Merger from treatment as a tax free "reorganization" under the Code. For purposes of any such redemption or put, the aggregate value of the Warrants shall be equal to the then current Minimum Value, as defined in the Warrants. Any such redemption or put shall be consummated in the manner and at the time(s) set forth in the Warrants. In addition, under no circumstances shall Alloy be obligated to issue any shares of Alloy Common Stock under the Warrant if, but only to the extent that, such shares, when aggregated with the Merger Shares and Additional Merger Shares, if any, issued pursuant to this Agreement, would result in the issuance of a number of shares of Alloy Common Stock that exceeds 19.9% of the total number of shares of Alloy Common Stock outstanding as of the day immediately prior to the Closing Date. Notwithstanding the foregoing, if Alloy redeems any or all of the Warrants and, in connection with all such redemptions, Alloy pays the Stockholders cash in an amount that, alone or in combination with all prior actual redemptions and puts, results in the Merger being disqualified from treatment as a tax free reorganization, (i) the Stockholders shall (notwithstanding any other provision of this Agreement) have no liability for any additional Tax payable by the Company or Alloy as a result of such disqualification, and (ii) Alloy shall pay to the Stockholders an additional amount equal to (A) the interest and penalties that actually accrue as a result of the acceleration of all of the long term capital gain on the Merger into tax year 2001, assuming for purposes of such calculation that the Stockholders collectively sold an aggregate of $791,667.00 in value of Merger Shares in each month from and after the Closing Date until the first anniversary of the Closing Date, and (B) the present value of the acceleration of the taxes due on a portion of the long term capital gain on the Merger from tax year 2002 into tax year 2001, assuming for purposes of such calculation that the Stockholders collectively sold an aggregate of $791,667.00 in value of Merger Shares in each month from and after the Closing Date until the first anniversary of the Closing Date, discounted at a annual interest rate equal to the interest rate charged by the Internal Revenue Service on late payments. For purposes of the calculation of the exchange ratio for Company Common Stock under Section 2.1(a) hereof, it is assumed that the Redemption Transaction will have occurred and that the number of Outstanding Company Shares is 460.141, comprised of 61.75 shares of Voting Common and 398.391 shares of Non-Voting Common, which number shall be confirmed or updated at the Closing and reflected in the certificate of the Chief Executive Officer of the Company that is being provided to Alloy pursuant to Section 6.2(a) (the "Outstanding Company Share Amount"). At the Effective Time, subject and pursuant to the terms and conditions of this Agreement, the Certificate of Merger and the Articles of Merger, by virtue of the Merger and without any action on the part of the Constituent Corporations or the holders of the capital stock of the Constituent Corporations: (a) Conversion and Exchange Ratio for Company Common Stock. (i) Subject to Section 2.2, each share of Company Common Stock issued and for outstanding at the Effective Time (other than shares canceled pursuant to Section 2.1(b), if any), including all optionsaccrued and unpaid dividends thereon, warrantsshall be exchanged and converted automatically into the right to receive (1) such number of validly issued, rights, calls, commitments, agreements or arrangements of any character to which the Company is a party or by which it is bound calling for the issuance of fully paid and non-assessable shares of capital stock Alloy Common Stock as is determined by dividing (i) the Total Alloy Share Amount by (ii) the Outstanding Company Share Amount, (2) a Warrant to purchase such number of shares, if any, of validly issued, fully paid and non-assessable Alloy Common Stock, as is determined by dividing (i) the Total Warrant Share Amount by (ii) the Outstanding Company Share Amount, (3) a portion of the Closing Cash Payment as is equal to $5,000,000 divided by the Outstanding Company Share Amount and (4) a portion of each Quarterly Cash Payment as is equal to $700,000 divided by the Outstanding Company Share Amount (collectively, the "Per Share Consideration"). The shares of Alloy Common Stock to be issued upon the exchange and conversion of the Company or any Common Stock in accordance with this Section 2.1(a) shall sometimes be hereinafter collectively referred to as the "Merger Shares." (ii) As of the Effective Time, all shares of Company Common Stock and all shares and other securities convertible into or exercisable or exchangeable for, or representing the right to purchase or otherwise receive, directly or indirectly, any such capital stock, or other arrangement to acquire, at any time or under any circumstance, Company Common Stock or other capital stock or other securities of the Company, if any (collectively, the "Convertible Securities"), shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate or other instrument representing any such shares or interests shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in Section 2.1 hereof, and any cash in lieu of fractional shares of Alloy Common Stock to be issued or paid in consideration for the Company Common Stock, upon surrender of such certificate in accordance with Section 2.2(d) hereof. (iii) The parties acknowledge that the Aggregate Consideration is based upon a presumed consolidated Net Working Capital amount of the Company or any such other securities at Closing equal to $0 (such options, warrants, rights, calls, commitments, agreements and arrangements being sometimes hereinafter collectively referred to as "Equity Rights"; and the Equity Rights, together with all such outstanding shares of capital stock of the Presumed Company being sometimes hereinafter collectively referred to as the "Fully Diluted Company SharesNet Working Capital"), shallwhich shall not include any assets or liabilities which are being transferred in connection with or which arise out of or in connection with the Asset Sale, subject to plus $150,000 in cash, which is the amount of the estimated Actual 2001 FY Tax Liability (as defined below). Notwithstanding the foregoing, if on the Closing Date, the Estimated Company Net Working Capital (as defined in Section 7.36.2 below) is less than the Presumed Company Net Working Capital, then the Total Alloy Share Amount shall be reduced at Closing by an aggregate consideration payable as follows: (i) An aggregate of $15,000 in cash (the "Aggregate Cash Consideration"); and (ii) A number of shares of Parent Common Stock amount equal to $235,000 divided by the Average Parent Trading Price Working Capital Adjustment Factor (the "Total Parent Share Amount" and, together with the Aggregate Cash Consideration, the "Aggregate Purchase Price"as defined below). The Any such reduction shall reduce the overall Aggregate Purchase Price is subject to adjustment prior to the Closing pursuant to Section 7.3 hereofConsideration. For purposes of this Agreement and the Agreement of Mergerhereof, the Average Parent Trading Price "Net Working Capital" shall mean current assets less current liabilities, "Working Capital Difference" shall mean the average closing price per share of Parent Common Stock on The NASDAQ Stock Market (as reported in The Wall Street Journal, ordifference, if not reported thereinany, any other authoritative source) for between the twenty (20) consecutive trading days ending one (1) trading day preceding Presumed Company Net Working Capital and the Effective TimeEstimated Company Net Working Capital and "Working Capital Adjustment Factor" shall mean the nearest whole number obtained by dividing the Working Capital Difference by the Stipulated Price.

Effect of the Merger on the Capital Stock of the Constituent Corporations Exchange of Certificates. 2.1.1. TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK. (a) PAYMENT OF CONSIDERATION. The entire consideration payable by Parent with respect to all outstanding shares of capital stock of the Company and for all options, warrants, rights, calls, commitments, agreements or arrangements of any character to which the Company is a party or by which it is bound calling for the issuance of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for, or representing the right to purchase or otherwise receive, directly or indirectly, any such capital stock, or other arrangement to acquire, at any time or under any circumstance, capital stock of the Company or any such other securities (such options, warrants, rights, calls, commitments, agreements and arrangements being sometimes hereinafter collectively referred to as "Equity Rights"; and the Equity Rights, together with all such outstanding shares of capital stock of the Company being sometimes hereinafter collectively referred to as the "Fully Diluted Company Shares"), shall, subject to Section 7.3, be an aggregate consideration payable as follows: (i) An aggregate of $15,000 1,485,000 in cash (the "Aggregate Cash Consideration"); and (ii) A number of shares of Parent Common Stock equal to $235,000 23,265,000 divided by the Average Parent Trading Price (the "Total Parent Share Amount" and, together with the Aggregate Cash Consideration, the "Aggregate Purchase Price"). The Aggregate Purchase Price is subject to adjustment prior to the Closing pursuant to Section 7.3 hereof. For purposes of this Agreement and the Agreement of Merger, the Average Parent Trading Price shall mean the average closing price per share of Parent Common Stock on The NASDAQ Stock Market (as reported in The Wall Street Journal, or, if not reported therein, any other authoritative source) for the twenty (20) consecutive trading days ending one (1) trading day preceding the Effective Time.

Effect of the Merger on the Capital Stock of the Constituent Corporations Exchange of Certificates. 2.1. 2.1 TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK (a) PAYMENT OF CONSIDERATION. The entire consideration (the "Aggregate Consideration") payable by Parent with respect to all outstanding shares of capital stock of the Company (the "Outstanding Shares") and for all optionsoptions (whether vested or unvested), warrants, rights, calls, commitments, commitments or agreements or arrangements of any character to which the Company is a party or by which it is bound calling for the issuance of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for, or representing the right to purchase or otherwise receive, directly or indirectly, any such capital stock, or other arrangement to acquire, at any time or under any circumstance, capital stock of the Company or any such other securities (such options, warrants, rights, calls, commitments, agreements and arrangements being sometimes hereinafter collectively referred to as "Equity Rights"; and the Equity Rights, together with all such outstanding shares of capital stock of the Company being sometimes hereinafter collectively referred to as the "Fully Diluted Company SharesConvertible Securities"), shall, subject to Section 7.3, ) shall be an aggregate consideration payable as follows: (i) An aggregate of $15,000 in cash (the "Aggregate Cash Consideration"); and (ii) A number of shares of Parent Common Stock equal (subject to $235,000 divided by the Average Parent Trading Price adjustment as hereinafter provided in this Section 2.1) (the "Total Parent Share Amount" and, together ") as is obtained by dividing (A) the sum of $11,820,000 and $3,600 (representing the aggregate exercise amount of all Company Options with an exercise price greater than the Aggregate Cash Consideration, the "Aggregate Purchase Price"). The Aggregate Purchase Price is subject to adjustment prior to the Closing pursuant to Section 7.3 hereof. For purposes fair market value of this Agreement and the Agreement a share of Merger, the Average Parent Trading Price shall mean Company Common Stock) by (B) the average closing price per of a share of Parent Common Stock on The NASDAQ Nasdaq Stock Market (as reported in The the Wall Street Journal, or, if not reported therein, any other authoritative source) Journal for the twenty (20) consecutive most recent trading days ending one on the day immediately preceding the Closing Date (1the "Stipulated Price"); provided, however, that if the average closing price of a share of Parent Common Stock shall be less than $3.00, the average closing price shall be deemed to be $3.00 for purposes of the calculation of the Stipulated Price. For purposes of the calculation of the exchange ratios for Company Stock under Section 2.1(c) trading day preceding hereof, it is assumed that the number of Fully Diluted Company Shares is 14,931,178 shares of capital stock of the Company, which number excludes all Company Options which have an exercise price greater than the fair market value of a share of Company Common Stock, and which number shall be confirmed or updated at the Closing and reflected in the certificate of the Chief Executive Officer or Chief Financial Officer of the Company that is being provided to Parent and Acquisition Sub pursuant to Section 6.2(a) (the "Fully Diluted Company Share Amount"). At the Effective Time, subject and pursuant to the terms and conditions of this Agreement by virtue of the Merger and without any action on the part of the Constituent Corporations or the holders of the capital stock of the Constituent Corporations: (a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and outstanding share of common stock, $.01 par value per share, of Acquisition Sub shall be converted into one share of common stock, no par value per share, of the Surviving Corporation.