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EXHIBIT 10.04
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
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THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER is made and entered
into as of the ____ day of February, 1998, by and among SEATTLE COFFEE COMPANY,
a Washington corporation ("SCC"); ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, THE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ CHARITABLE REMAINDER UNITRUST, THE ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ CHARITABLE
REMAINDER UNITRUST, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ REVOCABLE TRUST, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LIVING
TRUST, GAI FAMILY TRUST B, GAI FAMILY TRUST C, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PINCO PALLINO,
INC., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. (hereinafter, sometimes
referred to, individually, as a "Principal Shareholder" and, collectively, as
the "Principal Shareholders"); AFC ENTERPRISES, INC., a Minnesota corporation
("AFC"), and AFC ACQUISITION CORP., a Georgia Corporation ("MergerCo").
RECITALS
A. The parties hereto have previously entered into an Agreement and Plan
of Merger dated January 23, 1998 (the "Merger Agreement").
B. The parties have agreed to enter into an amendment to the Merger
Agreement in the event that certain requirements of the Internal Revenue Code of
1986, as amended (the "Code"), are satisfied and the transactions contemplated
under the Merger Agreement can be effected as a tax-free reorganization.
C. Based upon information provided to AFC and MergerCo by SCC, such
conditions have been satisfied and the parties hereto desire to amend said
Merger Agreement as hereinafter set forth,
AMENDMENT
In consideration of the mutual covenants and conditions hereinafter set
forth, and other good and valuable consideration, the receipt, sufficiency and
adequacy of which are hereby acknowledged, AFC, SCC, MergerCo and the
Principal Shareholders hereby mutually agree as follows:
1. Recital C. is hereby amended so that, as amended, it shall read as
follows:
C. The parties hereto desire to effect a merger of SCC into MergerCo
(the "Merger") pursuant to which (i) AFC will own all of the issued and
outstanding shares of capital stock of the Surviving Corporation (as
hereinafter defined) (on a fully diluted and as converted basis); and (ii)
the shareholders of SCC will acquire cash, stock and rights to acquire
stock of AFC, all on the terms and conditions set forth in this Agreement.
The Merger is intended to comply with the provisions of Section
368(a)(1)(A) of the Internal Revenue Code.
2. Section 1.a.(1) through 1.a.(6) of the Merger Agreement are amended so
that, as amended, they shall read as follows:
(1) Surviving Corporation. Upon the terms and subject to the
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conditions hereof, at the Effective Time (as defined in Paragraph 1.a(2)
below), SCC shall be merged with and into MergerCo and the separate
existence of SCC shall
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thereupon cease, and MergerCo shall continue as the surviving corporation
in the Merger (hereinafter sometimes called the "Surviving Corporation")
under the laws of the State of Georgia under the name set forth in the
Certificate of Incorporation of the Surviving Corporation.
(2) Effective Time of the Merger. As soon as practicable on the
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Closing Date (as hereinafter defined), AFC and the Principal Shareholders
shall cause a Certificate of Merger to be filed with the office of the
Secretary of State of the State of Washington (the "Washington Certificate
of Merger") in accordance with the provisions of the Washington Business
Corporations Act (the "Washington Merger Law"), and shall cause a
Certificate of Merger to be filed with the office of the Secretary of State
of Georgia (the "Georgia Certificate of Merger") in accordance with the
provisions of the Georgia Business Corporation Code, as amended (the
"Georgia Merger Law"). When used in this Merger Agreement, the term
"Effective Time" shall mean the time at which the Washington Certificate of
Merger is accepted for filing by the Secretary of State of the State of
Washington and the Georgia Certificate of Merger is accepted for filing
with the Secretary of State of Georgia or such other time as shall be
agreed to by SCC and MergerCo and specified in each of the Certificates of
Merger.
(3) Effect of the Merger. The Merger shall, from and after the
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Effective Time, have all the effects provided by the Georgia Merger Law.
(4) Certificate of Incorporation. The Certificate of Incorporation
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of MergerCo as in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or
by applicable law.
(5) Bylaws. The Bylaws of MergerCo as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation,
until thereafter changed or amended as provided therein or by applicable
law.
(6) Board of Directors. The current directors and officers of
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MergerCo immediately prior to the Effective Time shall continue to serve
for the period commencing as of the Effective Time and continuing until the
earlier of their respective resignations or removals or the times that
their respective successors are duly elected or appointed and qualified.
3. Section 1.b.(2)(1)(a) of the Merger Agreement is amended so that,
as amended, it shall read as follows:
(a) the holders of SCC Acquisition Rights (the "SCC Acquisition Rights
Holders") representing, on the date hereof, no less than eighty
percent (80%) of the SCC Shares subject thereto shall convert such
SCC Acquisition Rights into AFC Acquisition Rights as set forth
herein. The SCC Acquisition Rights consist of either options to
acquire SCC Shares (the "SCC Options") or warrants to acquire SCC
Shares (the "SCC Warrants"), a full and complete list of which is
set forth in Schedule 6.f. hereof. At closing, AFC shall convert
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SCC Options and SCC Warrants representing no less
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than eighty percent (80%) of the SCC Shares subject thereto, as of the
date hereof, to an option to acquire AFC Shares (the "AFC Option") or a
warrant to acquire AFC Shares (the "AFC Warrant") equal in value, as of the
Effective Time, to the value of the SCC Option or SCC Warrant, as of the
Effective Time (the "Acquisition Rights Portion of the Purchase Price").
The AFC Options and AFC Warrants shall be exercisable upon substantially
the same terms and conditions as the SCC Options and the SCC Warrants
exchanged therefor and such other terms and conditions as shall be
reasonably required by AFC, including without limitation an agreement to
execute a shareholders agreement in substantially the form of that
contemplated by Paragraph 4 hereof upon acquisition of any AFC Shares.
For purposes of determining the number of AFC Shares subject to each AFC
Option and AFC Warrant, the value of the AFC Shares (the "AFC Per Share
Value") shall be determined in accordance with the terms of Paragraph
1.b(4). The value of each SCC Option and each SCC Warrant to be exchanged
hereunder shall be determined by (i) multiplying the SCC Option Per Share
Value (hereinafter defined) times the number of SCC Shares subject to such
SCC Option, and (ii) multiplying the SCC Warrant Per Share Value
(hereinafter defined) times the number of SCC Shares subject to such SCC
Warrant. The total value of the SCC Options (the "SCC Options Value") and
the SCC Warrants (the "SCC Warrants Value") shall be the aggregate value of
all the SCC Options and the aggregate value of all the SCC Warrants.
The SCC Option Per Share Value shall be the sum of the Net Closing Payment
plus the aggregate amount payable as exercise price under all SCC Options
and all SCC Warrants (the "Exercise Consideration"), divided by the sum of
(i) the number of SCC Shares issued and outstanding and owned by the SCC
Shareholders immediately prior to the Effective Time, plus (ii) the number
of SCC Shares subject to the SCC Options and SCC Warrants granted and
outstanding immediately prior to the Effective Time (i.e. all SCC Shares on
a fully diluted basis, which Shares shall sometimes be referred to herein
as the "Aggregate Number of SCC Shares"), less the per share exercise price
of the applicable SCC Option. The SCC Warrant Per Share Value shall be the
Net Closing Payment plus the Exercise Consideration divided by the
Aggregate Number of SCC Shares, less the per share exercise price of the
applicable SCC Warrant.
The SCC Per Share Value shall be the Net Closing Payment less the sum of
(i) the SCC Options Value; plus (ii) the SCC Warrants Value, divided by the
number of SCC Shares issued and outstanding owned by the SCC Shareholders
immediately prior to the Effective Time. The number of AFC Shares to be
subject to each AFC Option and AFC Warrant issued pursuant hereto shall be
determined by dividing the total value of each SCC Option and SCC Warrant
being exchanged by the AFC Per Share Value. AFC shall have the right to
pay, in cash, to the SCC Acquisition Rights Holder, the value of any
fractional AFC Share
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resulting from the exchange described herein. In the event that the SCC
Acquisition Rights Holders cannot determine among themselves which SCC
Acquisition Rights will be converted to AFC Acquisition Rights for purposes
of the eighty percent (80%) requirement hereunder, then and in such event,
eighty percent (80%) of each SCC Option and SCC Warrant shall be converted
to an AFC Option and AFC Warrant as provided herein. In the event that it
is determined, in the reasonable opinion of counsel to SCC, that the SCC
Warrants cannot be converted into AFC Warrants as contemplated herein on a
tax-free basis to the SCC Warrantholders, then the requirements of this
subparagraph shall not apply to the SCC Warrants and the SCC Warrantholders
may elect to receive cash or AFC Shares equal to the value of their SCC
Warrants in the same manner as the SCC Shareholders.
The computation of the SCC Option Per Share Value, the SCC Warrant Per
Share Value and the SCC Per Share Value is illustrated on Exhibit A to this
Amendment.
4. Sections 1.b.(2)(2) and (2)(3) are hereby amended so that, as amended,
they shall read as follows:
(2) Each SCC Shareholder and each SCC Acquisition Rights Holders shall
be entitled to that portion of the Holdback Funds determined by multiplying
the number of SCC Shares owned by the applicable SCC Shareholder (or the
number of SCC Shares subject to the applicable SCC Acquisition Rights
Holder's SCC Options or SCC Warrants) by the Holdback Fund Per Share Value,
determined as hereinafter provided. The Holdback Fund Per Share Value
shall be determined by dividing the Holdback Funds by the Aggregate SCC
Shares. The Holdback Funds shall be payable in the same ratio of cash, AFC
Shares and AFC Acquisition Rights, as the Net Closing Payment payable to
the SCC Shareholders and SCC Acquisition Rights Holders pursuant to
subparagraphs (a), (b) and (c) above and as reflected on Schedule 1.c. (the
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ratio of cash, AFC Shares and AFC Acquisition Rights is hereinafter
referred to as the "Net Closing Payment Ratio").
(3) the Contingent Payment, if any, shall be paid, as provided in
Paragraph 1.(f)(2) below, to the SCC Shareholders and the SCC Acquisition
Rights Holders in the same proportion as the Holdback Funds and in the same
ratio of cash, AFC Shares and AFC Acquisition Rights as the Net Closing
Payment Ratio.
5. Section 1.b. (2) (4) of the Merger Agreement is amended so that, as
amended, it shall read as follows:
(4) The amounts withheld pursuant to subparagraphs b.2(ii) and
b.2(iii) above, if any, shall be paid by AFC or the Surviving Corporation
at Closing in satisfaction of the obligations referred to in such
subparagraphs.
6. Section 1.b.(3) of the Merger Agreement is amended so that, as
amended, it
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shall read as follows:
(3) After the Effective Time, AFC shall own one hundred percent (100%)
of the issued and outstanding stock of the Surviving Corporation.
7. Section 1.b.(4)(c) of the Merger Agreement is amended so that, as
amended, it shall read as follows:
(c) Add to the difference the amount of AFC's cash and cash
equivalents (including the aggregate exercise price of all
outstanding rights to acquire AFC Shares) as of the Closing Date;
8. Section 1.f.(1) is hereby amended so that, as amended, it shall read as
follows:
(1) Deferred Payment. Except as provided below, at the expiration of
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the twelve (12) consecutive month period following the Closing
Date (the "Holdback Period"), the Surviving Corporation or AFC
(through a loan or capital contribution to the Surviving
Corporation), shall pay to, and deposit with, the Funding Agent,
in proportion to the Net Closing Payment Ratio, cash, AFC Shares
and AFC Acquisition Rights, with an aggregate value, equal to
Three Million Five Hundred Ninety Thousand Dollars ($3,590,000)
plus interest on such amount payable, in one (1) installment at
the end of the Holdback Period, at the rate of 5.7% per annum
compounded monthly from the Effective Date through the last day
of the Holdback Period (the aggregate of such amounts being
hereinafter referred to as the "Holdback Funds"). Anything in
this Agreement to the contrary notwithstanding, the AFC Share
portion of the Holdback Funds and the AFC Share portion of the
interest payment due thereon shall be deposited with the Escrow
Agent at Closing and shall be held pursuant to the terms of the
Escrow Agreement. The Holdback Funds will be retained by the
Funding Agent in escrow for a period of two (2) years following
the Holdback Period (the "Escrow Period") to secure the
continuing obligations of the Principal Shareholders for
indemnification as described in Paragraph 12 below. The
Principal Shareholders, AFC and the Funding Agent shall, prior to
Closing, enter into an Escrow Agreement setting forth the terms
and conditions of such escrow and providing, inter alia, for the
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payment of all interest on the escrowed funds, pro rata, to the
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SCC Shareholders and SCC Acquisition Rights Holders during the
term thereof based upon their relative shares of the cash portion
of the Holdback Funds as set forth on Schedule 1.c..
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9. Sections 1.f.(2)(b) and 1.f.(2)(c) are hereby amended so that, as
amended, they shall read as follows:
(b) Determination of EBITDA. As used herein "EBITDA" shall mean the
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earnings of SCC (and, after Closing, the Surviving Corporation) and the
Subsidiaries on a consolidated basis before deductions or offset for
interest expense, taxes, depreciation and amortization, as determined by
the accountant regularly servicing the Surviving Corporation at the end of
the Determination Year (the "SCC Accountant") in accordance with generally
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accepted accounting principals ("GAAP") consistently applied with respect
to prior periods. Such determination shall be exclusive of Extraordinary
Business Expenses incurred by SCC (and, after Closing, the Surviving
Corporation), including, but not limited to, any amounts paid by SCC (or,
after Closing, the Surviving Corporation) (i) under Section 4.e., and (ii)
in satisfaction of all or part of the WC Line of Credit after Closing, and
shall be adjusted for non-cash items related to gains/losses on asset
dispositions and writedowns, compensation expense related to stock option
activity (deferred compensation), any executive compensation awards payable
in stock of SCC or, after Closing, AFC and non-cash officer notes
receivable related to executive compensation awards. The term
"Extraordinary Business Expenses" shall mean any expense or liability
incurred by the Surviving Corporation, after Closing, as a result of this
transaction or as a result of material variances in the 1998 Business Plan
(attached hereto as Schedule 1.f(2)) incurred at AFC's request or
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direction. AFC shall cause the SCC Accountant to prepare and deliver to AFC
and the SCC Shareholder Representative, on or before the last day of the
Holdback Period, a statement of SCC's EBITDA for the Determination Year,
together with the work papers reflecting the computation thereof
(collectively the "EBITDA Statement"). If the actual EBITDA for the
Determination Year equals or exceeds the Minimum EBITDA, then AFC shall, on
or before the last day of the Holdback Period, pay the applicable
Contingent Payment (i.e. $1,900,000 if the Minimum EBITDA is achieved or
$3,800,000 if the Target EBITDA is achieved, as the case may be) to the
Funding Agent to be disbursed in accordance with Schedule 1.c.
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(c) AFC Negative Covenant. AFC shall not take any action or require
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the Surviving Corporation to take any action not included in, or
contemplated by, SCC's 1998 Business Plan attached hereto as
Schedule 1.f(2) that materially adversely impacts SCC's and the
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Surviving Corporation's ability to achieve the Minimum EBITDA or
Target EBITDA. In the event the Principal Shareholders become
aware of any action taken or required by AFC in violation of this
covenant, the Principal Shareholders shall deliver to AFC written
notice of such adverse action. If AFC fails or refuses to cure
or take material steps to commence to cure such adverse action
within fifteen (15) days after such notice, such adverse action
shall become an "Alleged Default Event". If SCC and the
Surviving Corporation fail to accomplish the Minimum or Target
EBITDA and such failure was caused by the Alleged Default Event
or an adverse action by AFC with respect to which a Principal
Shareholder was not aware, then the Contingent Payment shall
become due and payable, subject to AFC's right to dispute as
hereinafter set forth, as if the Minimum or Target EBITDA had
been achieved. If AFC disputes the contention of the Principal
Shareholders regarding the effect of such adverse action or
Alleged Default Event, such dispute shall be resolved in
accordance with the dispute resolution procedure described in
Paragraph 1.f(2)(d); provided, however, that the prevailing party
in such dispute shall be entitled to recover from the non-
prevailing party all of the fees, costs and expenses (including
reasonable attorney's fees) incurred by such party in
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connection with such dispute.
10. Section 2.b of the Merger Agreement is hereby amended so that, as
amended, it shall read as follows:
b. Schedules. Unless otherwise provided for in this Agreement, SCC and
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the Principal Shareholders shall prepare final Schedules to the
Disclosure Statement (the "Schedules") required herein and deliver all
such Schedules to AFC, together with true and correct copies of any
documents required to be attached thereto, on or before the ___
business day following the date of execution of this Amendment. AFC
shall examine each such final Schedule and related documents, and
within ___ (__) business days following AFC's receipt thereof, AFC
shall notify SCC whether AFC accepts or rejects such Schedule and
related documents. In the event AFC and SCC and the Principal
Shareholders are unable to agree with respect to a material issue on
any Schedule within ___ (__) business days following SCC's receipt of
notice of AFC's rejection thereof, AFC shall either agree in writing
within two (2) business days thereafter to accept such Schedule as
submitted by SCC and proceed with the transactions contemplated
hereunder or this Agreement shall terminate. SCC and AFC acknowledge
that the time period for AFC to provide its written objections to the
Schedules already delivered shall not commence to run until AFC
receives written notice from SCC that the Schedules, as delivered, are
final and complete.
11. Section 3 of the Merger Agreement is hereby amended so that, as
amended, it shall read as follows:
3. CLOSING. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place on or before March 17, 1998 (the
"Closing Date"). The parties agree to use their reasonable efforts and to act
in good faith to satisfy all conditions to Closing and consummate the
transaction at the earliest possible date. The Closing shall be held at the
offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C. in Atlanta, Georgia,
at 10:00 a.m. on the Closing Date.
12. Section 4.d. of the Merger Agreement is hereby amended so that, as
amended, it shall read as follows:
▇. ▇▇▇▇▇▇▇▇▇ Pay. AFC shall cause the Surviving Corporation,
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immediately following Closing, to implement a severance pay policy for employees
of the Surviving Corporation and the Subsidiaries which is substantially the
same as the severance pay policy in effect for the employees of AFC. All
employees of the Surviving Corporation or the Subsidiaries shall receive service
credit under such plan for their time employed by SCC and the Subsidiaries prior
to the Effective Time of the Merger. The payment of any severance pay by the
Surviving Corporation or the Subsidiaries after Closing shall not be considered
an Extraordinary Expense for purposes of computing SCC's EBITDA.
13. [Reserved]
14. References to SCC in the Merger Agreement which, in the context used,
are, in fact, references to the Surviving Corporation shall be read accordingly.
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15. Section 6.t.iv. of the Merger Agreement is hereby amended by changing
the reference to "Schedule 6.t.i.,ii, or iii" as it appears therein to "Schedule
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6.t.i.,ii, iii or iv".
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16. Section 6.y..i. of the Merger Agreement is hereby amended by changing
the reference to "Schedule 6.u.i." as it appears therein to "Schedule 6.y.i".
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17. Subsections a. and b. of Section 9 of the Merger Agreement are hereby
amended by changing the date February 21, 1998 as it appears therein to March
10, 1998. In addition, there shall be added to Section 9 of the Merger
Agreement the following subsection:
s. Tax Opinion. AFC shall have received the letters of opinion
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required to be delivered pursuant to Section 1.g. in form and substance
satisfactory to AFC.
18. The preamble to Section 12.a. of the Merger Agreement is hereby
amended so that, as amended, it shall read as follows:
a. General. The Principal Shareholders, jointly and severally,
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hereby agree to indemnify, defend and hold harmless AFC, the Surviving
Corporation, SCC and the Subsidiaries on demand, from and against any and all
loss, liability, claim cost, damage or deficiency, including interest,
penalties, and reasonable attorneys' fees, (herein, collectively referred to as
a "Loss") arising out of or due to:
19. The amendment shall be effective as of the date hereof; provided,
however, that if, after this Amendment is executed, AFC is unable to obtain a
favorable opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, acceptable to AFC, that the
transaction will qualify as a tax-free reorganization as contemplated hereunder,
AFC shall have the option to terminate this Amendment and cause the consummation
of the Merger on the terms and conditions of the Merger Agreement in effect
prior to the execution of this Amendment. In such event and notwithstanding the
termination of this Amendment, the provisions of Paragraphs 3, 4, 5, 7, 10, 11,
13, 17 (except the additon of subsection s.) and 18 of this Amendment shall
survive such termination and remain in full force and effect. The Principal
Shareholders agree that so long as there is no material adverse effect on the
Principal Shareholders, they will take such actions, and cause SCC and the
Subsidiaries to take such actions, as AFC may reasonably request in connection
with the structuring of the transaction as a tax-free reorganization and in
connection with any tax elections or other transactions designed to mitigate the
adverse consequences to AFC, the Surviving Corporation or SCC of the failure of
the Merger to qualify as tax-free.
18. Except as amended hereby, the Merger Agreement is ratified, approved
and confirmed as originally executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed and delivered their duly authorized officers, as of the
day and year first above written.
SCC:
ATTEST: SEATTLE COFFEE COMPANY
By:______________________ By:_______________________________
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Its ________ Secretary Its ____________ President
PRINCIPAL SHAREHOLDERS:
______________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ REVOCABLE TRUST
BY:________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LIVING TRUST
BY:________________________________
GAI FAMILY TRUST B
BY:________________________________
GAI FAMILY TRUST C
BY:_________________________________
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
PINCO PALLINO, INC.
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BY:_________________________________
THE ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CHARITABLE
REMAINDER UNITRUST
BY:__________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CHARITABLE REMAINDER UNITRUST
BY:__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
AFC:
ATTEST: AFC ENTERPRISES, INC.
By:______________________ By:____________________________________
Its ________ Secretary Its ____________ President
[CORPORATE SEAL]
MERGERCO
ATTEST: AFC ACQUISITION CORP.
By:______________________ By:____________________________________
Its ________ Secretary Its ____________ President
[CORPORATE SEAL]
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Exhibit A
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Assume a Net Closing Payment of $50,000,000. There are 5,211,260 SCC Shares
issued and outstanding and 1,286,100 SCC Shares subject to Options and Warrants.
Assume the aggregate exercise price of all SCC Options and Warrants equals
$5,032,561 at an exercise price of $3.91 per share. The per share value of an
SCC Warrant or Option would be $4.56 per share
[(50,000,000+5,032,561)/(5,211,260+1,286,100))-$3.91). The option and warrants
would be valued at $4.56 times 1,286,100 or $5,867,483. The actual per share
value and the aggregate value will differ for individual SCC Acquisition Rights
Holders depending upon the actual exercise price of each option or warrant.
The SCC Shares are valued by subtracting from the Net Closing Payment the
value of the SCC Options and Warrants and dividing the result by the SCC Shares
issued and outstanding. This results in a value of $8.47 per share
[($50,000,000-5,867,483)/5,211,260)].