Exhibit 10.6
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and entered
into as of 26th day of February, 1999, among AMERICOM USA, INC. (the "Parent
Corporation"), RMC Diversified Associates International Ltd. (the "Acquiring
Corporation"), JIM AND JON TECH (the "Target Corporation"); and Jim Heintz and
Jon Iverson ("Principal Shareholders", "Shareholders" or individually
"Shareholder").
RECITALS:
A. The Boards of Directors of each of Parent Corporation, Target Corporation,
and Acquiring Corporation believe it is in the best interests of each
Corporation and their respective shareholders that Acquiring Corporation
acquire Target Corporation through the statutory merger of Target
Corporation with and into Acquiring Corporation (the "Merger") and in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms and
conditions of this Agreement, (i) all of the issued and outstanding shares
of common stock, of the Target Corporation ("Target Corporation Common
Stock") shall be converted into the right to receive shares of Common Stock
of Parent Corporation and (ii) all of the issued and outstanding shares of
preferred stock of Target Corporation shall be canceled.
C. Target Corporation, the Shareholder, Parent Corporation, and Acquiring
Corporation desire to make certain representations, warranties, covenants
and other agreements in connection with the Merger.
D. It is agreed and understood between the parties that the Principal
Shareholders have developed certain operational computer software as more
particularly described in Schedule "D-1" annexed hereto (the "Technology")
and are prepared to warrant and represent which warranty and representation
shall survive closing that the Technology operates in a good and
workmanlike fashion in accordance with the parameters set forth in Schedule
"D-2" hereof and paragraph 3.12 hereof
NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I - THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law, as
amended (the "Delaware GCL") and the California General Corporation
Law, as amended (the "California GCL"), Target Corporation shall be
merged with and into Acquiring Corporation, the separate corporate
existence of Target Corporation shall cease, and Acquiring Corporation
shall continue as the surviving corporation. The surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
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1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to
Section 8.1, the closing of the Merger (the "Closing") shall take place
on the 26th day of February, 1999, at the offices of the Parent
Corporation 124 S. Halcyon Road, Arroyo Grande, California, at 10:00
o'clock in the morning unless another place or time is agreed to in
writing by Acquiring Corporation and Target Corporation.
The date upon which the Closing actually occurs is herein referred to
as the "Closing Date." Simultaneously with the Closing, the parties
hereto shall cause the Merger to be consummated by filing a Certificate
of Merger (the "Merger Certificate") with the Secretary of State of the
State of California. The time of acceptance by the Secretary of State
of the State of California of such filing shall be referred to herein
as the "Effective Time."
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the California
GCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of Target Corporation and Acquiring Corporation
shall vest in the Acquiring Corporation, which subsequent to the merger
shall be referred to as the "Surviving Corporation" and all debts,
liabilities and duties of Target Corporation and Acquiring Corporation
shall become the debts, liabilities and duties of Surviving
Corporation.
1.4 Certificate of Incorporation Bylaws.
(a) The Certificate of Incorporation of Acquiring Corporation, as in effect
immediately prior to the Effective Date, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended.
(b) The Bylaws of Acquiring Corporation, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 Directors and Officers. The directors of Acquiring Corporation
immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation. The officers of Acquiring Corporation
immediately prior to the Effective Time, with the addition of Jon
Iverson as President and Chief Operating Officer and Jim Heintz as
Chief technical Officer, shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Effect of Merger on the Capital Stock of Target Corporation.
(a) Exchange of Target Corporation Common Stock. As of the Effective Time
of the Merger, each share of Target Corporation Common Stock that is
issued and outstanding immediately prior to the Effective Time of the
Merger shall, by virtue of the Merger and without any action on the
part of Acquiring Corporation, Target Corporation, or the Shareholders
of the Target Corporation, be canceled and extinguished and converted
into the right to receive their pro rata share of Two Hundred Thousand
(200,000) shares of common stock, (the "Common Stock") from Parent
Corporation. Stock certificates representing same will be delivered to
the shareholders at the effective time.
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(b) Fractional Shares. No fractional share of Parent Corporation Common
Stock shall be issued in the Merger. In lieu thereof, any fractional
share shall be rounded up or down to the nearest whole share of Parent
Corporation Common Stock (with any fraction greater than or equal to
.50 being rounded up and any fraction less than .50 rounded down).
(c) Treasury Stock. Any shares of capital stock of Target Corporation held
in the treasury of Target Corporation immediately prior to the
Effective Time shall be canceled and extinguished without any
conversion thereof and no Parent Corporation Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(d) Stock Options. Subject to the provisions of this Agreement, at the
Effective Time, the Parent Corporation shall grant to each of Jon
Iverson and Jim Heintz an option to purchase 100,000 shares each of the
Parent Corporation's Common Stock at an exercise price of $2.00 per
share, and such options shall be subject to the Parent Corporation's
qualified employee stock option plan. These options shall be treated as
fully vested. The options herein described shall be granted by delivery
of the Stock Option Agreement attached as Schedule "1.6(d)";
(e) Subject to the provisions of this Agreement, at the Effective Time, the
Parent Corporation shall grant to each of Jon Iverson and Jim Heintz
further options to purchase 200,000 shares each of the Parent
Corporation's Common Stock at an exercise price of $2.00 per share, and
such options shall be subject to the Parent Corporation's qualified
employee stock option plan. The options shall vest at the rate of
100,000 shares each, at the end of each subsequent year of completed
employment. The options herein described shall be granted by delivery
of the Stock Option Agreement attached as Schedule "1.6(e)";
(f) The above options shall be in addition to any others to which the
Shareholders might hereafter become entitled under any Parent
Corporation employee stock option plan in effect at Closing or
hereafter.
1.7 No Further Ownership Rights in Target Corporation Common Stock. All
shares of Parent Corporation Common Stock issued upon the surrender for
exchange of shares of Target Corporation Common Stock in accordance
with the terms hereof (including any cash paid in respect thereof)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Target Corporation Common Stock, and there
shall be no further registration of transfers on the records of the
Surviving Corporation of shares of capital stock of Target Corporation
that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, any stock certificates evidencing shares of
capital stock of Target Corporation are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.8 Tax Treatment of the Merger. For federal income tax purposes, the
parties shall use reasonable best efforts to qualify the Merger as a
tax-free reorganization under the "forward triangular merger"
provisions of Section 368(a)(1)(A) and 368(a)(2)(C) of the Code. Each
party to this Agreement has consulted with its own tax advisors in
connection with the Merger.
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1.9 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of Target
Corporation and Acquiring Corporation, the officers and directors of
Target Corporation and Acquiring Corporation are fully authorized in
the name of their respective corporations or otherwise to take, and
will take, all such lawful and necessary action.
1.10 Cash Consideration. The Parent Corporation shall pay to each of the
Shareholders at the Effective Time, a cashier check in the sum of One
Hundred Thousand Dollars ($100,000).
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF TARGET CORPORATION AND THE
SHAREHOLDERS
Target Corporation and the Principal Shareholders hereby, jointly and severally,
represent and warrant to Acquiring Corporation, Each Shareholder solely as to
himself and, where applicable, jointly with the Corporation, hereby represents
and warrants to Acquiring Corporation and Parent Corporation and covenants and
agrees as follows:
2.1 Organization. The Target Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. The Target Corporation has full power and authority to own
its assets and to carry on its business as and where such business is
now conducted. The Target Corporation is duly qualified or licensed to
do business and is in good standing in California which is the sole
jurisdiction in which the nature of its business or the character of
its properties or assets requires such qualification or license (except
where any failure to do so does not have a Material Adverse Effect).
Copies of the Formation Documents of the Target Corporation, and all
amendments thereto, heretofore delivered to Acquiring Corporation are
true, accurate and complete as of the date of this Agreement and are
attached as Schedule "2.1".
2.2 Capitalization. The number of shares of authorized capital stock of the
Target Corporation, the par value per share, and the number of shares
of each class of capital stock of the Target Corporation which are
presently issued and outstanding are as set forth on Schedule "2.1".
Also set forth in Schedule "2.2" is a list of the holders of Stock
along with an indication of the number of shares held by each such
Person. Each Shareholder is the sole shareholder of each share of Stock
indicated on Schedule "2.2" as owned by him, free and clear of any and
all Encumbrances. All outstanding shares of Stock have been duly and
validly issued and are fully paid and non-assessable and were issued in
compliance with all applicable state and federal securities and other
laws. There is no other capital stock of any class authorized or issued
by the Target Corporation. There are no outstanding options, warrants,
calls, commitments, agreements or other rights to subscribe for,
purchase or otherwise acquire any capital stock of the Target
Corporation or securities convertible into or exchangeable for any
capital stock of the Target Corporation to which the Target Corporation
or each Shareholder is or may be bound.
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2.3 Ability to Carry Out Agreement. The consummation of the transactions
contemplated hereby, including, but not limited to, the execution,
delivery and performance of this Agreement and all other documents
collateral hereto or thereto, contemplated hereby or thereby, or
required to effect the transactions contemplated hereby and thereby,
does not and will not: (a) constitute a violation of or default under,
conflict with or result in a breach of (i) the Formation Documents of
the Target Corporation, (ii) any terms of any Contract to which the
Business, the Target Corporation or the Shareholders are or may be
bound or constitute a default thereunder (either immediately or upon
notice, lapse of time or both), (iii) any Court Order or (iv) to their
knowledge, any Regulation; (b) result in the creation or imposition of
any Encumbrances other than Permitted Encumbrances or Liability of any
nature whatsoever which can be reasonably be expected to have a
Material Adverse Effect, or give to any person any interest or right in
any of the Stock, the Assets of the Target Corporation and/or the
Business; or (c) accelerate the maturity of, or otherwise modify, any
Contract of the Target Corporation and/or the Business.
2.4 Validity of Agreement - Authority. The execution, delivery and
performance of this Agreement and all other documents required to
effect the transactions contemplated hereby, and the consummation of
the transactions contemplated hereby and thereby, have been duly and
validly authorized and approved by all necessary action on the part of
the Shareholders and the Target Corporation. This Agreement and any
other document or instrument contemplated by this Agreement, after
execution and delivery by the Shareholders and the Target Corporation
to Acquiring Corporation, shall constitute valid and binding
obligations of the Shareholders and the Target Corporation, enforceable
in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, reorganization, moratorium or
similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability. No Consent is required
with respect to the Shareholders or the Target Corporation in
connection with the execution, delivery and performance of this
Agreement or any other agreement collateral hereto or contemplated
hereby.
2.5 Permits and Licenses. No Permits and Licenses are necessary for the
operation of the Business as conducted and presently anticipated to be
conducted by the Target Corporation. To their knowledge, the Target
Corporation is in compliance with all of the terms and conditions of
the Permits and Licenses. The transactions contemplated by this
Agreement shall not conflict with or result in the modification,
cancellation or termination of any of the Permits or Licenses.
2.6 Compliance with Regulations. The Assets, the Business, and the Target
Corporation are in compliance with all Regulations and neither the
Shareholders or the Target Corporation have received written notice of
any violation of any Regulation(s), the violation of which would have a
Material Adverse Effect on the Business. Since inception, the Target
Corporation has not engaged in any transaction, maintained any bank
account or used any funds except for transactions, bank accounts and
funds which have been and are reflected in their normally maintained
Books and Records.
2.7 Financial Statements. The Books and Records of the Target Corporation
fairly and accurately reflect in all material respects the transactions
to which the Target Corporation
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is and was a party or by which its properties are and were affected and
such Books and Records have been properly kept and maintained in
accordance with GAAP, and will continue to be so kept and maintained
through the Closing Date. On the Closing Date such Books and Records
will be correct and complete and will fairly and accurately present the
Target Corporation's financial condition and operations in all material
respects.
2.8 Title to and Condition of Certain Fixtures and Equipment. The Target
Corporation has good, valid and marketable title to all of its Fixtures
and Equipment, wherever located, and the Assets, free and clear of all
Encumbrances other than Permitted Encumbrances. All such Fixtures and
Equipment are, and shall on the Closing Date be, in good operating
condition and repair, reasonable wear and tear excepted, and adequate
and sufficient for the operation of the Business as currently
conducted, and there are no material defects in such Fixtures and
Equipment as would have a Material Adverse Effect on the use of such
Fixtures and Equipment in the Business. The only asset of the Target
Corporation is the technology pursuant to schedule d-1.
2.9 Tax Returns and Taxes.
(a) The Target Corporation has duly and timely filed with the appropriate
Governmental Entity all tax and other returns and reports required to
be filed, all of which have been accurately prepared. All Taxes due,
owing and payable, or which may be due, owing and payable, arising out
of all operations of the Target Corporation for all periods ended on
February 28, 1999, have been fully paid or duly reserved for by the
Target Corporation in accordance with GAAP in the Financial Statements,
including, without limitation, any and all Taxes due, owing or payable
with respect to employees, consultants and independent contractors of
the Target Corporation. All Taxes arising from the date of this
Agreement to the Closing Date will be, on the Closing Date, fully paid
or reserved in accordance with GAAP. Adequate provisions have been and
will through the Closing Date be made by the Target Corporation in its
Books and Records for Taxes not required to be paid prior to the
respective due dates therefor. The Target Corporation has received
written notice from any Governmental Entity of any deficiency or other
adjustment that has not been satisfied. The Target Corporation is not
presently under audit by the Internal Revenue Service ("IRS") for any
Taxes, has not been the subject of an IRS audit, or has received any
notice of a proposed IRS audit. There are no agreements, waivers, or
other arrangements providing for an extension of time with respect to
the assessment of any Taxes or deficiency against the Target
Corporation, nor are there any Actions, now pending or, to their
knowledge, threatened against the Target Corporation in respect of any
Taxes; and
2.10 Labor Relations. The Target Corporation is not a party to any
collective bargaining or union contract, nor are any of the
Shareholders or the Target Corporation aware of any current union
organization effort with respect to the Target Corporation's employees.
The Target Corporation has not received any notice, of, and there have
not been, any strikes, slowdowns, work stoppages, lock-outs or threats
thereof, by or with respect to any of the Target Corporation's
employees.
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2.11 Status of Contracts. There are no Contracts between the Target
Corporation and third parties as relate to, or are connected with and
are parts of the Business. The Contracts represent all of the
agreements between the Target Corporation and third parties relating to
the Target Corporation's conduct of the Business. All of the foregoing
Contracts are valid, binding and in full force and effect and the
Target Corporation is not a party to or otherwise bound by any oral
agreement or contract.
2.12 Changes or Events. None of the following has occurred with respect to
the Target Corporation:
(a) any change in the financial condition, assets, Liabilities, business,
prospects or operations, other than changes in the regular, normal and
ordinary course of business consistent with past custom or practice,
which alone or in the aggregate could have a Material Adverse Effect on
the Target Corporation or the Business;
(b) any damage, destruction or loss, as a result of fire, storm casualty,
other acts of God or theft of a substantial amount of Fixtures and
Equipment, whether or not covered by insurance, adversely affecting the
Target Corporation or any of their assets which alone or in the
aggregate could be reasonably be expected to have a Material Adverse
Effect on the Target Corporation or the Business;
(c) any disposition of or Encumbrance or agreement to dispose of or place
an Encumbrance upon any of the Target Corporation's assets, other than
dispositions in the regular, normal and ordinary course of business,
consistent with past custom or practice and Permitted Encumbrances;
(d) any transaction relating to the Target Corporation involving over
$2,000 entered into by the Target Corporation other than in the
regular, normal and ordinary course of business consistent with past
custom or practice;
(e) any adverse event of default, cancellation or termination of any
Contract involving over $2,000 between the Target Corporation and any
party thereto;
(f) any Liability involving over $2,000 incurred by the Target Corporation,
except Liabilities incurred and obligations under Contracts entered
into, in the regular, normal and ordinary course of the Target
Corporation's business;
(g) any capital expenditure or commitment for addition to property, plant
or equipment of the Target Corporation involving over $2,000;
(h) any agreement or commitment by the Target Corporation to do or take any
of the actions referred to in paragraphs (a) through (h) of this
Section 5.12.
2.13 Employees and Employee Benefits.
(a) There are no (a) employment, managerial, advisory or consulting
agreements to which the Target Corporation and any employee are
parties; (b) confidentiality or other agreements protecting proprietary
processes, formulae or information to which the Target
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Corporation and any employee are parties; (c) other written obligations
of the Target Corporation to any employee; (d) Employee Plans. Neither
the Target Corporation, any of their respective officers or directors,
has taken any action directly or indirectly to obligate the Target
Corporation to adopt any additional Employee Plan. True, correct and
complete copies of all Employee Plans and related documents, including
amendments thereto, any related trust agreements, any documents setting
out the Target Corporation's personnel policies and procedures, any
insurance contracts under which benefits are provided, as currently in
effect, and descriptions of any such plan that is not written, have
been supplied to Acquiring Corporation. Acquiring Corporation has also
been provided with a copy of the Summary Plan Description, if any, for
each Employee Plan, as well as copies of any other summaries or
descriptions of any such Employee Plans that have been provided to
employees or other beneficiaries.
(b) The Target Corporation does not maintain any plans or programs and are
not parties to any agreement providing post-retirement medical benefits
(other than benefits described in this Section and those required by
Law), death benefits or other post retirement welfare benefits. There
are no post-retirement welfare benefits or plans;
2.14 Real Property; Leaseholds.
(a) The Target Corporation does not own nor lease any real property of any
nature whatsoever;
2.15 Insurance. There are no insurance policies in effect;
2.16 Litigation. There is no Action or Court Order pending, to their
knowledge, threatened, affecting, naming or directly involving the
Shareholders, the Target Corporation, the Assets or the Business.
Neither the Shareholders nor the Corporation know of any facts or
circumstances or other events which have occurred or may reasonably be
expected to recur that could be reasonably expected to give rise to any
Action or Court Order.
2.17 Related-Party Transactions. There exist no transactions or agreements
between the Target Corporation and any Affiliate of the Target
Corporation involving more than $5,000 in amount, including, without
limitation all guarantees by the Target Corporation, which have
occurred between January 1, 1998 and the date of this Agreement.
2.18 Accounts Receivable. There are no accounts receivable;
2.19 Relationship with Customers. The Target Corporation has no reason to
believe that relationships with its customers are not good commercial
working relationships. No customer of the Target Corporation has
canceled or otherwise terminated or threatened to cancel or otherwise
terminate, its relationship with the Target Corporation, or has during
the last twelve (12) months decreased materially, or threatened to
decrease, its relationship with the Target Corporation or its usage of
any of the Target Corporation's services or purchases of the Target
Corporation's products. The Target Corporation has not received notice
that any customer intends to take any of the action in the preceding
sentence.
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2.20 Proprietary Rights. Schedule "D-1" contains a listing of all material
Proprietary Rights of the Target Corporation. Except as disclosed in
Schedule "2.20":
(a) the Target Corporation owns all right, title and interest in the
Proprietary Rights described in Schedule D-1 (including, without
limitation, exclusive rights to use and license the same) free and
clear of any Encumbrances other than Permitted Encumbrances;
(b) the Target Corporation has not granted any other party rights with
respect to the Proprietary Rights;
(c) the Proprietary Rights described in Schedule "D-1" are valid;
(d) the Proprietary Rights described in Schedule "D-1", have been duly
issued and have not been canceled, abandoned or otherwise terminated;
(e) the Target Corporation has not received notice of default under any of
the Proprietary Rights and, to their knowledge, no other party is in
default thereunder.
2.21 Non-Infringement of Proprietary Rights. (i) none of the services or
products provided by the Target Corporation, or processes, equipment,
software or technology used by the Target Corporation, or the
trademarks, trade names, labels or other marks or copyrights used by
the Target Corporation, infringe the Proprietary Rights of any other
Person, or require the payment of any royalty, license fee, or other
charge or fee of any kind to any Person, and none of the Target
Corporation, Shareholders has received any notice of adverse claim by
any third party with respect thereto, (ii) all employees of the Target
Corporation have executed written agreements protecting the Proprietary
Rights of the Target Corporation, (iii) the Target Corporation has
license agreements in force to the extent necessary to permit its full
use of all of the processes used by it in its operations in accordance
with present and planned practices; and (iv) the Target Corporation
owns or has the right to use pursuant to the license(s) disclosed on
Schedule "2.20" all Proprietary Rights used in its business.
2.22 Environmental Requirements.
(a) neither the Target Corporation nor any other Person has engaged in or,
to their knowledge, permitted any operations or activities upon, or any
use or occupancy of, any Leasehold, or any portion thereof, or any
other property now or previously owned or operated by the Target
Corporation, resulting in the storage, emission, release, discharge,
dumping or disposal of any Hazardous Materials on, under, in or about
any Leasehold or any other property now or previously owned or operated
by the Target Corporation, nor have any Hazardous Materials migrated
from any Leasehold or any other property now or previously owned or
operated by the Target Corporation to, upon, about or beneath other
properties, nor have any Hazardous Materials migrated or threatened to
migrate from other properties to, upon, about or beneath any Leasehold
or any other property now or previously owned or operated by the
Corporation;
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(b) there is not, nor has there been, constructed, placed, deposited,
stored, disposed of or located on any Leasehold or any other property
now or previously owned or operated by the Target Corporation any
asbestos or lead paint, (ii) each Leasehold and its existing uses and
activities and its prior uses and activities and the uses and
activities of other property now or previously owned or operated by the
Target Corporation, comply and have at all times complied in all
material respects with all Environmental Requirements, and each of the
Target Corporation has obtained and complied with all Permits and
Licenses necessary under applicable Environmental Requirements, and
(iii) neither the Target Corporation nor any prior owner or occupant of
any Leasehold or any other property now or previously owned or operated
by the Target Corporation or has received any notice or other
communication concerning any alleged violation of Environmental
Requirements, whether or not corrected to the satisfaction of the
appropriate Governmental Entity, or any notice or other communication
concerning alleged liability for violation of Environmental
Requirements in connection with each Leasehold or any other property
now or previously owned or operated by the Target Corporation, and
there exists no Action or Court Order threatened, relating to the
ownership, use, maintenance of operation of any Leasehold or any other
property now or previously owned or operated by the Target Corporation
or by any Person, arising from allege violation of Environmental
Requirements, or from the suspected presence of Hazardous Materials
thereon or potential migration thereto, and there are no existing facts
or conditions which could give rise to any such violation or
liabilities; and
(c) Neither any Leasehold nor any of the Assets is (or with the passage of
time and/or giving of notice would be) subject to any private or
governmental Encumbrances relating to Hazardous Materials or a
violation of an Environmental Requirement.
2.23 Political Contributions and Other Payments. During the past five (5)
years, neither the Target Corporation, Affiliated Entities, nor any
other Person acting on behalf of the Target Corporation, Affiliated
Entities, has (i) except for lawful political contributions in the
regular, normal and ordinary course of business consistent with past
custom or practice, made any payment to any official, employee or agent
(domestic or foreign) of any Governmental Entity to wrongfully induce
the recipient or the recipient's employer to do business with, grant
favorable treatment to, or compromise or forego any claim by or against
the Target Corporation, or (ii) made any significant payment or
conferred any significant benefit which, the Target Corporation, in the
exercise of reasonable business judgment, considers or reasonably
should consider to be improper.
2.24 Occupational Safety and Health Act. The Corporation is in compliance
with all requirements of the Occupational Safety and Health Act and the
Americans With Disabilities Act, pertaining to the Corporation, the
Assets and the Business.
2.25 Consents. No Consent is required to be obtained, satisfied or made
pursuant to any Regulation, Permit or License or Contract in connection
with the execution, delivery and performance of this Agreement by the
Target Corporation.
2.26 Disclosure. No representation or warranty by the Shareholders and/or
the Target Corporation in this Agreement, nor any statement contained
in any certificate, schedule,
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list or other writing furnished or to be furnished by the Shareholders
and/or the Target Corporation to Acquiring Corporation pursuant to this
Agreement (a) contains or shall contain any untrue statement of a
material fact, or (b) omits or shall omit to state a material fact
necessary in order to make the statements contained herein or therein
not misleading.
2.27 Year 2000 Compliance. All software products and components designed,
manufactured, produced or sold by or on behalf of the Target
Corporation are designed to be used prior to, during, and after
calendar year 2000 A.D. and will, to the extent that other software,
hardware, and other components properly exchange date data with them,
operate during each such time period without error relating to date
data, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more
than one century and will be otherwise Year 2000 Compliant.
2.28 Investor Status. Each Shareholder is taking ownership of the Parent
Corporation Stock for investment purposes only and not with a view to
distribute same within the meaning of the Securities Act. Each
Shareholder has been provided with an opportunity to ask questions of
management of Acquiring Corporation as each Shareholder deemed
appropriate.
ARTICLE III - ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
In addition to the representations and warranties made by the Shareholders in
Article II hereof, each Shareholder hereby individually represents and warrants,
to Acquiring Corporation as follows:
3.1 Title to the Shares. The Shareholder is and as of the Effective Time
will be the sole legal, beneficial and record owner of all of the
issued and outstanding shares of capital stock of Target Corporation
issued in the name of such Shareholder.
3.2 Authority and Capacity. The Shareholder has full legal right, capacity,
power and authority to execute and deliver this Agreement and all other
documents, instruments, certificates and agreements executed or to be
executed by the Shareholder pursuant hereto, and to consummate the
transactions contemplated hereby and thereby.
3.3 Absence of Violation. The execution, delivery and performance by the
Shareholder of this Agreement and all other documents, instruments,
certificates and agreements contemplated hereby to which the
Shareholder is a party, the fulfillment of and the compliance with the
respective terms and provisions hereof and thereof, and the
consummation of the transactions contemplated hereby and thereby, do
not and will not: (a) conflict with, or violate any provision of, any
laws having applicability to the Shareholder, or (b) conflict with, or
result in any breach of, or constitute a default under, any agreement
to which the Shareholder is a party.
3.4 Restrictions and Consents. There are no agreements, laws or other
restrictions of any kind to which the Shareholder is a party or subject
that would prevent or restrict the execution, delivery or performance
of this Agreement by the Shareholder.
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3.5 Binding Obligation. This Agreement has been duly executed and delivered
by the Shareholder and, assuming the due authorization, execution and
delivery by Acquiring Corporation and Target Corporation, constitutes a
legal, valid and binding obligation of such Shareholder, enforceable in
accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors'
rights generally and by the application of general principles of
equity.
3.6 No Registration Under the Securities Act. The Shareholder understands
that the shares of Parent Corporation Common Stock to be issued to the
Shareholder under this Agreement have not been and will not be
registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions contained in the
Securities Act or interpretations thereof, and cannot be offered for
sale, sold or otherwise transferred unless such shares of Parent
Corporation Common Stock are so registered or qualify for exemption
from registration under the Securities Act. The Shareholder
acknowledges and agrees that each certificate representing Parent
Corporation Common Stock issued pursuant to this Agreement, and any
shares issued or issuable in respect of any such shares of Parent
Corporation Common Stock upon any stock split, stock dividend,
recapitalization, or similar event, shall be imprinted with a legend in
substantially the following form (in addition to any legend required
under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
TRANSFERRED OR SOLD OTHER THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT AND OTHER APPLICABLE STATE SECURITIES LAWS OR AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION, AND (II) UPON RECEIPT BY THE ISSUER OF
EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE STATE SECURITIES LAWS. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THESE
REQUIREMENTS.
The certificates evidencing the shares of Parent Corporation Common Stock to be
issued to the Shareholder under this Agreement shall also bear any
legend required by the Commissioner of Corporations of the State of
California or such as are required pursuant to any state, local or
foreign law governing such securities.
3.7 Acquisition for Investment. The shares of Parent Corporation Common
Stock being issued to the Shareholder pursuant to this Agreement are
being acquired by the Shareholder in good faith solely for the
Shareholder's own account, for investment and not with a view toward
resale or other distribution within the meaning of the Securities Act.
The Shareholder further represents that the Shareholder has no present
contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to grant to any
third person with respect to any share of Parent Corporation Common
Stock. The shares of Parent Corporation Common Stock being issued to
the Shareholder pursuant to this Agreement will not be offered for
sale,
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sold or otherwise transferred by the Shareholder without either
registration or exemption from registration under the Securities Act.
3.8 Evaluation of Merits and Risks of Investment. The Shareholder has such
knowledge and experience in financial and business matters that the
Shareholder is capable of evaluating the merits and risks of the
Shareholder's investment in the shares of Parent Corporation Common
Stock being acquired hereunder. The Shareholder further represents that
the Shareholder: (i) has received a copy of Parent Corporation's Form
8-k as submitted including audit to the Securities and Exchange
Commission (the "Commission") on the 18th of February 1999; (ii) has
received all the information that the Shareholder has requested from
Acquiring Corporation and Target Corporation that the Shareholder
considers necessary or appropriate for deciding whether to accept the
Parent Corporation Common Stock being issued to the Shareholder
pursuant to this Agreement; (iii) has the ability to bear the economic
risks of the Shareholder's prospective investment; and (iv) is able,
without materially impairing the Shareholder's financial condition, to
hold the Parent Corporation Common Stock for an indefinite period of
time and to suffer complete loss on the Shareholder's investment. The
Shareholder confirms that Acquiring Corporation has made available to
the Shareholder and its representatives and agents the opportunity to
ask questions of the officers and management employees of Acquiring
Corporation about the business and financial condition of Acquiring
Corporation as the Shareholder has requested.
3.9 Forward Looking Information/Risk Factors. The Shareholder acknowledges
and agrees that any oral or written forward-looking statements made by
or on behalf of Acquiring Corporation in connection with the Merger
were made in the context of and shall have been deemed to have been
accompanied by the risk factors set forth in Corporation's Form 8-k as
submitted including audit to the Securities and Exchange Commission
(the "Commission") on the 18th of February 1999; The Shareholder
acknowledges that actual results could differ materially from those
projected in or implied by any forward-looking statement.
3.10 Transfer Limitations. The Shareholder further agrees that unless
transferred in compliance with Rule 144 promulgated under the
Securities Act ("Rule 144") promulgated under the Securities Act, prior
to any proposed transfer of any of the shares of Parent Corporation
Common Stock, unless there is in effect a registration statement under
the Securities Act covering the proposed transfer, the Shareholder
shall give written notice to Parent Corporation of the Shareholder's
intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail,
and shall, if Parent Corporation so requests, shall be accompanied by
either (a) a written opinion of legal counsel who shall be satisfactory
to Parent Corporation, addressed to Parent Corporation and satisfactory
in form and substance to Parent Corporation's counsel, to the effect
that the proposed transfer of Parent Corporation Common Stock may be
effected without registration under the Securities Act, or (b) a "No
Action" letter from the Commission to the effect that the transfer of
such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with
respect thereto, whereupon the holder of such Parent Corporation Common
Stock shall be entitled to transfer such shares of Parent
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Corporation Common Stock in accordance with the terms of the notice
delivered by the holder to Parent Corporation. Each certificate
evidencing the shares of Parent Corporation Common Stock transferred as
above provided shall bear the appropriate restrictive legend set forth
in Section 3.6 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for Parent Corporation
such legend is not required in order to establish compliance with any
provisions of the Securities Act.
3.11 Rule 144 Limitations. The Shareholder is familiar with the provisions
of Rule 144, which in substance permits the limited public resale of
"restricted securities" acquired, directly or indirectly from the
issuer thereof (or from an affiliate of such issuer) in a non-public
offering subject to the satisfaction of certain conditions. The
Shareholder further understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the 1933
Act or compliance with a registration exemption would be required to
sell the shares of Parent Corporation Common Stock received from Parent
Corporation hereunder. With a view to making available the benefits of
certain rules and regulations of the Commission, which may permit the
sale to the public without registration of the shares of Parent
Corporation Common Stock being issued to the Shareholder pursuant to
this Agreement, Parent Corporation agrees, for a period of two years
following the Closing Date, to use reasonably diligent efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after the effective
date that Acquiring Corporation becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(b) file with the Commission in a timely manner all reports and other
documents required of Acquiring Corporation under the Securities Act
and the Exchange Act; and
(c) so long as any of the Shareholders owns any shares of Parent
Corporation Common Stock being issued pursuant to this Agreement, to
furnish to the Shareholder forthwith upon request a written statement
by Acquiring Corporation as to its compliance with the reporting
requirements of Rule 144, a copy of the most recent annual or quarterly
report of Acquiring Corporation and such other reports and documents of
Acquiring Corporation and other information in the possession of or
reasonably obtainable by Acquiring Corporation as the Shareholder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Shareholder to sell any such shares of Parent
Corporation Common Stock without registration.
(d) that the Technology is fit for the purposes for which it was intended
as set out in Schedule "D-2" and the Principal Shareholders agree and
acknowledge that the Parent and Acquiring Corporations are relying on
the representations and warranties as to the effectiveness of the
Technology as set forth in Schedule "D-2" hereof for the determination
of the purchase price of the Target Corporation and matters related
thereto.
(e) The target Corporation has only operated under one name and is not
known by any other.
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIRING CORPORATION
Parent and Acquiring Corporations represents and warrant to Target Corporation
and the Shareholders as follows:
4.1 Organization and Qualification. Acquiring Corporation is a corporation
duly organized, validly existing and in good standing under the laws of
the State of California. Acquiring Corporation have the requisite power
and authority to own, lease and operate its assets and properties, to
carry on its business as now being conducted and to perform the terms
of this Agreement and the transactions contemplated hereby. Acquiring
Corporation is duly qualified to conduct its business, and is in good
standing, in each jurisdiction where the ownership or leasing of its
properties or the nature of its activities in connection with the
conduct of its business makes such qualification necessary.
4.2 Authority. The execution and delivery of this Agreement by Acquiring
and Parent Corporation and the consummation by Acquiring and Parent
Corporation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Acquiring and Parent Corporation
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Acquiring and Parent Corporation and, assuming the due
authorization, execution and delivery by Target Corporation and the
Shareholders, constitutes a legal, valid and binding obligation of
Acquiring and Parent Corporation, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
4.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiring Corporation
do not, and the performance by Acquiring Corporation of their
obligations under this Agreement will not, (i) conflict with or violate
the certificate of incorporation or bylaws of Acquiring Corporation,
(ii) conflict with or violate any law applicable to Acquiring
Corporation or their assets and properties, or (iii) result in any
breach of or constitute a default under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Acquiring Corporation is a
party or by which Acquiring Corporation is bound, or by which any of
their properties or assets is subject
(b) The execution and delivery of this Agreement by Acquiring Corporation
does not, and the performance of this Agreement by Acquiring
Corporation will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any government entity.
4.4 Brokers and Finders. Acquiring Corporation has not retained any
investment banker, broker or finder in connection with the transactions
contemplated by this Agreement.
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4.5 Issuance of Parent Corporation Common Stock. The shares and options of
Parent Corporation Common Stock issued to the Shareholders in
connection with this Agreement, when issued, sold and delivered in
accordance with the terms and for the consideration expressed in this
Agreement, shall be duly and validly issued (including, without
limitation, issued in compliance with applicable federal and state
securities laws), fully paid and non-assessable.
ARTICLE V - CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Affirmative Covenants of Target Corporation and the Shareholders.
Target Corporation and the Shareholders hereby covenant and agree that,
prior to the Effective Time, unless otherwise expressly contemplated by
this Agreement or consented to in writing by Acquiring Corporation,
Target Corporation shall (i) operate its business in the usual and
ordinary course consistent with past practices and in accordance with
applicable laws; (ii) preserve intact its business organization,
maintain its rights and franchises, use its best efforts to retain the
services of its officers and key employees and maintain its
relationship with its suppliers, contractors, distributors, customers
and others having business relationships with it; (iii) maintain and
keep its properties and assets in as good repair and condition as at
present, ordinary wear and tear excepted; and (iv) keep in full force
and effect insurance comparable in amount and scope of coverage to that
currently maintained. Target Corporation shall promptly notify
Acquiring Corporation of any event or occurrence or emergency not in
the ordinary course of business of Target Corporation, and any material
event involving Target Corporation.
5.2 Negative Covenants of Target Corporation and the Shareholders. Except
as expressly contemplated by this Agreement or otherwise consented to
in writing by Acquiring Corporation, from the date hereof until the
Effective Time, Target Corporation shall not, and the Shareholders
shall cause Target Corporation not to, do any of the following:
(a) enter into any commitment or transaction not in the ordinary course of
business or any commitment;
(b) enter into any agreement or issue any purchase order, in either case
involving payment by Target Corporation of more than $10,000
individually or $25,000 in the aggregate;
(c) enter into any arrangement with any person or entity to: (i) transfer
to such person or entity or any other person or entity any rights to
the intellectual property of Target Corporation; (ii) acquire any
rights to the intellectual property of such person or entity or any
other person or entity; or (iii) modify in any way any of the
intellectual property of Target Corporation;
(d) enter into or amend any agreements pursuant to which any other party is
granted marketing, distribution or similar rights of any type or scope
with respect to any products of Target Corporation;
(e) amend or otherwise modify (or agree to do so), or violate the terms of,
any of the agreements set forth or described in the Disclosure Letter;
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(f) commence any litigation;
(g) grant any loans to others or purchase debt securities of others or
amend the terms of any outstanding loan agreement, except in the
ordinary course of business and consistent with past practices;
(h) grant any severance or termination pay (i) to any director or officer
or (ii) to any other employee except payments made pursuant to standard
written agreements outstanding on the date hereof;
(i) adopt or amend any employee benefit plan, or enter into any employment
contract, pay or agree to pay any special bonus or special remuneration
to any director or employee, or increase the salaries or wage rates of
its employees, except in connection with annual pay adjustment
consistent with past practices which increases in the aggregate have
been approved by Acquiring Corporation in writing and which for the
Shareholders have been approved by Acquiring Corporation in writing;
(j) revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(k) enter into any strategic alliance or joint marketing arrangement or
agreement, or any agreement to perform services (including research and
development services);
(l) (i) increase the compensation payable to or to become payable to any of
its directors, officers or employees, except for increases in salary,
wages or bonuses payable or to become payable in the ordinary course of
business and consistent with past practice; (ii) grant any severance or
termination pay to, or enter into or modify any employment or severance
agreement with, any of its directors, officers or employees; or (iii)
adopt or amend any employee benefit plan or arrangement, except as may
be required by applicable law;
(m) declare, set aside or pay any dividend on, or make any other
distribution in respect of, any of its capital stock;
(n) (i) redeem, repurchase or otherwise reacquire any share of its capital
stock or any securities or obligations convertible into or exchangeable
for any share of its capital stock, or any options, warrants or
conversion or other rights to acquire any shares of its capital stock
or any such securities or obligations; (ii) effect any reorganization
or recapitalization; or (iii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock;
(o) (i) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale (including the grant of any
encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury) or other equity securities, any
securities or obligations directly or indirectly convertible into or
exercisable or exchangeable for any such shares, or any rights,
warrants or options to acquire, any such shares or securities or any
rights, warrants or options directly or indirectly to acquire any
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such shares or securities; or (ii) amend or otherwise modify the terms
of any such securities, obligations, rights, warrants or options in a
manner inconsistent with the provisions of this Agreement or the effect
of which shall be to make such terms more favorable to the holders
thereof;
(p) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets of any other person
(other than the purchase of inventory in the ordinary course of
business and consistent with past practice), or make or commit to make
any capital expenditures other than capital expenditures in the
ordinary course of business consistent with past practice and in
amounts which are set forth and described in Target Corporation's 1998
capital budget, a true and complete copy of which has been provided to
Acquiring Corporation;
(q) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose
of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its assets except for dispositions of
inventory in the ordinary course of business and consistent with past
practice;
(r) propose or adopt any amendment to its Articles of Incorporation or
Bylaws;
(s) (i) change any of its methods of accounting in effect at January 1,
1997, or (ii) make or rescind any express or deemed election relating
to taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 1997, except, in the case of clause (i) or clause
(ii), as may be required by law or generally accepted accounting
principles, consistently applied;
(t) prepay, before the scheduled maturity thereof, any of its long-term
debt, or incur any obligation for borrowed money, whether or not
evidenced by a note, bond, debenture or similar instrument, other than
trade payables incurred in the ordinary course of business consistent
with past practices;
(u) enter into or modify in any material respect any agreement which, if in
effect as of the date hereof, would have been required to be disclosed
in the Disclosure Letter;
(v) take any action that would or could reasonably be expected to result in
any of its representations and warranties set forth in this Agreement
being untrue or in any of the conditions to the Merger set forth in
Article VIII not being satisfied; or
(w) agree in writing or otherwise to do any of the foregoing.
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ARTICLE VI - ADDITIONAL AGREEMENTS
6.1 Sale of Shares. The parties hereto acknowledge and agree that the
shares of Parent Corporation Common Stock issuable in the Merger shall
constitute "restricted securities" within the meaning of the Securities
Act. The certificates for the shares of Parent Corporation Common Stock
to be issued in the Merger shall bear appropriate legends to identify
such privately placed shares as being restricted under the Securities
Act, to comply with applicable state securities laws and, if
applicable, to notice the restrictions on transfer of such shares.
6.2 Consents and Approvals; Filings and Notices. Target Corporation and the
Shareholders shall use reasonable efforts to as promptly as possible
make all filings with, provide all notices to and obtain all consents
and approvals from third parties required to be obtained by Target
Corporation in connection with the transactions contemplated hereunder,
including, without limitation, all filings with, notices to and
consents and approvals from government entities and other persons.
6.3 Access and Information. From the date hereof to the Effective Time,
Target Corporation shall afford to Acquiring Corporation and its
officers, employees, accountants, consultants, legal counsel,
representatives of current and prospective sources of financing and
other representatives of Acquiring Corporation full and complete access
during normal business hours to the properties, books, records,
documents, instruments, reports, contracts, facilities, premises, and
equipment relating to Target Corporation and its properties, save and
except the Technology, and to the employees of Target Corporation, and
an opportunity to review and copy such books, records, documents,
instruments, reports, contracts and other materials as Acquiring
Corporation may request.
6.4 Confidentiality. Each party shall hold in confidence all documents and
information concerning the other and its business and properties
(except that either party may disclose such documents and information
to any government entity reviewing the transactions contemplated hereby
or as required in either party's judgment pursuant to any legal
requirement or in furtherance of the transactions contemplated herein),
and if the transaction contemplated hereby should not be consummated,
such confidence shall be maintained, and all such documents and
information (in whatever form) and copies thereof shall immediately
thereafter be destroyed, or returned to the party originally furnishing
same.
6.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without
limitation, all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties ("Third Party Expenses")
incurred by a party in connection with the negotiation and effectuation
of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party
incurring such fees and expenses.
6.6 Further Action; Reasonable Best Efforts. Each of the parties shall use
reasonable best efforts to take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or
advisable under applicable laws or otherwise to consummate
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and make effective the transactions contemplated by this Agreement as
promptly as practicable, including, without limitation, using its
reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of government
entities and parties to contracts with Target Corporation and Acquiring
Corporation as are necessary for the transactions contemplated herein.
6.7 Public Announcements. No announcement with respect to this agreement
will be made by any party hereto without the prior approval of the
other parties. The foregoing will not apply to any announcement by any
party required in order to comply with laws pertaining to timely
disclosure, provided that such party consults with the other parties
before making any such announcement.
6.8 Solicitation. During the term of this Agreement, neither Target
Corporation, any Shareholder nor any of its affiliates or any person
acting on behalf of such party shall (a) directly or indirectly,
through a representative or otherwise, solicit or entertain offers
from, or negotiate with or in any manner encourage, discuss, accept or
consider any proposal of any other person relating to any proposed
merger, consolidation, sale or acquisition of Target Corporation, the
assets or any capital stock of Target Corporation, whether directly,
indirectly, through merger, purchase, consolidation or otherwise or (b)
furnish or cause to be furnished any nonpublic information concerning
Target Corporation to any person. Target Corporation shall immediately
notify Acquiring Corporation regarding any contact between Target
Corporation or its representatives and any other person or entity
regarding any such offer or proposal or any related inquiry and shall
state the name of such other person or entity and the material terms
and conditions of any such offer, including the offering price.
6.9 Notification of Certain Matters. Target Corporation shall give prompt
notice to Acquiring Corporation, and Acquiring Corporation shall give
prompt notice to Target Corporation, of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which
is likely to cause any representation or warranty of Target Corporation
or the Shareholders and Acquiring Corporation, respectively, contained
in this Agreement to be untrue or inaccurate at or prior to the
Effective Time and (ii) any failure of Target Corporation or Acquiring
Corporation, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant
to this Section 6.9 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
6.10 Blue Sky Laws. Parent Corporation shall take such steps as may be
necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the Parent
Corporation Common Stock pursuant hereto. Target Corporation shall use
its best efforts to assist Parent Corporation as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which
are applicable in connection with the issuance of Parent Corporation
Common Stock pursuant hereto.
6.11 Shareholder Approval. As promptly as practicable after the execution of
this Agreement, Target Corporation shall submit this Agreement and the
transactions contemplated hereby
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to its shareholders for approval and adoption as provided by the
California GCL and Target Corporation's Articles of Incorporation and
Bylaws. Each of the Shareholders agrees to vote in favor of the Merger
and to use reasonable best efforts to enable the Closing to occur as
promptly as practicable. The materials submitted to Target
Corporation's shareholders shall be subject to review and approval by
Acquiring Corporation and include information regarding Target
Corporation, the terms of the Merger and this Agreement and the
unanimous recommendation of the Board of Directors of Target
Corporation in favor of the Merger and this Agreement. Acquiring
Corporation shall cooperate with Target Corporation to the extent
reasonably necessary to accomplish the foregoing, and shall provide all
information regarding Acquiring Corporation or the Merger required by
Target Corporation in connection therewith.
6.12 Filing with California Secretary of State. Each of the parties shall
use reasonable best efforts to take, or to cause to be taken, such
actions as may be necessary to facilitate the filing, as promptly as
practicable after the Closing Date, of the Merger Certificate with the
Secretary of State of the State of California in accordance with the
relevant provisions of the California GCL. Such actions shall include,
but shall not be limited to, actions required to obtain a Tax Clearance
Certificate from the Franchise Tax Board of the State of California.
6.13 Tax Returns. Acquiring Corporation shall prepare all federal and state
income tax returns of Target Corporation to be filed by Target
Corporation for taxable periods ending on or prior to the Effective
Time and the shareholders of Target Corporation have paid or will pay
all income and withholding taxes attributable to them with respect to
the income of Target Corporation for such periods, including any
withholding associated with the receipt of shares of Target Corporation
Common Stock prior to the Merger. Each of the parties hereto shall
report the Merger as a tax-free reorganization under the provisions of
Sections 368(a)(1)(A) 368(a)(2)(C) of the Code and shall make all
requisite filings associated therewith, including the statement
required under Treasury Regulations Section 1.368-3. After the
Effective Time, Acquiring Corporation, on the one hand, and the
Shareholders, on the other hand, will make available to the other, as
reasonably requested, all information, records or documents relating to
the liability for taxes of Target Corporation for all periods ending on
or prior to the Effective Time and will preserve such information,
records or documents until the expiration of any applicable statute of
limitations or extensions thereof.
ARTICLE VII - CONDITIONS PRECEDENT TO ACQUIRING CORPORATION'S OBLIGATIONS ON THE
CLOSING DATE
Each and every obligation of Acquiring Corporation to be performed on or after
the Closing Date shall be subject to the satisfaction, prior to or concurrently
with the performance of such obligation, of the following conditions precedent:
7.1 Representations and Warranties. The representations and warranties made
by the Shareholder and the Target Corporation in Article V hereof,
shall each be true, correct and accurate, in all material respects on,
as of, and with respect to, the Closing Date, with
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the same force and effect as though they had been made or given
on, as of, and with respect to the Closing Date.
7.2 No Changes. From the date of execution hereof until the Closing Date,
the Business shall have been conducted in accordance with the
requirements of Article VIII hereof, the Target Corporation shall not,
subsequent to the date hereof, have suffered any material loss or
damage to its financial condition, business, properties or assets.
7.3 Compliance with Obligations. The Shareholder and the Target Corporation
shall have performed and complied with all of their respective
obligations under this Agreement which are to be performed or complied
with by them prior to or on the Closing Date, as the case may be.
7.4 Consents.
(a) The Shareholder shall have obtained all necessary Consents to the
transactions contemplated by this Agreement pursuant to (i) all
applicable Regulations or (ii) the terms of any Contract to which the
Target Corporation is a party or by which it is bound.
(b) To the extent that consummation of the transactions specified in this
Agreement might constitute a breach or violate any Contract absent the
Consent of another Person which has not been obtained, the Shareholder
shall use her best good faith efforts to obtain any such required
Consent as promptly as possible after the Closing. If any such Consent
shall not be obtained the Shareholder, to the maximum extent permitted
by law and the instrument or document, shall act as Acquiring
Corporation's agent in order to obtain for it the benefits thereunder
and shall cooperate, to the maximum extent permitted by law and the
instrument or document, with Acquiring Corporation in any other
reasonable arrangement designed to provide such benefits exclusively to
Acquiring Corporation.
7.5 Title; Lien Search Report and Release(s) of Liens. Acquiring
Corporation shall have received a lien search report, dated on or about
the Closing Date, issued by a reputable third party search firm
selected by the Shareholder and acceptable to Acquiring Corporation,
reflecting that no Encumbrances other than Permitted Encumbrances are
outstanding as against the Target Corporation, the Stock, the Assets or
the Business, and Acquiring Corporation shall have additionally
received, in the form suitable for recording, any and all instruments
necessary or required in order to remove of record any Encumbrances
other than Permitted Encumbrances affecting any of the Assets in favor
of any party, and the Shareholder shall have arranged for the filing
thereof, including payment of any applicable fees or other charges,
with the proper local and state authorities in each jurisdiction where
any of the Assets is located in a manner sufficient to remove and
release all such liens, encumbrances and/or security interests.
7.6 Good Standing/Subsistence Certificate. Acquiring Corporation shall have
received a good standing/subsistence certificate for the Target
Corporation dated not more than ten (10) days prior to the Closing Date
issued by the Secretary of State of the State of California.
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7.7 Satisfactory Investigation. Acquiring Corporation shall have
satisfactorily completed its investigation of the business, assets and
financial condition of the Target Corporation in connection with the
transactions contemplated hereby and shall have been satisfied with
such result. Acquiring Corporation shall have satisfactorily completed
its investigation of any event or condition arising or discovered after
the date of this Agreement which could reasonably be expected to result
in a failure of any of Acquiring Corporation's conditions hereunder to
be fulfilled.
7.8 Resignations of Directors and Officers. Acquiring Corporation shall
have received resignations duly executed by all directors and officers
of the Target Corporation which shall be dated the Closing Date.
7.9 Transfer Documents. Acquiring Corporation shall have received good and
sufficient instruments and documents of conveyance and transfer all
dated the Closing Date, in form and substance reasonably satisfactory
to Acquiring Corporation and its counsel, as shall be necessary and
effective to convey, transfer and assign to, and vest in Acquiring
Corporation all of the Shareholder's right, title and interest in and
to the Stock, consisting of good, valid and marketable title, free and
clear of all Encumbrances.
7.10 Agreements, Etc. Acquiring Corporation shall have taken and received
possession of all of the agreements, contracts, commitments, leases,
plans, bids, quotations, proposals, licenses, permits, authorizations,
instruments, books of account, computer programs and software and
licenses thereto, all machine readable data files relating to the
Business as of the Effective Time and hard copies relating thereto,
manuals and guidebooks, customer and supplier lists, sales records,
files, correspondence and other documents, books, records, papers,
files and data belonging to the Target Corporation which are part of
the Assets or relate to the Business; and simultaneously with such
delivery, all such steps will be taken as may be required to put the
Acquiring Corporation in actual possession and operating control of the
Assets.
7.11 Other Documents, Etc. Acquiring Corporation shall have received all
other documents, instruments and other things required to be delivered
pursuant to this Agreement including, without limitation, all of the
items required by Article VII hereof.
7.12 Results of Due Diligence and Legal Analysis. The Acquiring Corporation
shall have conducted its legal and accounting analysis of issues deemed
relevant by the Acquiring Corporation and the Acquiring Corporation has
been satisfied with the results and information obtained from such
legal and accounting analysis.
7.13 Other Conditions. If any of the conditions precedent to Acquiring
Corporation's obligations hereunder shall not be satisfied as of the
Closing Date, Acquiring Corporation may, in addition to its other
rights and remedies, (i) terminate this Agreement, or (ii) waive such
default and proceed with performance of this Agreement. Any such
termination or waiver shall be without prejudice to Acquiring
Corporation's other rights and remedies arising from the default.
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7.14 No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.
7.15 Legal Opinions. Acquiring Corporation shall have received an opinion
from Kim Mistretta, counsel to Target Corporation and the Shareholders,
in form reasonably satisfactory to Acquiring Corporation to the effect
set forth in Schedule "7.15" as to the ownership of the Technology in
Target Corporation and all other matters relating to the corporate
status of the Target Corporation.
ARTICLE VIIA - CONDITIONS PRECEDENT TO TARGET CORPORATION'S OBLIGATIONS ON THE
CLOSING DATE
7A.1 Target Corporation and Shareholders shall have received an opinion from
Groom and Cave, counsel to Parent Corporation and Acquiring
Corporation, in form reasonably satisfactory to Target Corporation and
Shareholders in form as set forth on Schedule 7A.1, as follows:
(a) Neither the execution and delivery of this Agreement nor the
consummation of the transactions, nor issuance of the stock or options,
contemplated hereby will (i) violate any provision of the Articles,
Bylaws, or other internal corporate documents or resolutions of Parent
or Acquiring Corporation (ii) violate, or be in conflict with or
constitute a default under, any agreement or commitment to which Parent
or Acquiring Corporation is a party or by which Parent or Acquiring
Corporation is bound, or (iii) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or
governmental authority, including, without limitation, the SEC or any
security exchange.
(b) Except for the consents set forth in Section 4.5 herein, (i) no
consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority and (ii) no
consent of any other person, including, without limitation, consents
from shareholders, parties to loans, contracts, or other agreements, is
required in connection with the execution, delivery and performance of
this Agreement, or the issuance of the shares or options for shares
contemplated hereby.
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual written consent of Acquiring Corporation and Target
Corporation;
(b) by either party if that party is not then in breach of its obligations
under this Agreement and if other either party shall have breached any
of their representations, warranties,
24
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covenants or agreements contained in this Agreement, or any such
representation or warranty shall have become untrue, in any such case
such that the conditions precedent to the obligation of either party to
close, will not be satisfied and such breach has not been promptly
cured within ten (10) days following receipt by the other party of
written notice of such breach;
(c) by either Acquiring Corporation or Target Corporation if (i) any
decree, permanent injunction, judgment, order or other action by any
court of competent jurisdiction or any government entity preventing or
prohibiting consummation of the Merger shall have become final and
nonappealable; or (ii) there shall be any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger
by any government entity that would make consummation of the Merger
illegal;
(d) by Acquiring Corporation if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any government entity, which would:
(i) prohibit Acquiring Corporation's ownership or operation of any
portion of the business of Target Corporation or (ii) compel Acquiring
Corporation or Target Corporation to dispose of or hold separate all or
a portion of the business or assets of Target Corporation or Acquiring
Corporation as a result of the Merger;
(e) by either party if the Effective Time has not occurred on or prior to
March 15, 1999 (unless such date shall be extended by the mutual
written consent of the parties); or
(f) by Acquiring Corporation if an event having a Material Adverse Effect
on Target Corporation shall have occurred after the date of this
Agreement.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, this Agreement shall forthwith become void and there shall
be no liability or obligation on the part of any party hereto, except
that the Target Corporation shall be required to forthwith repay any
and all monies advanced pursuant to the loan agreement together with
interest accrued thereon as hereinafter set forth.
8.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
8.4 Waiver. At any time prior to the Effective Time, the parties may (a)
extend the time for the performance of any of the obligations or other
acts of the other party, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement and (c) waive compliance
by the other party with any of the agreements or conditions contained
in this Agreement. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
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ARTICLE IX - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
9.1 Survival of Representations. All of Target Corporation's and the
Shareholders' representations and warranties made herein or pursuant
hereto shall be deemed made on and as of the Effective Time as though
such representations and warranties were made on and as of such date,
and all such representations and warranties shall survive the Effective
Time and any investigation, audit or inspection at any time made by or
on behalf of any party hereto, as follows: (a) unless otherwise
specified below, representations and warranties shall survive for a
period of three years after the Effective Time; (b) representations and
warranties with respect to taxes shall survive until the expiration of
the applicable statute of limitations; and (c) representations,
warranties and covenants for matters relating to title to the capital
stock of Target Corporation shall continue in full force and effect in
perpetuity. Notwithstanding anything herein to the contrary, any
representation or warranty which is the subject of a claim which is
asserted in writing reasonably and in good faith prior to the
expiration of the applicable period set forth above shall survive with
respect to such claim or dispute until the final resolution thereof.
9.2 Agreement of Shareholders to Indemnify. The Principal Shareholders
hereby jointly and severally, and each of the Shareholders other than
the Principal Shareholders hereby individually, agree to indemnify,
defend and hold harmless Acquiring Corporation and its officers,
directors, employees, agents and representatives (collectively, the
"Indemnified Persons") from and against and in respect of all demands,
losses, claims, actions or causes of action, assessments, damages,
liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements,
excluding any lost profits, lost revenue or opportunity costs
(collectively, "Losses") resulting from, imposed upon or incurred by
the Indemnified Persons, directly or indirectly, by reason of or
resulting from any misrepresentation or breach of any representation or
warranty, given or made by the Shareholders or Target Corporation in
this Agreement or in any document, certificate or agreement furnished
by or on behalf of any such party pursuant to this Agreement;
(a) notwithstanding the foregoing, nothing herein shall limit an
Indemnified Person's remedies in the event of fraud or intentional
deception on the part of Target Corporation or any Shareholder with
respect to any of the obligations of Target Corporation or the
Shareholders under this Agreement.
9.3 Notice of Losses.
(a) If an Indemnified Person believes that it has suffered or is likely to
suffer any Losses against which it is indemnified pursuant hereto, it
shall notify the Shareholders promptly in writing describing such
Losses, the amount thereof, if known, and the method of computation of
such Losses, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such
Losses have occurred. If any action at law or suit in equity is
instituted by or against a third party with respect to which any
Indemnified Person intends to claim any liability or expense as Losses
under
26
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this Article IX, any such Indemnified Person shall promptly notify the
Shareholders of such action or suit. The failure of any Indemnified
Person to give notice as provided herein shall not relieve any
Shareholder of his respective obligations under this Article IX unless
such failure results in actual detriment to such Shareholder, and only
to the extent of such detriment.
(b) In calculating any Losses (i) there shall be no reduction for any tax
benefits with respect to any Losses; and (ii) there shall be no
increase for taxes imposed upon the receipt of any indemnity payment
with respect to any Losses.
(c) The amount to which an Indemnity shall be entitled under this Article
IX shall be determined (i) by written agreement between the Indemnified
Person and the Shareholders; or (ii) if the Indemnified Person and the
Shareholders are unable to agree as to any claim for indemnification
hereunder within sixty (60) days, such claim may be referred to
arbitration by either party in accordance with the provisions of
Section 9.6 hereof.
9.4 Third Party Claims. If a third party asserts a Claim against any
Indemnified Person, the Indemnified Person shall promptly give notice
of such Claim in accordance with Section 9.3 above. The Shareholders
shall be entitled to assume the defense of such Claim, including the
employment of counsel reasonably satisfactory to the Indemnified
Person; provided, however, that, in the event that the Indemnified
Person reasonably determines in good faith that such Indemnified
Person's interests with respect to such Claim cannot appropriately be
represented by the Shareholders, such Indemnified Person shall have the
right to assume control of the defense of such Claim and to have such
Indemnified Person's reasonable expenses reimbursed promptly with
respect to such Claim. In addition, in the event that the Shareholders,
within a reasonable time after notice of any such Claim, fail to defend
any Indemnified Person, such Indemnified Person (upon further notice to
the Shareholders) shall have the right to undertake the defense of such
Claim for the account of the Shareholders and to have such Indemnified
Person's reasonable expenses reimbursed promptly with respect to such
Claim. Regardless of which party is controlling the defense of any
Claim, no settlement of such Claim may be agreed to without the written
consent of each of the Indemnified Person, which consent shall not be
unreasonably withheld. The controlling party shall deliver, or cause to
be delivered, to the other parties copies of all correspondence,
pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of any such
Claim, and timely notices of any hearing or other court proceeding
relating to such Claim.
9.5 No Recourse Against Target Corporation. The Shareholders hereby
irrevocably waive any and all right to recourse against Target
Corporation with respect to any misrepresentation or breach of any
representation, warranty or indemnity, given or made by the
Shareholders or Target Corporation in this Agreement and any document,
certificate and agreement entered into or delivered pursuant hereto.
The Shareholders shall not be entitled to contribution from,
subrogation to or recovery against Target Corporation with respect to
any liability of the Shareholders or Target Corporation that may arise
under or pursuant to this Agreement or the transactions contemplated
hereby.
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9.6 Binding Mediation/Arbitration.
(a) None of the parties shall institute an arbitration proceeding to
resolve a dispute between the parties hereunder before the parties have
sought to resolve the dispute through direct negotiation with the other
parties. If the dispute is not resolved within fifteen (15) Business
Days after a demand for direct negotiation, the parties shall attempt
to resolve the dispute through mediation conducted in San Luis Obispo,
California. If the parties do not promptly agree on a mediator, then
any of the parties may notify the American Arbitration Association, to
initiate selection of a mediator from the commercial dispute resolution
panel. The fees and expenses of the mediator shall be paid equally by
the parties. If the mediator is unable to facilitate a settlement of
the dispute within a reasonable period of time, as determined by the
mediator, the mediator shall issue a written statement to the parties
to that effect and the aggrieved party(ies) may then seek relief
through arbitration, which shall be binding, before a single arbitrator
pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "Association"). The place of arbitration
shall be San Luis Obispo, California. Arbitration may be commenced at
any time by any party seeking arbitration by written notice to the
other party(ies) by first class mail, postage prepaid. The arbitrator
shall be selected by the joint agreement of the parties, but if they do
not so agree within fifteen (15) Business Days after the date of the
notice referred to above, the selection shall be made pursuant to the
rules from the panels of arbitrators maintained by such Association.
The arbitrator shall render his decision within one hundred eight (180)
days of appointment. Any award rendered by the arbitrator shall be
final, conclusive and binding upon the parties hereto and there shall
be no right of appeal therefrom. Judgment upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof.
Each party shall pay its own costs and expenses of arbitration,
including attorneys' fees and expenses of the arbitrator. The
arbitrator shall not be permitted to award punitive or similar type
damages under any circumstances.
ARTICLE X - GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by
commercial messenger or courier service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiring Corporation to:
with a copy to:
Mr. Robert M. Cezar,
President
Americom USA, Inc.
124 South Halcyon Road
Arroyo Grande, CA 93420
Telephone: (805) 542-6700
Telefax: (805) 473-4976
28
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With a copy to:
Tim Hopkins and to Jayson B. Schwarz
Groom and Cave Schwarz, Gillen
2040 Yonge St., Ste. 220,
Toronto, Ontario,
Canada, M4S 1Z9
Telephone: (408) 286-3300 Telephone - (416) 486-2040
Telefax: (408) 286-3423 Telefax - (416) 486-3325
(b) if to Target Corporation or the Shareholders, to:
Jim & Jon Tech Jim Heintz Jon Iverson
687 Islay St. Unit 5, 277 El Portal Dr. 9825 El Enchanto
San Luis Obispo, CA Pismo Beach, CA Atascadero, CA
93401 93449 93422
With a copy to:
Kim Mistretta
1101 Marsh St. Suite C,
San Luis Obispo, CA 93401
10.2 Remuneration. Jon Iverson shall receive an annual salary of $96,000,
until such time as Parent Corporation shall achieve its first month of
profitability and then his annual salary shall be increased to
$120,000. Upon the Parent Corporation achieving its first full quarter
of profitability his annual salary shall be increased to $144,000 and
he shall be entitled to the same incentive plans that are established
from time to time for key employees of the Parent Corporation. The
terms of his employment in all other respects shall be governed in
accordance with the generally accepted practices of the Parent
Corporation and he shall be treated parri passu with all other
employees as relates to profit sharing.
10.3 Remuneration. Jim Heintz shall receive an annual salary of $96,000,
until such time as Parent Corporation shall achieve its first month of
profitability and then his annual salary shall be increased to
$120,000. Upon the Parent Corporation achieving its first full quarter
of profitability his annual salary shall be increased to $144,000 and
he shall be entitled to the same incentive plans that are established
from time to time for key employees of the Parent Corporation. The
terms of his employment in all other respects shall be governed in
accordance with the generally accepted practices of the Parent
Corporation and he shall be treated parri passu with all other
employees as relates to profit sharing.
10.4 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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10.5 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
10.6 Entire Agreement. This Agreement (together with the Exhibits, the
Disclosure Letter and the other documents delivered pursuant hereto)
constitutes the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, are not intended to
confer upon any other person any rights or remedies hereunder.
10.7 Specific Performance. The transactions contemplated by this Agreement
are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled,
each of the parties hereto is entitled to a decree of specific
performance, provided such party is not in material default hereunder.
10.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
10.9 Third Party Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
10.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of law.
10.11 Counterparts. This Agreement may be executed and delivered in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed
to be an original but all of which taken together shall constitute one
and the same agreement.
10.12 Further Assurances. From and after the Closing Date, each of Acquiring
Corporation and the Shareholders, at any time and from time to time
shall make, execute and deliver, or cause to be made, executed and
delivered, such instruments, agreements, consents and assurances and
take or cause to be taken all such actions as may reasonably be
requested by any party to effect the purpose and intent of this
Agreement.
30
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10.13 Interpretation. The words "include, "includes" and "including" when
used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
10.14 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy.
10.15 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party
drafting such agreement or document.
31
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IN WITNESS WHEREOF, Acquiring Corporation, Target Corporation and the
Shareholders have caused this Agreement to be signed by their duly authorized
respective officers, all as of the date first written above.
AMERICOM USA, INC., a Delaware Corporation
By /s/ David Loomis
----------------------------------------------
Name: David Loomis
Title: President
RMC DIVERSIFIED ASSOCIATES INTERNATIONAL LTD., a California Corporation
By /s/ Robert Cezar
----------------------------------------------
Name: Robert Cezar
Title: President
JIM AND JON TECH., a California Corporation
By /s/ Jim Heintz
----------------------------------------------
Name: Jim Heintz
Title: President
/s/ Gary Hogue /s/ Jim Heintz
--------------------------------------------- -------------------
Witness JIM HEINTZ
/s/ Gary Hogue /s/ Jon Iverson
--------------------------------------------- -------------------
Witness JON IVERSON
32
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Table of Contents
Page
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I. ARTICLE I - THE MERGER...................................................1
1.1 The Merger....................................................1
1.2 Effective Time................................................2
1.3 Effect of the Merger..........................................2
1.4 Certificate of Incorporation Bylaws...........................2
1.5 Directors and Officers........................................2
1.6 Effect of Merger on the Capital Stock of Target
Corporation...................................................2
1.7 No Further Ownership Rights in Target Corporation
Common Stock..................................................3
1.8 Tax Treatment of the Merger...................................3
1.9 Taking of Necessary Action; Further Action....................4
1.10 Cash Consideration............................................4
II. ARTICLE II - REPRESENTATIONS AND WARRANTIES OF TARGET CORPORATION
AND THE SHAREHOLDERS....................................4
2.1 Organization...................................................4
2.2 Capitalization.................................................4
2.3 Ability to Carry Out Agreement.................................5
2.4 Validity of Agreement - Authority..............................5
2.5 Permits and Licenses...........................................5
2.6 Compliance with Regulations....................................5
2.7 Financial Statements...........................................5
2.8 Title to and Condition of Certain Fixtures and Equipment.......6
2.9 Tax Returns and Taxes..........................................6
2.10 Labor Relations................................................6
2.11 Status of Contracts............................................7
2.12 Changes or Events..............................................7
2.13 Employees and Employee Benefits................................7
2.14 Real Property: Leaseholds......................................8
2.15 Insurance......................................................8
2.16 Litigation.....................................................8
2.17 Related-Party Transactions.....................................8
2.18 Accounts Receivable............................................8
2.19 Relationship with Customers....................................8
2.20 Proprietary Rights.............................................9
2.21 Non-Infringement of Proprietary Rights.........................9
i
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Table of Contents
(continued)
Page
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2.22 Environmental Requirements.....................................9
2.23 Political Contributions and Other Payments....................10
2.24 Occupational Safety and Health Act............................10
2.25 Consents......................................................10
2.26 Disclosure....................................................10
2.27 Year 2000 Compliance..........................................11
2.28 Investor Status...............................................11
III. ARTICLE III - ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS....................................11
3.1 Title to the Shams............................................11
3.2 Authority and Capacity........................................11
3.3 Absence of Violation..........................................11
3.4 Restrictions and Consents.....................................11
3.5 Binding Obligation............................................12
3.6 No Registration Under the Securities Act......................12
3.7 Acquisition for Investment....................................12
3.8 Evaluation of Merits and Risks of Investment..................13
3.9 Forward Looking Information/Risk Factors......................13
3.10 Transfer Limitations..........................................13
3.11 Rule 144 Limitations..........................................14
IV. ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUIRING CORPORATION..................................15
4.1 Organization and Qualification................................15
4.2 Authority.....................................................15
4.3 No Conflict; Required Filings and Consents....................15
4.4 Brokers and Finders...........................................15
4.5 Issuance of Parent Corporation Common Stock...................16
V. ARTICLE V - CONDUCT PRIOR TO THE EFFECTIVE TIME......................16
5.1 Affirmative Covenants of Target Corporation and the
Shareholders..................................................16
5.2 Negative Covenants of Target Corporation and the
Shareholders..................................................16
VI. ARTICLE VI - ADDITIONAL AGREEMENTS...................................19
6.1 Sale of Shares................................................19
6.2 Consents and Approvals; Filings and Notices...................19
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Table of Contents
(continued)
Page
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6.3 Access and Information........................................19
6.4 Confidentiality...............................................19
6.5 Expenses......................................................19
6.6 Further Action; Reasonable Best Efforts.......................19
6.7 Public Announcements..........................................20
6.8 Solicitation..................................................20
6.9 Notification of Certain Matters...............................20
6.10 Blue Sky Laws.................................................20
6.11 Shareholder Approval..........................................20
6.12 Filing with California Secretary of State.....................21
6.13 Tax Returns...................................................21
VII. ARTICLE VII - CONDITIONS PRECEDENT TO ACQUIRING CORPORATION'S
OBLIGATIONS ON THE CLOSING DATE........................21
7.1 Representations and Warranties................................21
7.2 No Changes....................................................22
7.3 Compliance with Obligations...................................22
7.4 Consents......................................................22
7.5 Title; Lien Search Report and Release(s) of Liens.............22
7.6 Good Standing/Subsistence Certificate.........................22
7.7 Satisfactory Investigation....................................23
7.8 Resignations of Directors and Officers........................23
7.9 Transfer Documents............................................23
7.10 Agreements; Etc...............................................23
7.11 Other Documents, Etc..........................................23
7.12 Results of Due Diligence and Legal Analysis...................23
7.13 Other Conditions..............................................23
7.14 No Injunctions or Restraints; Illegality......................24
7.15 Legal Opinions................................................24
VIII. ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.....................24
8.1 Termination...................................................24
8.2 Effect of Termination.........................................25
8.3 Amendment.....................................................25
8.4 Waiver........................................................25
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Table of Contents
(continued)
Page
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IX. ARTICLE IX - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION;
REMEDIES...............................................26
9.1 Survival of Representations..................................26
9.2 Agreement of Shareholders to Indemnify.......................26
9.3 Notice of Losses.............................................26
9.4 Third Party Claims...........................................27
9.5 No Recourse Against Target Corporation.......................27
9.6 Binding Mediation/Arbitration................................28
X. ARTICLE X - GENERAL PROVISIONS......................................28
10.1 Notices......................................................28
10.2 Remuneration.................................................29
10.3 Remuneration.................................................29
10.4 Headings.....................................................29
10.5 Severability.................................................30
10.6 Entire Agreement.............................................30
10.7 Specific Performance.........................................30
10.8 Assignment...................................................30
10.9 Third Party Beneficiaries....................................30
10.10 Governing Law................................................30
10.11 Counterparts.................................................30
10.12 Further Assurances...........................................30
10.13 Interpretation...............................................31
10.14 Other Remedies...............................................31
10.15 Rules of Construction........................................31
iv
