AGREEMENT AND PLAN OF MERGER
This Agreement ("Agreement") is made and entered into on June 10, 1998,
pursuant to the provisions of Section 4A-701 of the Annotated Code of Maryland,
by and among:
DIVERSIFIED TECHNOLOGIES, INC., a Wyoming corporation (the "Company");
ATC GROUP, INC., a Maryland corporation, as the surviving corporation in
the merger ("Survivor");
ATC GROUP L.L.C., a Maryland limited liability company sometimes referred
to as ATC GROUP, LLC, as the company assimilated in the merger
("Assimilated Company" or "ATC Group");
and those persons executing this Agreement in their capacity as members of
ATC Group (the "Members").
R E C I T A L S:
A. The Members collectively own of record and beneficially all of the
membership interests of ATC Group (the "ATC Interests"), which now and as of the
closing of the transactions herein contemplated shall constitute one hundred
percent (100%) of the equity ownership interest in and to ATC Group: and
B. Survivor is a Maryland corporation wholly owned by the Company, formed
for the purpose of the merger herein contemplated. The Members and the Company
desire that ATC Group be merged into Survivor, on the terms and subject to the
conditions of this Agreement; and
C. The board of directors of the Company and the Managers of ATC have
approved the execution of this Agreement and performance of the parties'
respective obligations hereunder.
NOW THEREFORE, for and in consideration of the premises and the mutual
promises and undertakings contained herein, and for other good and valuable
consideration, and subject to the terms and conditions of this Agreement, the
parties hereto agree as follows:
1. THE MERGER.
1.1 Merger. In accordance with the provisions of this Agreement, the
Maryland General Corporation Law, and the Maryland Limited Liability Company
Act, ATC Group shall be merged with and into Survivor (the "Merger"). Survivor
and the Assimilated Company are sometimes referred to in this Agreement as the
"Constituent Companies."
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and
approved by the shareholders of each Constituent Company in accordance with
the respective requirements of the Maryland General Corporation Law and the
Maryland Limited Liability Company Act; and
(b) An executed counterpart of this Agreement shall have been filed
with the Secretary of State of the State of Maryland; and
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Time."
1.3 Articles of Incorporation. The Articles of Incorporation of Survivor
as in effect immediately prior to the Effective Time shall continue
in full force and effect as the Articles of Incorporation of the Survivor
until duly amended in accordance with the provisions thereof and applicable
law.
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1.4 Bylaws. The Bylaws of Survivor as in effect immediately prior to the
Effective Time shall continue in full force and effect as the Bylaws of the
Survivor until duly amended in accordance with the provisions thereof and
applicable law.
1.5 Directors and Officers. On the Effective Time, the current officers
and directors of the Company and Subsidiary shall resign as necessary and the
persons named below shall be elected as the directors and executive officers
of both the Company and Survivor:
Name Position
----------------- -------------------------------
Thomas Yang DIRECTOR, President
Enghe Chimood DIRECTOR, Vice President for Engineering Development
Ke-Ou Chao DIRECTOR, Vice President for System Engineering
Director Designee DIRECTOR, Chairman of the Board
It is agreed by the parties that the above four persons shall serve on the board
of directors of the Company for a period of three (3) years following the
Effective Time, subject to each person's continuing consent to serve, and the
Members agree that such persons shall, during such three-year period, be
nominated for election to the board of directors at every meeting of the
shareholders at which directors are elected. The Members agree to affirmatively
vote all of their shares of the Company entitled to vote in the election of
directors in favor of electing the above four persons to the board of directors
in all elections of directors during the three year period, whether occurring at
a shareholder meeting or by written consent or otherwise. All four persons shall
also serve on the board of directors of and hold the same positions in the
Survivor. It is agreed by the parties that Director Designee shall serve on the
executive, audit and compensation committees (when and if established) of the
board of directors of the Company and the Survivor, for such three (3)-year
period.
1.6 Effect of Merger. Upon the Effective Time, the separate existence
of ATC Group shall cease and the Survivor (i) shall continue to possess all of
the assets, rights, powers and property of Survivor as constituted immediately
prior to the Effective Time, shall be subject to all actions previously taken by
ATC Group and shall succeed, without other transfer, to all of the assets,
rights, powers and property of ATC Group, (ii) shall continue to be subject to
all of the debts, liabilities and obligations of ATC Group as constituted
immediately prior to the Effective Time and shall succeed, without other
transfer, to all of the debts, liabilities and obligations of ATC Group in the
same manner as if Survivor had itself incurred them, all as more fully provided
under the applicable provisions of the Maryland General Corporation Law and the
Maryland Limited Liability Company Act.
1.7 Post-Merger Covenants of Survivor. Survivor covenants and agrees
that it will, after the Effective Time:
(a) File all documents with the franchise tax authorities of the State
of Maryland necessary to the assumption by Survivor of all of the franchise
tax liabilities of the Assimilated Company.
(b) File with the Securities and Exchange Commission and any applicable
state authorities a completed Notice of Sale of Securities on Form D as
required by Rule 503 of Regulation D and take such other actions as may be
required by applicable law.
1.8 Amendment. The Boards of Directors and Managers of the Constituent
Companies and the Company may amend or supplement this Agreement by written
instrument at any time prior to the filing of this Agreement (or a
certificate in lieu thereof) with the Secretary of State of the State of
Maryland, provided that an amendment shall not (i) alter or change the amount
or kind of Merger Shares to received, (ii) alter or change any term of the
Articles of Incorporation of Survivor, or (iii) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series thereof or adversely
affect the Members.
1.9 Registered Office. The Registered Office of the Survivor in the
State of Maryland is located at 300 Lombard Street, Baltimore, Maryland
21202, and Corporation Trust Incorporated is the Resident Agent of the
Survivor at such address.
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1.10 Further Actions. If at any time Survivor shall consider or be
advised that any further assignment or assurances in law are necessary or
desirable to vest or to perfect or confirm of record in Survivor the title to
any property or rights of an Assimilated Company, or to otherwise carry out
the provisions of this Agreement, then the proper officers and directors of
the Assimilated Company as of the Effective Time shall execute and deliver to
Survivor any and all proper deeds, assignments and assurances in law, and do
all things necessary or proper to vest, perfect or confirm title to such
property or rights in Survivor.
1.11 Copies of this Agreement. Executed copies of this Agreement will be
on file at the principal place of business of Survivor located at 20010
Century Boulevard, Suite 300, Germantown, Maryland 20874, and copies thereof
will be furnished to any shareholder or Member of the Constituent Company
upon request and without cost.
2. MANNER OF CONVERSION OF ATC GROUP MEMBERSHIP INTERESTS.
2.1 Conversion of ATC Group Membership Interests. At the Effective Time,
all of the membership interest in and to ATC Group shall, by virtue of the
Merger and without any action by any Member owning such membership interests
or any other person, be converted into and exchanged for an aggregate of:
(i) 6,200,000 common shares of the Company, no par value (the "Common
Merger Shares"); and
(ii) 2,066,667 shares of the preferred stock of the Company, no par
value, designated as the Series A Voting Convertible Preferred Stock
("Preferred Merger Shares"), the rights, preferences and designations of the
Preferred Merger Shares being set forth as EXHIBIT A to this Agreement.
The Common Merger Shares and Preferred Merger Shares are sometimes collectively
referred to in this Agreement as the "Merger Shares." The Merger Shares shall be
prorated among the Members in proportion to their respective ownership of the
total membership interest in ATC Group and shall be issued as set forth on
SCHEDULE 2.1 hereto. The Merger Shares will, when issued, be validly issued,
fully paid, and nonassessable, the sale, issuance and delivery of the Merger
Shares on the terms herein contemplated has been authorized by all requisite
corporate action of the Company, and the Merger Shares will not be subject to
any preemptive rights, options or similar rights on the part of any shareholder
or creditor of the Company or any other person.
2.2 Outstanding Common Stock of Survivor. At the Effective Time, the
shares of common stock of Survivor issued and outstanding immediately prior
thereto shall continue to exist without change.
2.3 Membership Interests Deemed Exchanged. The Operating Agreement of
ATC Group, and it alone, sets forth the ownership and identifies the holders
of all the membership interest of ATC Group, and no certificates or similar
instruments exist which evidence any Member's ownership of the membership
interest or identify the extent of any Member's interest. Accordingly, the
Members shall not be required to surrender any certificate or other
instrument in exchange for the Merger Shares other than due execution of this
Agreement and performance of the Member's obligations hereunder. At the
Effective Time, the Members shall cease to own an interest in or to ATC Group
and shall be entitled only to their respective Merger Shares in exchange
therefor.
2.4 Restricted Status of Merger Shares. The Merger Shares, which term
also includes the common shares into which the Preferred Merger Shares are
converted ("Conversion Shares"), have not been registered under the
Securities Act of 1933, as amended ("Act"), in reliance upon exemptions from
registration provided by Section 4(2) of the Act and/or Rule 505 or 506 under
the Act and under the securities or blue sky laws of applicable states or any
rules or regulations promulgated thereunder, on the grounds that the
transactions contemplated in this Agreement do not involve any public
offering. The Merger Shares are "restricted securities" as that term is
defined in Rule 144(a) of the General Rules and Regulations under the Act and
must be held indefinitely, unless they are subsequently registered under the
Act or an exemption from such registration requirements is available for
their resale. The prior written consent of the Company will be necessary for
any transfer of any or all of the Merger Shares, unless the shares have been
duly registered under the Act or the transfer is made in accordance with Rule
144 or other available exemption under the Act.
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2.5 Investment Legends Required. Further, any and all certificates
issued evidencing the Merger Shares shall, unless and until removed in
accordance with law, bear a restrictive legend substantially in the following
form:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), and
are "restricted securities" as that term is defined in Rule 144 under
the Act. These shares may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement under
the Act, or pursuant to an exemption from registration under the Act."
2.6 Assignment of Merger Shares. If any certificate for Merger Shares is
to be issued in a name other than that in which the membership interest is
registered as reflected in the Operating Agreement of ATC Group, it shall be
a condition of issuance thereof that the assigning Member has given clear and
unequivocal written instructions to the Company for such assignment, that
such instructions be notarized, that such transfer otherwise be proper, and
that the person requesting such transfer pay any transfer or other taxes
payable by reason of the issuance of such new certificate in a name other
than that of the assigning Member or establish to the satisfaction of
Survivor that such tax has been paid or is not payable.
2.7 No Additional Shares to be Issued. Other than shares of common stock
and Standing Options (as defined below) outstanding as of the date of this
Agreement as disclosed in writing to ATC Group or otherwise permitted by this
Agreement, the Company shall not issue any other shares of its capital stock
prior to consummation of the Merger, without the prior written consent of ATC
Group. However, ATC Group and the Members acknowledge and agree that the
Company intends to sell and issue an aggregate of 1,600,000 units ("Units")
at a price of US$.10 per Unit, each Unit consisting of (i) ONE share of
common stock, (ii) ONE Class A common stock purchase warrant exercisable
until 5:00 o'clock p.m. Eastern Time on April 30, 1999, to purchase one share
of the Company's common stock at a price of US$0.12 per share, (iii) ONE
Class B common stock purchase warrant exercisable until 5:00 o'clock p.m.
Eastern Time on April 30, 1999, to purchase one share of the Company's common
stock at a price of US$0.16 per share, and (iv) ONE Class C common stock
purchase warrant exercisable until 5:00 o'clock p.m. Eastern Time on April
30, 1999, to purchase one share of the Company's common stock at a price of
US$0.22 per share, all intended to raise funds for operations of ATC Group,
some or all of which may be sold and issued prior to the Effective Time. The
exercise prices of the warrants shall be subject to adjustment in the event
of certain corporate events and recapitalizations, and the exercise periods
may be extended in the discretion of the Company's board of directors.
2.8 Plans to Continue In Force. The 1997 Compensatory Stock Option Plan
and 1997 Employee Stock Compensation Plan of the Company shall continue in
force after the Effective Time without change.
3. OTHER AGREEMENTS.
3.1 The Company's Option to Redeem Merger Shares. The Company shall have
the right for a period of twenty-four (24) months following the Effective
Time (the "Period") to redeem and shall redeem all Merger Shares at a price
of Five Cents (US$.05) per share, held by any Member whose employment with
the Company is, during the Period, voluntarily terminated by the Member or is
involuntarily terminated by the Company for serious cause; and the Company
shall, in the event a Member's employment with the Company is involuntarily
terminated for cause during the Period, have the right to redeem and shall
redeem only part of the Merger Shares based upon proration through the date
of termination. Every Member agrees to this redemption right in favor of the
Company and agrees to execute at the Effective Time an option in favor of the
Company in the form of EXHIBIT B to this Agreement. The Members agree that
the terms and duration of the Period are reasonable. This Section 3.1 shall
not apply to any Member who is not employed by the Company or an affiliated
company during the Period. This redemption right shall not apply if
termination of a Member's employment with the Company occurs due to a merger,
stock exchange or consolidation of the Company with, or sale of the Company
or all or substantially all of its assets to, another company or persons then
unaffiliated with the Company.
"Employment with the Company" as used in this Section shall include a
Member's employment or relationship as an officer, employee, consultant or
adviser with the Company or any affiliated company, provided that the Member
renders regular services averaging in any 90-day period not less than
twenty-five (25) hours per week. "Employment with the Company" as herein used
shall not be affected by a Member's transfer of employment
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among the Company and any one or more affiliated companies. A Member's
employment with the Company shall not be deemed terminated by death, by bona
fide permanent or temporary disability or sick leave, by military leave or by
leave (e.g., jury duty) required by law or legal process; except that
incarceration for a period exceeding nine months upon conviction for any crime
or for contempt of court will constitute termination of employment with the
Company. The term "affiliated company" means Survivor, any other wholly or
principally owned subsidiary of the Company, and any joint venture or other
business venture in which the Company or an affiliated company owns at least
twenty-five percent (25%) of the equity and net profits interest. "Serious
cause" is defined on SCHEDULE 3.1 to this Agreement. "Cause" means any reason
for termination by the Company other than serious cause.
The Company is required to redeem Merger Shares of any Member whose
employment with the Company terminates during the Period, and this redemption
right shall not be waived, surrendered, forgiven or in any manner given up by
the Company. Any officer or director of the Company who does or attempts to do
so or who fails to vigorously pursue redemption when applicable shall be liable
to the Company. This Section is intended for the protection of existing
shareholders of the Company and persons who become shareholders of the Company
during the Period. The parties expressly agree that all shareholders of the
Company at the time a Member's employment with the Company terminates during the
Period are and shall be third party beneficiaries of this provision. Any one or
more of such shareholders may bring an action to compel the Company to redeem
Merger Shares when redemption is required by this Section and/or to recover on
the Company's behalf any damages suffered by failing to redeem Merger Shares
when required hereunder. A shareholder prevailing in such action shall be
entitled to reimbursement from the Company for costs and reasonable attorneys'
fees incurred in bringing such action(s). Notwithstanding anything to the
contrary contained in this Section the Company and its officers and directors
shall be excused from pursuing any redemption required by this Section if
redemption is excused by affirmative vote of a majority of the Company's
shareholders other than the Members, who shall not vote or have any right to
vote on any such proposal. This Section 3.1 shall not constitute an employment
agreement, and no provision of this Section 3.1 shall in and of itself entitle
any Member to continued employment with the Company.
3.2 Prohibited Recapitalizations. The parties acknowledge that,
following the Effective Time, the Members when acting as a group will hold
the majority of the Company's voting power. It is expressly agreed among the
parties that during the Period, the Company shall not effect any "prohibited
recapitalization," defined as any reverse split or combination of its common
shares, or any reorganization, recapitalization or other action whatsoever
which has the effect of changing the number of outstanding common shares of
the Company into a smaller number of common shares. Each Member expressly
agrees that, during the Period, he, she or it will not vote for or support
any prohibited recapitalization nor grant a proxy or other voting right to a
person other than a Member to vote at any meeting or act by written consent
on a proposal to effect a prohibited recapitalization, and will affirmatively
oppose any attempt to effect a prohibited recapitalization during the Period
unless approved as permitted in this Agreement. The term prohibited
recapitalization does not include a merger, exchange, consolidation or
similar transaction with an entity then unaffiliated with the Company or any
Member.
3.3 Options and Warrants Prohibited. During the second year of the
Period, the Company's board of directors may by unanimous action grant to one
or more of the Members options to purchase an aggregate of not more than
600,000 shares of the Company's common stock for an option period not to
exceed three years (the "Permitted Options") pursuant to the Company's 1997
Compensatory Stock Option Plan, on terms determined by the Company's full
board of directors, provided, that the price per share shall be the greater
of $3.00 per share or the fair value of the common stock on the date of
grant; "fair value" meaning the highest sale price of the common stock on the
date of award. If the common stock of the Company is split or (with
shareholder approval as herein provided) reverse split during the Period, the
number of shares subject to purchase under Permitted Options and the lowest
permissible exercise price per share as set forth in this Paragraph shall be
adjusted accordingly. Except for Permitted Options, during the Period no
stock, nor options, warrants or other rights to acquire common stock of the
Company, nor any instrument exchangeable for or convertible into common stock
or any right to acquire common stock of the Company, shall be issued, awarded
or granted to any Member.
3.4 Excessive Parachute Awards Prohibited. During the Period, no
contract, agreement or understanding of any kind shall be executed or put
into place between the Company or any affiliated company on the one hand, and
any Member on the other hand, which calls for any excessive parachute award,
whether in the form of money, money equivalents, stock or other property or
thing of value, to be paid to a Member upon termination of the
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Member's employment with the Company as defined in this Agreement. An excessive
parachute award is one the cash amount or fair value of which exceeds $10,000 at
the time of award, excluding compensation and accrued or deferred compensation
already due at the time of termination.
3.5 Excessive Compensation Prohibited. During the first twelve months of
the Period, no Member shall receive annual compensation in cash or cash
equivalents or in any other form with a cash value exceeding US$60,000 in
amount, including fees, salaries, bonuses, perquisites and the like, but
excluding commissions on sales generated; provided, that compensation may be
increased in the second twelve months of the Period to an amount not
exceeding US$70,000 for any Member. Notwithstanding the foregoing provisions
of this Section, the full board of directors may by unanimous vote award
extra compensation in excess of amounts permitted by this Section to a Member
based on extraordinary effort or results benefitting the Company, in an
amount reasonably commensurate with the effort or results.
3.6 Right to Enforce Provisions. The provisions set forth in Paragraphs
3.2 through 3.5 are intended for the protection of persons who are and during
the Period become shareholders of the Company, and all parties agree that
such provisions and the duration of the Period are reasonable. Prohibited
recapitalizations and other things and acts prohibited in Sections 3.2
through 3.5 are referred to in this paragraph as "prohibited acts." The
parties expressly agree that all shareholders of the Company at the time of
the taking of a prohibited act are or shall be third party beneficiaries of
such provisions. Any one or more of such shareholders may bring an injunctive
action to prevent a prohibited act, an action to force the Company to revoke
or rescind a prohibited act as if it had never been effected, an action to
recover on the Company's behalf any damages suffered by effecting the
prohibited act, or any one or more of such actions, or may otherwise
judicially enforce such provisions. Any shareholder prevailing in such
injunctive or other action shall be entitled to reimbursement from the
Company and all officers and directors involved in effecting the prohibited
act for costs and reasonable attorneys' fees incurred in bringing such
action(s). Notwithstanding anything contained in Sections 3.2 through 3.5,
however, a prohibited act may be effected during the Period if (i) approved
by the Board of Directors and placed by the Board of Directors before the
Company's shareholders for vote; and (ii) approved in advance by affirmative
vote of a majority of the Company's shareholders other than the Members, who
shall not vote or have the right to vote on approval of any prohibited act.
3.7 The Company, Survivor and ATC Group to Obtain Financial Statements.
The Company, Survivor and ATC Group each shall by June 30,1998, provide
financial statements, including a balance sheet as of December 31, 1997, and
statements of cash flows, operations and changes in stockholders' or members'
equity for the period from inception through December 31, 1997, together with
all required footnotes and schedules, reviewed by a certified public
accountant. Such statements shall be prepared in accordance with Item 310 of
Regulation S-B of the Securities and Exchange Commission and with generally
accepted accounting principles, applied on a consistent basis. Such
statements shall be audited as soon as practicable thereafter by independent
certified public accountants who are members of the SEC Practice Section of
the AICPA.
3.8 The Company's Capitalization at the Effective Time. At the Effective
Time, the Company shall have issued and outstanding common stock and/or
options or other rights to purchase its common stock (the "Standing Options")
totaling in the aggregate not more than 2,000,000 shares of its common stock,
excluding any common shares issued as part of the Units (defined below).
Other than such 2,000,000 shares and shares underlying options, at the
effective time the Company will not without the prior written consent of ATC
Group have issued or outstanding any other shares of stock, nor any options
or other rights to purchase its common stock, nor any instrument convertible
into or exchangeable for its common stock.
3.9 Capital Available to Survivor. The parties acknowledge that a
principal consideration for the Assimilated Companies and the Members to
enter into the Merger is for the Company to raise US$1,000,000 in cash or
other value from an offering of securities prior to deduction of
offering-related expenses and legal costs not to exceed US$100,000, to be
raised within six (6) months after the Effective Time. ATC Group and the
Members acknowledge and agree that the Company will raise such capital
through the offer and sale of the Units in an offering exempt from the Act's
registration requirements pursuant to Rule 504 under the Act. Each time the
Company transfers any of the net proceeds from the offering to Survivor, the
Company's management shall determine whether the transfer of funds to
Survivor shall be treated as a loan or a capital contribution, and the proper
documents shall be prepared and executed to memorialize the treatment
selected.
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4. ATC GROUP'S REPRESENTATIONS AND WARRANTIES. ATC Group hereby
represents and warrants that the following are true and correct as of the
date hereof and will be true and correct through the Effective Time as if
made on that date:
(a) Legal Status. ATC Group is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Maryland, with all requisite power and authority to carry on the business
in which it is engaged, to own the properties and assets it owns, and is duly
qualified and licensed to do business and is in good standing in all
jurisdictions where the nature of its business makes such qualification
necessary.
(b) Capitalization. SCHEDULE 4(b) sets forth, as of the date of this
Agreement, the names and addresses of all Members of ATC Group and the
membership interest held by each. No other class or type of membership or
equity interest in or to ATC Group exists. All of the membership interest of
ATC Group have been duly authorized, validly issued, and are fully paid and
nonassessable. Neither ATC Group has outstanding any option, warrant or
similar instrument and is not a party to or bound by any agreement,
instrument, arrangement, contract, obligation, commitment or understanding of
any character, whether written or oral, express or implied, whereby it is
bound to issue to any person a share of its membership or equity interest, or
any instrument or right convertible into or exchangeable for a share of its
membership or equity interest. ATC Group has provided to the Company an
operating agreement which among other things sets forth the names and
addresses of its Members and the membership interests held by each, which are
the same as reflected on the signature page hereto.
(c) ATC Group's Ownership of the Technology. ATC Group has solely
developed and owns all right, interest and title whatsoever in and to certain
products and technologies (collectively, the "Technology") free of any claim
of invention, contribution or other adverse claims of third persons and free
and clear of all security interests, liens, claims and encumbrances of
Members and all third persons, including all current and former employees,
officers, directors, consultants and agents of ATC Group (collectively,
"Related Parties"). The Technology is identified on SCHEDULE 4(c) to this
Agreement, which shall not disclose any proprietary information or trade
secrets. The Company's ownership of the Technology is not subject to any
legitimate claim of ownership, interest, invention, contribution or other
claim by any current or former Related Party of ATC Group, except as
disclosed in writing to the Company. Nothing in this Agreement shall be
deemed to be a representation or warranty that ATC Group is the owner of any
part or component of the Technology licensed or otherwise held or used by ATC
Group subject to the ownership rights of a third party, provided that such
part or component is described on SCHEDULE 4(c) to this Agreement, along with
the name of the owner and the nature of the license or other right to it held
by ATC Group.
(d) Litigation. There are no claims, actions, suits, proceedings or
investigations pending or threatened against or affecting ATC Group or any of
its properties or assets in any court or by or before any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or other instrumentality, domestic or foreign, or arbitration tribunal or
other forum which, if determined adversely to ATC Group, would materially
affect its business, prospects, properties or financial condition or ATC
Group's right to conduct its business as being conducted or expected to be
conducted, except as disclosed on SCHEDULE 4(d). There are no judgments,
decrees, injunctions, writs, orders or other mandates outstanding to which
ATC Group is a party or by which it is bound or affected, except as disclosed
on SCHEDULE 4(d). Copies of material pleadings shall accompany such schedule.
(e) Estoppel. All statements made in this Agreement, or in any Exhibit
or Schedule hereto, or in any document or certificate executed and delivered
herewith, by ATC Group are true, correct and complete as of the date of this
Agreement and will be so as of the Effective Time. All statements contained
in any certificate made by any official of ATC Group and delivered to the
Company shall be deemed representations and warranties of ATC Group.
(f) Compliance with Laws and Permits. ATC Group has complied in all
material respects with its articles of organization and operating agreement
(each as amended to date), all applicable laws, regulations and rules, all
applicable orders, judgments, writs, decrees or injunctions of federal, state
and municipal governments or any department, agency or other instrumentality
thereof, domestic or foreign, applicable to its business or properties, and
has not done or omitted to do any act or acts which singly or in the
aggregate are in violation of any
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of the foregoing. ATC Group has obtained all federal, state and municipal
licenses and permits necessary to its properties and operations, is not in
violation of any such license or permit and has not received any notification
that any revocation or limitation thereof is pending or threatened.
(g) No Undisclosed Material Liabilities. ATC Group has not incurred any
liabilities or obligations whatever (whether direct, indirect, accrued,
contingent, absolute, secured or unsecured or otherwise), including
liabilities as guarantor or surety or otherwise for the obligations of others
and tax liabilities due or to become due, except as described on SCHEDULE
4(g). There is no basis for any material claim against ATC Group's assets
which involves an amount in excess of $10,000, except as disclosed in writing
to the Company.
(h) Material Transactions and Adverse Changes. Except as has been
disclosed in writing to the Company, ATC Group has not and as of the
Effective Time will not have: (i) suffered any materially adverse change in
its assets taken as a whole; (ii) suffered any damage or destruction in the
nature of a casualty loss to any one or more of its assets, whether or not
covered by insurance, which singly or in the aggregate are materially adverse
to the properties or business of ATC Group; (iii) made any change in any
method of accounting or accounting practice, including the revaluation of any
of its assets; or (iv) agreed in writing or otherwise to take any action
prohibited in this Paragraph 4(h).
(i) Taxes. All income, excise, unemployment, social security,
occupational, franchise, ad valorem and other taxes, duties, assessments or
charges levied, assessed or imposed upon ATC Group by the United States or by
any state or municipal government or subdivision or instrumentality thereof
have been duly paid or adequately provided for, and all required tax returns
or reports concerning any such items have been duly filed. Adequate reserves
have been established for all income and other tax liabilities in its
financial statements for the period then ended and all preceding periods,
except as otherwise disclosed on SCHEDULE 4(i). ATC Group has not waived any
statute of limitations with respect to any tax liability whatever for any
period prior to the date of this Agreement or agreed to any extension of time
with respect to a tax assessment or liability. No consents have been filed by
ATC Group pursuant to Paragraph 341(f) of the Internal Revenue Code of 1986,
as amended.
(j) Contracts. Attached to this Agreement as SCHEDULE 4(j) is a listing
of all contracts to which ATC Group is a party. With respect to each such
contract, except as disclosed in writing to the Company (i) ATC Group is not
in default, (ii) the contract is legal, valid, binding, in full force and
effect and enforceable in accordance with its terms, and (iii) the contract
will continue after the Effective Time to be legal, valid, binding, in full
force and effect in accordance with its terms. Contracts or commitments
described in any other schedule need not be disclosed in such schedule.
(k) Indebtedness to or from Affiliates. Except as disclosed on SCHEDULE
4(k), ATC Group is not indebted to any officer, director, employee or
shareholder thereof as of the date of this Agreement, and no money or
property is owed to ATC Group by any officer, director, employee or
shareholder thereof, and none will be owed as of the Effective Time.
(l) Financial Statements and Records. ATC Group will provide to the
Company its financial statements back to inception. All such statements shall
fairly present the assets, liabilities and financial condition of ATC Group
as of the respective dates thereof, and all shall have been prepared in
conformity with generally accepted accounting principles, consistently
applied during the periods covered. For purposes of this Agreement, such
statements shall include all notes thereto. ATC Group also will furnish to
the Company copies of its other books, accounts and records.
(m) Employees and Salaries. ATC Group will provide to the Company a list
of all officers and employees of ATC Group, reflecting the job description
and salary of each person.
(n) Insurance. Attached hereto as Schedule 4(n) is a list of all
insurance policies of ATC in effect.
(o) Documents Genuine. All originals and/or copies of ATC Group's
articles of organization and operating agreement, each amended to date, and
all minutes of meetings and written consents in lieu of meetings of Members,
managers, board of governors and committees of governors of ATC Group,
financial data, and any and
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all other documents, material, data, files, or information which have been or
will be furnished to the Company, are and will be true, complete, correct and
unmodified originals and/or copies of such documents, information, data, files
or material.
(p) Authorization and Validity. The execution, delivery and performance
by ATC Group of this Agreement and any other agreements contemplated hereby,
and the consummation of the transactions contemplated hereby and thereby,
have been duly authorized by ATC Group and all necessary approvals of the
shareholder(s) of ATC Group will have been obtained by the Effective Time.
This Agreement and any other agreement contemplated hereby have been or will
be as of the Effective Time duly executed and delivered by ATC Group and
constitutes and will constitute legal, valid and binding obligations of ATC
Group, enforceable against it in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies.
(q) Consents; Approvals; Conflict. Except for compliance with applicable
federal and state securities laws, no consent, approval, authorization or
order of any court or governmental agency or other body is required for the
Members to consummate the Merger. Neither the execution, delivery,
consummation or performance of this Agreement shall conflict with, or
constitute a breach of, and no prior approval is necessary by or under, ATC
Group's articles of organization, operating agreement, or any note, mortgage,
indenture, deed of trust, lease, obligation, or other agreement or instrument
to which ATC Group is a party.
(r) Intellectual Property. Attached to this Agreement as SCHEDULE 4(r)
is a description of all letters patent and patents pending, trademarks,
registered trademarks, servicemarks, copyrights, trade names and licenses,
owned or held by the ATC Group (or any shareholder or affiliate of ATC Group
intended to be used in ATC Group's business), and applications pending
therefor, relating to the Technology and otherwise owned by ATC Group. Copies
of each such right or application shall be furnished to the Company. ATC
Group has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any patent, trademark, trade name, servicemark or
copyright belonging to any third person, and ATC Group has never received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement or misappropriation. ATC Group owns or holds adequate licenses
or other rights to use all patents, trademarks, trade names, and copyrights
used in its business as now conducted, and such use does not conflict with,
infringe upon or violate the rights of any third party in a manner which
might have a materially adverse effect upon ATC Group.
(s) Restrictive Covenants. Prior to the consummation of the proposed
transaction, ATC Group shall conduct its business in the ordinary and usual
course without unusual commitments and in compliance with all applicable
laws, rules, and regulations. Furthermore, ATC Group will not, without the
prior written consent of the Company, (i) make any changes in its capital
structure, (ii) incur any liability or obligation other than current
liabilities incurred in the ordinary and usual course of business, (iii)
incur any indebtedness for borrowed money, (iv) make any loans or advances
other than advances to employees in the ordinary and usual course of
business, (v) declare or pay any dividend or make any other distribution with
respect to its capital stock, (vi) issue, sell, or deliver or purchase or
otherwise acquire for value any of its stock or other securities, (vii)
mortgage, pledge, or subject to encumbrance any of its assets or properties,
(viii) sell or transfer any of its assets or properties except in the
ordinary and usual course of business, (ix) make any investment of a capital
nature, (x) adopt or amend in any material respect any collective bargaining
agreement or employee benefit plan, or (xi) enter into any contract,
agreement, or other commitment which is material to the business, assets,
properties, or financial position of ATC Group.
(t) Disclaimer of Further Warranties; Etc. Except as expressly set forth
in this Agreement and the Schedules and Exhibits hereto, the Company and
Survivor have made no other representation or warranty to ATC Group or the
Members in connection with the Merger. ATC Group's decision to enter into the
Merger is based upon its own independent judgment and investigation and not
on any representations and warranties of the Company or Survivor other than
those expressly stated in this Agreement and in the Schedules and Exhibits
hereto.
5. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS. The Members each
represent and warrant to the Company that the following are true and correct
as of the date hereof and will be true and correct through the Effective Time
as if made on that date:
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(a) Each Member owns of record and beneficially all the ATC Interest
respectively shown next to his, her or its name on Schedule 4(b) to this
Agreement; and his, her or its ATC Interest are free and clear of all liens,
claims, rights or other encumbrances whatever and of all options and similar
rights of third persons; and no person has or will have any right in and to
such shares except as are created by force of law under any marital,
community property or similar rights. No third party has or at the Effective
Time will have any right of first refusal, pre-emptive right, option or
similar right to acquire the Member's ATC Interest except as disclosed to the
Company in writing prior to the Effective Time.
(b) Each Member has the full right, power and legal capacity to enter
into this Agreement and transfer his ATC Interest to the Company. As to each
Member which is a corporation or other entity, all requisite corporate or
equivalent action has been taken necessary to approve the execution and
performance of this Agreement.
(c) Each Member represents and warrants that he, she or it is not now
insolvent and will not be insolvent after exchanging the ATC Interest in the
Merger, and each Member is receiving new consideration at least equal to the
full and fair value of the ATC Interest being sold.
(d) ATC Group and the Members understand and acknowledge that (i) the
Company is a public shell with no current operations or revenues (ii) the
Company has no cash or other assets and must raise cash from the sale of the
Units or otherwise, and (iii) the Company does not have full-time or
professional management, and the officers and directors of the Company after
the Effective Time will principally be the current officers of ATC Group.
Each Member recognizes that the Merger Shares are speculative and involve a
high degree of risk, and that the prospects and future success of the Company
depend principally upon the Members of ATC Group.
(e) Each Member acknowledges and agrees that he, she or it or his, her
or its representatives have been furnished with substantially the same kind
of information regarding the Company and its business, assets, financial
condition and plan of operation as would be contained in a registration
statement and included prospectus prepared in connection with a public
offering of the Merger Shares. Each Member further represents that he, she or
it has had an opportunity to ask questions of and receive answers from the
Company regarding the Company and its business, assets, results of
operations, financial condition and plan of operation and the terms and
conditions of the Merger and the issuance of the Merger Shares.
(f) In connection with the issuance and delivery of the Merger Shares,
each Member understands and acknowledges that the Merger Shares have not been
and will not be registered under the Act in reliance upon exemptions from
registration provided by Section 4(2) of the Act and Rule 506 under the Act
and under the securities or blue sky laws of any state or any rules or
regulations promulgated thereunder, on the grounds that the transactions
contemplated in this Agreement do not involve any public offering. Each
Member is acquiring the Merger Shares for his, her or its own account, and
not for the account of any other person and not for distribution, assignment
or resale to others, or for pledge or hypothecation, and no other person has
or is intended to have a direct or indirect ownership or contractual interest
in the Merger Shares except as may exist or arise under marital property laws
or otherwise by operation of law. Each Member acknowledges that the Merger
Shares are 'restricted securities' as that term is defined in Rule 144(a) of
the General Rules and Regulations under the Act and understands that the
Merger Shares must be held indefinitely, unless they are subsequently
registered under the Act or an exemption from such registration requirements
is available for their resale. Each Member understands and agrees that the
prior written consent of the Company will be necessary for any transfer of
the Merger Shares, unless the shares have been duly registered under the Act
or the transfer is made in accordance with Rule 144 or other available
exemption under the Act. Each Member further understands that every
certificate issued by the Company evidencing Merger Shares will bear a legend
restricting transfer as provided in this Agreement.
(g) The Member, alone or together with the Member's adviser(s), has such
knowledge and experience in financial, tax and business matters as to enable
the Member to utilize the information made available by the Company, in
connection with the Merger and issuance of the Merger Shares, to evaluate the
merits and risks of acquiring the Merger Shares and to make an informed
investment decision with respect thereto.
(h) All information which each Member has provided or will provide to
the Company is or will be correct and complete as of the date furnished to
the Company, and, if there should be any material change in
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such information prior to the Effective Time as to a Member, that Member will
immediately provide the Company with such information.
(i) No Member was solicited by the Company by any form of general
solicitation or general advertising, including but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or made available over telephone lines by any information service, or (ii)
any seminar or meeting whose attendees had been invited by any means of
general solicitation or general advertising.
(j) Except as expressly set forth in this Agreement and the Schedules
and Exhibits hereto, the Company has not made any representation or warranty
to any Member in connection with this Agreement, and the Company has made no
communication to any Member that constitutes tax or investment advice. Each
Member's decision to approve the Merger is based upon his, her or its own
independent judgment and investigation and not on any representations and
warranties of the Company or Survivor other than those expressly stated in
this Agreement and in the Schedules and Exhibits hereto.
(k) To the best of the knowledge of each Member, all of the
representations and warranties of ATC Group set forth in this Agreement are
accurate and true.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY and SURVIVOR. Unless
specifically stated otherwise, the Company and Survivor represent and warrant
to the other parties that the following are true and correct as of the date
of this Agreement and will be true and correct through the Effective Time.
(a) Organization and Good Standing. The Company is and on the Effective
Time will be duly organized, validly existing and in good standing under the
laws of the State of Maryland. The Company and Survivor have no assets or
liabilities and currently conduct no business in any state.
(b) Authorized Capitalization. As provided in its Articles of
Incorporation, the authorized capital stock of the Company consists of
70,000,000 shares, of which 50,000,000 shares without par value are
designated as common stock, of which 2,000,000 shares or options to purchase
shares are outstanding, and 20,000,000 shares without par value are
designated as preferred stock, none of which are issued or outstanding, but
2,100,000 shares of which shall be designated as the Series A, Voting
Convertible Preferred Stock, the terms of which are set forth as EXHIBIT A to
this Agreement, shall be issued in the Merger. Survivor has or will have 100
shares of common stock without par value authorized by the Effective Time,
all of which will be held by the Company.
(c) Subsidiaries. The Company has and at the Effective Time will have no
subsidiaries other than Survivor.
(d) Documents Genuine. All originals and/or copies of the Company's and
Survivor's articles of incorporation and bylaws, each amended to date, and
all minutes of meetings and written consents in lieu of meetings of
shareholders, directors and committees of directors of the Company and
Survivor, financial data, and any and all other documents, material, data,
files, or information which have been or will be furnished to ATC Group, are
and will be true, complete, correct and unmodified originals and/or copies of
such documents, information, data, files or material.
(e) Litigation. There are no claims, actions, suits, proceedings or
investigations pending or threatened against or affecting the Company or
Survivor in any court or by or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, or arbitration tribunal or other forum.
There are no judgments, decrees, injunctions, writs, orders or other mandates
outstanding to which the Company or Survivor is a party or by which it is
bound or affected.
(f) Compensation Plans. Except as described below, the Company and
Survivor have not authorized and do not have in effect any stock option or
stock purchase plan, dividend reinvestment plan or similar plan pursuant to
which any person is entitled to acquire capital stock of the Company or
Survivor or any securities
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convertible into or exchangeable for its capital stock. The Company has
delivered to ATC Group a copy of each plan described below. No options or shares
will be awarded pursuant to either such plan without the prior written
authorization of ATC Group.
(i) The Company has in effect a 1997 Compensatory Stock Option
Plan, covering 1,500,000 shares of the Company's common stock. No
options have been granted or shares issued pursuant to this plan, and
none will be granted or issued prior to the Effective Time.
(ii) The Company has in effect a 1997 Employee Stock Compensation
Plan covering 1,000,000 of the Company's common shares, pursuant to
which the Company may award shares of common stock to persons defined
therein as employees. No shares have been awarded pursuant to such plan
or will be awarded prior to the Effective Time.
(g) Authorization and Validity. The execution, delivery and performance
by the Company and Survivor of this Agreement and any other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by all requisition corporate
action of the Company and Survivor, respectively. This Agreement and any
other agreement contemplated hereby have been or will be as of the Effective
Time duly executed and delivered by the Company and Survivor and constitutes
and will constitute a legal, valid and binding obligation, enforceable
against it in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
(h) Financial Statements. The Company and Survivor have no material
assets or liabilities. The Company and Survivor will provide to ATC Group
their respective financial books and records and such financial statements,
back to inception, as exist. All such statements shall fairly present the
assets, liabilities and financial condition of the Company or Survivor as of
the respective dates thereof, and all shall have been prepared in conformity
with generally accepted accounting principles, consistently applied during
the periods covered. For purposes of this Agreement, such statements shall
include all notes thereto.
(i) No Undisclosed Material Liabilities. The Company and Survivor have
not incurred any liabilities or obligations whatever (whether direct,
indirect, accrued, contingent, absolute, secured or unsecured or otherwise),
which singly or in the aggregate are material to it, except as disclosed in
its financial statements or otherwise disclosed in writing to ATC Group.
(j) Taxes. All income, excise, unemployment, social security,
occupational, franchise and other taxes, duties, assessments or charges
levied, assessed or imposed upon the Company or Survivor by the United States
or by any state or municipal government or subdivision or instrumentality
thereof have been duly paid or adequately provided for, and all required tax
returns or reports concerning any such items have been duly filed or will be
so filed.
(k) Indebtedness to or from Affiliates. The Company and Survivor are not
and will not be indebted to any officer, director, employee or shareholder
thereof as of the Effective Time. No money or property is owed to the Company
or Survivor by any officer, director, employee or shareholder thereof, and
none will be owed as of the Effective Time.
(l) Salaries. No person currently receives a salary or other cash
compensation from the Company or Survivor, and no person will receive a
salary or other cash compensation from the Company or Survivor prior to the
Effective Time.
(m) Insurance. The Company and Survivor do not now have any insurance
policy in effect and will not obtain any insurance policy prior to the
Effective Time.
(n) Books, Records and Accounts. Except for the minute book and
accounting and corporate records of the Company and Survivor furnished to ATC
Group, there are no other books, records or accounts of the Company or
Survivor. Other than as disclosed on any Schedule or Exhibit hereto or
otherwise disclosed in writing to the Assimilated Companies, neither the
Company nor Survivor is party to any material contract or agreement.
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(o) Estoppel. All statements made herein, or in any Exhibit or Schedule
hereto, or in any document or certificate executed and delivered herewith by
the Company and Survivor are true, correct and complete as of the date of
this Agreement and will be so as of the Effective Time. All statements
contained in any certificate made by any officer or director of the Company
or Survivor and delivered to ATC Group or a Member shall be deemed
representations and warranties of the corporation for which they act.
(p) Consents; Approvals; Conflict. No consent, approval, authorization
or order of any court or governmental agency or other body is required for
the Company to execute and perform its obligations under this Agreement.
Neither the execution, delivery, consummation or performance of this
Agreement shall conflict with, constitute a breach of the Company's articles
of incorporation and bylaws, as amended to date, or any note, mortgage,
indenture, deed of trust or other agreement of instrument to which the
Company is a party or by which it is bound nor, to the best of the Company's
knowledge and belief, any existing law, rule, regulation, or any decree of
any court or governmental department, agency, commission, board or bureau,
domestic or foreign, having jurisdiction over the Company.
(q) Compliance with Laws, Etc. The Company and Survivor have complied in
all material respects with their respective articles of incorporation and
bylaws (each as amended to date), all applicable laws, regulations and rules,
all applicable orders, judgments writs, decrees or injunctions of federal,
state and municipal governments or any department, agency or other
instrumentality thereof, domestic or foreign, applicable to its respective
business or properties, and has not done or omitted to do any act or acts
which singly or in the aggregate are in violation of any of the foregoing.
(r) Restrictive Covenants. Prior to the consummation of the proposed
Merger, the Company shall not engage in any business or activity other than
attempting to consummate the Merger and raise the cash required by this
Agreement. Furthermore, the Company will not, without the prior written
authorization of ATC Group, (i) make any changes in its capital structure,
(ii) incur any liability or obligation other than current liabilities
incurred in the ordinary and usual course, (iii) incur any indebtedness for
borrowed money, (iv) make any loans or advances, (v) declare or pay any
dividend or make any other distribution with respect to its capital stock,
(vi) issue, sell, or deliver or purchase or otherwise acquire for value any
of its stock or other securities, (vii) make any investment of a capital
nature, or (viii) enter into any contract, agreement, or other commitment
which is material to the Company.
(s) Disclaimer of Further Warranties; Etc. Except as expressly set forth
in this Agreement and the Schedules and Exhibits hereto, ATC Group has made
no other representation or warranty to the Company or Survivor in connection
with the Merger. The Company's and Survivor's decision to enter into the
Merger is based upon their own independent judgment and investigation and not
on any representations and warranties of ATC Group other than those expressly
stated in this Agreement and in the Schedules and Exhibits hereto.
8. CONDITIONS TO OBLIGATIONS OF THE PARTIES; DELIVERIES. All obligations
of the parties under this Agreement are subject to the fulfillment, prior to
the Effective Time, of all conditions precedent and to performance of all
covenants and agreements and completion of all deliveries contemplated
herein, unless specifically waived in writing by the party entitled to
performance or to demand fulfillment of the covenant or delivery of the
documents.
8.1 Documents to be Delivered to the Company. Prior to the Effective
Time, the following documents shall be delivered to the Company by ATC Group
or the Members, as the case may be, which documents shall be satisfactory in
form and content to the Company's counsel:
(a) Certificates executed by the President and, if one exists, the chief
financial or accounting officer or equivalent, of ATC Group, certifying that
the representations and warranties of ATC Group contained in this Agreement
and the information set forth in all Schedules and Exhibits of ATC Group
hereto are then true and correct and that it has complied with all agreements
and conditions required by this Agreement and all related agreements to be
performed or complied with by it.
(b) A copy of the resolution or other action of the managers or board of
governors or other governing body of ATC Group approving the execution and
performance of this Agreement.
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(c) Copies of written consents of the Members in lieu of a meeting
approving the execution of this Agreement and consummation of the Merger.
(d) All Schedules and Exhibits called for in this Agreement, properly
filled out.
(e) Options to Redeem Merger Stock executed by all Members who will be
officers and directors of the Company after the Effective Time.
8.2 Documents to be Delivered to ATC Group and the Members. At or after
the Effective Time the following documents shall be delivered to ATC Group
and the Members by the Company or Survivor, as applicable, which documents
shall be satisfactory in form and content to ATC Group's counsel:
(a) To the Members, certificates evidencing the Merger Shares in the
proper denominations.
(b) To ATC Group, a certificate executed by the Company and Survivor
dated the Effective Time, certifying that their respective representations
and warranties contained in this Agreement and the information set forth in
all Schedules and Exhibits of the Company are then true and correct and that
the Company and Survivor each have complied with all agreements and
conditions required by this Agreement to be performed or complied with by it.
(c) To ATC Group, a copy of the directors' resolution or the minutes of
the meeting of the directors of the Company and Survivor approving the
execution and performance of this Agreement.
(d) All Schedules and Exhibits called for in this Agreement, properly
filled out.
8.3 Conditions Precedent. The obligations of the parties under this
Agreement are subject to the satisfaction of the following conditions (in
addition to other conditions and terms of this Agreement), unless waived in
writing, on or prior to the Effective Time:
(a) Representations and Warranties Correct. The representations and
warranties of every party contained in this Agreement shall be in all
material respects true and correct on and as of the Effective Time as if made
on such date.
(b) Compliance. The Company, ATC Group and the Members each shall have
performed all covenants and agreements, satisfied all conditions and complied
with all other terms and provisions of this Agreement to be respectively
performed, satisfied or complied with by it as of the Effective Time, and the
statement designating and establishing the Series A, Voting Convertible
Preferred Stock shall have been filed with the Maryland Secretary of State.
(c) No Errors or Misrepresentations. The Company shall not have
discovered any material error, misstatement or omission in or failure of any
representation or warranty made by any of the other parties, and ATC Group
shall not have discovered any material error, misstatement or omission in or
failure of any representation or warranty made by the Company or Survivor.
(d) No Material Change. Between the date of this Agreement and the
Effective Time, neither ATC Group, the Company nor Survivor shall have
incurred any liabilities or obligations, direct or contingent, and shall not
have done any act or engaged in any course of conduct prohibited herein
without the necessary consent of the other party.
(e) Legal Matters. All legal matters in connection with this Agreement
and the consummation of all transactions herein contemplated, and all
documents and instruments delivered in connection herewith shall be
reasonably satisfactory in form to each party.
(f) No Litigation or Proceedings. No injunction or restraining order of
any federal or state court is in effect which prevents the Merger or issuance
and delivery of the Merger Shares, and no lawsuit or other
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proceeding has been filed by any person by the Effective Time contesting or
attempting to enjoin either action, and no action is taken and no law is passed
after the date of this Agreement which prevents the Merger.
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9. OTHER COVENANTS OF THE PARTIES. The parties agree that, prior to the
Effective Time:
(a) Effectuation of this Agreement. The parties hereto each will use
their best efforts to cause this Agreement and all related agreements to
become effective, and all transactions herein and therein contemplated to be
consummated, in accordance with its and their terms, to obtain all required
consents, waivers and authorizations of governmental entities and other third
parties, to make all filings and give all notices to those regulatory
authorities or other third parties which may be necessary or reasonably
required in order to effect the transactions contemplated in this Agreement,
and to comply with all federal, local and state laws, rules and regulations
as may be applicable to the contemplated transactions.
(b) Restriction on Action. The parties each agree that he, she or it
will not do any thing or act prohibited by this Agreement or any related
agreement, or fail to do any thing or act which he, she or it has undertaken
to do in this Agreement or any related agreement.
(c) Access and Information. To the extent each party deems necessary for
purposes of this Agreement and the transactions contemplated hereby, ATC
Group, the Company and Survivor each shall permit the other, its counsel,
accountants and other representatives to have full access, upon reasonable
notice and during regular business hours, throughout the period prior to the
Effective Time, to its equipment, assets, properties, books and records, and
will cause to be furnished to the requesting party and its representatives
during such period all information it or its representatives may reasonably
request.
(d) No-Shop Provision. ATC Group and the Members agree that, from the
date hereof until the Effective Time or termination of this Agreement,
neither will take any action, directly or indirectly, to solicit indications
of interest in, or offers for, any transaction similar to the Merger or any
investment into ATC Group from anyone other than the Company. ATC Group
agrees promptly to inform the Company of any offers or solicitations for a
similar transaction, including the terms thereof, made by any third party,
provided, that ATC Group is not obligated to inform the Company of casual
oral offers or solicitations not formally considered by ATC Group. Violation
by ATC Group of any of the requirements of this paragraph shall constitute a
material breach of this Agreement.
(e) Confidentiality. ATC Group, the Company and Survivor
covenant that they each will not disclose any confidential information of the
other party, except to its officers, directors, attorneys, accountants, and
employees involved in these transactions, and only then on the condition that
such individuals not disclose the information disclosed to them. Notwithstanding
the foregoing, the terms of this Agreement, or of any of the transactions
contemplated hereby, may be disclosed following execution hereof, provided that
each party will provide at least twenty-four hours' notice to the other party
prior to making the initial public announcement regarding the transaction. In
addition, either party may disclose this Agreement or any part hereof to any
third party at any time if required to do so by law, this Agreement or other
contractual obligation.
10. INDEMNIFICATION.
10.1 Indemnification by ATC Group. ATC Group agrees to defend, indemnify
and hold the Company and Survivor, any subsidiary or affiliate thereof, and
its respective successors, officers, directors and controlling persons (the
"Indemnified Company Group") harmless from and against any and all losses,
liabilities, damages, costs or expenses (including reasonable attorney's
fees, penalties and interest) payable to or for the benefit of, or asserted
by, any party resulting from, arising out of, or incurred as a result of (a)
the breach of any representation made by ATC Group or a Member herein or in
any Schedule, Exhibit or related agreement; (b) the breach of any warranty or
covenant made by ATC Group or a Member herein or in any Schedule, Exhibit or
related agreement; or (c) any claim, whether made before or after the date of
this Agreement, or any litigation, proceeding or governmental investigation
against ATC Group, whether commenced before or after the date of this
Agreement, arising out of the business of ATC Group or arising out of any act
or occurrence prior to, or any state of facts existing as of the Effective
Time.
10.2 Indemnification by the Company. The Company agrees to defend,
indemnify and hold ATC Group, any subsidiary or affiliate thereof, and its
respective successors, officers, directors and controlling persons
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(the "Indemnified ATC Group") harmless from and against any and all losses,
liabilities, damages, costs or expenses (including reasonable attorney's fees,
penalties and interest) payable to or for the benefit of, or asserted by, any
party resulting from, arising out of, or incurred as a result of (a) the breach
of any representation made by the Company or Survivor herein or in any Schedule,
Exhibit or related agreement; (b) the breach of any warranty or covenant made by
the Company or Survivor herein or in any Schedule, Exhibit or related agreement;
or (c) any claim, litigation, proceeding or governmental investigation against
the Company or Survivor, whether commenced before or after the date of this
Agreement, arising out of any act or occurrence prior to, or any state of facts
existing as of the Effective Time.
10.3 Survival of Covenants and Warranties. The representations,
warranties, covenants and agreements made by ATC Group on the one hand, and
the Company on the other hand, shall survive the Effective Time and shall be
fully enforceable at law or in equity against such other party and its
successors and assigns for, a period of one year after the Effective Time.
Any investigation at any time made by or on behalf of (or any disclosure to)
any party hereto shall not diminish in any respect whatsoever its right to
rely on the representations and warranties of the other party hereto.
10.4 Notice of Claims. The Company and ATC Group each agree to give
prompt written notice to the other of any claim against the party giving
notice which might give rise to a claim by it against the other party hereto
based upon the indemnity provisions contained herein, stating the nature and
basis of the claim and the actual or estimated amount thereof; provided,
however, that failure to give such notice will not affect the obligation of
the indemnifying party to provide indemnification in accordance with the
provisions of this Section 10 unless, and only to the extent that, such
indemnifying party is actually prejudiced thereby. In the event that any
action, suit or proceeding is brought against any member of the Indemnified
ATC Group or the Indemnified Company Group with respect to which any party
hereto may have liability under the indemnification provisions contained
herein, the indemnifying party shall have the right, at its sole cost and
expense, to defend such action in the name of or on behalf of the indemnified
party and, in connection with any such action, suit or proceeding, the
parties hereto agree to render to each other such assistance as may
reasonably be required in order to ensure the proper and adequate defense of
any such action, suit or proceeding; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate because of actual or potential differing interests between such
indemnified party and any other party represented by such counsel. Neither
party hereto shall make any settlement of any claim which might give rise to
liability of the other party under the indemnification provisions contained
herein without the written consent of such other party, which consent such
other party covenants shall not be unreasonably withheld.
11. TERMINATION OF THIS AGREEMENT.
11.1 Grounds for Termination. This Agreement shall terminate:
(a) By mutual written consent of the Company and ATC Group;
(b) By ATC Group or the Company, if:
(i) all the conditions precedent to its respective obligations
hereunder have not been satisfied or waived prior to the Effective Time,
as it may be accelerated or extended, or if any Member refuses to
execute this Agreement;
(ii) any party shall have defaulted or refused to perform in any
material respect under this Agreement, or if the Company or ATC Group
should have reasonable cause to believe there has been a material
failure or breach of, any representation or warranty by the other party,
or if it appears that either ATC Group, Survivor or the Company has
committed any unlawful acts affecting the other party;
(iii) the Merger and other transactions contemplated in this
Agreement and related agreements have not been consummated on or before
June 12, 1998, OR
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(iv) either the Company or ATC Group shall reasonably determine
that the transactions contemplated in this Agreement have become
inadvisable by reason of the institution or threat by any federal, state
or municipal governmental authorities or by other person whatever of a
formal investigation or of any action, suit or proceeding of any kind
against either or both parties which in one party's reasonable belief is
material in light of the other party's business, prospects, properties
or financial condition;
11.2 Manner of Termination. Any termination of this Agreement shall be
made in accordance with the above listed grounds and, if terminated by ATC
Group or the Company, shall be accompanied by a copy of the resolution of the
terminating party's board of directors. Written notice of termination shall
be given to the other party as required in this Agreement as promptly as is
practical under the circumstances. Upon a party's receipt of such termination
notice, this Agreement shall terminate and the transactions herein
contemplated shall be abandoned without further action by the parties.
11.3 Survival of Confidentiality Provisions. Upon termination of this
Agreement for any reason, (i) the covenants of the parties concerning the
confidentiality and proprietary nature of all documents and other information
furnished hereunder shall remain in force except as to information which has
otherwise become public knowledge, and (ii) each party shall promptly return
all documents received from the other party in connection with this
Agreement. This Paragraph constitutes a mutual covenant of the parties, and
either may judicially enforce it.
12. MISCELLANEOUS PROVISIONS.
(a) Assignment. Neither this Agreement nor any right created hereby or
in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto.
(b) Parties in Interest; No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Neither this Agreement
nor any other agreement contemplated hereby shall be deemed to confer upon
any person not a party hereto or thereto any rights or remedies hereunder or
thereunder, except for persons or classes of person expressly named in this
Agreement as third party beneficiaries.
(c) Entire Agreement. This Agreement and the agreements contemplated
hereby constitute the entire agreement of the parties regarding the subject
matter hereof, and supersede all prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
(d) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Further, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid and
enforceable.
(e) Interpretation. This Agreement shall be governed by and construed
under the laws of the State of Maryland and shall be interpreted as if both
parties participated equally in its drafting. The captions in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
any of the terms or provisions hereof. Whenever the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and plural.
Use of the words "herein", "hereof", "hereto" and the like in this Agreement
shall be construed as references to this Agreement as a whole and not to any
particular provision in this Agreement, unless otherwise noted.
(f) Notice. Any notice or communication hereunder or in any agreement
entered into in connection with the transactions contemplated hereby must be
in writing and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return
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receipt requested, by telefax transmission or by delivery by use of a messenger
which regularly retains its delivery receipts. Such notice shall be deemed
received on the date on which it is delivered to the addressee. For purposes of
notice, the addresses of the parties shall be, if to a Member, sent to ATC Group
for forwarding, and:
If to ATC Group: 20010 Century Boulevard, Suite 300
Germantown, Maryland 20874
Attn: Thomas Yang, President
If to the Company or Survivor: 90 Madison Street, Suite 707
Denver, Colorado 80206
President
(g) No Finders. Each party represents and warrants to the others and
agrees that it has not employed or engaged, and will not employ or engage,
any person as a finder or broker in connection with the transactions
contemplated herein, and that no person is entitled to compensation as a
finder or broker. Each party hereby indemnifies the other parties and holds
the other parties harmless from and against any claims of any third persons
claiming to have acted as a finder or broker in connection with the
transactions herein contemplated, and such indemnity shall include all
expenses, costs and damages arising from or related to such claims, including
reasonable attorneys fees.
(h) Expenses. Except as otherwise provided in this letter, the Company,
Survivor and ATC Group shall each bear their own fees and expenses incurred
in connection with the transactions contemplated herein.
(i) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Execution and delivery
of this Agreement by exchange of facsimile copies bearing facsimile signature
of a party shall constitute a valid and binding execution and delivery of
this Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
(j) Prevailing Pony Clause. In the event of any litigation or proceeding
arising as a result of the breach of this Agreement or the failure to perform
hereunder, or failure or untruthfulness of any representation or warranty
herein, the party or parties prevailing in such litigation or proceeding
shall be entitled to collect the costs and expenses of bringing or defending
such litigation or proceeding, including reasonable attorneys' fees, from the
party or parties not prevailing.
(k) Relationship of the Parties. Nothing in this Agreement is intended
to be construed so as to suggest that the parties hereto are partners or
joint venturers, or that any party or its employees is the employee or agent
of the other. Neither the ATC Group on one hand nor the Company or Survivor
on the other hand has any express or implied right or authority under this
Agreement to assume or create any obligations on behalf of or in the name of
the other party to any contract, agreement, arrangement, understanding or
undertaking with any third party.
(l) Schedules, etc. Each Exhibit to this Agreement shall be initialed by
ATC Group, Survivor and the Company, and each Schedule must be initialed by
the party providing it. A Schedule provided by the Members must be initialed
by all Members. Any Schedule which does not apply must be supplied and
labeled as not applicable. The parties agree that the information contained
in every Schedule shall be updated as of a date as close as possible to the
Effective Time and that each Schedule must be accurate and complete as of the
Effective Time. Each party signing this Agreement represents and warrants, to
all other parties, by such signature that he, she or it has carefully read
this Agreement in its entirety and understands the provisions of this
Agreement.
(m) No Advice Given. ATC Group and the Members acknowledge and agree
that they have neither asked for nor received any legal or tax advice from
the Company, Survivor or John D. Brasher, Jr. or any other person associated
with the Company, in regard to this Agreement or the transactions herein
contemplated, and have instead relied on advice and counsel furnished by
their own legal, tax, accounting or other advisers in order to satisfy
themselves as to the tax and other legal implications to them of the Merger.
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(n) Acknowledgments by Members. The Members acknowledge that this
Agreement is properly executed by Thomas Yang as President and manager on
behalf of ATC Group under its operating agreement as amended to date and
currently in force. The Members also acknowledge and agree that their
execution of this Agreement shall constitute a written consent in lieu of a
meeting of the Members of ATC Group and that no meeting of or written consent
or other action by the Members of ATC Group is necessary for valid execution
and performance of this Agreement and consummation of the Merger by ATC
Group.
IN WITNESS WHEREOF, all parties have executed this Agreement, and ATC
Group and the Company have initialed every preceding page hereof, as of the
dates respectively indicated below.
ATC GROUP L.L.C. DIVERSIFIED TECHNOLOGIES, INC.
By /s/ Thomas Yang By /s/ John D. Brasher, Jr.
----------------------------- ---------------------------
Thomas Yang, President Authorized Officer
DATED: 6/10/98 DATED: 6-10-98
-------------------------- -----------------------
ATC GROUP, INC.
By /s/ John D. Brasher, Jr.
---------------------------
Authorized Officer
DATED: 6-10-98
-----------------------
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EXHIBIT A
to
Agreement and Plan of Merger
among Diversified Technologies, Inc., ATC Group, Inc.
ATC Group, LLC, and certain individuals
-----------------------------------------------------
Summary of terms and preferences of Series A, Voting Convertible Preferred
Stock of Diversified Technologies, Inc. (the "Company):
1. Designation and Consideration.
A total of 2,100,000 shares of the Company's authorized but unissued
shares of preferred stock, no par value per share, shall be designated as the
SERIES A, VOTING CONVERTIBLE PREFERRED STOCK (the "Series A Preferred
Stock"). Each share of Series A Preferred Stock shall be issued for such
consideration as the Board may determine (whether cash, property or other
assets). Once duly issued for the consideration herein called for, shares of
the Series A Preferred Stock shall be deemed fully paid and nonassessable.
2. Dividends.
The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends thereon; provided, that, if a dividend is
declared on the common shares of the Company or on any series of preferred
shares ranking equal or junior to the Series A Preferred Stock, then in such
event the holders of the Series A Preferred Stock shall be entitled to
receive a proportional share of such dividend, based upon the proportion of
the number of shares of Series A Preferred Stock then outstanding to the
total number of shares of common and preferred stock entitled to share in
such dividend.
3. Redemption.
The shares of Series A Preferred Stock shall not be subject to
redemption.
4. Conversion Right.
4.1 Conversion Into Common Stock. Each share of Series A Preferred Stock
may, subject to all terms and conditions of this Section 4 and subject to
adjustment as provided below, at any time after issuance, be converted at the
option of the holder thereof into fully paid, nonassessable common stock of
the Company, no par value per share.
(a) Maximum Conversion Rate. Each share of Series A Preferred Stock may
be converted into six (6) fully paid, nonassessable shares of common stock of
the Company, subject to the following conversion conditions:
(i) one fourth (1/4th) of the shares of Series A Preferred
Stock held may be converted when the two-port Voice
Server owned by the Company's wholly owned subsidiary,
ATC Group, Inc., a Maryland corporation, has successfully
completed original beta testing by a customer, as
evidenced by the customer's final written acceptance
specifying all testing carried out and test results;
(ii) one fourth (1/4th) of the shares of Series A Preferred
Stock held may be converted when the four-port Voice
Server owned by the Company's wholly owned subsidiary,
ATC Group, Inc., a Maryland corporation, has successfully
completed original beta testing by a customer, as
evidenced by the customer's final written acceptance
specifying all testing carried out and test results;
In addition to the customer's final written acceptance as
called for in subparagraphs (i) and (ii) preceding, it
shall also be a conversion condition that
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the Company's full board of directors by unanimous vote
determines that the customer's beta testing occurred as
represented in the final written acceptance and that such
testing was reasonably appropriate to evaluate fitness of
the tested device for its intended use;
(iii) one fourth (1/4th) of the shares of Series A Preferred
Stock held may be converted when the Company and all
subsidiaries have on a combined basis achieved an
aggregate of Five Million Dollars (US$5,000,000.00) in
booked sales, evidenced by firm purchase orders, firm
distribution agreements, license agreements, royalty
agreements or other written agreements committing
contracting parties to purchase a minimum specified
dollar amount of product (collectively, the "Sales
Agreements"), subject to no condition, contingency or
limitations other than product delivery and satisfying
technical specifications made part of the Sales
Agreements; and
(iv) one fourth (1/4th) of the shares of Series A Preferred
Stock held may be converted when the Company and all
subsidiaries have on a combined basis achieved an
aggregate of Ten Million Dollars (US$ 10,000,000.00) in
booked sales, evidenced by Sales Agreements that are not
subject to any condition, contingency or limitation other
than product delivery and satisfying technical
specifications made part of the Sales Agreements.
In addition to the booked sales required by subparagraphs
(iii) and (iv) preceding, it shall also be a conversion
condition that the Company's full board of directors by
unanimous vote determines that all Sales Agreements which
evidence the booked sales are valid, arm's length agreements
and appropriate to the Company's operations.
The four conversion conditions of this Paragraph 4.1(a) need
not be satisfied in any particular order, nor is the
satisfaction of any conversion condition dependent upon the
prior satisfaction of any other conversion condition.
(b) Automatic Conversion at Maximum Conversion Rate. Notwithstanding the
provisions of Paragraph 4.1(a) preceding, if the Company has not realized
US$1,000,000 in cash or other value from an offering of its securities prior
to deduction of offering-related expenses and other non-operating expenses
not to exceed US$100,000, (the "Qualifying Amount") within six (6) months
following the date of original issuance of the Series A Preferred Stock
("Original Issue Date"), the each share of Series A Preferred Stock shall,
automatically and without any requirement to satisfy any conversion
conditions of this Section 4 and without need of any further action on the
part of holders of Series A Preferred Stock except to surrender the Series A
Preferred Stock certificates to the Company's Secretary for conversion, be
converted into and thereafter represent six (6) shares of the common stock of
the Company; provided, however, that if on the date which is six (6) months
following the Original Issue Date, a total of at least $650,000 has then been
realized by the Company in cash or other value from an offering of its
securities prior to deductions, then the six-month period in which the
Company must raise the Qualifying Amount shall be extended to eight (8)
months following the Original Issue Date.
(c) When Conversion Rate Determinable by Board of Directors. For
purposes of this Section 4, the term "Reorganization" includes any merger,
consolidation, share exchange, or other business combination pursuant to
which the Company is not the surviving corporation after the effective date
of the Reorganization, and any sale or lease of all or substantially all of
the assets of the Company, and the term "Reorganization Agreement" shall mean
a plan or agreement with respect to a Reorganization. In the event the
Company consummates a Reorganization, every share of Series A Preferred Stock
issued and outstanding on the Reorganization's effective date shall on such
date be converted into the number and kind of shares or other property that
would be received by a person holding the number of common shares of the
Company into which the shares of Series A Preferred Stock would be
convertible on the effective date.
Notwithstanding any other provisions of this Paragraph 4.1, if the
conversion conditions set forth in subparagraphs 4.1 (a)(i) and (ii) have
been satisfied by the Reorganization's effective date, then any requirement
set
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forth herein to satisfy the conversion conditions set forth in subparagraphs
4.1(a) (iii) and (iv) shall be waived and such two conditions shall be deemed to
have been fully satisfied. If on the Reorganization's effective date the
conversion conditions set forth in subparagraphs 4.1(a)(i) and (ii) have not
been satisfied, then the immediately following paragraph shall apply to the
holders of the Series A Preferred Stock.
In regard to any conversion conditions which at the time of execution of
the Reorganization Agreement have not been satisfied, the Board of Directors
shall, prior to such effective date, in good faith determine the extent to
which such remaining conversion conditions have been partially satisfied.
(For example, achieving $1,000,000 in booked sales would satisfy one-fifth of
the subparagraph 4.1(a) (iii) conversion condition and one-tenth of
subparagraph 4. 1(a)(iv) conversion condition, respectively.] The Board of
Directors shall then determine the number of shares of the Company's common
stock into which the shares of Series A Preferred Stock may be converted,
which shall be in proportion to the extent the remaining conversion
conditions have then been partially satisfied. The determination of the Board
of Directors in this mailer shall be final and binding for all purposes.
(d) Automatic Conversion at Minimum Conversion Rate. On the fifth (5th)
anniversary of the Original Issue Date of the Series A Preferred Stock, every
share of Series A Preferred Stock which has not theretofore satisfied any of
the foregoing conversion conditions in this Section 4 and been converted to
common stock shall, automatically and without any requirement to satisfy any
conversion conditions of this Section 4 and without need of any further
action on the part of holders of Series A Preferred Stock except to surrender
the Series A Preferred Stock certificates to the Company's Secretary for
conversion, be converted into and thereafter represent one (1) share of the
common stock of the Company.
(e) Other Matters Relating to Conversion. The common shares of the
Company into which shares of Series A Preferred Stock are converted
("Conversion Shares") will not be registered under the Securities Act of
1933, as amended ('Act"), but shall be issued in reliance upon Section 4(2)
of the Act or Rule 505 or 506 of Regulation D under the Act, or Regulation S
under the Act, or other available exemption from registration under the Act.
Conversion shall be deemed to occur on the date a certificate evidencing
shares of Series A Preferred Stock being converted is presented to the
Company or to the Company's transfer agent and registrar, properly endorsed
and accompanied by the proper fee payable for issuance of the Conversion
Shares. Each certificate evidencing Series A Preferred Shares or Conversion
Shares shall be subject to such restrictions, conditions and limitations, and
shall bear such restrictive legends, if any, as are required by applicable
laws, rules and regulations.
4.2 Other Adjustments to Conversion Rates. The conversion rates set
forth in Paragraph 4.1 above will be subject to further adjustment if the
Company is reorganized, merged, consolidated or party to a plan of exchange
with another corporation pursuant to which shareholders of the Company
receive any shares of stock or other securities, or in the event of any sale
or other transfer of all or substantially all of the Company's assets, or in
case of any reclassification of the Common Stock. Holders of shares of the
Series A Preferred Stock shall be entitled, after the occurrence of any such
event, to receive on conversion thereof the kind and amount of shares of
stock or other securities, cash or other property receivable upon such event
by a holder of the number of Common Shares into which the shares of Series A
Preferred Stock might have been converted immediately prior to occurrence of
the event. In the event of a split or combination, the number of Conversion
Shares issuable shall be appropriately adjusted. For purposes of this
Paragraph, the term "shareholder" means a holder of Common Stock.
4.3 No Fractional Shares Issuable. No fractional share of Common Stock,
or scrip or other instrument representing a fractional Common Share, shall be
issued upon conversion of any share of Series A Preferred Stock. If any such
conversion results in a fractional share of Common Stock being issuable, the
Company issue a whole share if the fraction is one half (0.50) or more, and
the converting holder shall forfeit the fraction if less than one half
(0.50).
5. Rights on Liquidation, Dissolution, or Winding Up.
5.1 Payment of Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the
holders of shares of Series A Preferred Stock shall be subordinate to all
claims of the Company's creditors and to claims of the holders of every
series of the Company's preferred stock ranking senior upon liquidation to
the Series A Preferred Stock, but otherwise are entitled to receive a
liquidation preference in the amount of $.001 per share, before any payment
is made to any holder of common
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<PAGE>
shares or any series of preferred shares ranking junior to the shares of Series
A Preferred Stock. After the payment of such liquidation preference and any
liquidation preferences payable to holders of any other series of preferred
shares, the holders of the shares of Series A Preferred Stock shall share
ratably with the holders of the Company's common stock and all series of
preferred stock ranking on a parity with or junior to the Series A Preferred
Stock in the Company's assets available for distribution to its shareholders.
5.2 Effective Reorganization. Neither the consolidation or merger of the
Company with or into any other company nor the lease, exchange, sale or
transfer of all or substantially all of the Company's assets shall be deemed
to be a liquidation, dissolution or winding up of the Company's affairs,
whether voluntary or otherwise, within the meaning of this Section 5.
6. Voting Rights.
The shares of Series A Preferred Stock shall have the right to vote in
elections of directors and on other matters generally as to which
shareholders of the Company may vote. Each share of Series A Preferred Stock
shall be entitled to cast three (3) votes on every matter placed before
shareholders for consideration. The shares of Series A Preferred Stock shall
vote with the common shares and not as a separate class. Any matter which
requires the approval of the holders of the Series A Preferred Stock shall
require only the affirmative vote of a majority of the votes cast by the
holders of such shares, voting as a separate class, at any lawful meeting of
such holders which commences with a quorum; or if such shares vote by means
of written consent in lieu of a meeting, the concurrence of only a majority
of the holders of the Series A Preferred Stock shall be necessary.
7. Certain Corporate Actions.
The Company shall not amend its articles or certificate of incorporation
without the prior approval of the holders of the Series A Preferred Stock,
voting as a separate class, if such amendment would directly or indirectly
effect any adverse change in any of the rights, preferences or privileges of,
or limitations provided for herein for the benefit of, the holders of Series
A Preferred Stock. Without limiting the generality of the foregoing, no such
amendment may be effected without such approval if such amendment would:
(a) Reduce the amount payable to the holders of Series A Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Company, or change the seniority of the liquidation
preferences of the holders of Series A Preferred Stock relative to the
rights upon liquidation, dissolution or winding up of the holders of any
other class or series of the Company's shares; or
(b) Cancel or modify the right of holders of Series A Preferred
Stock to convert such shares to Common Shares of the Company, all as set
forth herein.
8. Rank of Series A Preferred Stock.
The shares of the Series A Preferred Stock shall rank junior to all
series of preferred stock of the Company hereafter created, unless such
subsequently created series expressly ranks on a parity with or subordinate
to the Series A Preferred Stock. The Company may issue other shares of
another class or series of preferred stock after the Original Issue D which
rank on a parity with or senior to the Series A Preferred Stock.
9. Status of Certain Shares.
Shares of Series A Preferred Stock which (i) have been redeemed,
converted, exchanged, purchased, retired or surrendered to the Company, or
(ii) have been reacquired in any other manner, or (iii) have not been sold or
issued and which by determination of the Board of Directors shall not be sold
or issued as Series A Preferred Stock, shall have the status of authorized
and unissued preferred shares and may be reissued by the Board of Directors
as shares of Series A Preferred Stock or any other series of preferred stock.
In any such event, the Board of Directors may but shall not required to file
an amendment to the Company's articles of incorporation with the Nevada
Secretary of State to reflect any such fact.
10. Tax Matters.
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<PAGE>
The holders of Series A Preferred Stock shall be solely liable
for and shall pay any and all taxes and other governmental charges, of every
kind, that may be imposed in respect of the issue or delivery of Common Shares
upon redemption or conversion of Series A Preferred Stock. The Company may
withhold certain of such Common Shares in order to satisfy the Company's tax
withholding obligations or take similar steps to ensure that such taxes and
charges are duly paid. If the Company becomes liable for or pays any such taxes
due to acts of a Series A Preferred Stock holder, it may, in order to recoup the
amount of such tax or tax liability:
(i) withhold the amount of such tax or tax liability from any funds
whatever in or coming into the Company's possession and belonging to
such holder, including dividends declared on the Series A Preferred
Stock and payable to such holder; and/or
(ii) cancel and reissue in the Company's name such number of shares
of Series A Preferred Stock, based upon the original issue price per
share, as will equal the amount of the tax paid or tax liability
incurred.
11. No Limit Imposed on Corporate Powers.
Except to the extent expressly set forth herein, the issuance and
existence of the Series A Preferred Stock shall not affect in any way the
right or power of the Company or its shareholders to make or authorize any
and all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures or other
indebtedness, or the dissolution or liquidation of the Company, or any sale,
exchange or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
- - - - - END OF EXHIBIT A - - - - -
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EXHIBIT B
to
Agreement and Plan of Merger
among Diversified Technologies, Inc., ATC Group, Inc.
ATC Group, LLC, and certain individuals
-----------------------------------------------------
OPTION TO REDEEM MERGER STOCK
Option Agreement dated this June __, 1998, among the person or entity
executing this Option as "Grantor" of this option and DIVERSIFIED
TECHNOLOGIES, INC., a Wyoming corporation and its successors and assigns as
the optionee (the "Company"), the parties agreeing as follows:
SECTION 1. RECITALS.
Grantor and Optionee are parties to that certain Agreement and Plan of
Merger dated June __, 1998 ("Merger Agreement"), among the Company, ATC
SUBSIDIARY, INC., a Maryland corporation wholly owned by the Company
("Survivor"), ATC GROUP, LLC, a Maryland limited liability company ("ATC
Group"), and the members of ATC Group, including Grantor, who executed the
Merger Agreement as a "Member." Upon the completion of the merger
contemplated in the Merger Agreement ("Merger"), certain shares of the common
stock and preferred stock of the Company were issued to Grantor in the
aggregate number set forth in Section 2 of this Option (the "Merger Shares").
Pursuant to Section 3.1 of the Merger Agreement, the Company has the right to
redeem the Merger Shares upon the occurrence of certain events. The Merger
Agreement, together with all exhibits and schedules, is incorporated by
reference into this Option as if fully set forth here.
SECTION 2. MERGER SHARES.
_________________ Common Shares
_________________Series A Voting Convertible Preferred Stock
all of which common and preferred shares are collectively referred to in this
Option as the "Merger Shares" subject to this Option.
SECTION 3. GRANT OF OPTION.
Grantor hereby grants to the Company, for valuable consideration, the
receipt and sufficiency of which Grantor hereby acknowledges, an option (the
"Option") to purchase the Merger Shares at a price of Five Cents (US$0.05)
per share (the "Exercise Price") commencing on the date of this Option and
expiring on June __, 2000 (the "Option Period") in the event that, during the
Option Period, Grantor voluntarily terminates his employment with the Company
or his employment with the Company is involuntarily terminated for cause or
serious cause. However, in the event Grantor's employment with the Company is
terminated for cause, then the number of Merger Shares purchasable by the
Company under this Option shall be prorated, based on the portion of the
Option Period then lapsed. Grantor agrees that the Exercise Price and the
duration of the Option Period are reasonable. This redemption right shall not
apply if termination of a Member's employment with the Company occurs due to
a merger, stock exchange or consolidation of the Company with, or sale of the
Company or all or substantially all of its assets to, another company or
persons then unaffiliated with the Company.
SECTION 4. DEFINITIONS.
The term "employment with the Company" as used in this Option shall
include Grantor's employment or relationship as an officer, employee,
consultant or adviser with the Company or any affiliated company, provided
that the Grantor renders regular services averaging in any 90-day period not
less than fifteen (15) hours per week. "Employment with the Company" as
herein used shall not be affected by Grantor's transfer of employment among
the Company and any one or more affiliated companies. The term "affiliated
company" means Survivor, any other wholly or principally owned subsidiary of
the Company, and any joint venture or other business venture in which the
Company or an affiliated company owns at least twenty-five percent (25%) of
the equity and net profits interest.
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Grantor's employment with the Company shall not be deemed terminated by death,
by bona fide permanent or temporary disability or sick leave, by military leave
or by leave (e.g., jury duty) required by law or legal process other than
incarceration due to conviction of a felony crime. "Serious cause" as used in
this Option shall have the same meaning as set forth on Schedule 3.1 to the
Merger Agreement. "Cause" as used in this Option means any reason for
termination other than serious cause.
SECTION 5. EXERCISE, PAYMENT AND DELIVERY OF MERGER SHARES.
The Company may only exercise this Option by written notice to Grantor,
accompanied by payment of the Exercise Price by means of cashier's or bank
check, money order, or certified check. Notice of exercise of this Option may
be made by first class mail, postage prepaid, overnight courier service,
telegram or cable, or by any messenger service which regularly retains its
delivery receipts. Exercise shall be deemed made when notice of exercise and
payment of the Exercise Price are dispatched to Grantor.
Upon due exercise of this Option as provided in this paragraph, all
rights whatever of Grantor in and to the Exchange Shares, including
ownership, voting rights and the right to receive dividends, shall cease and
shall belong to the Company. Upon Grantor's receipt of the Exercise Price,
Grantor shall within five (5) business days deliver to the Company all
certificates evidencing the Exchange Shares (or if the Exchange Shares have
been changed or converted into any other securities, certificates evidencing
such other securities), each endorsed by Grantor with signature medallion
guaranteed or accompanied by stock powers executed by Grantor, each signature
being medallion guaranteed. Upon Grantor's failure to deliver such
certificates properly endorsed or accompanied by signature-guaranteed stock
powers, the Company shall have the right to compel their delivery by suit or
other judicial action, at the sole cost of Grantor.
SECTION 6. COMBINATIONS, RECAPITALIZATIONS, ETC.
The Merger Shares are shares of the common stock of the Company as
currently constituted. If, prior to exercise of this Option, the Company
shall one or more times effect any subdivision or consolidation of shares or
other capital readjustment, a stock split or combination of shares (reverse
stock split), or recapitalization or other increase or reduction of the
number of shares of its common stock which has the effect of changing the
Merger Shares into a different number of shares of the Company, then the
shares into which the Merger Shares are changed shall be subject to this
Option in lieu of the Merger Shares. If the Company is reorganized, merged,
consolidated or party to a plan of exchange with another corporation pursuant
to which shareholders of the Company receive any shares of stock or other
securities, there shall be substituted for the Merger Shares subject to this
Option the appropriate number of shares of each class of stock or other
securities which were distributed to the Grantor in respect of the Merger
Shares.
SECTION 7. LITIGATION.
In the event of any litigation or proceeding arising as a result of any
alleged breach or violation of this Agreement, Grantor's failure to deliver
the Merger Shares upon proper exercise of this Option, or the failure of any
representation or warranty herein of Grantor, the party or parties prevailing
in such litigation or proceeding shall be entitled to collect all costs and
expenses thereof, including reasonable attorneys' fees, from the party or
parties therein not prevailing. The parties expressly agree that all
shareholders of the Company at the time Grantor's employment with the Company
terminates during the Option Period are and shall be third party
beneficiaries of this provision, and any one or more of such shareholders may
bring an action to compel the Company to redeem the Merger Shares if this
Option becomes exercisable during the Option Period.
SECTION 8. MISCELLANEOUS PROVISIONS.
This Option shall terminate only upon due exercise of this Option and
delivery of the Merger Shares or expiration of the Option Period without such
exercise. This Option is binding on the parties and their respective
successors, assigns, heirs, legatees and legal representatives. Otherwise,
neither party may assign this Option or any obligations or rights hereunder.
The transfer agent and registrar of the Company may rely on a copy of this
Option as its authority for the transfer of the Merger Shares following
exercise and may rely on the written statement of the
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Company that this Option has been duly exercised. Grantor is fully authorized
and has all legal right and power to grant and perform as required under this
Option.
IN WITNESS WHEREOF, Grantor and the Company have executed this Option
and initialed each preceding page hereof, on the date first above indicated.
GRANTOR: DIVERSIFIED TECHNOLOGIES, INC.
X By
-------------------------------- -----------------------------
Signature Authorized Officer
Name
---------------------------
Title
---------------------------
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