AGREEMENT AND PLAN OF MERGER
AMONG
IMAGINON, INC. (A CALIFORNIA CORPORATION)
AND
CALIFORNIA PRO SPORTS, INC. (A DELAWARE CORPORATION)
AND
IMAGINON ACQUISITION CORP. (A CALIFORNIA CORPORATION)
AS OF JANUARY 30, 1998
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This Agreement and Plan of Merger (the "Agreement") is made as of the
30th day of January, 1998, among California Pro Sports, Inc., a Delaware
corporation ("Cal Pro"); ImaginOn Acquisition Corp., a California corporation
(the "Merger Subsidiary"), which is wholly owned by Cal Pro; and ImaginOn, Inc.,
a California corporation ("ImaginOn").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Cal Pro, the Merger
Subsidiary and ImaginOn each have determined that it is in the best interests of
their respective stockholders for Cal Pro to acquire ImaginOn through the merger
of Merger Subsidiary with and into the ImaginOn upon the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and certain other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE 1
The Merger
1.1 MERGER. In accordance with the provisions of the business
corporation laws of the State of California at the Effective Date (as
hereinafter defined), Merger Subsidiary shall be merged (the "Merger") into
ImaginOn, as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Articles 6 and 7. Following the
Merger, ImaginOn shall continue as the surviving corporation (the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
California.
1.2 CONTINUING OF CORPORATE EXISTENCE. Except as may otherwise be set
forth herein, the corporate existence and identity of ImaginOn, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of Merger Subsidiary, with all its purposes, powers, franchises,
privileges, rights and immunities, at the Effective Date shall be merged with
and into that of ImaginOn, and ImaginOn shall be vested fully therewith and the
separate corporate existence and identity of Merger Subsidiary shall thereafter
cease except to the extent continued by statute.
1.3 EFFECTIVE DATE. The Merger shall become effective upon the filing
of the Certificate of Merger with the Secretary of State of California pursuant
to the provisions of the California General Corporation Law. The date and time
when the Merger shall become effective is hereinafter referred to as the
"Effective Date".
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1.4 CORPORATE GOVERNANCE OF THE SURVIVING CORPORATION.
(a) The Certificate of Incorporation of ImaginOn, as in effect on
the Effective Date, shall continue in full force and effect and shall
be the Certificate of Incorporation of the Surviving Corporation.
(b) The Bylaws of ImaginOn, as in effect as of the Effective Date,
shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation.
(c) The members of the Board of Directors of the Surviving
Corporation shall be the persons holding such office in ImaginOn as of
the Effective Date.
(d) The officers of the Surviving Corporation shall be the persons
holding such offices in ImaginOn as of the Effective Date.
1.5 RIGHTS AND LIABILITIES OF THE SURVIVING CORPORATION. The Surviving
Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under the laws of the
State of California.
(b) The title to all real estate and other property owned by each
of ImaginOn and the Merger Subsidiary shall be, at the Effective Date,
transferred to and vested in the Surviving Corporation without
reversion or impairment; and such transfer to and vesting in the
Surviving Corporation shall be deemed to occur by operation of law, and
no consent or approval of any other person shall be required in
connection with any such transfer or vesting unless such consent or
approval is specifically required in the event of merger by law or by
express provision in any contract, agreement, decree, order, or other
instrument to which ImaginOn or the Merger Subsidiary is a party or by
which it is bound.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth have all liabilities of ImaginOn and the Merger Subsidiary,
and any proceeding pending against ImaginOn or the Merger Subsidiary
may be continued as if the Merger did not occur or the Surviving
Corporation may be substituted in the proceeding for the Merger
Subsidiary.
1.6 CLOSING. Consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ImaginOn located at
000 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxx, Xxxxxxxxxx, commencing at 10:00 a.m.,
local time, as soon as practicable after the last to be fulfilled or waived of
the conditions set forth in Articles 6 and 7 or at such other place, time and
date as shall be fixed by mutual agreement between Cal Pro and ImaginOn. The day
on which the Closing shall occur is referred to herein as the "Closing Date."
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Each party will cause to be prepared, executed and delivered the Certificate of
Merger to be filed with the Secretary of State of California and all other
appropriate and customary documents as any party or its counsel may reasonably
request for the purpose of consummating the transactions contemplated by this
Agreement. All actions taken at the Closing shall be deemed to have been taken
simultaneously at the time the last of any such actions is taken or completed.
1.7 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
ARTICLE 2
Conversion of Shares; Treatment of Options
2.1 CONVERSION OF SHARES. At the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Except as noted on Exhibit 2.1, the holders of ImaginOn common
stock, par value $.001 per share (the "ImaginOn Common Stock") shall
hold 60% of the post-Merger issued and outstanding Cal Pro common
stock, par value $.01 per share (the "Cal Pro Common Stock").
Consequently, the ImaginOn Common Stock outstanding immediately prior
to the Effective Date (the "Converted Shares") shall as of the
Effective Date, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and represent 16,789,205
shares of issued and outstanding Cal Pro Common Stock. To the extent
that the proceeds from the sale by Cal Pro of its interest in USA Skate
Corporation to a third party (the "USA Transaction") are not available
to ImaginOn or the Surviving Corporation in the form of a loan, working
capital or otherwise, then the number of shares of Cal Pro Common Stock
to be issued to holders of ImaginOn Common Stock shall be adjusted so
that they receive additional shares equal to 1.5 times the number of
shares attributable to the proceeds from the USA Transaction which are
not available to ImaginOn or the Surviving Corporation.
(b) Each share of Common Stock, $.01 par value, of the Merger
Subsidiary which shall be outstanding immediately prior to the
Effective Date shall at the Effective Date, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into
one share of newly issued Cal Pro Common Stock.
2.2 FRACTIONAL SHARES. No scrip or fractional shares of Cal Pro Common
Stock shall be issued in the Merger. All fractional shares of Cal Pro Common
Stock to which a holder of ImaginOn Common Stock immediately prior to the
Effective Date would otherwise be entitled at the Effective Date shall be
aggregated. If a fractional share results from such aggregation, such
stockholder shall be entitled, after the later of (a) the Effective Date or (b)
the surrender of such stockholder's "Certificate" (as defined in Section 2.5) or
Certificates that represent such shares of ImaginOn Common Stock, to receive
from Cal Pro an amount in cash in lieu of such fractional share. The amount of
such cash payment shall be equal to such fractional proportion of the "Average
Closing Price" of Cal Pro's common stock, $0.01 par value ("Cal Pro Common
Stock"). Cal Pro will make available to the "Exchange Agent" (as defined in
Section 2.5) the cash necessary for the purpose of paying cash for fractional
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shares. For purposes of this Agreement, "Average Closing Price" shall mean the
average per share closing price of Cal Pro Common Stock as reported on the
Nasdaq SmallCap Market ("NSM") over the 20 trading days immediately preceding
the fifth trading day prior to the Effective Date.
2.3 STOCK OPTIONS AND WARRANTS.
(a) Except as set forth on Schedule 2.3, there are no options,
warrants or convertible securities outstanding entitling the holder
thereof to purchase Cal Pro capital stock.
(b) At the Effective Date, all options and warrants (collectively
the "Options") then outstanding to acquire shares of ImaginOn Common
Stock shall remain outstanding following the Effective Date and such
Options shall, by virtue of the Merger and without any further action
on the part of ImaginOn or the holder of any such Option, be assumed by
Cal Pro in accordance with the terms and conditions of the Options,
except that (A) each such Option shall be exercisable in accordance
with its terms for that whole number of shares of Cal Pro Common Stock
(rounded to the nearest whole share) into which the number of shares of
ImaginOn Common Stock subject to such Option immediately prior to the
Effective Date would be converted under Section 2.1 at an exercise
price per share of Cal Pro Common Stock (rounded to the nearest cent)
equal to the exercise price per share of ImaginOn Common Stock
applicable to such Option divided by the exchange ratio as finally
determined by the parties; (B) all actions to be taken thereunder by
the Board of Directors of ImaginOn or a committee thereof shall be
taken by the Board of Directors of Cal Pro or a committee thereof; and
(C) no payment shall be made for fractional interests. From and after
the date of this Agreement, no additional options shall be granted by
ImaginOn.
(c) It is intended that the assumed Options, as set forth herein,
shall not give to any holder thereof any benefits in addition to those
which such holder had prior to the assumption of the Option. Cal Pro
shall take all necessary corporate action necessary to reserve for
issuance a sufficient number of shares of Cal Pro Common Stock for
delivery upon exercise of the Options.
2.4 EXCHANGE AGENT.
(a) Cal Pro shall authorize Corporate Stock Transfer to serve as
exchange agent hereunder (the "Exchange Agent"). Promptly after the
Effective Date, Cal Pro shall deposit or shall cause to be deposited in
trust with the Exchange Agent the aggregate of the following: (i) the
Merger Consideration with respect to each Converted Share; and (ii)
cash sufficient to pay for fractional shares then known to Cal Pro, if
applicable (such cash amounts and certificates being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant
to irrevocable instructions received from Cal Pro, pay the Merger
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Consideration with respect to such Converted Shares as provided for in
this Article 2 out of the Exchange Fund. Any cash needed from time to
time by the Exchange Agent to make payments for fractional shares shall
be provided by Cal Pro and shall become part of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose, except as
provided in this Agreement, or as otherwise agreed to by Cal Pro, the
Merger Subsidiary and ImaginOn prior to the Effective Date.
(b) As soon as practicable after the Effective Date, the Exchange
Agent shall mail and otherwise make available to each record holder
who, as of the Effective Date, was a holder of an outstanding
certificate or certificates which immediately prior to the Effective
Date represented shares of the Converted Shares (the "Certificates") a
form of letter of transmittal and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion
thereof, which letter of transmittal shall comply with all applicable
rules of the NSM.
(c) Delivery of Certificates shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent and the form of letter of
transmittal shall so reflect. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor one or more certificates as requested by the holder (properly
issued, executed and countersigned, as appropriate) representing that
number of whole shares of Cal Pro Common Stock to which such holder of
ImaginOn Common Stock shall have become entitled pursuant to the
provisions of this Article 2, and the Certificate so surrendered shall
forthwith be canceled.
(d) Cal Pro shall pay any transfer or other taxes required by
reason of the issuance of a certificate representing shares of Cal Pro
Common Stock; provided, however, that such certificate is issued in the
name of the person in whose name the Certificate surrendered in
exchange therefor is registered. If any portion of the consideration to
be received pursuant to this Article 2 upon exchange of a Certificate
is to be issued or paid to a person other than the person in whose name
the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such issuance and payment that the Certificate
so surrendered shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such exchange shall pay in
advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of Cal Pro Common Stock to such
other person, or establish to the satisfaction of the Exchange Agent
that such tax has been paid or that no such tax is applicable. From the
Effective Date until surrender in accordance with the provisions of
this Section 2.5, each Certificate shall represent for all purposes
only the right to receive the consideration provided in Sections 2.1
and 2.2. No dividends that are otherwise payable on Cal Pro Common
Stock will be paid to persons entitled to receive Cal Pro Common Stock
until such persons surrender their Certificates. After such surrender,
there shall be paid to the person in whose name Cal Pro Common Stock
shall be issued any dividends on such Cal Pro Common Stock that shall
have a record date on or after the Effective Date and prior to such
surrender. In no event shall the persons entitled to receive
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surrender. In no event shall the persons entitled to receive such
dividends be entitled to receive interest on such dividends. All
payments in respect of shares of ImaginOn Common Stock that are made in
accordance with the terms hereof shall be deemed to have been made in
full satisfaction of all rights pertaining to such securities.
(e) In the case of any lost, mislaid, stolen or destroyed
Certificates, the holder thereof may be required, as a condition
precedent to the delivery to such holder of the consideration described
in this Article 2, to deliver to Cal Pro a bond, in such reasonable sum
as Cal Pro may direct, or other form of indemnity satisfactory to Cal
Pro, as indemnity against any claim that may be made against the
Exchange Agent, Cal Pro or the Surviving Corporation with respect to
the Certificate alleged to have been lost, mislaid, stolen or
destroyed.
(f) After the Effective Date, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of
ImaginOn Common Stock that were outstanding immediately prior to the
Effective Date. If, after the Effective Date, Certificates are
presented to the Surviving Corporation for transfer, they shall be
canceled and exchanged for the consideration described in this Article
2.
2.5 ADJUSTMENT. If, between the date of this Agreement and the Closing
Date or the Effective Date, as the case may be, the outstanding shares of
ImaginOn Common Stock or Cal Pro Common Stock shall have been changed into a
different number of shares or a different class by reason of any classification,
recapitalization, split-up, combination, exchange of shares, or readjustment or
a stock dividend thereon shall be declared with a record date within such
period, then the consideration to be received pursuant to Section 2.1(a) hereof
by the holders of shares of ImaginOn Common Stock shall be adjusted to
accurately reflect such change.
2.6 STATUS OF CAL PRO SECURITIES. The shares of Cal Pro Common Stock
being issued in the Merger are "restricted securities" as defined in Rule 144
under the Securities Act (the "Rule"), and (unless registered for resale or some
other exemption from registration, are available for any transfer) the Cal Pro
Common Stock must be held for a minimum of one year following the Merger, and
thereafter Cal Pro Common Stock may be sold in only limited amounts in a
specified manner in accordance with the terms and conditions of the Rule, if the
Rule is applicable (there being no representation by Cal Pro that it will be
applicable). In case the Rule is applicable, any sales of Cal Pro Common Stock
may be made only pursuant to an effective registration statement or an available
exemption from registration. Cal Pro will cause its stock transfer agent to
reflect such restrictions in Cal Pro's stock transfer books and to place an
appropriate restrictive legend or legend on any certificates evidencing the Cal
Pro Common Stock and any certificates issued in replacement or exchange
therefor. The Rule 144 holding period for the Cal Pro Common Stock will begin on
the Effective Date. Cal Pro has no intention of registering Cal Pro Common
Stock.
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ARTICLE 3
Representations and Warranties of ImaginOn
ImaginOn represents and warrants to Cal Pro and the Merger Subsidiary
that the statements contained in Article 3 are true and correct in all material
respects, except as set forth on the schedules attached hereto.
3.1 ORGANIZATION AND GOOD STANDING OF IMAGINON. ImaginOn is a
corporation duly organized, validly existing and in good standing under the laws
of California.
3.2 NO SUBSIDIARIES OR INVESTMENTS. ImaginOn owns no equity or debt
interest in any subsidiary corporation, limited liability company, partnership
or other business entity.
3.3 FOREIGN QUALIFICATION. ImaginOn is duly qualified or licensed to do
business and is in good standing as a foreign corporation in every jurisdiction
where the failure so to qualify would have a material adverse effect (a
"ImaginOn Material Adverse Effect") on (a) the business, operations, assets or
financial condition of ImaginOn or (b) the validity or enforceability of, or the
ability of ImaginOn to perform its obligations under, this Agreement. ImaginOn
is qualified to do business in no state other than California.
3.4 COMPANY POWER AND AUTHORITY. ImaginOn has the corporate or company
power and authority to own, lease and operate its properties and assets and to
carry on its business as currently being conducted. ImaginOn has the corporate
power and authority to execute and deliver this Agreement and, subject to the
approval of this Agreement and the Merger by its stockholders, to perform its
obligations under this Agreement and to consummate the Merger. The execution,
delivery and performance by ImaginOn of this Agreement has been duly authorized
by all necessary corporate action.
3.5 BINDING EFFECT. This Agreement has been duly executed and delivered
by ImaginOn and is the legal, valid and binding obligation of ImaginOn
enforceable in accordance with its terms except that:
(a) enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by
equitable principles of general applicability; and
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(c) rights to indemnification may be limited by considerations of
public policy.
3.6 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation of the Merger and the
fulfillment of and compliance with the terms and conditions of this Agreement do
not and will not, with the passing of time or the giving of notice or both,
violate or conflict with, constitute a breach of or default under, result in the
loss of any material benefit under, or permit the acceleration of any obligation
under, (i) any term or provision of the Certificate of Incorporation or Bylaws
of ImaginOn, (ii) any "Material Contract" (as defined in Section 3.13), (iii)
any judgment, decree or order of any court or governmental authority or agency
to which ImaginOn is a party or by which ImaginOn or any of its properties is
bound, or (iv) any statute, law, regulation or rule applicable to ImaginOn other
than such violations, conflicts, breaches or defaults which would not have an
ImaginOn Material Adverse Effect. Except for the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and the Secretary of
State of the State of California, compliance with the applicable requirements of
the Securities Act, Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and applicable state securities laws, no consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
agency or public or regulatory unit, agency, body or authority with respect to
ImaginOn is required in connection with the execution, delivery or performance
of this Agreement by ImaginOn or the consummation of the transactions
contemplated hereby.
3.7 CAPITALIZATION OF IMAGINON.
(a) The capitalization of ImaginOn is set forth on Schedule 3.7(a).
(b) All of the issued and outstanding shares of ImaginOn Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights.
(c) There are no voting trusts, stockholder agreements or other
voting arrangements by the stockholders of ImaginOn.
(d) There is no outstanding subscription, contract, convertible or
exchangeable security, option, warrant, call or other right obligating
ImaginOn to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem or otherwise acquire, shares of, or securities
convertible into or exchangeable for, capital stock of ImaginOn.
3.8 IMAGINON INFORMATION. ImaginOn has made or will make available to
Cal Pro and the Merger Subsidiary all information that ImaginOn has available
(including all tax returns, financial statements given to any other person,
contracts, payroll schedules, financial books and records), and all other
information ImaginOn, its business, its customers, its management, and its
financial condition which Cal Pro may have requested (all such information being
referred to herein as the "ImaginOn Information"). As of their respective dates,
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the ImaginOn Information did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
3.9 FINANCIAL STATEMENTS AND RECORDS OF IMAGINON. ImaginOn has made
available to Cal Pro and the Merger Subsidiary true, correct and complete copies
of the following financial statements (the "ImaginOn Financial Statements"). The
consolidated financial statements of ImaginOn and its subsidiaries as of
December 31, 1996 and 1997 and for the years then ended, including the notes
thereto, in each case examined by and accompanied by the report of Xxxxxxx &
Assoc. (collectively, the "ImaginOn Year-End Statements").
The ImaginOn Year-End Statements have been prepared from, and are in
accordance with, the books and records of ImaginOn and present fairly,
in all material respects, the financial position of ImaginOn as of the
dates thereof and the results of operations and cash flows thereof for
the periods then ended, in each case in conformity with generally
accepted accounting principles, consistently applied, except as noted
therein. Adequate reserves are set forth on the ImaginOn Year-End
Statements, and the amount of such reserves are reasonable. The books
and records of ImaginOn have been and are being maintained in
accordance with good business practice, reflect only valid
transactions, are complete and correct in all material respects and
present fairly in all material respects the basis for the financial
position and results of operations of ImaginOn as set forth on the
ImaginOn Year Statements.
3.10 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, ImaginOn has
not, except as otherwise set forth in the ImaginOn Information or the ImaginOn
Financial Statements:
(a) suffered any adverse change in the business, operations,
assets, or financial condition, except for such changes that would not
result in an ImaginOn Material Adverse Effect;
(b) suffered any material damage or destruction to or loss of the
assets of ImaginOn, whether or not covered by insurance, which property
or assets are material to the operations or business of ImaginOn;
(c) settled, forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims other than in the
ordinary course of business;
(d) entered into or terminated any Material Contract or agreed or
made any changes in any Material Contract, other than renewals or
extensions thereof and leases, agreements, transactions and commitments
entered into or terminated in the ordinary course of business;
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(e) written up, written down or written off the book value of any
material amount of assets other than in the ordinary course of
business;
(f) declared, paid or set aside for payment any dividend or
distribution with respect to ImaginOn's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of ImaginOn's
capital stock or securities or any rights to acquire such capital stock
or securities, or agreed to changes in the terms and conditions of any
such rights outstanding as of the date of this Agreement;
(h) increased the compensation of or paid any bonuses to any
employees or contributed to any employee benefit plan, other than in
accordance with established policies, practices or requirements and as
provided in Section 5.1 hereof;
(i) entered into any employment, consulting or compensation
agreement with any person or group, except for agreements which would
not have an ImaginOn Material Adverse Effect;
(j) entered into any collective bargaining agreement with any
person or group;
(k) entered into, adopted or amended any employee benefit plan; or
(l) entered into any agreement to do any of the foregoing.
3.11 NO MATERIAL UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of ImaginOn of any nature, whether absolute, accrued, contingent, or
otherwise, other than:
(a) the liabilities and obligations that are reflected, accrued or
reserved against on the ImaginOn Financial Statements, or referred to
in the footnotes thereto, or incurred in the ordinary course of
business and consistent with past practices since December 31, 1997; or
(b) liabilities and obligations which in the aggregate would not
result in an ImaginOn Material Adverse Effect.
3.12 TAX RETURNS; TAXES. ImaginOn has duly filed all U.S. federal and
material state, county, local and foreign tax returns and reports required to be
filed by it and all such returns and reports are correct in all material
respects; have either paid in full all taxes that have become due and any
interest and penalties with respect thereto or have fully accrued on its books
or have established adequate reserves for all taxes payable but not yet due; and
have made cash deposits with appropriate governmental authorities representing
estimated required payments of taxes. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
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requested by ImaginOn with respect to any tax. No unsatisfied deficiency,
delinquency or default for any tax, assessment or governmental charge has been
claimed, proposed or assessed against ImaginOn, nor has ImaginOn received notice
of any such deficiency, delinquency or default. ImaginOn has no material tax
liabilities other than those reflected on the ImaginOn Financial Statements and
those arising in the ordinary course of business since the date thereof.
ImaginOn will make available to Cal Pro true, complete and correct copies of
ImaginOn's tax returns. There is no dispute or claim concerning any tax
liability of ImaginOn or any of its subsidiaries either: (a) raised by any
taxing authority in writing; (b) as to which ImaginOn has received notice
concerning a potential audit of any return filed by ImaginOn; and (c) there is
no outstanding audit or pending audit of any tax return filed by ImaginOn,
except as set forth on Schedule 3.12.
3.13 MATERIAL CONTRACTS. ImaginOn has furnished or made available to
Cal Pro accurate and complete copies of the Material Contracts (as defined
herein) applicable to ImaginOn. Except as set forth on Schedule 3.13, there is
not under any of the Material Contracts any existing breach, default or event of
default by ImaginOn nor any event that with notice or lapse of time or both
would constitute a breach, default or event of default by ImaginOn other than
breaches, defaults or events of default which would not have an ImaginOn
Material Adverse Effect nor does ImaginOn know of, and ImaginOn has not received
notice of, or made a claim with respect to, any breach or default by any other
party thereto which would, severally or in the aggregate, have an ImaginOn
Material Adverse Effect. As used herein, the term "Material Contracts" shall
mean all contracts and agreements providing for expenditures or commitments by
ImaginOn in excess of $10,000 over more than a 12-month period.
3.14 LITIGATION AND GOVERNMENT CLAIMS. There is no pending suit, claim,
action or litigation, or administrative, arbitration or other proceeding or
governmental investigation or inquiry against ImaginOn to which its business or
assets are subject which would, severally or in the aggregate, reasonably be
expected to result in an ImaginOn Material Adverse Effect nor have any such
proceedings been threatened or contemplated. ImaginOn is not subject to any
judgment, decree, injunction, rule or order of any court, or, to the knowledge
of ImaginOn, any governmental restriction applicable to ImaginOn which is
reasonably likely (i) to have an ImaginOn Material Adverse Effect or (ii) to
cause a material limitation on Cal Pro's ability to operate the business of
ImaginOn (as it is currently operated) after the Closing.
3.15 COMPLIANCE WITH LAWS. ImaginOn has all material authorizations,
approvals, licenses and orders to carry on its business as it is now being
conducted, to own or hold under lease the properties and assets it owns or hold
under lease and to perform all of its obligations under the agreements to which
it is a party, except for instances which would not have a ImaginOn Material
Adverse Effect. ImaginOn has been and is, to the knowledge of ImaginOn, in
compliance with all applicable laws (including those related to environmental
matters referenced in the ImaginOn Information), regulations and administrative
orders of any country, state or municipality or of any subdivision of any
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thereof to which its business and its employment of labor or its use or
occupancy of properties or any part hereof are subject, the violation of which
would have a ImaginOn Material Adverse Effect.
3.16 EMPLOYEE BENEFIT PLANS. ImaginOn has no employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
3.17 EMPLOYMENT AGREEMENTS; LABOR RELATIONS.
(a) Schedule 3.16 sets forth a complete and accurate list of all
material employee benefit or compensation plans, agreements and
arrangements to which ImaginOn is a party and which is not disclosed in
the ImaginOn Information, including without limitation (i) all
severance, employment, consulting or similar contracts, (ii) all
material agreements and contracts with "change of control" provisions
or similar provisions and (iii) all indemnification agreements or
arrangements with directors or officers.
(b) ImaginOn is in compliance in all material respects with all
laws (including Federal and state laws) respecting employment and
employment practices, terms and conditions of employment, wages and
hours, and is not engaged in any unfair labor or unlawful employment
practice.
3.18 INTELLECTUAL PROPERTY. ImaginOn owns or has valid, binding and
enforceable rights to use all material patents, trademarks, trade names, service
marks, service names, copyrights, applications therefor and licenses or other
rights in respect thereof ("Intellectual Property") used or held for use in
connection with the business of ImaginOn, without any known conflict with the
rights of others, except for such conflicts as do not have an ImaginOn Material
Adverse Effect. ImaginOn has not received any notice from any other person
pertaining to or challenging the right of ImaginOn to use any Intellectual
Property or any trade secrets, proprietary information, inventions, know-how,
processes and procedures owned or used or licensed to ImaginOn, except with
respect to rights the loss of which, individually or in the aggregate, would not
have an ImaginOn Material Adverse Effect.
3.19 PROPERTIES AND RELATED MATTERS. ImaginOn owns no real estate.
3.20 BROKERS AND FINDERS. Neither ImaginOn, nor to ImaginOn's
knowledge, any of its officers, directors and employees has employed any broker,
finder or investment bank or incurred any liability for any investment banking
fees, financial advisory fees, brokerage fees or finders' fees in connection
with the transactions contemplated hereby. ImaginOn is not aware of any claim
for payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
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ARTICLE 4
Representations and Warranties of Cal Pro
and the Merger Subsidiary
Cal Pro and the Merger Subsidiary represent and warrant to ImaginOn
that the statements contained in Article 4 are true and correct in all material
respects. As used in this Article 4 and elsewhere in this Agreement, the phrase
"to Cal Pro's or the Merger Subsidiary's knowledge" or "to Cal Pro's or the
Merger Subsidiary's actual knowledge" shall mean to the knowledge of the officer
of Cal Pro or the Merger Subsidiary who has the principal responsibility for the
matter being stated.
4.1 ORGANIZATION AND GOOD STANDING. Each of Cal Pro, the Merger
Subsidiary and all corporations, partnerships and other entities in which Cal
Pro owns any equity interest (the "Cal Pro Subsidiaries" which includes the
Merger Subsidiary) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization. All
shares of capital stock or other equity interests of each of the material Cal
Pro Subsidiaries are owned by Cal Pro, either directly or indirectly, free and
clear of all material liens, encumbrances, equities or claims.
4.2 FOREIGN QUALIFICATION. Cal Pro and each of the Cal Pro Subsidiaries
are duly qualified or licensed to do business and are in good standing as a
foreign corporation in every jurisdiction where the failure so to qualify would
have a material adverse effect (a "Cal Pro Material Adverse Effect") on (a) the
business, operations, assets or financial condition of Cal Pro and the Cal Pro
Subsidiaries taken as a whole or (b) the validity or enforceability of, or the
ability of Cal Pro to perform its obligations under, this Agreement.
4.3 CORPORATE POWER AND AUTHORITY. Cal Pro and the Cal Pro Subsidiaries
have the corporate power and authority and all material licenses and permits to
own, lease and operate their respective properties and assets and to carry on
their respective businesses as currently being conducted. Each of Cal Pro and
the Merger Subsidiary has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement and
to consummate the Merger. The execution, delivery and performance by Cal Pro and
the Merger Subsidiary of this Agreement has been duly authorized by all
necessary corporate action.
4.4 BINDING EFFECT. This Agreement has been duly executed and delivered
by Cal Pro and the Merger Subsidiary and is the legal, valid and binding
obligations of Cal Pro and the Merger Subsidiary, enforceable in accordance with
its terms except that:
(a) enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights;
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(b) the availability of equitable remedies may be limited by
equitable principles of general applicability; and
(c) rights to indemnification may be limited by considerations of
public policy.
4.5 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation of the Merger and the
fulfillment of and compliance with the terms and conditions of this Agreement do
not and will not, with the passing of time or the giving of notice or both,
violate or conflict with, constitute a breach of or default under, result in the
loss of any material benefit under, or permit the acceleration of any obligation
under, (i) any term or provision of the Certificate of Incorporation or Bylaws
of Cal Pro or the Merger Subsidiary, (ii) any "Cal Pro Material Contract" (as
defined in Section 4.12), (iii) any judgment, decree or order of any court or
governmental authority or agency to which Cal Pro or any of the Cal Pro
Subsidiaries is a party or by which Cal Pro or any of the Cal Pro Subsidiaries
or any of their respective properties is bound, or (iv) any statute, law,
regulation or rule applicable to Cal Pro or any of the Cal Pro Subsidiaries
other than such violations, conflicts, breaches or defaults as would not have a
Cal Pro Material Adverse Effect. Except for the filing of the Certificate of
Merger with the Secretary of State of California, compliance with the Securities
Act, the Exchange Act and applicable state securities laws, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental agency or public or regulatory unit, agency, body or
authority with respect to Cal Pro or the Cal Pro Subsidiaries is required in
connection with the execution, delivery or performance of this Agreement by Cal
Pro or the consummation of the transactions contemplated hereby.
4.6 CAPITALIZATION OF CAL PRO.
(a) The capitalization of Cal Pro is set forth on Schedule 4.6(a).
All of the issued and outstanding shares of Cal Pro Preferred Stock
have been duly authorized and validly issued and are fully paid and
nonassessable.
(b) All of the issued and outstanding shares of Cal Pro Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights.
(c) The shares of Cal Pro Common Stock to be issued in the Merger
will be duly authorized and validly issued and will be fully paid,
nonassessable shares of Cal Pro Common Stock free of preemptive rights.
(d) The shares of Cal Pro Common Stock to be issued upon the
conversion of the Cal Pro Preferred Stock will be duly authorized and
validly issued and will be fully paid, nonassessable shares of Cal Pro
Common Stock free of preemptive rights.
(e) To Cal Pro's knowledge, there are no voting trusts, stockholder
agreements or other voting arrangements by the stockholders of Cal Pro.
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(f) Except as set forth in subsection (a) above, there is no
outstanding subscription, contract, convertible or exchangeable
security, option, warrant, call or other right obligating Cal Pro or
its subsidiaries to issue, sell, exchange, or otherwise dispose of, or
to purchase, redeem or otherwise acquire, shares of, or securities
convertible into or exchangeable for, capital stock of Cal Pro.
4.7 CAL PRO SEC REPORTS. Cal Pro has made available to ImaginOn (i) Cal
Pro's Annual Reports on Form 10-K, including all exhibits filed thereto and
items incorporated therein by reference, (ii) Cal Pro's Quarterly Reports on
Form 10-Q, including all exhibits thereto and items incorporated therein by
reference, (iii) proxy statements relating to Cal Pro's meetings of stockholders
and (iv) all other reports or registration statements (as amended or
supplemented prior to the date hereof), filed by Cal Pro with the Securities and
Exchange Commission ("SEC") since January 1, 1996, including all exhibits
thereto and items incorporated therein by reference (items (i) through (iv)
being referred to as the "Cal Pro SEC Reports"). As of their respective dates,
Cal Pro SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Since January 1, 1996, Cal Pro has filed all material
forms (and necessary amendments), reports and documents with the SEC required to
be filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, each of which complied as to form, at the time such
form, report or document was filed, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the applicable rules
and regulations thereunder.
4.8 FINANCIAL STATEMENTS AND RECORDS OF CAL PRO. Cal Pro has made
available to ImaginOn true, correct and complete copies of the following
financial statements (the "Cal Pro Financial Statements"):
(a) the consolidated balance sheets of Cal Pro and its consolidated
subsidiaries as of December 31, 1995 and 1996, and the consolidated
statements of income, stockholders' equity and cash flows for the
fiscal years then ended, including the notes thereto, in each case
examined by and accompanied by the report of Xxxxxxx Xxxxxxxxx Xxxxxxxx
& Co.; and
(b) the unaudited balance sheet of Cal Pro as of December 31, 1997
(the "Cal Pro Balance Sheet"), with any notes thereto, and the related
unaudited statement of income for the fiscal quarter then ended
(collectively, the "Cal Pro Quarterly Statements") as set forth on
Schedule 4.8(b).
The Cal Pro Financial Statements present fairly, in all material
respects, the financial position of Cal Pro as of the dates thereof and
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the results of operations and changes in financial position thereof for
the periods then ended, in each case in conformity with generally
accepted accounting principles, consistently applied, except as noted
therein. Since December 31, 1997, there has been no change in
accounting principles applicable to, or methods of accounting utilized
by, Cal Pro, except as noted in the Cal Pro Financial Statements. The
books and records of Cal Pro have been and are being maintained in
accordance with good business practice, reflect only valid
transactions, are complete and correct in all material respects, and
present fairly in all material respects the basis for the financial
position and results of operations of Cal Pro set forth in the Cal Pro
Financial Statements.
4.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, Cal Pro has
not, except as otherwise set forth in the Cal Pro SEC Reports or on Schedule
4.9:
(a) suffered any adverse change in the business, operations,
assets, or financial condition except for such changes that would not
have a Cal Pro Material Adverse Effect;
(b) suffered any material damage or destruction to or loss of the
assets of Cal Pro or any of the Cal Pro Subsidiaries, whether or not
covered by insurance, which property or assets are material to the
operations or business of Cal Pro and its subsidiaries taken as a
whole;
(c) settled, forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims other than in the
ordinary course of business;
(d) entered into or terminated any Material Contract or agreed or
made any changes in any Material Contract, other than renewals or
extensions thereof and leases, agreements, transactions and commitments
entered into or terminated in the ordinary course of business;
(e) written up, written down or written off the book value of any
material amount of assets other than in the ordinary course of
business;
(f) declared, paid or set aside for payment any dividend or
distribution with respect to Cal Pro's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of Cal Pro's capital
stock or securities (other than shares issued upon exercise of the Cal
Pro Options) or any rights to acquire such capital stock or securities,
or agreed to changes in the terms and conditions of any such rights
outstanding as of the date of this Agreement;
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(h) increased the compensation of or paid any bonuses to any
employees or contributed to any employee benefit plan, other than in
accordance with established policies, practices or requirements and as
provided in Section 5.2 hereof;
(i) entered into any employment, consulting or compensation
agreement with any person or group, except for agreements which would
not have a Cal Pro Material Adverse Effect;
(j) entered into any collective bargaining agreement with any
person or group;
(k) entered into, adopted or amended any employee benefit plan; or
(l) entered into any agreement to do any of the foregoing.
4.10 NO MATERIAL UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of Cal Pro and its consolidated subsidiaries of any nature, whether
absolute, accrued, contingent, or otherwise, other than:
(a) liabilities and obligations that are reflected, accrued or
reserved against on the Cal Pro Balance Sheet or referred to in the
footnotes to the Cal Pro Balance Sheet, or incurred in the ordinary
course of business and consistent with past practices since December
31, 1997; or
(b) liabilities and obligations which in the aggregate would not
result in a Cal Pro Material Adverse Effect.
4.11 TAX RETURNS; TAXES. Each of Cal Pro and the Cal Pro Subsidiaries
have duly filed all U.S. federal and material state, county, local and foreign
tax returns and reports required to be filed by it and all such returns and
reports are correct in all material respects; have either paid in full all taxes
that have become due and any interest and penalties with respect thereto or have
fully accrued on its books or have established adequate reserves for all taxes
payable but not yet due; and have made cash deposits with appropriate
governmental authorities representing required estimated payments of taxes. No
extension or waiver of any statute of limitations or time within which to file
any return has been granted to or requested by Cal Pro or the Cal Pro
Subsidiaries with respect to any tax. No unsatisfied deficiency, delinquency or
default for any tax, assessment or governmental charge has been claimed,
proposed or assessed against Cal Pro or the Cal Pro Subsidiaries, nor has Cal
Pro or the Cal Pro Subsidiaries received notice of any such deficiency,
delinquency or default. Cal Pro and the Cal Pro Subsidiaries have no material
tax liabilities other than those reflected on the Cal Pro Balance Sheet and
those arising in the ordinary course of business since the date thereof. Cal Pro
will make available to ImaginOn true, complete and correct copies of Cal Pro's
consolidated tax returns. There is no dispute or claim concerning any material
tax liability of Cal Pro or any of its subsidiaries either: (a) raised by any
taxing authority in writing; (b) as to which Cal Pro or any of its subsidiaries
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has received notice concerning a potential audit of any return filed by Cal Pro;
and (c) there is no outstanding audit or pending audit of any tax return filed
by Cal Pro, except as set forth on Schedule 4.11.
4.12 MATERIAL CONTRACTS. Cal Pro has furnished or made available to
ImaginOn accurate and complete copies of the Cal Pro Material Contracts (as
defined herein) applicable to Cal Pro or any of the Cal Pro Subsidiaries. Except
as set forth on Schedule 4.12, there is not under any of the Cal Pro Material
Contracts any existing breach, default or event of default by Cal Pro or any of
the Cal Pro Subsidiaries nor event that with notice or lapse of time or both
would constitute a breach, default or event of default by Cal Pro or any of the
Cal Pro Subsidiaries other than breaches, defaults or events of default which
would not have a Cal Pro Material Adverse Effect nor does Cal Pro know of, and
Cal Pro has not received notice of, or made a claim with respect to, any breach
or default by any other party thereto which would, severally or in the
aggregate, have a Cal Pro Material Adverse Effect. As used herein, the term "Cal
Pro Material Contracts" shall mean all contracts and agreements filed, or
required to be filed, as exhibits to Cal Pro's Annual Report on Form 10-K for
the year ended December 31, 1996 and any contracts and agreements entered into
since December 31, 1996 which would be required to be filed or incorporated by
reference therein as an exhibit to Cal Pro's Annual Report on Form 10-K for the
year ending December 31, 1997.
4.13 LITIGATION AND GOVERNMENT CLAIMS. Except as disclosed in the Cal
Pro SEC Reports, there is no pending suit, claim, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry against Cal Pro or the Cal Pro Subsidiaries to which their businesses or
assets are subject which would, severally or in the aggregate, reasonably be
expected to result in a Cal Pro Material Adverse Effect nor have any such
proceedings been threatened or contemplated. Neither Cal Pro nor any Cal Pro
Subsidiary is subject to any judgment, decree, injunction, rule or order of any
court, or, to the knowledge of Cal Pro, any governmental restriction applicable
to Cal Pro or any Cal Pro Subsidiary which is reasonably likely to have a Cal
Pro Material Adverse Effect.
4.14 COMPLIANCE WITH LAWS. Cal Pro and the Cal Pro Subsidiaries each
own or hold under lease the properties or assets they own or hold under lease
and perform all of their obligations under the agreements to which they are a
party, except for instances which would not have a Cal Pro Material Adverse
Effect. Cal Pro and the Cal Pro Subsidiaries have been and are, to the knowledge
of Cal Pro, in compliance with all applicable laws (including those referenced
in the Cal Pro SEC Reports), regulations and administrative orders of any
country, state or municipality or any subdivision of any thereof to which their
respective business and their employment of labor or their use or occupancy of
properties or any part hereof are subject, the violation of which would have a
Cal Pro Material Adverse Effect.
4.15 EMPLOYMENT AGREEMENTS; LABOR RELATIONS. Each of Cal Pro and the
Cal Pro Subsidiaries is in compliance in all material respects with all laws
(including Federal and state laws) respecting employment and employment
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practices, terms and conditions of employment, wages and hours, and is not
engaged in any unfair labor or unlawful employment practice. There is no
unlawful employment practice discrimination charge pending before the EEOC or
EEOC recognized state "referral agency." There is no unfair labor practice
charge or complaint against Cal Pro or any of the Cal Pro Subsidiaries pending
before the National Labor Review Board. There is no collective bargaining
agreement that is binding on Cal Pro or any of the Cal Pro Subsidiaries.
4.16 CAL PRO EMPLOYEE BENEFIT PLANS. Cal Pro has no employee benefit
plans subject to ERISA.
4.17 INTELLECTUAL PROPERTY. Cal Pro and the Cal Pro Subsidiaries own or
have valid, binding and enforceable rights to use all material patents,
trademarks, trade names, service marks, service names, copyrights, applications
therefor and licenses or other rights in respect thereof ("Cal Pro Intellectual
Property") used or held for use in connection with the business of Cal Pro or
the Cal Pro Subsidiaries, without any known conflict with the rights of others,
except for such conflicts as do not have a Cal Pro Material Adverse Effect.
Neither Cal Pro nor any of the Cal Pro Subsidiaries has received any notice from
any other person pertaining to or challenging the right of Cal Pro or any of the
Cal Pro Subsidiaries to use any Cal Pro Intellectual Property or any trade
secrets, proprietary information, inventions, know-how, processes and procedures
owned or used or licensed to Cal Pro or the Cal Pro Subsidiaries, except with
respect to rights the loss of which, individually or in the aggregate, would not
have a Cal Pro Material Adverse Effect.
4.18 PROPERTIES AND RELATED MATTERS. Neither Cal Pro nor the Merger
Subsidiary owns any real property.
4.19 NASDAQ FEES. Except as set forth on Schedule 4.19, Cal Pro has
paid all fees due and owing to Nasdaq with respect to Cal Pro Common Stock on
the NSM and Cal Pro will pay all such fees arising out of the issuance of any
shares of Cal Pro Common Stock in connection with the transactions contemplated
hereby.
ARTICLE 5
Certain Covenants and Agreements
5.1 CONDUCT OF BUSINESS BY IMAGINON. From the date hereof to the
Effective Date, ImaginOn will, except as required in connection with the Merger
and the other transactions contemplated by this Agreement and except as
otherwise disclosed in the ImaginOn Information or consented to in writing by
Cal Pro:
30698_8
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(a) not engage in any new line of business or enter into any
Material Contract, transaction or activity or make any material
commitment except those in the ordinary and regular course of business
and not otherwise prohibited under this Section 5.1;
(b) neither change nor amend its Articles of Incorporation or
Bylaws;
(c) not issue or sell shares of capital stock of ImaginOn (other
than upon the exercise of ImaginOn Options) or issue, sell or grant
options, warrants or rights to purchase or subscribe to, or enter into
any arrangement or contract with respect to the issuance or sale of any
of the capital stock of ImaginOn or rights or obligations convertible
into or exchangeable for any shares of the capital stock of ImaginOn,
not alter the terms of any outstanding ImaginOn Options and not make
any changes (by split-up, combination, reorganization or otherwise) in
the capital structure of ImaginOn;
(d) not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities
of ImaginOn and not redeem, purchase or otherwise acquire any shares of
the capital stock or other securities of ImaginOn or rights or
obligations convertible into or exchangeable for any shares of the
capital stock or other securities of ImaginOn or obligations
convertible into such, or any options, warrants or other rights to
purchase or subscribe to any of the foregoing;
(e) not acquire or enter into any agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(f) use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of ImaginOn;
(g) perform all of its obligations under all Material Contracts
(except those being contested in good faith) and not enter into, assume
or amend any contract or commitment that would be a Material Contract
other than contracts to provide services entered into in the ordinary
course of business; and
(h) except in instances which would not have an ImaginOn Material
Adverse Effect, prepare and file all federal, state, local and foreign
returns for taxes and other tax reports, filings and amendments thereto
required to be filed by it, and allow Cal Pro, at its request, to
review all such returns, reports, filings and amendments at ImaginOn's
offices prior to the filing thereof, which review shall not interfere
with the timely filing of such returns.
In connection with the continued operation of the business of ImaginOn
between the date of this Agreement and the Effective Date, ImaginOn shall confer
in good faith and on a regular and frequent basis with one or more
representatives of Cal Pro designated in writing to report operational matters
of materiality and the general status of ongoing operations. ImaginOn
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acknowledges that Cal Pro does not and will not waive any rights it may have
under this Agreement as a result of such consultations nor shall Cal Pro be
responsible for any decisions made by ImaginOn's officers and directors with
respect to matters which are the subject of such consultation.
5.2 CONDUCT OF BUSINESS BY CAL PRO. From the date hereof to the
Effective Date, Cal Pro will, and will cause the Merger Subsidiary and each of
the Cal Pro Subsidiaries to, except as required in connection with the Merger
and the other transactions contemplated by this Agreement and except as
otherwise disclosed in the Cal Pro Information hereto or consented to in writing
by ImaginOn:
(a) not engage in any new line of business or enter into any
agreement, transaction or activity or make any commitment;
(b) neither change nor amend its Certificate of Incorporation or
Bylaws;
(c) not make any changes (by split-up, combination, reorganization
or otherwise) in the capital structure of Cal Pro, the Merger
Subsidiary or any of the Cal Pro Subsidiaries; provided, however, Cal
Pro may sell all or a portion of the shares it owns in USA Skate Corp.
for which it is currently negotiating the sale;
(d) except as set forth on Schedule 5.2(d), not issue or sell
shares of capital stock of Cal Pro (other than upon the exercise of Cal
Pro Options) or issue, sell or grant options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of any of the capital stock of Cal
Pro or rights or obligations convertible into or exchangeable for any
shares of the capital stock of ImaginOn and not alter the terms of any
outstanding Cal Pro Options or the Cal Pro Option Plans;
(e) not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities
of Cal Pro and not redeem, purchase or otherwise acquire any shares of
the capital stock or other securities of Cal Pro or any of the Cal Pro
Subsidiaries, or rights or obligations convertible into or exchangeable
for any shares of the capital stock or other securities of Cal Pro, the
Merger Subsidiary or any of the Cal Pro Subsidiaries or obligations
convertible into such, or any options, warrants or other rights to
purchase or subscribe to any of the foregoing;
(f) not acquire or enter into any agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
and
(g) use its reasonable efforts to preserve intact the corporate
existence of Cal Pro and the Cal Pro Subsidiaries.
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(h) not make or incur (other than in the ordinary course of
business) any capital expenditures;
(i) perform all of its obligations under all Material Contracts
(except those being contested in good faith) and not enter into, assume
or amend any contract or commitment that would be a Material Contract;
and
(j) prepare and file all federal, state, local and foreign returns
for taxes and other tax reports, filings and amendments thereto
required to be filed by it, and allow ImaginOn, at its request, to
review all such returns, reports, filings and amendments at Cal Pro's
office prior to the filing thereof, which review shall not interfere
with the timely filing of such returns.
In connection with the wind-down of the business of Cal Pro between the
date of this Agreement and the Effective Date, Cal Pro shall confer in
good faith and on a regular and frequent basis with one or more
representatives of ImaginOn designated in writing to report operational
matters of materiality and the general status of ongoing operations.
Cal Pro acknowledges that ImaginOn does not and will not waive any
rights it may have under this Agreement as a result of such
consultations nor shall ImaginOn be responsible for any decisions made
by Cal Pro's officers and directors with respect to matters which are
the subject of such consultation.
5.3 NOTICE OF ANY MATERIAL CHANGE. Each of ImaginOn and Cal Pro shall,
promptly after the first notice or occurrence thereof but not later than the
Closing Date, advise the other in writing of any event or the existence of any
state of facts that (i) would make any of its representations and warranties in
this Agreement untrue in any material respect, or (ii) would otherwise
constitute either an ImaginOn Material Adverse Effect or a Cal Pro Material
Adverse Effect.
5.4 INSPECTION AND ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Date,
ImaginOn will provide to the Merger Subsidiary and Cal Pro and their
accountants, counsel and other authorized representatives reasonable
access, during normal business hours to its premises, and will cause
its officers to furnish to Cal Pro and the Merger Subsidiary and their
authorized representatives such financial, technical and operating data
and other information pertaining to its business, as the Merger
Subsidiary and Cal Pro shall from time to time reasonably request.
(b) Between the date of this Agreement and the Effective Date, Cal
Pro will, and will cause each of the Cal Pro Subsidiaries to, provide
to ImaginOn and its accountants, counsel and other authorized
representatives reasonable access, during normal business hours to its
30698_8
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premises, and will cause its officers to furnish to ImaginOn and its
authorized representatives such financial, technical and operating data
and other information pertaining to its business, as ImaginOn shall
from time to time reasonably request.
(c) Each of the parties hereto and their respective representatives
shall maintain the confidentiality of all information (other than
information which is generally available to the public) concerning the
other parties hereto acquired pursuant to the transactions contemplated
hereby in the event that the Merger is not consummated. Each of the
parties hereto and their representatives shall not use such information
so obtained to the detriment or competitive disadvantage of the other
party hereto. All files, records, documents, information, data and
similar items relating to the confidential information of ImaginOn,
whether prepared by Cal Pro or otherwise coming into Cal Pro's
possession, shall remain the exclusive property of ImaginOn and shall
be promptly delivered to ImaginOn upon termination of this Agreement.
All files, records, documents, information, data and similar items
relating to the confidential information of Cal Pro, whether prepared
by ImaginOn or otherwise coming into ImaginOn's possession, shall
remain the exclusive property of Cal Pro and shall be promptly
delivered to Cal Pro upon termination of this Agreement.
5.5 CAL PRO EXCHANGE ACT REPORTS. ImaginOn acknowledges that Cal Pro
will be required to report its acquisition of ImaginOn promptly following the
Effective Date. ImaginOn agrees to provide as promptly as practicable to Cal Pro
such information concerning its business and financial statements and affairs
as, in the reasonable judgment of Cal Pro, may be required or appropriate for
inclusion in the required report, or in any amendments or supplements thereto,
and to cause its counsel and auditors to cooperate with Cal Pro's counsel and
auditors in the preparation of such report.
5.6 REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the
other provisions of this Agreement, the parties hereby shall each use their
reasonable efforts to perform their obligations herein and to take, or cause to
be taken or do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable law to obtain all regulatory approvals and satisfy
all conditions to the obligations of the parties under this Agreement and to
cause the Merger and the other transactions contemplated herein to be carried
out promptly in accordance with the terms hereof. The parties agree to use their
reasonable best efforts to consummate the transactions contemplated hereby as
promptly as possible. The parties shall cooperate fully with each other and
their respective officers, directors, employees, agents, counsel, accountants
and other designees in connection with any steps required to be taken as a part
of their respective obligations under this Agreement, including without
limitation:
(a) In the event any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which
questions the validity or legality of the Merger or any of the other
transactions contemplated hereby or seeks damages in connection
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therewith, the parties agree to cooperate and use all reasonable
efforts to defend against such claim, action, suit, investigation or
other proceeding and, if an injunction or other order is issued in any
such action, suit or other proceeding, to use all reasonable efforts to
have such injunction or other order lifted, and to cooperate reasonably
regarding any other impediment to the consummation of the transactions
contemplated by this Agreement.
(b) Each party shall give prompt written notice to the other of (i)
the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of
ImaginOn or Cal Pro, as the case may be, contained in this Agreement to
be untrue or inaccurate in any material respect at any time from the
date hereof to the Effective Date or that will or may result in the
failure to satisfy the conditions specified in Article 6 or 7 and (ii)
any failure of ImaginOn or Cal Pro, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
5.7 PUBLIC ANNOUNCEMENTS. The timing and content of all announcements
regarding any aspect of this Agreement or the Merger to the financial community,
government agencies, employees or the general public shall be mutually agreed
upon in advance (unless Cal Pro or ImaginOn is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law or applicable NSM rule and then only after making a reasonable
attempt to comply with the provisions of this Section).
5.8 NO SOLICITATIONS. (a) From the date hereof until the Effective Date
or until this Agreement is terminated or abandoned as provided in this
Agreement, ImaginOn shall not directly or indirectly (i) solicit or initiate
discussion with or (ii) enter into negotiations or agreements with, or furnish
any information to, any corporation, partnership, person or other entity or
group (other than Cal Pro, an affiliate of Cal Pro or their authorized
representatives pursuant to this Agreement) concerning any proposal for a
merger, sale of substantial assets, sale of shares of stock or securities or
other takeover or business combination transaction (the "Acquisition Proposal")
involving ImaginOn, and ImaginOn will instruct its officers, directors, advisors
and its financial and legal representatives and consultants not to take any
action contrary to the foregoing provisions of this sentence; provided, however,
that ImaginOn, its officers, directors, advisors and its financial and legal
representatives and consultants will not be prohibited from taking any action
described in (ii) above to the extent such action is taken by, or upon the
authority of, the Board of Directors of ImaginOn in the exercise of good faith
judgment as to its fiduciary duties to the shareholders of ImaginOn, which
judgment is based upon the advice of independent, outside legal counsel that a
failure of the Board of Directors of ImaginOn to take such action would be
likely to constitute a breach of its fiduciary duties to such shareholders.
ImaginOn will notify Cal Pro promptly if ImaginOn becomes aware that any
inquiries or proposals are received by, any information is requested from or any
negotiations or discussions are sought to be initiated with, ImaginOn with
respect to an Acquisition Proposal, and ImaginOn shall promptly deliver to Cal
Pro any written inquiries or proposals received by ImaginOn relating to an
Acquisition Proposal.
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5.9 NO SOLICITATIONS. (a) From the date hereof until the Effective Date
or until this Agreement is terminated or abandoned as provided in this
Agreement, Cal Pro shall not directly or indirectly (i) solicit or initiate
discussion with or (ii) enter into negotiations or agreements with, or furnish
any information to, any corporation, partnership, person or other entity or
group (other than ImaginOn, an affiliate of ImaginOn or its authorized
representatives pursuant to this Agreement) concerning any proposal for a
merger, sale of substantial assets, sale of shares of stock or securities or
other takeover or business combination transaction (the "Acquisition Proposal")
involving Cal Pro, and Cal Pro will instruct its officers, directors, advisors
and its financial and legal representatives and consultants not to take any
action contrary to the foregoing provisions of this sentence; provided, however,
that Cal Pro, its officers, directors, advisors and its financial and legal
representatives and consultants will not be prohibited from taking any action
described in (ii) above to the extent such action is taken by, or upon the
authority of, the Board of Directors of Cal Pro in the exercise of good faith
judgment as to its fiduciary duties to the shareholders of Cal Pro, which
judgment is based upon the advice of independent, outside legal counsel that a
failure of the Board of Directors of Cal Pro to take such action would be likely
to constitute a breach of its fiduciary duties to such shareholders. Cal Pro
will notify ImaginOn promptly if Cal Pro becomes aware that any inquiries or
proposals are received by, any information is requested from or any negotiations
or discussions are sought to be initiated with, Cal Pro with respect to an
Acquisition Proposal, and Cal Pro shall promptly deliver to ImaginOn any written
inquiries or proposals received by Cal Pro relating to an Acquisition Proposal.
5.10 CAL PRO BOARD OF DIRECTORS. Not later than the Effective Date, Cal
Pro's current directors shall have resigned and have elected Xxxxx X. Xxxxxxxx
and his nominees as directors of Cal Pro.
5.11 PROXY STATEMENT. As soon as possible after the date hereof, Cal
Pro shall prepare and file with the SEC and mail to its stockholders, as soon as
permitted, proxy materials requesting that the Cal Pro stockholders approve (i)
the Merger; (ii) a recapitalization or other amendment to its charter documents
that will result in there being sufficient shares of Cal Pro Common Stock
available for the Merger Consideration and for other corporate purposes; (iii) a
reverse stock split; (iv) a change of the name of Cal Pro to ImaginOn, Inc.; and
(v) election of a new board of directors.
5.12 EXERCISE OF PUBLIC WARRANTS. If, within 12 months after the
Effective Date Cal Pro shall not have received at least $2 million from the
exercise of its publicly traded warrants (the "Warrants") and/or alternative
financing, then the persons who were stockholders of ImaginOn immediately prior
to the Effective Date ("ImaginOn Stockholders") shall be entitled to receive
additional shares of Cal Pro Common Stock, or Cal Pro Common Stock if Cal Pro
shall not yet have complied with the provisions of Section 5.11 hereof, so that
the ImaginOn Stockholders shall have received 80% of the outstanding voting
shares of Cal Pro capital stock as of the Effective Date.
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5.13 SUBSCRIPTION AGREEMENTS. All of the ImaginOn shareholders who are
to receive shares of Cal Pro Common Stock in the Merger shall have executed the
Subscription Agreement attached as Exhibit 5.13.
ARTICLE 6
Conditions Precedent to Obligations of ImaginOn
Except as may be waived by ImaginOn, the obligations of ImaginOn to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction on or before the Closing Date of each of the following
conditions:
6.1 COMPLIANCE. Cal Pro shall have, or shall have caused to be,
satisfied or complied with and performed in all material respects all terms,
covenants and conditions of this Agreement to be complied with or performed by
Cal Pro on or before the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. ALl of the representations and
warranties made by Cal Pro in this Agreement shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as if such representations and warranties had been made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
6.3 MATERIAL ADVERSE CHANGES. Subsequent to December 31, 1997, there
shall have occurred no Cal Pro Material Adverse Effect other than any such
change that affects both Cal Pro and ImaginOn in a substantially similar manner.
6.4 RESOLUTIONS. Cal Pro shall have delivered to ImaginOn a copy of
resolutions duly adopted by the board of directors, authorizing and approving
the execution and delivery by Cal Pro of this Agreement, and the completion by
Cal Pro of the Merger.
6.5 CERTIFICATES. ImaginOn shall have received a certificate or
certificates, executed on behalf of Cal Pro by an executive officer of Cal Pro,
to the effect that the conditions contained in Sections 6.1, 6.2, 6.3 and 6.4
hereof have been satisfied.
6.6 PREPARATION AND DELIVERY OF SCHEDULES. Cal Pro shall have delivered
all Cal Pro Schedules referred to in this Agreement and ImaginOn shall have
accepted them, which acceptance shall not be unreasonably withheld.
6.7 RESERVATION OF SHARES FOR OPTIONS. Cal Pro shall have reserved
200,000 shares of Common Stock for issuance after the Effective Date (a) upon
exercise of options or (b) granting of stock bonuses.
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6.8 CAL PRO'S BUSINESS. Cal Pro shall have no ongoing business
operations, other than sales of existing inventory, and shall have no full time
employees.
6.9 APPROVAL OF STOCKHOLDERS. The stockholders of Cal Pro shall have
approved the matters set forth in Section 5.11 and elected a new board of
directors.
6.10 QUOTATION OF COMMON STOCK. Quotations of Cal Pro Common Stock
shall be available through a system maintained by the National Association of
Securities Dealers or as otherwise available to registered broker-dealers.
6.11 OUTSTANDING PUBLIC WARRANTS. Cal Pro shall have reduced the
exercise price of the Warrants from $6.00 to $1.50 per share or such other price
as to which Cal Pro and ImaginOn shall have agreed.
6.12 SATISFACTION OF DEBTS AND LIABILITIES. Cal Pro shall have
satisfied all of its debts and outstanding liabilities, except as the parties
may reasonably agree.
ARTICLE 7
Conditions Precedent to obligations of Cal Pro
and the Merger Subsidiary
Except as may be waived by Cal Pro and the Merger Subsidiary, the
obligations of Cal Pro and the Merger Subsidiary to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each of the following conditions:
7.1 COMPLIANCE. ImaginOn shall have, or shall have caused to be,
satisfied or complied with and performed in all material respects all terms,
covenants, and conditions of this Agreement to be complied with or performed by
it on or before the Closing Date.
7.2 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties made by ImaginOn in this Agreement shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as if such representations and warranties had been made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
7.3 MATERIAL ADVERSE CHANGE. Since December 31, 1997, except as set
forth in this Agreement or on the schedules hereto, there shall have occurred no
ImaginOn Material Adverse Effect other than any such change that affects both
Cal Pro and ImaginOn in a substantially similar manner.
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7.4 RESOLUTIONS. ImaginOn shall have delivered to Cal Pro a copy of
resolutions duly adopted by the board of directors, authorizing and approving
the execution and delivery by ImaginOn of this Agreement, and the completion by
ImaginOn of the Merger.
7.5 CERTIFICATES. Cal Pro shall have received a certificate or
certificates, executed on behalf of ImaginOn by an executive officer of
ImaginOn, to the effect that the conditions in Sections 7.1, 7.2, 7.3 and 7.4
hereof have been satisfied.
7.6 PREPARATION AND DELIVERY OF SCHEDULES. ImaginOn shall have
delivered all ImaginOn Schedules referred to in this Agreement and Cal Pro shall
have accepted them, which acceptance shall not be unreasonably withheld.
7.7 OPINION OF COUNSEL. Cal Pro shall have received the opinion of
Xxxxxx & Xxxxxxx LLP, special counsel to ImaginOn, reasonably acceptable to Cal
Pro, including, but not limited to the following:
(a) ImaginOn is the exclusive owner of, and has sole, full and
clear title to, the ImaginOn Patents set forth on Schedule 7.7(a)
issued by the United States Patent and Trademark Office, and is the
owner of the patent applications set forth on Schedule 7.7(a), free and
clear of any encumbrances, liens or adverse claims of any kind, and all
of the registrations of said Patents are valid and subsisting in the
records of the United States Patent and Trademark Office.
(b) ImaginOn is the exclusive owner of, and has sole, full and
clear title to, the registrations for the Trademarks (described in
Schedule 7.7(b)) currently registered in the United States Patent and
Trademark Office, free and clear of any encumbrances, liens or adverse
claims of any kind, and all of the registrations of said Trademarks are
valid and subsisting in the records of the United States Patent and
Trademark Office.
(c) To the best of such counsel's knowledge, ImaginOn's present use
of the Patents and Trademarks does not infringe on any rights of third
parties, and there are no third parties infringing on or otherwise
interfering with the use of the Patents and Trademarks. Such counsel is
not aware of any adverse claims with respect to any of the Patents or
Trademarks.
(d) The status of the license agreement between ImaginOn and
JTS/Atari Corp.
(e) Upon the Merger of Merger Subsidiary into ImaginOn, ImaginOn,
without more, will continue to be the exclusive owner of and have the
sole full and clear title to the Patents and the Trademarks and the
good will associated therewith, free and clear of any encumbrances,
liens or adverse claims of any kind.
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7.8 OPINION OF INVESTMENT BANKER. Cal Pro shall have received an
opinion from an investment banking firm that the transaction is fair to the Cal
Pro shareholders from a financial point of view.
7.9 APPROVAL OF STOCKHOLDERS. The stockholders of Cal Pro shall have
approved the matters set forth in Section 5.11 and elected a new board of
directors.
7.10 CONSENTS; LITIGATION. Other than the filing of the Certificate of
Merger as described in Article 1, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations or terminations of
waiting periods imposed by, any governmental entity, and all required
third-party consents, the failure to obtain which would have an ImaginOn
Material Adverse Effect or a Cal Pro Material Effect, shall have been obtained.
In addition, no preliminary or permanent injunction or other order shall have
been issued by any court or by any governmental or regulatory agency, body or
authority which prohibits the consummation of the Merger and the transactions
contemplated by this Agreement and which is in effect at the Effective Date.
7.11 APPRAISAL RIGHTS. All of the ImaginOn shareholders shall have
voted for the Merger and none shall have asserted dissenter or appraisal rights.
ARTICLE 8
Indemnification; Directors' and Officers' Insurance
8.1 INDEMNIFICATION. In the event of any threatened or actual claim,
action, suit, proceeding or investigation (including any claims regarding
securities law matters), whether civil, criminal or administrative, including,
without limitation, any such claim, action, suit, proceeding or investigation in
which any of the present or former officers or directors (the "Managers") of
ImaginOn is, or is threatened to be, made a party by reason of the fact that he
or she is or was a stockholder, director, officer, employee or agent of
ImaginOn, or is or was serving at the request of ImaginOn as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, whether before or after the Effective Date, ImaginOn
shall indemnify and hold harmless, and from and after the Effective Date each of
the Surviving Corporation and Cal Pro shall indemnify and hold harmless, as and
to the full extent permitted by applicable law (including by advancing expenses
promptly as statements therefor are received), each such Manager against any
losses, claims, damages, liabilities, costs, expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with any
such claim, action, suit, proceeding or investigation, and in the event of any
such claim, action, suit proceeding or investigation (whether arising before or
after the Effective Date), (i) if ImaginOn (prior to the Effective Date) or Cal
Pro or the Surviving Corporation (after the Effective Date) have not promptly
assumed the defense of such matter, the Managers may retain counsel satisfactory
to them, and ImaginOn, or the Surviving Corporation and Cal Pro after the
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Effective Date, shall pay all fees and expenses of such counsel for the Managers
promptly, as statements therefor are received, and (ii) ImaginOn, or the
Surviving Corporation and Cal Pro after the Effective Date, will use their
respective best efforts to assist in the vigorous defense of any such matter;
provided that neither ImaginOn nor the Surviving Corporation or Cal Pro shall be
liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld); and provided further that the
Surviving Corporation and Cal Pro shall have no obligation under the foregoing
provisions of this Section 8.1 to any Manager if (x) the indemnification of such
Manager in the manner contemplated hereby is prohibited by applicable law, and
(y) ImaginOn has breached a representation or warranty hereunder with respect to
the same matters for which indemnification is being sought by such Manager and
such Manager fails to prove that such Manager had no actual knowledge of such
breach at the Effective Date. Upon the determination that the Surviving
Corporation or Cal Pro is not liable for any such indemnification claims, the
Manager will reimburse Cal Pro and the Surviving Corporation for any fees,
expenses and costs incurred by Cal Pro or the Surviving Corporation in
connection with the defense of such claims. Any Manager wishing to claim
indemnification under this Section 8.1, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify ImaginOn and, after the
Effective Date, the Surviving Corporation and Cal Pro, thereof (provided that
the failure to give such notice shall not affect any obligations hereunder,
except to the extent that the indemnifying party is actually and materially
prejudiced thereby). Cal Pro and ImaginOn agree that all rights to
indemnification existing in favor of the Managers as provided in ImaginOn's
Certificate of Incorporation or Bylaws as in effect as of the date hereof, and
in any agreement between ImaginOn and any Manager with respect to matters
occurring prior to the Effective Date, shall survive the Merger. Cal Pro further
covenants not to amend or repeal any provisions of the Certificate of
Incorporation or Bylaws of ImaginOn in any manner which would adversely affect
the indemnification or exculpatory provisions contained therein. The provisions
of this Section 8.1 are intended to be for the benefit of, and shall be
enforceable by, each indemnified party and his or her heirs and representatives.
ARTICLE 9
Miscellaneous
9.1 TERMINATION. In addition to the provisions regarding termination
set forth elsewhere herein, this Agreement and the transactions contemplated
hereby may be terminated at any time on or before the Closing Date:
(a) by mutual consent of ImaginOn and Cal Pro;
(b) by either Cal Pro or ImaginOn if the transactions contemplated
by this Agreement have not been consummated by August 31, 1998, unless
such failure of consummation is due to the failure of the terminating
30698_8
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party to perform or observe the covenants, agreements, and conditions
hereof to be performed or observed by it at or before the Closing Date;
(c) by either ImaginOn or Cal Pro if the transactions contemplated
hereby violate any nonappealable final order, decree, or judgment of
any court or governmental body or agency having competent jurisdiction;
(d) by Cal Pro if the ImaginOn Board of Directors withdraws or
materially modifies or changes its recommendation to the stockholders
of ImaginOn to approve this Agreement and the Merger if there exists at
such time an Acquisition Proposal;.
(e) by Cal Pro if the Cal Pro Board of Directors reasonably
determines that the ImaginOn Schedules are not acceptable to Cal Pro;
or
(f) by ImaginOn if the ImaginOn Board of Directors reasonably
determines that the Cal Pro Schedules are not acceptable to ImaginOn.
9.2 EXPENSES. If the transactions contemplated by this Agreement are
not consummated, each party hereto shall pay its own expenses incurred in
connection with this Agreement and the transactions contemplated hereby.
9.3 ENTIRE AGREEMENT. This Agreement and the exhibits hereto contain
the complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings among
the parties with respect to such transactions. Section and other headings are
for reference purposes only and shall not affect the interpretation or
construction of this Agreement. The parties hereto have not made any
representation or warranty except as expressly set forth in this Agreement or in
any certificate or schedule delivered pursuant hereto. The obligations of any
party under any agreement executed pursuant to this Agreement shall not be
affected by this section.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each party contained herein or in any exhibit, certificate,
document or instrument delivered pursuant to this Agreement shall not survive
the Closing.
9.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
9.6 NOTICES. All notices, demands, requests, or other communications
that may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be sent by
facsimile transmission, next-day courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
hand delivery, addressed as follows:
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(a) If to ImaginOn:
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxx, XX 00000
ATTN: Xxxxx X. Xxxxxxxx, President
(b) If to Cal Pro or the Merger Subsidiary:
Xxxxx X. Xxxxxxxxx, Chief Financial Officer
California Pro Sports, Inc.
0000-X Xxxxx Xxxxxxxxxx Xxxx
Xxxxx, Xxxxx Xxxxxxxx 00000
with a copy (which shall not constitute notice) to:
Friedlob Xxxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC
0000 Xxxxxxx Xx., Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
ATTN: Xxxxxx Xxxxxx
Each party may designate by notice in writing a new address to which
any notice, demand, request, or communication may thereafter be so
given, served, or sent. Each notice, demand, request, or communication
that is mailed, delivered, or transmitted in the manner described
above shall be deemed sufficiently given, served, sent, and received
for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt or the affidavit of messenger
being deemed conclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
9.7 SUCCESSORS; ASSIGNMENTS. This Agreement and the rights, interests,
and obligations hereunder shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, by operation of law or otherwise, by any of the parties hereto without
the prior written consent of the other.
9.8 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
9.9 WAIVER AND OTHER ACTION. This Agreement may be amended, modified,
or supplemented only by a written instrument executed by the parties against
which enforcement of the amendment, modification or supplement is sought.
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9.10 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision were never a part hereof; 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; and in lieu of
such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
9.11 NO THIRD PARTY BENEFICIARIES. Article 8 is intended for the
benefit of each "Manager" (as defined in Article 8) and may be enforced by such
persons, their heirs and representatives. Other than as expressly set forth in
this Section 9.11, nothing expressed or implied in this Agreement is intended,
or shall be construed, to confer upon or give any person, firm or corporation
other than the parties hereto and their stockholders, any rights, remedies,
obligations or liabilities under or by reason of this Agreement or result in
such person, firm or corporation being deemed a third party beneficiary of this
Agreement.
9.12 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no provision of
this Agreement shall be construed against any party on the ground that such
party drafted the provision or caused it to be drafted or the provision contains
a covenant of such party.
9.13 ARBITRATION. Any controversy or dispute among the parties arising
in connection with this Agreement shall be submitted to a panel of three
arbitrators and finally settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. Each of the disputing
parties shall appoint one arbitrator, and these two arbitrators shall
independently select a third arbitrator. Arbitration shall take place in Los
Angeles, California. The prevailing party in such arbitration shall be entitled
to the award of all costs and attorneys' fees in connection with such action.
Judgment upon the award rendered may be entered in any court having jurisdiction
or application may be made to such court for judicial acceptance of the award
and an order of enforcement, as the case may be.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ImaginOn, Inc.
/s/ Xxxxx X. Xxxxxxxx
By:__________________________________
Xxxxx X. Xxxxxxxx, President
California Pro Sports, Inc.
/s/ Xxxxx Xxxx
By:__________________________________
Xxxxx Xxxx, Chairman
/s/ Xxxxx X. Xxxxxxxxx
By:__________________________________
Xxxxx X. Xxxxxxxxx, President
ImaginOn Acquisition Corp.
/s/ Xxxxx X. Xxxxxxxxx
By:__________________________________
Xxxxx X. Xxxxxxxxx, President
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