EXHIBIT 2.1
MERGER AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF FEBRUARY 9, 1999
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
Parent: XxxxxxXx.xxx
Subsidiary: iNow
Target: Network Specialists, Inc.
Date: February 9, 1999
0
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
PREAMBLE
This Merger Agreement and Plan of Reorganization is made as of February
9, 1999, between XxxxxxXx.xxx, a California Corporation, and Network
Specialists, Inc., a Nevada corporation. In consideration of the mutual
covenants, agreements, representations and warranties contained in this Merger
Agreement the Parties hereto agree as follows:
ARTICLE I
1. DEFINITIONS. The capitalized terms set forth below shall have the
following meanings:
"Agreement of Merger" shall mean Exhibit I-1.
"Business" shall mean and refer to all of the business enterprises
presently conducted by Target.
"Business Day" means a day in which banks are open for business in
Los Angeles and San Francisco, California.
"Closing" has that meaning set forth in Section 2.2.
"Closing Date" has that meaning set forth in Section 2.2.
"Common Stock" has that meaning set forth in Section 4.2.
"Code" means the United States Internal Revenue Code of 1986 and the
regulations thereunder as either or both are amended.
"Effective Date" means that date on which Subsidiary is merged into
Target as evidenced by the filing of the Agreement of Merger.
"Financial Statements" has that meaning set forth in Section 4.3.
"Knowledge" or "best of knowledge" of a person means that no
information has come to the attention of such person that would give such person
actual knowledge of facts contrary to the existence or absence of the facts
indicated and that such person has not undertaken any independent investigation
to determine the existence or absence of such facts.
"Material Adverse Change" means a change materially and adversely
affecting the financial condition, business, assets or (to Target's knowledge)
prospects of Target.
"Merger" means that transaction set forth in Section 2.1.
"Merger Agreement" means this agreement to merge Target into
Subsidiary.
----- --------
NSI ImaginOn
1
"Parent" means XxxxxxXx.xxx, a California corporation.
"Party" means either Parent, Subsidiary or Target.
"Parties" shall mean Parent, Subsidiary and Target.
"Selling Shareholders" means those holders of Target Common Stock
surrendering their shares for the consideration set forth in Section 3.1.1 as
listed on Exhibit H-1.
"Shareholders" means, as of the date hereof, those persons listed on
Exhibit A-1.
"Subsidiary" means a wholly-owned subsidiary of Parent to be formed
as set forth herein.
"Surviving Corporation" has that meaning set forth in Section 2.1.
"Target" means Network Specialists, Inc., a Nevada corporation.
"Target Common Stock" has that meaning set forth in Section 3.1.1.
"Tax" means tax, license, franchise or registration fee,
governmental charge, withholding or assessment of any nature, including without
limitation income, excise, property, franchise, sales, use and transfer taxes
(including vehicle transfer taxes) imposed by any government (federal, state, or
local) or any subdivision, agency, or taxing authority thereof, and any
interest, penalty, or addition to tax relating thereto.
"Termination with rights Retained" has the meaning set forth in
Section 11.2.
ARTICLE II
2. Merger Agreement: Effect Of The Transaction; Term.
2.1 MERGER. On the Effective Date, and subject to and upon the terms
and conditions of this Merger Agreement, a merger shall take place (the
"Merger") whereby Target shall merge with and into Subsidiary, and Subsidiary
shall be the Surviving Corporation and the separate existence of Target shall
cease. (The term "Surviving Corporation" appearing in this Merger Agreement
denotes Subsidiary after consummation of the Merger.) Subsidiary's corporate
name, existence, and all its purposes, powers, and objectives shall continue
unaffected and unimpaired by the Merger, and as the Surviving Corporation it
shall be governed by the laws of the State of California and succeed to all of
Target's rights, assets, liabilities, and obligations in accordance with the
California General Corporation Law and pursuant to the terms of this Merger
Agreement.
2.2 CLOSING PLACE, DATE AND TIME. Consummation of the Merger (the
"Closing") shall be effected as soon as practicable after all the conditions
established in this Merger Agreement have been satisfied or waived. The Closing
----- --------
NSI ImaginOn
2
shall take place at the offices of Jacobson, Markham, LLP, 8880 Cal Center Dr.
Ste. 100, Sacramento, Ca., or such other place as the parties may agree to in
writing. The time and date of closing are called the "Closing Date."
2.3 ARTICLES. The articles of incorporation of Subsidiary in effect
on the Effective Date of the Merger shall become the articles of incorporation
of the Surviving Corporation. From and after the Effective Date of the Merger,
said articles of incorporation, as they may be amended from time to time as
provided by law, shall be, and may be separately certified as, the articles of
incorporation of the Surviving Corporation.
2.4 BYLAWS. The bylaws of Subsidiary in effect on the Effective Date
of the Merger shall be the bylaws of the Surviving Corporation until they are
thereafter duly altered, amended, or repealed.
2.5 DIRECTORS. The directors of Subsidiary on the Effective Date of
the Merger shall be the directors of the Surviving Corporation. They shall hold
office until their successors have been elected and qualified. The officers of
Subsidiary on the Effective Date of the Merger shall be the officers of
Surviving Corporation. Each shall hold office subject to the bylaws and the
pleasure of the directors of Surviving Corporation.
ARTICLE III
Conversion Of Shares
3. CONVERSION OF SHARES:
3.1. On the Effective Date Parent will issue to each Selling
Shareholder 0.26 shares of Parent's common stock ("Parent Common Stock") for
each share of Target Common Stock held by each such Selling Shareholder ("Target
Common Stock")as of the Effective Date. In addition, each Selling Shareholder
shall receive 23 CENTS ($0.23) for each share of Target Common Stock of such
Selling Shareholder (the "Additional Consideration") in the form of immediately
negotiable checks of Parent.
3.2 STOCK TRANSFER. On the Effective Date, the stock transfer books
of Target shall be closed, and thereafter no transfers of shares of Target
Common Stock shall be made or consummated.
----- --------
NSI ImaginOn
3
3.3 PAYMENT FOR SHARES. On the Effective Date, Parent shall take all
steps necessary to deliver the Parent Common Stock and the Additional
Consideration to the Selling Shareholders and the Selling Shareholders shall
deliver the Target Common Stock to be canceled. In the event that any
certificate evidencing ownership of Target Common Stock shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed, transfer of Parent
Common Stock specified in Section 3.1. for the shares of Target Common Stock
represented by such certificate will be made in accordance with this Section 3.3
to the persons legally entitled thereto. Notwithstanding the procedures set
forth in this Section 3.3, each Shareholder who presents an executed letter of
transmittal and certificates evidencing ownership of Target Common Stock at the
Closing shall be immediately entitled to payment of the consideration for such
stock specified in Section 3.1.
ARTICLE IV
4. TARGET'S REPRESENTATIONS AND WARRANTIES. Target and the Selling
Shareholders, jointly and severally, represent and warrant to Parent and
Subsidiary as follows:
4.1 DUE ORGANIZATION. Target is a corporation duly organized,
validly existing, and in good standing under Nevada law and has all necessary
corporate powers to own its properties and to operate its business as now owned
and operated by it; and is duly qualified to do intrastate business and is in
good standing in California.
4.2 CAPITAL STOCK. The authorized capital stock of Target consists
of one million (1,000,000) shares of common stock ("Common Stock"), par value
$0.01 per share. One million (1,000,000) shares of Common Stock are issued and
outstanding as set forth on Exhibit A-1. All shares are validly issued, fully
paid, and non-assessable, and all shares have been so issued in full compliance
with all federal and state securities laws. There are not outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating Target to issue or to transfer from
treasury any additional shares of its capital stock.
4.3 FINANCIAL STATEMENTS. Exhibit B-1 sets forth the balance sheet
of Target as of December 31, 1998, and the related statements of income and
retained earnings for the period ending December 31, 1998. Exhibits B-2 and B-3
to this Merger Agreement set forth the balance sheets of Target as of December
31, 1997, and December 31, 1996, respectively, and the related statements of
income and retained earnings for the years ending on those dates. The financial
statements in Exhibits B-1 through B-3 are referred to collectively as the
"Financial Statements." The Financial Statements fairly present the financial
position of Target in all material respects as of the respective dates of the
balance sheets included in the Financial Statements, and the results of its
operations for the respective periods indicated.
4.4 TRANSACTIONS. Except as set forth on Exhibit B-4, to Target's
knowledge, since December 31, 1998, there has not been any:
----- --------
NSI ImaginOn
4
4.4.1 Transaction by Target except in the ordinary course of
business as conducted on that date except as set forth on Exhibit C;
4.4.2 Capital expenditures in the aggregate by Target exceeding
Ten Thousand Dollars ($10,000) other than those listed on Exhibit B-6;
4.4.3 Material Adverse Change;
4.4.4 Destruction, damage to, or loss of any asset of Target
(whether or not covered by insurance) resulting in a Material Adverse Change;
4.4.5 Material Change in accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) by Target;
4.4.6 Material revaluation by Target of any of its assets;
4.4.7 Declaration, setting aside, or payment of a dividend or
other distribution in respect of the common stock of Target;
4.4.8 Other than as described on Exhibit E-1, an increase in
the salary or other compensation payable to or to become payable by Target to
any of its officers, directors, or employees, or the declaration, payment, or
commitment or obligation of any kind for the payment by Target of a bonus or
other additional salary or compensation to any such person;
4.4.9 Sale or transfer of any material asset of Target, except
in the ordinary course of business;
4.4.10 Amendment or termination of any material contract,
agreement, or license to which Target is a party, except in the ordinary course
of business;
4.4.11 Loan by Target to any person or entity, or guarantee by
Target of any loan;
4.4.12 Mortgage, pledge, or other encumbrance of any asset of
corporation;
4.4.13 Waiver or release of any material right or claim of
Target, except in the ordinary course of business;
4.4.14 Commencement or notice or threat of commencement of any
civil litigation or any governmental proceeding against or investigation of
Target or the affairs of Target;
4.4.15 Labor trouble or other event or condition of any
character resulting in a Material Adverse Change;
4.4.16 Issuance or sale by Target of any shares of its capital
stock of any class, or of any other of its securities;
----- --------
NSI ImaginOn
5
4.4.17 Other event or condition of any character that has or
might reasonably result in a Material Adverse Change;
4.4.18 Agreement by Target to do any of the things described in
the preceding clauses of this Section 4.4.
4.5 DEBTS. Except as set forth on the Exhibits hereto, Target has no
known material debt, liability, or obligation of any nature, whether accrued,
absolute, contingent or otherwise and whether due or to become due, that is not
reflected or reserved against in Target's balance sheet as of December 31, 1998,
included in the Financial Statements or set forth in Exhibits B-4 and B-5 to
this Merger Agreement, except for those (i) that may have been incurred after
the date of that balance sheet, and (ii) that are not required by generally
accepted accounting principles to be included in a balance sheet. Except as
described in Exhibits B-4 and B-5, all known material debts, liabilities, and
obligations incurred after that date were incurred in the ordinary course of
business.
4.6 TAX RETURNS. Within the times and in the manner prescribed by
law, Target has filed all federal, state, county, and local tax returns required
by law. Target has paid all, or made adequate provision for the payment of,
taxes, assessments, and penalties due and payable, except such taxes,
assessments and penalties, if any, that are adequately reserved against in the
Financial Statements. The federal and state income and franchise tax returns of
Target have not been audited by the Internal Revenue Service for Target's fiscal
years ended 1997, 1996, 1995 and 1994. The provisions for taxes reflected in
Target's balance sheet as of December 31, 1998, are adequate for any and all
federal, state, county, and local taxes for the period ending on the date of
that balance sheet and for all prior periods. There are no present disputes as
to taxes of any nature payable by Target which could reasonably result in a
Material Adverse Change. Target has not and will not file a consent under
ss.341(f) of the code.
4.7 REAL PROPERTY. Exhibit C-1 to this Merger Agreement is a legal
description of each parcel of real property owned by or leased to Target. All
the leases listed in Exhibit C-1 are valid and in full force, and, to Target's
knowledge, there does not exist any material default or event that, with notice
or lapse of time, or both, would constitute a default under any of these leases.
4.8 TANGIBLE PERSONAL PROPERTY. Except as stated in Exhibit C, no
personal property used by either Corporation or Subsidiary in connection with
its business is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement, or is located other
than in the possession of Corporation or Subsidiary.
4.9 MARKS. Exhibit B-7 to this agreement is a schedule of all trade
names, trademarks, service marks, and copyrights and their registrations owned
by Target, or in which it has any rights or licenses, together with a brief
description of each. Target has no knowledge of any infringement or alleged
infringement by others of any such trade name, trademark, service xxxx, or
copyright. Target has not infringed, and is not now infringing, on any trade
name, trademark, service xxxx, or copyright belonging to any other person, firm,
or corporation. Except as set forth in Exhibit E-2, Target is not a party to any
----- --------
NSI ImaginOn
6
license, agreement, or arrangement, whether as licensor, licensee, franchisor,
franchisee, or otherwise, with respect to any copyrights or any trademarks,
service marks, trade names, or applications. Target owns, or holds adequate
licenses or other rights to use, all trademarks, service marks, trade names, and
copyrights necessary for its businesses as now conducted, and that use does not,
and will not violate any rights of others. Target has the right to sell or
assign to Buyer all such owned trademarks, trade names, service marks, and
copyrights, and all such licenses or other rights.
4.10 PATENTS. Exhibit B-8 to this agreement is a complete and
accurate schedule of all patents, inventions, industrial models, processes,
designs, and applications for patents owned by Target or in which it has any
rights, licenses, or immunities. The patents and applications for patents listed
in Exhibit B-8 are valid and in full force and effect and are not subject to any
taxes, maintenance fees, or actions falling due within 30 days after the
Effective Date. Except as set forth in Exhibits F-1 or F-2, there have been no
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the patents or applications for patents listed in Exhibit
B-8. Each patent application is awaiting action by its respective patent office
except as otherwise indicated in Exhibit B-8. The manufacture, use, or sale of
the inventions, models, designs, and systems covered by the patents and
applications for patents listed in Exhibit B-8 do not violate or infringe on any
patent or any proprietary or personal right of any person, firm, or corporation;
and Target has not infringed or is now infringing on any patent or other right
belonging to any person, firm, or corporation. Except as set forth in Exhibit
E-2, Target is not a party to any license, agreement, or arrangement, whether as
licensee, licensor, or otherwise, with respect to any patent, application for
patent, invention, design, model, process, trade secret, or formula. Target has
the right and authority to use and to transfer to Buyer such inventions, trade
secrets, processes, models, designs, and formulas as are necessary to enable
continuation of the conduct all phases of its businesses in the manner presently
conducted by it, and that use will not violate any patent or other rights of
others.
----- --------
NSI ImaginOn
7
4.11 TRADE SECRETS. Exhibit B-9 to this agreement is a complete and
accurate list, without extensive or revealing descriptions, of Target's trade
secrets, including all secret formulas, recipes, customer lists, processes,
know-how, computer programs and routines, and other technical data. That exhibit
also contains the specific location of each trade secret's documentation,
including its complete description, specifications, charts, procedures, and
other material relating to it. Each trade secret's documentation is current,
accurate, and sufficient in detail and content to identify and explain it and to
allow its full and proper use by Buyer without reliance on the special knowledge
or memory of others.
Target is the sole owner of each of these trade secrets, free and
clear of any liens, encumbrances, restrictions, or legal or equitable claims of
others, except as specifically stated in Exhibit E-2. Target has taken all
reasonable security measures to protect the secrecy, confidentiality, and value
of these trade secrets; any of its employees and any other persons who, either
alone or in concert with others, developed, invented, discovered, derived,
programmed, or designed these secrets, or who have knowledge of or access to
information relating to them, have been put on notice and, if appropriate, have
entered into agreements that these secrets are proprietary to Target and not to
be divulged or misused.
All these trade secrets are presently valid and protectible and are
not part of the public knowledge or literature; to Target's knowledge, they have
not been used, divulged, or appropriated for the benefit of any past or present
employees or other persons, or to the detriment of Corporation or Subsidiary.
4.12 INTANGIBLES. Exhibit B-10 to this agreement is a complete and
accurate list of all intangible assets, other than those specifically referred
to elsewhere in this agreement.
4.13 TITLE. Target has good and marketable title to all its assets
and interests in assets, whether real, personal, mixed, tangible or intangible,
which constitute all the assets and interests in assets that are necessary in
the business of Target. All these assets are free and clear of restrictions on
or conditions to transfer or assignment, and are free and clear of mortgages,
liens, pledges, charges, encumbrances, equities, claims, easements,
right-of-way, covenants, conditions, or restrictions, except for (i) those
disclosed in Target's balance sheet as of December 31, 1998 (Exhibit B-1) and in
Exhibit B-5 to this Merger Agreement; (ii) the lien of current taxes not yet due
and payable; (iii) statutory mechanics and materialmen's liens; and (iv)
possible minor matters that, in the aggregate, could not reasonably result in a
Material Adverse Change. Neither any Shareholder, nor any officer, director, or
employee of Target, nor any spouse, or child, of any Shareholder, officer or
director, owns, or has any interests, directly or indirectly, in any of the real
or personal property owned by or leased to Target. To Target's knowledge, Target
does not occupy any real property in violation of any material law, regulation,
or decree.
4.14 CUSTOMERS. Exhibit D-1 to this Merger Agreement is a correct
and current schedule of all customers of Target. Except as indicated thereon,
Target has no information and is not aware of any facts indicating that any of
these customers intend to cease doing business with Target, or materially alter
the amount of business that they are presently doing with Target.
----- --------
NSI ImaginOn
8
4.15 EMPLOYMENT AGREEMENTS. Exhibit E-1 to this Merger Agreement is
a list of all employment contracts and collective bargaining agreements, and all
pension, bonus, profit sharing, stock option, or other agreements or
arrangements providing for employee remuneration or benefits to which Target is
a party or by which Target is bound; all these contracts and arrangements are in
full force and effect, and neither Target nor, to Target's knowledge, any other
party is in default under them. There have been no claims of defaults and, to
Target's knowledge, there are not facts or conditions which if continued will
result in a default under these contracts or arrangements.
4.16 INSURANCE. Exhibit C-2 to this Merger Agreement is a
description of all insurance policies held by Target concerning its business and
properties. All these policies in their respective principal amounts are set
forth in Exhibit C-2.
4.17 AGREEMENTS. Exhibit E-2 sets forth a true and correct list of
each and every agreement calling for annual consideration in cash or in kind in
excess of $25,000.00 to which Target is a party or by which Target's property is
bound, including, but not limited to, any distributor's or manufacturer's
representative or agency agreement, any service agreement, any output or
requirements agreement, any agreement not entered into in the ordinary course of
business, any indenture, mortgage, deed of trust, lease, agreement to provide
water service, main line extension agreements or will serve letters, copies of
which have been furnished or made available to Parent. To Target's knowledge,
there is not existing as of the date of this Merger Agreement any material
default or event that with notice or lapse of time, or both, would constitute a
material default by any party to any of these agreements. Except as disclosed to
Parent, Target has not received notice that any party to any of these agreements
intends to cancel or terminate any of these agreements or to exercise or not
exercise any options under any of these agreements.
4.18 COMPLIANCE. To Target's knowledge, Target has complied with
all, and is not in violation of any, applicable federal, state, or local
statutes, laws, and regulations (including, without limitation, any applicable
building, zoning, or other law, ordinance, or regulation) materially affecting
its properties or the operation of its business; provided, however, that no
additional representation or warranty is made with respect to any statutes, laws
or regulations that are the subject matter of Section 4.6.
4.19 SUITS. Except as set forth on Exhibits F-1 or F-2, there is no
suit, action, arbitration, or legal, administrative, or, other proceeding, or
governmental investigation pending or, to Target's knowledge, threatened,
against Target or any of its business or assets. The matters set forth in
Exhibits F-1 and F-2, if decided adversely to Target, will not result in a
Material Adverse Change. Except as set forth on Exhibits F-1 or F-2, Target is
not in default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or instrumentality
nor is Target presently engaged in any legal action to recover monies due or
damages sustained.
4.20 CONSUMMATION. The execution and delivery of this Merger
Agreement do not, and the consummation of the Merger will not, subject to
----- --------
NSI ImaginOn
9
obtaining requisite approval of Target's shareholders, (1) violate any provision
of the articles of incorporation or bylaws of Target; (2) violate any material
provision of or result in the acceleration of any material obligation under any
mortgage, note, lien, lease, franchise, license, permit, agreement, instrument,
order, arbitration award, judgment, or decree to which Target is a party or by
which it is bound, except for such violations or acceleration as to which
requisite waivers or consents have been obtained or which would not result in a
Material Adverse Change; (3) result in the termination of any license,
franchise, lease, or permit to which Target is a party or by which it is bound,
except for such terminations which would not result in a Material Adverse
Change. After the shareholder(s) of Target have adopted the Agreement of Merger,
said board of directors and shareholder(s) will take or will have taken all
actions required by law, the articles of incorporation, the bylaws, or
otherwise, to authorize the execution and delivery of this Merger Agreement and
to authorize the Merger.
4.21 AUTHORITY. Target and Target Shareholders have the right,
power, legal capacity, and authority to enter into and perform their respective
obligations under this Agreement, and no approvals or consents of any persons
other than Target and its shareholders are necessary in connection with it. The
execution and delivery of this agreement by Target has been duly authorized by
all necessary corporate action on the part of Target.
4.22 INTERESTED PARTY AGREEMENT. Except as set forth in Exhibit D-2,
neither any Target Shareholder, nor any officer, director, or employee of
Target, nor any spouse or child of any of them, has any direct or indirect
interest in any competitor, supplier, or customer of Target or in any person
from whom or to whom Target leases any real or personal property, or in any
other person with whom Target is doing business.
4.23 BOOKS & RECORDS. Target will furnish to Parent for its
examination, to the extent such documents exist, (i) copies of the articles of
incorporation and bylaws of Target certified by the secretary of Target; (ii)
the minutes books of Target containing all records required to be set forth of
all proceedings, consents, actions, and meetings of the Shareholder and Board of
Directors of Target; (iii) all permits, orders, and consents issued by the
California Commissioner of Corporations with respect to Target, and all
applications for such permits, orders, and consents; (iv) the stock transfer
books of Target setting forth all transfers of any capital stock; and (v) the
Financial Statements for Target's three (3) most recent fiscal years.
4.24 REPRESENTATIONS TRUE AND CORRECT. None of the representations
and warranties made herein by Target, or made in any certificate or memorandum
referenced herein and furnished or to be furnished, contains or will contain any
untrue statement of a material fact, or omit any material fact the omission of
which would be misleading.
----- --------
NSI ImaginOn
10
ARTICLE V
5. PARENT'S REPRESENTATIONS AND WARRANTIES. Parent represents and
warrants to Target as follows:
5.1 DUE ORGANIZATION. Parent is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
California. As of the Closing, Subsidiary will be a wholly owned subsidiary of
Parent duly organized, validly existing, and in good standing under the laws of
the State of California. Parent has and Subsidiary will have as of the Closing
all necessary corporate powers to own their respective properties and to operate
their respective businesses as now owned and operated by them.
5.2 AUTHORIZATION. Parent has the corporate power to execute and
deliver this Merger Agreement and has taken (or by the Closing Date will have
taken) all actions required by law, its articles of incorporation, its bylaws,
or otherwise, to authorize the execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated hereby. This Merger
Agreement is a valid and binding agreement of Parent in accordance with its
terms.
5.3 CONSUMMATION. The execution and delivery of this Merger
Agreement do not, and the consummation of the Merger will not, (1) violate any
provision of the articles of incorporation or bylaws of Parent or of Subsidiary;
(2) violate any provision of or result in the acceleration of any obligation
under any mortgage, note, lien, lease, franchise, license, permit, agreement,
instrument, order, arbitration award, judgment, or decree to which Parent or
Subsidiary is a party or by which either is bound; (3) result in the termination
of any license, franchise, lease, or permit to which Parent or Subsidiary is a
party or by which either is bound; or (4) violate or conflict with any other
restriction of any kind or character to which Parent or Subsidiary is subject.
After the boards of directors of Parent and Subsidiary and the shareholder(s) of
Subsidiary have adopted the plan of merger as set forth in this Merger
Agreement, said boards of directors and shareholder(s) will take or will have
taken all actions required by law, their respective articles of incorporation,
their bylaws, or otherwise, to authorize the execution and delivery of this
Merger Agreement and to authorize the Merger.
5.4 CONFIDENTIALITY. Parent and Subsidiary agree that, unless the
Closing has been consummated, Parent, Subsidiary, and their respective officers,
directors and other representatives will hold in strict confidence and will not
use to the detriment of Target any and all data and information obtained from
Target in connection with this transaction or Merger Agreement with respect to
the business of Target, except as such disclosure may be required by
governmental authorities.
5.5 REPRESENTATIONS TRUE AND CORRECT. None of the representations
and warranties made herein by Parent or Subsidiary, or made in any certificate
or memorandum referenced herein and furnished or to be furnished, contains or
will contain any untrue statement of a material fact, or omits any material fact
the omission of which would be misleading.
----- --------
NSI ImaginOn
11
ARTICLE VI
6. TARGET'S OBLIGATIONS BEFORE CLOSING. Target covenants that from the
date of this Merger Agreement until the Closing:
6.1 ACCESS. Parent and its counsel, accountants, and other
representatives shall have full access upon reasonable notice during normal
business hours to all properties, books, accounts, records, contracts, and
documents of or relating to Target. Target shall furnish or cause to be
furnished to Parent and its representatives all data and information concerning
the business, finances, and properties of Target that may reasonably be
requested.
6.2 CONTINUATION OF BUSINESS. Target will use commercially
reasonable efforts to carry on its business and activities diligently and in
substantially the same manner as they have previously been carried out, and
shall not make or institute any unusual or novel methods of manufacture,
purchase, sale, lease, management, accounting, or operation that will vary
materially from those methods by Target as of the date of this Merger Agreement.
6.3 PRESERVATION OF BUSINESS RELATIONS. Target will use commercially
reasonable efforts, without making any commitments on behalf of Parent, to
preserve its business organization intact until the closing, to keep available
its present officers and employees, and to preserve its present relationships
with suppliers, customers, and others having business relationships with it.
6.4 CAPITAL STOCK. Target will not (i) amend its articles of
incorporation or bylaws, (ii) issue or acquire any shares of its capital stock,
(iii) issue or create any warrants, obligations, subscription, options,
convertible securities, or other commitments under which any additional shares
of its capital stock of any class may be directly or indirectly authorized,
issued, or transferred from treasury, or (iv) agree to do any of the acts listed
above.
6.5 INSURANCE. Target will continue to carry its existing insurance,
subject to variations in amounts required by the ordinary operations of its
business. At the request of Parent and at Parent's sole expense, the amount of
insurance against fire and other casualties which, at the date of this Merger
Agreement, Target carries on any of its properties or in respect of its
operation shall be increased by such amount or amounts as Parent shall specify.
6.6 COMPENSATION. Target will not do, or agree to do, any of the
following acts without obtaining Parent's written consent; (i) grant any
increase in salaries payable or to become payable by Target to any officer,
employee, sales agent, or representative, or (ii) increase benefits payable to
any officer, employee, sales agent, or representative under any bonus or pension
plan or other contract or commitment.
6.7 ACTS. Target will not, without Parent's written consent, do or
agree to any of the following acts:
6.7.1 Enter into any material contract, commitment or
transaction not in the usual and ordinary course of its business;
----- --------
NSI ImaginOn
12
6.7.2 Enter into any contract, commitment, or transaction in
the usual and ordinary course of business involving an amount exceeding Ten
Thousand Dollars ($10,000), or enter into any leases of capital equipment or
property; or
6.7.3 Sell or dispose of any capital assets.
6.8 PROHIBITED ACTS. Target will not do, or agree to do, any of the
following acts:
6.8.1 Pay any obligation or liability, fixed or contingent,
other than current liabilities;
6.8.2 Waive or compromise any right or claim of substantial
value; or
6.8.3 Cancel, without full payment, any note, loan, or other
obligation owing to Target.
6.8.4 Modify, amend, cancel, or terminate any of its existing
material contracts or agreements, or agree to do any of those acts.
6.9 DOCUMENTATION. At the request of Parent (which shall not be
unreasonable or be an undue burden on Target), Target will document and describe
any of its processes or business procedures specified by Parent, in form and
content reasonably satisfactory to Parent.
ARTICLE VII
7. PARENT'S OBLIGATIONS BEFORE CLOSING. Parent covenants that prior to
the Closing, Parent shall cause Subsidiary to be formed.
ARTICLE VIII
8. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
8.1 CONSUMMATION. Parent's obligation to consummate the Merger is
subject to the satisfaction, on or before the Closing Date, of all the
conditions set out below in this Article VIII. Parent may waive any or all of
these conditions in whole or in part without prior notice; provided, however,
that no such waiver of a condition shall constitute waiver by Parent of any of
its other rights or remedies, at law or in equity, if Target shall be in default
of any of its representations, warranties, or covenants under this Merger
Agreement. Should any condition not be met or unwaived, Parent and Target may
elect to proceed with the Closing and reduce the cash consideration to be paid
at Closing in an agreed amount.
8.2 ACTS COMPLETED. Each of the acts and undertakings of Target to
be performed on or before the Closing Date pursuant to the terms of this Merger
Agreement shall have been duly performed.
----- --------
NSI ImaginOn
13
8.3 RESOLUTIONS. Target shall have furnished Parent with a copy,
certified by Target's secretary, of (1) a resolution or resolutions duly adopted
by Target's board of directors authorizing and approving this Merger Agreement
and directing that it be submitted to a vote of Target's shareholders; and (2) a
resolution or resolutions adopting this Merger Agreement, duly approved by the
holders of at least a majority of the total number of outstanding shares of
common stock of Target.
8.4 REPRESENTATIONS. All of the representations and warranties of
Target contained in this Merger Agreement shall be true in all material respects
on and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of that date; and Parent
shall have received at the closing a certificate, dated the Closing Date and
executed by the president or a vice president of Target, containing a
representation and warranty to that effect.
8.5 SHAREHOLDER APPROVAL. All outstanding shares of Target Common
Stock shall have been voted for the adoption of the Merger set forth in this
Merger Agreement.
8.6 FILING. The Agreement of Merger shall have been filed in the
office of the Secretary of State or other office of each jurisdiction in which
such filings are required in order for the Merger to become effective, or Parent
shall have satisfied itself that all such filings will be or are capable of
being made effective as of the Closing Date.
8.7 CHANGES. During the period from December 31, 1998, to the
Closing Date, there shall not have been any Material Adverse Change.
8.8 FORM & SUBSTANCE. The form and substance of all certificates,
instruments, opinions, and other documents delivered to Parent under this Merger
Agreement shall be satisfactory in all reasonable respects to Parent.
ARTICLE IX
9. CONDITIONS PRECEDENT TO TARGET'S OBLIGATION TO CLOSE
9.1 CONSUMMATION. Target's obligation to consummate the Merger is
subject to the satisfaction, on or before the Closing Date, of all the
conditions set out below in this Article IX. Target may waive any or all of
these conditions in whole or in part without prior notice; provided, however,
that no such waiver of a condition shall constitute waiver by Target of any of
its other rights or remedies, at law or in equity, if Parent shall be in default
of any of its representations, warranties, or covenants under this Merger
Agreement.
9.2 ACTS COMPLETED. Each of Parent's acts and undertakings to be
performed on or before the Closing Date pursuant to this Merger Agreement shall
have been performed.
9.3 RESOLUTIONS. Parent shall have furnished Target with certified
copies of (1) resolutions duly adopted by the board of directors of Parent and
the board of directors of Subsidiary authorizing and approving the execution and
----- --------
NSI ImaginOn
14
delivery of this Merger Agreement and authorizing the consummation of the
transactions contemplated by this Merger Agreement, and (2) resolutions duly
adopted by Parent as sole shareholder of Subsidiary, authorizing this Merger
Agreement.
9.4 REPRESENTATIONS. The representations and warranties of Parent
contained in this Merger Agreement shall be true on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of that date; and Target shall have received at the closing a
certificate, dated the Closing Date and executed on behalf of Parent by its
president or any vice president, containing a representation and warranty to
that effect.
9.5 SHAREHOLDER APPROVAL. At least a majority of the outstanding
shares of common stock of Target shall have been voted for the adoption of the
Merger contemplated by this Merger Agreement.
9.6 FILING. The Agreement of Merger shall have been filed in the
office of the Secretary of State or other office of each jurisdiction in which
such filings are required in order for the Merger to become effective, or Target
shall have satisfied itself that all such filings will be or are capable of
being made effective as of the Closing Date.
9.7 FORM & SUBSTANCE. The form and substance of all certificates,
instruments, opinions, and other documents delivered to Target under this Merger
Agreement shall be satisfactory in all reasonable respects to Target and its
counsel.
ARTICLE X
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNITIES
10.1 SURVIVAL. The representations, warranties, and indemnities
included or provided for in this Merger Agreement or in any Schedule or
certificate or other document delivered pursuant to this Merger Agreement shall
survive the Closing Date.
10.2 LIMITATIONS ON DAMAGES: Notwithstanding any provision of this
Merger Agreement to the contrary, Parent and its subsidiaries shall not be
indemnified and held harmless unless and until such damages, losses, and
expenses exceed $5,000 net of insurance proceeds from coverage paid for by
Target prior to execution of this Merger Agreement, in which event Parent and
its subsidiaries shall be indemnified and held harmless in full. All claims
under this provision for indemnity shall be made within the time period and in
the manner provided for herein.
----- --------
NSI ImaginOn
15
ARTICLE XI
11. TERMINATION
11.1 TERMINATION. This Merger Agreement and the transactions
contemplated under this Merger Agreement may be terminated at any time prior to
the Closing Date, either before or after the meeting of Target's shareholders:
11.1.1 By mutual consent of Parent and Target;
11.1.2 By Parent if there has been a material misrepresentation or a
material breach of Target's obligations, representations and warranties set
forth in this Merger Agreement or in any exhibit or certificate required by and
delivered pursuant to this Merger Agreement;
11.1.3 By Target if there has been a material misrepresentation or a
material breach of Parent's obligations, representations and warranties set
forth in this Merger Agreement or in any exhibit or certificate required by and
delivered pursuant to this Merger Agreement;
11.1.4 By Target or Parent if (i) a temporary restraining order,
preliminary injunction or permanent injunction or other order preventing the
consummation of the Merger shall have been issued by any federal, state or
foreign court or other governmental or regulatory authority and remain in
effect, (ii) any litigation seeking the issuance of such an order or injunction,
or seeking substantial damages against Target or Parent if the Merger is
consummated, shall be pending which, in the good faith judgment of Target or
Parent (acting upon advice of their respective counsel) has a reasonable
probability of resulting in such order, injunction or substantial damages, or
(iii) any federal, state, local or foreign statute, rule or regulation shall
have been enacted which would make the consummation of the Merger illegal; and
11.1.5 By Target or by Parent if the Closing Date referred to in
Section 2.2 has not occurred by March 31, 1999.
11.2 CONTINUING OBLIGATIONS. In the event that this Merger Agreement is
terminated pursuant to this Article XI, or because of the failure to satisfy any
of the conditions specified in Article VIII or Article IX, all further
obligations of Parent and of Target under this Merger Agreement shall terminate
without further liability of Parent to Target (provided Parent has not breached)
or Target to Parent (provided Target has not breached), except for the
obligations of Parent under Sections 5.4 and 11.3 and Target under Section 11.4.
Notwithstanding the above, if the Merger Agreement is terminated pursuant to
Section 11.1.4(i) or (ii) and (a) the party involved in such suit was aware of
such or threat thereof and did not disclose it to the other, or (b) such suit
results from a breach of contract, the negligence or intentional misconduct of
such party (collectively "Termination With Rights Retained") upon termination of
this Merger Agreement, the other party shall retain any claim it may have
against such party. Notwithstanding the above, if Target fails to satisfy any of
the conditions specified in Article VIII, Parent shall nonetheless have the
right, in its discretion, to proceed with the transactions contemplated by this
----- --------
NSI ImaginOn
16
Merger Agreement, and if Parent fails to satisfy any of the conditions specified
in Article IX, Target shall nonetheless have the right, in its discretion, to
proceed with the transactions contemplated by this Merger Agreement.
11.3 RETURN OF MATERIALS. In the event of the termination of this
Merger Agreement for any reason, Parent will return to Target all documents,
work papers, and other materials (including copies) relating to the transactions
contemplated by this Merger Agreement, whether obtained before or after
execution of this Merger Agreement. Parent will not use any information so
obtained for any purpose, and will take all practicable steps to have such
information kept confidential.
11.4 COSTS AND EXPENSES. In the event this Merger Agreement is
consummated, each Party shall pay its own costs and expenses. In the event of
the termination of this Merger Agreement for any reason other than a breach of
this Merger Agreement or a Termination With Rights Retained, in which the
non-breaching party or the party who exercises the right to terminate under a
Termination With Rights Retained, respectively, each party shall bear its own
costs and expenses, including attorney fees.
ARTICLE XII
12. INDEMNIFICATION. Target and Selling Shareholders, jointly and
severally, will hold Parent and Subsidiary harmless from any loss or liabilities
resulting from the breach of any of the warranties or representations made in
Section 4 provided however that this indemnification obligation shall not exceed
the value of the Parent stick and Additional Consideration received by the
Selling Shareholders. In the event of such loss or liability, shareholders shall
deliver to Parent or its order, that number of shares of common stock of Parent,
together with such number of additional shares, rounded to the next whole share,
as represents the stock dividends thereon, the record dates of which are after
the Closing Date, as shall be determined by dividing $2.97 into the amount of
such loss or liability, rounded off to the next whole share. In the event that a
stock dividend is declared on common stock of Parent, or there is a stock split
or reverse stock split in respect thereof, the record or effective date of which
is after the Closing Date and prior to the date of contemplated redelivery of
shares to Parent, the figure of $2.97 shall be adjusted accordingly.
ARTICLE XIII
13. MISCELLANEOUS
13.1 PUBLICITY. The parties shall cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the transactions contemplated hereby. None of the parties shall
issue or make, or cause to have issued or made, any press release or
announcement concerning the transactions contemplated hereby without the advance
approval in writing of the form and substance thereof by the other party, unless
otherwise required by applicable law.
----- --------
NSI ImaginOn
17
13.2 Tax REORGANIZATION. Parent, Subsidiary and Target acknowledge
this transaction is intended to qualify as a reorganization under Code section
368(a)(1)(A). No Party hereto shall take any action contrary to that intent.
13.3 CAPTIONS. Captions and headings in this Merger Agreement are
for convenience only and shall not be considered in interpreting any provisions.
13.4 INTEGRATION. This Merger Agreement embodies the entire
agreement and understanding which exists between the signatories hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, and undertakings. No supplement,
modification, or amendment of this Merger Agreement shall be binding unless
executed in writing by all the parties. No waiver of any of the provisions of
this Merger Agreement shall be deemed, or shall constitute, a waiver of any
other provisions whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
13.5 COUNTERPARTS. This Merger Agreement may be executed in
counterparts and all counterparts so executed shall constitute one Agreement
binding on all the parties hereto. It shall not be necessary for each party to
execute the same counterpart hereof.
13.6 GENDER/TENSE. Whenever required by the context hereof, the
singular shall be deemed to include the plural, and the plural shall be deemed
to include the singular, and the masculine, feminine and neuter genders shall
each be deemed to include the other.
13.7 THIRD PARTIES. Nothing in this Merger Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Merger Agreement on any persons other than the parties to it and
their respective successors and assigns, nor is anything in this Merger
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Merger Agreement, nor shall any provision
give any third persons any right of subrogation or action over or against any
party to this Merger Agreement.
13.8 ASSIGNMENT. This Merger Agreement shall be binding on, and it
shall inure to the benefit of the parties to it and their respective heirs,
legal representative, successors, and assigns; provided, however, Parent may not
assign any of its rights under it, except to a wholly-owned subsidiary
corporation of Parent. No such assignment by Parent to its wholly-owned
subsidiary shall relieve Parent of any of its obligations or duties under this
Merger Agreement.
13.9 NOTICES. All notices, requests, demands, and other
communications under this Merger Agreement shall be in writing and shall be
deemed to have been duly given upon personal delivery, facsimile transmission
(with written or facsimile confirmation of receipt), telex or delivery by an
overnight express courier service (delivery, postage or freight charges
prepaid), or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
----- --------
NSI ImaginOn
18
To Parent and Subsidiary at:
XxxxxxXx.xxx
0000 Xxxxxx Xxxxxx, #0
Xxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Email: xxxxxxxx@xxxxxxxx.xxx
With a copy to:
Xxxx Xxxxxxxx & Xxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
To Target at:
Network Specialists, Inc.
0000 Xxxx Xxxx Xxxxx
Xxxxx 00
Xxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Email: xxxx@xxxx.xxx
With a copy to:
Xxxxx Xxxxx, Esq.
Xxxxxxxx Markham LLP
0000 Xxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Any Party may change its address for purposes of this Section by giving the
other Parties written notice of the new address in the manner set forth above.
13.10 GOVERNING LAW. This Merger Agreement shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of California.
13.11 ATTORNEY'S FEES. If either party to this Merger Agreement shall
bring any action, suit, counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the prevailing party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in bringing and prosecuting such Action
and/or enforcing any order, judgment, ruling or award granted as part of such
Action. "Prevailing party" within the meaning of this section includes, without
limitation, a party who agrees to dismiss an Action upon the other party's
----- --------
NSI ImaginOn
19
payment of all or a portion of the sums allegedly due or performance of the
covenants allegedly breached, or who obtains substantially the relief sought by
it.
13.12 SEVERABILITY. Any portion or provision of the Merger Agreement
which is invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining portions or
provisions hereof in such jurisdiction or, to the extent permitted by law,
rendering that or any other portion or provision of the Merger Agreement
invalid, illegal or unenforceable in any other jurisdiction.
13.13 SCHEDULES AND EXHIBITS. All schedules, exhibits, appendices and
documents referred to in or attached to this Merger Agreement are integral parts
of this Merger Agreement as if fully set forth herein, and all statements
appearing therein shall be deemed disclosed for all purposes and not only in
connection with the specific representation to which they are explicitly
referenced. The parties acknowledge that certain of the schedules and exhibits
hereto have not been completed as of the date hereof and shall be completed and
attached hereto at Closing.
13.14 CONSTRUCTION. The parties hereto acknowledge and agree that (i)
each party hereto is of equal bargaining strength, (ii) each party has actively
participated in the drafting, preparation and negotiation of this Merger
Agreement, (iii) each party has consulted with such party's own, independent
legal counsel, and such other professional advisors as such party has deemed
appropriate, relative to any and all matters contemplated under this Merger
Agreement, (iv) each party and such party's legal counsel and advisors have
reviewed this Merger Agreement, (v) each party has agreed to enter into this
Merger Agreement following such review and their rendering of such advice, and
(vi) any rule of construction to the effect that ambiguities are to be resolved
against the drafting parties shall not apply in the interpretation of this
Merger Agreement, or any portions hereof, or any amendments hereto.
IN WITNESS WHEREOF, each of the Parties have caused this Merger
Agreement to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
XXXXXXXX.XXX
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------
President
NETWORK SPECIALISTS, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------
President
----- --------
NSI ImaginOn
20
