FIRST AMENDMENT AND WAIVER
OF AGREEMENT AND PLAN OF REORGANIZATION
This First Amendment and Waiver of Agreement and Plan of Reorganization
(this "Amendment and Waiver") is made as of the 23rd day of December, 1998, by
and among SoftNet Systems, Inc., a New York corporation ("Acquiror"), SoftNet
Acquisitions, Inc., a Delaware corporation ("Acquisition Sub"), Intelligent
Communications, Inc., a Delaware corporation ("Target"), Xxxxx Xxxxxxx, an
individual and principal stockholder of Target ("Meachim") and Xxxxxxxxx Xxxxxx,
an individual and principal stockholder of Target ("Xxxxxx"). Capitalized terms
used herein without definition shall have the same meaning herein as in the
Acquisition Agreement (as defined below).
RECITALS
A. Each of Acquiror, Acquisition Sub and Target are parties to an
Agreement and Plan of Reorganization dated as of November 22, 1998 (the
"Acquisition Agreement"), pursuant to which Target has agreed to be merged with
and into Acquisition Sub with Acquisition Sub surviving as a wholly-owned
subsidiary of Acquiror (the "Merger").
B. Section 7.1(b) of the Acquisition Agreement provides that any party
to the Acquisition Agreement may terminate such agreement if the Closing of the
Merger shall have not occurred on or before 6.00 p.m. San Francisco Time on
December 18, 1998 (the "Merger Deadline"), subject to certain exceptions.
C. Target owns FCC VSAT satellite licenses E960246, E960247, and
E960248 (the "FCC Licenses"). Section 1.3 of the Acquisition Agreement provides
for the transfer of control of the FCC Licenses from Target to the Surviving
Corporation. Pursuant to the Communications Act of 1934, as amended and Title 47
of the Code of Federal Regulations, the FCC must approve any assignment,
transfer of ownership, or transfer of control of the FCC Licenses. The transfer
of control may be accomplished by either an Assignment of License or a Pro Forma
Assignment of License (each as defined below) to a Pro Forma Partnership (as
defined below) which will then grant rights under the FCC License to the
Surviving Corporation while retaining ownership of such FCC License pending
approval of a permanent Assignment of License. The completion of the approval
process for a Pro Forma Assignment of License is estimated to require two months
and the completion of an Assignment of License is estimated to require six
months. Target initiated the FCC approval process for a Pro Forma Assignment of
License on or about December 22, 1998 and such process will not be completed
before the Merger Deadline.
D. The parties wish to waive their respective rights of termination
which may arise by virtue of the failure of the Closing of the Merger to occur
on or before the Merger Deadline, to amend the Acquisition Agreement to specify
a different Merger Deadline and to make other conforming changes.
X. Xxxxxxx and Xxxxxx, the holders of a majority in interest of Target
capital stock and the parties who will own a majority in interest of the Pro
Forma Partnership, wish to commit in writing to causing the Pro Forma
Partnership to transfer the ownership interest in the FCC Licenses to the
Surviving Corporation immediately following FCC approval of an Assignment of
License of the FCC Licenses to the Surviving Corporation.
F. The Parties wish to provide for the operational management of Target
during the period during which they are waiting for FCC consent to the Pro Forma
Assignment of License of the FCC Licenses.
NOW THEREFORE, in consideration of the mutual covenants
contained herein and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 7.1(b) of the Acquisition Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"by Acquiror, if the Closing shall not have occurred
on or before 6:00 p.m. San Francisco Time on March 31, 1999
(provided, a later date may be agreed upon in writing by the
parties hereto, and provided further that the right to
terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose action or failure to act has
been the cause or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act
constitutes a breach of this Agreement);"
2. Article II of the Acquisition Agreement is amended to add the
following language immediately following Section 2.36 thereof:
"2.37 Transfer of Certain Licenses. Target owns
Federal Communications Commission ("FCC") VSAT satellite
licenses E960246, E960247, and E960248 (the "FCC Licenses").
Target initiated the FCC approval process for a pro forma
Transfer of Control (as defined in the Communications Act of
1934, as amended, a "Pro Forma Transfer of Control") of the
FCC Licenses on or about December 22, 1998 and has filed all
necessary documents with the FCC and any other required
governmental authority on or before the date hereof."
3. Article V of the Acquisition Agreement is amended to add the
following language immediately following Section 5.16 thereof:
"5.17 Transfer of Certain Licenses. In connection with the FCC
Licenses, Target agrees to: (i) use its best efforts to obtain
a Pro Forma Assignment of License (as defined in the
Communications Act of 1934, as amended, a "Pro Forma
Assignment of License") of the FCC Licenses to a partnership
controlled by Xxxxx Xxxxxxx and Xxxxxxxxx Xxxxxx (The "Pro
Forma Partnership"); (ii) use its best efforts to cause the
Pro Forma Partnership, within 48 hours of FCC approval of the
Pro Forma Assignment of License becoming final, to grant the
Surviving Corporation, under a management, service, or use
agreement, all of the rights inherent in such FCC Licenses
which have been transferred pursuant to a Pro Forma Assignment
of License; (iii) complete and file all documents necessary to
obtain FCC consent to an Assignment of License (as defined in
the Communications Act of 1934, as amended, an "Assignment of
License") of the FCC Licenses to the Pro Forma Partnership on
or prior to December 31, 1998; and (iv) use its best efforts
to obtain FCC approval of the Assignment of License of the FCC
Licenses from the Pro Forma Partnership to the Surviving
Corporation as soon as possible.
5.18 Closing. The Parties agree to cause the Closing
of the Merger to occur within 48 hours of the earlier to occur
of: (i) the approval by the FCC of a Transfer of Control of
the FCC Licenses to either Acquiror or the Surviving
Corporation (or both); or (ii) the approval by the FCC of a
pro forma Transfer of Control of the FCC Licenses to the Pro
Forma Partnership and the signing of management/service/use
agreements for the FCC Licenses between the Pro Forma
Partnership and either Acquiror or the Surviving Corporation
(or both) which provide sufficient rights to Acquiror and/or
the Surviving Corporation such that the Surviving Corporation
would be able to operate the business of Target as currently
conducted."
4. Section 6.3(c) of the Acquisition Agreement is deleted in its
entirety and the following substituted therefor:
"(c) Third Party Consents. Acquiror and Acquisition Sub shall
have been furnished with evidence satisfactory to them of the consent
or approval of those persons whose consent, approval or authorization
shall be required in connection with the Merger under the contracts of
Target set forth in Section 2.30 of the Target Disclosure Schedule and
the approvals referred to in Sections 2.9 and 2.31."
5. Section 8.1(e) of the Acquisition Agreement shall be amended to
insert the following words after the parenthetical "(`Key Intellectual Property
Representations')" and before the comma immediately following such parenthetical
"or Sections 2.37, 5.17 or 5.18".
6. Section 9.1 of the Acquisition Agreement shall be deleted in its
entirety and the following substituted therefor:
"9.1 Non-Survival at Effective Time. The representations and
warranties set forth in Articles II and III will survive until the
expiration of the Indemnification Period. The agreements set forth in
this Agreement shall terminate at the Effective Time, except that the
agreements set forth in Article I, Section 5.4 (Confidentiality), 5.7
(Shareholder Agreements), 5.11 (Registration Rights), 5.15 (Reasonable
Efforts and Further Assurances), 5.17 (Transfer of Certain Licenses),
7.3 (Expenses and Termination Fees), 7.4 (Amendment), Article VIII and
this Article IX shall survive the Effective Date and the Closing."
7. Target hereby waives any right to terminate the Acquisition
Agreement and any other rights and obligations in their favor under such
agreement which may arise by virtue of the failure of the Closing of the Merger
to occur on or before the Merger Deadline, including, without limitation, any
such right arising pursuant to Section 7.1(b) or (d) of the Acquisition
Agreement.
8. Acquiror hereby waives any right to terminate the Acquisition
Agreement and any other rights and obligations in their favor under such
agreement which may arise by virtue of the failure of Target to obtain FCC
consent to the transfer of the FCC Licenses, including, without limitation, any
such right arising pursuant to Section 7.1(b) or (c) of the Acquisition
Agreement.
9. The delay occasioned by the need for FCC approval for a transfer of
control of the FCC Licenses shall not be considered a breach of the Acquisition
Agreement or invoked by the Parties as a justification for a Purchase Price
Adjustment, and no adjustment of the purchase price shall be made based on the
delay occasioned by the need for such FCC approval.
10. Except as set forth above, the Acquisition Agreement shall remain
unmodified and in full force and effect and the Parties shall continue to enjoy
and be bound by all of their rights and obligations thereunder.
11. Meachim and Xxxxxx hereby covenant and agree to cause the Pro Forma
Partnership to transfer all ownership interest in the FCC Licenses and any
remaining rights in such FCC Licenses which cannot be transferred or granted
pursuant to a Pro Forma Assignment of License to the Surviving Corporation
within 48 hours of FCC approval of an Assignment of License of the FCC Licenses
to the Surviving Corporation and to take all actions necessary to effectuate
such transfer, including, without limitation, (i) voting any partnership
interest in the Pro Forma Partnership or its general partner (if any) in favor
of causing such transfer within the specified time period and (ii) executing any
documents or certificates and entering into any reasonable agreements with
customary provisions, necessary to bring about such result.
12. The Parties hereby agree that the preceding Section 11 hereof shall
be incorporated into and be construed as a part of the Acquisition Agreement as
if originally included therein and further that any Acquiror Damages arising out
of any breach of the preceding Section 11 by Meachim or Xxxxxx shall give rise
to a claim for indemnification by the Target Stockholders in favor of the
appropriate Acquiror Indemnified Persons pursuant to the provisions and subject
to the terms and conditions of Article VIII of the Acquisition Agreement and
further that any such claim shall not be subject to the $1,000,000 limit on
certain claims of Acquiror Damages set forth in Section 8.1(e) of the
Acquisition Agreement, but shall instead be limited only to an amount equal to
the Future Compensation, as though Section 11 were a Key Intellectual Property
Representation. Section 11 hereof shall survive the Effective Date and the
Closing.
13. As of January 1, 1999, Acquiror shall take over all operational
management functions of Target; provided that Acquiror shall not a) exercise any
authority which is inconsistent with the ultimate responsibility of Target to
operate, maintain and control any licenses held by Target which have been issued
by the Federal Communications Commission, or b) enter into any agreement or
commitment on behalf of Target in excess of $50,000, without the prior written
consent of Target. Acquiror shall serve at the request of the Board of Directors
of Target and can be terminated at any time in the sole discretion of the Board
of Directors of Target.
14. Acquiror shall provide up to $150,000 per month for the operation
of Target's business. Acquiror shall not be held liable for any losses and or
damages whatsoever resulting from such management prior to the Closing; provided
that should the Closing not occur by March 31, 1999, Target shall repay Acquiror
the amounts advanced to Target for the period from January 1, 1999 until Target
resumes Management control over Target or April 10, 1999, whichever comes first.
Repayments of all amounts advanced to Target shall be made in cash within 48
hours of such date or by a note given within 48 hours thereof with mutually
agreeable terms that are commercially reasonable.
15. (a) Target agrees to indemnify and hold harmless each and every
Acquiror Indemnified Person for any and all Acquiror Damages paid out of pocket
by any Acquiror Indemnified Person or as to which any Acquiror Indemnified
Person is liable which arise from the management of Target prior to the Closing
of the Merger and further agrees that such indemnification obligation shall not
be limited in amount. If the Closing of the Merger occurs prior to April 10,
1999, Acquiror may, at its option, offset any amount owed pursuant to such
indemnification obligation from the Cash Purchase Price due at the Closing, and
if such amount exceeds the Cash Purchase Price, Acquiror may, at its option,
offset such excess amount from the original principal amount of the First
Promissory Note by subtracting it therefrom. If the Closing of the Merger does
not occur on or prior to April 10, 1999, repayment of Acquiror Damages shall be
made by Target in cash within 48 hours of such date or by a note given within 48
hours thereof with mutually agreeable terms that are commercially reasonable.
The indemnification provided by this Section 15 shall be exclusive of the
indemnification provisions of Article VIII of the Acquisition Agreement;
however, any dispute as to whether Target is liable in indemnification as a
result of this Section 15 shall be resolved by the dispute resolution procedures
set forth in Section 8.8(b)-(d) inclusive of the Acquisition Agreement, except
that references to the Shareholders' Agent therein shall instead refer to the
Target Board of Directors, mutatis mutandis.
(b) Notwithstanding anything to the contrary in the preceding
paragraph or in the Acquisition Agreement, (i) Acquiror may not claim any
indemnification for Acquiror Damages which occurs directly as a result of
willful misconduct or gross negligence of Acquiror in the management of Target
during the Management Period (as defined below) and (ii) Acquiror may not claim
any indemnification for Acquiror Damages or terminate the Acquisition Agreement
on account of any breach of any representation, warranty or covenant thereof by
Target which occur as a direct result of actions (but not omissions) of Acquiror
in the management of Target during the Management Period. The "Management
Period" for purposes of the preceding sentence shall refer to the period
beginning on January 1, 1999 and ending at the earlier of (a) when Target
terminates Acquiror's operational management responsibilities or (b) the
Effective Time of the Merger.
16. This Amendment and Waiver may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
17. This Amendment and Waiver constitutes the entire agreement among
the Parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof
18. In the event that any provision of this Amendment and Waiver, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Amendment and Waiver will continue in full force and effect and the application
of such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The Parties further agree
to replace such void or unenforceable provision of this Amendment and Waiver
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
19. This Amendment and Waiver shall be governed by and construed in
accordance with the laws of California without reference to principles of
conflicts of law.
20. The parties hereto agree that they have been represented by counsel
during the negotiation, preparation and execution of this Amendment and Waiver
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
21. The agreements set forth in this Amendment and Waiver shall
terminate at the Effective Time, except for (i) any amendment to the Acquisition
Agreement, which provision shall terminate at the time provided therein as if
included at the time of signing thereof, and (ii) Section 11 hereof, which shall
terminate at the earlier of the termination of the Acquisition Agreement
(according to the terms of Article VII thereof) or transfer or the remaining
interest held by the Pro Forma Partnership in the FCC Licenses to the Surviving
Corporation following FCC consent to an Assignment of Control thereof.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, Target, Acquiror, Acquisition Sub, Meachim
and Xxxxxx have caused this First Amendment and Waiver of Agreement and Plan of
Reorganization to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
INTELLIGENT COMMUNICATIONS,
INC.
By: /s/ Xxxxxxxxx X. Xxxxxx
Xxxxxxxxx X. Xxxxxx
President
SOFTNET SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
Chief Operating Officer
SOFTNET ACQUISITIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
Vice President
Solely as to Section 11 hereof:
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx X. Xxxxxxx, individually
By: /s/ Xxxxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxxxx X. Xxxxxx, individually
