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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
VOICE CONTROL SYSTEMS, INC.
(a Delaware corporation)
PURE ACQUISITION INC.
(a Massachusetts corporation)
and
PURESPEECH, INC.
(a Massachusetts corporation)
Dated: March 28, 1998
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This Agreement and Plan of Merger (the "Agreement") is made as of the
28th day of March, 1998, by and among Voice Control Systems, Inc., a Delaware
corporation ("VCS"), Pure Acquisition Inc., a Massachusetts corporation
("Acquisition"), and PureSpeech, Inc., a Massachusetts corporation
("PureSpeech").
In consideration of the mutual covenants and agreements contained
herein, 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 Commonwealth of Massachusetts, at the Effective Date
(as hereinafter defined), Acquisition shall be merged with and into PureSpeech
(the "Merger"), and PureSpeech shall be the surviving corporation (the
"Surviving Corporation") and as such shall continue to be governed by the laws
of the Commonwealth of Massachusetts.
1.2. Continuing of Corporate Existence. Except as may otherwise
be set forth herein, the corporate existence and identity of PureSpeech, 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 Acquisition, with all its purposes, powers, franchises,
privileges, rights and immunities, at the Effective Date shall be merged with
and into that of PureSpeech, and the Surviving Corporation shall be vested
fully therewith and the separate corporate existence and identity of
Acquisition shall thereafter cease except to the extent continued by statute.
1.3. Effective Date. The Merger shall become effective on such
date (the "Effective Date") of the occurrence of the issuance of a certificate
by the Secretary of State of the Commonwealth of Massachusetts upon filing on
the Closing Date (as defined herein) by the parties of a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the Commonwealth
of Massachusetts pursuant to the provisions of the Massachusetts General Laws,
Chapter 156B ("MGL").
1.4. Corporate Government.
(a) The Certificate of Incorporation of PureSpeech, 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.
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(b) The Bylaws of PureSpeech, 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 and the officers of the Surviving Corporation
shall be the persons holding such offices in Acquisition 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 Commonwealth of Massachusetts.
(b) The Surviving Corporation shall possess all of the
rights, privileges immunities and franchises, of either a public or
private nature, of PureSpeech and Acquisition, and all property, real,
personal and mixed, and all debts due on whatever account, including
subscription to shares, and all other choses in action, and every
other interest of or belonging or due to PureSpeech and Acquisition
shall be taken and deemed to be transferred or invested in the
Surviving Corporation without further act or deed.
(c) At the Effective Date, the Surviving Corporation
shall thenceforth be responsible and liable for all liabilities and
obligations of PureSpeech and Acquisition and any claim existing or
action or proceeding pending by or against Acquisition or PureSpeech
may be prosecuted as if the Merger had not occurred, or the Surviving
Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of Acquisition or PureSpeech
shall be impaired by the Merger.
1.6. Closing. Consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of VCS in
Dallas, Texas, commencing at 10:00 a.m., local time, on the date which is five
business days after each of the conditions set forth in Articles 6 and 7 have
been satisfied or waived, and shall proceed promptly to conclusion, or at such
other place, time and date as shall be fixed by mutual agreement between VCS
and PureSpeech. The day on which the Closing shall occur is referred to herein
as the "Closing Date." Each party will cause to be prepared, executed and
delivered the Certificate of Merger to be filed with the Secretary of State of
the Commonwealth of Massachusetts 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.
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1.7. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) 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(a)
of the Code.
ARTICLE 2.
CONVERSION OF SHARES
2.1. Conversion of Shares. The manner and basis of converting
shares of the capital stock of PureSpeech ("PureSpeech Capital Stock") into
Common Stock, $.01 par value, of VCS ("VCS Common Stock"), shall be as follows:
(a) The outstanding shares of PureSpeech common stock,
no par value (the "PureSpeech Common Stock"), the outstanding shares
of PureSpeech Series A preferred stock, $1.00 par value (the
"PureSpeech Series A Preferred"), the options granted under the
PureSpeech 1997 Stock Option Plan (the "PureSpeech Option Plan") to
acquire shares of PureSpeech Common Stock (the "PureSpeech Options"),
the outstanding warrants issued to investors in May 1997 and to
Imperial Bank in September 1997 (collectively the "PureSpeech Bridge
Warrants") to acquire shares of PureSpeech Common Stock and certain
bridge notes in the aggregate principal amount of $200,000 issued in
January 1998 (the "January 1998 Bridge Notes") shall at the Effective
Date, by virtue of the Merger and without any further action on the
part of the holders thereof, in the aggregate be converted into such
number of shares (the "VCS Merger Shares") of VCS Common Stock as is
equal to the following:
(i) Each outstanding share of PureSpeech Common
Stock shall be converted into .1422 shares of VCS Common
Stock (the "Common Exchange Ratio");
(ii) Each outstanding share of PureSpeech Series A
Preferred (including any accrued but unpaid dividends
thereon) shall be converted into .9107 shares of VCS Common
Stock;
(iii) Each PureSpeech Option and PureSpeech Bridge
Warrant shall be converted into the right to acquire VCS
Merger Shares as described in Section 2.4; and
(iv) The January 1998 Bridge Note shall be
converted into a number of VCS Common Stock equal to product
of (A) the number of shares of PureSpeech Common Stock into
which such note is convertible immediately prior to the
Effective Date multiplied by (B) the Common Exchange Ratio.
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(b) Each share of PureSpeech Capital Stock held in the
treasury of PureSpeech and each share of PureSpeech Capital Stock
owned by Acquisition or VCS shall automatically be canceled and
extinguished without any conversion thereof and no payment will be
made with respect thereto.
(c) Each share of Common Stock of Acquisition 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 share of common stock of the Surviving Corporation.
2.2. Fractional Shares. No scrip or fractional shares of VCS
Common Stock shall be issued in the Merger. All fractional shares of VCS
Common Stock to which a holder of PureSpeech Capital 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 PureSpeech Capital Stock, to
receive from VCS an amount in cash in lieu of such fractional share, based on
the Determination Price. As used herein, "Determination Price" shall mean the
average per share closing price of VCS Common Stock as reported on the Nasdaq
National Market ("NMS") over the 15 trading days ending on the third trading
day immediately preceding the Effective Date. VCS will make available to the
"Exchange Agent" (as defined in Section 2.5) the cash necessary for the purpose
of paying cash for fractional shares.
2.3. Dissenting Shares. To the extent that appraisal rights are
available under the MGL, shares of PureSpeech Capital Stock that are issued and
outstanding immediately prior to the Effective Date and that have not been
voted for adoption of the Merger and with respect of which appraisal rights
have been properly demanded in accordance with the applicable provisions of the
MGL ("Dissenting Shares") shall not be converted into the right to receive the
consideration provided for in Sections 2.1 and 2.2 at or after the Effective
Date unless and until the holder of such shares withdraws his demand for such
appraisal (in accordance with the applicable provisions of the MGL) or becomes
ineligible for such appraisal. If a holder of Dissenting Shares withdraws his
demand for such appraisal (in accordance with the applicable provisions of the
MGL) or becomes ineligible for such appraisal, then, as of the Effective Date
or the occurrence of such event, whichever later occurs, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the consideration provided for in
Sections 2.1 and 2.2. If any holder of PureSpeech Capital Stock shall assert
the right to be paid the fair value of such PureSpeech Capital Stock as
described above, PureSpeech shall give VCS notice thereof, and VCS shall have
the right to participate in all negotiations and proceedings with respect to
any such demands. PureSpeech shall not, except with the prior written consent
of VCS, voluntarily make any payment with respect to, or settle or offer to
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settle, any such demand for payment. After the Effective Date, VCS will cause
the Surviving Corporation to pay its statutory obligations to holders of
Dissenting Shares.
2.4. PureSpeech Convertible Securities
(a) At the Effective Date, all PureSpeech Options and
PureSpeech Bridge Warrants then outstanding (collectively the
"PureSpeech Convertible Securities") shall remain outstanding
following the Effective Date. At the Effective Date, such PureSpeech
Convertible Securities shall, by virtue of the Merger and without any
further action on the part of PureSpeech or the holder of any such
PureSpeech Convertible Security (except that certain written
agreements must be obtained as contemplated by Section 7.9 hereof with
respect to the 1997 Bridge Notes), be assumed by VCS in accordance
with their terms and conditions as in effect at the Effective Date
(and the terms and conditions of the PureSpeech Option Plan,
PureSpeech Bridge Warrant or 1997 Bridge Note), except that (i) each
such PureSpeech Convertible Security shall be exercisable for or
convertible into that whole number of shares of VCS Common Stock (to
the nearest whole share) into which the number of shares of PureSpeech
Common Stock subject to such PureSpeech Convertible Security
immediately prior to the Effective Date would be converted under
Section 2.1; (ii) the exercise or conversion price per share of the
PureSpeech Common Stock shall be an amount equal to the exercise or
conversion price per share of PureSpeech Common Stock subject to such
PureSpeech Convertible Security in effect immediately prior to the
Effective Date divided by the Common Exchange Ratio (the price per
share, as so determined, being rounded upward to the nearest full
cent); and (iii) all actions to be taken thereunder by the Board of
Directors of PureSpeech or a committee thereof shall be taken by the
Board of Directors of VCS or a committee thereof. No payment shall be
made for fractional interests.
(b) It is intended that the assumed PureSpeech
Convertible Security 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 PureSpeech Convertible Security. VCS shall
take all necessary corporate action necessary to reserve for issuance
a sufficient number of shares of VCS Common Stock for delivery upon
exercise of each PureSpeech Convertible Security. VCS shall file a
registration statement, or an amendment to an existing registration
statement, under the Securities Act of 1933, as amended (the
"Securities Act"), on Form S-8 with respect to the shares of VCS
Common Stock subject to the PureSpeech Options and shall use its best
efforts to maintain the effectiveness of such registration statement
for so long as the PureSpeech Options remain outstanding. In addition,
VCS shall use reasonable best efforts to take any actions that may be
necessary so that the PureSpeech Options qualified as incentive stock
options for the purposes of Section 422 of the Code continue to be
qualified as incentive stock options following the Effective Date and
assumption by VCS.
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(c) Approval by the stockholders of PureSpeech of this
Agreement shall constitute authorization and approval of any and all
of the actions described in this Section 2.4.
(d) VCS will cause all shares of VCS Common Stock
issued upon exercise or conversion of the PureSpeech Convertible
Securities to be listed on the NMS.
(e) The May 1997 and March 1998 Bridge Notes will
convert into such number of VCS Common Stock equal to the quotient of
(x) the outstanding amount of such notes (including accrued interest)
divided by (y) $6.7544.
2.5. Exchange Agent.
(a) VCS shall authorize Xxxxx Xxxxxx Shareholder
Services, Dallas, Texas, to serve as exchange agent hereunder (the
"Exchange Agent"). Promptly after the Effective Date, VCS shall
deposit or shall cause to be deposited in trust with the Exchange
Agent certificates for the number of whole shares of VCS Common Stock
to which the holders of PureSpeech Capital Stock (other than holders
of Dissenting Shares) are entitled pursuant to this Article 2,
together with cash sufficient to pay for fractional shares then known
to VCS (such cash amounts and certificates being hereinafter referred
to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions received from VCS, deliver the number of
shares of VCS Common Stock and pay the amounts of cash provided for in
this Article 2 out of the Exchange Fund. Additional amounts of cash,
if any, needed from time to time by the Exchange Agent to make
payments for fractional shares shall be provided by VCS 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 VCS and PureSpeech 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 (other than holders of Dissenting Shares) 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 PureSpeech Capital Stock (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 NMS. Delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the
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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 (i) one
or more certificates as requested by the holder (properly issued,
executed and countersigned, as appropriate) representing that number
of whole shares of VCS Common Stock to which such holder of PureSpeech
Capital Stock shall have become entitled pursuant to the provisions of
this Article 2, and (ii) as to any fractional share, a check
representing the cash consideration to which such holder shall have
become entitled pursuant to Section 2.2, and the Certificate so
surrendered shall forthwith be canceled. VCS will use its reasonable
best efforts to cause certain major stockholders of PureSpeech to
receive their certificates evidencing the shares of VCS Common Stock
within 5 business days of the Exchange Agent's receipt of a properly
completed and executed letter of transmittal and delivery of the
applicable Certificates. No interest will be paid or accrued on the
cash payable upon surrender of the Certificates. VCS shall pay any
transfer or other taxes required by reason of the issuance of a
certificate representing shares of VCS Common Stock; provided,
however, that VCS shall not pay any transfer or other tax if the
obligation to pay such tax under applicable law is solely that of the
stockholder or if payment of any such tax by VCS otherwise would cause
the Merger to fail to qualify as a tax free reorganization under the
Code. If any portion of the consideration to be received pursuant to
this Article 2 upon exchange of a Certificate (whether a certificate
representing shares of VCS Common Stock or a check representing cash
for a fractional share) 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 VCS Common Stock or a check representing cash for a
fractional share 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
(other than Certificates representing treasury shares of PureSpeech
and Certificates representing Dissenting Shares) 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 VCS
Common Stock will be paid to persons entitled to receive VCS Common
Stock until such persons surrender their Certificates. After such
surrender, there shall be paid to the person in whose name VCS Common
Stock shall be issued any dividends on such VCS Common Stock that
shall have a record date on or after the Effective Date and prior to
such surrender. If the payment date for any such dividend is after the
date of such surrender, such payment shall be made on such payment
date. In no event shall the persons entitled to receive such
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dividends be entitled to receive interest on such dividends. All
payments in respect of shares of PureSpeech Capital 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.
(c) 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 VCS a bond in
such reasonable sum as VCS may direct as indemnity against any claim
that may be made against the Exchange Agent, VCS or the Surviving
Corporation with respect to the Certificate alleged to have been lost,
mislaid, stolen or destroyed.
(d) After the Effective Date, there shall be no
transfers on the stock transfer books of the Surviving Corporation of
the shares of PureSpeech Capital 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.
(e) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of PureSpeech for six months after the
Effective Date shall be returned to VCS, upon demand, and any holder
of PureSpeech Capital Stock who has not theretofore complied with
Section 2.5(b) shall thereafter look only to VCS for issuance of the
number of shares of VCS Common Stock and other consideration to which
such holder has become entitled pursuant to this Article 2; provided,
however, that neither the Exchange Agent nor any party hereto shall be
liable to a holder of shares of PureSpeech Capital Stock for any
amount required to be paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.6 Escrow Fund.
(a) In order to secure the indemnification obligations
of PureSpeech set forth in Section 8.2, (i) on or before the Effective
Date, PureSpeech will cause certain representatives (as defined below)
of its former shareholders (the "PureSpeech Shareholders") to enter
into the Escrow Agreement, with VCS and Xxxxxxxx, Xxxxxxx & Xxxxxxx as
escrow agent (the "Escrow Agent"), in substantially the form of
Exhibit A hereto (the "Escrow Agreement") and (ii) promptly upon the
occurrence of the Merger, VCS shall deposit with the Escrow Agent
certificates representing 10% of the number of the VCS Merger Shares.
The representatives of the PureSpeech Shareholders (the "Shareholders'
Representatives") shall be as set forth in the Escrow Agreement. The
Shareholders' Representatives are authorized by this Agreement to act
hereunder and under the Escrow Agreement with the powers and authority
provided for herein and therein, as
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representatives of the PureSpeech Shareholders and their successors.
Approval of this Agreement and the Merger by the PureSpeech
Shareholders shall constitute (i) approval of the terms and conditions
of the Escrow Agreement and ratification of the selection of the
Shareholders' Representatives as agents and attorneys-in- fact for the
PureSpeech Shareholders and of the Shareholders' Representatives'
authority to enter into any agreement in connection with the
transactions contemplated by this Agreement, or the Escrow Agreement,
to receive payment of all sums due such PureSpeech Shareholder
pursuant to this Agreement or the Escrow Agreement, to exercise all or
any of the powers, authority and discretion conferred on him under any
such agreement, to waive any terms and conditions of any such
agreement (other than the payment of the Merger Consideration), to
give and receive notices on their behalf and to be their exclusive
representative with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by any
such agreement, including, without limitation, the defense, settlement
or compromise of any claim, action or proceeding for which VCS may be
entitled to indemnification and the Shareholder Representatives agrees
to act as, and to undertake the duties and responsibilities of, such
agent and attorney-in-fact and (ii) the agreement of each PureSpeech
Shareholder that the Shareholders' Representatives may use the VCS
Merger Shares subject to the Escrow Agreement, in order to pay any
expenses incurred in connection with any disputes or obligations
relating to the Escrow Agreement or to Article 8 of this Agreement
relating to indemnification and defenses and disputes related thereto.
To the extent available for distribution to PureSpeech Shareholders
pursuant to the Escrow Agreement to advance funds, the Shareholders'
Representatives may attach and dispose of, on a pro rata basis any
such available shares of VCS Common Stock in the Escrow Fund held for
the benefit of PureSpeech Shareholders.
(b) The Shareholders' Representatives shall not be
liable for any action taken or not taken by them in connection with
their obligations under this Agreement or the Escrow Agreement (i)
with the consent of PureSpeech Shareholders who, as of the date of
this Agreement, owned a majority in number of the PureSpeech Common
Stock Equivalents or (ii) without such consent, but taken or not taken
in the absence of gross negligence or wilful misconduct. If either
Shareholders' Representative shall be unable or unwilling to serve in
such capacity, his successor shall be named by those persons holding a
majority of the PureSpeech Common Stock Equivalents outstanding
immediately prior to the Effective Time, which successor shall serve
and exercise the powers of Shareholders' Representative hereunder.
2.7. Adjustment. If, between the date of this Agreement and the
Closing Date or the Effective Date, as the case may be, (i) the outstanding
shares of PureSpeech Capital Stock or VCS Common Stock shall have been changed
into a different number of shares or a different class by reason of any
classification,
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recapitalization, split-up, combination, exchange of shares, or readjustment or
a stock dividend thereon shall be declared with a record date within such
period or (ii) PureSpeech shall have issued additional shares of PureSpeech
Capital Stock (other than upon the exercise of stock options or warrants
granted prior to the date hereof) or options or warrants to purchase the same,
or securities convertible into the same, the number of shares of VCS Common
Stock issued pursuant to the Merger shall be adjusted to accurately reflect
such change (it being acknowledged that PureSpeech elsewhere herein covenants
not to take any of the actions described in (i) or (ii) above).
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURESPEECH
PureSpeech represents and warrants to VCS that the statements
contained in this Article 3 are true and correct in all material respects,
except as set forth in the disclosure schedule delivered to VCS by PureSpeech
on or before the date of this Agreement (the "PureSpeech Disclosure Schedule").
The PureSpeech Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered Sections contained in this Article 3 and the
disclosures in any paragraph shall qualify only the corresponding Section in
this Article 3.
3.1. Organization and Good Standing of PureSpeech. PureSpeech is
a corporation duly organized, validly existing and in good standing under the
laws of Massachusetts.
3.2. PureSpeech Subsidiaries and Other Ownership Interests.
PureSpeech has no material record or beneficial equity or ownership interest in
any corporations, partnerships or other entities.
3.3. Foreign Qualification. PureSpeech 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 could have a material
adverse effect on (a) the business, operations, assets or financial condition
of PureSpeech or (b) the validity or enforceability of, or the ability of
PureSpeech to perform its obligations under, this Agreement and the other
documents contemplated hereby (a "PureSpeech Material Adverse Effect").
3.4. Corporate Power and Authority. PureSpeech has the corporate
power and authority and all material licenses and permits required by
governmental authorities to own, lease and operate its properties and assets
and to carry on its business as currently being conducted. PureSpeech has the
corporate power and authority to execute and deliver this Agreement and the
agreements, documents and instruments contemplated hereby and, subject to the
approval of this Agreement and the Merger by its stockholders, to perform its
obligations under this Agreement and the other documents executed or to be
executed by PureSpeech in
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connection with this Agreement and to consummate the Merger. The execution,
delivery and performance by PureSpeech of this Agreement and the other
documents executed or to be executed by PureSpeech in connection with this
Agreement have been duly authorized by all necessary corporate action.
3.5. Binding Effect. This Agreement and the other documents
executed or to be executed by PureSpeech in connection with this Agreement have
been or will have been duly executed and delivered by PureSpeech and are or
will be, when executed and delivered, the legal, valid and binding obligations
of PureSpeech enforceable in accordance with their 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
(c) rights to indemnification may be limited by
considerations of public policy.
3.6. Absence of Restrictions and Conflicts. Subject only to the
approval of the adoption of this Agreement and the Merger by PureSpeech's
stockholders, the execution, delivery and performance of this Agreement and the
other documents executed or to be executed by PureSpeech in connection with
this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement 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 Articles of Organization or Bylaws of PureSpeech, (ii) any "PureSpeech
Material Contract" (as defined herein), (iii) any judgment, decree or order of
any court or governmental authority or agency to which PureSpeech is a party or
by which PureSpeech or any of its properties is bound, or (iv) any statute,
law, regulation or rule applicable to PureSpeech. Except for compliance with
the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 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 PureSpeech is required in connection with the execution,
delivery or performance of this Agreement by PureSpeech or the consummation of
the transactions contemplated hereby and the ownership and operation by
PureSpeech of its business and properties after the Effective Date in
substantially the same manner as now owned and operated.
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3.7. Capitalization of PureSpeech.
(a) The authorized capital stock of PureSpeech consists
of 6,000,000 shares of PureSpeech Common Stock and 1,500,000 shares of
PureSpeech preferred stock, of which 825,000 shares have been
designated as PureSpeech Series A Preferred. As of the date hereof,
there were 3,613,641 shares of PureSpeech Common Stock and 819,466
shares of PureSpeech Series A Preferred issued and outstanding and
5,245,376 shares of PureSpeech Common Stock reserved for issuance upon
the exercise of outstanding PureSpeech Options, the January 1998
Bridge Note and PureSpeech Bridge Warrants. A detailed listing of the
outstanding PureSpeech Options and PureSpeech Bridge Warrants,
including expiration dates and vesting information, is set forth on
the PureSpeech Disclosure Schedule.
(b) All of the issued and outstanding shares of
PureSpeech Capital Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights.
(c) To PureSpeech's knowledge, there are no voting
trusts, stockholder agreements or other voting arrangements by the
stockholders of PureSpeech.
(d) 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 PureSpeech
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 PureSpeech.
3.8. Financial Statements and Records of PureSpeech. PureSpeech
has made available to VCS true, correct and complete copies of the balance
sheets of PureSpeech as of December 31, 1996 and 1997, and the 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 Price Waterhouse LLP (the "PureSpeech Financial Statements"). The
PureSpeech Financial Statements have been prepared from, and are in accordance
with, the books and records of PureSpeech present fairly, in all material
respects, the assets, liabilities and financial position of PureSpeech as of
the dates thereof and 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, PureSpeech,
except as noted in the PureSpeech Financial Statements. The books and records
of PureSpeech have been and are being maintained in accordance with good
business practice, reflect only valid transactions, are
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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 PureSpeech set forth in PureSpeech Financial Statements.
3.9. Absence of Certain Changes. Since December 31, 1997,
PureSpeech has not, except as may result from the transactions contemplated by
this Agreement:
(a) incurred any adverse change in its results of
operations (including the loss of business of a material customer),
except as reflected on the PureSpeech Financial Statements and except
for such changes that would not have a PureSpeech Material Adverse
Effect;
(b) suffered any damage or destruction to or loss of
the assets of PureSpeech, whether or not covered by insurance, which
property or assets are material to the operations or business of
PureSpeech;
(c) forgiven, compromised, canceled, released, waived
or permitted to lapse any material rights or claims;
(d) entered into or terminated any material agreement,
commitment or transaction, or agreed or made any changes in material
leases or agreements, other than renewals or extensions thereof and
leases, agreements, transactions and commitments entered into in the
ordinary course of business;
(e) written up, written down or written off the book
value of any material amount of assets;
(f) declared, paid or set aside for payment any
dividend or distribution with respect to PureSpeech's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of
PureSpeech's capital stock or securities (other than shares issued
upon exercise of options and warrants granted prior to the date
hereof) 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,
compensation or collective bargaining agreement with any person or
group;
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(j) entered into, adopted or amended any employee
benefit plan;
(k) entered into any transaction other than in the
ordinary course of business; or
(l) entered into any agreement to do any of the
foregoing.
3.10. No Material Undisclosed Liabilities. There are no
liabilities or obligations of PureSpeech of any nature, whether absolute,
accrued, contingent or otherwise, other than the liabilities and obligations
that are fully reflected, accrued or reserved against in the PureSpeech
Financial Statements, for which the reserves are appropriate and reasonable, or
incurred in the ordinary course of business and consistent with past practices
since December 31, 1997.
3.11. Tax Returns; Taxes. PureSpeech has duly filed all material
federal, state, county, local and foreign tax returns and reports required to
be filed by it, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise and sales taxes
and all such returns and reports are true and correct in all material respects;
has either paid in full all taxes that have become due as reflected on any
return or report and any interest and penalties with respect thereto or has
fully accrued on its books or has established adequate reserves for all taxes
payable but not yet due; and has made cash deposits with appropriate
governmental authorities representing estimated payments of taxes, including
income taxes and employee withholding tax obligations. No extension or waiver
of any statute of limitations or time within which to file any return has been
granted to or requested by PureSpeech 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 PureSpeech, nor has
PureSpeech received notice of any such deficiency, delinquency or default.
PureSpeech has no material tax liabilities other than those reflected on the
PureSpeech Financial Statements and those arising in the ordinary course of
business since December 31, 1997. PureSpeech will make available to VCS true,
complete and correct copies of PureSpeech's federal tax returns since January
1, 1995 and make available such other tax returns requested by VCS.
3.12. Material Contracts. The PureSpeech Disclosure Schedule sets
forth, and PureSpeech will furnish or make available accurate and complete
copies of, the PureSpeech Material Contracts (as defined herein) applicable to
PureSpeech to VCS. All of the PureSpeech Material Contracts are valid, binding
and enforceable on PureSpeech. There is not under any of the PureSpeech
Material Contracts any existing breach, default or event of default by
PureSpeech nor event that with notice or lapse of time or both would constitute
a breach, default or event of default by PureSpeech nor does PureSpeech know
of, and PureSpeech 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 PureSpeech Material Adverse Effect. As used herein, the
term "PureSpeech Material Contracts"
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shall mean any of the following categories of contracts and commitments
(including summaries of oral contracts) to which PureSpeech is a party or
bound:
(i) contracts with any labor union; employee benefit
plans or contracts; and employment, consulting or similar contracts,
including confidentiality, invention and non-competition agreements;
(ii) leases, whether as lessor or lessee; loan
agreements, mortgages, indentures, instruments of indebtedness or
commitments in each case involving indebtedness for borrowed money or
money loaned to others; and guaranty or suretyship, performance bond,
indemnification or contribution agreements involving obligations;
(iii) contracts with third parties that involve aggregate
payments by PureSpeech of more than $25,000 in any fiscal year;
(iv) contracts that authorize third parties to possess,
copy, license, sublicense or otherwise use any patent, copyright,
trade secret, software, technology or other intellectual property of
PureSpeech;
(v) insurance policies material to the business of
PureSpeech; and
(vi) other contracts that are material to the
operations, business or financial condition of PureSpeech taken as a
whole.
3.13. Litigation and Government Claims. There is no pending suit,
claim, action or litigation, or administrative, arbitration or other proceeding
or governmental investigation or inquiry, or any pending change in any
environmental, zoning or building laws, regulations or ordinances against
PureSpeech to which its business or assets are subject which would, severally
or in the aggregate, have a PureSpeech Material Adverse Effect. To the
knowledge of PureSpeech, there are no such proceedings threatened or
contemplated, or any unasserted claims (whether or not the potential claimant
may be aware of the claim) of any nature that might be asserted against
PureSpeech which would, severally or in the aggregate, have a PureSpeech
Material Adverse Effect. PureSpeech is not subject to any judgment, decree,
injunction, rule or order of any court, or, to the knowledge of PureSpeech, any
governmental restriction applicable to it which is reasonably likely (i) to
have a PureSpeech Material Adverse Effect or (ii) to cause a material
limitation on VCS' ability to operate the business of PureSpeech after the
Closing.
3.14. Compliance With Laws. PureSpeech 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 or license the properties
and assets it owns or holds 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 PureSpeech Material Adverse Effect. PureSpeech has been and is, to
the knowledge of
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PureSpeech, in compliance with all applicable laws, regulations and
administrative orders of any country, state or municipality or of any
subdivision of any thereof to which its business and its employment of labor or
its use or occupancy of properties or any part hereof are subject, except where
the failure to so comply would have a PureSpeech Material Adverse Effect.
3.15. Employee Benefit Plans. Each employee benefit plan, as such
term is defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), of PureSpeech (collectively the "PureSpeech
Employee Plans") complies in all material respects with all applicable
requirements of ERISA and the Code, and other applicable laws. None of the
PureSpeech Employee Plans is an employee pension benefit plan or a
multiemployer plan, as such terms are defined in ERISA. Neither PureSpeech nor
any of its directors, officers, employees or agents has, with respect to any
PureSpeech Employee Plan, engaged in any "prohibited transaction," as such term
is defined in the Code or ERISA, nor has any PureSpeech Employee Plan engaged
in such prohibited transaction which could result in any taxes or penalties or
other prohibited transactions, which in the aggregate could have a PureSpeech
Material Adverse Effect.
3.16. Labor Relations. PureSpeech is in compliance in all material
respects with all laws (including federal and state laws and the laws of
another country or governmental entity thereof) 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. 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 PureSpeech pending before the National Labor
Relations Board. There is no labor strike, dispute, slowdown or stoppage
actually pending or, to the knowledge of PureSpeech, threatened against or
involving or affecting PureSpeech and no National Labor Relations Board
representation question exists respecting its employees. No grievances or
arbitration proceeding is pending and no written claim therefor exists. There
is no collective bargaining agreement that is binding on PureSpeech.
3.17. Intellectual Property. The patents, patent applications,
patent licenses, trade names, trademarks, servicemarks and copyrights
identified on the PureSpeech Disclosure Schedule constitute all such
intellectual property rights owned by or licensed to PureSpeech which are
material to its business (the "PureSpeech Intellectual Property"). All of the
PureSpeech Intellectual Property is being used or held for use in connection
with the business of PureSpeech, without any known conflict with the rights of
others, except for such conflicts as do not have a PureSpeech Material Adverse
Effect. PureSpeech has not received any notice from any other person pertaining
to or challenging the right of PureSpeech to use any PureSpeech Intellectual
Property or any trade secrets, proprietary information, inventions, know-how,
processes and procedures owned or used or
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licensed to PureSpeech, except with respect to rights the loss of which,
individually or in the aggregate, would not have a PureSpeech Material Adverse
Effect.
3.18. Properties.
(a) PureSpeech has good and marketable title, free and
clear of all liens, claims or encumbrances (other than "Permitted
Liens") to all of its material properties and assets whether tangible
or intangible, real, personal or mixed. All buildings and all
fixtures, equipment and other property and assets which are material
to its business held under leases or subleases by PureSpeech are held
under valid instruments enforceable in accordance with their
respective terms. As used herein, the term "Permitted Liens" includes
(i) liens for taxes, assessments or other governmental charges not yet
due and payable; (ii) statutory liens incurred in the ordinary course
of business with respect to liabilities that are not yet due and
payable; (iii) landlord liens contained in leases in the ordinary
course of business; (iv) such imperfections of title and/or
encumbrances as are not material in character, amount or extent and do
not materially detract from the value or interfere with the use of the
properties and assets subject thereto or affected thereby; and (v)
liens identified on the PureSpeech Financial Statements.
(b) At the Effective Date, none of the shareholders of
PureSpeech nor any Affiliate of such shareholders will have any
material interest in, or own, any material property or right used
principally in the conduct of the business of PureSpeech. The term
"Affiliate" shall mean any of the shareholders of PureSpeech, or any
member of the immediate family of a natural person shareholder, or any
corporation, partnership, trust or other entity in which any such
shareholder or family member has a substantial interest or is a
director, officer, partner or trustee.
(c) Substantially all of PureSpeech's equipment and
properties has been well maintained and is in good and serviceable
condition, reasonable wear and tear excepted.
3.19. Environmental Matters. PureSpeech is in compliance in all
material respects with all applicable federal, state, local and foreign laws
relating to emissions, discharged and releases of hazardous materials into the
environment and the generation, treatment, storage, transportation and disposal
of hazardous waste, including without limitation, any applicable provisions of
the Resource Conservation and Recovery Act of 1976 or the Comprehensive
Environmental Response, Compensation and Liability Act of 1980. There are no
conditions at, on, under or related to any real property owned or operated by
PureSpeech which presently or potentially poses a significant hazard to human
health or the environment, and there has been no production, use, treatment,
storage, transportation or disposal by PureSpeech of any "Hazardous Substance"
(as defined below) nor any release or threatened release by PureSpeech of any
Hazardous Substance. As used herein,
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the term "Hazardous Substance" means any hazardous or toxic substance, material
or waste which is regulated by any applicable federal, state or local
authority.
3.20. Warranty Claims. There are no existing or, to PureSpeech's
knowledge, threatened claims against PureSpeech for services or products which
are defective or for failure to meet and service products or warranties.
3.21. Insurance. PureSpeech is presently insured, and during each
of the past two years has been insured for reasonable amounts against such
risks as companies engaged in similar business would, in accordance with good
business practice, customarily be insured.
3.22. Brokers and Finders. None of PureSpeech, or to PureSpeech'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. Other than certain fees
that may be paid to VCS' financial advisor as contemplated herein below,
PureSpeech 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.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF VCS AND ACQUISITION
Each of VCS and Acquisition, jointly and severally, represents and
warrants to PureSpeech that the statements contained in this Article 4 are true
and correct in all material respects.
4.1. Organization and Good Standing. VCS is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
Acquisition is a corporation duly organized, validly existing and in good
standing under the laws of Massachusetts.
4.2. Foreign Qualification. Each of VCS and Acquisition 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 could have a
material adverse effect on (a) the business, operations, prospects, assets or
financial condition of VCS or (b) the validity or enforceability of, or the
ability of VCS or Acquisition to perform its obligations under, this Agreement
and the other documents contemplated hereby (a "VCS Material Adverse Effect").
4.3. Corporate Power and Authority. Each of VCS and Acquisition
has the corporate power and authority and all material licenses and permits
required by governmental authorities to own, lease and operate its properties
and assets and to carry on its business as currently being conducted. Each of
VCS and Acquisition
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has the corporate power and authority to execute and deliver this Agreement and
to perform its obligations under this Agreement and the other documents
executed or to be executed by each of them in connection with this Agreement
and to consummate the Merger. The execution, delivery and performance by VCS
and Acquisition of this Agreement and the other documents executed or to be
executed by VCS and Acquisition in connection with this Agreement have been
duly authorized by all necessary corporate action.
4.4. Binding Effect. This Agreement and the other documents
executed or to be executed by VCS and Acquisition in connection with this
Agreement have been or will have been duly executed and delivered by VCS and
Acquisition and are or will be, when executed and delivered, the legal, valid,
and binding obligations of VCS and Acquisition, enforceable in accordance with
their 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
(c) rights to indemnification may be limited by
considerations of public policy.
4.5. Absence of Restrictions and Conflicts. The consummation of
the Merger and the other transactions contemplated by this Agreement 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 VCS, (ii) any "VCS Material Contract" (as defined herein), (iii)
any judgment, decree or order of any court or governmental authority or agency
to which VCS is a party or by which VCS or any of its properties is bound, or
(iv) any statute, law, regulation or rule applicable to VCS. Except for
compliance with the applicable requirements of 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
VCS or is required in connection with the execution, delivery or performance of
this Agreement by VCS or the consummation of the transactions contemplated
hereby and the ownership and operation of PureSpeech by VCS after the Effective
Date in substantially the same manner as now owned and operated.
4.6. Capitalization of VCS.
(a) The authorized capital stock of VCS consists of
20,000,000 shares of VCS Common Stock and 300,000 shares of preferred
stock, $.01
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par value. As of December 31, 1997, there were (i) 11,312,466 shares
of Common Stock outstanding, (ii) no shares of preferred stock
outstanding, and (iii) 3,026,052 shares reserved for issuance upon the
exercise of outstanding options and warrants. All of the issued and
outstanding shares of VCS Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.
(b) All of the issued and outstanding shares of VCS
Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights.
(c) To VCS' knowledge, there are no voting trusts,
stockholder agreements or other voting arrangements by the
stockholders of VCS.
(d) 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 VCS 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 VCS.
4.7. VCS SEC Reports. VCS has made available to PureSpeech (i)
VCS' Annual Reports on Form 10-KSB or 10-K, including all exhibits filed
thereto and items incorporated therein by reference, (ii) VCS' Quarterly
Reports on Form 10-QSB or 10-Q, including all exhibits thereto and items
incorporated therein by reference, (iii) proxy statements relating to VCS'
meetings of stockholders and (iv) all other reports or registration statements
exclusive of Form S-8 (as amended or supplemented prior to the date hereof),
filed by VCS with the Securities and Exchange Commission ("SEC") since December
31, 1995, including all exhibits thereto and items incorporated therein by
reference (items (i) through (iv) being referred to as the "VCS SEC Reports").
As of their respective dates, the VCS 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 December 31,
1995, VCS has filed all material forms, 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 VCS. The VCS SEC Reports
include the balance sheets of VCS as of December 31, 1996 and 1997, and the
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, including the notes thereto, examined by and accompanied by the
report of BDO Xxxxxxx, LLP (the "VCS Financial Statements"). The VCS Financial
Statements have been prepared from, and are in accordance with, the books and
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records of VCS and present fairly, in all material respects, the assets,
liabilities and financial position of VCS as of the dates thereof and 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, VCS, except as noted in the VCS Financial
Statements. The books and records of VCS 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 VCS set forth in VCS Financial Statements.
4.9. Absence of Certain Changes. Since December 31, 1997, VCS has
not, except as may result from the transactions contemplated by this Agreement,
(i) incurred any adverse change in its results of operations (including the
loss of business of a material customer), except as reflected on the VCS
Financial Statements and except for such changes that would not have a VCS
Material Adverse Effect; or (ii) suffered any damage or destruction to or loss
of the assets of VCS, whether or not covered by insurance, which property or
assets are material to the operations or business of VCS.
4.10. No Material Undisclosed Liabilities. There are no
liabilities or obligations of VCS of any nature, whether absolute, accrued,
contingent or otherwise, other than the liabilities and obligations that are
fully reflected, accrued or reserved against in the VCS Financial Statements,
for which the reserves are appropriate and reasonable, or incurred in the
ordinary course of business and consistent with past practices since December
31, 1997.
4.11. Material Contracts. All of the VCS Material Contracts are
valid, binding and enforceable. There is not under any of the VCS Material
Contracts any existing breach, default or event of default by VCS nor event
that with notice or lapse of time or both would constitute a breach, default or
event of default by VCS nor does VCS know of, and VCS 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 VCS Material Adverse
Effect. VCS will furnish or make available accurate and complete copies of the
VCS Material Contracts to PureSpeech. As used herein, the term "VCS Material
Contracts" shall mean all of contracts and agreements filed, or required to be
filed, as exhibits to VCS' Annual Report on Form 10-KSB for the year ended
December 31, 1997 and any contract or agreement entered into since December 31,
1997 which would be required to be filed as an exhibit to VCS' Annual Report on
Form 10-KSB for the year ending December 31, 1997.
4.12. Litigation and Government Claims. There is no pending suit,
claim, action or litigation, or administrative, arbitration or other proceeding
or governmental investigation or inquiry, or any pending change in any
environmental,
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zoning or building laws, regulations or ordinances against VCS to which its
business or assets are subject which would, severally or in the aggregate,
reasonably be expected to result in a VCS Material Adverse Effect. To the
knowledge of VCS, there are no such proceedings threatened or contemplated, or
any unasserted claims (whether or not the potential claimant may be aware of
the claim) of any nature that might be asserted against VCS which would,
severally or in the aggregate, have a material adverse effect on the business,
results of operations, assets or the condition, financial or otherwise, of VCS.
VCS is not subject to any judgment, decree, injunction, rule or order of any
court, or, to the knowledge of VCS, any governmental restriction applicable to
VCS which is reasonably likely (i) to have a VCS Material Adverse Effect or
(ii) to cause a material limitation on VCS' ability to operate the business of
PureSpeech after the Closing.
4.13. Compliance With Laws. VCS 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
holds 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 VCS Material
Adverse Effect. VCS has been and is, to the knowledge of VCS, in compliance
with all applicable laws, regulations and administrative orders of any country,
state or municipality or of any subdivision of any thereof to which its
business and its employment of labor or its use or occupancy of properties or
any part hereof are subject, the failure to obtain or the violation of which
would have a VCS Material Adverse Effect.
4.14. Employee Benefit Plans. Each employee benefit plan, as such
term is defined in Section 3(3) of ERISA, of VCS (collectively the "VCS
Employee Plans") complies in all material respects with all applicable
requirements of ERISA and the Code and other applicable laws. None of the VCS
Employee Plans is an employee pension benefit plan or a multiemployer plan, as
such terms are defined in ERISA. Neither VCS nor any of its directors,
officers, employees or agents has, with respect to any VCS Employee Plan,
engaged in any "prohibited transaction," as such term is defined in the Code or
ERISA, nor has any VCS Employee Plan engaged in such prohibited transaction
which could result in any taxes or penalties or other prohibited transactions,
which in the aggregate could have a VCS Material Adverse Effect.
4.15. Labor Relations. VCS is in compliance in all material
respects with all laws (including federal and state laws and the laws of
another country or governmental entity thereof) 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. 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 VCS pending before the National Labor Relations
Board. There is no labor strike, dispute, slowdown or stoppage actually pending
or, to the knowledge of VCS, threatened against or involving or affecting VCS
and no National Labor Relations
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Board representation question exists respecting its employees. No grievances or
arbitration proceeding is pending and no written claim therefor exists. There
is no collective bargaining agreement that is binding on VCS.
4.16. Intellectual Property. The patents, patent applications,
patent licenses, trade names, trademarks, servicemarks and copyrights
identified in VCS' Annual Report on Form 10-KSB for the year ended December 31,
1997 constitute all such intellectual property rights owned by or licensed to
VCS which are material to its business (the "VCS Intellectual Property"). All
of the VCS Intellectual Property is being used or held for use in connection
with the business of VCS, without any known conflict with the rights of others,
except for such conflicts as do not have a VCS Material Adverse Effect. VCS has
not received any notice from any other person pertaining to or challenging the
right of VCS to use any VCS Intellectual Property or any trade secrets,
proprietary information, inventions, know-how, processes and procedures owned
or used or licensed to VCS, except with respect to rights the loss of which,
individually or in the aggregate, would not have a VCS Material Adverse Effect.
4.17. Properties.
(a) VCS has good and marketable title, free and clear
of all liens, claims or encumbrances (other than "Permitted Liens") to
all of its material properties and assets whether tangible or
intangible, real, personal or mixed. All buildings and all fixtures,
equipment and other property and assets which are material to its
business held under leases or subleases by VCS are held under valid
instruments enforceable in accordance with their respective terms. As
used herein, the term "Permitted Liens" includes (i) liens for taxes,
assessments or other governmental charges not yet due and payable;
(ii) statutory liens incurred in the ordinary course of business with
respect to liabilities that are not yet due and payable; (iii)
landlord liens contained in leases in the ordinary course of business;
(iv) such imperfections of title and/or encumbrances as are not
material in character, amount or extent and do not materially detract
from the value or interfere with the use of the properties and assets
subject thereto or affected thereby; and (v) liens identified on the
VCS Financial Statements.
(b) At the Effective Date, except as set forth in the
VCS SEC Reports, none of the shareholders of VCS nor any Affiliate of
such shareholders will have any material interest in, or own, any
material property or right used principally in the conduct of the
business of VCS. The term "Affiliate" shall mean any of the
shareholders of VCS, or any member of the immediate family of a
natural person shareholder, or any corporation, partnership, trust or
other entity in which any such shareholder or family member has a
substantial interest or is a director, officer, partner or trustee.
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(c) Substantially all of VCS' equipment and properties
has been well maintained and is in good and serviceable condition,
reasonable wear and tear excepted.
4.18. Brokers and Finders. None of VCS, or, to VCS' 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. VCS 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.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
5.1. Conduct of Business by PureSpeech. From the date hereof to the
Effective Date, PureSpeech will except as required in connection with the
Merger and the other transactions contemplated by this Agreement and except as
otherwise disclosed in PureSpeech's Disclosure Schedule or consented to in
writing by VCS:
(a) Carry on its business in the ordinary and regular
course in substantially the same manner as heretofore conducted and
not engage in any new line of business or enter into any agreement,
transaction or activity or make any 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
Organization or Bylaws;
(c) Other than pursuant to the exercise of the Options,
Warrants and/or conversion of Bridge Notes, if any, outstanding on the
date hereof or pursuant to the conversion of bridge loans as described
in Schedule 5.1, not 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 capital stock of PureSpeech or
rights or obligations convertible into or exchangeable for any shares
of the capital stock of PureSpeech and not alter the terms of any
presently outstanding options or warrants (or plans pursuant to which
they were granted) or make any changes (by split-up, combination,
reorganization or otherwise) in the capital structure of PureSpeech;
(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 PureSpeech and not redeem, purchase or
otherwise acquire any shares of the
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capital stock or other securities of PureSpeech or rights or
obligations convertible into or exchangeable for any shares of the
capital stock or other securities of PureSpeech 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 PureSpeech,
to keep the officers and employees of PureSpeech available to
PureSpeech and to preserve the relationships of PureSpeech with
suppliers, customers and others having business relations with any of
them, except for such instances which would not have a material
adverse effect on the business, operations and financial condition of
PureSpeech;
(g) Not (i) create, incur or assume any long-term debt
(including obligations in respect of capital leases which individually
involve annual payments in excess of $10,000) or, create, incur or
assume any short-term debt for borrowed money, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person,
(iii) make any loans or advances to any other person except in the
ordinary course of business and consistent with past practice, (iv)
make any capital contributions to, or investments in, any person or
(v) make any capital expenditure or cash commitment in excess of
$5,000; or
(h) Not (i) enter into, modify or extend in any manner
the terms of any employment, severance or similar agreements with
officers and directors, (ii) grant any increase in the compensation of
officers or directors, whether now or hereafter payable, or (iii)
grant any increase in the compensation of any other employees except
for compensation increases in the ordinary course of business and
consistent with past practice.
In connection with the continued operation of the business of
PureSpeech between the date of this Agreement and the Effective Date,
PureSpeech shall confer in good faith and on a regular and frequent basis with
one or more representatives of VCS designated in writing to report operational
matters of materiality and the general status of ongoing operations. In
addition, PureSpeech will allow VCS' employees or agents to be present at
PureSpeech's business locations to observe the business and operations of
PureSpeech. PureSpeech acknowledges that VCS does not and will not waive any
rights it may have under this Agreement as a result of such consultations nor
shall VCS be responsible for any decisions made by PureSpeech's officers and
directors with respect to matters which are the subject of such consultation.
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5.2. Conduct of Business by VCS. From the date hereof to the Effective
Date, VCS will, except as required in connection with the Merger and the other
transactions contemplated by this Agreement and except as otherwise disclosed
in VCS' Disclosure Schedule or consented to in writing by PureSpeech:
(a) Carry on its businesses in the ordinary and regular
course in substantially the same manner as heretofore conducted and
not engage in any new line of business or enter into any agreement,
transaction or activity or make any commitment except in the ordinary
and regular course of business and not otherwise prohibited under this
Section 5.2;
(b) Neither change nor amend its Certificate or
Articles of Incorporation or Bylaws;
(c) Not declare, pay or set aside for payment any
dividend or other distribution in respect of the capital stock or
other equity securities of VCS and not redeem, purchase or otherwise
acquire any shares of the capital stock or other securities of VCS, or
rights or obligations convertible into or exchangeable for any shares
of the capital stock or other securities of VCS or obligations
convertible into such, or any options, warrants or other rights to
purchase or subscribe to any of the foregoing; or
(d) Use its reasonable efforts to preserve intact the
corporate existence, goodwill and business organization of VCS, to
keep the officers and employees of VCS available to VCS and to
preserve the relationships of VCS with suppliers, customers and others
having business relations with any of them, except for such instances
which would not have a material adverse effect on the business,
operations and financial condition of VCS.
In connection with the continued operation of the business of VCS
between the date of this Agreement and the Effective Date, VCS shall confer in
good faith and on a regular and frequent basis with one or more representatives
of PureSpeech designated in writing to report operational matters of
materiality and the general status of ongoing operations. VCS acknowledges that
PureSpeech does not and will not waive any rights it may have under this
Agreement as a result of such consultations nor shall PureSpeech be responsible
for any decisions made by VCS' officers and directors with respect to matters
which are the subject of such consultation.
5.3. Notice of any Material Change. Each of PureSpeech and VCS
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 would (i) make any of its representations and
warranties in this Agreement untrue in any material respect, or (ii) otherwise
constitute a PureSpeech Material Adverse Effect or VCS Material Adverse Effect,
as the case may be.
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5.4. Inspection and Access to Information.
(a) Between the date of this Agreement and the
Effective Date, each party hereto will provide each other party and
its accountants, counsel and other authorized representatives full
access, during reasonable business hours and under reasonable
circumstances to any and all of its premises, properties, contracts,
commitments, books, records and other information (including tax
returns filed and those in preparation) and will cause their
respective officers to furnish to the other party and its authorized
representatives any and all financial, technical and operating data
and other information pertaining to its business, as each other party
shall from time to time request.
(b) 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 PureSpeech, whether prepared by VCS or
otherwise coming into VCS' possession, shall remain the exclusive
property of PureSpeech and shall be promptly delivered to PureSpeech
upon termination of this Agreement. All files, records, documents,
information, data and similar items relating to the confidential
information of VCS, whether prepared by PureSpeech or otherwise coming
into PureSpeech's possession, shall remain the exclusive property of
VCS and shall be promptly delivered to VCS upon termination of this
Agreement.
5.5. Delivery of Interim Financial Statements. On or before the
20th day of each calendar month following the date of this Agreement,
PureSpeech shall deliver to VCS unaudited financial statements as of the end of
the previous month and for the year to date.
5.6. Registration Statement.
(a) Upon the demand after the Closing of holders of at
least 500,000 of the VCS Merger Shares, VCS shall prepare and file
with the SEC a Registration Statement on Form S-3 or Form S-2 or S-1
to the extent VCS is not eligible to register shares on Form S-3 (the
"S-3 Registration Statement") registering all of the VCS Merger Shares
issued pursuant to the Merger other than those covered by the S-8
registration statement described in Section 2.4 (the "Registrable
Securities") for resale to the public. VCS will as expeditiously as
possible:
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(i) use its best efforts to cause such S-3
Registration Statement to become effective and remain
effective so that the Registrable Securities may be offered
and sold on a continuous or delayed basis in accordance with
Rule 415 under the Securities Act until the earlier of (X)
two years after the Closing Date or (Y) such time as all of
the Registrable Securities have been sold by the holders of
the Registrable Securities (the "Holders") or could have
been sold under Rule 144(K) promulgated under the Securities
Act;
(ii) prepare and file with the SEC such amendments
and post-effective amendments to the S-3 Registration
Statement, and such supplements to the prospectus forming a
part thereof (the "Prospectus"), as may be requested by the
Holders, or as may be required by the Securities Act or
rules and regulations thereunder to keep the S-3
Registration Statement effective until the date referenced
in the preceding subparagraph;
(iii) deliver to the Holders, without charge, as
many copies of each Prospectus as the Holders may reasonably
request (VCS hereby consenting to the use of each such
Prospectus by the Holders in connection with the offering
and sale of the Registrable Securities covered by such
Prospectus) and a reasonable number of copies of the
then-effective S-3 Registration Statement and any
post-effective amendments thereto and any supplements to the
Prospectus, including financial statements and schedules,
all documents incorporated therein by reference and all
exhibits (including those incorporated by reference);
(iv) register or qualify or cooperate with the
Holders and their counsel in connection with the
registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of
such jurisdictions as the Holders may reasonably designate
in writing and do anything else necessary or advisable to
enable the disposition in such jurisdictions of the
Registrable Securities covered by the S-3 Registration
Statement; provided that VCS shall not be required to
qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which
would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(v) cause all such Registrable Shares to be
listed on the NMS or such other securities exchange or
automated quotation system on which shares of VCS Common
Stock are then listed;
(vi) advise each Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance
of any stop order by
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the SEC suspending the effectiveness of such S-3
Registration Statement or the initiation or threatening of
any proceeding for such purpose and promptly use its
reasonable best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should
be issued; and
(vii) notify the Holders at any time when a
Prospectus relating to such S-3 Registration Statement is
required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus
included in such S-3 Registration Statement, as then in
effect, includes an untrue statement of a material fact or
an omission to state a material fact required to be stated
in a registration statement or prospectus or necessary to
make the statements in a registration statement or
prospectus not misleading (hereafter, a "Misstatement"), and
then promptly to correct such Misstatement.
(b) Based upon the written opinion of VCS's securities
law counsel, VCS may, by written notice to the Holders, for a period
not to exceed 30 days, suspend the S-3 Registration Statement and
require that the Holders cease sales of the Registrable Securities
thereunder, if (i) VCS is engaged in negotiations or preparations for
any transaction that VCS desires to keep confidential for valid
business reasons, and (ii) VCS determines in good faith that the
public disclosure requirements imposed on VCS as a result of the S-3
Registration Statement would require public disclosure of such
negotiations or preparations; provided, however, that VCS may not
exercise this right on more than one occasion during any six month
period.
(c) VCS agrees to indemnify, to the extent permitted by
law, the Holders of Registrable Shares, its officers and directors and
each person who controls such Holders (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and
expenses (including attorneys' fees) caused by any untrue or alleged
untrue statement of material fact contained in any S-3 Registration
Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to VCS
by such Holders expressly for use therein or by such Holders's failure
to deliver a copy of the S-3 Registration Statement or prospectus or
any amendments or supplements thereto after VCS has furnished such
Holders with a sufficient number of copies of the same. Any person
entitled to indemnification herein will (i) be required to give prompt
written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such
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claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party.
If such defense is assumed, the indemnifying party will not be subject
to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not
to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such
indemnified parties with respect to such claim. The indemnification
provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the
indemnified party or any officer, director or controlling person of
such indemnified party and will survive the transfer of securities.
VCS also agrees to make such provisions as are reasonably requested by
any indemnified party for contribution to such party in the event
VCS's indemnification is unavailable for any reason.
(d) VCS shall bear all expenses of the S-3 Registration
Statement, which shall include, without limitation, all registration
and filing fees and the reasonable fees and disbursements of counsel
and accountants for VCS; but which shall not include any selling
commissions or underwriting discounts or stock transfer taxes for the
Holders or their brokers or underwriters or of any counsel or
accountants retained by the Holders.
5.7. PureSpeech Stockholders' Meeting. PureSpeech shall obtain
the approval of its stockholders of the transactions contemplated hereby either
by obtaining written consent of its stockholders or by calling a meeting to be
held as soon as practicable after the date hereof for the purpose of voting
upon matters relating to this Agreement. PureSpeech will use its reasonable
efforts to hold any such stockholders' meeting as promptly as practicable and
will, through its Board of Directors, recommend to its stockholders approval of
the Merger and this Agreement at any such stockholders' meeting.
5.8. Listing Application. VCS will file a listing application
with the NMS to approve for listing, subject to official notice of issuance,
the shares of VCS Common Stock to be issued in the Merger. VCS shall use its
reasonable efforts to cause the shares of VCS Common Stock to be issued in the
Merger to be approved for listing on the NMS, subject to official notice of
issuance, prior to the Effective Date.
5.9. Affiliates. No later than two business days prior to the
Closing, PureSpeech will deliver to VCS a letter identifying all persons who
are, at the time the Merger is submitted to a vote to the stockholders of
PureSpeech, "affiliates" of PureSpeech for purposes of Rule 145 under the
Securities Act. PureSpeech shall use its reasonable efforts to cause each
person who is identified as an "affiliate" in
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such letter to deliver to VCS on or prior to the Effective Date a written
statement, in form satisfactory to VCS and PureSpeech, that such person will
not offer to sell, transfer or otherwise dispose of any of the shares of VCS
Common Stock issued to such person pursuant to the Merger, except in accordance
with the applicable provisions of the Securities Act and the rules and
regulations thereunder.
5.10. Reasonable Efforts; Further Assurances; Corporation. 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 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 and 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 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 PureSpeech or VCS, 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 any of the conditions specified in
Article 6 and (ii) any failure of PureSpeech or VCS, as the case may
be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder.
(c) PureSpeech has obtained (and will promptly deliver
copies to VCS) agreements from Xxxxxxxx Xxxxxxx and Highland Capital
Partners II Limited Partnership, (i) to execute any consent of
stockholders of PureSpeech to approve the transactions hereby, (ii) if
stockholders' meeting is not held or such consent is not otherwise
executed by them, not to perfect appraisal rights with respect to the
Merger (to the extent applicable) and to vote all shares of PureSpeech
Capital Stock beneficially owned by such person in favor of the
approval of this Agreement and the Merger (which
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agreements shall contain a proxy in favor of VCS with respect to the
shares of PureSpeech Capital Stock beneficially owned by such
persons), and (iii) to acknowledge the termination, effective as of
the Effective Date, of all covenants relating to the ownership of the
PureSpeech Series A Preferred.
5.11. 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 VCS or PureSpeech 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 stock exchange rule and
then only after making a reasonable attempt to comply with the provisions of
this Section).
5.12. No Solicitations. From the date hereof until the Effective
Date or until this Agreement is terminated or abandoned as provided in this
Agreement, PureSpeech shall not directly or indirectly (i) solicit or initiate
discussion with or (ii) enter into negotiations or agreements with, or furnish
any information that is not publicly available to, any corporation,
partnership, person or other entity or group (other than VCS) 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 PureSpeech, and PureSpeech 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. PureSpeech will notify VCS promptly in writing if PureSpeech 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, PureSpeech with respect to an Acquisition Proposal, and PureSpeech shall
promptly deliver to VCS any written inquiries or proposals received by
PureSpeech relating to an Acquisition Proposal.
5.13 Amendment of PureSpeech Disclosure Schedule. From time to
time between the date hereof and the Closing Date, PureSpeech may revise the
PureSpeech Disclosure Schedule. VCS shall have 24 hours upon its receipt of
such revised schedule to accept or reject such revisions. The parties will use
their best efforts to resolve any conflicts.
ARTICLE 6.
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURESPEECH
Except as may be waived by PureSpeech, the obligations of PureSpeech
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:
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6.1. Compliance. VCS 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
VCS on or before the Closing Date.
6.2. Representations and Warranties. All of the representations
and warranties made by VCS in this Agreement and in all certificates and other
documents delivered by VCS to PureSpeech pursuant hereto or in connection with
the transactions contemplated hereby, shall have been true and correct in all
material respects as of the date hereof, and shall be true and correct in all
material respects at 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. NMS Listing. The VCS Common Stock issuable pursuant to the
Merger or upon exercise of the Options shall have been authorized for listing
on the NMS.
6.4. Certificates. PureSpeech shall have received a certificate
or certificates, executed on behalf of VCS by an executive officer of VCS, to
the effect that the conditions contained in Sections 6.1 and 6.2 hereof have
been satisfied.
6.5. PureSpeech Stockholder Approval. This Agreement shall have
been approved and adopted by the affirmative vote of the holders of a majority
of the outstanding shares of each of PureSpeech Series A Preferred and
PureSpeech Common Stock, voting separately as a class.
6.6. Consents; Litigation. Other than the filing of Articles of
Merger as described in Article 1, all authorizations, consents, orders or
approvals of, or declarations or filings with, any governmental entity, and all
required third-party consents, the failure to obtain which would have a
material adverse effect on VCS, shall have been filed, occurred or been
obtained. VCS shall have received all state securities or Blue Sky permits and
other authorizations necessary to issue VCS Common Stock pursuant to the Merger
and the other terms of this Agreement. In addition, no action, suit or
proceeding shall have been instituted before any court or other governmental
entity to restrain, modify, enjoin or prohibit the carrying out of the
transactions contemplated hereby.
6.8 Payment of Management Bonuses. VCS hereby agrees to deliver
checks at the Closing in order to pay the Management Bonuses totaling an
aggregate of $1,370,000.
6.9 Discharge of Imperial Bank Indebtedness. VCS hereby agrees
to discharge the indebtedness to Imperial Bank in cash, at the time of Closing
or at such other time as VCS and Imperial Bank might agree.
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ARTICLE 7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF VCS
Except as may be waived by VCS, the obligations of VCS 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. PureSpeech 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 PureSpeech in this Agreement and in all certificates and
other documents delivered by PureSpeech pursuant hereto or in connection with
the transactions contemplated hereby, shall have been true and correct in all
material respects as of the date hereof after giving effect to the delivery of
PureSpeech's Disclosure Schedule, and shall be true and correct in all material
respects at 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. Certificates. VCS shall have received a certificate or
certificates, executed on behalf of PureSpeech by an executive officer of
PureSpeech, to the effect that the conditions in Sections 7.1 and 7.2 hereof
have been satisfied.
7.4. Dissenters' Rights. To the extent appraisal rights are
available to PureSpeech's stockholders in connection with the Merger, no more
than 10% of the outstanding shares of PureSpeech Capital Stock shall qualify as
Dissenting Shares.
7.5. PureSpeech Stockholder Approval. This Agreement shall have
been approved and adopted by the affirmative vote of the holders of a majority
of the outstanding shares of each of PureSpeech Series A Preferred and
PureSpeech Common Stock, voting separately as a class.
7.6. Consents; Litigation. Other than the filing of Articles of
Merger as described in Article 1, all authorizations, consents, orders or
approvals of, or declarations or filings with, any governmental entity, and all
required third-party consents, the failure to obtain which would have a
material adverse effect on VCS, shall have been filed, occurred or been
obtained. VCS shall have received all state securities or Blue Sky permits and
other authorizations necessary to issue VCS Common Stock pursuant to the Merger
and the other terms of this Agreement. In addition, no action, suit or
proceeding shall have been instituted before any court or other governmental
entity to restrain, modify, enjoin or prohibit the carrying out of the
transactions contemplated hereby.
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7.7. Corporate Law Opinion. VCS shall have received the opinion
of Xxxxxxxx, Xxxxxxx & Xxxxxxx, dated the Closing Date, with respect to the
enforceability of this Agreement and the validity of the shares of capital
stock of PureSpeech.
7.8 Subscription Agreement. Pursuant to a Subscription Agreement
in substantially the form of Exhibit B hereto, each of the holders of
PureSpeech Common Stock Equivalents shall have acknowledged receipt of the SEC
Reports described in Section 4.7 from VCS and the opportunity to ask questions
of and receive answers from representatives of the management of VCS concerning
an investment in VCS Common Stock, and shall have acknowledged and agreed that
the shares of VCS Common Stock to be received by virtue of the Merger are being
acquired for investment purposes and not with a view to the distribution or
resale thereof in violation of the Securities Act and cannot be resold unless
they are registered under the Securities Act and applicable state securities
laws or an exemption from registration is available therefor.
7.9 Bridge Notes and Bridge Warrants. PureSpeech and the holders
of the January 1998 Bridge Note will amend and restate such notes, in form
satisfactory to VCS, to provide that at the Effective Date such notes will be
converted into shares of VCS Common Stock in accordance with the provisions of
Section 2.1 hereof. In addition, PureSpeech and the holders of 80% of the
outstanding principal amounts of the May 1997 and March 1998 Bridge Notes will
amend and restate such notes satisfactory to VCS, to provide that at the Merger
such notes will only be convertible into shares of VCS Common Stock in
accordance with the provisions of Section 2.4(e). The holders of PureSpeech
Bridge Warrants will have executed an acknowledgment, in form satisfactory to
VCS, that such securities, on and after the Closing Date, shall be exercisable
for shares of VCS Common Stock in accordance with the provisions of Section
2.4.
7.10 Covenants of Imperial Bank. PureSpeech and Imperial Bank
will have executed an agreement, in form satisfactory to VCS, to the extent
that any and all covenants or agreements of PureSpeech to Imperial Bank will
terminate as of the extinguishment of such indebtedness and that Imperial Bank
consents to the transactions contemplated hereby.
ARTICLE 8.
INDEMNIFICATION
8.1. Indemnification of PureSpeech Managers. In the event of any
threatened or actual claim, action, suit, proceeding or investigation, whether
civil, criminal or administrative, including, without limitation, any such
claim, action, suit,
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proceeding or investigation in which any of the present or former officers or
directors (the "Managers") of PureSpeech 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 PureSpeech, or is or was serving at the request
of PureSpeech as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether before or after
the Effective Date, PureSpeech shall indemnify and hold harmless, and from and
after the Effective Date, VCS 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 PureSpeech (prior to the Effective Date) or
VCS (after the Effective Date) have not promptly assumed the defense of such
matter, the Managers may retain counsel satisfactory to them, and PureSpeech,
and VCS after the Effective Date, shall pay all fees and expenses of such
counsel for the Managers promptly, as statements therefor are received, and
(ii) PureSpeech, and VCS after the Effective Date, will use their respective
best efforts to assist in the vigorous defense of any such matter; provided
that neither PureSpeech nor VCS shall be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld); and provided further that VCS shall have no obligation under the
foregoing provisions of this Article 8 to any Manager when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, (x) that indemnification of such Manager
in the manner contemplated hereby is prohibited by applicable law, and (y) that
PureSpeech 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 finality of any such determination that
VCS is not liable for any such indemnification claims, the Manager will
reimburse VCS for any fees, expenses and costs incurred by VCS in connection
with the defense of such claims. Any Manager wishing to claim indemnification
under this Article 8, upon learning of any such claim, action, suit, proceeding
or investigation, shall notify PureSpeech and, after the Effective Date, VCS,
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). VCS agrees that all rights to
indemnification existing in favor of the Managers as provided in PureSpeech's
Articles of Organization or Bylaws as in effect as of the date hereof, and in
any agreement between PureSpeech and any Manager with respect to matters
occurring prior to the Effective Date shall survive the Merger. VCS further
covenants not to amend or repeal any provisions of the Articles of Organization
or Bylaws of PureSpeech in any manner which would adversely affect the
indemnification or exculpatory provisions contained therein. The provisions of
this Article 8 are intended to be for the benefit of, and shall be enforceable
by, each
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indemnified party and his or her heirs and representatives and shall survive
the Closing for a period of six years from the Effective Date.
8.2. Indemnification of VCS. PureSpeech shall indemnify and hold
VCS harmless from, against, for and in respect of any and all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action and encumbrances suffered, sustained, incurred or required to be paid by
VCS because of the breach of any written representation, warranty, agreement or
covenant of PureSpeech contained in this Agreement, and all reasonable costs
and expenses (including, without limitation, attorneys' fees, interest and
penalties) incurred by VCS in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters indemnified
against in this Section 8.2. VCS's sole recourse with respect to the
satisfaction of this indemnification obligation of PureSpeech shall be limited
to claims which may be made by VCS under the Escrow Agreement, and no
stockholder of PureSpeech shall have any personal liability in connection with
such indemnification obligation. VCS shall have the right to make a claim
against PureSpeech under the Escrow Agreement for breaches of representations
or warranties or other matters set forth in this Section 8.2 for a period of
one year only from the date of Closing. The representations and warranties
shall survive for this purpose for one year from the date of Closing. VCS may
not make any claims under the Escrow Agreement unless and until the cumulative
amount of such claims exceeds a deductible of $25,000.
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 PureSpeech and VCS;
(b) by VCS if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of PureSpeech set forth herein or a failure to perform in
any material respect a covenant on the part of PureSpeech with respect
to its representations, warranties and covenants set forth in this
Agreement;
(c) by PureSpeech if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of VCS set forth herein or a failure to perform in any
material respect a covenant on the part of VCS with respect to its
representations, warranties and covenants set forth in this Agreement;
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(d) by either VCS or PureSpeech if the transactions
contemplated by this Agreement have not been consummated by May 31,
1998, unless such failure of consummation is due to the failure of the
terminating party to perform or observe the covenants, agreements, and
conditions hereof to be performed or observed by it at or before the
Closing Date;
(e) by either VCS or PureSpeech if the Determination
Price is $3.50 or less; or
(f) by either PureSpeech or VCS if the transactions
contemplated hereby violate any nonappealable final order, decree or
judgment of any court or governmental body or agency having competent
jurisdiction.
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;
provided, however, that if the transactions contemplated by this Agreement are
consummated, PureSpeech shall pay its expenses incurred in connection with this
Agreement and the transactions contemplated hereby.
9.3. Entire Agreement. This Agreement and the schedules 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 and Covenants.
Except as provided in Section 8.2, 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, and the
covenants and agreements of the parties (other than those contained in Section
5.6 and Article 8) 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 to the
address or facsimile number (as applicable) set forth below and shall be either
(i) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, (ii)
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transmitted by hand delivery, (iii) sent by nationally recognized overnight
courier or (iv) sent by facsimile transmission (with confirming copy by regular
mail):
(i) If to VCS or Acquisition:
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: President
Facsimile: 000-000-0000
(ii) If to PureSpeech:
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
Facsimile: 000- 000-0000
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 (except the
choice of law rules thereof).
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. Section 5.6 is intended for
the benefit of each "Holder" (as defined therein) and may be enforced by such
persons. Section 8.1 is intended for the benefit of each "Manager" (as defined
therein) and may be enforced by such persons. 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, 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
PURESPEECH, INC.
By: /s/ Xxxxxxx Xxxx
-------------------------
Xxxxxxx Xxxx
President
VOICE CONTROL SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------
Xxxxx X. Xxxxxx
President
PURE ACQUISITION INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------
Xxxxx X. Xxxxxx
President
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EXHIBIT A
POST-CLOSING ESCROW AGREEMENT
THIS POST-CLOSING ESCROW AGREEMENT, dated as of ____________, 1998
("Agreement"), is by and among Voice Control Systems, Inc. ("VCS"), [Xxxxxxxx
Xxxxxxx and Highland Capital Partners], as attorneys-in-fact ("Shareholder
Representatives"), and Xxxxxxxx, Xxxxxxx & Xxxxxxx ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, VCS and PureSpeech, Inc. ("PureSpeech") are parties to that
certain Agreement and Plan of Merger, dated as of March _____, 1998 (the
"Merger Agreement") (capitalized terms not otherwise defined herein shall have
the meanings set forth in the Merger Agreement); and
WHEREAS, PureSpeech agreed in the Merger Agreement that its
indemnification obligations shall be secured in the manner set forth in this
Agreement; and
WHEREAS, pursuant to the Merger agreement, PureSpeech has instructed
that VCS deposit _________ VCS Merger Shares (the "Escrow Shares") on the
Closing Date in an escrow account with the Escrow Agent; and
WHEREAS, the Shareholder Representatives are acting on behalf of those
persons constituting the stockholders of PureSpeech immediately prior to the
Closing Date as to the matters set forth herein;
In consideration of the mutual covenants and agreements contained
herein and certain other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree as follows:
1. Appointment of Escrow Agent and Deposit of Escrow Shares. VCS
and the Shareholder Representatives hereby appoint and designate the Escrow
Agent as the Escrow Agent hereunder, and the Escrow Agent hereby accepts such
appointment and agrees to serve hereunder for the purposes and on the terms set
forth herein. Concurrently with the Closing, the parties shall deposit with
the Escrow Agent the Escrow Shares. The Escrow Agent shall receive, hold and
deliver the Escrow Shares, as provided for herein. It is understood and agreed
that Xxxxxxxx, Xxxxxxx & Xxxxxxx has represented PureSpeech in the past and may
continue to represent the Shareholder Representative and former PureSpeech
stockholders, option holders, and warrant holders in connection with any claims
made against the Escrow Fund.
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2. Disbursement of the Escrow Shares.
(a) Unless and to the extent that subparagraph (b) below shall
apply, the Escrow Agent shall hold the Escrow Shares (which term includes the
shares or any proceeds from the sale of escrow shares) until the first
anniversary of the Closing Date and shall thereafter deliver all Escrow Shares
held by the Escrow Agent on such first anniversary date to the Shareholder
Representatives for further distribution to the former PureSpeech shareholders.
(b) If, at any time prior to the first anniversary of the Closing
Date (subject to the last sentence of this subparagraph), VCS has given the
Escrow Agent a notice (the "VCS Notice") that it is entitled to receive Escrow
Shares as a result of the indemnification obligations of PureSpeech arising
under the Merger Agreement or as a result of subparagraph (b) above, VCS shall
give a copy of the VCS Notice to the Shareholder Representatives. The
Shareholder Representatives may direct the Escrow Agent to sell any or all of
the Escrow Shares in their sole discretion, the proceeds of which shall remain
subject to escrow as though Escrow Shares. If the Escrow Agent does not
receive a written objection from the Shareholder Representatives to the VCS
Notice prior to the 30th day following the date the VCS Notice is deemed
delivered to the Shareholder Representatives, the Escrow Agent shall at its
option either disburse to VCS the number of Escrow Shares described in the VCS
Notice and deliver the proceeds to VCS. If the Escrow Agent timely receives a
copy of a written objection from the Shareholder Representatives to the VCS
Notice, then the claim set forth in the VCS Notice shall remain outstanding
until (x) the Shareholders' Representative and VCS jointly instruct the Escrow
Agent, in writing, as to the disposition of all or any portion of the Escrow
Shares or (y) there is a "Final Determination" with respect to the dispute and
a copy of the court order or settlement agreement relating thereto has been
delivered to the Escrow Agent. For purposes of this Agreement, the term "Final
Determination" shall mean the final decision of any court of competent
jurisdiction from which no appeal may be taken because of lapse of time or
otherwise or the execution of an agreement signed by VCS and the Shareholders'
Representative resolving the claim and/or the amount of claimed damages. It is
further agreed that the Shareholder Representatives may use up to 5% of the
escrow fund to defend and settle claims; and at the expiration of the escrow
period, to be paid from the escrow fund, any and all expenses or other amounts
paid by them, or owed in connection with the Escrow or the Merger on behalf of
the former PureSpeech Shareholders, the balance of the escrow fund then to be
distributed in accordance with Section 2(a).
3. Escrow Agent Duties. Without in any way limiting any other
provision of this Agreement, it is expressly understood and agreed that the
Escrow Agent shall be under no duty or obligation to give any notice, or to do
or to omit the doing of any action with respect to the Escrow Shares. The
Escrow Agent shall not be liable for any error in judgment or any act or steps
taken or permitted to be taken or
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for any mistake of law or fact, or for anything it may do or refrain from doing
in connection herewith, except for its own willful misconduct or gross
negligence. The Escrow Agent shall not be required in any way to determine the
validity or sufficiency, whether in form or substance, of any instrument,
document, certificate, statement or notice referred to in this Agreement or
contemplated hereby, or the identity or authority of the persons executing the
same, and it shall be sufficient if any writing purporting to be such
instrument, document, certificate, statement or notice is delivered to the
Escrow Agent and purports to be correct in form and signed or otherwise
executed by the party or parties required to sign or execute the same under
this Agreement.
4. Right of Interpleader. Should any controversy arise between
or among VCS and the Shareholder Representatives, or any other person, firm or
entity, with respect to this Agreement or the Escrow Shares, or the Escrow
Agent should be in doubt as to what action to take, the Escrow Agent shall have
the right to (i) withhold delivery of the Escrow Shares until the controversy
is resolved, the conflicting demands are withdrawn or the doubt is resolved, or
(ii) institute a xxxx of interpleader in a court of applicable jurisdiction to
determine the rights of the parties hereto. Should a xxxx of interpleader be
instituted, or should the Escrow Agent be threatened with litigation or become
involved in litigation in any manner whatsoever on account of this Agreement or
the Escrow Shares, then as between themselves and the Escrow Agent, VCS and the
Shareholder Representatives, jointly and severally, hereby bind and obligate
themselves, their successors, heirs, executors and assigns to pay the Escrow
Agent its reasonable attorney's fees and any and all other disbursements,
expenses, losses, costs and damages of the Escrow Agent in connection with or
resulting from such threatened or actual litigation.
5. Indemnity. VCS and Shareholder Representatives, jointly and
severally, agree to indemnify the Escrow Agent against and hold the Escrow
Agent harmless from any and all losses, costs (other than general servicing of
the account), damages, expenses, claims and attorney's fees (collectively, the
"Agent Damages") suffered or incurred by the Escrow Agent as a result of, in
connection with or arising from or out of the acts or omissions of the Escrow
Agent in performance of or pursuant to this Agreement, except such acts or
omissions as may result from the Escrow Agent's willful misconduct or gross
negligence. The Escrow Agent may sell such number of the Escrow Shares to
discharge the amount of any Agent Damages. Except for a claim for
indemnification pursuant to this Section 5, if applicable, the Escrow Agent
shall not deduct any charges from the Escrow Shares for serving as Escrow
Agent.
6. Resignation. The Escrow Agent may resign upon 10 days' prior
written notice to VCS and the Shareholder Representatives, and, upon joint
instructions from VCS and the Shareholder Representatives, shall deliver the
Escrow Shares to any designated substitute Escrow Agent selected by VCS and the
Shareholder Representatives. If VCS and the Shareholder Representatives fail
to
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designate a substitute Escrow Agent within 10 days, the Escrow Agent may, at
its sole discretion and its sole option, institute a xxxx of interpleader as
contemplated by Section 4 hereof.
7. Termination. Upon delivery of all of the Escrow Shares as
provided in Section 2 or upon the institution of a xxxx of interpleader as
provided in Section 4 hereof, this Agreement shall terminate except for the
provisions of Section 5.
8. Authority of Shareholder Representatives. All actions of the
Shareholder Representatives hereunder shall require the consent in writing of
both Shareholder Representatives; provided, however, that if either of the
Shareholder Representatives resigns in writing or is legally incapable of
acting hereunder, the remaining Shareholder Representative may act alone on
behalf of both Shareholder Representatives.
9. Notices. Any notice or communication must be in writing and
given in the manner contemplated by the Merger Agreement. For the purpose of
notice, the address of VCS shall be as set forth in the Merger Agreement, and
the addresses of the Shareholder Representatives and the Escrow Agent shall be
as set forth opposite their respective names on the signature page hereto. Any
party may change its address for notice by written notice given to the other
parties.
10. Choice of Laws; Cumulative Rights. This Agreement shall be
construed under the laws of the State of Delaware. All of the Escrow Agent's
rights hereunder are cumulative of any other rights it may have by law or
otherwise.
11. 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.
12. Entire Agreement. This Agreement and any other documents
executed or delivered pursuant to this Agreement, contain the complete
agreement among the parties with respect to the transactions contemplated
hereby and supersede all prior agreements and understandings, whether oral or
written, among the parties with respect to such transactions.
13. Binding Effect. 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 heirs, personal representatives,
successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
VOICE CONTROL SYSTEMS, INC.
By:
-------------------------------
Xxxxx X. Xxxxxx
President
-------------------------------
[Xxxxxxxx Xxxxxxx]
Address:
--------------------------
--------------------------
[Highland Capital Partners]
By:
-------------------------------
Address:
--------------------------
--------------------------
[ESCROW AGENT]
By:
-------------------------------
Address:
--------------------------
--------------------------
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