EXHIBIT 10.3
AGREEMENT
AND
PLAN OF CORPORATE REORGANIZATION AND SEPARATION
This Agreement and Plan of Corporate Reorganization and Separation
is made this 18th day of December, 1998, by and among DESIGN ANALYSIS
ASSOCIATES, INC., a California corporation (hereinafter referred to as the
"Corporation"), TERAGLOBAL COMMUNICATIONS CORP., a Wyoming Corporation
(hereinafter referred to as "TeraGlobal"), Xxxxxxx X. Xxxxxxxx, an
individual, and Xxxxxxx X. Xxxxxxxx and Xxxxx Xxxxxxxx, as Trustees of the
Xxxxxxx X. Xxxxxxxx Family Trust dated October 12, 1983, (collectively
Xxxxxxx X. Xxxxxxxx and the Trustees are hereinafter referred to as the
"Shareholder").
RECITALS
A. On or about September 30, 1998, Shareholder was the sole
shareholder of Design Analysis Associates, Inc. a Utah Corporation (the "Utah
Corporation"). For more than five years prior to September 30, 1998, the
Utah Corporation engaged in two lines of business: (1) design, engineering
and manufacturing of high technology computer electronics (the "High Tech
Business") and (2) design, engineering and manufacturing of water monitoring
products (the "Water Monitoring Business").
B. TeraGlobal is the sole shareholder of TGC Acquisition, Inc. a
California corporation ("TGC"). On or about September 30, 1998, TeraGlobal,
TGC and the Utah Corporation, signed an Agreement of Merger whereby the Utah
Corporation was merged with TGC in a transaction that qualified as a tax-free
reorganization under Section 368(c)(2)(D) of the Internal Revenue Code of
1986, as amended ("Code"). None of the parties to the reorganization
reorganized gain or loss, in whole or in part. TGC was the surviving
corporation and on or about October 30, 1998, TGC changed its name to Design
Analysis Associates, Inc. (the "Corporation").
C. Since October 30, 1998 it has become apparent that a
separation of the Water Monitoring Business from the High Tech Business would
enhance the operation of each business. Separation would allow the
Shareholder to devote its undivided attention to the Water Monitoring
Business and would allow TeraGlobal to devote its undivided attention the to
High Tech Business.
D. The parties desire to separate the Water Monitoring Business
and the High Tech Business through a tax free spin-off in accordance with
Code Sections 368(a)(1)(D), 355 and 361.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. PLAN OF REORGANIZATION. The parties hereby adopt the
following plan of reorganization:
1. On or before December 18, 1998, the Corporation shall change its
name back to "TGC Acquisition, Inc." by filing a Certificate of
Amendment of Articles of Incorporation substantially in the form
of the Certificate attached hereto as Exhibit A.
2. On or before December 18, 1998, the Corporation shall change its
name in Utah to "TGC Acquisition, Inc." by filing an Application
to Amend the Certificate of Authority or Registration
substantially in the form of the Application attached hereto as
Exhibit B.
3. On or before December 18, 1998, the Corporation shall cause the
formation of a new wholly owned Utah subsidiary corporation named
"Design Analysis Associates, Inc." ("DAA") by filing Articles of
Incorporation substantially in the form of the Articles attached
hereto as Exhibit C.
4. On or before December 18, 1998, the Corporation shall transfer to
DAA all of the assets associated with the Water Monitoring
Business identified in the transfer document Attached hereto as
Exhibit D.
5. On or before December 18, 1998, the Corporation shall distribute
all of the outstanding shares in DAA to Shareholder (by properly
endorsing the DAA stock certificate attached hereto as Exhibit E)
in exchange for EIGHT HUNDRED AND FIFTY THOUSAND (850,000) Shares
of TeraGlobal. This will leave the Shareholder with TWO HUNDRED
AND FIFTY THOUSAND (250,000) shares in TeraGlobal. On or before
December 18, 1998, TeraGlobal shall give binding instructions to
its transfer agent to cancel Shareholder's stock certificate in
TeraGlobal stock for ONE MILLION ONE HUNDRED
2
THOUSAND (1,100,000) shares and issue a new certificate to
Shareholder for the TWO HUNDRED AND FIFTY THOUSAND (250,000)
shares in TeraGlobal common stock. The Corporation shall
ensure that the new certificate is delivered to Shareholder
on or before Monday, January 4, 1999.
6. On or before December 18, 1998, Xxxx Xxxxxxxx shall resign as an
officer of the Corporation by signing the resignation attached
hereto as Exhibit F.
2. TERMINATION OF NON-COMPETITION AGREEMENT DATED SEPTEMBER 30,
1998. The parties agree that the Non-competition Agreement dated September
30, 1998, a copy of which is attached. hereto as Exhibit G is hereby
terminated.
3. HOLDOVER PERIOD. The four engineers identified in Exhibit D
who will continue to work for the Corporation in the High Tech Business shall
be allowed to continue to conduct business operations at the DAA offices in
Xxxxx until January 4, 1999. The Corporation shall reimburse DAA for any
reasonable overhead expenses DAA incurs as a result of allowing the four
engineers to stay at its facility until January 4, 1999. In addition, the
Corporation and TeraGlobal shall be allowed to keep their property identified
in Exhibit D at the DAA offices in Logan, Utah until Monday, January 4, 1999.
If the Corporation and TeraGlobal have not removed their property by January
4, 1999, DAA in its sole discretion may cause the property to be moved at
TeraGlobal's expense to the Corporation's facility in California or one of
the homes of the four engineers in Utah.
4. RELEASE OF THE CORPORATION AND TERAGLOBAL. The Corporation
and TeraGlobal for themselves, their subsidiaries, affiliates, directors,
officers, employees, agents, successors, assigns, and anyone claiming by,
through or under them, do hereby release, acquit and forever discharge
Xxxxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxx, the Xxxxxxx X. Xxxxxxxx Family Trust and
any of their affiliates, directors, officers, employees, agents, successors,
or assigns (collectively "Fletchers") of and from any and all claims,
demands, actions, causes of action, suits, debts, sums of money, accounts,
reckonings, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, claims and all and any
of every nature of actions or causes of action and demands, in law or equity,
which the Corporation and TeraGlobal had, now have or may subsequently accrue
against Fletchers which relate directly or indirectly to
3
any relationship the Corporation, TeraGlobal and Fletchers have had arising
prior to the date hereof. The Corporation and TeraGlobal acknowledge that
they have been fully advised by their attorney of the contents of section
1542 of the Civil Code of the State of California, and that section and the
benefits thereof are hereby expressly waived. Section 1542 reads as follows:
"SECTION 1542. (GENERAL RELEASE - CLAIMS EXTINGUISHED.) A GENERAL RELEASE
DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." THE CORPORATION AND
TERAGLOBAL AGREE TO INDEMNIFY SHAREHOLDER AGAINST ANY ACTION OR CLAIM THAT
MAY BE ASSERTED AGAINST SHAREHOLDER BY A SHAREHOLDER, VENDOR OR INVESTOR OF
THE CORPORATION OR TERAGLOBAL CHALLENGING THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREIN.
5. RELEASE OF SHAREHOLDER. Xxxxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxx,
the Xxxxxxx X. Xxxxxxxx Family Trust and any of their affiliates, directors,
officers, employees, agents, successors, assigns, and any one claiming by,
through or under them, (collectively "Fletchers") do hereby release, acquit
and forever discharge Corporation and TeraGlobal for themselves, their
subsidiaries, affiliates, directors, officers, employees, agents, successors,
assigns of and from any and all claims, demands, actions, causes of action,
suits, debts, sums of money, accounts, reckonings, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, claims and all and any of every nature of actions or
causes of action and demands, in law or equity, which the Fletchers had, now
have or may subsequently accrue against the Corporation and TeraGlobal which
relate directly or indirectly to any relationship the Corporation, TeraGlobal
and Fletchers have had arising prior to the date hereof. Fletchers
acknowledge that they have been fully advised by their attorney of the
contents of section 1542 of the Civil Code of the State of California, and
that section and the benefits thereof are hereby expressly waived. Section
1542 reads as follows: "SECTION 1542. (GENERAL RELEASE - CLAIMS
EXTINGUISHED.) A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR."
6. REPRESENTATIONS OF THE CORPORATION AND TERAGLOBAL. The
Corporation and TeraGlobal have the legal power to enter into and perform
this Agreement and have taken all necessary legal action to authorize and
approve the execution, delivery, and performance of this Agreement and all
transactions contemplated hereby. The execution and delivery of this
4
Agreement, and the performance and satisfaction of the covenants, terms,
conditions, agreement, and warranties contained herein, do not and will not
violate or conflict with any agreement, instrument, license, permit,
authorization, court order, or decree to which the Corporation or TeraGlobal
is a party. The Corporation and TeraGlobal further represent that they have
taken no action to encumber any of the property transferred to DAA in Exhibit
D.
7. REPRESENTATIONS OF SHAREHOLDER. Shareholder has the legal
power to enter into and perform this Agreement and has taken all necessary
legal action to authorize and approve the execution, delivery, and
performance of this Agreement and all transactions contemplated hereby. The
execution and delivery of this Agreement, and the performance and
satisfaction of the covenants, terms, conditions, agreement, and warranties
contained herein, do not and will not violate or conflict with any agreement,
instrument, license, permit, authorization, court order, or decree to which
the Shareholder is a party. The 850,000 shares of TeraGlobal stock being
redeemed are free and clear of all liens and encumbrances.
8. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9. NONDISCLOSURE. The parties agree to maintain the
confidentiality of this transaction and not to disclose its terms except in
response to court order or to the parties' accountants, lawyers and other
singular third parties on a strict need-to-know basis.
10. CONFIDENTIAL. The Corporation and TeraGlobal, on the one
hand, have had access to Confidential Information relating to the Water
Monitoring Business. The Shareholder and DAA, on the other hand, have had
access to Confidential Information relating to the High Tech Business. Each
party desires to maintain ownership of the Confidential Information relating
to their business and accordingly agrees to maintain the confidentiality of,
and not to make use of or disclose to any third party Confidential
Information belonging to the other. Each party agrees that it will not copy,
photograph, photocopy, alter, modify, disassemble, reverse engineer,
decompile, or in any manner reproduce any materials containing or
constituting Confidential Information without the express prior written
consent of the other, and will return all such materials, together with any
copies thereof, promptly upon the request of the other party. Each party
shall promptly notify the other of any items of Confidential Information
prematurely disclosed. Disclosure of Confidential Information is not
5
precluded if such disclosure is in response to a valid order of a court or
other governmental body of the United States or any political subdivision
thereof; provided that the receiving party will first give notice to the
disclosing party and make a reasonable effort to obtain a protective order
requiring that the Confidential Information be disclosed only for limited
purposes for which the other was issued.
For purposes of this Agreement, "Confidential Information" means
all information and material which is proprietary to the Corporation,
TeraGlobal, the Shareholder or DAA, whether or not marked as "confidential"
or "proprietary" and which relates to such entity's past, present or future
research, development or business activities. Confidential Information
includes, without limitation, all of the following: designs, drawings,
specifications, techniques, models, data, documentation, diagrams, flow
charts, research, development, processes, procedures, "know-how," new product
or new technology information, product prototypes, product copies,
manufacturing, development or marketing techniques and materials, development
or marketing timetables, strategies and development plans, including trade
names, trademarks, customers, supplier or personal names and other
information related to customers, suppliers or personnel, pricing policies
and financial information, and other information of a similar nature, whether
or not reduced to writing or other tangible form, and any other trade secrets
or non-public business information. Confidential Information does not
include any information which (a) was in the lawful and unrestricted
possession of either party prior to its disclosure by the other, (b) is or
becomes generally available to the public, or (c) has been received lawfully
and in good faith from a third party who did not derive it from a party.
11. EXPENSES. The parties shall bear their own legal, accounting,
and other related expenses in connection with this Agreement, provided that
if any party is required to take any action to enforce its rights under this
Agreement as a result of a breach of another party, whether or not a suit or
other legal action is initiated, the breaching party shall reimburse and pay
the non-breaching party promptly upon demand all fees and costs incurred by
the non-breaching party in connection with such action, including, without
limitation, reasonable attorneys' fees and court costs.
6
12. FURTHER ASSURANCES. After December 18, 1998, the parties, at
their own expense, shall do, execute, acknowledge, and deliver all further
acts, deeds, conveyances, transfers, documents, and assurances necessary or
proper to fully effectuate the transactions contemplated in this Agreement.
Shareholder has delivered or otherwise made available all Corporation
financial records in it possession and agrees to provide reasonable access to
all such records to the Corporation and its agents for the purpose of
permitting them to prepare accurate financial statements and tax returns, and
to respond to all reasonable requests of the Corporation after December 18,
1998 to provide assistance to the Corporation to explain any such records.
13. SOLE AGREEMENT. This Agreement is intended as the sole
interpretation of all prior agreements, understandings, and discussions
between the parties and constitutes the entire agreement between the parties
and replaces all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
14. GOVERNING LAW AND VENUE. This Agreement and the transactions
described herein shall be construed in accordance with, and governed by, the
laws of the State of Utah. Any legal proceeding arising out of this
Agreement shall be brought only in a state or federal court in the State of
Utah, and all parties hereto agree that venue shall be therein and agree to
submit themselves to the personal jurisdiction of such court.
15. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective in such
jurisdiction only to the extent of such prohibition or unenforceability
without affecting the remaining provisions of this Agreement.
16. EXHIBITS. The Exhibits to this Agreement are an integral part
of this Agreement and shall be deemed to be incorporated into this Agreement.
17. TAX REPORTING. The parties agree that they will report the
transaction included herein as a tax-free reorganization under Code Section
368(c)(1)(D) and will cooperate with each other in the event any federal or
state taxing authority refuses to exempt this reorganization. The
Corporation and TeraGlobal agree that they are responsible for all tax
reporting and tax liabilities associated with the Corporation, TeraGlobal and
the Utah Corporation prior to this reorganization. After this
reorganization, the
7
Shareholder recognizes that it will be responsible for all future tax
reporting and tax liabilities that may arise from the newly created DAA.
18. COUNTERPARTS AND SIGNATURES. This Agreement may be executed
in two or more counterparts which together shall constitute a single
agreement. Facsimile copies of signatures shall be accepted as binding on the
parties.
IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date first written above.
TERAGLOBAL:
By: /S/ XXXXX XXXX
------------------------------------
Title: PRESIDENT AND SECRETARY
CORPORATION:
By: /S/ XXXXX XXXX
------------------------------------
Title: PRESIDENT AND SECRETARY
SHAREHOLDER:
/S/ XXXXXXX X. XXXXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxxxx, and
/S/ XXXXX XXXXXXXX
---------------------------------------
Xxxxx Xxxxxxxx, as Trustee of the Xxxxxxx X.
Xxxxxxxx Family Trust
8
