Exhibit 2.3
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of November 24, 2002
(this "Merger Agreement") by and among Patron Systems, Inc., a Delaware
corporation ("Parent"), ESC Acquisition, Inc., a California corporation and
wholly owned subsidiary of Parent ("Mergerco"), and Entelagent Software Corp., a
California corporation (the "Company") (Mergerco and the Company are hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the Company was incorporated by the filing of Articles of
Incorporation with the Secretary of State of the State of California on July 30,
1996;
WHEREAS, Mergerco was incorporated by the filing of Articles of
Incorporation with the Secretary of State of the State of California on
September 17, 2002;
WHEREAS, the Company is a California corporation having authorized
capital consisting of (a) 10,000,000 shares of Common Stock, par value $.01 per
share (the "Company Common Stock"), of which, immediately prior to the Effective
Time (as hereinafter defined), 3,278,900 shares shall be issued and outstanding,
and (b) and 200,000 shares of Preferred Stock, par value $.01 per share (the
"Company Preferred Stock", together with the Company Common Stock, the "Company
Stock"), of which (i) 50,000 shares have been designated as Series A Preferred
Stock, of which, immediately prior to the Effective Time, 19,250 shares shall
be issued and outstanding, (ii) 15,000 shares have been designated Series B
Preferred Stock, of which, immediately prior to of the Effective Time, 12,000
shares shall be issued and outstanding and (iii) 100,000 shares have been
designated Series C Preferred Stock, of which, immediately prior to the
Effective Time, 20,227 shares shall be issued and outstanding.
WHEREAS, Mergerco is a California corporation having authorized
capital of 100 shares of common stock, par value $.01 per share ("Mergerco
Common Stock"), all of which is issued and outstanding and owned by Parent;
WHEREAS, the respective Board of Directors of each Constituent
Corporation has approved this Merger Agreement and the merger of Mergerco with
and into the Company (the "Merger");
WHEREAS, the Constituent Corporations and Parent are concurrently
entering into a Supplemental Agreement (the "Supplemental Agreement") that,
among other things, sets forth certain covenants, agreements, representations
and warranties with respect to the Merger and the transactions contemplated by
this Merger Agreement;
WHEREAS, Parent and each of its stockholders (the "Parent
Stockholders") entered into that certain Share Exchange Agreement dated as of
September 27, 2002, as amended and restated on October 10, 2002 (the "Share
Exchange Agreement"), with Patron Holdings,
Inc., a Nevada corporation, f/k/a Combined Professional Services, Inc. ("Patron
Holdings"), pursuant to the terms of which all outstanding shares of Parent
Common Stock were exchanged for shares of common stock, par value $0.001, of
Patron Holdings, such that the Parent Stockholders, upon the consummation of the
transactions contemplated by the Share Exchange Agreement, acquired
approximately 85% of the outstanding capital stock of Patron Holdings with
Parent surviving as a wholly owned subsidiary of Patron Holdings;
WHEREAS, subsequent to the date hereof, but prior to the Closing Date,
Parent and Patron Holdings intend to effect a merger whereby Patron Holdings
will be merged with and into Parent, with Parent continuing as the surviving
corporation incorporated under the laws of the State of Delaware;
WHEREAS, certain capitalized terms are defined in the Supplemental
Agreement and shall have the same meaning when used in this Agreement unless
otherwise defined herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof
and of the Supplemental Agreement, and in accordance with the California General
Corporation Law ("CGCL") at the Effective Time (as hereinafter defined) Mergerco
shall be merged with and into the Company, which, as the corporation surviving
in the Merger (the "Surviving Corporation"), shall continue unaffected and
unimpaired by the Merger to exist under and be governed by the laws of the State
of California. Upon the effectiveness of the Merger, the separate existence of
Mergerco shall cease except to the extent provided by law in the case of a
corporation after its merger into another corporation.
1.2 Effective Time. As promptly as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VI of the
Supplemental Agreement, the parties hereto shall cause the Merger to be
consummated by filing this Merger Agreement with the Secretary of State of the
State of California pursuant to Section 1103 of the CGCL. When used in this
Merger Agreement, the term "Effective Time" shall mean the date and time of
receipt of the Merger Agreement for filing by the Secretary of State of the
State of California unless a delayed effective time is specified therein.
1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 1107 of the CGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and franchises
of Mergerco and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Mergerco and the Company shall become the
debts, liabilities and duties of the Surviving Corporation. The Surviving
Corporation shall be a wholly owned subsidiary of Parent.
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1.4 Articles of Incorporation and By-laws of the Surviving
Corporation; Officers and Directors. The Articles of Incorporation of Mergerco
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended; the By-laws of the Company, as in effect
immediately prior to the Effective Time, shall continue in full force and effect
as the By-laws of the Surviving Corporation until thereafter changed or amended.
From and after the Effective Time, until their successors are duly elected or
appointed and qualified, the directors and the officers of the Surviving
Corporation shall be as follows:
DIRECTORS
Xxxxxxx X. Xxxxx - Chairman
Xxxx Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx
OFFICERS
Name Office
Xxxxxxx X. Xxxxx Chief Executive Officer
Xxxx Xxxxxxx Xxxxxx Vice President - Sales and Marketing
Xxxxx Xxxxxxx President - Products
1.5 Effect on Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any shareholder of either of the
Constituent Corporations:
(a) Each issued and outstanding share of Mergerco Common Stock shall
be converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation. Each certificate
of Mergerco evidencing ownership of any such shares of Mergerco Common Stock
shall continue to evidence ownership of the same number of shares of common
stock of the Surviving Corporation.
(b) All shares of Company Stock that are held in the treasury of the
Company or by a wholly owned Subsidiary of the Company shall be canceled and no
consideration shall be delivered in exchange therefor.
(c) All shares of Company Stock issued and outstanding immediately
prior to the Effective Time, except shares canceled in accordance with Section
1.5(b), shall be converted, in the aggregate, into 1,800,000 shares of validly
issued, fully paid and nonassessable shares of Parent Common Stock
(collectively, the "Merger Consideration"). Each shareholder of the Company (the
"Shareholders") shall be entitled hereunder to receive in respect of such
Shareholder's shares of Company Stock held immediately prior to the Effective
Time such Shareholder's portion of such Merger Consideration as set forth on
Annex A to the Supplemental Agreement.
(d) All shares of Company Stock (other than shares of Company Stock
to be canceled in accordance with Section 1.5(b)), when so converted as provided
in Section 1.5(c),
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shall no longer be outstanding and shall automatically be canceled and retired
and each holder of a certificate theretofore representing any such shares shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such certificate in accordance with Section 1.6, the portion of
the Merger Consideration attributable to such shares.
(e) Each of the stock options to purchase Company Common Stock issued
by the Company pursuant to the Company Stock Plan (the "Company Stock Options"),
which are outstanding immediately prior to the Effective Time shall terminate
and be of no further force and effect as of the Effective Time.
(f) Each outstanding warrant to purchase shares of Company Stock (the
"Stock Purchase Warrants"), which are outstanding immediately prior to the
Effective Time shall be terminated and be of no further force and effect as of
the Effective Time.
(g) Any issued and outstanding shares of Company Stock held by a
Person (a "Dissenting Shareholder") who properly exercises such Person's
dissenters' rights under the CGCL ("Dissenting Shares") shall not be converted
as described in Section 1.5(c), but rather shall be converted into the right to
receive such consideration as may be determined to be due to such Dissenting
Shareholder pursuant to the CGCL. Subject to the foregoing, if, after the
Effective Time, such Dissenting Shareholder withdraws his demand for payment or
fails to perfect or otherwise loses his right of payment, in any case pursuant
to the CGCL, the Dissenting Shares of such Dissenting Shareholder shall be
deemed to be converted as of the Effective Time into the right to receive the
amount to which such Dissenting Shareholder would otherwise have been entitled
to pursuant to Section 1.5(c). The Company shall give Parent prompt notice of
any demands for payment received by the Company. The Company shall not, without
the prior written consent of Parent, make any payment with respect to, or settle
or offer to settle, any such demands, and, prior to the Effective Time, Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands.
1.6 Parent to Make Certificates Available; Dividends.
(a) At the Effective Time, Parent shall deposit, or shall cause to be
deposited, with or for the account of a commercial bank or trust company
designated by Parent, which shall be reasonably satisfactory to the Company (the
"Paying Agent"), for the benefit of the holders of the shares of Company Stock
for exchange in accordance with this Article I, (i) certificates representing
shares of Parent Common Stock representing the aggregate Merger Consideration
and (ii) an estimated amount of cash sufficient to pay the cash payable in lieu
of fractional shares pursuant to Section 1.7. Parent shall make available to the
Paying Agent from time to time as needed cash sufficient to pay cash in lieu of
fractional shares pursuant to Section 1.7 and all dividends and other
distributions pursuant to Section 1.6(e). Any cash and certificates of Parent
Common Stock deposited with the Paying Agent are referred to as the "Payment
Fund."
(b) As soon as reasonably practicable after the Effective Time (and
in any event within five (5) business days after the Effective Time), Parent
shall use its commercially reasonable efforts to cause the Paying Agent to mail
to each record holder of a certificate or certificates that immediately before
the Effective Time represented outstanding shares of
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Company Stock (the "Certificates") (i) a letter of transmittal that shall
specify that delivery shall be effective and risk of loss and title to the
Certificates shall pass only upon delivery of the Certificates to the Paying
Agent, and which letter shall be in customary form and have such other
provisions as Parent may reasonably specify; and (ii) instructions for effecting
the surrender of such Certificates in exchange for the consideration
contemplated by Section 1.5(c), including cash in lieu of fractional shares.
Upon surrender of a Certificate to the Paying Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Paying
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor (A) shares of Parent Common Stock representing, in the aggregate, the
whole number of shares that such holder has the right to receive pursuant to
Section 1.5(c) (after taking into account all shares of Company Stock then held
by such holder) (B) a check in the amount equal to the cash that such holder has
the right to receive pursuant to this Article I, including cash in lieu of any
dividends and other distributions pursuant to Section 1.6(e) and cash in lieu of
fractional shares pursuant to Section 1.7. No interest will be paid or will
accrue on any cash payable as Merger Consideration pursuant to Section 1.6(e)
and 1.7.
(c) If the Merger Consideration (or any portion thereof) is to be
delivered to a person other than the person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Surviving Corporation any transfer or
other taxes payable by reason of the foregoing or establish to the satisfaction
of the Surviving Corporation that such taxes have been paid or are not required
to be paid. For purposes of this Merger Agreement, the term "person" means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or any
agency or instrumentality thereof.
(d) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, Parent will deliver or cause
to be delivered in exchange for such lost, stolen or destroyed Certificate, with
respect to each share of the Company Stock represented thereby, certificates for
any portion of the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article I. No bond shall be required in
connection therewith.
(e) No dividends or other distributions, if any, that are declared on
or after the Effective Time on Parent Common Stock or are payable to the holders
of record thereof on or after the Effective Time will be paid to persons
entitled by reason of the Merger to receive certificates representing shares of
Parent Common Stock, nor shall such persons be entitled to vote such shares of
Parent Common Stock, until such persons surrender their Certificates, as
provided in this Article I. Subject to the effect of applicable law, there shall
be paid to the record holder of the certificates representing such shares of
Parent Common Stock (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to whole shares of Parent Common Stock and having
a record date on or after the Effective Time and a payment date prior to such
surrender and (ii) at
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the appropriate payment date, the amount of dividends or other distributions, if
any, payable with respect to whole shares of Parent Common Stock and having a
record date on or after the Effective Time but prior to surrender and a payment
date subsequent to surrender. In no event shall the person entitled to receive
any such dividends or other distributions be entitled to receive interest on
such dividends or other distributions.
1.7 No Fractional Securities. No certificates representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution, stock split or interest shall relate to any fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder of Parent. In lieu of any fractional
share, each holder of Parent Common Stock who would otherwise have been entitled
to a fraction of a share of Parent Common Stock upon surrender of Certificates
for exchange pursuant to this Article I will be paid an amount in cash (without
interest and rounded to the nearest whole cent) determined by multiplying $3.56
by the fractional share interest to which such holder would otherwise be
entitled. As soon as practicable after the determination of the amount of cash
to be paid to former Shareholders of the Company in lieu of any fractional
interests, the Paying Agent shall notify Parent, and Parent shall deposit such
amount with the Paying Agent and shall cause the Paying Agent to forward
payments to such holders of fractional interests subject to and in accordance
with the terms hereof.
1.8 Return of the Merger Consideration. Any portion of the Payment
Fund which remains undistributed to the Shareholders for six months after the
Effective Time shall, to the extent permitted by applicable law, be delivered to
Parent, upon demand by Parent, and any Shareholder who has not theretofore
complied with this Article I shall thereafter look only to Parent for payment
of, and Parent shall pay any such Shareholder's valid claim for, any portion of
the Merger Consideration which such Shareholder is otherwise entitled to
receive. Notwithstanding the foregoing, none of Parent, the Constituent
Corporations or the Paying Agent shall be liable to any Shareholder for any cash
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws. Any such portion of the Payment Fund remaining
unclaimed by holders of shares of Company Stock five (5) years after the
Effective Time (or such earlier date immediately before such time as such
amounts otherwise would escheat to or become property of any governmental body)
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
1.9 No Further Ownership Rights in Company Stock. All Merger
Consideration paid or payable upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been paid or be payable
in full satisfaction of all rights of ownership, including voting rights,
pertaining to the shares of Company Stock.
1.10 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Stock shall thereafter be made. On or after the Effective Time, all
Certificates presented to the Paying Agent or Parent for any reason shall be
converted into the Merger Consideration in respect of the shares of Company
Stock formerly represented thereby, any cash in lieu of fractional shares of
Parent
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Common Stock to which the holders thereof are entitled pursuant to Section 1.7
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 1.6(e).
1.11 Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Stock such
amounts as it is required to deduct and withhold in respect of the making of
such payment under the Internal Revenue Code of 1986, as amended, the rules and
regulations thereunder or any provision of applicable law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes as having been paid
to the holder of Company Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
1.12 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Merger Agreement, the Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and deliver, in the
name and on behalf of either of the Constituent Corporations, all such deeds,
bills of sale, assignments and assurances and do, in the name and on behalf of
each of the Constituent Corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such Constituent Corporation and otherwise to carry out the purposes
of this Merger Agreement.
ARTICLE II
CONDITIONS AND TERMINATION
2.1 Conditions. The obligations of each Constituent Corporation
under this Merger Agreement are subject to the condition that, prior to the
Effective Time, each of the conditions to its obligations contained in Article
VI of the Supplemental Agreement shall have been satisfied or waived.
2.2 Waiver. The Board of Directors or a duly authorized officer of a
Constituent Corporation may, on behalf of such corporation, waive or extend the
time for performance of any condition to its obligations under the Supplemental
Agreement.
2.3 Termination. Notwithstanding the approval of this Merger
Agreement by the Board of Directors, and its adoption by the shareholders of
each Constituent Corporation, this Merger Agreement may be terminated and the
Merger abandoned prior to the Effective Time by:
(a) The mutual consent of the Constituent Corporations;
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(b) Either Constituent Corporation if the Merger has not become
effective by April 30, 2003 (or such later date as shall be mutually agreed to
in writing by the parties hereto); provided, that, the party seeking termination
is not in default or breach of this Merger Agreement or the Supplemental
Agreement;
(c) The Company in the event of a material breach by Parent of any
of its representations, warranties, agreements or covenants contained in the
Supplemental Agreement, which breach is not cured by Parent within 10 days after
written notice of such breach; provided, that, the Company shall have no right
to terminate pursuant to this Section 2.3(c) if any such breach or breaches,
individually or in the aggregate, do not deprive the Company of the economic
benefits of the transactions contemplated hereby in an amount in excess of
$200,000;
(d) Parent or Mergerco in the event of a material breach by the
Company of any of its representations, warranties, agreements and covenants
contained in the Supplemental Agreement, which breach is not cured by the
Company within 10 days after written notice of such breach; provided, that,
Parent shall have no right to terminate pursuant to this Section 2.3(d) if any
such breach or breaches, individually or in the aggregate, do not deprive Parent
of the economic benefits of the transactions contemplated hereby in an amount in
excess of $200,000; or
(e) Either the Company, on the one hand, or Parent or Mergerco, on
the other hand, if the Supplemental Agreement is terminated in accordance with
its terms.
ARTICLE III
GENERAL
3.1 Partial Invalidity. Wherever possible each provision of this
Merger Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Merger Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Merger Agreement.
3.2 Successors and Assigns. This Merger Agreement shall not be
assignable prior to the Effective Time by either Constituent Corporation without
the written consent of the other, but, if assigned with such consent, shall
inure to the benefit of and be binding upon the successor or assign of the
assigning Constituent Corporation before the Effective Time and thereafter upon
the Surviving Corporation.
3.3 Amendment. This Merger Agreement shall not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
3.4 Interpretation. This Merger Agreement shall be governed by the
laws of the State of California and may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The
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headings of the several articles and sections herein are for convenience of
reference only and shall not be a part of or affect the meaning or
interpretation of this Merger Agreement.
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IN WITNESS WHEREOF, the undersigned have caused this Merger Agreement
to be executed by their respective officers thereunto duly authorized, and their
respective seals to be affixed and attested, all as of the date first above
written.
ENTELAGENT SOFTWARE CORP.
By: /s/ J. Xxxxxxx Xxxxxx
------------------------
Name: J. Xxxxxxx Xxxxxx
Title: President and CEO
PATRON SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: President
ESC ACQUISITION, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: CEO
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