EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of February 24,
2005 (this "MERGER AGREEMENT") by and among Patron Systems, Inc., a Delaware
corporation ("PARENT"), LL Acquisition I Corp., a Delaware corporation and
wholly owned subsidiary of Parent ("MERGERCO"), and LucidLine, Inc., an Illinois
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 Illinois
on June 18, 2001;
WHEREAS, Mergerco was incorporated by the filing of Articles
of Incorporation with the Secretary of State of the State of Delaware on January
26, 2005;
WHEREAS, the Company is an Illinois corporation having
authorized capital consisting of 10,000,000 shares of Common Stock, no par value
per share (the "COMPANY COMMON STOCK"), all of which shall be issued and
outstanding immediately prior to the Effective Time (as hereinafter defined).
WHEREAS, Mergerco is a Delaware corporation having authorized
capital of 1,000 shares of common stock, par value $0.001 per share ("MERGERCO
COMMON STOCK"), all of which shall be issued and outstanding immediately prior
to the Effective Time;
WHEREAS, the respective Board of Directors of each Constituent
Corporation has approved this Merger Agreement and 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; and
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
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof and of the Supplemental Agreement, and in accordance with the Delaware
General Corporation Law ("DGCL") and the Illinois Business Corporation Act of
1983, as amended ("IBCA"), 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 Illinois. Upon the effectiveness of the
Merger, the separate existence of Mergerco shall cease except to the extent
provided by applicable law in the case of a corporation after its merger into
another corporation.
SECTION 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 Delaware pursuant to Section 252 of the DGCL and the Secretary of
State of the State of Illinois pursuant to Section 11.35 of the IBCA. 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 Illinois unless a delayed effective time is specified therein.
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 252 of the DGCL and Section 11.35 of the IBCA. 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.
SECTION 1.4 ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION; OFFICERS AND DIRECTORS. The Articles of Incorporation of the
Surviving Corporation shall be amended and restated as of the Effective Time as
set forth in EXHIBIT A attached hereto. 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
Rafiq Kaswani
Afi Hasan
Xxxxxxx Xxxxxx
OFFICERS
NAME OFFICE
Rafiq Kaswani President & Chief Executive Officer
Afi Hasan Secretary & Treasurer
SECTION 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
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converted into and become one fully paid and nonassessable share of common
stock, par value $0.001 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 Common 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 Common 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
4,400,000 shares of validly issued, fully paid and nonassessable shares of
Parent Common Stock, and the right to receive, in the aggregate, $200,000
(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 Common 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 Common Stock (other than shares
of Company Common Stock to be canceled in accordance with Section 1.5(b)), when
so converted as provided in Section 1.5(c), 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) Any issued and outstanding shares of Company Common
Stock held by a Person (a "DISSENTING SHAREHOLDER") who properly exercises such
Person's dissenters' rights under the IBCA ("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 IBCA. 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 IBCA, 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.
SECTION 1.6 PARENT TO MAKE CERTIFICATES AVAILABLE; DIVIDENDS.
(a) As soon as reasonably practicable after the Effective
Time (and in any event within ten (10) business days after the Effective Time),
Parent shall use its commercially reasonable efforts to mail to each record
holder of a certificate or certificates that immediately before the Effective
Time represented outstanding shares of Company Common Stock (the "CERTIFICATES")
(i) a letter of transmittal that shall specify that delivery shall be effective
and risk
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of loss and title to the Certificates shall pass only upon delivery of the
Certificates to Parent, 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 Parent 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
Parent, 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 Common Stock
then held by such holder), and (B) cash, payable either by check or wire
transfer of immediately available funds, 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(d) 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 and 1.7.
(b) 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.
(c) 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 Common 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.
(d) 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 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
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shall the person entitled to receive any such dividends or other distributions
be entitled to receive interest on such dividends or other distributions.
SECTION 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 $1.00
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, Parent shall forward payments to such holders of fractional interests
subject to and in accordance with the terms hereof.
SECTION 1.8 RETURN OF THE MERGER CONSIDERATION. None of Parent or the
Constituent Corporations shall be liable to any Shareholder for any cash
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
SECTION 1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON 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 Common Stock.
SECTION 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 Common Stock shall thereafter be made. On or after the
Effective Time, all Certificates presented to Parent for any reason shall be
converted into the Merger Consideration in respect of the shares of Company
Common Stock formerly represented thereby, any cash in lieu of fractional shares
of Parent 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(d).
SECTION 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
Common 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 Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent, as
the case may be.
SECTION 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
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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
SECTION 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.
SECTION 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.
SECTION 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) Either Constituent Corporation if the Merger has not
become effective by March 30, 2005 (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;
(b) 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(b) 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;
(c) 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(c) 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
(d) 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.
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ARTICLE III
GENERAL
SECTION 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.
SECTION 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.
SECTION 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.
SECTION 3.4 INTERPRETATION. This Merger Agreement shall be governed by
the laws of the State of Delaware 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 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.
LUCIDLINE, INC.
By: /S/ XXXXX XXXXXXX
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
PATRON SYSTEMS, INC.
By: /S/ XXXXXX X. XXX, XX
-----------------------------------
Name: Xxxxxx X. Xxx, XX
Title: Chairman of the Board
LL ACQUISITION I CORP.
By: /S/ XXXXXX X. XXX, XX
-----------------------------------
Name: Xxxxxx X. Xxx, XX
Title: Chief Executive Officer
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EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
LUCIDLINE, INC.
FIRST. The name of this Corporation is: LucidLine, Inc. (hereinafter
referred to as the "Corporation").
SECOND. The address of the registered office of this Corporation in the
State of Illinois is: 0000 Xxxxxxx Xxxxx, Xxxxx 0 XX, Xxxxx Xxxxxxx, Xxxxxxxx
00000. The name of its registered agent at such address is: Xxxxx Xxxxxxx.
THIRD. The purpose of this Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the Illinois Business
Corporation Act of 1983 (the "IBCA").
FOURTH. (a) This Corporation is authorized to issue Common Stock, par
value $0.001 per share. The number of shares of Common Stock authorized to be
issued is 1,000.
(b) At each election of directors, each shareholder entitled to
vote at such election has the right to vote the number of voting shares owned by
him for as many persons as there are directors to be elected (and for whose
election such shareholder has a right to vote).
FIFTH. Elections of directors need not be by written ballot unless a duly
adopted Bylaw of the Corporation shall so provide.
SIXTH. (a) To the fullest extent permitted by the IBCA as the same exists
or may hereafter be amended, a director of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damage for breach of
fiduciary duty as a director. If the IBCA is amended after the date of the
filing of this Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the IBCA, as so amended from time to time. No
amendment or repeal of this Article SIXTH shall adversely affect any right or
protection of a director of the Corporation provided hereunder with respect to
any act or omission occurring prior to such amendment or repeal.
(b) The Corporation shall indemnify to the fullest extent
permitted by the IBCA as the same exists or may hereafter be amended, any person
made, or threatened to be made, a defendant or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact that
such person, or his or her testator or intestate, is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or enterprise. Nothing
contained herein shall affect any rights to indemnification to which any person
may be entitled by law. No amendment or repeal of this Article SIXTH shall
adversely effect any right to indemnification provided hereunder with respect to
any act or omission occurring prior to such amendment or repeal.
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(c) In furtherance and not in limitation of the powers conferred
by statute:
(i) this Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer, employee or agent
of the Corporation, or is serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify against such liability under the provisions of law;
and
(ii) this Corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation, letters
of credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to any or
all of the foregoing to ensure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or elsewhere.
SEVENTH. In furtherance and not in limitation of the powers conferred by the
laws of the State of Illinois, the Board of Directors of the corporation is
expressly authorized to make, alter and repeal the bylaws of the corporation,
subject to the power of the stockholders of the corporation to alter or repeal
any by-law whether adopted by them or otherwise.
EIGHTH. A director of the corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the IBCA as the same exists or may hereafter be
amended. Any amendment, modification or repeal of the foregoing sentence shall
not adversely affect any right or protection of a director of the corporation
hereunder in respect of any act or omission occurring prior to the time of such
amendment, modification of repeal.
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