EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
FOCUS AFFILIATES, INC.
FOCUS AFFILIATES MERGER SUB, INC.
THE WIRELESS GROUP, INC.
AND
PRINCIPAL WIRELESS GROUP, INC. STOCKHOLDERS
DATED AS OF DECEMBER 14, 1999
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of December 14, 1999, by and among Focus Affiliates, Inc., a
Delaware corporation doing business as Focus Xxxxxxxx.Xxx ("FOCUS"), Focus
Affiliates Merger Sub, Inc., a Delaware corporation ("MERGER SUB"), The
Wireless Group, Inc., a Texas corporation doing business as
XxxxxxXxxxxxxx.Xxx ("SOURCE"), and Xxxxxx Xxxx, Xxxxx Xxxxx and Xxxx
Xxxxxxxxxxx (the "PRINCIPAL SOURCE STOCKHOLDERS") with reference to the
following facts:
WHEREAS, Focus has formed Merger Sub as a wholly-owned subsidiary for
the purpose of effectuating the merger of Source with and into Merger Sub as
provided herein (the "MERGER"); and
WHEREAS, the respective Boards of Directors of Focus, Merger Sub and
Source (collectively, the "COMPANIES") deem it to be in the best interests of
the Companies and their respective stockholders that Source merge with and
into Merger Sub on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the Principal Source Stockholders approve of the Merger and
desire to facilitate the Merger by their agreements contained herein; and
WHEREAS, the parties intend that the transactions contemplated hereby
qualify for nonrecognition treatment under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, the parties
agree as follows:
I. SOURCE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as hereinafter defined), Source shall
be merged with and into Merger Sub, with Merger Sub as the corporation
surviving the Merger (the "SURVIVING CORPORATION"), and the separate
existence of Source shall cease.
1.2 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the Texas
Business Corporation Act (the "TEXAS ACT") and Subchapter IX of the Delaware
General Corporation Law (the "DELAWARE ACT").
1.3 EFFECTIVE TIME. The consummation of the transactions
contemplated hereby (the "CLOSING") shall take place at the offices of Focus
at 000 Xxxx Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxx, 00000, or such
other place as the parties hereto shall agree, at a time and on a date (the
"CLOSING DATE") to be determined by the parties, but in any event not later
than five business days following fulfillment or waiver of the conditions
specified in Article V hereof. Contemporaneously with the Closing, Merger Sub
and Source (the "CONSTITUENT COMPANIES") shall cause an agreement of merger
between Merger Sub and Source, in a form that is acceptable to each of the
Constituent Companies and otherwise conforms to the requirements of the Texas
Act (the "AGREEMENT OF MERGER"), to be filed with the Secretary of State of
the State of Texas as provided in Section 5.04 of the Texas Act, and with the
Secretary of State of the State of Delaware as provided in Section 252 of
Subchapter IX of the Delaware Act. The Merger shall become effective on the
Closing Date or at such other time as the parties shall agree (the "EFFECTIVE
TIME").
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1.4 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation. The Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation.
1.5 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION. As of the
Effective Time, the then current directors of Merger Sub shall be the
directors of the Surviving Corporation, in each case to serve until their
respective successors are elected or appointed in accordance with the Bylaws
of the Surviving Corporation. As of the Effective Time, the then current
officers of Merger Sub shall be the officers of the Surviving Corporation, to
serve in each case until their respective successors are appointed in
accordance with the Bylaws of the Surviving Corporation.
1.6 CONVERSION OF SOURCE SHARES. At the Effective Time, all of the
issued and outstanding shares of capital stock of Source ("SOURCE STOCK")
shall, by virtue of the Merger and without any action on the part of the
holders thereof, be converted into and thereafter represent the number of
shares of common stock, $0.01 par value per share of Focus ("FOCUS COMMON
STOCK") determined by dividing $750,000 by an amount (the "SHARE PRICE")
equal to the lesser of (a) $4 15/16 or (b) the average closing price per
share of Focus Common Stock as reported on NASDAQ for the 20 trading days
period ending on the day prior to the Closing Date. Fractional shares shall
not be issued, and in lieu thereof Focus shall pay cash in an amount equal to
the Share Price times the applicable fraction of a share. The holders of the
Source Stock shall also be entitled to receive an aggregate cash payment (the
"CASH CONSIDERATION") from Focus of $50,000. The Cash Consideration shall be
distributed to them pro rata (based on their holdings of Source Stock on the
Closing Date) on the Closing Date. In addition to any restrictions on resale
of Focus Common Stock imposed under the federal securities laws, each of the
Source stockholders will further agree to not publicly resell any of the
Focus Common Stock issued to them in connection with the Merger during the
one-year period following the Closing Date and to limit any public resales
after such one-year period to an amount in any 90-day period thereafter equal
to one-fourth of the shares originally issued to such stockholder.
1.7 OMITTED INTENTIONALLY
1.8 MERGER SUB COMMON STOCK REPRESENTS SURVIVING CORPORATION COMMON
STOCK. At the Effective Time, each share of common stock, $.01 par value, of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of Focus as
the holder thereof, represent one share of common stock, $.01 par value, of
the Surviving Corporation.
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1.9 EXCHANGE OF CERTIFICATES. After the Effective Time, any holder
of an outstanding certificate or certificates (the "SOURCE STOCK
CERTIFICATES") theretofore representing any of the shares of Source Stock,
upon surrender thereof to Focus or the transfer agent for Focus Common Stock,
shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of Focus Common Stock as
provided in Section 1.6. Until so surrendered, the outstanding Source Stock
Certificates shall be deemed for all purposes, other than the payment of
dividends or other distributions, if any, in respect of Focus Common Stock,
to represent that certain number of shares of Focus Common Stock as set forth
in Section 1.6. No dividend or distribution, if any, payable to holders of
shares of Focus Common Stock shall be paid to the holders of Source Stock
Certificates; provided, however, that upon surrender and exchange of such
Source Stock Certificates, there shall be paid to the record holders of the
stock certificate or certificates issued in exchange therefor, the amount,
without interest thereon, of dividends or other distributions, if any, which
theretofore but subsequent to the Effective Time have been declared and
become payable with respect to the number of whole shares of Source Common
Stock into which the shares of Source Stock theretofore represented thereby
shall have been converted.
1.10 FOCUS TO RESERVE SHARES. At or prior to the Closing Date,
Focus shall reserve for the benefit of the holders of the Source Stock
Certificates such number of shares of Focus Common Stock as shall be required
for conversion of Source Stock in accordance with this Agreement.
1.11 FURTHER DOCUMENTS. From time to time, on and after the Closing
Date, as and when requested by Focus, the appropriate officers and directors
of Source as of the Closing Date shall, for and on behalf and in the name of
Source or otherwise, execute and deliver all such instruments, and shall take
or cause to be taken such further or other actions as Focus may reasonably
request in order to confirm of record or otherwise to Focus title to all of
the outstanding shares of Source and otherwise to carry out fully the
provisions and purposes of this Agreement.
1.12 REORGANIZATION. This Agreement constitutes a plan of
reorganization within the meaning of the Treasury Regulations under the Code
and has been duly adopted by each party hereto as such. The parties hereto
intend that the transactions contemplated by this Agreement shall qualify for
nonrecognition treatment under Section 368(a) of the Code, and each party
hereto will take all commercially reasonable actions in order to accomplish
such intent.
II. BOARD AND SHAREHOLDER APPROVALS
2.1 SOURCE BOARD AND STOCKHOLDER APPROVAL. Source hereby
represents that its Board of Directors has duly authorized the execution and
delivery of this Agreement and approved this Agreement, the Merger and
related matters, and all of the stockholders of Source have executed and
delivered to Source their written consents under Section 5.03 of the Texas
Act to the execution, delivery and performance by Source of this Agreement,
the Merger and any related matters.
2.2 FOCUS BOARD AND STOCKHOLDER APPROVAL. Focus hereby represents
that its Board of Directors has duly authorized the execution and delivery of
this Agreement and approved this Agreement, the Merger and any related
matters and that none of these matters require the approval of the
stockholders of Focus.
2.3 MERGER SUB BOARD AND SHAREHOLDER APPROVAL. Merger Sub hereby
represents that its Board of Directors has duly authorized the execution and
delivery of this Agreement and approved this Agreement, the Merger and
related matters, and Focus, in its capacity as the sole shareholder of Merger
Sub, has executed and delivered to the Merger Sub a written consent under
Section 252 of Subchapter
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IX of the Delaware Act approving the execution, delivery and performance by
Merger Sub of the Agreement of Merger and the approval of this Agreement.
III. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SOURCE. Source hereby
represents and warrants to Focus, subject to such exceptions as are
specifically disclosed by Source to Focus in the disclosure letter of even
date herewith relating to this Agreement and delivered by Source to Focus
herewith (the "SOURCE DISCLOSURE LETTER"), as follows:
(a) DUE INCORPORATION, GOOD STANDING AND QUALIFICATION.
Source is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation with all requisite
power and authority to own, operate and lease its properties and to carry on
its business as now being conducted. Source is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so qualified or licensed and in
good standing would not, in the aggregate, have a Material Adverse Effect.
As used in this Agreement, "MATERIAL ADVERSE EFFECT" means, with respect to
Source or Focus, a material adverse effect on the business, operations, or
condition, financial or otherwise, of Source or Focus, as the case may be,
and their respective subsidiaries, taken as a whole. Section 3.1(a) of the
Source Disclosure Letter sets forth, as of the date of this Agreement, each
jurisdiction in which Source is qualified to do business. Source has
heretofore delivered or will promptly deliver to Focus accurate and complete
copies of the charter and by-laws, as currently in effect, of Source.
(b) CORPORATE AUTHORITY. Source has the corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
validly delivered by Source, and constitutes a valid and binding agreement of
Source, enforceable against Source in accordance with its terms.
(c) CAPITAL STOCK. As of the date hereof, Source has an
authorized capital stock consisting of 1,000,0000 shares of Source Common
Stock, of which 100,000 shares are issued and outstanding. All of the issued
and outstanding shares of Source Common Stock are owned by the persons
identified on Schedule 3.1 to this Agreement in the amounts shown thereon.
All of the issued and outstanding shares of capital stock of Source have been
validly authorized and issued and are fully paid and nonassessable and free
of preemptive or similar rights.
(d) OPTIONS, WARRANTS AND RIGHTS. There are no outstanding
options, warrants or other rights to purchase or to convert any obligation
into any shares of the capital stock of Source.
(e) SUBSIDIARIES. Source does not have any subsidiaries,
which for the purposes of this Agreement shall include every other
corporation, partnership, joint venture or other business association in
which Source directly or indirectly owns or controls at least 50% of the
securities or other equity interests.
(f) FINANCIAL STATEMENTS. The balance sheet of Source as of
November 30, 1999, the statements of operations, stockholders' equity and
cash flows of Source for the seven-month period ended November 30, 1999, and
all related schedules and notes to the foregoing, copies of which are
attached to the Source Disclosure Letter, were prepared on a cash basis which
were applied on a consistent basis, and fairly and accurately present the
financial position, results of operations and
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changes in financial position of Source as of its respective dates and for
the periods indicated. The foregoing financial statements for the
seven-month period ended November 30, 1999 have been certified by the
principal financial officer of Source. Source does not have any material
liabilities or obligations of a type which would be included in a balance
sheet prepared on a cash basis or in accordance with generally accepted
accounting principles, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or otherwise,
except as and to the extent disclosed or reflected in the balance sheet of
Source as of November 30, 1999 or incurred since November 30, 1999 in the
ordinary course of business.
(g) ACTIONS IN THE ORDINARY COURSE OF BUSINESS. Since
November 30, 1999, Source has not: (i) taken any action outside the ordinary
and usual course of business; (ii) borrowed any money or become contingently
liable for any obligations or liability of another; (iii) failed to pay all
of its debts and obligations as they become due; (iv) incurred any debt,
liability or obligation of any nature to any party except for obligations
arising from the purchase of goods or the rendition of services in the
ordinary course of business, none of which aggregate more than $10,000 with
respect to the same supplier or customer; (v) failed to use commercially
reasonable efforts to preserve its business organization intact, to keep
available the services of its employees and independent contractors, or to
preserve its relationships with its customers, suppliers and others with
which it deals; or (vi) increased or committed to increase the salary or
compensation of any officer.
(h) NO MATERIAL ADVERSE CHANGE. Since November 30, 1999,
there has not been and, to the knowledge of Source, there is not threatened
(i) any material adverse change in the financial condition, business,
properties, assets or results of operations of Source; (ii) any loss or
damage (whether or not covered by insurance) to any of the assets or
properties of Source which materially affects or impairs its ability to
conduct its respective business; (iii) any event or condition of any
character which has materially and adversely affected the business or
prospects (financial or otherwise) of Source; or (iv) any mortgage or pledge
of any material amount of the assets or properties of Source, or any
indebtedness incurred by Source other than indebtedness, not material in the
aggregate, incurred in the ordinary course of business.
(i) REAL ESTATE RIGHTS. Section 3.1(i) of the Source
Disclosure Letter contains a list of each piece of real property owned,
leased or occupied by Source, including in each case the location thereof and
a description of the use to which it is put by Source. Source has delivered
to Focus a true and accurate copy of each deed, mortgage, lease, and other
documents (collectively, the "SOURCE REAL ESTATE DOCUMENTS") pursuant to
which Source owns, leases, or otherwise occupies each of its real estate
properties (collectively, the "SOURCE PROPERTIES"). Source does not have any
interest as owner, lessor, lessee, or otherwise in any real estate, other
than as set forth in the Source Disclosure Letter. Source has not received
notice from any mortgagee or landlord of any of the Source Properties that
Source is in default of any terms, conditions, or provisions of any mortgage
("SOURCE MORTGAGE") or lease ("SOURCE LEASE") relating to any of the Source
Properties. The Source Mortgages and Source Leases are in good standing and,
to the knowledge of Source, no condition exists which, with the passage of
time, giving of notice, or both, would lead to a default under any Source
Mortgage or Source Lease.
(j) TITLE TO PROPERTIES. Source has good and marketable
title to all of its respective real and personal properties, including the
Source Properties and all other properties reflected in Source's balance
sheet as of November 30, 1999, or acquired subsequent to November 30, 1999
(except properties disposed of subsequent to that date in the ordinary course
of business). Except as disclosed in Source's balance sheet as of November
30, 1999, such assets and properties are not subject to any mortgage, pledge,
lien, claim, encumbrance, charge, security interest or title retention or
other security
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arrangement except for liens for the payment of federal, state and other
taxes, the payment of which is neither delinquent nor subject to penalties,
and except for other liens and encumbrances incidental to the conduct of the
business of Source or the ownership of its assets or properties which were
not incurred in connection with the borrowing of money or the obtaining of
advances, and which do not in the aggregate materially detract from the value
of the assets or properties of Source taken as a whole or materially impair
the use thereof in the operation of its respective business.
(k) CONDITION AND SUFFICIENCY OF ASSETS AND PROPERTIES. The
buildings, equipment, fixtures, furniture, furnishings, office equipment and
all other tangible personal assets and properties of Source presently used in
Source's business do not require any material repairs other than normal
maintenance and are in good operating condition and in a state of reasonable
maintenance and repair. Source has adequate access to computer hardware and
software to operate its website via ownership, lease, license or other
similar arrangement on a commercially acceptable basis.
(l) LITIGATION. There are no actions, suits, proceedings or
other litigation pending or, to the knowledge of Source, threatened against
or affecting Source, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality which, if determined adversely to Source, would
individually or in the aggregate be reasonably likely to have a Material
Adverse Effect.
(m) INTELLECTUAL PROPERTY. No claim is pending or, to the
knowledge of Source, threatened to the effect that the present or past
operations of Source infringe upon or conflict with the rights of others with
respect to any intellectual property (including, without limitation,
licenses, patents, patent rights, patent applications, trademarks, trademark
applications, trade names, copyrights, drawings, trade secrets, know-how and
computer software) necessary to permit Source to conduct its business as now
operated (the "SOURCE INTELLECTUAL PROPERTY") and no claim is pending or, to
the knowledge of Source, threatened to the effect that any of the Source
Intellectual Property is invalid or unenforceable. None of the Source
Intellectual Property infringes the rights of any third party and, to
Source's best knowledge, no third party is infringing any of the Source
Intellectual Property. The Source Disclosure Letter contains a list of all
licenses, patents, patent rights, patent applications, trademarks, trademark
applications, trade names, copyrights, and service marks of Source and each
of its Subsidiaries. No contract, agreement or understanding between Source
or any of its Subsidiaries and any other party exists which would impede or
prevent the continued use by Source of the entire right, title and interest
of Source in and to the Source Intellectual Property.
To the best of Source's knowledge, all software used by Source
constitutes an original work of Source authored by employees of Source within
the course and scope of their employment for Source, except that to the
extent that such software has been developed or created by any person other
than Source, Source has a written agreement with such person with respect
thereto and Source thereby has obtained ownership of, and is the exclusive
owner of, or a permitted licensee of, all such software and all intellectual
property rights therein by operation of law or by valid assignment. Source
has taken commercially reasonable steps that are required to protect Source's
rights in confidential information and trade secrets related to the Source
Intellectual Property. All employees of Source that may have rights to the
Source Intellectual Property have executed an assignment agreement in a form
reasonably satisfactory to Focus. Source has not assigned, transferred,
conveyed or otherwise encumbered any right, title or interest in or created
or suffered to be created any lien on or with respect to any of the Source
Intellectual Property. Source is the sole and exclusive owner of the Source
Intellectual Property, free and clear of any liens, and no other person or
entity has or shall have any claim of ownership with respect to the Source
Intellectual Property.
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To the best of Source's knowledge, the software used by Source is
substantially free of errors and performs substantially in accordance with
its documentation and as it purports to or is represented to perform. Source
has, prior to the Closing Date, scanned and disinfected its software using a
then-current version of commercially available third party antivirus
software. Source is not aware of any of its software containing any virus,
Trojan horse, worm, or other software designed to permit unauthorized access
to its software or any part or component thereof or to cause any damage,
disability, loss of data, denial of access or of service, or which will cause
its software or any part thereof to be disabled, erased, shut down,
inoperable or otherwise incapable of being used by Focus or Merger Sub or its
customers or any back door, time bomb, software lockout key or device, drop
dead routine, or other software designed to disable its software or cause or
facilitate any of the foregoing.
Source is the registered owner of the domain names xxxxxxxxxxxxxx.xxx
and xxxxxxxxxxxxxxx.xxx (the "DOMAIN NAMES") on the WHOIS database; Source
has a currently valid registration of the Domain Names with Network
Solutions, Inc. or InterNIC ("NSI"); to the best of Source's knowledge, the
Domain Names do not infringe the trademark, trade name, service xxxx or
related rights of any third party; Source has not received notice, and
Sources does not have any knowledge, of any pending or threatened claims by
any third party relating to the use, registration, or ownership of the Domain
Names; and the registration and renewal fees charged by NSI for the Domain
Names are paid at least through April 7, 2001.
The best of Source's knowledge, the current version of all of the
software used by Source (i) will and does record, store, process, calculate
and present calendar dates falling on and after, and spans of time including,
January 1, 2000, and will calculate any information dependent on or relating
to such dates in the same manner, and with the same functionality, data
integrity and performance, as such software records, stores, processes,
calculates and presents calendar dates on or before December 31, 1999, or
calculate any information independent on or relating to such dates
(collectively, "YEAR 2000 COMPLIANT"), and (ii) will lose no functionality
with respect to the introduction of records containing dates falling on or
after January 1, 2000. The Source Intellectual Property constitutes all
assets, intellectual property and intellectual property rights necessary for
the development, creation of executable versions of, and exploitation of the
software currently used by Source.
(n) CONSENTS AND APPROVALS; NO VIOLATION. Except for
applicable requirements of the state "blue sky" laws, and the filing and
recordation of the Agreement of Merger, as required by the Texas Act and
Delaware Act, no filing with, and no permit, authorization, consent or
approval of, any governmental entity is necessary for the consummation by
Source of the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Source and the consummation of the transactions
contemplated hereby will not violate or result in a breach by Source, or
constitute a default under, or conflict with, or cause any acceleration of
any material obligation with respect to (i) any material provision or
restriction of any charter, bylaw, loan, indenture or mortgage of Source; or
(ii) any provision or restriction of any lien, lease agreement, contract,
instrument, order, judgment, award, decree, ordinance or regulation or any
other restriction of any kind or character to which any assets or properties
of Source is subject or by which Source is bound.
(o) TAXES. Source has filed all Federal, state, foreign,
local and any other applicable tax returns and reports required to be filed,
and have paid in full all income, sales and other taxes and assessments shown
due thereon or otherwise (together with all interest, penalties, assessments
and deficiencies assessed in connection therewith due through the date
hereof). Such tax returns and reports are correct in all material respects.
Federal tax returns of Source have not been audited by the Internal Revenue
Service or any other governmental agency. There are no outstanding
agreements or
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waivers extending the statutory period of limitation applicable to any
Federal or state income tax returns of Source.
(p) ACCOUNTS RECEIVABLE. The accounts receivable of Source
have been acquired in the ordinary course of business, and are subject to no
known defenses, set-offs or counterclaims, except to the extent of the
reserve reflected in the November 30, 1999 financial statements of Source.
(q) CONTRACTS. Except as set forth in the Source Disclosure
Letter, Source is not a party to (i) any lease, installment purchase
agreement or other contract with respect to any real property, used or
proposed to be used in its operations, except, in each case, items reflected
in Source's November 30, 1999 financial statements; (ii) any contract or
agreement for the purchase of any personal property, commodity, material,
fixed asset or equipment in excess of $10,000; (iii) any mortgage, lease,
contract or agreement creating an obligation of $10,000 or more; (iv) any
contract or agreement involving payments in excess of $10,000 which by its
terms does not terminate or is not terminable without penalty to it within
one year after the date hereof; (v) any loan agreement, indenture, promissory
note, conditional sales agreement or other similar type of arrangement; (vi)
any material license agreement; or (vii) any contract which could be
reasonably be expected to result in a material loss or obligation to Source.
Each of the foregoing mortgages, leases, contracts, agreements and other
arrangements to which Source is a party is valid and enforceable in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy laws and other similar laws affecting creditors' rights
generally and (ii) general principles of equity, whether asserted in a
proceeding in equity or at law. Source, and to Source's knowledge, all other
parties to each of the foregoing mortgages, leases, contracts, agreements or
other arrangements have performed all material obligations required to be
performed to date thereunder; neither Source, nor, to Source's knowledge, any
such other party is in default or in arrears under the terms of any of the
foregoing; and, to Source's knowledge, no condition exists or event has
occurred which, with the giving of notice or lapse of time or both, would
constitute a default under any of them.
(r) COMPLIANCE WITH LAW AND OTHER REGULATIONS. Source is in
compliance with all requirements (including those relating to environmental
matters) of Federal, state or local law, and all requirements of all
governmental bodies and agencies having jurisdiction over it, the conduct of
its business, the use of its assets and properties and all premises occupied
by it, except where the failure to comply would not be reasonably likely to
have a Material Adverse Effect.
(s) EMPLOYEE BENEFIT AND EMPLOYMENT MATTERS. Source and its
"ERISA Affiliates" (as determined under Section 414(b), (c), (m) or (o) of
the Code) (i) maintain, administer or contribute to, or at any time during
the past six years have maintained, administered or contributed to, only
those employee pension benefit plans (as defined in Section 3(2) of the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not excluded from coverage under specific Titles or Subtitles of
ERISA) described in Section 3.1(s) of the Source Disclosure Letter; and (ii)
maintain, administer or contribute to only those employee welfare benefit
plans (as defined in Section 3(l) of ERISA, whether or not excluded from
coverage under specific Titles or Subtitles of ERISA) described in Section
3.1(s) of the Disclosure Letter. Source and all ERISA Affiliates maintain,
administer or contribute to only those bonus, deferred compensation, stock
purchase, stock option, severance plan, insurance or similar arrangements
described in Section 3.1(s) of the Source Disclosure Letter. Source is not a
party to any collective bargaining agreement and there is no request for
union representation pending or, to the knowledge of Source, threatened
against Source. The employment of each employee of Source is terminable at
will, subject to applicable law. Source has complied in all material
respects with all other applicable Federal, state and local laws relating to
the employment of labor, including, but not limited to, the provisions
thereof relative to wages, hours, collective bargaining,
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working conditions and payment of taxes of any kind, and Source is not liable
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing or has any obligations for any vacation, sick leave or
other compensatory time. All officers and independent contractors of Source
are paid salaries or other compensation in accordance with the amounts set
forth in Section 3.1(s) of the Source Disclosure Letter, and Section 3.1(s)
of the Source Disclosure Letter correctly and accurately sets forth all
salaries, expenses and personal benefits paid to or accrued for all
directors, officers and principal stockholders of Source as of the date of
this Agreement, all of which are reflected as appropriate in Source's
financial statements as of November 30, 1999.
(t) CONFLICTING INTEREST. No director or officer of Source
(i) has any pecuniary interest in any supplier or customer of Source or in
any other business with which Source conducts business or with which Source
is in competition other than holdings of the publicly-traded securities of
such entities; or (ii) is indebted to Source for borrowed money.
(u) NO PAYMENTS TO DIRECTORS, OFFICERS, STOCKHOLDERS OR
OTHERS. Since November 30, 1999, there has not been any purchase or
redemption of any shares of capital stock of Source or any transfer,
distribution or payment by Source, directly or indirectly, of any assets or
properties to any director or officer or other person other than the payment
of compensation for services actually rendered at rates not in excess of the
rates prevailing on November 30, 1999 and amounts paid in the normal course
in reimbursement of reasonable expenses incurred on behalf of Source.
(v) MINUTE BOOKS. The minute books of Source accurately
record all actions taken by its stockholders and directors.
(w) ACCURACY OF STATEMENTS. Neither this Agreement nor any
statement, list, certificate, document or other information furnished or to
be furnished by Source to Focus in connection with this Agreement or any of
the transactions contemplated hereby contains or will contain an untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in the light of
circumstances under which they are made, not misleading.
(x) BROKERS AND FINDERS. Neither Source nor any of its
directors, officers or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions
contemplated by this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF SOURCE AND THE PRINCIPAL
SOURCE STOCKHOLDERS. Each of the Principal Source Stockholders as to himself
and Source as to all of the Principal Source Stockholders hereby represents
and warrants to Focus as follows:
(a) OWNERSHIP OF SHARES. Each of the shares of Source Stock
is owned by each of the Source stockholders free and clear of any lien,
pledge, charge, adverse claim, security interest, encumbrance (including any
imposed by law in any jurisdiction), title retention agreement, option or
right to purchase of any kind.
(b) INVESTMENT REPRESENTATIONS. Each of the Source
stockholders is either an "accredited investor" as defined under Rule 501 of
Regulation D under the Securities Act of 1933, or, alone or with his
representative(s) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of an
investment in Focus, and in any case is acquiring the Focus Common Stock
solely for the purpose of investment and not with a view to, or for
9
sale in connection with, any distribution thereof. Each of the Principal
Source Stockholders acknowledges that the Focus Common Stock will not be
registered under the Securities Act or any state securities laws, and that
such Focus Common Stock may not be transferred or sold except pursuant to the
registration provisions of the Securities Act of 1933, or pursuant to an
applicable exemption therefrom and pursuant to state securities laws and
regulations, as applicable. Each of the Principal Source Stockholders
acknowledges that the certificate or certificates evidencing the Focus Common
Stock will bear a legend or legends referring to the restrictions on the
transferability thereof and any other legends required by applicable law.
(c) APPRAISAL RIGHTS. Each of the Principal Source
Stockholders hereby acknowledges and agrees that by signing this Agreement he
is approving the Merger and is waiving his appraisal rights with respect to
the Merger under the Texas Act.
3.3 REPRESENTATIONS AND WARRANTIES OF FOCUS AND MERGER SUB. Except
as disclosed in the Focus SEC Reports (as hereinafter defined) and subject to
such exceptions as are specifically disclosed in the disclosure letter of
even date herewith relating to this Agreement and delivered by Focus to
Source herewith (the "FOCUS DISCLOSURE LETTER"), Focus and Merger Sub jointly
and severally represent and warrant to Source as follows:
(a) DUE INCORPORATION, GOOD STANDING AND QUALIFICATION.
Focus and each of its subsidiaries is a corporation or other legal entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with all requisite power
and authority to own, operate and lease its properties and to carry on its
business as now being conducted. Each of Focus and its subsidiaries is duly
qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so qualified
or licensed and in good standing would not, in the aggregate, have a Material
Adverse Effect. Focus has heretofore delivered or will promptly deliver to
Source accurate and complete copies of the charter and bylaws, as currently
in effect, of Focus and each of its subsidiaries.
(b) CORPORATE AUTHORITY. Each of Focus and Merger Sub has
the corporate power and authority to carry out the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Focus and Merger Sub and constitutes a valid and binding agreement of each of
Focus and Merger Sub, enforceable against Focus and Merger Sub in accordance
with its terms.
(c) CAPITAL STOCK. As of the date hereof, Focus has an
authorized capital stock consisting of 25,000,000 shares of Focus Common
Stock, $.01 par value per share, of which 9,264,893 shares are issued and
outstanding and 1,000,000 shares of preferred stock, $.01 par value per
share, none of which shares have been issued or are outstanding. As of the
date hereof, an aggregate of 5,691,873 shares of Focus Common Stock were
reserved for issuance upon (i) the exercise of outstanding Focus stock
options or stock options that may be issued in the future under Focus's stock
option plans, and (ii) the exercise of outstanding warrants to purchase
shares of Focus Common Stock. All of the issued and outstanding shares of
capital stock of Focus have been validly authorized and issued and are fully
paid and nonassessable and free of preemptive or similar rights. The shares
of Focus Common Stock into which the shares of Source Common Stock will be
converted pursuant to this Agreement will be, when issued, validly authorized
and issued, fully paid, nonassessable and not subject to any preemptive
rights.
10
(d) OPTIONS, WARRANTS AND RIGHTS. Neither Focus nor Merger
Sub has outstanding any options, warrants, or other rights to purchase or
convert any obligation into any shares of the capital stock of Focus or
Merger Sub, other than those referred to in Section 3.3(c).
(e) FOCUS SEC REPORTS. Focus has made available to Source
all forms, reports, and documents filed by Focus with the SEC since December
31, 1998 under the Securities Exchange Act of 1934 (the "1934 ACT")
(collectively, the "FOCUS SEC REPORTS"). Each Focus SEC Report at the time
filed (or, if amended or superseded by a subsequent filing, then on the date
of such filing), (i) complied in all material respects with the applicable
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder; and (iii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated herein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) FINANCIAL STATEMENTS. The balance sheets of Focus as of
December 31, 1998 and 1997, the statements of operations, stockholders'
equity and cash flows of Focus for each of the three years ended December 31,
1998 and for the nine months ended September 30, 1999, and the schedules and
notes to the foregoing, as contained in the Focus SEC Reports, complied as to
form in all material respects with the regulations of the SEC, were prepared
in accordance with generally accepted accounting principles which were
applied on a consistent basis, and fairly and accurately present the
financial position, results of operations and changes in financial position
of Focus as of their respective dates and for the periods indicated. The
foregoing financial statements as for the three years ended December 31, 1998
have been audited by Xxxxxxxxx, Xxxxx & Co. LLP, independent public
accountants, and the foregoing financial statements as of September 30, 1999,
and for the three months ended September 30, 1999, have been certified by the
principal financial officer of Focus. To Focus's knowledge, neither Focus
nor Merger Sub has any material liabilities or obligations of a type which
would be included in a balance sheet prepared in accordance with generally
accepted accounting principles, whether related to tax or non-tax matters,
accrued or contingent, due or not yet due, liquidated or unliquidated, or
otherwise, except as and to the extent disclosed or reflected in the balance
sheet of Focus as of September 30, 1999, or incurred since September 30, 1999
in the ordinary course of business.
(g) ACTIONS IN THE ORDINARY COURSE OF BUSINESS. Since
September 30, 1999, neither Focus nor Merger Sub has: (i) taken any action
outside the ordinary and usual course of business; (ii) borrowed any money or
become continently liable for any obligations or liability of another; (iii)
failed to pay all of its debts and obligations as they become due; (iv)
incurred any debt, liability or obligation of any nature to any party except
for obligations arising from the purchase of goods or the rendition of
services in the ordinary course of business, none of which aggregate more
than $100,000 with respect to the same supplier or customer; (v) failed to
use commercially reasonable efforts to preserve its business organization
intact, to keep available the services of its employees and independent
contractors, or to preserve its relationships with its customers, suppliers
and others with which it deals; or (vi) increased or committed to increase
the salary or compensation of any officer.
(h) NO MATERIAL ADVERSE CHANGE. Since September 30, 1999,
there has not been and, to the knowledge of Focus, there is not threatened
(i) any material adverse change in the financial condition, business,
properties, assets or results of operations of Focus and Merger Sub, taken as
a whole; (ii) any loss or damage (whether or not covered by insurance) to any
of the assets or properties of Focus or Merger Sub materially affects or
impairs its ability to conduct its business; (iii) any event or condition of
any character which has materially and adversely affected the business or
prospects (financial or otherwise) of Focus or Merger Sub; or (iv) any
mortgage or pledge of any material amount
11
of the assets or properties of Focus or Merger Sub, or any indebtedness
incurred by Focus or Merger Sub, other than indebtedness, not material in the
aggregate, incurred in the ordinary course of business.
(i) LITIGATION. There are no actions, suits, proceedings or
other litigation pending or, to the knowledge of Focus or Merger Sub,
threatened against or affecting Focus or Merger Sub, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which, if determined
adversely to Focus or Merger Sub, would individually or in the aggregate be
reasonably likely to have a Material Adverse Effect.
(j) CONSENTS AND APPROVALS; NO VIOLATION. Except for
applicable requirements of the state "blue sky" laws and the filing and
recordation of the Agreement of Merger, as required by the Delaware Act and
Texas Act, no filing with, and no permit, authorization, consent or approval
of, any governmental entity is necessary for the consummation by Focus and
Merger Sub of the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Focus and Merger Sub and the consummation
of the transactions contemplated hereby will not violate or result in a
breach by Focus or Merger Sub of, or constitute a default under, or conflict
with or cause any acceleration of any obligation with respect to (i) any
material provision or restriction of any charter, bylaw, loan, indenture or
mortgage of Focus or Merger Sub; or (ii) any material provision or
restriction of any lien, lease agreement, contract, instrument, order,
judgment, award, decree, ordinance or regulation or any other restriction of
any kind or character to which any assets or properties of Focus or Merger
Sub is subject or by which Focus or Merger Sub is bound.
(k) COMPLIANCE WITH LAW AND OTHER REGULATIONS. Focus and
Merger Sub are in compliance with all requirements (including those relating
to environmental matters) of Federal, state or local law, and all
requirements of all governmental bodies and agencies having jurisdiction over
them, the conduct of their business, the use of their assets and properties
and all premises occupied by them except where the failure to comply would
not be reasonably likely to have a Material Adverse Effect.
(l) ACCURACY OF STATEMENTS. Neither this Agreement nor any
statement, list, certificate, document or other information furnished or to
be furnished by Focus or Merger Sub to Source in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain an untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or therein,
in the light of the circumstances under which they are made, not misleading.
(m) BROKERS AND FINDERS. Neither Focus nor Merger Sub nor
any of their directors, officers or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or similar payments in connection with the transactions
contemplated by this Agreement.
IV. COVENANTS
4.1 COVENANTS OF SOURCE. Source agrees that, unless Focus
otherwise consents in writing, prior to the Closing:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. Source shall
not take or suffer or permit any action which would render untrue any of the
representations or warranties of Source herein contained, and Source shall
omit to take any action, the omission of which would render untrue any such
representation or warranty.
12
(b) PRESERVATION OF BUSINESS. Source shall use commercially
reasonable efforts to (i) preserve intact the present business organization
of Source; (ii) preserve the present goodwill and advantageous relationships
of Source with vendors, customers and all other persons having business
dealings with Source; and (iii) preserve and maintain in force all Source
Intellectual Property. Source shall not enter into any employment agreements
with any of its officers or management personnel which may not be cancelled
without penalty upon notice not exceeding 90 days. Source shall maintain in
force all property, casualty, directors and officers and other forms of
insurance which it is presently carrying and shall refrain from making any
change in any insurance coverage.
(c) ORDINARY COURSE. Source shall operate its business only
in the usual, regular and ordinary course and manner consistent with past
practice. Without limiting the foregoing, Source shall not (i) encumber or
mortgage any property or assets; (ii) incur any obligation (contingent or
otherwise), or purchase or acquire, or transfer or convey, any material
assets or properties or enter into any transaction or make or enter into any
contract or commitment except in the ordinary course of business or, whether
or not in the ordinary course of business, which involve obligations in
excess of $10,000 or which extend beyond six months from the date of this
Agreement; (iii) amend, modify or terminate any presently existing lease,
contract, agreement or other obligation; or (iv) acquire any stock or other
equity interest in any corporation, trust or other entity.
(d) BOOKS AND RECORDS. Source shall maintain its books,
accounts and records in the usual, regular and ordinary manner, and on a
basis consistent with prior years.
(e) NO ORGANIC CHANGE. Source shall not (i) amend its
charter or bylaws; (ii) make any change in its capital stock by
reclassification, subdivision, reorganization or otherwise; or (iii) merge or
consolidate with any other corporation, trust or entity or change the
character of its business.
(f) NO ISSUANCE BY SOURCE OF SHARES, OPTIONS, OR OTHER
SECURITIES. Except in connection with the conversion of all of its
outstanding debt (other than trade debt) into equity, Source shall not (i)
issue any shares of capital stock; or (ii) grant any option, warrant or other
right to purchase or to convert any obligation into shares of capital stock.
(g) COMPENSATION. Source shall not (i) increase the
compensation payable to any elected officer or to other management personnel
from the amount payable as of the date of this Agreement; or (ii) introduce
or change any pension or profit sharing plan, or any other employee benefit
arrangement.
(h) DIVIDENDS. Source shall not (i) declare, make or pay
any dividend or other distribution with respect to shares of Source Common
Stock or otherwise; (ii) purchase, redeem or otherwise acquire any shares of
Source Common Stock; or (iii) transfer, distribute or pay, directly or
indirectly, any assets or properties to any stockholders of Source or to any
other person, except as otherwise permitted by this Agreement.
(i) RIGHT OF INSPECTION. Source shall make available to
Focus and its representatives for inspection at all reasonable times all of
the assets, properties, facilities, records, agreements (including all
documents of any description evidencing any right or obligation of Source)
and the financial statements of Source and allow Focus and its
representatives the right to make whatever copies of such materials they
require, and Source shall permit Focus and its independent accountants to
audit or make such audit tests respecting the accounts of Source as Focus or
its accountants consider appropriate.
13
(j) CONFIDENTIALITY. Source shall not reveal, orally or in
writing, to any person, other than Focus and its representatives, any of the
business procedures or practices followed by it in the conduct of its
business or any other information of a confidential nature. All information
obtained by Source from Focus, shall be kept confidential in accordance with
the confidentiality agreement, dated October 14, 1999, entered into by and
between Focus and Source (the "CONFIDENTIALITY AGREEMENT").
(k) SATISFACTION OF OBLIGATIONS AND LIABILITIES. Source
shall (i) pay or cause to be paid all of the obligations and liabilities
arising out of its business as they mature, except for those which are in
good faith disputed with the written approval of Focus; (ii) maintain in all
material respects and perform its obligations under all agreements and
contracts to which it is bound in accordance with their terms; and (iii)
comply in all material respects with all requirements of applicable federal,
state and local laws, regulations and rules.
(l) BEST EFFORTS. Subject to the terms and conditions of
this Agreement, Source shall use its commercially reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement.
(m) DELIVERY OF INTELLECTUAL PROPERTY. Source shall deliver
and transfer by electronic transmission to Focus (i) all of the software used
by Source, including, without limitation, all copies of such software
(including source code, object code and data files), notebooks, flowcharts
and prototypes in Source's possession or control, (ii) any software tools
used by Source, and (iii) all artwork and text in electronic form that relate
to such software. Source shall execute and deliver to Focus any required
Domain Name transfer documents.
4.2 COVENANTS OF FOCUS. Focus agrees that, unless Source otherwise
consents in writing, prior to the Closing:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. Focus and
Merger Sub shall not take or suffer or permit any action which would render
untrue any of the representations or warranties of Focus herein contained,
and Focus shall not omit to take any action, the omission of which would
render untrue any such representation or warranty.
(b) RIGHT OF INSPECTION. Focus shall make available to
Source and its representatives for inspection at all reasonable times all of
the assets, properties, facilities, records, agreements (including all
documents of any description evidencing any right or obligation of Focus or
Merger Sub) and the financial statements of Focus and allow Source and its
representatives the right to make whatever copies of such materials they
require, and Focus shall permit Source and its independent accountants to
audit or make such audit tests respecting the accounts of Focus as Source or
its accountants consider appropriate.
(c) CONFIDENTIALITY. Focus shall not reveal, orally or in
writing, to any person, other than Source, any of the business procedures or
practices followed by it in the conduct of its business or any other
information of a confidential nature. All information obtained by Focus or
Merger Sub from Source shall be kept confidential in accordance with the
Confidentiality Agreement.
(d) BEST EFFORTS. Subject to the terms and conditions of
this Agreement, Focus shall use its commercially reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement.
14
V. CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FOCUS. The
obligations of Focus and Merger Sub under this Agreement are, at the option
of Focus and Merger Sub, subject to the satisfaction of the following
conditions on or before the Closing:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Source herein contained shall have been
true and correct in all material respects when made, and, in addition, shall
be true and correct in all material respects on and as of the Closing with
the same force and effect as though made on and as of the Closing, except as
affected by transactions contemplated hereby.
(b) PERFORMANCE OF AGREEMENTS. Source shall have in all
material respects performed all obligations and agreements and complied in
all material respects with all covenants and conditions contained in this
Agreement to be performed and complied with by it on or prior to the Closing.
(c) OPINION OF COUNSEL FOR SOURCE. At the Closing, Focus
shall have received an opinion of Xxxxxxxx & Xxxxxxxx, counsel for Source,
dated the Closing Date, in form and substance reasonably satisfactory to
Focus and its counsel, to the effect that:
(i) Source is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, and has all requisite corporate power under the laws of such
state to own, lease and operate its properties, to carry on its business as
currently conducted and to consummate the Merger;
(ii) All necessary corporate proceedings of the Board
of Directors of Source to approve and adopt this Agreement and to authorize
the execution and delivery of this Agreement and the consummation of the
Merger have been duly and validly taken and the stockholders of Source either
do not have any appraisal rights under the Texas Act or have waived those
rights.
(iii) Source has the corporate power to execute and
deliver this Agreement, and this Agreement has been duly authorized, executed
and delivered by Source and constitutes its legal, valid and binding
obligation except that the enforceability thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally; and (ii)
general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law); and
(iv) Except as disclosed in the Source Disclosure
Letter, such counsel knows of no actions, suits or proceedings pending or
threatened against or affecting Source, at law or in equity, or before or by
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency, or instrumentality that relate to the transactions
contemplated by this Agreement, that would, if determined adversely to
Source, individually or in the aggregate have a Material Adverse Effect.
15
(d) NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the business, properties or financial condition of Source,
taken as a whole.
(e) LITIGATION. No action or proceeding before any court or
governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in
respect of this Agreement or the consummation of the transactions
contemplated by this Agreement, and would in the reasonable judgment of Focus
make it inadvisable to consummate such transactions, and no court order shall
have been entered in any action or proceeding instituted by any other party
which enjoins, restrains or prohibits this Agreement or the consummation of
the transactions contemplated by this Agreement.
(f) CERTIFICATE OF SOURCE. At the Closing, Focus shall have
received from Source a certificate of the chairman or president and the
secretary of Source, dated the Closing Date, certifying that all
representations and warranties set forth in this Agreement are true, complete
and correct in all material respects at and as of the Closing Date as if made
at that time, and that Source has performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by Source on or prior to the Closing.
(g) CONSENTS AND APPROVALS. Source shall have obtained all
consents and approvals of other persons, mortgagees, lessors, and
governmental authorities necessary to the performance by Source of the
transactions hereunder. Source shall have made all filings, applications,
statements and reports to all Federal, state, and local governmental agencies
or entities required to be made prior to the Closing by or on behalf of
Source pursuant to any statute, rule or regulation in connection with the
transactions contemplated hereunder. Focus shall have obtained the approval
of the Merger and the transactions contemplated by this Agreement by Banc of
America Commercial Finance Corporation, and Critical Capital Growth Fund, L.P.
(h) DELIVERY OF DOCUMENTS. All other documents required to
be delivered by Source on or prior to the Closing shall be delivered or shall
be tendered by the Closing.
(i) CONVERSION OF DEBT. All of the outstanding debt (other
than trade debt) of Source shall be converted into capital stock of Source
prior to the Closing.
(j) EMPLOYMENT CONTRACTS. Focus or Merger Sub shall have
entered into employment agreements with Xxxxxx Xxxx and Xxxxx Xxxxx and any
other employees of Source who are determined by Focus to be key employees on
terms that are acceptable to Focus.
(k) CANCELLATION OF SHAREHOLDER AGREEMENTS. The Buy-Sell
Agreement, dated as of May ___, 1999 among the Principal Source Stockholders
and the Shareholders' Agreement dated as of May ___, 1999 among the Principal
Source Stockholders shall have been cancelled by each of the parties thereto.
(l) RESOLUTION OF COVENANT NOT TO COMPETE. Source shall
have obtained a waiver or release acceptable to Focus from all entities which
hold a covenant not to compete relating to Xxxxx Xxxxx or Xxxxxx Xxxx, or such
other mutually acceptable resolution has been made between Source and Focus
regarding such covenants not to compete. Notwithstanding anything to the
contrary in this Agreement, this provision is specifically subject to Section
6.3, but is not subject to Section 8.11 such that any termination of this
Agreement pursuant to Section 6.3 for the reason that the provisions of
5.1(l) shall not be accomplished by Source after reasonable and diligent
efforts, shall not trigger the liquidated damages provisions of Section 8.11.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SOURCE. The
obligations of Source under this Agreement are, at the option of Source,
subject to the satisfaction of the following conditions on or before the
Closing:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Focus and Merger Sub herein contained shall
have been true and correct in all material respects when made, and, in
addition, shall be true and correct in all material respects on and as of the
16
Closing with the same force and effect as though made on and as of the
Closing, except as affected by transactions contemplated hereby.
(b) PERFORMANCE OF AGREEMENTS. Focus and Merger Sub shall
have in all material respects performed all obligations and agreements and
complied in all material respects with all covenants and conditions contained
in this Agreement to be performed and complied with by them on or prior to
the Closing.
(c) OPINION OF COUNSEL FOR FOCUS. At the Closing, Source
shall have received an opinion of Xxxx & Xxxxx Professional Corporation,
counsel for Focus, dated the Closing Date, in form and substance reasonably
satisfactory to Source and its counsel, to the effect that:
(i) Focus and Merger Sub are corporations duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and each of them has all requisite corporate power under
the laws of such state to own, lease and operate its properties, to carry on
its business as currently conducted, and to consummate the Merger;
(ii) All necessary corporate proceedings of the Boards
of Directors and the stockholders of Focus and Merger Sub to approve and
adopt this Agreement and to authorize the execution and delivery of this
Agreement and the consummation of the Merger have been duly and validly taken;
(iii) Each of Focus and Merger Sub has the corporate
power to execute and deliver this Agreement, and this Agreement has been duly
authorized, executed and delivered by Focus and Merger Sub and constitutes
its legal, valid and binding obligation except that the enforceability
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally; and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity
or at law);
(iv) Except as disclosed in the Focus Disclosure
Letter, such counsel knows of no actions, suits or proceedings pending or
threatened against or affecting Focus or Merger Sub, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality that would, if
determined adversely to Focus or Merger Sub, individually or in the
aggregate, have a Material Adverse Effect;
(v) The shares of Focus Common Stock to be issued in
accordance with this Agreement are duly authorized, and will be, upon the
effectiveness of the Merger, validly issued, fully paid and nonassessable.
(d) NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the business, properties or financial condition of Focus
and Merger Sub, taken as a whole.
(e) LITIGATION. No action or proceeding before any court or
governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in
respect of this Agreement or the consummation of the transactions
contemplated by this Agreement, and would in the reasonable judgment of
Source make it inadvisable to consummate such transactions, and no court
order shall have been entered in any action or proceeding instituted by any
other party which enjoins, restrains or prohibits this Agreement or the
consummation of the transactions contemplated by this Agreement.
17
(f) CERTIFICATES OF FOCUS AND MERGER SUB. At the Closing,
Source shall have received from Focus and Merger Sub certificates of the
president and secretary of Focus and Merger Sub, dated the Closing Date,
certifying that all representations and warranties set forth in this
Agreement are true, complete and correct in all material respects at and as
of the Closing as if made at that time, and that Focus and Merger Sub each
has performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed or complied with by Focus and
Merger Sub on or prior to the Closing.
(g) DELIVERY OF DOCUMENTS. All other documents required to
be delivered by Focus or Merger Sub on or prior to the Closing shall be
delivered or shall be tendered by the Closing.
(h) CONSENTS AND APPROVALS. Focus and Merger Sub shall have
obtained all consents and approvals of other persons, mortgagees, lessors,
and governmental authorities necessary to the performance by Focus and Merger
Sub of the transactions hereunder. Focus and Merger Sub shall have made all
filings, applications, statements and reports to all Federal, state, and
local governmental agencies or entities required to be made prior to the
Closing by or on behalf of Focus or Merger Sub pursuant to any statute, rule
or regulation in connection with the transactions contemplated hereunder.
VI. AMENDMENT, WAIVER, TERMINATION
6.1 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.2 WAIVER. At any time prior to the Closing, the parties hereto
may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (ii) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in
any document delivered pursuant hereto; and (iii) waive compliance with any
of the agreements or conditions of the other parties contained herein. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party.
6.3 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(i) by mutual consent of Source and Focus;
(ii) by either Source or Focus, if the Merger shall
not have been consummated before January 31, 2000 (unless the failure to
consummate the Merger by such date shall be due to the action or failure to
act of the party seeking to terminate this Agreement); or
(iii) by either Source or Focus, if (a) the conditions
to such party's obligations shall have become impossible to satisfy; or (b)
any permanent injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall have become final
and non-appealable.
6.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 6.3 hereof, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any
party hereto or its affiliates, directors, officers or stockholders. Nothing
contained in this Section 6.4 shall relieve any party from liability for any
willful breach of this Agreement.
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VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. If the Merger
occurs, all of the representations and warranties contained in Article III
shall survive the Closing for a period of one year.
7.2 INDEMNIFICATION BY SOURCE PRINCIPAL STOCKHOLDERS.
(a) Subject to the terms and conditions contained herein,
Source, jointly and severally with the Principal Source Stockholders, agree
to indemnify, defend and hold harmless Focus, its stockholders, officers,
directors, employees and attorneys, all subsidiaries and affiliates of Focus
(including Merger Sub), and the respective officers, directors, employees and
attorneys of such entities (all such persons and entities being collectively
referred to as the "FOCUS GROUP") from, against, for and in respect of any
and all losses, damages, costs and expenses (including reasonable legal fees
and expenses) which any member of the Focus Group may sustain or incur which
are caused by or arise out of any inaccuracy in or breach of any of the
representations, warranties or covenants made by Source or the Principal
Source Stockholders in this Agreement (collectively, the "FOCUS LOSSES");
provided, however, that following completion of the Merger, the foregoing
indemnification (including without limitation with respect to Source's
representations and warranties) shall be provided solely by the Principal
Source Stockholders, and the foregoing indemnified parties shall neither be
permitted nor required to seek indemnification from Source.
(b) Source and the Principal Source Stockholders shall not
be required to indemnify any member of the Focus Group for any Focus Losses
until the aggregate amount of all Focus Losses under all claims shall exceed
$100,000 (the "FLOOR"); provided, however, that if the aggregate amount of
Focus Losses in respect of such claims exceeds the Floor, Source and the
Principal Source Stockholders shall indemnify such member or members of the
Focus Group for all such Source Losses (including the initial $100,000 in
respect of such claims), subject to the further limitations set forth herein.
(c) The obligation of Source and the Principal Source
Stockholders to indemnify members of the Focus Group with respect to a Focus
Loss as described in sections 7.2(a) and 7.2(b) is subject to the condition
that Source and the Principal Source Stockholders shall have received a claim
for such Focus Loss prior to the expiration of one year following the Closing
Date.
7.3 INDEMNIFICATION BY FOCUS.
(a) Subject to the terms and conditions contained herein,
Focus agrees to indemnify, defend and hold harmless Source, its stockholders,
officers, directors, employees and attorneys, all affiliates of Source, and
the respective officers, directors, employees and attorneys of such entities
(all such persons and entities being collectively referred to as the "Source
Group") from, against, for and in respect of any and all losses, damages,
costs and expenses (including reasonable legal fees and expenses) which any
member of the Source Group may sustain or incur which are caused by or arise
out of any inaccuracy in or breach of any of the representations, warranties
or covenants made by Focus in this Agreement (collectively, the "SOURCE
LOSSES").
(b) Focus shall not be required to indemnify any member of
the Source Group for any Source Losses until the aggregate amount of all such
Source Losses exceeds the Floor; provided, however that if the aggregate
amount of Source Losses in respect of such claims exceeds the Floor, Focus
shall indemnify such member or members of the Source Group for all such
Source Losses
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(including the initial $100,000 in respect of such claims), subject to the
further limitations set forth herein.
(c) The obligation of Focus to indemnify members of the
Source Group with respect to any Source Loss is subject to the condition that
Focus shall have received a claim for such Source Loss prior to the
expiration of one year following the Closing Date.
7.4 PROCEDURES FOR INDEMNIFICATION.
(a) As used in this Article VII, the term "INDEMNITOR" means
the party or parties against whom indemnification hereunder is sought, and
the term "INDEMNITEE" means the party or parties seeking indemnification
hereunder.
(b) A claim for indemnification hereunder (an
"INDEMNIFICATION CLAIM") shall be made by Indemnitee by delivery of a written
notice to Indemnitor requesting indemnification and specifying the basis on
which indemnification is sought in reasonable detail (and shall include
relevant documentation related to the Indemnification Claim), the amount of
the asserted Focus Losses or Source Losses, as the case may be, and, in the
case of a Third Party Claim (as defined in Section 7.5), containing (by
attachment or otherwise) such other information as Indemnitee shall have
concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 7.5 hereof shall be observed by
Indemnitee and Indemnitor.
7.5 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made or any
suit or proceeding instituted by a third party against Indemnitee which, if
prosecuted successfully, would be a matter for which Indemnitee would be
entitled to indemnification under this Article VII (a "THIRD PARTY CLAIM"),
the obligations and liabilities of the parties hereunder with respect to such
Third Party Claim shall be subject to the following terms and conditions:
(a) Indemnitee shall give Indemnitor written notice of any
such Third Party Claim promptly after receipt by Indemnitee of notice
thereof, and Indemnitor will undertake control of the defense thereof by
counsel of its own choosing reasonably acceptable to Indemnitee. Indemnitee
may participate in the defense through its own counsel at its own expense.
If Indemnitor fails or refuses to undertake the defense of such Third Party
Claim within 15 days after written notice of such claim has been delivered to
Indemnitor by Indemnitee, Indemnitee shall have the right to undertake the
defense, compromise and, subject to Section 7.6, settlement of such Third
Party Claim with counsel of its own choosing. In the circumstances described
in the preceding sentence, Indemnitee shall, promptly upon its assumption of
the defense of such Third Party Claim, make an Indemnification Claim as
specified in Section 7.4(b) which shall be deemed an Indemnification Claim
that is not a Third Party Claim for the purposes of the procedures set forth
herein. Failure of Indemnitee to furnish written notice to Indemnitor of a
Third Party Claim shall not release Indemnitor from Indemnitor's obligations
hereunder, except to the extent Indemnitor is prejudiced by such failure.
(b) Indemnitee and Indemnitor shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim, including making available records relating to such claim and
furnishing employees of Indemnitee as may be reasonably necessary for the
preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim.
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7.6 SETTLEMENT OF THIRD PARTY CLAIMS. Unless Indemnitor has failed
to fulfill its obligations under this Article VII, no settlement by
Indemnitee of a Third Party Claim shall be made without the prior written
consent by or on behalf of Indemnitor, which consent shall not be
unreasonably withheld or delayed. If Indemnitor has assumed the defense of a
Third Party Claim as contemplated by Section 7.5(a), no settlement of such
Third Party Claim may be made by Indemnitor without the prior written consent
by or on behalf of Indemnitee, unless such settlement includes a complete
release of all claims against Indemnitee.
VIII. GENERAL
8.1 FEES AND EXPENSES. If the Merger is consummated, (a) all costs
and expenses incurred by Focus or Merger Sub in connection with this
Agreement and the transactions contemplated hereby, will be borne by Focus
and (b) all costs and expenses incurred by Source or the Principal Source
Stockholders in connection with this Agreement and the transactions
contemplated hereby will be borne by the Principal Source Stockholders
(except that Focus will reimburse the Principal Source Stockholders for up to
$5,000 of such costs and expenses no later than 30 days following Closing
Date). If the Merger is not consummated each party shall bear its own costs
and expenses incurred in connection with this Agreement and the transactions
contemplated thereby.
8.2 INDEMNITY AGAINST FINDERS. Each party hereto shall indemnify
and hold the other party harmless against any claim for finders' fees based
on alleged retention of a finder by it.
8.3 CONTROLLING LAW. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement, shall be governed
by and construed in accordance with the laws of the State of Texas,
notwithstanding any Texas or other conflict-of-law provisions to the contrary.
8.4 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered
against receipt, upon receipt of a facsimile transmission or when deposited
in the United States mails, first class postage prepaid, addressed as set
forth below:
If to Focus or Merger Sub:
Focus Wireless Group
000 Xxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy given in the manner prescribed above, to:
Xxxx & Xxxxx Professional Corporation
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
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If to Source:
0000 Xxxxx Xxxxxxx Xxxx, Xxxxx 00
Xxxxxx Xxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xx. Xxxxxx Xxxx
With a copy given in the manner prescribed above, to:
If to Xxxxxx Xxxx:
000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
If to Xxxxx Xxxxx:
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
If to Xxxx Xxxxxxxxxxx:
000 Xxxxxxxxxx Xxx
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
With a courtesy copy to:
Xxxxxxxx & Xxxxxxx
0000 XX 000, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Phone: 000-000-0000
Any party may alter the address to which communications or copies are to
be sent by giving notice to the other parties of such change of
address in conformity with the provisions of this paragraph for
the giving of notice.
8.5 BINDING NATURE OF AGREEMENT; NO ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that no party may assign or
transfer its rights or obligations under this Agreement without the prior
written consent of the other parties hereto.
8.6 ENTIRE AGREEMENT. Except as set forth in the Confidentiality
Agreement, this Agreement contains the entire understanding between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, except as herein contained.
The express terms hereof control and supersede any course of performance
and/or usage of the trade inconsistent with any of the terms hereof.
8.7 PUBLIC ANNOUNCEMENTS. Except as contemplated by this Agreement
or as may be required by applicable law or the rules and regulations or the
SEC or the National Association of Securities Dealers, Inc., none of the
parties hereto shall make any press release or other public
22
announcement or filings with respect to this Agreement or the transactions
contemplated hereby without the prior approval of both Focus and Source,
which approvals shall not be unreasonably withheld or delayed.
8.8 INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other
or further exercise of the same or any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
8.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Any photographic or xerographic copy of this Agreement, with
all signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as if it were an executed counterpart of this
Agreement.
8.10 PROVISIONS SEPARABLE. The provisions of this Agreement are
independent and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole
or in part.
8.11 LIQUIDATED DAMAGES. In the event Source or Focus and Merger
Sub fails to complete the Merger for any reason (except if such party is in
compliance with the terms and conditions of this Agreement), (i) the sole
remedy for Focus and Merger Sub in the case of such a failure by Source will
be a cash payment by Source to Focus of $50,000 and (ii) the sole remedy of
Source in the case of such a failure by Focus or Merger Sub will be a cash
payment by Focus to Source of $50,000. The foregoing payment is intended to
serve as a liquidated damages penalty by the defaulting party.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FOCUS AFFILIATES, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
FOCUS AFFILIATES MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
THE WIRELESS GROUP, INC.
By: /s/ Xxxxxx X. Xxxx
-----------------------------------------
Xxxxxx X. Xxxx
President
/s/ Xxxxxx X. Xxxx
-----------------------------------------
Xxxxxx Xxxx
/s/ Xxxxx Xxxxx
-----------------------------------------
Xxxxx Xxxxx
/s/ Xxxx Xxxxxxxxxxx
-----------------------------------------
Xxxx Xxxxxxxxxxx
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