AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FOCUS ENHANCEMENTS, INC.,
FOCUS ACQUISITION CORP.
AND
TVIEW, INC.
Dated as of September 30, 1996
TABLE OF CONTENTS
Section Page
1. The Plan of Merger....................................................1
1.01 Execution of Certificate of Merger...........................1
1.02 Existence of TView...........................................1
1.03 Certificate of Incorporation; By-Laws........................1
1.04 Directors and Officers.......................................2
1.05 Surrender and Cancellation of TView Capital Stock............2
1.06 Common Stock of Surviving Corporation........................2
1.08 Issuance of FOCUS Common Stock to Stockholders...............3
1.09 Stockholders' Representative.................................3
1.10 Closing......................................................4
1.11 Registration of FOCUS Common Stock...........................4
1.12 Lock-Up Agreement for Public Offering........................6
2. Representations of the Stockholders Regarding the Shares..............6
3. Representations of TView..............................................7
3.01 Organization.................................................7
3.02 Capitalization of TView......................................8
3.03 Subsidiaries.................................................8
3.04 Authorization................................................8
3.05 Financial Statements.........................................9
3.06 Absence of Undisclosed Liabilities...........................9
3.07 Litigation..................................................10
3.08 Insurance...................................................10
3.09 Intangible Property.........................................10
3.10 Leases; Real Estate.........................................11
3.11 Title to Assets.............................................13
3.12 Inventory...................................................13
3.13 Accounts Receivable.........................................13
3.14 Tax Matters.................................................13
3.15 Books and Records...........................................14
3.16 Contracts and Commitments...................................14
3.17 Compliance with Agreements and Laws.........................16
3.18 Employee Relations..........................................17
3.19 Employee Benefit Plans......................................17
3.20 Absence of Certain Changes or Events........................18
3.21 Customers...................................................19
3.22 Suppliers...................................................19
3.23 Product Warranties and Returns..............................20
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3.24 Prepayments and Deposits....................................20
3.25 Indebtedness to and from Officers,
Directors and Stockholders..................................20
3.26 Banking Facilities..........................................20
3.27 Powers of Attorney and Suretyships..........................20
3.28 Conflicts of Interest.......................................20
3.29 Regulatory Approvals........................................21
3.30 Disclosure..................................................21
4. Representations of FOCUS and FAC.....................................22
4.01 Organization and Authority..................................22
4.02 Capitalization..............................................22
4.03 Authorization...............................................22
4.04 Regulatory Approvals........................................23
4.05 Financial Statements........................................23
4.06 Absence of Undisclosed Liabilities..........................23
4.07 Litigation..................................................23
4.08 Tax Matters.................................................24
4.09 Compliance with Agreements and Laws.........................24
4.10 Absence of Certain Changes or Events........................24
4.11 Disclosure..................................................25
5. Access to Information; Public Announcements..........................25
5.01 Access to Management, Properties and Records................25
5.02 Confidentiality.............................................26
5.03 Public Announcements........................................26
6. Pre-Closing Covenants of the Stockholders and TView..................26
6.01 Conduct of Business.........................................26
6.02 Absence of Material Changes.................................27
6.03 Delivery of Interim Financial Statements....................28
6.04 Communications with Customers and Suppliers.................28
6.05 Compliance with Laws........................................28
6.06 Continued Truth of Representations and Warranties...........28
6.07 Continuing Obligation to Inform.............................29
6.08 Exclusive Dealing...........................................29
6.09 Reports, Taxes..............................................29
6.10 Agreement to Vote for Merger................................30
7. Conditions to Obligations of FOCUS and FAC...........................30
7.01 Continued Truth of Representations and Warranties of the
Stockholders and TView; Compliance with Covenants and
Obligations.................................................30
7.02 Performance by the Stockholders and TView...................30
7.03 Corporate Proceedings.......................................30
7.04 Governmental Approvals......................................30
7.05 Consent of Third Parties....................................30
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7.06 Adverse Proceedings.........................................30
7.07 Opinions of Counsel.........................................31
7.08 Update......................................................31
7.09 Employment Contracts........................................31
7.10 Non-Competition Agreements..................................31
7.11 Certificate of Merger.......................................32
7.12 Escrow Agreement............................................32
7.13 Resignations................................................32
7.14 Indebtedness................................................32
7.15 Employees of TView..........................................32
7.16 Closing Deliveries..........................................32
7.17 Purchasers' Representative..................................33
8. Conditions to Obligations of TView and the Stockholders..............33
8.01 Continued Truth of Representations and Warranties of
FOCUS and FAC; Compliance with Covenants and Obligations....33
8.02 Corporate/Stockholder Proceedings...........................33
8.03 Governmental Approvals......................................33
8.04 Consents of Third Parties...................................33
8.05 Adverse Proceedings.........................................33
8.06 Opinion of Counsel..........................................34
8.07 Employment Agreements.......................................34
8.08 Escrow Agreement............................................34
8.09 Certificate of Merger.......................................34
8.10 Closing Deliveries..........................................34
9. Indemnification......................................................34
9.01 By FOCUS....................................................34
9.02 By the Stockholders and TView...............................35
9.03 Claims for Indemnification..................................36
9.04 Defense by the Indemnifying Party...........................37
9.05 Payment of Indemnification Obligation.......................37
9.06 Survival of Representations; Claims for Indemnification.....38
9.07 Escrow......................................................38
10. Dispute Resolution...................................................39
10.01 General.....................................................39
10.02 Consent of the Parties......................................39
10.03 Arbitration........................................39
11. Termination of Agreement.............................................40
11.01 Termination by Lapse of Time................................40
11.02 Termination by Agreement of the Parties.....................40
11.03 Termination by Reason of Breach.............................40
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12. Brokers..............................................................40
12.01 For the Stockholders and TView..............................40
12.02 For FOCUS...................................................40
13. Notices..............................................................41
14. Successors and Assigns...............................................42
15. Entire Agreement; Amendments; Attachments............................42
16. Severability.........................................................42
17. Investigation of the Parties.........................................42
18. Expenses.............................................................43
19. Governing Law........................................................43
20. Section Headings.....................................................43
21. Counterparts.........................................................43
Exhibits
Exhibit A: Certificate of Merger
Exhibit B: TView Disclosure Schedule
Exhibit C: FOCUS Disclosure Schedule
Exhibit D: Form of Opinion of Counsel to TView
Exhibit E: Form of Employment Contracts
Exhibit F: Form of Non-Competition Agreements
Exhibit G: Form of Escrow Agreement
Exhibit H: Form of Opinion of Counsel to FOCUS AND FAC
Schedules
Schedule 1.08: Performance Criteria of TView NTSC/Scan
Conversion Video Scaling ASIC Chip
Schedule I: List of TView Capital Stock and Stockholders
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PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger (the "Agreement") is made effective
as of the 30th day of September, 1996 by and among FOCUS Enhancements, Inc., a
Delaware corporation with its principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("FOCUS"), FOCUS Acquisition Corp., a Delaware
corporation with its principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("FAC"), TView, Inc., a Delaware corporation with its
principal place of business at ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
("TView"), and the stockholders of TView who are listed on the signature pages
hereof (individually, a "Stockholder" and, collectively, the "Stockholders").
Preliminary Statement
WHEREAS, the Boards of Directors of FOCUS, FAC and TView deem it
advisable and in the best interest of FOCUS, FAC and TView and their respective
stockholders that FAC merge with and into TView (the "Merger") pursuant to this
Agreement and the Certificate of Merger (the "Certificate of Merger") between
TView and FAC in substantially the form attached hereto as Exhibit A; and
WHEREAS, the parties hereto intend that this Agreement qualify as a tax
free reorganization under the provisions of Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. The Plan of Merger
1.01 Execution of Certificate of Merger. Prior to the Closing
Date (as hereinafter defined), TView and FAC will execute the Certificate of
Merger and cause the Certificate of Merger to be delivered to the Secretary of
State of the State of Delaware in accordance with applicable provisions of the
General Corporation Law of the State of Delaware. TView and FAC will also
execute and deliver such other documents or certificates as may be required to
effect the Merger. The date on which the filings with the Delaware Secretary of
State shall have been completed pursuant to this Section 1.01 is hereinafter
referred to as the "Effective Date."
1.02 Existence of TView. On the Effective Date, the separate
existence of FAC shall cease, and FAC shall be merged with and into TView, which
shall be the surviving entity of the Merger (the "Surviving Corporation"). On
the Effective Date, all of the rights, privileges, powers, franchises,
properties and assets of FAC shall be vested in the Surviving Corporation.
1.03 Certificate of Incorporation; By-Laws. The Certificate of
Incorporation and By-Laws of TView, as in effect immediately prior to the
Effective Date, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until thereafter amended
as provided by law.
1.04 Directors and Officers. Subject to the receipt of the
director and officer resignations contemplated by Section 7.13 of this
Agreement, on the Effective Date the respective terms of such resigning
directors and officers of TView shall terminate and those persons who are
serving, immediately prior to the Effective Date, as directors and officers of
TView and who have not so resigned, together with those persons who are serving,
immediately prior to the Effective Date, as directors and officers of FAC, shall
each assume the same positions with the Surviving Corporation.
1.05 Surrender and Cancellation of TView Capital Stock.
(a) Conversion of TView Capital Stock. On the
Effective Date, (i) each share of Common Stock, $.01 par value per share, of
TView ("TView Common Stock") issued and outstanding immediately prior to the
Effective Date shall be converted into the right of receive .139284 shares of
Common Stock, $.01 par value per share, of FOCUS ("FOCUS Common Stock"); and
(ii) each share of Series A Preferred Stock, $.01 par value per share, of TView
("TView Series A Stock") issued and outstanding immediately prior to the
Effective Date shall be converted into the right of receive .283691 shares of
FOCUS Common Stock. For purposes of this Agreement, the TView Common Stock and
the TView Series A Stock shall be referred to collectively as the "TView Capital
Stock."
(b) Surrender. At and after the Effective Date, each
share of TView Capital Stock issued and outstanding immediately prior to the
Effective Date shall be converted into the right to receive the FOCUS Common
Stock described in Section 1.05(a) hereof, and each holder thereof shall cease
to have any rights in respect of such shares and their rights shall be solely to
receive, contemporaneously with the surrender of the certificate or certificates
representing such share or shares, the FOCUS Common Stock described in Section
1.05(a) above. Without limiting the foregoing, each holder of the TView Series A
Stock, by the execution of this Agreement, hereby acknowledges that the receipt
of the FOCUS Common Stock, set forth in the foregoing Subsection 1.05(a), in
consideration for the surrender of their respective shares of TView Series A
Stock shall be in full satisfaction of, and shall constitute an express waiver
of, any rights, claims, preferences, dividends or privileges which such
stockholders may have had otherwise held under TView's certificate of
incorporation.
(c) Fractional Shares. No fractional shares of FOCUS
Common Stock will be issued in connection with the Merger, but in lieu thereof,
each holder of TView Capital Stock who would otherwise be entitled to receive a
fraction of a share of FOCUS Common Stock will receive from FOCUS, promptly
after the Effective Date, an amount of cash equal to $2.729 multiplied by the
fraction of a share of FOCUS Common Stock to which such holder would otherwise
be entitled.
1.06 Common Stock of Surviving Corporation. On the
Effective Date, each share of common stock of FAC issued and outstanding
immediately prior to the Effective Date shall
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continue unchanged and shall continue to evidence one share of common stock of
the Surviving Corporation.
1.07 [intentionally omitted]
1.08 Issuance of FOCUS Common Stock to Stockholders. At the
Closing, FOCUS shall deliver the FOCUS Common Stock to the Escrow Agent (as
hereinafter defined) to be held in escrow until the TView NTSC/Scan Conversion
Video Scaling ASIC chip meets the performance criteria set forth on the attached
Schedule 1.08 and as otherwise provided in Section 9.07 hereof (the "Escrow").
To the extent that FOCUS Common Stock remains in Escrow on the Escrow Release
Date (as hereinafter defined), such FOCUS Common Stock shall be delivered to the
Stockholders' Representative for distribution to the Stockholders in accordance
with the provisions of Section 9.07.
1.09 Stockholders' Representative.
(a) In order to efficiently administer (i) the
distribution of the FOCUS Common Stock, (ii) the waiver of any condition to the
obligations of the Stockholders to consummate the transactions contemplated
hereby, and (iii) the defense and/or settlement of any claims for which the
Stockholders may be required to indemnify FOCUS or the Surviving Corporation
pursuant to Article 8 hereof, each of the Stockholders hereby irrevocably
constitutes and appoints, effective as of the Effective Date, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(the "Stockholders' Representative"), as its true and lawful agent and
attorney-in-fact in respect of the transactions contemplated by this Agreement
and the Escrow Agreement.
(b) By their approval of the Merger and their
appointment of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as the Stockholders' Representative, the
Stockholders agree that:
(i) FOCUS or the Surviving Corporation shall
be able to rely conclusively on the instructions and decisions of the
Stockholders' Representative as to the settlement of any indemnification claim
by FOCUS or the Surviving Corporation pursuant to Article 8 hereof or any other
actions required to be taken by the Stockholders' Representative hereunder, and
no party hereunder shall have any cause of action against FOCUS or the Surviving
Corporation for any action taken by FOCUS or the Surviving Corporation in
reliance upon the instructions or decisions of the Stockholders' Representative;
(ii) all actions, decisions and instructions
of the Stockholders' Representative shall be conclusive and binding upon all of
the Stockholders and no Stockholder shall have any cause of action against the
Stockholders' Representative for any action taken, decision made or instruction
given by the Stockholders' Representative under this Agreement, except for fraud
or willful breach of this Agreement by the Stockholders' Representative;
(iii) the provisions of this Subsection 1.09
are independent and severable, are irrevocable and coupled with an interest and
shall be enforceable notwithstanding any
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rights or remedies that any Stockholder may have in connection with the Merger
and the other transactions contemplated by this Agreement;
(iv) remedies available at law for any breach
of the provisions of this Subsection 1.09 are inadequate; therefore, FOCUS and
the Surviving Corporation shall be entitled to temporary and permanent
injunctive relief without the necessity of proving damages if FOCUS or the
Surviving Corporation brings an action to enforce the provisions of this
Subsection 1.09; and
(v) the provisions of this Subsection 1.09
shall be binding upon the executors, heirs, legal representatives and successors
of each Stockholder, and any references in this Agreement to a Stockholder or
the Stockholders shall mean and include the successors to the Stockholders'
rights hereunder, whether pursuant to testamentary disposition, the laws of
descent and distribution or otherwise.
1.10 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
Worcester LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00
a.m., Boston Time, on September 30, 1996 or at such other place, time or date as
may be mutually agreed upon in writing by TView and FOCUS (the "Closing Date").
The surrender of the TView Capital Stock by the Stockholders to FOCUS for
cancellation in connection with the Merger shall be deemed to occur at 9:00
a.m., Boston Time, on the Closing Date.
1.11 Registration of FOCUS Common Stock.
(a) Unless otherwise requested in writing by the
holders of not less than 85% of the FOCUS Common Stock, FOCUS will within ninety
(90) days of the Escrow Release Date file a registration statement on Form S-3
or equivalent form with respect to all the FOCUS Common Stock pursuant to the
Securities Act of 1933, as amended, (the "Act") so that the FOCUS Common Stock
may be publicly sold under the Act as promptly as practicable thereafter and
FOCUS will use its best efforts to cause such registration to become and remain
effective (including the taking of such steps as are necessary to obtain the
removal of any stop order), provided that the Stockholders shall furnish FOCUS
with appropriate information in connection therewith as FOCUS may reasonably
request in writing. All costs and expenses of the registration statement shall
be borne by FOCUS, except that the Stockholders shall bear the fees of their own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by them. FOCUS shall supply prospectuses, and such other
documents as the Stockholders may request in order to facilitate the public sale
or other disposition of the FOCUS Common Stock and use its best efforts to
register and qualify any of the FOCUS Common Stock for sale in such states as
such Stockholders designate.
(b) In the event a registration statement relating to
the FOCUS Common Stock is filed under the Act, amended or supplemented, FOCUS
will indemnify and hold harmless each holder of the securities covered by such
registration statement, amendment or supplement (such holder being hereinafter
called the "Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act) the Distributing Holder, and each underwriter (within
the meaning
4
of the Act) of such securities and each person, if any, who controls (within the
meaning of the Act) any such underwriter, against any losses, claims, damages or
liabilities, joint or several, to which the Distributing Holder, any such
controlling person or any such underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages, or liabilities, or actions
in respect thereof, arise out of or are based upon any untrue statement or
alleged untrue statement or any material fact contained in any such registration
statement or any preliminary prospectus or final prospectus constituting a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to the state therein of a material
fact required to be stated therein or necessary to make the statements therein
not misleading. FOCUS shall reimburse the Distributing Holder or such
controlling person or underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that FOCUS
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said financial prospectus
or said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder or any other Distributing
Holder for use in the preparation thereof.
(c) The Distributing Holder will indemnify and hold
harmless FOCUS, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls FOCUS (within the meaning of the Act) against any
losses, claims, damages or liabilities, joint or several, to which FOCUS or any
such director, officer or controlling person may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities, or actions
in respect thereof, arise out of or are based upon (i) any untrue statement of
any material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus, said final prospectus
or said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder for use in the preparation
thereof or (ii) the Distributing Holder's failure to deliver a prospectus as
required under applicable federal or state securities laws. The Distributing
Holders shall reimburse FOCUS or any such director, officer or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action.
(d) Promptly after receipt by an indemnified party
under this Section 1.11 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof, but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise then
under this Section 1.11.
(e) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled
5
to participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 1.11 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
(f) The obligations of the Company under this Section
1.11 to register the FOCUS Common Stock shall expire and terminate on the
earlier of (i) October 22, 1998 or (ii) at such time as the Stockholder shall be
entitled to sell such securities without restriction and without a need for the
filing of a registration statement under the Act, including, without limitation,
for any resales of "Restricted Securities" made pursuant to Rule 144 as
promulgated by the SEC, or a sale made pursuant to Sections 4(1) and/or 4(2)
under the Act.
1.12 Lock-Up Agreement for Public Offering. If prior to the
registration of the FOCUS Common Stock pursuant to Section 1.11 hereof, FOCUS
undertakes a public offering of its equity securities, the Stockholder agrees
not to sell, pledge, transfer or otherwise dispose of, or grant any option or
purchase right with respect to, any shares of capital stock then owned by him
and not otherwise offered in the public offering, or engage in any short sale,
hedging transaction or other derivative security transaction involving the FOCUS
Common Stock, or other shares of Common Stock of FOCUS held by him, for such
period of time commencing 30 days prior to the proposed effective date of such
public offering until such period of time following the offering as FOCUS and
the managing underwriter of such public offering deem necessary in order to
ensure a stable and orderly trading market; provided, however, that such period
shall not exceed any lockup period which may be imposed on an affiliate (as such
term is defined in the Act and the rules and regulations promulgated thereunder)
(each, an "Affiliate") of Focus, and, provided, further, that in no
circumstances shall such lockup apply to a Shareholder who holds less than 1% of
the outstanding shares of Common Stock of FOCUS.
2. Representations of the Stockholders Regarding the Shares
Each Stockholder severally represents and warrants to FAC and
FOCUS, if the Closing does not occur, and to the Surviving Corporation and
FOCUS, if the Closing occurs, as follows:
(a) Such Stockholder has good and marketable title to the
shares of TView Capital Stock (the "Shares") owned by such Stockholder as listed
on Schedule I attached hereto. Except as set forth on Schedule I attached
hereto, such Shares on the Closing Date will be free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever.
(b) Such Stockholder has the full right, power and authority
to enter into this Agreement and to transfer and convey to FAC for cancellation
in connection with the Merger the Shares to be surrendered and conveyed by such
Stockholder hereunder and, upon the surrendering
6
thereof for cancellation in connection with the Merger as contemplated hereby,
FAC will acquire from such Stockholder good and marketable title to such Shares,
free and clear of all covenants, conditions, restrictions, voting trust
arrangements, liens, charges, encumbrances, options and adverse claims or rights
whatsoever.
(c) As of the Closing Date, such Stockholder shall not be a
party to, subject to or bound by any agreement or any judgment, order, writ,
prohibition, injunction or decree of any court or other governmental body which
would prevent the execution or delivery of this Agreement by such Stockholder or
the transfer, conveyance and surrender of the Shares to be surrendered by such
Stockholder to FAC pursuant to the terms hereof.
(d) No broker or finder has acted for such Stockholder in
connection with this agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder's fee or other
commissions in respect of such transactions based upon agreements, arrangements
or understandings made by or on behalf of such Stockholder.
(e) Each Stockholder represents, severally and not jointly, to
FOCUS and FAC that such Stockholder understands that the FOCUS Common Stock
being acquired by him has not been registered under the Act or any state
securities laws and is being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering. Each Stockholder
represents that he has had a full opportunity to request from FOCUS and to
review and has received all information which he deems relevant in making a
decision to acquire the FOCUS Common Stock. Each Stockholder represents that he
either (i) is an "accredited investor" as defined in Regulation D promulgated
pursuant to the Act or (ii) alone or with the Stockholders' Representative has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the FOCUS Common Stock.
3. Representations of TView
Except as otherwise set forth in the "TView Disclosure
Schedule" delivered to FAC and FOCUS as of the date hereof and attached hereto
as Exhibit B (the "TView Disclosure Schedule"), TView represents and warrants to
FAC and FOCUS, if the Closing does not occur, and to the Surviving Corporation
and FOCUS, if the Closing occurs, as set forth below. Facts and circumstances
disclosed in the TView Disclosure Schedule by TView to FOCUS and FAC shall
constitute exceptions to the specific representations and warranties set forth
below and shall also constitute general disclosures by TView under this
Agreement.
3.01 Organization. TView is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own or lease its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein (including the
Certificate of Merger), and to consummate the Merger and other transactions
contemplated hereby and thereby. TView is duly qualified to do business and in
good standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification except where failure to be
so qualified or to be in such good standing would not have a material adverse
effect on
7
the business, properties, finances or prospects of TView, taken as a whole. A
true and complete list of such jurisdictions is set forth in Section 3.01 of the
TView Disclosure Schedule. Certified copies of the Certificate of Incorporation
and By-laws of TView, as amended to date, have been previously delivered to
FOCUS, are complete and correct, and no amendments have been made thereto or
have been authorized since the date thereof.
3.02 Capitalization of TView.
On the date hereof, TView's authorized capital stock consists
of 4,113,470 shares of TView Common Stock, $.001 par value per share, of which
2,104,681 shares are issued and outstanding (including 0 treasury shares), and
1,613,470 shares are reserved for issuance upon conversion of the TView Series A
Stock; 3,226,940 shares of Preferred Stock, $.001 par value per share, of which
1,613,370 shares are designated as TView Series A Preferred Stock, of which
1,550,000 shares are issued and outstanding and 1,613,370 shares are designated
as Series A-1 Preferred Stock. The TView Capital Stock is held of record and
beneficially by the Stockholders as set forth on Schedule I. All such issued and
outstanding shares of TView Capital Stock have been and on the Closing Date will
be duly and validly issued and are, or will be on such date, fully paid and
non-assessable. There are not outstanding (i) any options, warrants or other
rights to purchase from TView any TView Capital Stock; (ii) any securities
convertible into or exchangeable for shares of such stock; or (iii) any other
commitments of any kind for the issuance of additional shares of TView Capital
Stock or options, warrants or other securities of TView. On the Closing Date,
there will not be outstanding (i) any options, warrants or other rights to
purchase from TView any TView Capital Stock; (ii) any securities convertible
into or exchangeable for shares of such stock; or (iii) any other commitments of
any kind for the issuance of additional shares of capital stock or options,
warrants or other securities of TView.
3.03 Subsidiaries. TView has no subsidiaries and does not own
any equity interest (including without limitation any options, warrants or other
rights to purchase such an equity interest or any securities convertible into or
exchangeable for such an equity interest) in any other corporation or similar
entity.
3.04 Authorization. The execution and delivery by TView of
this Agreement and the agreements provided for herein, and the consummation by
TView of the Merger and all other transactions contemplated hereunder and
thereunder by TView, have been (or, in the case of stockholder approval, will
be) duly authorized by all requisite shareholder, director and other corporate
action. This Agreement has been duly executed by TView and the Stockholders.
This Agreement and all other agreements and obligations entered into and
undertaken in connection with the Merger and all other transactions contemplated
hereby to which TView or any of the Stockholders is a party constitute the valid
and legally binding obligations of TView and the Stockholders, enforceable
against them in accordance with their respective terms, except as enforcement
may be limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or similar laws effecting creditors' rights
generally, and by the exercise of judicial discretion. The execution, delivery
and performance by TView and the Stockholders of this Agreement and the
agreements provided for herein, and the consummation by TView and the
Stockholders of the Merger and all other transactions contemplated hereby and
thereby, will not,
8
with or without the giving of notice or the passage of time or both, (a) violate
the provisions of any law, rule or regulation applicable to TView or any of the
Stockholders; (b) violate the provisions of the Certificate of Incorporation or
By-laws of TView; or (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator by which TView or any of its assets or
properties are bound; or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of TView pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which TView is a party or by
which TView or its assets is or may be bound. Section 3.04 of the TView
Disclosure Schedule sets forth a true, correct and complete list of all consents
and approvals of third parties that are required in connection with the
consummation by TView of the Merger and the performance by TView of its
obligations under this Agreement.
3.05 Financial Statements.
(a) Attached hereto as part of the TView Disclosure
Schedule are (i) the audited balance sheets of TView as of December 31, 1994 and
1995 and the related audited statements of income, shareholders' equity,
retained earnings and changes in financial condition of TView for the fiscal
year then ended, together with the notes thereto and the report thereon of KPMG
Peat Marwick LLP (collectively, the "Audited Year-End Financial Statements"),
and (ii) the unaudited balance sheet of TView as of August 31, 1996 (the
"Current Balance Sheet") and the related statements of income, shareholders'
equity, retained earnings and changes in financial condition of TView for the
six-month period then ended (collectively, the "Current Financial Statements").
The Audited Year-End Financial Statements and the Current Financial Statements
have been prepared in accordance with GAAP applied consistently with past
practice (except that the Current Financial Statements are subject to year-end
audit adjustments and do not contain all footnotes and related information
required by GAAP) and, in the case of the Audited Year-End Financial Statements,
have been certified without qualification (except for a "going concern"
qualification) by KPMG Peat Marwick LLP, TView's independent public accountants,
and, in the case of the Current Financial Statements, and are accompanied by a
certificate of the Chief Executive Officer of TView to the effect that the
Current Financial Statements were prepared in accordance with GAAP, subject to
year-end audit adjustments and the absence of footnotes and other related
information required by GAAP. The date of the Audited Year-End Balance Sheet is
hereinafter referred to as the "Balance Sheet Date."
(b) The Financial Statements fairly present in all
material respects, as of their respective dates, the financial condition,
retained earnings, assets and liabilities of TView and the results of operations
of TView for the periods indicated.
3.06 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected and reserved against in the Current Balance Sheet, (b) set
forth in Section 3.06 of the TView Disclosure Schedule, or (c) incurred in the
ordinary course of business after the date of the Current Balance Sheet and not
material in amount, either individually or in the aggregate, to the best of
TView's knowledge, TView has no liability or obligation, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise, which is
material to the condition (financial or
9
otherwise) of the assets, properties, business or prospects of TView. For
purposes of this Subsection 3.06, "material" means any amount in excess of
$25,000.
3.07 Litigation. There is no action, suit or proceeding to
which TView is a party pending or, to the best knowledge of TView, threatened
before any court or governmental agency, authority, body or arbitrator. TView
has not been permanently or temporarily enjoined by any order, judgment or
decree of any court or any governmental agency, authority or body from engaging
in or continuing any conduct or practice in connection with the business,
assets, or properties of TView. There is not in existence on the date hereof any
order, judgment or decree of any court, tribunal or agency enjoining or
requiring TView to take any action of any kind with respect to its business,
assets or properties.
3.08 Insurance. Section 3.08 of the TView Disclosure Schedule
sets forth a true, correct and complete list of all fire, theft, casualty,
general liability, workers compensation, business interruption, product
liability, automobile and other insurance policies maintained by TView and of
all life insurance policies maintained by TView on the lives of any of its
employees, specifying the type of coverage, the amount of coverage, the premium,
the insurer and the expiration date of each such policy (collectively, the
"Insurance Policies"). True, correct and complete copies of all Insurance
Policies have been previously delivered by TView to FOCUS. The Insurance
Policies are in full force and effect. All premiums due on the Insurance
Policies or renewals thereof have been paid through the Closing Date, and there
is no default by TView under the Insurance Policies nor any default by any other
party to the Insurance Policies that is known by TView. There are no outstanding
recommendations by any issuer of the Insurance Policies or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
governmental authority exercising similar functions which requires or recommends
any changes in the conduct of the business of, or any repairs or other work to
be done on or with respect to any of the properties or assets of, TView.
3.09 Intangible Property.
Section 3.09 of the TView Disclosure Schedule sets forth a
true, correct and complete list and, where appropriate, a description of, all
items of intangible property owned by TView (the "Owned Intangible Property"),
or used in the business of TView (the "Licensed Intangible Property"), including
without limitation, in-process research and development, inventions,
discoveries, trade secrets, Software (as defined below), know-how, patents,
patent applications, trade names, trademarks, trade registrations, applications
for trade registrations, copyrights, copyright registrations and all licenses
and other agreements to which TView is a party, which relate to the foregoing
kinds of property or rights to any "know-how" or disclosure or use of any ideas
relating to the business conducted by TView (the Owned Intangible Property and
the Licensed Intangible Property are hereinafter collectively referred to as the
"Intangible Property"). For purposes of this Agreement, the term "Software"
shall mean all of TView's right, title and interest in and to all software
programs, products and systems, including without limitation the software
programs described by the trademarks listed in Section 3.09 of the TView
Disclosure Schedule and any and all other software products developed or under
development by TView or any person for the benefit of TView, and including
without limitation all copies of source code, object code, documentation,
10
schematics, diagrams, machine readable information, technical manuals and data,
internal technical memorandum and records relating to such software programs,
products and systems, whether completed or unfinished, all license and other
agreements to which TView is a party as licensor or licensee or by which TView
is bound relating to the foregoing.
(a) TView is the sole and exclusive owner of all
right, title and interest in and to the Owned Intangible Property, and all
designs, permits, labels and packages used on or in connection therewith, free
and clear of all liens, security interests, charges, encumbrances, equities and
to its knowledge is not aware of any adverse claims against the Owned Intangible
Property;
(b) TView has the right and authority to use the
Licensed Intangible Property in connection with the conduct of its business in
the manner presently conducted, and TView is not aware of any such use which
conflicts with, infringes upon or violates any rights of any other person,
corporation or entity;
(c) TView has not received notice of a pending or
threatened claim, interference action or other judicial or adversarial
proceeding against TView that any of TView's operations, activities, products,
services or publications infringes any patent, trademark, trade name, copyright,
trade secret or other property right of a third party, or that it is illegally
or otherwise using any trade secret, formula or property right of any third
party;
(d) there are no outstanding disputes or other
isagreements with respect to any licenses or similar agreements or arrangements
described in Section 3.09 of the TView Disclosure Schedule or with respect to
infringement by a third party of any of the Intangible Property; and
(e) TView has taken all steps reasonably necessary to
protect its right, title and interest in and to the Intangible Property (other
than "shrink-wrap" licenses), and no rights, licenses, permissions or
assignments have been granted to any third parties with respect to any of the
Intangible Property and the Software (other than "shrink-wrap" licenses).
3.10 Leases; Real Estate.
(a) Section 3.10 of the TView Disclosure Schedule
sets forth a true, correct and complete list as of the date hereof of all leases
of real property to which TView is a party (collectively, the "Leases"). True,
correct and complete copies of all Leases and all amendments, modifications and
supplemental agreements thereto have previously been delivered by TView to
FOCUS. The Leases are in full force and effect, are binding and enforceable
against TView in accordance with their respective terms, and TView has no reason
to believe that the Leases are not binding and enforceable against the other
parties thereto in accordance with their respective terms, and such Leases have
not been modified or amended since the date of delivery to FOCUS. TView has not
received any written notice from any party to any Lease claiming that TView is
in default thereunder and that such default remains uncured. There has not
occurred any event which would constitute a material breach of or material
default in the performance of any covenant, agreement or condition contained in
any Lease, nor has there occurred any event which with the passage of
11
time or the giving of notice or both would constitute such a material breach or
material default. TView is not obligated to pay any leasing or brokerage
commission relating to any Lease and will not have any obligation to pay any
leasing or brokerage commission upon the renewal of any Lease. No construction,
alteration or other leasehold improvement work with respect to any of the Leases
remains to be paid for or to be performed by TView, or the landlords under the
Leases.
(b) There are no actual or potential material
environmental hazards on real property at any time owned, leased or operated by
TView (the "Properties").
(c) TView and the Properties are and have at all
times been operated in compliance with all Environmental Laws (as defined
below), and there are at the date hereof no existing, pending or threatened
claims, suits, proceedings or other judicial or administrative actions relating
to any violation of any Environmental Law with respect to TView or any of the
Properties. "Environmental Laws," as used herein, shall mean the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss.ss.6901 et seq.
("RCRA"), as amended from time to time, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
ss.ss.9601 et seq. ("CERCLA"), as amended from time to time, and all other
federal, state and local laws, rules, regulations and ordinances relating to air
or water quality, hazardous or solid wastes, hazardous substances or any other
environmental matters.
(d) The Properties are not now being used and, since
the commencement of TView's occupancy of the Properties, such Properties have
not been used, and to TView's best knowledge without independent investigation,
have not at any other time been used, for the treatment, storage or disposal of
any (a) "hazardous waste" (as that term is currently or in the future defined in
RCRA, (b) "hazardous substances" (as currently or in the future defined in
CERCLA), or (c) any chemical, compound, material, mixture, living organism or
substance that is now or hereafter defined or listed in or otherwise classified
pursuant to any Environmental Laws as a "hazardous waste," "extremely hazardous
waste," "toxic substances," "toxic pollutant," or any other formulation intended
to define, list or classify substances by reason of deleterious properties such
as ignitability, corrosivity, reactivity, carcinogenicity, or toxicity,
including petroleum, polychlorinated biphenyls ("PCBs"), asbestos, radon,
natural gas, natural gas liquids, liquefied natural gas or synthetic gas usable
for fuel; except to the extent permitted by applicable Environmental Laws and to
TView's best knowledge without independent investigation, no release (as defined
in CERCLA) of any such hazardous waste or hazardous substance has occurred on
any of the Properties except to the extent permitted by applicable Environmental
Laws.
(e) TView neither owns nor operates any "Underground
Storage Tank," as that term is defined in the Hazardous and Solid Waste
Amendments Act of 1984 (amending RCRA).
(f) With respect to the Properties, neither TView nor
any Affiliate of TView has filed, or has been or is required by any
Environmental Law to file, any notice with respect to the release of a
"hazardous substance," as defined under CERCLA, or the ownership or operation of
a facility where hazardous substances are stored, treated or disposed of other
than notices with respect thereto filed pursuant to the Superfund Amendments and
Reauthorization Act of 1986, as amended, 42 U.S.C. ss.ss.11021-11023.
12
3.11 Title to Assets. TView has good and marketable title to
all of its properties and assets, real, personal and mixed, including those
reflected in the Current Balance Sheet, free and clear of any security
interests, mortgages, pledges, liens, encumbrances, restrictions, or charges,
except for (i) those described in Section 3.11 of the TView Disclosure Schedule,
(ii) liens shown on the Current Balance Sheet or the Notes thereto as securing
specified liabilities set forth therein, with respect to which no material
default exists (except for defaults cured prior to the declaration of default
thereon), and except for minor imperfections of title and encumbrances, if any,
which are not substantial in character, amount, or extent, do not detract from
the value of the properties subject thereto, or interfere with the use of the
properties for the purposes for which they are presently used, or otherwise
impair TView's operations, and have arisen only in the ordinary course of
business.
3.12 Inventory. Section 3.12 of the TView Disclosure Schedule
sets forth a true, correct and complete list of the inventory of TView (the
"Inventory") as of the date of September 30, 1996. The Inventory consists of
items of a quality and quantity which are usable or saleable in the ordinary
course of the business conducted by TView. The value of all items of obsolete
materials and of materials of below standard quality have been written down to
realizable market value and the values at which such inventory is carried
reflect the normal inventory valuation policy of TView of stating inventory at
the lower of cost or market value on a first in first out (FIFO) basis in
accordance with GAAP.
3.13 Accounts Receivable. Section 3.13 of the TView Disclosure
Schedule sets forth a true, correct and complete list of the accounts and notes
receivable of TView (the "Accounts Receivable"), including the aging thereof as
of September 30, 1996. All Accounts Receivable arose out of the sales of
inventory or services in the ordinary course of business and are collectible in
the ordinary course of business net of the allowance for doubtful accounts and
sales returns reflected in the Closing Balance Sheet using normal collection
procedures.
3.14 Tax Matters.
(a) Within the times and in the manner prescribed by
law, TView has filed or has obtained valid extensions to file (copies of which
have previously been delivered to FOCUS) all federal, state and local tax
returns and all tax returns for foreign countries, provinces and other governing
bodies having jurisdiction to levy taxes upon it which are required to be filed.
TView has paid all taxes, interest, penalties, assessments and deficiencies
which are reflected on such returns as having become due or which have been
claimed to be due, including without limitation income, franchise, real estate,
sales and withholding taxes and other employee-related taxes and imports. There
are no tax liens (other than the lien for ad-valorem and similar taxes which are
not past due) or taxes on any of the assets of TView except for taxes arising
under operation of law and discharged by TView through timely payment or
satisfaction thereof.
(b) All tax returns filed by TView for the taxable
years ending December 31, 1993 through December 31, 1995 constitute complete and
accurate representations of the tax liabilities of TView for such years and
accurately set forth all items (to the extent required to be included or
reflected in such returns) relevant to its future tax liabilities, including the
tax basis of its properties and assets;
13
(c) TView has not waived or extended any applicable
statute of limitations relating to the assessment of federal, state, local or
foreign taxes. No examinations of the federal, state, local or foreign tax
returns of TView is currently in progress nor, to the best knowledge of TView or
the Stockholders, threatened and no deficiencies have been asserted or assessed
against TView as a result of any audit by the Internal Revenue Service or any
state or local taxing authority and to the best knowledge of TView, no such
deficiency has been proposed or threatened.
(d) Section 3.14 of the TView Disclosure Schedule sets
forth those taxable years for which the tax returns of TView have been reviewed
or audited by applicable federal, state, local and foreign taxing authorities
and those tax years for which said tax returns have received clearances or other
indications of approval from applicable federal, state, local and foreign taxing
authorities.
3.15 Books and Records. The general ledgers and books of
account of TView, and all other books and records of TView are in all material
respects complete and correct and have been maintained in accordance with good
business practice and in accordance with all applicable procedures required by
laws and regulations.
3.16 Contracts and Commitments.
(a) Section 3.16 of the TView Disclosure Schedule
contains a true, complete and correct list of all written, and a description of
all oral, contracts and agreements of the types listed below (collectively, the
"Contracts"):
(i) all loan agreements, indentures,
mortgages and guaranties to which TView is a party or by which TView or any of
its property is bound;
(ii) all material pledges, conditional sale
or title retention agreements, security agreements, equipment obligations,
personal property leases and lease purchase agreements to which TView is a party
or by which TView or any of its property is bound;
(iii) all contracts, agreements, commitments,
purchase orders or other understandings or arrangements to which TView is a
party or by which TView or any of its property is bound which (A) involve
payments or receipts by TView of more than $25,000 in the case of any single
contract, agreement, commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all parties thereto or
(B) which may materially adversely affect the condition (financial or otherwise)
or the properties, assets, business or prospects of TView;
(iv) all collective bargaining agreements,
employment and consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, pension plans, retirement plans, employee
stock option or stock purchase plans and group life, health and accident
insurance and other employee benefit plans, agreements, arrangements or
commitments to which TView is a party or by which TView or any of its property
is bound;
14
(v) all licenses, software rental agreements,
software maintenance agreements, consulting agreements, OEM agreements, private
label agreements, development agreements, technical support agreements,
marketing agreements, software escrow agreements and similar agreements to which
TView is a party (whether as licensor, licensee or in any other capacity) or
which concern, affect or relate to the Software (other than "shrink wrap"
license agreements in the hands of customers).
(vi) all agency, distributor, sales
representative, franchise or similar agreements to which TView is a party or by
which TView or any of its property is bound;
(vii) all contracts, agreements or other
understandings or arrangements between TView and any Affiliate of TView,
including, but not limited to, any of the Stockholders or their Affiliates;
(viii) all material leases for personal
property, whether operating, capital or otherwise, under which TView is lessor
or lessee;
(ix) all contracts, agreements and other
documents or information relating to past disposal of waste (whether or not
hazardous);
(x) all contracts, agreements or other
arrangements imposing a non- competition or non-solicitation obligation on
TView;
(xi) all confidentiality or proprietary
information agreements with respect to the confidential information of TView or
any third party to which TView is a party in any capacity; and
(xii) any other material agreements or
contracts entered into by TView.
(b) (i) each Contract is a valid and
binding agreement of TView, enforceable against TView in accordance with its
terms, and TView does not have any knowledge that any Contract is not a valid
and binding agreement of the other parties thereto;
(ii) TView has fulfilled all material
obligations required pursuant to the Contracts to have been performed by TView
on its part prior to the date hereof, and TView has no reason to believe that it
will not be able to fulfill, when due, all of its obligations under all material
Contracts which remain to be performed after the date hereof;
(iii) TView is not in breach of or default
under any material Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute such a default, result in a
loss of rights under the Contracts or result in the creation of any lien, charge
or encumbrance, thereunder or pursuant thereto;
15
(iv) to the best knowledge of TView, there
is no existing breach or default by any other party to any material Contract,
and no event has occurred which with the passage of time or giving of notice or
both would constitute a default by such other party, result in a loss of rights
or result in the creation of any lien, charge or encumbrance thereunder or
pursuant thereto;
(v) there are not and, since the date of the
Audited Financial Statements, there have not been, any claims of a non-routine
nature by customers of TView under any warranties, whether express or implied;
(vi) TView is not restricted by any Contract
from carrying on its business anywhere in the world; and
(vii) TView has no Contracts to sell
products or license Software or perform services which are expected to be
performed at, or to result in, a material loss to TView.
(c) The continuation, validity and effectiveness of
each Contract will not be affected by the transfer thereof to FAC pursuant to
this Agreement and the Merger.
(d) True, correct and complete copies of all Material
Contracts have previously been delivered by TView to FOCUS.
(e) For purposes of this Section 3.16 and elsewhere
in this Agreement, the term "material Contract" means any contract which has a
value, either in terms of products to be sold, services to be performed or
otherwise, in excess of $25,000.
3.17 Compliance with Agreements and Laws. To the best of
TView's knowledge, TView has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal, state and
local authorities necessary to conduct its business and own and operate its
assets (collectively, the "Permits"), except with a failure to hold a Permit
does not have a material adverse effect on TView. Section 3.17 of the TView
Disclosure Schedule sets forth a true, correct and complete list of all such
Permits, copies of which have previously been delivered by TView to FOCUS. To
the best knowledge of TView, TView is not in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, disposal of hazardous substances,
land use, air pollution or similar matters) applicable to it or its properties.
The business of TView as conducted since its incorporation has not violated, and
on the date hereof does not violate, in any material respect, any federal,
state, local or foreign laws, regulations or orders (including, but not limited
to, any of the foregoing relating to employment discrimination, occupational
safety, environmental protection, hazardous waste, conservation, or corrupt
practices), the enforcement of which would have a material adverse effect on the
results of operations, condition (financial or otherwise), assets, properties,
business or prospects of TView. TView has had no notice or communication from
any federal, state or local governmental or regulatory authority or otherwise
since its incorporation of any such violation or noncompliance.
16
3.18 Employee Relations.
(a) To the best knowledge of TView, TView is in
compliance with all federal, state and municipal laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice, and there are no arrears in the
payment of wages or social security taxes (other than amounts accrued in the
regular and ordinary course of business since the last regular payment of such
wages and taxes).
(b) (i) none of the employees of TView is
represented by any labor union;
(ii) there is no unfair labor practice
complaint against TView pending before the National Labor Relations Board or any
state or local agency;
(iii) there is no pending labor strike or
other material labor trouble affecting TView (including, without limitation, any
organizational drive);
(iv) there is no material labor grievance
pending against TView;
(v) there is no pending representation
question respecting the employees of TView;
(vi) there are no pending arbitration
proceedings arising out of or under any collective bargaining agreement to which
TView is a party, or any basis for which a claim may be made under any
collective bargaining agreement to which TView is a party; and
(vii) TView has no continuing obligation for
health, life, medical insurance or other similar fringe benefits to any former
employee of TView or any other entity;
(c) TView has previously delivered a true, correct
and complete list of the current payroll of TView, including the job title and
salary or wage rates of each employee, showing separately for each such person
who received an annual salary in excess of $25,000 the amounts paid or payable
as salary and bonus payments for the fiscal year ended December 31, 1995.
(d) For purposes of this Subsection 3.18, the term
"employee" shall be construed to include sales agents and other independent
contractors who spend a majority of their working time on the business of TView.
3.19 Employee Benefit Plans.
(a) As of the date of this Agreement, TView has no
(i) contracts with any of its employees; (ii) pension profit sharing, deferred
compensation, retirement, severance or other plans, agreements or arrangements
with any current or former employee of TView; or (iii) commitment or
understanding with respect to the implementation of any of the foregoing.
17
(b) Section 3.19 of the TView Disclosure Schedule
contains a true, correct and complete list of all pension, benefit, profit
sharing, retirement, deferred compensation, welfare, insurance, disability,
bonus, vacation pay, severance pay and other similar plans, programs and
agreements, whether reduced to writing or not, relating to the employees of
TView, or maintained at any time since its incorporation by TView (the "Employee
Plans") of which they are or have been members, and TView has no obligations,
contingent or otherwise, past or present, under applicable law or the terms of
any Employee Plan. TView has not contributed to, and has no past or present
obligation to contribute to, any stock option or stock purchase plan or other
plan designed to hold the stock of TView or any affiliate.
(c) TView has previously delivered to FOCUS true,
correct and complete copies of all Employee Plans which have been reduced to
writing and written descriptions of all Employee Plans which have not been
reduced to writing, and all agreements, including trust agreements and insurance
contracts, related to such Employee Plans, and the summary plan description and
all modifications thereto for each Employee Plan communicated to employees. No
Employee Plan is a "defined benefit plan," as such term is defined in Section
3(35) of the Employee Retirement Income Security Act of 1974, as amended.
3.20 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date TView has not
entered into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, TView has not:
(i) incurred any obligation or liability for
borrowed money;
(ii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability other than current liabilities
reflected in the Current Balance Sheet;
(iii) mortgaged, pledged or subjected to
lien, charge or other encumbrance any of its properties or assets;
(iv) sold or purchased, assigned or
transferred any of its tangible assets or cancelled any debts or claims, except
for inventory sold and raw materials and supplies purchased in the ordinary
course of business;
(v) made any material amendment to or
termination of any material Contract or done any act or omitted to do any act
which would cause the breach of any material Contract;
(vi) suffered any losses of personal or real
property, whether insured or uninsured, and whether or not in the control of
TView in excess of $25,000 in the aggregate, or waived any rights of any value;
18
(vii) authorized any declaration or payment
of dividends or distributions or paid any such dividends or distributions, or
authorized any transfer of assets of any kind whatsoever to any of the
Stockholders or any other party with respect to any shares of capital stock;
(viii) received notice of any litigation,
warranty claim or products liability claim;
(ix) made any material change in the terms,
status or funding condition of any Employee Plan, as defined in Subsection 3.19
hereof;
(x) engaged any new employee for a salary in
excess of $25,000 per annum:
(xi) made, or committed to make, any changes
in the compensation payable to any officer, director, employee or agent of
TView, or any bonus payment or similar arrangements made to or with any of such
officers, directors, employees or agents;
(xii) incurred any capital expenditure in
excess of $25,000 in the aggregate;
(xiii) made any material alteration in the
manner of keeping the books, accounts or records of TView, or in the accounting
practices therein reflected, including, without limitation, any changes in the
method of calculating reserves for doubtful accounts or sales returns; or
(xiv) suffered any material adverse change
in the results of operations, condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent or otherwise), business or
prospects of TView.
(b) TView has no knowledge of any existing or
threatened occurrence, event or development which, as far as can now be
reasonably foreseen, is likely to have a material adverse effect on the
business, properties, assets, condition (financial or otherwise) or prospects of
TView; provided, however that no representation or warranty is made with respect
to general business, economic or technological conditions or developments which
may effect TView in a substantially similar manner as other software and
hardware companies engaged in a comparable line of business.
3.21 Customers. Section 3.21 of the TView Disclosure Schedule
sets forth a true, correct and complete list of the names and addresses of each
customer of TView (a) in the fiscal years ended December 31, 1994 and December
31, 1995 and (b) for the first six months of the fiscal year ending December 31,
1996. There are no outstanding material claims against TView made by any its
customers relating to the goods and services provided by TView.
3.22 Suppliers. Section 3.22 of the TView Disclosure Schedule
sets forth a true, correct and complete list of the names and addresses of each
of the suppliers of TView for (x) the
19
fiscal years ended December 31, 1994 and December 31, 1995 and (y) the first six
months of the fiscal year ending December 31, 1996. TView believes that it has
good relations with all of its suppliers, and TView is not more than 30 days
past due in any trade accounts payable or other payments owing to any supplier.
3.23 Product Warranties and Returns. TView has made no
warranties, guarantees or service agreements relating to any of its products
other than those implied by law. During 1995 and for the six month period ending
on date of the Current Balance Sheet, returns of defective products sold by
TView have occurred at a rate of less than two percent (2%) of the gross sales
of TView for such periods. TView represents and confirms that the complaint and
warranty settlements and payments for the foregoing periods did not exceed in
the aggregate $90,000.
3.24 Prepayments and Deposits. Section 3.24 of the TView
Disclosure Schedule sets forth all customers from whom prepayments and deposits
have been received by TView as of the date hereof, for products to be shipped,
or services to be performed, after the Closing Date.
3.25 Indebtedness to and from Officers, Directors and
Stockholders. TView is not indebted, directly or indirectly, to any person who
is an officer, director or Stockholder of TView or any Affiliate of TView or any
such person in any amount whatsoever other than for salaries for services
rendered or reimbursable business expenses, all of which have been reflected on
the books and records of TView previously delivered to FOCUS, and no such
officer, director, stockholder or Affiliate is indebted to TView except for
advances made to employees of TView in the ordinary course of business to meet
reimbursable business expenses anticipated to be incurred by such obligor.
3.26 Banking Facilities. Section 3.26 of the TView Disclosure
Schedule sets forth a true, correct and complete list of:
(a) each bank, savings and loan or similar financial
institution in which TView has an account or safety deposit box and the numbers
of the accounts or safety deposit boxes maintained by TView thereat; and
(b) the names of all persons authorized to draw on
each such account or to have access to any such safety deposit box facility,
together with a description of the authority (and conditions thereof, if any) of
each such person with respect thereto.
3.27 Powers of Attorney and Suretyships. TView has no general
or special powers of attorney outstanding (whether as grantor or grantee
thereof), nor does it have any obligation or liability (whether actual, accrued,
accruing, continent or otherwise) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect of the obligation of any person,
corporation, joint venture, association, organization or other entity, except as
endorser or maker of checks or letters of credit, respectively, endorsed or made
in the ordinary course of business.
20
3.28 Conflicts of Interest. No officer, director or
Stockholder of TView, nor, to the best knowledge of TView, any Affiliate of any
such person, now has or within the last three (3) years had, either directly or
indirectly:
(a) an equity or debt interest in any corporation,
joint venture, association, organization or other person or entity which
furnishes or sells or during such period furnished or sold services or products
to TView, or purchases or during such period purchased from TView any goods or
services, or otherwise does nor during such period did business with TView; or
(b) a beneficial interest in any contract, commitment
or agreement to which TView is or was a party or under which any of them is or
was obligated or bound or to which any of its properties may be or may have been
subject, other than stock options and other contracts, commitments or agreements
between TView and such persons in their capacities as creditors, stockholders,
employees, officers or directors of TView, all of which have been listed in
Section 3.16 of the TView Disclosure Schedule.
3.29 Regulatory Approvals. All consents, approvals,
authorizations or other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by TView and which are necessary for the
execution and delivery by the Stockholders and TView of this Agreement or any
documents to be executed and delivered by the Stockholders or TView in
connection herewith are set forth on Section 3.29 of the TView Disclosure
Schedule and have been, or prior to the Closing Date will be, obtained and
satisfied.
3.30 Disclosure.
(a) The information concerning TView set forth in
this Agreement, the Exhibits and Schedules attached hereto and any document,
statement or certificate furnished or to be furnished to FOCUS pursuant hereto
or in connection herewith, does not and on the Closing Date will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated herein or therein or necessary to make the statements and facts
contained herein or therein, in light of the circumstances in which they are
made, not false and misleading. Copies of all documents heretofore or hereafter
delivered or made available to FOCUS pursuant to this Agreement were or will be
complete and accurate copies of such documents.
(b) Wherever used in this Agreement with respect to
any representation, warranty, covenant or agreement of TView or the
Stockholders, the term "knowledge", "known" or any similar variation thereof
shall be deemed to include:
(i) all matters actually known to such party
with respect to the subject matter of such representation, warranty, covenant or
agreement; and
(ii) all matters which should have been
known to such party with respect to the subject matter of such representation,
warranty, covenant or agreement if such party was acting in a manner in which a
reasonably prudent person would act in similar circumstances with respect to the
subject matter of such representation, warranty, covenant or agreement.
21
4. Representations of FOCUS and FAC
Except as otherwise set forth in the "FOCUS AND FAC Disclosure
Schedule" delivered to TView as of the date hereof and attached hereto as
Exhibit C (the "FOCUS Disclosure Schedule"), FOCUS and FAC, jointly and
severally, represent and warrant to TView as set forth below. Facts and
circumstances disclosed in the FOCUS Disclosure Schedule by FOCUS and FAC to
TView shall constitute exceptions to the specific representations and warranties
set forth below and shall also constitute general disclosures by FAC and FOCUS
under this Agreement.
4.01 Organization and Authority. FOCUS and FAC are each
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and have all requisite corporate power and
authority to own their respective properties, to carry on their respective
businesses as now being conducted, to execute and deliver this Agreement and the
agreements contemplated herein (including the Certificate of Merger), and to
consummate the Merger and the other transactions contemplated hereby and
thereby. FOCUS is duly qualified to do business and in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification, except where failure to be so qualified or
to be in such good standing would have a material adverse effect on the
business, properties, finances or prospects of FOCUS, taken as a whole. A true
and complete list of such jurisdictions is set forth in Section 4.01 of the
FOCUS Disclosure Schedule. Certified copies of the Certificates of Incorporation
and Bylaws of FOCUS and FAC, as amended to date, have been previously delivered
to TView, are complete and correct, and no amendments have been made thereto or
have been authorized since the date thereof. FAC has conducted no business or
operations prior to the date hereof except in connection with the transactions
contemplated by this Agreement.
4.02 Capitalization. As of the Closing, the authorized capital
stock of FOCUS will consist of 16,000,000 shares of FOCUS Common Stock, of which
10,064,182 shares are issued and outstanding and 5,189,870 shares are reserved
for issuance upon exercise of outstanding options and warrants; and 3,000,000 of
shares of Preferred Stock, $.01 par value per share, of which no shares are
issued and outstanding. As of the Closing, all of the outstanding shares of
FOCUS's Common Stock are validly issued, fully paid and non-assessable.
4.03 Authorization. The execution and delivery of this
Agreement by FOCUS and FAC, and the agreements provided for herein, and the
consummation by FOCUS and FAC of all transactions contemplated hereby, have been
duly authorized by all requisite corporate action. This Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the valid and
legally binding obligations of FOCUS and FAC, enforceable against FOCUS and FAC,
respectively, in accordance with their respective terms, except as enforcement
may be limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or similar laws effecting creditors' rights
generally, and by the exercise of judicial discretion. The execution, delivery
and performance of this Agreement and the agreements provided for herein, and
the consummation by FOCUS and FAC of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the passage of time
or both, (a) violate the provisions of any law, rule or regulation applicable to
FOCUS or FAC; (b) violate the provisions of FOCUS's or FAC's Certificate of
Incorporation; (c)
22
violate any judgment, decree, order or award of any court, governmental body or
arbitrator by which FOCUS or any of its assets or properties are bound or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the properties or assets of
FOCUS pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which FOCUS is a party or by which FOCUS or its assets is or may
be bound. Section 4.03 of the FOCUS Disclosure Schedule sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required in connection with the consummation by FOCUS and FAC of the Merger
and the performance by FOCUS and FAC of their obligations under this Agreement.
4.04 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by FOCUS or FAC and which are necessary for
the consummation of the transactions contemplated by this Agreement have been,
or will be prior to the Closing Date, obtained and satisfied.
4.05 Financial Statements.
(a) FOCUS has previously delivered to TView (i) its
audited balance sheet as of December 31, 1995 and the related statements of
income, stockholders' equity, cash flow and supplementary schedules of FOCUS for
the fiscal year then ended, (collectively, "FOCUS 1995 Financial Statements")
and (ii) its unaudited June 30, 1996 balance sheet and the related statements of
income, stockholders' equity, cash flow and supplementary schedules for the
six-month period then ended, (collectively, the "FOCUS Current Financial
Statements"). The FOCUS 1995 Financial Statements and the FOCUS Current
Financial Statements (collectively, the "FOCUS Financial Statements") have been
prepared in accordance with GAAP applied consistently with past practice,
subject to normal year-end adjustments and the absence of footnotes, and are
accompanied by a certificate of the Chief Financial Officer of FOCUS to the
effect that the FOCUS Current Financial Statements were prepared in accordance
with GAAP, subject to year-end audit adjustments and the absence of footnotes
and other related information required by GAAP.
(b) The FOCUS Financial Statements fairly present in
all material respects, as of their respective dates, the financial condition,
retained earnings, assets and liabilities of FOCUS and the results of operations
of FOCUS's business for the periods indicated.
4.06 Absence of Undisclosed Liabilities. Except as and to the
extent (i) reflected and reserved against in the FOCUS Current Financial
Statements, (b) set forth in Section 4.06 of the FOCUS Disclosure Schedule or
(c) incurred in the ordinary course of business after June 30, 1996, and not
material in amount, either individually or in the aggregate, to the best of
FOCUS's knowledge, FOCUS has no liability or obligation, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise, affecting its
assets, properties, business or prospects. For purposes of this Subsection 4.06
"material" means any amount in excess of $50,000.
4.07 Litigation. There is no action, suit or proceeding
to which either FOCUS or FAC is a party pending or, to the best knowledge of
FOCUS and FAC, threatened before any court or governmental agency, authority,
body or arbitrator. Neither FOCUS nor FAC has been
23
permanently or temporarily enjoined by any order, judgment or decree of any
court or any governmental agency, authority or body from engaging in or
continuing any conduct or practice in connection with the business, assets, or
properties of FOCUS or FAC. There is not in existence on the date hereof any
order, judgment or decree of any court, tribunal or agency enjoining or
requiring FOCUS or FAC to take any action of any kind with respect to its
business, assets or properties.
4.08 Tax Matters. Within the times and in the manner
prescribed by law, each of FOCUS and FAC has filed or has obtained valid
extensions to file all federal, state and local tax returns and all tax returns
for foreign countries, provinces and other governing bodies having jurisdiction
to levy taxes upon them which are required to be filed. FOCUS and FAC have paid
all taxes, interest, penalties, assessments and deficiencies which are reflected
on such returns as having become due or which have been claimed to be due,
including without limitation income, franchise, real estate, sales and
withholding taxes and other employee related taxes and imports. There are no tax
liens (other than the lien for ad-valorem and similar taxes which are not past
due) or taxes on any of the assets of FOCUS or FAC.
4.09 Compliance with Agreements and Laws. FOCUS has all
requisite licenses, permits and certificates, including environmental, health
and safety permits, from federal, state and local authorities necessary to
conduct its business and own and operate its assets (collectively, the
"Permits"), except for the failure to hold a Permit would not have a material
adverse effect on FOCUS. Section 4.09 of the FOCUS Disclosure Schedule sets
forth a true, correct and complete list of all such Permits, copies of which
have previously been delivered by FOCUS to TView. FOCUS is not in violation of
any law, regulation or ordinance (including, without limitation, laws,
regulations or ordinances relating to building, zoning, environmental, disposal
of hazardous substances, land use, air pollution or similar matters) known to
FOCUS to be applicable to it or its properties.
4.10 Absence of Certain Changes or Events.
Since the date of the FOCUS Current Financial
Statement, FOCUS has not entered into any transaction which is not in the usual
and ordinary course of business, and, without limiting the generality of the
foregoing, FOCUS has not:
(a) incurred any obligation or liability for borrowed
money;
(b) discharged or satisfied any lien or encumbrance
or paid any obligation or liability other than current liabilities reflected in
the FOCUS Current Financial Statements;
(c) mortgaged, pledged or subjected to lien, charge
or other encumbrance any of its properties or assets;
(d) sold or purchased, assigned or transferred any of
its tangible assets or cancelled any debts or claims, except for inventory sold
and raw materials and supplies purchased in the ordinary course of business;
24
(e) suffered any losses of personal or real property,
whether insured or uninsured, and whether or not in the control of FOCUS in
excess of $25,000 in the aggregate, or waived any rights of any value;
(f) authorized any declaration or payment of
dividends or distributions or paid any such dividends or distributions, or
authorized any transfer of assets of any kind whatsoever to any of its
stockholders or any other party with respect to any shares of capital stock;
(g) received notice of any litigation, warranty claim
or products liability claim;
(h) incurred any capital expenditure in excess of
$50,000 in the aggregate;
(i) made any material alteration in the manner of
keeping the books, accounts or records of FOCUS, or in the accounting practices
therein reflected; or
(j) suffered any material adverse change in the
results of operations, condition (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise), business or prospects of
FOCUS.
4.11 Disclosure. The information concerning FOCUS set forth in
this Agreement, the Exhibits and Schedules attached hereto and any document,
statement or certificate furnished or to be furnished to TView pursuant hereto
or in connection herewith, including FOCUS's Form 10- KSB Annual Report for the
year ended December 31, 1995, FOCUS's Form 10-QSB Quarterly Report for the
period ended June 30, 1996, FOCUS's Form 8-K, dated May 14, 1996, and FOCUS's
Form 8-K dated June 18, 1996, does not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated herein
or therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they are made, not false and
misleading. Copies of all documents heretofore or hereafter delivered or made
available to TView pursuant to this Agreement were or will be complete and
accurate copies of such documents.
5. Access to Information; Public Announcements
5.01 Access to Management, Properties and Records. From the
date of this Agreement until the Closing Date, TView shall afford the officers,
attorneys, accountants and other authorized representatives of FOCUS free and
full access upon reasonable advance notice and during normal business hours to
all management personnel, offices, properties, books and records of TView, so
that FOCUS may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of TView, and
FOCUS shall be permitted to make abstracts from, or copies of, all such books
and records. TView shall furnish to FOCUS and/or authorized representatives
designated by FOCUS such financial and operating data and other information as
to the business of TView as FOCUS shall reasonably request. TView shall upon the
written request of FOCUS authorize the release to FOCUS of all files pertaining
to the business or operations of TView held by any federal, state, county or
local authorities, agencies or
25
instrumentalities. Such authorization shall specifically waive all previous
claims of privilege or other restrictions, and in any case where a release by a
present or former employee of TView is necessary, TView shall exercise its best
efforts to obtain such a release.
5.02 Confidentiality.
(a) TView has furnished and will continue to furnish
FOCUS with certain information which is non-public, confidential or proprietary
in nature. All information furnished to FOCUS, its directors, officers,
employees, agents or representatives, including, without limitation, attorneys,
accountants, consultants, potential lenders, investors and financial advisors
(collectively, "Representatives") by TView or any of its representatives, and
all analyses, compilations, data, studies or other documents prepared by FOCUS
or its representatives containing or based in whole or in part on any such
furnished information or reflecting FOCUS's review of, or interest in, TView is
hereinafter referred to as "TView Information." FOCUS hereby agrees to use the
TView Information solely in connection with the consummation of the transactions
contemplated by this Agreement and to transmit the TView Information only to
those employees and representatives of FOCUS who need to know the TView
Information. If the Closing does not occur, the TView Information, and all
copies thereof will be returned by FOCUS, its directors, officers, and employees
(but not its other representatives), without retaining any copies thereof, to
TView.
(b) FOCUS has furnished and will continue to furnish
TView with certain information which is non-public, confidential or proprietary
in nature. All information furnished to TView, its directors, officers,
employees, agents or representatives, including, without limitation, attorneys,
accountants, consultants, potential lenders, investors and financial advisors
(collectively, "Representatives") by FOCUS or any of its representatives, and
all analyses, compilations, data, studies or other documents prepared by TView
or its representatives containing or based in whole or in part on any such
furnished information or reflecting TView's review of, or interest in, FOCUS is
hereinafter referred to as "FOCUS Information." TView hereby agrees to use the
FOCUS Information solely in connection with the consummation of the transactions
contemplated by this Agreement and to transmit the FOCUS Information only to
those representatives of TView who need to know the FOCUS Information. If the
Closing does not occur, the FOCUS Information, and all copies thereof will be
returned by TView, its directors, officers, and employees (but not its other
representatives), without retaining any copies thereof, to FOCUS.
5.03 Public Announcements. The parties agree that prior to the
Closing Date any and all public pronouncements or other public communications
concerning this Agreement and the Merger, and the timing, manner and content of
such disclosures, shall be subject to the mutual agreement of TView and FOCUS.
6. Pre-Closing Covenants of the Stockholders and TView
From and after the date hereof and until the Closing Date:
6.01 Conduct of Business. TView shall carry on its business
diligently and substantially in the same manner as heretofore and shall not make
or institute any unusual or new
26
methods of manufacture, purchase, sale, shipment or delivery, lease, management,
accounting or operation, and shall not ship or deliver any quantity of products
in excess of normal shipment or delivery levels, except as agreed to in writing
by FOCUS, which agreement shall not be unreasonably withheld. All of the
property of TView shall be used, operated, repaired and maintained in a normal
business manner consistent with past practice.
6.02 Absence of Material Changes. Without the prior written
consent of FOCUS,
which agreement shall not be unreasonably withheld, TView shall not:
(a) take any action to amend its Certificate of
Incorporation or By-Laws;
(b) issue any stock, bonds or other corporate
securities or grant any option or issue any warrant to purchase or subscribe for
any of such securities or issue any securities convertible into such securities;
(c) incur any obligation or liability (absolute or
contingent), except current liabilities incurred and obligations under contracts
entered into in the ordinary course of business;
(d) declare or make any payment or distribution to
the Stockholders with respect to its stock or purchase or redeem any shares of
its capital stock;
(e) mortgage, pledge, or subject to any lien, charge
or any other encumbrance any of its assets or properties;
(f) sell, assign, or transfer any of its assets,
except for inventory sold in the ordinary course of business, at a normal profit
margin;
(g) cancel any debts or claims, except in the
ordinary course of business;
(h) merge or consolidate with or into any corporation
or other entity;
(i) make, accrue or become liable for any bonus,
profit sharing or incentive payment, except for accruals under existing plans
and agreements, if any, or increase the rate of compensation payable or to
become payable by it to any of its officers, directors or employees;
(j) make any election or give any consent under the
Code or the tax statutes of any state or other jurisdiction or make any
termination, revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
(k) waive any rights of material value;
(l) modify, amend, alter or terminate any executory
contract of material value or which is material in amount; provided, however,
that TView may transfer the key man life insurance policies on the lives of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, which currently
name TView as beneficiary, to each such individual;
27
(m) take or permit any act or omission constituting a
breach or default under any contract or agreement by which it or its properties
are bound;
(n) fail to use reasonable commercial efforts to (i)
preserve the possession and control of its assets, (ii) retain its present
officers and key employees, (iii) preserve the relationships of consumers,
suppliers and others having business relations with it, and (iv) preserve the
business existing on the date hereof until the Closing Date;
(o) fail to operate its business and maintain its
books, accounts and records in the customary manner and in the ordinary and
regular course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(p) enter into any lease, contract, agreement or
understanding, other than those entered into in the ordinary course of business
calling for payments which in the aggregate do not exceed $25,000 for each such
lease, contract, agreement or understanding;
(q) incur any capital expenditure in excess of
$25,000 in the aggregate;
(r) engage any new employee for a salary in excess of
$25,000 per annum;
(s) materially alter the terms, status or funding
condition of any Employee Plan; or
(t) commit or agree to do any of the foregoing in the
future.
6.03 Delivery of Interim Financial Statements. As promptly as
possible and in any event within 15 days after the end of each month following
the date hereof until the termination of this Agreement or the consummation of
the Merger, TView shall deliver to FOCUS an unaudited balance sheet of TView and
the related statements of income, shareholders' equity, retained earnings and
changes in financial condition for the one-month period then ended, accompanied
by a certificate of the Chief Financial Officer of TView to the effect that such
interim financial statements are prepared in accordance with GAAP and fairly
present the financial condition of TView as of the date thereof and for the
period covered thereby (collectively, the "Interim Financial Statements").
6.04 Communications with Customers and Suppliers. TView and
FOCUS will cooperate in communications with suppliers and customers to
accomplish the Merger on the Closing Date.
6.05 Compliance with Laws. TView will comply with all laws and
regulations which are applicable to it or to the conduct of its business and
will perform and comply with all Contracts.
6.06 Continued Truth of Representations and Warranties.
Neither the Stockholders nor TView will take any actions which would result in
any of the representations or warranties set forth in Sections 2 and 3 hereof
being untrue.
28
6.07 Continuing Obligation to Inform.
(a) From the date hereof through and including the
Closing Date, each of TView and FOCUS will deliver or cause to be delivered to
the other party supplemental information concerning events subsequent to the
date hereof which would render any statement, representation or warranty in this
Agreement or any information contained in any Schedule attached hereto
inaccurate, misleading or incomplete in any material respect; provided, that
except as specified in Subsection 8.08 hereof, none of such supplemental
information shall constitute an amendment of any statement, representation or
warranty in this Agreement or any Schedule, Exhibit or document furnished
pursuant hereto.
(b) In the event that at any time from the date
hereof until the Closing Date, TView informs FOCUS of changes to the
representations, warranties or schedules hereto pursuant to paragraph (a) above
which would permit FOCUS, after the Closing Date, to institute a claim against
the Stockholders pursuant to Section 9 hereof for an amount which in FOCUS's
reasonable judgment would be in excess of $100,000 (a "Potential Termination
Claim"), then either FOCUS and FAC, on the one hand, or TView and the
Stockholders' Representative, on the other hand, shall have the option to
terminate the Merger and the transactions contemplated by this Agreement;
provided, that the parties hereto agree that prior to exercising such
termination option, they shall use their good faith efforts to negotiate a
mutually acceptable modification to the Consideration to permit the consummation
of the Merger and the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary contained herein, in the event FOCUS
and FAC are informed of a Potential Termination Claim and choose to consummate
the Merger and the transactions contemplated by this Agreement, then FOCUS and
FAC shall not be permitted to institute a claim against the Stockholders
pursuant to Section 9 hereof for damages arising under such Potential
Termination Claim.
6.08 Exclusive Dealing. Neither the Stockholders nor TView
will from the date hereof through the Closing Date, directly or indirectly,
through any officer, director, agent or otherwise, (a) solicit, initiate or
encourage submission of proposals or offers from any person relating to an
acquisition or purchase of all or a material portion of the assets of or an
equity interest in TView or any merger, consolidation or business combination
with TView, (b) participate in any discussions or negotiations regarding, or
furnish to any other person, any non-public information with respect to or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing, or (c) withdraw their intention to sell TView. The Stockholders and
TView agree to promptly notify FOCUS of any such proposal or offer, or any
inquiry or contact with respect thereto received by TView or any of the
Stockholders.
6.09 Reports, Taxes. TView will duly and timely file all
reports or returns required to be filed with federal, state, local and foreign
authorities and will promptly pay all federal, state, local and foreign taxes,
assessments and governmental charges levied or assessed upon them or any of
their properties (unless contesting such in good faith and adequate provision
has been made therefor).
29
6.10 Agreement to Vote for Merger. At the earliest practical
date after the date hereof, TView will submit this Agreement and the Certificate
of Merger to all holders of its capital stock for approval. At any meeting of
stockholders and in any proxy solicitation material prepared in connection with
the transactions contemplated by this Agreement, the Board of Directors of
TView, to the extent consistent with its fiduciary obligations, will recommend
to the stockholders of TView that they approve the Merger. By their execution of
this Agreement, the Stockholders hereby covenant and agree that they will vote
all shares of capital stock of TView held by them to approve this Agreement and
the Merger.
7. Conditions to Obligations of FOCUS and FAC
The obligations of FOCUS and FAC under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
FOCUS:
7.01 Continued Truth of Representations and Warranties of the
Stockholders and TView; Compliance with Covenants and Obligations. The
representations and warranties of the Stockholders and TView shall be true on
and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes permitted by the terms
hereof or consented to in writing by FOCUS. The Stockholders and TView shall
have performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by each of them prior to or at the Closing Date.
7.02 Performance by the Stockholders and TView. At the
Closing, the Stockholders' Representative and TView shall have delivered to
FOCUS a certificate signed by the Stockholders' Representative or the President
of TView, as the case may be, as to their compliance with Subsection 7.01
hereof.
7.03 Corporate Proceedings. All corporate, Stockholder and
other proceedings required to be taken on the part of TView and the Stockholders
to authorize and carry out this Agreement shall have been taken.
7.04 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation of the Merger, and the consummation of the
transactions contemplated by this Agreement and the operation of the business of
TView by FAC shall have consented to, authorized, permitted or approved such
transactions.
7.05 Consent of Third Parties. The Stockholders and TView
shall have received all requisite consents and approvals of all third parties
whose consent or approval is required in order for the Stockholders and TView to
consummate the transactions contemplated by this Agreement, including without
limitation, those set forth in Section 3.04 of the TView Disclosure Schedule.
7.06 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person
30
whatsoever which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of FAC to own or
operate the business of TView after the Closing.
7.07 Opinions of Counsel. FOCUS and FAC shall have received
the opinion of Stoel Rives LLP, counsel to TView, dated as of the Closing Date,
in substantially the form attached hereto as Exhibit D.
7.08 Update. TView shall have provided FOCUS with a true,
correct and complete list and amount, as of the last business day immediately
preceding September 30, 1996, of:
(a) the Inventory;
(b) the Accounts Receivable, including an aging
thereof;
(c) the Contracts;
(d) trade accounts payable and accrued liabilities;
(e) unfilled customer orders;
(f) all shipments made during the period from the
date of this Agreement to the Closing Date;
(g) outstanding principal of and accrued interest on
long-term and short-term debt; and.
(h) property, plant and equipment.
None of the information with respect to the items referred to in clauses (a)
through (h) above shall be materially adverse from the information supplied by
TView as of the date hereof on the TView Disclosure Schedule or otherwise. For
purposes of this Section 7.08, the term "materially adverse" shall mean any
change, other than those specifically contemplated by or permitted pursuant to
the terms of this Agreement, having an economic value in excess of $25,000.
7.09 Employment Contracts. On or prior to the Closing Date,
FOCUS or the Surviving Corporation shall have executed employment contracts (the
"Employment Agreements") with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ upon
substantially the terms set forth in Exhibit E attached hereto.
7.10 Non-Competition Agreements. On or prior to the Closing
Date, FOCUS or the Surviving Corporation shall have executed Non-Competition
Agreements with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in substantially the
form attached hereto as Exhibit F.
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7.11 Certificate of Merger. On or prior to the Closing Date,
the Certificate of Merger shall have been duly authorized and executed by TView
and such Certificate shall have been filed with the Secretary of State of the
State of Delaware.
7.12 Escrow Agreement. FOCUS, TView, FAC, the Stockholders'
Representative and ChaseMellon Shareholders Services, L.L.C. shall have entered
into an escrow agreement in substantially the form set forth as Exhibit G
attached hereto (the "Escrow Agreement").
7.13 Resignations. TView shall have, on or prior to the
Closing Date, delivered to FOCUS resignations from the officers and directors of
TView set forth in Section 7.13 of the TView Disclosure Schedule.
7.14 Indebtedness. TView shall not have any indebtedness for
borrowed money, other than short-term and as reflected on the Balance Sheet and
the TView Disclosure Schedule.
7.15 Employees of TView. FOCUS and TView shall have determined
mutually acceptable severance arrangements for all employees of TView who will
not be retained by FOCUS, and such employees shall have consented in writing to
the terms of such arrangements.
7.16 Closing Deliveries. FOCUS shall have received at or prior
to the Closing such documents, instruments or certificates as FOCUS may
reasonably request including, without limitation:
(a) evidence that the Merger shall have been
effected;
(b) such certificates of TView's officers and of the
Stockholders' Representative and such other documents evidencing satisfaction of
the conditions specified in this Section 7 as FOCUS shall reasonably request;
(c) a certificate of the Secretary of State of the
State of Delaware as to the legal existence and good standing (including tax) of
TView in Delaware;
(d) a certificate of the Secretary of TView attesting
to the incumbency of TView's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement and the authenticity
and continuing validity of the charter documents delivered pursuant to
Subsection 3.01;
(e) where required by each of the applicable Leases,
acknowledgments and consents from each lessor from whom TView leases real or
personal property consenting to the Merger and the other transactions
contemplated hereby, and representing that there are no outstanding claims
against TView under such Leases; and
(f) such other documents, instruments or certificates
as may be reasonably requested by FOCUS or its counsel.
32
7.17 Purchasers' Representative. FOCUS shall have received
evidence from TView, in form and substance reasonably satisfactory to FOCUS,
that each of the stockholders of TView who are "unaccredited investors," as such
term is defined in the Act, and the rules and regulations promulgated
thereunder, shall have appointed a Purchasers' Representative, as such term is
defined in the Act.
7.18 Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the holders of at least 90% of the outstanding
shares of TView Common Stock and TView Series A Stock (on an as-converted
basis).
8. Conditions to Obligations of TView and the Stockholders
The obligations of TView and the Stockholders under this
Agreement are subject to the fulfillment, at the Closing Date, of the following
conditions precedent, each of which may be waived in writing by TView:
8.01 Continued Truth of Representations and Warranties of
FOCUS and FAC; Compliance with Covenants and Obligations. The representations
and warranties of FOCUS and FAC in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes consented to in writing by TView. FOCUS and
FAC shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
8.02 Corporate/Stockholder Proceedings. All corporate,
stockholder and other proceedings required to be taken on the part of FOCUS and
FAC to authorize the Merger and carry out this Agreement shall have been taken.
8.03 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation of the Merger, and the consummation of the
transactions contemplated by this Agreement shall have consented to, authorized,
permitted or approved such transactions.
8.04 Consents of Third Parties. FOCUS and FAC shall have
received all requisite consents and approvals of all third parties whose consent
or approval is required in order for FOCUS and FAC to consummate the
transactions contemplated by this Agreement.
8.05 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of the Stockholders to transfer the TView Capital Stock.
33
8.06 Opinion of Counsel. The Stockholders shall have received
an opinion of ▇▇▇▇▇▇▇▇ & Worcester LLP, counsel to FOCUS, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit H.
8.07 Employment Agreements. On or prior to the Closing Date,
FOCUS shall have executed and delivered the Employment Agreements and the
Non-Competition Agreements.
8.08 Escrow Agreement. On or prior to the Closing Date, the
parties to the Escrow Agreement shall have executed and delivered the Escrow
Agreement.
8.09 Certificate of Merger. On or prior to the Closing Date,
the Certificate of Merger shall have been duly authorized and executed by FAC
and such Certificate shall have been filed with the Secretary of State of the
State of Delaware.
8.10 Closing Deliveries. The Stockholders shall have received
at or prior to the Closing such documents, instruments or certificates as the
Stockholders' Representative may reasonably request, including, without
limitation:
(a) evidence that the Merger shall have been
effected;
(b) such certificates of each of FOCUS's and FAC's
president and such other documents evidencing satisfaction of the conditions
specified in this Section 8 as the Stockholders' Representative shall reasonably
request;
(c) certificates of the Secretary of State of the
State of Delaware as to the legal existence and good standing of FOCUS and FAC;
and
(d) certificates of the Secretaries of FOCUS and FAC
attesting to the incumbency of the officers of FOCUS and FAC, respectively, the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement, and the authenticity and continuing validity of the charter
documents delivered pursuant to Subsection 4.01.
9. Indemnification
9.01 By FOCUS. FOCUS hereby indemnifies and holds harmless the
Stockholders (and TView, if the Closing does not occur) from and against all
claims, damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions) (collectively,
"Losses") in connection with each and all of the following:
(a) any misrepresentation or breach of any
representation or warranty made by FOCUS or FAC in this Agreement;
34
(b) any breach of any covenant, agreement or
obligation of FOCUS or FAC contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement;
(c) any misrepresentation contained in any statement,
certificate or schedule furnished by FOCUS or FAC pursuant to this Agreement or
in connection with the transactions contemplated by this Agreement; and
(d) products shipped by FOCUS in TView packaging.
9.02 By the Stockholders and TView. The Stockholders,
severally and not jointly, hereby indemnify and hold harmless the Surviving
Corporation and FOCUS from and against all Losses in connection with each and
all of the following:
(a) any misrepresentation or breach of any
representation or warranty made by the Stockholders or TView in this Agreement;
(b) any breach of any covenant, agreement or
obligation of the Stockholders or TView contained in this Agreement or any other
agreement, instrument or document contemplated by this Agreement;
(c) any misrepresentation contained in any statement,
certificate or schedule furnished by the Stockholders or TView pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement;
(e) any warranty claim or product liability claim
relating to (i) products manufactured or sold by TView prior to the Closing Date
or (ii) TView's business or operation prior to the Closing Date;
(f) any and all liabilities of TView related to any
borrowed money indebtedness of TView in excess of the indebtedness described in
Section 7.14 hereof.
(g) any tax liabilities or obligations of TView
relating to any period prior to the Closing Date;
(h) any claims against, or liabilities or obligations
of, TView by or to officers, directors, Stockholders or affiliates;
(i) any welfare benefits not fully covered by
third-party insurance policies or programs relating to claims incurred by
present or former employees of TView on or before the Closing Date.
(j) any costs or other liabilities of TView
associated in any way with the Merger and any other transaction contemplated
hereby, including without limitation any claims by any person or entity (in
excess of the per share Consideration) asserting appraisal rights or other
35
dissenters' rights in connection with the Merger (including legal fees and fees
and expenses of professional advisors representing FOCUS in connection with the
exercise of any such appraisal rights); and
(k) except as disclosed in Section 9.02(a) of the
TView Disclosure Schedule, all contingent liabilities of every kind and nature,
including but not limited to product and warranty claims referred to in clause
(e) above, tax liabilities referred to in paragraph (g) above, employee claims
referred to in clause (h) above and all other similar claims, whether or not the
amount or existence of any such claim is known or can be established as of the
Closing Date.
Notwithstanding anything to the contrary contained herein, TView and its
Stockholders shall not be subject to a claim for indemnification hereunder by
FOCUS and FAC for products shipped by FOCUS in TView packaging.
9.03 Claims for Indemnification. Whenever any claim shall
arise for indemnification under this Section 9, FOCUS or the Surviving
Corporation, on the one hand or TView and/or the Stockholders, on the other
hand, as the case may be (the party or parties seeking such indemnification, the
"Indemnified Party"), shall promptly notify the other party or parties hereto
(the "Indemnifying Party") in writing (the "Indemnification Notice") of the
claim and, when known, the facts constituting the basis for such claim
(including all relevant documentation). In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party (a "Third Party Claim"), the Indemnification
Notice shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. In the event that any claim for indemnification
involves a matter other than a Third Party Claim, the Indemnifying Party shall
have thirty (30) days from receipt of the Indemnification Notice to object to
such claim by delivery of a written notice of such objection to the Indemnified
Party specifying in reasonable detail the basis for such objection. Failure to
timely to so object shall constitute a final and binding acceptance of the Claim
for Indemnification by the Indemnifying Party and the claim shall be paid in
accordance with Section 9.05 hereof. If an objection is timely interposed by the
Indemnifying Party and the dispute is not resolved within twenty (20) business
days from the date (such period is hereinafter referred to as the "Negotiation
Period") the Indemnified Party receives such objection, such dispute shall be
resolved by arbitration in accordance with the provisions of Section 10 hereof.
The Indemnified Party shall not settle or compromise any claim by a third party
for which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party; provided, that the Stockholders' Representative shall have
the sole authority to act on behalf of the Stockholders and shall have the power
and authority to bind all of the Stockholders; and further, provided, however,
that if suit shall have been instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such suit within ten (10)
days after notification thereof, the Indemnified Party shall have the right to
settle or compromise such claim upon giving notice to the Indemnifying Party as
provided in Subsection 9.04.
36
9.04 Defense by the Indemnifying Party.
(a) In connection with any claim which may give rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person other than the Indemnified Party, the Indemnifying Party,
at his sole cost and expense may, upon written notice to the Indemnified Party,
assume the defense of any such claim or legal proceeding if the Indemnifying
Party acknowledges to the Indemnified Party in writing the obligation of the
Indemnifying Party to indemnify the Indemnified Party with respect to all
elements of such claim. If the Indemnifying Party assumes the defense of any
such claim or legal proceeding, the Indemnifying Party shall select counsel
reasonably acceptable to the Indemnified Party to conduct the defense of such
claims or legal proceedings and at the sole cost and expense of the Indemnifying
Party shall take all steps necessary in the defense or settlement thereof. The
Indemnifying Party shall not consent to a settlement of, or the entry of any
judgment arising from, any such claim or legal proceeding, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom within ten (10) days
after the date such claim is made: (a) the Indemnified Party may defend against
such claim or litigation in such manner as it may deem appropriate, including,
but not limited to, settling such claim or litigation, after giving notice of
the same to the Indemnifying Party, on such terms as the Indemnified Party may
deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. If the Indemnifying Party thereafter seeks to question
the manner in which the Indemnified Party defended such third party claim or the
amount or nature of any such settlement, the Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that the Indemnified party
did not defend or settle such third party claim in a reasonably prudent manner.
All references herein to the Indemnifying Party shall mean, with respect to the
Stockholders, the Stockholders' Representative
(b) The Indemnifying Party and Indemnified Party 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 the Indemnified Party as may be
reasonably necessary for the preparation of the defense of any such Third Party
Claim or for testimony as witnesses in any proceeding relating to such claim.
9.05 Payment of Indemnification Obligation.
(a) Each of the Stockholders hereby agrees that any
claim for indemnification by FOCUS or the Surviving Corporation under this
Section 8 or under any other provision of this Agreement, shall be paid from the
Escrow Account and the Stockholders shall not be obligated to indemnify the
Surviving Corporation or FOCUS for any amounts in excess of the Escrow Amount.
All indemnification amounts to be paid by FOCUS or FAC pursuant to this
Agreement shall be paid by cash, certified check or wire transfer to an account
designated by the Stockholders' Representative, within ten (10) days after the
date such amount is determined, whether by agreement or arbitration.
37
(b) Notwithstanding anything to the contrary in this
Section 11 or elsewhere in this Agreement, if the Closing occurs, neither
Indemnified Party shall be entitled to receive, and neither Indemnifying Party
shall be obligated to pay, any amounts under this Section 9 unless and until the
aggregate amount of all claims for indemnification by an Indemnified Party under
this Section 9 exceeds $100,000 (the "Floor"). The parties hereto agree that
once the aggregate amount of claims by any Indemnified Party exceeds the Floor,
the Indemnified Party shall be entitled to indemnity only for the amount of such
claims in excess of the Floor.
9.06 Survival of Representations; Claims for Indemnification.
All representations and warranties made by the Stockholders (and TView if the
Closing does not occur), FOCUS and the Surviving Corporation (or FAC, if the
Closing does not occur) in this Agreement, or in any instrument or document
furnished in connection with this Agreement or the transactions contemplated
hereby, shall survive the Closing and any investigation at any time made by or
on behalf of the Indemnified Party until one year from the Closing (the
"Expiration Date"). All such representations and warranties shall expire on the
Expiration Date, except for claims, if any, (a) properly asserted in writing
prior to such Expiration Date identified as a claim for indemnification pursuant
to this Section 9, or (b) which are based upon fraud of TView or any of the
Stockholders, which shall survive until finally resolved and satisfied in full.
Notwithstanding anything to the contrary set forth above in this Section 9.06,
the representations and warranties made by the Stockholders in Section 2 with
respect to title to and ownership of the Shares shall survive until the
twentieth anniversary of the Closing Date.
9.07 Escrow.
(a) In order to assure that the TView NTSC/Scan Conversion
Video Scaling ASIC chip meets the performance criteria set forth on Schedule
1.08 (the "Performance Criteria") and in order to provide for the payment of the
indemnity obligations of the Stockholders pursuant to this Section 9, at the
Closing all of the FOCUS Common Stock (the "Escrow Amount") shall be deposited
(or held, as appropriate) by FOCUS into an account (the "Escrow Account")
administered by ChaseMellon Shareholders Services, L.L.C. as escrow agent (the
"Escrow Agent") until such time as the Performance Criteria are met (the "Escrow
Release Date"). The Stockholders hereby agree and acknowledge that the delivery
of such amount to the Escrow Agent shall constitute the delivery of such amount
to the Stockholders for purposes of Section 1.05 of this Agreement, for all
purposes under applicable Delaware law and for all other purposes hereunder. The
Escrow Agent shall hold the Escrow Account in accordance with the provisions of
the Escrow Agreement. On the Escrow Release Date the Focus Common Stock shall be
transferred by the Escrow Agent to the Stockholders' Representative for payment
to the Stockholders in accordance with the provisions of Section 1.08.
(b) In the event there is, at any time prior to the Escrow
Release Date, an award of an arbitrator, in accordance with the provisions of
Section 10.03 hereof, of a claim under this Section 9, the award shall be
satisfied from the FOCUS Common Stock held by the Escrow Agent. For purposes of
valuing the FOCUS Common Stock in connection with any such arbitration award,
each share of FOCUS Common Stock held in escrow will be valued at the closing
price for the FOCUS Common Stock as reported on NASDAQ or other exchange.
38
10. Dispute Resolution
10.01 General. In the event that any dispute should arise
between the parties hereto with respect to any matter covered by this Agreement,
the parties hereto shall resolve such dispute in accordance with the procedures
set forth in this Section 10.
10.02 Consent of the Parties. In the event of any dispute
between the parties with respect to any matter covered by this Agreement, the
parties shall first use their best efforts to resolve such dispute among
themselves. If the parties are unable to resolve the dispute within 30 calendar
days after the commencement of efforts to resolve the dispute, the dispute will
be submitted to arbitration in accordance with Subsection 10.03 hereof.
10.03 Arbitration.
(a) Either FOCUS or the Surviving Corporation, on the
one hand, or the Stockholders' Representative, on the other hand, may submit any
matter referred to in Subsection 10.02 hereof to arbitration by notifying the
other party hereto and the Escrow Agent, in writing, of such dispute. Within 10
days after receipt of such notice, FOCUS or the Surviving Corporation, as the
case may be, and the Stockholders' Representative shall designate in writing one
arbitrator to resolve the dispute; provided, that if the parties hereto cannot
agree on an arbitrator within such 10- day period, the arbitrator shall be
selected by the American Arbitration Association. The arbitrator so designated
shall not be an employee, consultant, officer, director or stockholder of any
party hereto or any affiliate of any party to this Agreement.
(b) Within 15 days after the designation of the
arbitrator, the arbitrator, FOCUS or the Surviving Corporation, as the case may
be, and the Stockholders' Representative shall meet, at which time FOCUS and the
Stockholders' Representative shall be required to set forth in writing all
disputed issues and a proposed ruling on each such issue.
(c) The arbitrator shall set a date for a hearing(s),
which shall be no later than 30 days after the submission of written proposals
pursuant to paragraph (b) above, to discuss each of the issues identified by
FOCUS or the Surviving Corporation, as the case may be, and the Stockholders'
Representative. Each such party shall have the right to be represented by
counsel. The arbitration shall be governed by the rules of the American
Arbitration Association; provided, that the arbitrator shall have sole
discretion with regard to the admissibility of evidence.
(d) The arbitrator shall use his or her best efforts
to rule on each disputed issue within 30 days after the completion of the
hearings described in paragraph (c) above. The determination of the arbitrator
as to the resolution of any dispute shall be binding and conclusive upon all
parties hereto. All rulings of the arbitrator shall be in writing and shall be
delivered to the parties hereto and the Escrow Agent.
(e) The prevailing party in any arbitration shall be
entitled to an award of reasonable attorneys' fees incurred in connection with
the arbitration. The non-prevailing party shall pay such fees, together with the
fees of the arbitrator and the costs and expenses of the arbitration.
39
(f) Any arbitration pursuant to this Subsection 10.03
shall be conducted in Boston, Massachusetts. Any arbitration award may be
entered in and enforced by any court having jurisdiction thereover and the
parties hereby consent and commit themselves to the jurisdiction of the courts
of the State of Oregon for purposes of the enforcement of any arbitration award.
11. Termination of Agreement
11.01 Termination by Lapse of Time. This Agreement shall
terminate at 5:00 p.m., Boston Time, on October 15, 1996, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of TView, FOCUS and the Stockholders' Representative (whose
consent shall bind each of the Stockholders).
11.02 Termination by Agreement of the Parties. This Agreement
may be terminated by the mutual written agreement of the parties hereto. In the
event of such termination by agreement, FOCUS shall have no further obligation
or liability to the Stockholders or TView under this Agreement, and the
Stockholders and TView shall have no further obligation or liability to FOCUS or
FAC under this Agreement.
11.03 Termination by Reason of Breach. This Agreement may be
terminated by the Stockholders or TView, if at any time prior to the Closing
there shall occur a material breach of any of the representations, warranties or
covenants of FOCUS or FAC or the failure by FOCUS or FAC to perform any
condition or obligation hereunder, and may be terminated by FOCUS or FAC, if at
any time prior to the Closing there shall occur a material breach of any of the
representations, warranties or covenants of the Stockholders or TView or the
failure of the Stockholders or TView to perform any condition or obligation
hereunder.
12. Brokers
12.01 For the Stockholders and TView. Each of the Stockholders
and TView represent and warrant that no person, firm or corporation has acted in
the capacity of broker or finder on its behalf to bring about the negotiation of
this Agreement. The Stockholders jointly and severally agree to indemnify and
hold harmless FOCUS against any claims or liabilities asserted against it by any
person acting or claiming to act as a broker or finder on behalf of the
Stockholders and for TView.
12.02 For FOCUS. FOCUS represents and warrants that no person,
firm or corporation has acted in the capacity of broker or finder on its behalf
to bring about the negotiation of this Agreement. FOCUS or the Surviving
Corporation, if the Closing occurs, agrees to indemnify and hold harmless the
Stockholders (and TView, if the Closing does not occur) against any claims or
liabilities asserted against any of them by any person acting or claiming to act
as a broker or finder on behalf of FOCUS.
40
13. Notices
Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by telex,
federal express, registered or certified mail, postage prepaid, addressed as
follows or to such other address of which the parties may have given notice:
To FOCUS or the Surviving Corporation (if the Closing occurs):
FOCUS Enhancements, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To TView (if the Closing does not occur) or the Stockholders:
TView, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Stoel Rives LLP
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, or (b) three
business days after being sent, if sent by registered or certified mail, postage
prepaid and properly addressed as set forth above.
14. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that
FOCUS, on the one hand, and the Stockholders and TView, on the other hand, may
not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that FOCUS may assign this
Agreement, and its rights and obligations hereunder, to a subsidiary or
affiliate of FOCUS. Any assignment in contravention of this provision shall be
void.
15. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. FOCUS and TView, by the consent of their respective
presidents, and the Stockholders' Representative may amend or modify this
Agreement, in such manner as may be agreed upon, by a written instrument
executed by FOCUS, TView and the Stockholders' Representative.
(b) If the provisions of any Schedule or Exhibit to this
Agreement are inconsistent with the provisions of this Agreement, the provisions
of the Agreement shall prevail. The Exhibits and Schedules attached hereto or to
be attached hereafter are hereby incorporated as integral parts of this
Agreement.
16. Severability
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
17. Investigation of the Parties
All representations and warranties contained herein which are
made to the best knowledge of a party shall require that such party make
reasonable investigation and inquiry with respect thereto to ascertain the
correctness and validity thereof.
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18. Expenses
Except as otherwise expressly provided herein, FOCUS or the
Surviving Corporation, on the one hand, and the Stockholders (and TView, if the
Closing does not occur), jointly and severally, on the other hand, will pay all
fees and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by them in connection with the transactions contemplated
hereby (collectively, "Transaction Expenses"). In no event will any of the fees
or expenses incurred in connection with this transaction by the Stockholders,
TView or the Stockholders' Representative, including, without limitation, the
fees and expenses of counsel to the Stockholders and TView, be billed to or paid
by TView. TView shall provide FOCUS not later than five business days prior to
the Closing with a detailed list of all Transaction Expenses incurred, or which
shall be incurred prior to the Closing, by or on behalf of TView, the
Stockholders or the Stockholders' Representative. In addition, the Stockholders
shall provide TView with evidence at the Closing of payment by the Stockholders
of all such Transaction Expenses. Each Stockholder shall be responsible for
payment of all sales or transfer taxes arising out of the conveyance of the
Common Stock owned by such Stockholder.
19. Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
20. Section Headings
The section headings are for the convenience of the parties and
in no way alter, modify, amend, limit, or restrict the contractual obligations
of the parties.
21. Counterparts
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which shall be one and
the same document.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as an instrument under seal on and as of the date first above
written.
(Corporate Seal) FOCUS ENHANCEMENTS, INC.
ATTEST:
__________________________ By:__________________________
Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
(Corporate Seal) FOCUS ACQUISITION CORP.
ATTEST:
__________________________ By:__________________________
Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
(Corporate Seal) TVIEW, INC.
ATTEST:
__________________________ By:__________________________
Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
COMMON STOCKHOLDERS:
_____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually
_____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individually
_____________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, individually
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_____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
_____________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
President
_____________________________
▇▇▇ ▇▇▇▇▇▇, individually
_____________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
_____________________________
▇▇▇▇▇ ▇▇▇▇▇▇, individually
_____________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, individually
_____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
PREFERRED STOCKHOLDERS
OLYMPIC VENTURE PARTNERS III, L.P.
By:___________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
▇▇▇▇▇▇ ▇▇▇▇ VENTURES
By:___________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
45
OVP III ENTREPRENEURS FUND
By:___________________________
Name:
Title:
TOW PARTNERS
By:___________________________
Name:
Title:
THE YOUNGER LIVING TRUST
By:___________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Trustee
ANVEST, L.P.
By:___________________________
Name:
Title:
▇▇▇▇▇▇▇▇ HOLDINGS, L.P.
By:___________________________
Name:
Title:
SHV M/P/T FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: ▇▇▇▇▇ Fargo Bank, Trustee
By:___________________________
Name:
Title:
46
SHV M/P/T FBO ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: ▇▇▇▇▇ Fargo Bank, Trustee
By:___________________________
Name:
Title:
_______________________________
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., individually
_______________________________
Trenche ▇▇▇▇, individually
_______________________________
▇▇▇▇ ▇. Lego, individually
_______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, individually
_______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
_______________________________
▇▇▇ ▇▇▇▇▇▇▇, individually
47