EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
DTOMI, INC.,
DTOMI ACQUISITION CORPORATION
AND
VOCALSCAPE NETWORKS, INC.
DATED AS OF AUGUST 25, 2005
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
August 25, 2005 among Dtomi, Inc., a Nevada corporation ("PARENT"), Dtomi
Acquisition Corporation, a Nevada corporation and a wholly-owned subsidiary of
Parent ("MERGER SUB"), and VocalScape Networks, Inc., a Nevada corporation (the
"COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2) and in accordance with the Nevada General Corporation
Law ("NEVADA LAW"), Parent, Merger Sub and the Company intend to enter into a
business combination transaction.
B. Immediately upon the Effective Time (as defined in Section 1.2) of the
Merger (as defined herein), the Board of Directors of Parent (as the combined
company resulting from such business combination transaction) will consist of
four (4) members, with designees of the Company, as set forth herein, to hold
such four (4) such seats and Parent shall have no right to name designees to
hold any such seats. It is also contemplated that the senior management of the
combined company will, as set forth herein, consist of senior management from
both the Company and Parent, with senior management of the Parent continuing to
operate the current Air Spring Axle business of Parent.
t 6 0 C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of the Company adopt and approve this Agreement
and approve the Merger.
D. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and fair to, and in the best interests of, Parent and its shareholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has determined to recommend that the shareholders of
Parent vote to approve the issuance of shares of Parent Common Stock (as defined
herein) to the stockholders of the Company pursuant to the terms of the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
-2-
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Nevada Law, Merger Sub shall be merged with and into
the Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger on the preprinted form of Certificate of Merger required
by the Secretary of State of the State of Nevada (the "CERTIFICATE OF MERGER"),
with the Secretary of State of the State of Nevada in accordance with the
relevant provisions of Nevada Law (the time of such filing (or such later time
as may be agreed in writing by the parties and specified in the Certificate of
Merger) being the "EFFECTIVE TIME") as soon as practicable on or after the
Closing Date (as defined herein). Unless the context otherwise requires, the
term "AGREEMENT" as used herein refers collectively to this Agreement and Plan
of Reorganization and the Certificate of Merger. The closing of the Merger (the
"CLOSING") shall take place at the offices of The ▇▇▇▇ Law Group, PLLC at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Nevada
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Parent,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation of the Surviving Corporation;
provided, however, that the name of the Company in its Articles of Incorporation
shall be changed so as to allow Parent to be named "VocalScape Networks, Inc."
in its Articles of Incorporation in the State of Nevada
-3-
(b) The Amended and Restated Bylaws of Parent, as in effect
immediately prior to the Effective Time, shall be, at the Effective Time, the
Bylaws of the Surviving Corporation until thereafter amended.
1.5 Directors and Officers. Upon the Effective Time, the Board of
Directors of Parent shall consist of ▇▇▇▇▇▇ ▇. ▇▇▇▇ (who shall act as Chairman),
▇▇▇ ▇▇▇▇▇▇▇▇, , ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇ and the officers of the Parent
shall include ▇▇▇▇▇▇ ▇. ▇▇▇▇ (who shall act as Chief Executive Officer) and ▇▇▇
▇▇▇▇▇▇▇▇ (who shall act as President), , each such director and officer to serve
until his respective successor is duly elected or appointed and qualified. In
addition, at the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of one (1) member designated by the Company and no
members designated by Parent designated by Parent. The officers of Surviving
Corporation shall include one (1) member designated by the Company. Each such
director and officer of the Surviving Corporation to serve until his respective
successor is duly elected or appointed and qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of Common Stock,
no par value per share, of the Company (the "COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, (other than any shares of
the Company Common Stock to be canceled pursuant to Section 1.6(b)) will be
canceled and extinguished and automatically converted (subject to Sections
1.6(d) and (e)) into the right to receive .91111 (the "EXCHANGE RATIO") shares
of preferred stock of Parent, par value $0.001 per share ("PARENT PREFERRED
STOCK"), which shares of preferred stock shall, contain terms and preferences
which shall include but not be limited to, that such shares of preferred stock
are convertible into and equal in voting power to an aggregate of 455,555,555
shares of Common Stock, par value $0.001 per share, of Parent (the "PARENT
COMMON STOCK") upon surrender of the certificate representing such share of the
Company Common Stock in the manner provided in Section 1.7 (or in the case of a
lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner provided in Section 1.). If any shares of the Company
Common Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
-4-
(b) Percentage Ownership. It is understood and agreed by the parties
that the aggregate number of shares of Parent Common Stock issuable to the
Company shareholders by virtue conversion of the shares of preferred stock
referenced in Section 1.6(a) hereof and of the Merger as of the date hereof is
455,555,555 (which, for the avoidance of doubt, assumes that all outstanding
securities exercisable for, or convertible into, shares of Company Common Stock
have been so exercised or converted, and that all of the Company Stock Options
have been exercised), as adjusted to appropriately reflect the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time, which shares represent eighty-two
percent (82%) of the shares of Parent Common Stock outstanding on a
fully-diluted basis, (which, for the avoidance of doubt, shall include any
equity securities of Parent which Parent may sell to private investors prior to
the Closing), as of the Effective Time, (which, for the avoidance of doubt,
assumes that all Parent outstanding securities exercisable for, or convertible
into, shares of Parent Common Stock have been so exercised or converted, and
that all of the Company Stock Options have been exercised).
(c) Cancellation of Parent-Owned Stock. Each share of the Company
Common Stock held by the Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of the Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.001
par value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of Common Stock, $0.001 par value, of
the Surviving Corporation. Each certificate evidencing ownership of shares of
Merger Sub Common Stock shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted (such adjustment to be subject to the consent of the Company, which
shall not be unreasonably withheld) to reflect appropriately the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time.
-5-
(f) Fractional Shares. No fraction of a share of Parent Preferred
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Preferred Stock (after aggregating all fractional shares of
Parent Preferred Stock to be received by such holder) shall receive from Parent
, in the sole discretion of Parent, either the nearest whole share of Preferred
Stock greater than any fraction of a share of Preferred Stock that any
stockholder would otherwise receive, or an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the closing price of one share of Parent Common Stock on the trading day
immediately prior to the Effective Time, as reported on the Over-the-Counter
Bulletin Board ("OTCBB").
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select an institution reasonably
satisfactory to the Company to act as the exchange agent (the "EXCHANGE AGENT")
in the Merger.
(b) Parent to Provide Preferred Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent, for exchange in
accordance with this Article I, certificates representing the shares of Parent
Preferred Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of Company Common Stock, and cash in an amount sufficient for payment in
lieu of fractional shares pursuant to Section 1.6(f).
(c) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Preferred Stock whose shares were converted into the right to receive
shares of Parent Preferred Stock pursuant to Section 1.6 and cash in lieu of any
fractional shares pursuant to Section 1.6(f), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Preferred Stock and cash in lieu of any fractional shares pursuant to Section
1.6(f). Upon surrender of Certificates for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Preferred Stock and payment in lieu of fractional shares which
such holders have the right to receive pursuant to Section 1.6(f) and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes to evidence only the ownership of the number of full
shares of Parent Preferred Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.6(f).
-6-
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the date of this Agreement with
respect to Parent Preferred Stock with a record date after the Effective Time
will be paid to the holders of any unsurrendered Certificates with respect to
the shares of Parent Preferred Stock represented thereby until the holders of
record of such Certificates shall surrender such Certificates. Following
surrender of any such Certificates, the Exchange Agent shall deliver to the
record holders thereof, without interest, certificates representing whole shares
of Parent Preferred Stock issued in exchange therefor along with payment in lieu
of fractional shares pursuant to Section 1.6(f) hereof and, subject to
applicable law, the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Preferred Stock.
(e) Transfers of Ownership. If certificates for shares of Parent
Preferred Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Preferred Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Preferred Stock
or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in the Company Common Stock. All shares of
Parent Preferred Stock issued upon the surrender for exchange of shares of the
Company Common Stock in accordance with the terms hereof (together with any cash
paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
which were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
-7-
1.9 Appraisal Rights.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of capital stock of the Company held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with Nevada Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("DISSENTING SHARES"), shall not be converted into or represent
a right to receive that number of shares of Parent Preferred Stock (including
any cash in lieu of fractional shares) that such holder is entitled to receive
in the Merger, but the holder thereof shall only be entitled to such rights as
are granted by Nevada Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) such holder's appraisal rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive that
number of shares of Parent Preferred Stock, plus any cash in lieu of fractional
shares, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demand for appraisal received by the Company pursuant to the applicable
provisions of Nevada Law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment or offer to make any payment with respect to any such demands or offer
to settle or settle any such demands. Any payments relating to Dissenting Shares
shall be made solely by the Surviving Corporation, and no funds or other
property will be provided by Merger Sub.
1.10 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Preferred
Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(g) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
-8-
1.11 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
(b) It is intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
1.12 Taking of Necessary Action, Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action, so long
as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
2.1 Organization of the Company.
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
herein) on the Company.
(b) The Company has delivered to Parent a true and complete list of
all of the Company's subsidiaries, indicating the jurisdiction of incorporation
of each subsidiary and listing the shareholders of each such subsidiary and the
number of shares held by each such shareholder.
(c) The Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of the Company and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither the Company
nor any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing instruments.
-9-
(d) When used in connection with the Company, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of the Company and its
subsidiaries taken as a whole except for those changes, events and effects that
are directly caused by (i) conditions affecting the United States economy as a
whole, or (ii) conditions affecting the internet industry as a whole, which
conditions (in the case of clause (i) or (ii)) do not affect the Company in a
disproportionate manner) or (iii) conditions that in the good faith judgment of
the Company's Board of Directors result principally from the execution or
delivery of this Agreement or the announcement of the pendency of the Merger.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
500,000,000 shares of Common Stock, no par value per share, of which there were
500,000,000 shares issued and outstanding as of the date of this Agreement. All
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of the Company or any agreement
or document to which the Company is a party or by which it is bound.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Article 2.2(a) herein, there are no equity securities, partnership interests or
similar ownership interests of any class of the Company, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except for securities the Company owns, directly or
indirectly through one or more subsidiaries, there are no equity securities,
partnership interests or similar ownership interests of any class of any
subsidiary of the Company, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Section 2.2(a), there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its subsidiaries is a party or by which it is bound obligating
the Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no registration rights
and, to the knowledge of the Company, as of the date of this Agreement, there
are no voting trusts, proxies or other agreements or understandings (except for
the Company Voting Agreements) with respect to any equity security of any class
of the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries.
-10-
2.4 Authority.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders and the filing of the Certificate of Merger pursuant to Nevada Law.
A vote of the holders of a majority of the outstanding shares of Company Common
Stock is required for the Company's stockholders to approve and adopt this
Agreement and approve the Merger. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and, if applicable, Merger Sub, constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
the Company or the equivalent organizational documents of any of its
subsidiaries, (ii) subject to obtaining the approval and adoption of this
Agreement and the approval of the Merger by the Company's stockholders and
compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) assuming the receipt of all
material consents, waivers and approvals referred to in the last sentence of
this Section 2.4(a), result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair the Company's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties are bound or affected. The Company Schedules list all material
consents, waivers and approvals under any of the Company's or any of its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
-11-
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Nevada, (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings (if
any) as may be required under applicable federal and state securities laws and
the securities or antitrust laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations (if any) which if
not obtained or made would not be material to the Company or Parent or have a
material adverse effect on the ability of the parties to consummate the Merger.
2.5 Company Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) of the Company
(the "THE COMPANY FINANCIALS"), (x) was prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, and (y) fairly presented the
consolidated financial position of the Company and its subsidiaries as of and at
the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of the Company
as of December 31, 2004, is hereinafter referred to as the "THE COMPANY BALANCE
SHEET." Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet the Company has no liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Company taken
as a whole, except liabilities (i) provided for in the Company Balance Sheet, or
(ii) incurred since the date of the Company Balance Sheet in the ordinary course
of business consistent with past practices.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock, (iv) any granting by the Company or any of its
subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by the Company or any of its
subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by the Company or any of
its subsidiaries of any increase in severance or termination pay or any entry by
the Company or any of its subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company or any of its subsidiaries into
any licensing or other agreement with regard to the acquisition or disposition
of any material Company IP Rights (as defined in Section 2.7) other than
licenses in the ordinary course of business consistent with past practice, (vi)
any material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by the Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
-12-
2.7 Intellectual Property.
(a) To the knowledge of the Company, the Company and its
subsidiaries own, or have the right to use, sell or license all intellectual
property necessary or required for the conduct of their respective businesses as
presently conducted (such intellectual property and the rights thereto are
collectively referred to herein as the "COMPANY IP RIGHTS").
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Company IP Rights to
which the Company or any subsidiary of the Company is a party or by which, to
its knowledge, it is bound or affected, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any the
Company IP Rights or materially impair the right of the Company, the Surviving
Corporation or Parent to use, sell or license any the Company IP Rights or
portion thereof.
(c) To the knowledge of the Company, the manufacture, marketing,
license, sale or intended use of any product or technology currently licensed or
sold or under development by the Company or any of its subsidiaries does not
violate any license or agreement between the Company or any of its subsidiaries
and any third party nor infringe any intellectual property right of any other
party.
-13-
(d) Except with respect to pending litigation in the State of Ohio
with respect to a license agreement to use a telecommunications switch, there is
no pending or, to the knowledge of the Company, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any the Company IP Rights, nor has the Company received any written notice
asserting that any the Company IP Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party.
(e) The Company has taken commercially reasonable steps designed to
safeguard and maintain the confidentiality of, and its proprietary rights in,
all the Company IP Rights.
2.8 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which the Company or any of its subsidiaries or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected. No investigation or review by
any Governmental Entity is pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no agreement, judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of material property by the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
(b) Except with respect to pending litigation in the State of Ohio
with respect to a license agreement to use a telecommunications switch, the
Company and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company (collectively, the "COMPANY PERMITS").
The Company and its subsidiaries are in compliance in all material respects with
the terms of the Company Permits.
-14-
(c) The Company has no knowledge of any pending regulatory action of
any sort against the Company, or any contract manufacturer (a "CONTRACT
MANUFACTURER"), of certain of the Company's products by any regulatory agency or
any other duly authorized governmental authority which regulates the internet or
music industry in any jurisdiction which could have a Material Adverse Effect on
the Company or in any material way limit or restrict the ability of the Company
to market its existing products.
2.9 Litigation. Except with respect to pending litigation in the State of
Ohio with respect to a license agreement to use a switch in telecommunications,
there is no pending or, to the knowledge of the Company, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or as to which
the Company or any of its subsidiaries has received any notice of assertion nor,
to the Company's knowledge, is there a threatened action, suit, proceeding,
claim, arbitration or investigation against the Company or any of its
subsidiaries which reasonably would be likely to be material to the Company, or
which in any manner challenges or seeks to prevent, enjoin, alter or delay any
of the transactions contemplated by this Agreement.
2.10 Brokers' and Finders' Fees. , The Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.11 Agreements, Contracts and Commitments. Neither the Company nor any of
its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company or any of its
subsidiaries on no more than thirty (30) days notice without liability or
financial obligation;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
the Company or any of its subsidiaries and any of its officers or directors;
-15-
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company or any of its subsidiaries to engage in any
line of business or compete with any person or granting any exclusive
distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined herein), has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound of the type described in clauses
(a) through (f) above (any such agreement, contract or commitment, a "COMPANY
CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.
2.12 Change of Control Payments. The Company Schedules set forth each plan
or agreement pursuant to which any amounts may become payable (whether currently
or in the future) to current or former officers or directors of the Company as a
result of or in connection with the Merger.
2.13 Board Approval. The Board of Directors of the Company has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of the Company and its stockholders, (ii) to propose this
Agreement for approval and adoption by the Company's stockholders and to declare
the advisability of this Agreement, and (iii) to recommend that the stockholders
of the Company approve and adopt this Agreement and approve the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization of Parent.
(a) Parent and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
herein) on Parent.
-16-
(b) Parent has delivered to the Company a true and complete list of
all of Parent's subsidiaries, indicating the jurisdiction of incorporation of
each subsidiary and listing the shareholders of each such subsidiary and the
number of shares held by each such shareholder.
(c) Parent has delivered or made available to the Company a true and
correct copy of the Articles of Incorporation and Bylaws of Parent and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Parent is not in violation of
any of the provisions of its Articles of Incorporation or Bylaws or equivalent
governing instruments.
(d) When used in connection with Parent, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Parent and its subsidiaries
taken as a whole except for those changes, events and effects that are directly
caused by (i) conditions affecting the United States economy as a whole, or (ii)
conditions affecting the internet industry as a whole, which conditions (in the
case of clause (i) or (ii)) do not affect Parent in a disproportionate manner),
or (iii) conditions that in the good faith judgment of Parent's Board of
Directors result principally from the execution or delivery of this Agreement or
the announcement of the pendency of the Merger.
3.2 Parent and Merger Sub Capital Structure.
(a) The authorized capital stock of Parent consists of 100,000,000
shares of Common Stock, par value $.001 per share, of which all or substantially
all of such 100,000,000 shares of common stock are issued and outstanding as of
the date of this Agreement and 25,000,000 shares of Preferred Stock, par value
$.001 per share, of which no shares are issued or outstanding as of the date of
this Agreement. All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
Parent or any agreement or document to which Parent is a party or by which it is
bound. The authorized capital stock of Merger Sub consists of 1,000 shares of
Common Stock, $0.001 par value per share, all of which, as of the date hereof,
are issued and outstanding and are held by Parent. Merger Sub was formed on
April 26, 2005, for the purpose of consummating the Merger, has no material
assets or liabilities except as necessary for such purpose and has not, and
prior to the Effective Time will not have, conducted any business except as
necessary for such purpose.
-17-
(b) As of the date of this Agreement, Parent had reserved an
aggregate of 5,000,000 shares of Parent Common Stock, net of exercises, for
issuance to employees, consultants and non-employee directors pursuant to
Parent's 2002 Stock Option Plan under which options are outstanding for an
aggregate of 3,339,130 shares of Common Stock (the "PARENT STOCK OPTION PLAN.")
at exercise prices ranging from $0.095 to $0.20 per share, or a weighted average
exercise price of $0.16 per share. Stock options granted pursuant to the Parent
Stock Option Plan are referred to in this Agreement as "PARENT STOCK OPTIONS.")
Parent has made available to the Company accurate and complete copies of the
Parent Stock Option Plan and the forms of all agreements evidencing the Parent
Stock Options. There are no commitments or agreements of any character to which
Parent is bound obligating Parent to accelerate the vesting of any Parent Stock
Option as a result of the Merger. Additionally, as of the date of this Merger
Agreement, the Parent has issued and outstanding warrants to purchase
approximately (i) 18,074,723 shares of common stock which may be purchased at an
exercise price of $0.18 per share on or before December 31, 2006, (ii)
approximately 500,000 shares of common stock at an exercise price of $0.25 per
share on or before December 31, 2009, and (iii) approximately 85,614 shares of
common stock at an exercise price of $0.001 on or before December 31, 2004.
3.3 Obligations With Respect to Capital Stock. There are no equity
securities, partnership interests or similar ownership interests of any class of
Parent, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except for securities Parent owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class of
any subsidiary of Parent, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Parent
is a party or by which it is bound obligating Parent to issue, deliver or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition, of any shares of
capital stock, partnership interests or similar ownership interests of Parent or
obligating Parent to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of Parent, as of the date
of this Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of any class of Parent or
with respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
-18-
3.4 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub, subject
only to the filing of the Certificate of Merger pursuant to Nevada Law and the
approval by Parent's shareholders of the issuance of shares of Parent Common
Stock issuable under the terms of the Merger. A vote of the holders of a
majority of the outstanding shares of Parent Common Stock is required for
Parent's shareholders to approve the issuance of shares of Parent Common Stock
by virtue of the Merger. This Agreement has been duly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes the valid and binding obligation of each of
Parent and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by each of
Parent and Merger Sub do not, and the performance of this Agreement by each of
Parent and Merger Sub will not (i) conflict with or violate the Articles of
Incorporation or Bylaws of Parent or the Certificate of Incorporation or Bylaws
of Merger Sub or the equivalent organizational documents of any of Parent's
other subsidiaries, (ii) subject to obtaining the approval of Parent's
shareholders of the issuance of shares of Parent Common Stock by virtue of the
Merger and compliance with the requirements set forth in Section 3.4(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent (or Merger Sub) or by which its or any of their respective
properties is bound or affected, or (iii) assuming the receipt of all material
consents, waivers and approvals referred to in the last sentence of this Section
3.4(a), result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
Parent's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent (including Merger Sub) pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent (including
Merger Sub) is a party or by which Parent or its or any of its respective
properties are bound or affected. The Parent Schedules list all material
consents, waivers and approvals under any of Parent's ' agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby.
-19-
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the Merger, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Nevada, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings (if any) as may be required under applicable federal
and state securities laws and the securities or antitrust laws of any foreign
country, and (v) such other consents, authorizations, filings, approvals and
registrations (if any) which if not obtained or made would not be material to
Parent or the Company or have a material adverse effect on the ability of the
parties to consummate the Merger.
3.5 Parent SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed with the Securities and Exchange Commission (the "SEC") since January 1,
2002, and has made available to the Company such forms, reports and documents in
the form filed with the SEC. All such required forms, reports and documents
(including those that Parent may file subsequent to the date hereof) are
referred to herein as the "PARENT SEC REPORTS." As of their respective dates,
the Parent SEC Reports (i) were prepared in all material respects with the
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Parent SEC Reports, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Parent's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-QSB under the Exchange Act) and (z) fairly presented the financial
position of Parent as at the respective dates thereof and the results of
Parent's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments. The balance sheet of
Parent contained in Parent SEC Reports as of December 31, 2004 is hereinafter
referred to as the "PARENT BALANCE SHEET." Except as disclosed in the Parent
Financials, since the date of the Parent Balance Sheet Parent has no liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except liabilities
(i) provided for in the Parent Balance Sheet, or (ii) incurred since the date of
the Parent Balance Sheet in the ordinary course of business consistent with past
practices.
-20-
3.6 Absence of Certain Changes or Events. Since the date of Parent Balance
Sheet there has not been: (i) any Material Adverse Effect on Parent, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Parent's capital
stock, or any purchase, redemption or other acquisition by Parent of any of
Parent's capital stock or any other securities of Parent or its subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
(iii) any split, combination or reclassification of any of Parent's capital
stock, (iv) any granting by Parent of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by Parent of
any bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by Parent of any increase in severance or
termination pay or any entry by Parent into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving Parent of the nature contemplated
hereby, (v) entry by Parent into any licensing or other agreement with regard to
the acquisition or disposition of any material Parent IP Rights (as defined in
Section 3.8) other than licenses in the ordinary course of business consistent
with past practice, (vi) any material change by Parent in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (vii) any revaluation by Parent of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
3.7 Tax.
(a) Tax Returns and Audits.
(i) Parent and each of its subsidiaries have timely filed all
Returns relating to Taxes required to be filed by Parent and each of its
subsidiaries, except such Returns which are not material to Parent, and have
paid all Taxes shown to be due on such Returns.
-21-
(ii) Parent and each of its subsidiaries as of the Effective
Time will have withheld and paid over, as appropriate, with respect to its
employees all federal and state, local and/or foreign income taxes, FICA, FUTA
and other Taxes required to be withheld.
(iii) Parent has not been delinquent in the payment of any Tax
nor is there any Tax deficiency outstanding, proposed or assessed against
Parent, nor has Parent executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Parent is
presently in progress, nor has Parent been notified of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed by Parent has
been proposed formally or informally by any Tax authority to Parent or any
representative thereof and, to the knowledge of Parent, no basis exists for any
such adjustment which would be material to Parent.
(vi) Parent has no liability for unpaid Taxes which has not
been accrued for or reserved on the Parent Balance Sheet, whether asserted or
unasserted, contingent or otherwise, which is material to Parent, and the
Company has not incurred any liability for Taxes other than in the ordinary
course of business since the date of the Company Balance Sheet.
(vii) None of Parent's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Parent that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G or 404 of the Code.
(ix) Parent has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by Parent.
(x) Parent is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
-22-
(xi) No power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes payable by Parent .
(xii) Parent is not, nor has it been, a member of a
consolidated, combined or affiliated group or is a party to or affected by any
tax-sharing or allocation agreement or arrangement.
(xiii) The Parent Schedules list (y) any Tax exemption, Tax
holiday or other Tax-sparing arrangement that Parent has in any jurisdiction,
including the nature, amount and lengths of such Tax exemption, Tax holiday or
other Tax-sparing arrangement and (z) any expatriate tax programs or policies
affecting Parent . Each of Parent and its subsidiaries is in full compliance
with all terms and conditions of any Tax exemption, Tax holiday or other
Tax-sparing arrangement or order of any Governmental Entity and the consummation
of the transactions contemplated hereby will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sparing arrangement or order.
3.8 Intellectual Property.
(a) To the knowledge of Parent, the Parent and its subsidiaries own,
or have the right to use, sell or license all intellectual property necessary or
required for the conduct of their respective businesses as presently conducted
(such intellectual property and the rights thereto are collectively referred to
herein as the "PARENT IP Rights").
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Parent IP Rights to
which the Parent or any subsidiary of the Parent is a party or by which, to its
knowledge, it is bound or affected, will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of any Parent IP Rights or
materially impair the right of Parent, the Surviving Corporation or the Company
to use, sell or license any Parent IP Rights or portion thereof.
(c) To the knowledge of Parent, the manufacture, marketing, license,
sale or intended use of any product or technology currently licensed or sold or
under development by Parent does not violate any license or agreement between
Parent and any third party or infringe any intellectual property right of any
other party.
(d) There is no pending or, to the knowledge of Parent, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any Parent IP Rights, nor has Parent received any written
notice asserting that any Parent IP Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party.
-23-
(e) Parent has taken commercially reasonable steps designed to
safeguard and maintain the confidentiality of, and its proprietary rights in,
all Parent IP Rights.
3.9 Compliance; Permits; Restrictions.
(a) Parent is not, in any material respect, in conflict with, or in
default or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to Parent or by which Parent or any of its is bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent is a party
or by which Parent or its properties is bound or affected. No investigation or
review by any Governmental Entity is pending or, to Parent's knowledge,
threatened against Parent , nor has any Governmental Entity indicated an
intention to conduct the same. There is no agreement, judgment, injunction,
order or decree binding upon Parent which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
Parent, any acquisition of material property by Parent or the conduct of
business by Parent as currently conducted.
(b) Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of Parent (collectively, the
"PARENT PERMITS"). Parent and its subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
(c) Related Matters. The Parent has no knowledge of any pending
regulatory action of any sort against the Parent or any Contract Manufacturer by
any regulatory agency or any other duly authorized governmental authority which
regulates the internet or the music industry in any jurisdiction which could
have a Material Adverse Effect on the Parent, or in any material way limit or
restrict the ability of the Parent to market its existing products.
3.10 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which Parent has received any notice of
assertion nor, to Parent's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against Parent which reasonably
would be likely to be material to Parent, or which in any manner challenges or
seeks to prevent, enjoin, alter or delay any of the transactions contemplated by
this Agreement.
3.11 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
-24-
3.12 Employee Benefit Plans and Employment Matters.
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "PARENT EMPLOYEE PLAN" means any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether written
or unwritten or otherwise, funded or unfunded, including without limitation,
each "employee benefit plan," within the meaning of Section 3(3) of ERISA which
is or has been maintained, contributed to, or required to be contributed to, by
Parent or any Affiliate for the benefit of any Parent Employee;
(ii) "PARENT EMPLOYEE" means any current, former, or retired employee, officer,
or director of Parent or any Affiliate;
(iii) "PARENT EMPLOYEE AGREEMENT" means each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or
similar agreement or contract between Parent or any Affiliate and any Employee
or consultant;
(iv) "PARENT PENSION PLAN" means each Parent Employee Plan which is an "employee
pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Parent does not have any plan or commitment to
establish any new Parent Employee Plan, to modify any Parent Employee Plan or
Parent Employee Agreement (except to the extent required by law or to conform
any such Parent Employee Plan or Parent Employee Agreement to the requirements
of any applicable law, in each case as previously disclosed to the Company in
writing, or as required by this Agreement), or to enter into any Parent Employee
Plan or Parent Employee Agreement, nor does it have any intention or commitment
to do any of the foregoing.
(c) Documents. Parent has provided to the Company: (i) correct and
complete copies of all documents embodying each Parent Employee Plan and each
Parent Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Parent Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Parent Employee Plan or related trust; (iv) if the Parent Employee Plan is
funded, the most recent annual and periodic accounting of Parent Employee Plan
assets; (v) the most recent summary plan description together with the summary
of material modifications thereto, if any, required under ERISA with respect to
each Parent Employee Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and rulings relating to Parent Employee Plans and copies of
all applications and correspondence to or from the IRS or the DOL with respect
to any Parent Employee Plan; (vii) all material written agreements and contracts
relating to each Parent Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Parent Employee relating to
any Parent Employee Plan and any proposed Parent Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Parent; (ix) all COBRA forms and
related notices; and (x) all registration statements and prospectuses prepared
in connection with each Parent Employee Plan.
-25-
(d) Parent Employee Plan Compliance. (i) Parent has, to its
knowledge, performed in all material respects all obligations required to be
performed by it under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to each Parent Employee Plan, and
each Parent Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) each Parent Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination letter from the
IRS with respect to each such Plan as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has remaining a period of time under applicable
Treasury regulations or IRS pronouncements in which to apply for such a
determination letter and make any amendments necessary to obtain a favorable
determination; (iii) no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Parent Employee
Plan; (iv) to Parent's knowledge, there are no actions, suits or claims pending
or threatened or reasonably anticipated (other than routine claims for benefits)
against any Parent Employee Plan or against the assets of any Parent Employee
Plan; (v) each Parent Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (vi) to Parent's knowledge,
there are no audits, inquiries or proceedings pending or threatened by the IRS
or DOL with respect to any Parent Employee Plan; and (vii) to Parent's
knowledge, neither Parent nor any Affiliate is subject to any penalty or tax
with respect to any Parent Employee Plan under Section 402(i) of ERISA or
Sections 4975 through 4980 of the Code.
-26-
(e) Parent Pension Plans. Parent does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Parent Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code.
(f) Parent Multiemployer Plans. At no time has Parent contributed to
or been requested to contribute to any Parent Multiemployer Plan.
(g) No Post-Employment Obligations. No Parent Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and Parent has
never represented, promised or contracted (whether in oral or written form) to
any Parent Employee (either individually or to Parent Employees as a group) or
any other person that such Parent Employee(s) or other person would be provided
with retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) Health Care Continuation Obligations. Neither Parent nor any
Affiliate has, prior to the Effective Time, and in any material respect,
violated any of the health care continuation requirements of COBRA, the
requirements of FMLA or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Parent Employee Plan, Parent Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Parent Employee.
(ii) No payment or benefit which will or may be made by Parent
or its Affiliates with respect to any Parent Employee as a result of the
transactions contemplated by this Agreement will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. To Parent's knowledge, Parent (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Parent Employees; (ii) has withheld all amounts required by law
or by agreement to be withheld from the wages, salaries and other payments to
Parent Employees; (iii) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened or
reasonably anticipated claims or actions against Parent under any worker's
compensation policy or long-term disability policy. To Parent's knowledge, no
Parent Employee has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound due to such employee
being employed by Parent and disclosing to Parent or using trade secrets or
proprietary information of any other person or entity.
-27-
3.13 Absence of Liens and Encumbrances. Parent and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Parent Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to Parent.
3.14 Environmental Matters.
(a) Hazardous Material. To the knowledge of Parent, except as
reasonably would not be likely to result in a material liability to Parent, no
underground storage tanks and no amount of any Hazardous Material, but excluding
office and janitorial supplies, are present, as a result of the actions of
Parent or any affiliate of Parent, or, to Parent's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that
Parent has at any time owned, operated, occupied or leased.
t 12 (b) Hazardous Materials Activities. Except as reasonably would not be
likely to result in a material liability to Parent, neither Parent has
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has Parent engaged in any Hazardous Materials
Activities in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. Parent and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the "PARENT
ENVIRONMENTAL PERMITS") necessary for the conduct of Parent's and its
subsidiaries' Hazardous Material Activities and other businesses of Parent and
its subsidiaries as such activities and businesses are currently being
conducted. To the knowledge of Parent, there are no facts or circumstances
indicating that any Parent Environment Permit will or may be revoked, suspended,
canceled or not renewed. All appropriate action in connection with the renewal
or extension of any Parent Environmental Permit has been taken.
-28-
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Parent's knowledge, threatened concerning any Parent
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
Parent . Parent is not aware of any fact or circumstance which could involve
Parent in any material environmental litigation or impose upon Parent any
material environmental liability. Parent and its subsidiaries have not received
notice, nor to the Parent's knowledge is there a threatened notice, that Parent
or its subsidiaries are responsible, or potentially responsible, for the
investigation, remediation, clean-up, or similar action at property presently or
formerly used by Parent for recycling, disposal, or handling of waste.
3.15 Labor Matters. No work stoppage or labor strike against Parent is
pending, threatened or reasonably anticipated. Parent does not have knowledge of
any activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of Parent, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Parent. Neither Parent has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Parent is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Parent Employees and no collective bargaining agreement is being negotiated
by Parent. Parent and its subsidiaries are and have been in compliance in all
material respects with all applicable laws regarding employment practices, terms
and conditions of employment, and wages and hours (including, without
limitation, WARN or any similar state or local law).
3.16 Agreements, Contracts and Commitments. Parent is not a party to or is
bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director level employee or member of Parent's Board of
Directors, other than those that are terminable by Parent on no more than thirty
days notice without liability or financial obligation;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
-29-
(c) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
Parent and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of Parent to engage in any line of business or compete with
any person or granting any exclusive distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement. Parent,
nor to Parent's knowledge any other party to a Parent Contract (as defined
below), has breached, violated or defaulted under, or received notice that it
has breached violated or defaulted under, any of the material terms or
conditions of any of the agreements, contracts or commitments to which Parent is
a party or by which it is bound of the type described in clauses (a) through (f)
above (any such agreement, contract or commitment, a "PARENT CONTRACT") in such
a manner as would permit any other party to cancel or terminate any such Parent
Contract, or would permit any other party to seek damages, which would be
reasonably likely to be material to Parent.
3.17 Change of Control Payments. There is no plan or agreement pursuant to
which any amounts may become payable (whether currently or in the future) to
current or former officers or directors of Parent as a result of or in
connection with the Merger.
3.18 Board Approval. The Board of Directors of Parent and Merger Sub have,
as of the date of this Agreement, determined that the Merger is fair to, and in
the best interests of their respective shareholders
3.19 OTCBB Quotation. Parent's Common Stock is quoted on the OTCBB.
-30-
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, the Company (which for the purposes of this
Article 4 shall include the Company and each of its subsidiaries) and Parent
(which for the purposes of this Article 4 shall include Parent and each of its
subsidiaries) agree, except to the extent that the other of them shall otherwise
consent in writing, to carry on its business diligently and in accordance with
good commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, to pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, to pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, each of the Company and Parent will promptly notify the
other of any material event involving its business or operations. No information
or knowledge obtained in any investigation will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. In addition, except as
permitted by the terms of this Agreement, without the prior written consent of
the other, neither the Company nor Parent shall do any of the following, and
neither the Company nor Parent shall permit its subsidiaries to do any of the
following, nor take, or cause or permit to be taken, any other action that would
be reasonably likely to have the effect of causing any of its respective
representatives or warranties contained in this Agreement to become untrue if
such representation or warranty were deemed made at the time such action is
taken:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company IP Rights or
the Parent IP Rights, as the case may be, or enter into grants to future patent
rights, other than in the ordinary course of business consistent with past
practice;
-31-
(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(e) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date hereof;
(f) Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than (i)
the issuance of shares of Company Common Stock or Parent Common Stock, as the
case may be, pursuant to the exercise of stock options therefor outstanding as
of the date of this Agreement, (ii) the grant of options to purchase shares of
Company Common Stock or Parent Common Stock, as the case may be, to be granted
at fair market value in the ordinary course of business, consistent with past
practice and in accordance with stock option plans existing on the date hereof,
(iii) shares of Company Common Stock or Parent Common Stock, as the case may be,
issuable upon the exercise of the options referred to in clause (ii), and (iv)
shares of Company Common Stock or Parent Common Stock, as the case may be,
issuable to participants in the Parent Purchase Plan or the Company Purchase
Plan consistent with past practice and the terms thereof;
(g) Cause, permit or propose any amendments to any charter document
or Bylaw (or similar governing instruments of any subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company or Parent, as the case may be, or
enter into any material joint ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company or Parent, as the case may be, except in the
ordinary course of business consistent with past practice;
(j) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities of the Company or
Parent, as the case may be, or guarantee any debt securities of others;
-32-
t 12 (k) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures;
(l) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;
(m) Make any grant of exclusive rights to any third party;
(n) Take any action that would be reasonably likely to interfere
with Parent's ability to account for the Merger as a pooling of interests; or
(o) Agree in writing or otherwise to take any of the actions
described in Article 4 (a) through (n) above, provided however that nothing in
this Article IV shall be construed to limit or impair Parent's ability or
willingness to sell its securities to private investors prior to the Effective
Time.
4.2 OTCBB Quotation. Parent shall continue the quotation of its Common
Stock on the OTCBB during the term of this Agreement. Parent shall take all
reasonable steps to maintain the quotation of its Common Stock on the OTCBB.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Other Filings; Board Recommendations.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent will prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Federal, foreign or Blue Sky laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). Each of the Company and Parent will notify the other promptly
upon the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff or any other government officials.
5.2 Confidentiality. As used in this Agreement, "Confidential Information"
means all nonpublic information disclosed by the one party or its agents to the
other or that, given the nature of the information or the circumstances
surrounding its disclosure, reasonably should be considered as confidential or
otherwise provided in connection with this Agreement. Confidential Information
includes, without limitation (i) nonpublic information relating the Company's,
Parent's or Merger Sub's business, technology, customers, business plans,
promotional and marketing activities, finances and other business affairs, and
(ii) information provided by one party to the other party that is not in the
public domain. The parties to this Agreement may use Confidential Information
only in pursuance of its consummation of this Agreement. Except as expressly
provided in this Agreement, each party will not disclose Confidential
Information to any person or entity without the other party's prior written
consent. Each party will take all reasonable measures to avoid disclosure,
dissemination or unauthorized use of Confidential Information, including, at a
minimum, those measures it takes to protect its own confidential information of
a similar nature.
-33-
5.3 No Solicitation.
(a) Restrictions on Parent.
(i) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, Parent and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than the Company and its affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any non-public
information concerning Parent to, or afford any access to the properties, books
or records of Parent to, or otherwise assist or facilitate, or enter into any
agreement or understanding with, any person, entity or group (other than the
Company and its affiliates, agents and representatives), in connection with any
Acquisition Proposal with respect to Parent. Parent will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. For the purposes of
this Agreement, an "ACQUISITION PROPOSAL" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of substantial
assets or similar transactions involving the entity or any subsidiaries of the
entity (other than sales of assets or inventory in the ordinary course of
business or as permitted under the terms of this Agreement), (ii) sale of 15% or
more of the outstanding shares of capital stock of the entity (including without
limitation by way of a tender offer or an exchange offer), (iii) the acquisition
by any person of beneficial ownership or a right to acquire beneficial ownership
of, or the formation of any "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) which beneficially owns,
or has the right to acquire beneficial ownership of, 15% or more of the then
outstanding shares of capital stock of the entity (except for acquisitions for
passive investment purposes only in circumstances where the person or group
qualifies for and files a Schedule 13G with respect thereto and only for so long
as such person or group continues to be eligible to report its beneficial
ownership of such capital stock on Schedule 13G); or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing. Parent will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. Parent will (i)
notify the Company as promptly as practicable if any inquiry or proposal is made
or any information or access is requested in connection with an Acquisition
Proposal or potential Acquisition Proposal and (ii) as promptly as practicable
notify the Company of the significant terms and conditions of any such
Acquisition Proposal. In addition, subject to the other provisions of this
Section 5.3(a), from and after the date of this Agreement until the earlier of
the Effective Time and termination of this Agreement pursuant to its terms,
Parent and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any person, entity or group (other than the Company); provided, however,
that nothing herein shall prohibit Parent's Board of Directors from taking and
disclosing to Parent's shareholders a position with respect to a tender offer
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
-34-
(ii) Notwithstanding the provisions of paragraph (a)(i) above, prior
to the Effective Time, Parent may, to the extent the Board of Directors of
Parent determines, in good faith, after consultation with outside legal counsel,
that the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (a)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to Parent in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of Parent in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Merger to the stockholders of Parent (a
"PARENT SUPERIOR PROPOSAL"). In addition, notwithstanding the provisions of
paragraph (a)(i) above, in connection with a possible Acquisition Proposal,
Parent may refer any third party to this Section 5.3(a) or make a copy of this
Section 5.3(a) available to a third party.
(b) Restrictions on the Company.
From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, the
Company and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than Parent and its affiliates, agents and representatives), or (ii) participate
in any discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company will (i) notify Parent as
promptly as practicable if any inquiry or proposal is made or any information or
access is requested in connection with an Acquisition Proposal or potential
Acquisition Proposal and (ii) as promptly as practicable notify Parent of the
significant terms and conditions of any such Acquisition Proposal. In addition,
subject to the other provisions of this Section 5.3(b), from and after the date
of this Agreement until the earlier of the Effective Time and termination of
this Agreement pursuant to its terms, the Company and its subsidiaries will not,
and will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Parent); provided, however, that nothing herein shall
prohibit the Company's Board of Directors from taking and disclosing to the
Company's stockholders a position with respect to a tender offer pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
-35-
5.4 Public Disclosure. Parent and the Company will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Acquisition Proposal and will not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or Nasdaq.
5.5 Legal Requirements. Each of Parent, Merger Sub and the Company will
use its respective reasonable commercial efforts to take all actions necessary
or desirable to comply promptly with all legal requirements which may be imposed
on them with respect to the consummation of the transactions contemplated by
this Agreement (including furnishing all information required in connection with
approvals by or filings with any Governmental Entity, and prompt resolution of
any litigation prompted hereby) and will promptly cooperate with and furnish
information to any party hereto necessary in connection with any such filings
with or investigations by any Governmental Entity, and any other such
requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement. Parent will use its commercially reasonable efforts to take such
steps as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of Parent Common Stock
pursuant hereto. The Company will use its commercially reasonable efforts to
assist Parent as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of Parent Common Stock pursuant hereto.
5.6 Third Party Consents. As soon as practicable following the date
hereof, Parent and the Company will each use its commercially reasonable efforts
to obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
-36-
5.7 Notification of Certain Matters. Parent and Merger Sub will give
prompt notice to the Company, and the Company will give prompt notice to Parent,
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause (a) any representation or
warranty contained in this Agreement and made by it to be untrue or inaccurate
in any material respect at any time from the date of this Agreement to the
Effective Time such that the conditions set forth in Section 6.2(a) or 6.3(a),
as the case may be, would not be satisfied as a result thereof or (b) any
material failure of Parent and Merger Sub or the Company, as the case may be, or
of any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement. Notwithstanding the above, the delivery of any notice
pursuant to this section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.8 Reasonably Commercial Efforts and Further Assurances. Subject to the
respective rights and obligations of Parent and the Company under this
Agreement, each of the parties to this Agreement will use its reasonably
commercial efforts to effectuate the Merger and the other transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement; provided that neither Parent nor the Company nor
any subsidiary or affiliate thereof will be required to agree to any divestiture
by itself or any of its affiliates of shares of capital stock or of any
business, assets or property, or the imposition of any material limitation on
the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock. Subject to the foregoing, each
party hereto, at the reasonable request of another party hereto, will execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.
5.9 Board of Directors and Certain Officers of the Combined Company.
(a) The Board of Directors of Parent will take all actions necessary
to cause the Board of Directors of Parent and the Surviving Corporation,
immediately after the Effective Time, to consist of the four (4) persons named
in Section 1.5 hereof (the "COMPANY DESIGNEES"). If, prior to the Effective
Time, any of the Company Designees or the Parent's designees shall decline or be
unable to serve as a director of Parent or the Surviving Corporation, the
Company (if such person was designated by the Company) shall designate another
person to serve in such person's stead, which person shall be reasonably
acceptable to the other party.
-37-
(b) The Board of Directors of Parent will take all actions necessary
to cause the officers of Parent and the Surviving Corporation, immediately after
the Effective Time, to include the persons named in Section 1.5 hereof.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder and Shareholder Approval. This Agreement shall have
been approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of the Company and the
Merger Sub.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) OTCBB Quotation. The shares of Parent Common Stock issuable to
stockholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for quotation on the OTCBB upon official notice of issuance.
6.2 Additional Conditions to Obligations of the Company. The obligation of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement. In
addition, the representations and warranties of Parent and Merger Sub contained
in this Agreement shall be true and correct in all material respects on and as
of the Effective Time except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except in such cases (other than the representations in Sections 3.2, 3.3
and 3.19) where the failure to be so true and correct would not have a Material
Adverse Effect on Parent. The Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by the Chairman of the Board
of Directors of Parent. Such certificate shall also certify the about of
liabilities incurred by Parent from July 1, 2005 until the Closing Date, which
amount of liabilities shall be acceptable to the Company, in its sole
discretion.
-38-
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(c) Legal Opinion. The Company shall have received the legal opinion
from The ▇▇▇▇ Law Group, PLLC, legal counsel to Parent, opining, in principal
part, that Parent and Merger Sub are validly existing and duly organized in the
State of Nevada and that all shares of Preferred Stock to be issued by Parent
pursuant to this Agreement is validly existing, duly authorized and
non-assessable.
(d) Material Adverse Effect. No Material Adverse Effect with respect
to Parent shall have occurred since the date of this Agreement.
(e) Appointment of Directors. The four (4) persons named in Section
hereof shall have been appointed to the Board of Directors of the Company
effective not later than the Effective Time as evidenced by way of resolution of
the Board of Directors of Parent in a form acceptable to the Company in the
Company's sole discretion and be the only directors of Parent at such time.
(f) Liabilities. Parent shall not have more than $2,257,861 in
liabilities as of June 30, 2005.
(g) Certificate of Designation. The Company shall have approved in
writing the form of Certificate of Designation containing the rights and
preferences of the shares of Preferred Stock to be issued to the Company
pursuant to this Agreement, which Certificate of Designation shall be filed with
the Secretary of State of the State of Nevada prior to the Effective Time.
(h) Certificate of Merger. The Company shall have approved in
writing the form of Certificate of Merger which shall, pursuant to this
Agreement, be filed with the Secretary of State of the State of Nevada.
-39-
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement. In addition,
the representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects on and as of the Effective
Time except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on and as of the Effective Time, except in such
cases (other than the representations in Sections 2.2, 2.3 and 2.19) where the
failure to be so true and correct would not have a Material Adverse Effect on
the Company. Parent shall have received a certificate with respect to the
foregoing signed on behalf of the Company by the President and Chief Executive
Officer and the Chief Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and the Parent shall have received a certificate to such effect
signed on behalf of the Company by the President and Chief Executive Officer and
the Chief Financial Officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect
to the Company shall have occurred since the date of this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of the Company or the approval of the issuance of Parent Common
Stock in connection with the Merger by the shareholders of Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
-40-
(b) by either the Company or Parent if the Merger shall not have
been consummated by September 1, 2005, provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
(c) by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action (an "ORDER"),
in any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either the Company or Parent if the required approvals of the
stockholders of the Company or the shareholders of Parent contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required vote upon a vote taken at a meeting of stockholders or shareholders, as
the case may be, duly convened therefor or at any adjournment thereof (provided
that the right to terminate this Agreement under this Section 7.1(d) shall not
be available to any party where the failure to obtain shareholder or stockholder
approval of such party shall have been caused by the action or failure to act of
such party in breach of this Agreement);
(e) by Parent, if the Board of Directors of the Company recommends
another proposal to the stockholders of the Company, or if the Board of
Directors of the Company shall have withheld, withdrawn or modified in a manner
adverse to Parent its recommendation in favor of adoption and approval of this
Agreement and approval of the Merger;
(f) by the Company, if the Board of Directors of Parent recommends a
Parent Superior Proposal to the shareholders of Parent, or if the Board of
Directors of Parent shall have withheld, withdrawn or modified in a manner
adverse to the Company its recommendation in favor of approving the issuance of
the shares of Parent Common Stock by virtue of the Merger;
t 12 (g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable prior to September 1, 2005 by Parent through the exercise of its
commercially reasonable efforts, then the Company may not terminate this
Agreement under this Section 7.1(g) provided Parent continues to exercise such
commercially reasonable efforts to cure such breach; or
-41-
(h) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable prior to September 1, 2005 by the Company through the
exercise of its commercially reasonable efforts, then Parent may not terminate
this Agreement under this Section 7.1(h) provided the Company continues to
exercise such commercially reasonable efforts to cure such breach. 7.2 Notice of
Termination; Effect of Termination.
(i) by the Company if at any time prior to the Effective Time
(including any extension of the Effective Time) if Parent looses the quotation
of its Common Stock on the OTCBB.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 Fees and Expenses. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Merger is consummated;
provided, however, that Parent and the Company shall share equally all fees and
expenses.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
-42-
(a) if to Parent or Merger Sub, to:
Dtomi, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) with copy to:
The ▇▇▇▇ Law Group, PLLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇ , Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Company, to:
VocalScape Networks, Inc.
▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(d) with copy to:
VocalScape Networks, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "THE BUSINESS
OF" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be "deemed to include" all direct and indirect subsidiaries
of such entity. References herein to "Sections" are references to Sections
hereof unless otherwise stated herein.
-43-
8.4 Counterparts. This Agreement may be executed in counterparts, all of
which t 6 0 shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein(a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
confidentiality agreement herein contained in Section 5.2 hereof shall continue
in full force and effect until the Closing and shall survive any termination of
this Agreement for a period of five (5) years; and (b) are not intended to
confer upon any other person any rights or remedies hereunder except as
otherwise provided herein.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
-44-
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
the Superior Court of King County State of Washington, and the federal district
court for the Western District of Washington, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Nevada for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction and
such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Definition of "Knowledge". Wherever used in this Agreement, the term
"KNOWLEDGE" shall mean the actual knowledge of: (a) in the case of the Company,
its (i) President and Chief Executive Officer, (ii) Executive Vice President and
Chief Financial Officer and (iii) other Executive Vice Presidents; and (b) in
the case of Parent and Merger Sub, Parent's (i) Chief Executive Officer, (ii)
President and Chief Operating Officer and (iii) Chief Financial Officer.
[Remainder of page intentionally left blank]
-45-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
DTOMI, INC.
By: __________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman and Secretary
DTOMI ACQUISITION CORPORATION
By:
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Director and Secretary
VOCALSCAPE NETWORKS, INC.
By:
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: CEO
-46-