AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
DESIGN AUTOMATION SYSTEMS, INC.
(A TEXAS CORPORATION)
AND
DYNAMIC PROFESSIONAL SERVICES, L.L.C.
(A TEXAS LIMITED LIABILITY COMPANY)
AND
▇▇▇▇ SOLUTIONS, INC.
(A WHOLLY OWNED SUBSIDIARY OF DESIGN AUTOMATION SYSTEMS, INC.)
(A TEXAS CORPORATION)
TABLE OF CONTENTS
ARTICLES PAGE
-------- ----
ARTICLE I REPRESENTATIONS COVENANTS, AND WARRANTIES
OF DESIGN AUTOMATION SYSTEMS, INC.............. 1
1.01 Organization.............................. 1
1.02 Capitalization............................ 2
1.03 Subsidiaries and Predecessor Corporations. 2
1.04 Financial Statements...................... 2
1.05 Information............................... 3
1.06 Options or Warrants....................... 3
1.07 Absence of Certain Changes or Events...... 3
1.08 Litigation and Proceedings................ 4
1.09 Compliance With Applicable Security Laws.. 4
1.10 Employee Benefits......................... 5
ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES
OF ▇▇▇▇ SOLUTIONS, INC......................... 5
2.01 Organization.... ......................... 5
2.02 Capitalization............................ 5
2.03 Information............................... 6
2.04 Absence of Certain Changes or Events...... 6
ARTICLE III REPRESENTATIONS, COVENANTS AND WARRANTIES
OF DYNAMIC PROFESSIONAL SERVICES, L.L.C. ...... 7
3.01 Organization.............................. 7
3.02 Ownership................................. 7
3.03 Subsidiaries and Predecessor Entities..... 7
3.04 Financial Statements...................... 8
3.05 Information............................... 8
3.06 Absence of Certain Changes or Events...... 9
3.07 Title and Related Matters................. 10
3.08 Litigation and Proceedings................ 10
3.09 Contracts................................. 11
3.10 Material Contract Defaults................ 12
3.11 No Conflict With Other Instruments........ 12
3.12 Governmental Authorizations............... 12
3.13 Compliance With Laws and Regulations...... 12
3.14 Insurance................................. 13
3.15 Approval of Agreement..................... 13
3.16 Material Transactions or Affiliations..... 13
3.17 Labor Relations........................... 13
3.18 Dynamic Schedules......................... 13
3.19 Assistance in Registration................ 14
3.20 Year 2000................................. 14
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ARTICLES PAGE
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ARTICLE IV PLAN OF MERGER................................. 15
4.01 The Merger................................ 15
4.02 Closing................................... 16
4.03 Closing Events............................ 17
4.04 Piggyback Registration Rights............. 18
ARTICLE V SPECIAL COVENANTS.............................. 22
5.01 Access to Properties and Records.......... 22
5.02 Delivery of Books and Records............. 22
5.03 Special Covenants and Representations
Regarding the Exchanged Stock............. 22
5.04 Third Party Consents and Certificates..... 23
5.05 Actions Prior to Closing.................. 23
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS
OF DESIGN AUTOMATION SYSTEMS, INC. ............ 24
6.01 Accuracy of Representations............... 24
6.02 Officer's Certificates.................... 24
6.03 No Material Adverse Change................ 24
6.04 Good Standing............................. 24
6.05 Other Items............................... 25
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF
DYNAMIC PROFESSIONAL SERVICES, L.L.C.
MEMBERS........................................ 25
7.01 Accuracy of Representations............... 25
7.02 Officer's Certificate..................... 25
7.03 No Material Adverse Change................ 26
7.04 Good Standing............................. 26
ARTICLE VIII TERMINATION.................................... 26
8.01 Termination............................... 26
8.02 Effect of Termination..................... 26
ARTICLE IX MISCELLANEOUS.................................. 27
9.01 Brokers................................... 27
9.02 Governing Law............................. 27
9.03 Notices................................... 27
9.04 Arbitration............................... 28
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ARTICLES PAGE
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9.05 Confidentiality........................... 28
9.06 Schedules; Knowledge...................... 29
9.07 Third Party Beneficiaries................. 29
9.08 Entire Agreement.......................... 29
9.09 Survival.................................. 29
9.10 Counterparts.............................. 30
9.11 Amendment or Waiver....................... 30
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AGREEMENT
AND
PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement") is entered into as of the ____ day of May, 1999 by and among DESIGN
AUTOMATION SYSTEMS, INC., a Texas Corporation ("DESIGN"), ▇▇▇▇ SOLUTIONS, INC.,
a Texas corporation and wholly owned subsidiary of DESIGN (hereinafter referred
to as "▇▇▇▇") and DYNAMIC PROFESSIONAL SERVICES, L.L.C., a Texas Limited
Liability Company (hereinafter referred to as "DYNAMIC") whose members are
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇. ("Members")
PREMISES
This Agreement provides for the 100% acquisition of DYNAMIC by DESIGN
through the merger of DYNAMIC with and into ▇▇▇▇. It is the intention of all
parties that this transaction qualify as a tax-free re-organization under
Section 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code and as such
treated as a Forward Triangular Merger.
AGREEMENT
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived here from, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF DESIGN AUTOMATION SYSTEMS, INC.
As an inducement to, and to obtain the reliance of DYNAMIC, DESIGN
represents and warrants as follows:
SECTION 1.01. ORGANIZATION. DESIGN is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas.
DESIGN has the corporate power and is duly authorized, qualified, franchised,
and licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in Schedule 1.01 are complete
and correct
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copies of the articles of incorporation, as amended, and bylaws of DESIGN as
in effect on the date hereof. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any provision
of these articles of incorporation or bylaws. DESIGN has taken, or will take
prior to Closing, (as defined in Section 4.02) all action required by laws,
its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement. DESIGN has full power, authority,
and legal right and has taken all action required by law, its certificate of
incorporation, bylaws, and otherwise to consummate the transactions herein
contemplated.
SECTION 1.02. CAPITALIZATION. The authorized capitalization of DESIGN
consists of 50,000,000 shares of common stock, $0.01 par value per share, of
which 20,759,986 shares are currently issued and outstanding. A shareholder
list is available for inspection at the offices of DESIGN. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the pre-emptive or other rights of any person. There are
employee incentive options outstanding as shown by Schedule 1.06.
SECTION 1.03. SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Except for ▇▇▇▇
Solutions, Inc., a Texas corporation, and Loch Energy, Inc., DESIGN does not
have any subsidiaries and does not own, beneficially or of record, any shares of
any other corporation. DESIGN has title to such stock free and clear of any
liens.
SECTION 1.04. FINANCIAL STATEMENTS. DESIGN (i) has delivered or will
cause to be delivered to DYNAMIC true and correct copies of Form 10-K for the
fiscal year ended December 31, 1998 ("Form 10-K") and (ii) has delivered its
Form 10-Q ("Form 10-Q") dated effective March 31, 1999 and (iii) has delivered
its audited financial statements for the periods ended December 31, 1997 and
1996 (The "Audits"). As of their respective dates, the Form 10-K, Form 10-Q and
the Audits did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Form 10-K, Form 10-Q and the Audits present fairly the
financial condition, assets, liabilities, and stockholders' equity of DESIGN as
of its date; each such statement of income and statement of retained earnings
presents fairly the results of operations of DESIGN for the period indicated and
each such statement of changes in financial position presents fairly the
information purported to be shown therein. The Financial Statements referred to
in this
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Section 1.04 have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved, are correct and complete in all material respects and are in
accordance with the books and records of DESIGN, which books and records are
also complete and correct in all material respects and have been maintained in
accordance with sound business and accounting practices.
SECTION 1.05. INFORMATION. The information concerning DYNAMIC set forth
in this Agreement and in Schedules attached hereto is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
SECTION 1.06. OPTIONS OR WARRANTS. Existing options, warrants, calls, or
commitments of any character relating to the authorized and unissued DESIGN
common stock are set forth in Schedule 1.06.
SECTION 1.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Schedule 1.07 since March 31, 1999:
A. There has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of DESIGN; or (ii) any
damage, destruction, or loss to DESIGN (whether or not covered by
insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of DESIGN;
B. DESIGN has not (i) amended its certificate of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any
rights of value which in the aggregate are extraordinary or
material considering the business of DESIGN; (iv) made any material
change in its method of management, operation, or accounting; (v)
entered into any other material transaction; (vi) made any accrual
or arrangement for payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or
former officer of employee; (vii) increased the rate of
compensation payable or to become payable by it to any of its
officers or directors or any of its employees whose monthly
compensation exceeds
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$20,000; or (viii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement made to, for, or
with its officers, directors, or employees; and
C. DESIGN has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or
liability (absolute or contingent); (ii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the most recent DESIGN balance
sheet; (iii) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets,
properties, or rights not used or useful in its business which, in
the aggregate have a value of less than $20,000), or canceled, or
agreed to cancel, any debts or claims (except debts or claims which
in the aggregate are of a value of less than $1,000); (iv) made or
permitted any amendment or termination of any contract, agreement,
or license to which it is a party if such amendment or termination
is material, considering the business of DESIGN; or (v) issued,
delivered, or agreed to issue or deliver any stock, bonds, or other
corporate securities including debentures (whether authorized and
unissued or held as treasury stock).
SECTION 1.08. LITIGATION AND PROCEEDINGS. Except as expressly disclosed
in the Form 10-K, Form 10-Q or The Audits, there is no proceeding by or before
(or, to the best knowledge of DESIGN, any investigation by) any governmental or
other instrumentality or agency or before any court or other arbitrator of any
kind, pending, or, to the knowledge of DESIGN, threatened against or affecting
DESIGN or any of its properties or rights, except for such actions, suits,
proceedings, arbitrations or investigations that do not have and are not
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the condition of DESIGN. There are no proceedings pending or, to the
best knowledge of DESIGN, threatened, seeking to prevent or challenging the
transactions contemplated by this agreement. DESIGN is not subject to any
judgment, order or decree entered in any proceeding, that has had or could have
a material adverse effect on the condition of DESIGN.
SECTION 1.09. COMPLIANCE WITH APPLICABLE SECURITY LAWS. DESIGN has
complied in all material respects with all provisions of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934 as applicable to
DESIGN.
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SECTION 1.10. EMPLOYEE BENEFITS. All members and employees of DYNAMIC
shall immediately be entitled to participate in any employee benefit plans as
such term is defined in Section 3(3) of the Employer Retirement Security Income
Security Act of 1974. DESIGN and ▇▇▇▇ hereby represent and warrant that they
will not reduce in any material manner the benefits to which any employees of
DYNAMIC are entitled under any existing health plan, 401(k) plan or other
employee benefit plan and as further set forth by his or her employment
contract.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF ▇▇▇▇ SOLUTIONS, INC.
As an inducement and to obtain the reliance of DYNAMIC, ▇▇▇▇ represents and
warrants as follows:
SECTION 2.01. ORGANIZATION. ▇▇▇▇ is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas.
▇▇▇▇ has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in Schedule 2.01 are complete
and correct copies of the articles of incorporation and bylaws of ▇▇▇▇ as in
effect on the date hereof. The execution and delivery of this Agreement does
not, and the consummation of the transaction contemplated by this Agreement in
accordance with the terms hereof will not, violate any provision of these
articles of incorporation or bylaws. ▇▇▇▇ has taken, or will take prior to
Closing, (as defined in Section 4.02) all action required by laws, its articles
of incorporation, its bylaws, or otherwise to authorize the execution and
delivery of this Agreement. ▇▇▇▇ has full power, authority, and legal right and
has taken all action required by law, its certificate of incorporation, bylaws,
and otherwise to consummate the transactions herein contemplated.
SECTION 2.02. CAPITALIZATION. The authorized capitalization of ▇▇▇▇
consists of 100,000 shares of common stock, no par value per share, of which
1,000 shares are currently issued and outstanding and held of record by Design
Automation Systems, Inc. All issued and outstanding shares are legally issued,
fully paid, and non-assessable and not issued in violation of the pre-emptive or
other rights of any person. There are employee incentive options outstanding as
shown by Schedule 1.06.
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SECTION 2.03. INFORMATION. The information concerning ▇▇▇▇ set forth in
this Agreement and in Schedules attached hereto is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were, not misleading.
SECTION 2.04. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Schedule 2.04 since March 31, 1999:
D. There has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of ▇▇▇▇; or (ii) any
damage, destruction, or loss to ▇▇▇▇ (whether or not covered by
insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of ▇▇▇▇;
▇. ▇▇▇▇ has not (i) amended its certificate of incorporation or bylaws;
(ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (iii) waived any rights of value
which in the aggregate are extraordinary or material considering the
business of ▇▇▇▇; (iv) made any material change in its method of
management, operation, or accounting; (v) entered into any other
material transaction; (vi) made any accrual or arrangement for payment
of bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer of employee; (vii)
increased the rate of compensation payable or to become payable by it
to any of its officers or directors or any of its employees whose
monthly compensation exceeds $20,000; or (viii) made any increase in
any profit sharing, bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees; and
▇. ▇▇▇▇ has not (i) borrowed or agreed to borrow any funds or incurred,
or become subject to, any material obligation or liability (absolute
or contingent); (ii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in
or shown on the most recent ▇▇▇▇ balance sheet; (iii) sold or
transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except assets, properties, or rights not used
or useful in its business which, in the aggregate have a value of less
than
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$20,000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value of less
than $1,000); (iv) made or permitted any amendment or termination of
any contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
▇▇▇▇; or (v) issued, delivered, or agreed to issue or deliver any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock).
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF DYNAMIC PROFESSIONAL SERVICES, L.L.C.
As an inducement to, and to obtain the reliance of DESIGN, DYNAMIC
represents and warrants as follows:
SECTION 3.01. ORGANIZATION. DYNAMIC is a Limited Liability Company duly
organized, validly existing, and in good standing under the laws of the State of
Texas. DYNAMIC has the power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign limited liability company in the
states in which the character and location of the assets owned by it or the
nature of the business transacted by it requires qualification. Included in
Schedule 3.01 are complete and correct copies of the articles of organization
and regulations, of DYNAMIC as in effect on the date hereof. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not,
violate any provision of these articles of organization and regulations.
DYNAMIC has taken or will take prior to closing, all action required by laws,
its articles of organization and regulations to authorize the execution and
delivery of this Agreement. DYNAMIC has full power, authority, and legal right
and has taken all action required by law, to consummate the transactions herein
contemplated.
SECTION 3.02. OWNERSHIP. The ownership of DYNAMIC is as set forth by
schedule 3.02.
SECTION 3.03. SUBSIDIARIES AND PREDECESSOR ENTITIES. DYNAMIC does not
have any subsidiaries and does not own, beneficially or of record, any other
entity.
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SECTION 3.04. FINANCIAL STATEMENTS.
A. Included in Schedule 3.04(A) is the April 30, 1999 unaudited balance
sheet and statement of operations of DYNAMIC. (The "Financial
Statement")
B. The Financial Statement has been prepared on the cash basis of
accounting. DYNAMIC did not have, as of the date of The Financial
Statement, except as set forth on Schedule 3.04(B), any liabilities or
obligations (absolute or contingent) which should have been be
reflected in the balance sheet or the notes thereto, had such
financial statement been prepared in accordance with generally
accepted accounting principles.
C. DYNAMIC has filed all state, federal, and local income tax returns
required to be filed by it from inception to the date hereof.
Included in Schedule 3.04(C) are true and correct copies of the
federal income tax returns of DYNAMIC filed since inception. Except
as set forth on Schedule 3.04(C) none of such federal income tax
returns have been examined by the Internal Revenue Service. Each of
such income tax returns reflects the taxes due for the period covered
thereby, except for amounts which, in the aggregate, are immaterial.
DYNAMIC has filed its election with the IRS to be treated as a
corporation.
D. DYNAMIC does not owe any unpaid federal, state, county, local, or
other taxes (including any deficiencies, interest, or penalties)
through the date hereof, for which DYNAMIC may be liable in its own
right or as a transferee of the assets of, or as a successor to, any
other corporation or entity. Furthermore, except as accruing in the
normal course of business, DYNAMIC does not owe any accrued and unpaid
taxes to date of this Agreement.
E. The books and records, financial and otherwise, of DYNAMIC are in all
material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
F. DYNAMIC has good and valid title to its assets and, to the best
knowledge of DYNAMIC, except as set forth in Schedule 3.04(F) or The
Financial Statement of DYNAMIC or the notes thereto, has no material
contingent liabilities, direct or indirect, matured or unmatured.
SECTION 3.05. INFORMATION. The information concerning DYNAMIC set forth
in this Agreement and in Schedules attached
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hereto is complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under
which they were made, not misleading.
SECTION 3.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in this Agreement or Schedule 3.06, since May 1, 1999:
A. There has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of DYNAMIC; or (ii) any
damage, destruction, or loss to DYNAMIC (whether or not covered by
insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of DYNAMIC;
B. DYNAMIC has not (i) amended its articles of organization or
regulations; (ii) waived any rights of value which in the aggregate
are extraordinary or material considering the business of DYNAMIC;
(iii) made any material change in its method of management,
operations, or accounting; (iv) entered into any other material
transaction; (v) made any accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former MEMBER or employee; (vi)
increased the rate of compensation payable or to become payable by it
to any of its MEMBERS or any of its employees whose monthly
compensation exceeds $2,000; or (vii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement,
or other employee benefit plan, payment, or arrangement made to, for,
or with its MEMBERS, or employees;
C. DYNAMIC has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary
course of business which includes expenses related to this Agreement
and the Merger; (ii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in
or shown on the financial statement, and current liabilities incurred
since that date in the ordinary course of business; (iii) sold or
transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except assets, properties, or rights not used
or useful in its business which, in the aggregate have a value of less
than $2,000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value of less
than $2,000); (iv) made or permitted any amendment or
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termination of any contract, agreement, or license to which it is a
party if such amendment or termination is material, considering the
business of DYNAMIC; and
D. To the best knowledge of DYNAMIC, DYNAMIC has not become subject to
any law or regulation which materially and adversely affects, or in
the future could reasonably be expected to materially and adversely
affect, the business, operations, properties, assets, or condition of
DYNAMIC.
SECTION 3.07. TITLE AND RELATED MATTERS. DYNAMIC has good and valid title
to all of its properties, inventory, interests in properties, and assets, real
and personal, which are reflected in The Financial Statement or acquired after
that date (except properties, interests in properties, and assets sold or
otherwise disposed of since such date in the ordinary course of business), free
and clear of all liens, pledges, charges, or encumbrances except (a) statutory
liens or claims not yet due and payable and/or delinquent; (b) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in Schedule 3.07. Except as
set forth in Schedule 3.07, DYNAMIC owns, free and clear of any liens, claims,
encumbrances, royalty interests, or other restrictions or limitations of any
nature whatsoever, any and all products it is currently manufacturing, including
the underlying technology and data, and all procedures, techniques, marketing
plans, business plans, methods of management, or other information utilized in
connection with DYNAMIC's business. Except as set forth in Schedule 3.07, no
third party has any right to and DYNAMIC has not received any notice of
infringement of or conflict with asserted rights of others with respect to any
product, technology, data, trade secrets, know-how, proprietary techniques,
trademarks, service marks, trade names, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding, would
have a materially adverse affect on the business, operations, financial
condition, income, or business prospects of DYNAMIC or any material portion of
its properties, assets, or rights.
SECTION 3.08. LITIGATION AND PROCEEDINGS. Except as set forth in Schedule
3.08, there are no actions, suits, proceedings, or investigations pending or, to
the knowledge of DYNAMIC, threatened by or against DYNAMIC or affecting DYNAMIC
or its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind. DYNAMIC does not have any
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knowledge of any default on its part with respect to any judgment, order,
writ, injunction, decree, award, rule, or regulation of any court,
arbitrator, or governmental agency or instrumentality or of any circumstances
which would result in the discovery of such a default.
SECTION 3.09. CONTRACTS.
A. Schedule 3.09 lists all material contracts, agreements, franchises,
license agreements, or other commitments to which DYNAMIC is a party
or by which it or any of its assets, products, technology, or
properties are bound;
B. All contracts, agreements, franchises, license agreements, and other
commitments to which DYNAMIC is a party or by which its properties are
bound and which are material to the operations of DYNAMIC taken as a
whole are valid and enforceable by DYNAMIC in all respects, except as
limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally;
C. DYNAMIC is not a party to or bound by, and the properties of DYNAMIC
are not subject to: any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award, which materially
and adversely affects, or in the future may (as far as DYNAMIC can now
foresee) materially and adversely affect, the business, operations,
properties, assets, or condition of DYNAMIC; and
D. Except as included or described in Schedule 3.09 or reflected in The
Financial Statement, DYNAMIC is not a party to any oral or written (i)
contract for the employment of any member or employee which is not
terminable on 30 days or less notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which DYNAMIC is a
primary obligor, of the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations,
which in the aggregate do not exceed more than one year or providing
for payments in excess of $10,000 in the aggregate; (vi) collective
bargaining agreement; (vii) agreement with any present or former
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member, of DYNAMIC or (viii) contract, agreement, or other commitment
involving payments by it of more than $10,000 in the aggregate.
SECTION 3.10. MATERIAL CONTRACT DEFAULTS. Except as set forth in Schedule
3.10, DYNAMIC is not in default in any material respect under the terms of any
outstanding contract, agreement, lease, or other commitment which is material to
the business, operations, properties, assets, or condition of DYNAMIC and there
is no event of default in any material respect under any such contract,
agreement, lease, or other commitment in respect of which DYNAMIC has not taken
adequate steps to prevent such a default from occurring.
SECTION 3.11. NO CONFLICT WITH OTHER INSTRUMENTS. Except as set forth in
Schedule 3.11, the execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of, or constitute an event of default under, any material
indenture, mortgage, deed of trust, or other material contract, agreement, or
instrument to which DYNAMIC is a party or to which any of its properties or
operations are subject.
SECTION 3.12. GOVERNMENTAL AUTHORIZATIONS. Set forth in Schedule 3.12 is
a description of all licenses, franchises, permits, and other governmental
authorizations that are legally required to enable it to conduct its business in
all material respects as conducted on the date hereof. Except for compliance
with federal and state laws, as herein-after provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by DYNAMIC of this Agreement and the consummation by
DYNAMIC of the transactions contemplated hereby.
SECTION 3.13. COMPLIANCE WITH LAWS AND REGULATIONS. Except as set forth
in Schedule 3.13, DYNAMIC has complied with all applicable statutes and
regulations of any federal, state, or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets, or condition of
DYNAMIC or except to the extent that noncompliance would not result in the
incurrence of any material liability for DYNAMIC.
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SECTION 3.14. INSURANCE. All the insurable properties of DYNAMIC are
insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement. Set forth on Schedule 3.14 is a
list of all policies or binders of fire, liability, product liability, worker's
compensation, vehicular or other insurance held by or on behalf of DYNAMIC
(specifying for each such policy the insurer, the policy number or covering note
number with respect to binders, and each pending claim thereunder, if any, and
setting forth the aggregate amount paid out under each policy through the date
hereof.
SECTION 3.15. APPROVAL OF AGREEMENT. The MEMBERS of DYNAMIC have, or will
by the Closing, have authorized the execution and delivery of this Agreement and
have approved the transactions contemplated.
SECTION 3.16. MATERIAL TRANSACTIONS OR AFFILIATIONS. Set forth in
Schedule 3.16 is a description of every material contract, agreement, or
arrangement between DYNAMIC and any predecessor entity and a person who was at
the time of such contract, agreement or arrangement a MEMBER, or person owning
of record, or known by DYNAMIC to own beneficially, 5% or more in DYNAMIC and
which is to be performed in whole or in part after the date hereof or which was
entered into not more than three years prior to the date hereof. In all of such
transactions, the amount paid or received, whether in cash, in services, or in
kind, is, and is required to be during the unexpired portion of the term
thereof, no less favorable to DYNAMIC than terms available from otherwise
unrelated parties in arm's length transactions. There are no commitments by
DYNAMIC, whether written or oral, to lend any funds to, borrow any money from,
or enter into any other material transaction with, any such affiliated person
nor is there any pending material transaction with any affiliated person.
SECTION 3.17. LABOR RELATIONS. DYNAMIC has not had a work stoppage
resulting from labor problems. To the knowledge of DYNAMIC, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of DYNAMIC.
SECTION 3.18. DYNAMIC SCHEDULES. DYNAMIC has delivered to DESIGN as part
of this Agreement the following additional
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schedules, all certified by the manager of DYNAMIC as complete, true, and
correct:
A. Schedule 3.18(a) containing a description of all real property owned
by DYNAMIC together with a description of every mortgage, deed of
trust, pledge, lien, agreement, encumbrance, claim, or equity interest
of any nature whatsoever in such real property;
B. Schedule 3.18(b) listing the accounts receivable and notes and other
obligations receivable of DYNAMIC as of December 31, 1998, or that
arose thereafter other than in the ordinary course of business of
DYNAMIC, indicating the debtor and amount, and classifying the
accounts to show in reasonable detail the length of time, if any,
overdue, and stating the nature and amount of any refunds, set offs,
reimbursements, discounts, or other adjustments which are in the
aggregate material and due to or claimed by such creditor; and
C. Schedule 3.18(c) listing the accounts payable and notes and other
obligations payable of DYNAMIC as of April 30, 1999, or that arose
thereafter other than in the ordinary course of the business of
DYNAMIC, indicating the creditor and amount, classifying the accounts
to show in reasonable detail the length of time, if any, overdue, and
stating the nature and amount of any refunds, set-offs,
reimbursements, discounts, or other adjustments which in the aggregate
are material and due or payable to DYNAMIC respecting such
obligations.
SECTION 3.19. As provided by 4.04B.
SECTION 3.20. YEAR 2000. Year 2000 defects resulted from computer
programs being written using two digits rather than four to define the
applicable year. DYNAMIC represents and warrants that DYNAMIC's operation
systems are free from Year 2000 defects, or that if such defects exist the cost
of repair would not have a material adverse effect on the financial condition of
DYNAMIC. DESIGN and DYNAMIC agree that this Section 3.20 shall not apply to the
Windows 95 operating system used by DYNAMIC.
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ARTICLE IV
PLAN OF MERGER
SECTION 4.01. THE MERGER.
A. Subject to the provisions of this Agreement, DYNAMIC shall be merged
with and into ▇▇▇▇ in accordance with the provisions of the Texas
Business Corporation Act and the Texas Limited Liability Company Act
(collectively, the "Merger Law"), whereupon the separate existence of
DYNAMIC shall cease and ▇▇▇▇ shall be the survivor, ▇▇▇▇ and DYNAMIC
are sometimes referred to herein as "Constituent Companies",
hereinafter referred to as the "Surviving Company".
B. As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Closing, the Constituent
Companies shall execute and file Articles of Merger, prepared by
counsel to DESIGN in a form reasonably acceptable to counsel to
DYNAMIC (the "Articles of Merger"), with the Secretary of State of the
State of Texas in accordance with the Merger Law, and shall otherwise
make all other filings or recordings required by the Merger Law in
connection with the Merger. The Merger shall become effective at such
date and time as the Articles of Merger are duly filed with, and
accepted by, the Secretary of State (the "Effective Time").
C. At the Effective Time, the separate existence of DYNAMIC shall cease
and DYNAMIC shall be merged with and into ▇▇▇▇ and ▇▇▇▇ shall be the
Surviving Company.
D. From and after the Effective Time: (i) the Articles of Incorporation
of the Surviving Company shall be the Articles of Incorporation of
▇▇▇▇; (ii) the Bylaws of ▇▇▇▇ as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Company, until
thereafter amended in accordance with applicable law; (iii) the
directors of ▇▇▇▇ at the Effective Time shall become the directors of
the Surviving Company, until their respective successors are duly
elected or appointed and qualified in accordance with applicable law;
and (iv) the officers of ▇▇▇▇ at the Effective Time shall become the
initial officers of the Surviving Company, to serve at the pleasure of
the board of directors of the Surviving Company.
E. At the Effective Time by virtue of the Merger and the applicable
provisions of the Merger Law and without any further action on the
part of the Constituent Companies,
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all rights, franchises, and interests of DYNAMIC in and to every type
of property (real, personal, and mixed) and causes of action shall be
transferred to and vested in the Surviving Company by virtue of the
Merger without any deed or other transfer, and the Surviving Company
at the Effective Time and without any order or other action on the
part of any court or otherwise, shall hold and enjoy all rights of
property, franchises, and interests in the same manner and to the same
extent as such rights, franchises, and interest were held or enjoyed
by DYNAMIC and DESIGN, respectively, immediately prior to the
Effective Time. All corporate acts, plans, policies, contracts,
approvals, and authorizations of DYNAMIC and DESIGN, and their
respective shareholders, Boards of Directors, committees elected or
appointed thereby, officers, and agents, which were valid and
effective immediately prior to the Effective Time of the Merger,
shall be taken for all purposes as the acts, plans, policies,
contracts, approvals, and authorizations of the Surviving Company,
and shall be as effective and binding thereon as the same were with
respect to DYNAMIC and DESIGN.
F. At the Effective Time, the Surviving Company shall be liable for all
liabilities of DYNAMIC and DESIGN, and all debts, liabilities,
obligations, and contracts of DYNAMIC and DESIGN, respectively,
whether matured or unmatured, whether accrued, absolute, contingent,
or otherwise, and whether or not reflected or reserved against on
balance sheets, books, accounts, or records of DYNAMIC or DESIGN, as
the cases may be, shall be those of, and are hereby expressly assumed
by, the Surviving Company, and shall not be released or impaired by
the Merger; and all rights of creditors and other obligees and all
liens on property of either DYNAMIC or DESIGN shall be preserved
unimpaired. At the Effective Time, the Surviving Company shall be
liable for all then existing indemnification obligations of DYNAMIC
and DESIGN, under their respective Articles of Incorporation, Bylaws,
Articles of Organization, Regulations, or under any other agreement.
G. At the Effective Time, the Membership Interests of DYNAMIC shall be
converted into the right to receive the cash and Common Stock, par
value $0.01 per share of DESIGN in the amount set forth on Schedule
4.01 (the "Merger Consideration").
SECTION 4.02. CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be close of business as of the 28th day of
May, 1999.
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SECTION 4.03. CLOSING EVENTS.
A. As of the Closing, each of the respective parties hereto shall
authorize the filing of the Articles of Merger.
B. At the Closing, the Members of DYNAMIC shall receive the Merger
Consideration from DESIGN consisting of (i) $100,000.00 in cash; and
(ii) 524,000 shares of DESIGN. All such cash and shares of common
stock of DESIGN shall be distributed among the Members of DYNAMIC as
shown in Schedule 4.01 hereof.
C. In addition to the stock and cash referred to in Subsection B of this
Section 4.03, the Members of DYNAMIC shall receive from DESIGN, the
aggregate, $100,000.00 in cash to be distributed in four (4)
$25,000.00 installments beginning on August 31, 1999, and continuing
on November 30, 1999, February 29, 2000, and May 31, 2000. Such cash
payments shall be distributed among the Members of DYNAMIC as shown in
Schedule 4.01 hereof. DESIGN shall provide written evidence of such
obligation as may be requested from time to time by the Members of
DYNAMIC set forth on Schedule 4.01.
D. On June 1, 2000, DESIGN shall deliver to the Members of DYNAMIC the
additional Merger Consideration provided for in Schedule 4,01,
together with all documentation required thereby evidencing the
closing price calculation.
E. If at any time after the Closing, or after June 1, 2000 to the extent
any additional Merger Consideration shares are issued, DESIGN shall
receive a written request from the majority of the Members to effect
the registration under the Securities Act of any Common Stock owned by
the Members, then as soon as practicable thereafter, but in no event
later than 90 days following the receipt of such request, DESIGN shall
file a registration statement with the Securities and Exchange
Commission with respect to such DESIGN Common Stock and shall
thereafter use its best efforts to cause such registration to become
effective under the Securities Act in accordance with the provisions
of this paragraph. The Company shall be responsible for all expenses
in connection with the registration including legal, accounting and
filing fees. The same registration obligations set forth in this
paragraph will be applicable with respect to any such additional
shares which may be issued pursuant to Schedule 4.01 on June 1, 2000.
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SECTION 4.04. PIGGYBACK REGISTRATION RIGHTS. The individuals named in
Schedule 4.01 (Holder) are granted right to Piggyback on a firm commitment
underwriting of DESIGN securities for three (3) years with the shares set forth
beside their names as follows:
A. (1) DESIGN will (i) promptly give to the Holder written notice of any
registration relating to a firm commitment public offering of DESIGN
securities; and (ii) include in such registration (and related
qualification under blue sky laws or other compliance, unless such
expense or terms of such qualification is unreasonable in comparison
to the number of securities to be registered in such jurisdiction, as
determined in the sole discretion of DESIGN), and in the underwriting
involved therein, all the Securities specified in Holder's written
request or requests, herein within 30 days after the date of such
written notice from DESIGN.
(2) The right of Holder to registration shall be conditioned upon
Holder's participation in such underwriting, and the inclusion of the
Securities in the underwriting shall be limited to the extent provided
herein. The Holder and all other holders proposing to distribute
their securities through such underwriting shall (together with DESIGN
and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form
with the managing underwriter selected for such underwriting by
DESIGN. Notwithstanding any other provision of this Agreement, if the
managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing
underwriter may limit some or all of the Securities that may be
included in the registration and underwriting as follows: the number
of Securities that may be included in the registration and
underwriting by the Holder shall be determined by multiplying the
number of shares of Securities of all selling shareholders of DESIGN
which the managing underwriter is willing to include in such
registration and underwriting, times a fraction, the numerator of
which is the number of Securities requested to be included in such
registration and underwriting by the Holder, and the denominator of
which is the total number of Securities which all selling shareholders
of DESIGN have requested to have included in such registration and
underwriting. To facilitate the allocation of shares in accordance
with the above provisions, DESIGN may round the number of shares
allocable to any such person to the nearest 100 shares. If the Holder
disapproves of the terms of any such underwriting it may elect to
withdraw therefrom by written notice to DESIGN and the managing
underwriter,
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delivered not less than seven days before the effective date. Any
securities withdrawn from such underwriting by the Holder shall be
withdrawn from such registration, and shall not be transferred in
a public distribution prior to 120 days after the effective date
of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require.
B. REGISTRATION PROCEDURE. With respect to each Registration Right, the
following provisions shall apply:
(1) The Holder shall be obligated to furnish to DESIGN and the
underwriters (if any) such information regarding the Securities and
the proposed manner of distribution of the Securities as DESIGN and
the underwriters (if any) may request in writing and as shall be
required in connection with any registration, qualification or
compliance referred to herein and shall otherwise cooperate with
DESIGN and the underwriters (if any) in connection with such
registration, qualification or compliance.
(2) With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
the Restricted Securities (used herein as defined in Rule 144 under
the Securities Act) to the public without registration, DESIGN agrees
to use its best lawful efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act,
at all times during which DESIGN is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended
("Exchange Act");
(b) File with the Commission in a timely manner all reports and
other documents required of DESIGN under the Securities Act and
the Exchange Act (at all times during which DESIGN is subject to
such reporting requirements); and
(c) Remove all restrictive legends and stop transfer orders
applicable to any shares to be sold under Rule 144.
(3) All expenses (except for costs of any interim audit required by
underwriters, any underwriting and selling discounts and commissions
and legal fees for Holder's attorneys) of any registrations permitted
pursuant to this Agreement and of all other offerings by DESIGN
(including, but not limited to, the expenses of any
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qualifications under the blue-sky or other state securities laws and
compliance with governmental requirements of preparing and filing any
post-effective amendments required for the lawful distribution of the
Securities to the public in connection with such registration, of
supplying prospectuses, offering circulars or other documents) will be
paid by DESIGN.
(4) In connection with the preparation and filing of a registration
statement under the Securities Act pursuant to this Agreement, DESIGN
will give the Holder, its counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss
the business of DESIGN with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary to conduct a reasonable investigation within the meaning of
the Securities Act.
C. INDEMNIFICATION BY DESIGN. (1) In the event of any registration of
the Securities of DESIGN under the Securities Act, DESIGN agrees to
indemnify and hold harmless the Holder and each other person who
participates as an underwriter in the offering or sale of such
securities against any and all claims, demands, losses, costs,
expenses, obligations, liabilities, joint or several, damages,
recoveries and deficiencies, including interest, penalties and
attorneys' fees (collectively, "Claims"), to which the Holder or
underwriter may become subject under the Securities Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based on any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which Holder's
Securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein,
or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and DESIGN will reimburse the Holders and each such underwriter for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such Claim (or action
or proceeding in respect thereof); provided that DESIGN shall not be
liable in any such case to the extent that any such Claim (or action
or proceeding in respect thereof) or expense arises out of or is based
on an
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untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance on and in conformity with written information
furnished to DESIGN through an instrument duly executed by the
Holders specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Holders or
any such underwriter and shall survive the transfer of the Securities
by the Holder.
(2) INDEMNIFICATION BY THE HOLDER. DESIGN may require, as a condition
to including the Securities in any registration statement filed
pursuant to this Agreement, that DESIGN shall have received an
undertaking satisfactory to it from the Holder, to indemnify and hold
harmless DESIGN, each director of DESIGN, each officer of DESIGN and
each other person, if any, who controls DESIGN, within the meaning of
the Securities Act, with respect to any statement or alleged statement
in or omission or alleged omission from such registration statement,
any preliminary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission
or alleged omission was made in reliance on and in conformity with
written information furnished to DESIGN through an instrument duly
executed by the Holder specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement.
Notwithstanding-standing the foregoing, the maximum liability
hereunder which any holder shall be required to suffer shall be
limited to the net proceeds to such Holder from the Shares sold by
such Holder in the offering. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf
of DESIGN or any such director, officer or controlling person and
shall survive the transfer of the Securities by the Holder.
(3) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding
involving a Claim referred to in this Subsection C, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Subsection C,
except to the
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extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against
an indemnifying party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such Claim, the
indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying
party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of
such Claim.
(4) INDEMNIFICATION PAYMENTS. The indemnification required by this
Article shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. ACCESS TO PROPERTIES AND RECORDS. DESIGN and DYNAMIC will
each afford to the officers and authorized representa-tives of the other, full
access to the properties, books, and records of each other as the case may be,
in order that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of each other, as the case
may be, as the other shall from time to time reasonably request.
SECTION 5.02. DELIVERY OF BOOKS AND RECORDS. At the Closing, DYNAMIC
shall deliver to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, attorney for DESIGN and ▇▇▇▇, the originals
of the Limited Liability Company books, books of account, contracts, records,
and all other books or documents.
SECTION 5.03. SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE
EXCHANGED STOCK. (THIS SECTION OMITTED)
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SECTION 5.04. THIRD PARTY CONSENTS AND CERTIFICATES. DESIGN and DYNAMIC
agree to cooperate with each other in order to obtain any required third party
consents to this Agreement and the trans-actions herein and therein
contemplated.
SECTION 5.05. ACTIONS PRIOR TO CLOSING.
A. From and after the date of this Agreement until the Closing Date and
except as set forth in the Agreement or Schedules attached hereto or
as permitted or contemplated by this Agreement, DESIGN and DYNAMIC
respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear
and tear and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in amount and
in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligation under material
contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all obligations
and duties imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by federal or state governmental
authorities.
B. From and after the date of this Agreement until the Closing Date,
neither DYNAMIC nor DESIGN will:
(i) make any change in their articles of incorporation or articles of
organization, bylaws or regulations;
(ii) take any action described in Section 1.07 in the case of DESIGN or
Section 3.06 in the case of DYNAMIC (all except as permitted therein
or as disclosed in the applicable party's schedules); or
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(iii) enter into or amend any contract, agreement, or other instrument of
any of the types described in such party's schedules, except that a
party may enter into or amend any contract, agreement, or other
instrument in the ordinary course of business involving the sale of
goods or services.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF DESIGN
The obligations of DESIGN under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
SECTION 6.01. ACCURACY OF REPRESENTATIONS. The representa- tions and
warranties made by DYNAMIC in this Agreement were true when made and shall be
true at the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and DYNAMIC shall have
performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by DYNAMIC prior to or at the
Closing. DESIGN shall be furnished with a certificate, signed by a duly
authorized MEMBER of DYNAMIC and dated the Closing Date, to the foregoing
effect.
SECTION 6.02. OFFICER'S CERTIFICATES. DESIGN shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized MEMBER
of DYNAMIC to the effect that no litigation, proceeding, investigation, or
inquiry is pending or, to the best knowledge of DYNAMIC threatened, which might
result in an action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
SECTION 6.03. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business, or operations of DYNAMIC nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
DYNAMIC.
SECTION 6.04. GOOD STANDING. DESIGN shall have received a certificate of
good standing from the Secretary of State of the State of Texas or other
appropriate office, dated as of a date
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within ten days prior to the Closing Date certifying that DYNAMIC is in good
standing in the State of Texas and has filed all tax returns required to have
been filed by it to date and has paid all taxes reported as due thereon.
SECTION 6.05. OTHER ITEMS.
A. DESIGN shall have received or waived uniform commercial code
certificates from the appropriate state or local authority or agency
for each county and state in which any personal property of DYNAMIC
with a value in excess of $1,000 is situated, dated as of the Closing
Date, to the effect that there are no liens on such personal property,
other than those disclosed in a schedule attached hereto.
B. DESIGN shall have received or waived such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as DESIGN may reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF DYNAMIC
The obligations of DYNAMIC under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
SECTION 7.01. ACCURACY OF REPRESENTATIONS. The representa-tions and
warranties made by DESIGN in this Agreement were true when made and shall be
true as of the Closing Date (except for changes therein permitted by this
Agreement) with the same force and effect as if such representations and
warranties were made at and as of the Closing Date, and DESIGN shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with by DESIGN prior to or at the
Closing. DYNAMIC shall have been furnished with a certificate, signed by a
duly authorized executive officer of DESIGN and dated the Closing Date, to
the foregoing effect.
SECTION 7.02. OFFICER'S CERTIFICATE. DYNAMIC shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized
executive officer of DESIGN to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of DESIGN
threatened, which might result in an
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action to enjoin or prevent the consummation of the transactions contemplated
by this Agreement.
SECTION 7.03. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business, or operations of DESIGN nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
DESIGN.
SECTION 7.04. GOOD STANDING. DYNAMIC shall have received a certificate of
good standing from the Secretary of State of the State of Texas or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that DESIGN is in good standing in the State of Texas and has filed
all franchise tax returns required to have been filed by it to date and has paid
all taxes reported as due thereon.
ARTICLE VIII
TERMINATION
SECTION 8.01. TERMINATION. The parties may terminate this Agreement as
provided below:
A. DESIGN and DYNAMIC may terminate this Agreement by mutual written
consent at any time prior to Closing;
B. DESIGN may terminate this Agreement by giving written notice to
DYNAMIC at any time prior to Closing in the event DYNAMIC is in
breach, and DYNAMIC may terminate this Agreement by giving written
notice to DESIGN at any time prior to Closing in the event DESIGN is
in breach, of any material representation, warranty, or covenant
contained in this Agreement in any material respect; provided,
however, no party may terminate for such breach by the other party if
the terminating party is itself in breach hereunder;
C. DYNAMIC may terminate this Agreement by giving written notice to
DESIGN in the event the Closing has not taken place within sixty (60)
days from the date hereof.
SECTION 8.02. EFFECT OF TERMINATION. If any party terminates this
Agreement in accordance with Section 8.01 (A) or (C) all obligations of the
parties hereunder shall terminate without any liability of any party to the
other party (except for any liability
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of any party then in breach). In the event of such termination the
respective parties covenant and agree to return all documents and information
obtained from one another and to keep all such information confidential and
not to use it for competitive purposes or otherwise.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. BROKERS. DESIGN and DYNAMIC agree that there were no
finders or brokers involved in bringing the parties together or who were
instrumental in the negotiation, execution, or consummation of this Agreement.
DYNAMIC and DESIGN each agree to indemnify the other against any claim by any
third person for any commission, brokerage, or finders' fee arising from the
trans-actions contemplated hereby based on any alleged agreement or
understanding between the indemnifying party and such third person, whether
express or implied from the actions of the indemnifying party other.
SECTION 9.02. GOVERNING LAW. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
Texas.
SECTION 9.03. NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given in personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to DESIGN, to: ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to DYNAMIC, to: Dynamic Professional Services, L.L.C.
P. O Box 13434
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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With copies to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
SECTION 9.04. ARBITRATION.
A. Any dispute, claim or controversy arising out of or relating to this
Agreement or the interpretation or breach hereof shall be resolved by
binding arbitration under the commercial arbitration rules of the
American Arbitration Association (the "AAA Rules") to the extent such
AAA Rules are not inconsistent with this Agreement. Judgment upon the
award of the arbitrator(s) may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm
the award and order its enforcement, as the case may be. The demand
for arbitration shall be made by any party hereto within a reasonable
time after the claim, dispute or other matter in question has arisen,
and in any event shall not be made after the date when institution of
legal proceedings, based on such claim, dispute or other matter in
question, would be barred by this Agreement or the applicable statute
of limitations. The place of arbitration shall be Houston, Texas.
The arbitrator(s) shall be instructed to render its (their) decision
within sixty (60) days after its (their) selection and to allocate all
costs and expenses of such arbitration (including legal and accounting
fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits
(including the successful assertion of any defenses).
B. Nothing contained in this Section 9.04 shall prevent any party hereto
from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
SECTION 9.05. CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the transactions contemplated by this Agreement
have been consummated, it and its representatives will hold in strict confidence
all data and information obtained with respect to another party or any
subsidiary thereof from any representative, member, officer, director, or
employee, or from any books or records or from
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personal inspection, or such other party, and shall not use such data or
information or disclose the same to others, except (i) to the extent such
data or information is published, is a matter of public knowledge, or is
required by law to be published; and (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. This covenant shall survive termination of
this Agreement.
SECTION 9.06. SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information disclosed in the other party's schedules delivered
pursuant to this Agreement. Whenever any representation or warranty of DESIGN
or ▇▇▇▇ contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of DESIGN or ▇▇▇▇, such
knowledge shall be deemed to include (i) the best actual knowledge, information
and belief of the executive officers of DESIGN or ▇▇▇▇ and (ii) any information
which any such officer would reasonably be expected to be aware of in the
prudent discharge of his duties in the ordinary course of business.
Whenever any representation or warranty of DYNAMIC contained herein or in
any other document executed and delivered in connection herewith is based upon
the knowledge of DYNAMIC, such knowledge shall be deemed to include (i) the best
actual knowledge, information and belief of the MEMBERS of DYNAMIC without
inquiry, and (ii) any information which any such MEMBER would reasonably be
expected to be aware of in the prudent discharge of his duties in the ordinary
course of business on behalf of DYNAMIC.
SECTION 9.07. THIRD PARTY BENEFICIARIES. This contract is solely between
DESIGN, DYNAMIC and ▇▇▇▇ except as specifically provided, no director, officer,
stockholder, employee, agent, independent contractor, or any other person or
entity shall be deemed to be a third party beneficiary of this Agreement.
SECTION 9.08. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
SECTION 9.09. SURVIVAL. The representations, warranties, and covenants of
the respective parties shall terminate one (1) year from the Closing Date and
the consummation of the transactions herein contemplated.
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SECTION 9.10. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
SECTION 9.11. AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above-written.
By mutual agreement, the date for execution of the Agreement and Plan of
Merger in the Letter of Intent dated May 10, 1999 by and between Dynamic
Professional Services, L.L.C., ▇▇▇▇ Solutions, Inc. and the parent of ▇▇▇▇
Solutions, Inc., Design Automation Systems, Inc., is extended to June 4, 1999.
DESIGN AUTOMATION SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
▇▇▇▇ SOLUTIONS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice-President
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DYNAMIC PROFESSIONAL SERVICES, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Managing Member
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, Managing Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Managing
Member
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing
Member
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SCHEDULE 4.01
CASH AT CLOSING:
$100,000.00 at closing distributed as follows:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ $ 12,000.00
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 12,000.00
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 25,000.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 25,000.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 13,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 13,000.00
INSTALLMENT PAYMENT:
$100,000.00 payable in four (4) $25,000.00 increments with the first
payment ninety (90) days after closing distributed each payment as follows:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ $ 3,000.00
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 3,000.00
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 6,250.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 6,250.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 3,250.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 3,250.00
COMMON STOCK OF DESIGN AUTOMATION SYSTEMS, INC. AT CLOSING (RESTRICTED): Up to a
maximum of 524,000 shares determined by below stated formula:
The number of shares each member is to receive at the closing is:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 62,880
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 62,880
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 131,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 131,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 68,120
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 68,120
ADDITIONAL STOCK CONSIDERATION
If on June 1, 2000, the closing price (as determined by NASDAQ or other
mutually agreeable market quotation system) of Design Automation Systems, Inc.
Common Stock ("Design Common Stock") for the prior 15 business days is less than
$5.15 per share, the Members of Dynamic will each immediately receive as
additional Merger Consideration his or her pro rata share of Design Common Stock
in an amount equal to 5,340 shares for each $0.01 below $5.15 per share. The
pro rata percentages of the Members are:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 12.00%
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 12.00%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 25.00%
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 25.00%
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 13.00%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 13.00%
For example, if the average closing price of Design Common Stock as of the
15 days prior to June 1, 2000 is $4.15, the Members would receive his or her pro
rata share of 534,000 shares.
Design agrees to reserve for issuance at least 2,750,000 shares of Design
Common Stock for issuance to the Members of Dynamic in accordance with this
paragraph. The amount of Design Common Stock issuable pursuant to this
provision shall be adjusted for any reclassification, split up or other change
in capital which would affect the number of shares issued and outstanding or
issuable pursuant to stock options, stock warrants or other obligations to issue
shares not disclosed on the Closing Date or which would otherwise affect the
price of the shares. Design covenants and agrees that it will provide
documentation to the Members of Dynamic evidencing the average closing price of
the Design Common Stock for the 15 business days prior to June 1, 2000. Such
documentation shall include any and all information relating to the shares
traded, including but not limited to the record and beneficial owners of any
shares bought or sold during such period of time, the price and amount of shares
traded and a certificate from the senior officers of Design that none of the
shares or trades involved during such 15 day period were beneficially owned,
controlled, directly or indirectly, by Design or any of its affiliates and that
neither Design nor any of its affiliates took any direct or indirect action to
influence the share price during such 15 day period. To the extent that any
such documentation is not readily available on June 1, 2000, then Design agrees
to provide the Dynamic Members access to such information not later than July 1,
2000.
The right granted hereby is not assignable by a Member.