PLAN AND AGREEMENT OF REORGANIZATION
BETWEEN
DIGITAL CORPORATE PROFILES, INC.
AND
ADVANCED LASER PRODUCTS, INC.
RELATING TO THE EXCHANGE OF COMMON STOCK OF
DIGITAL CORPORATE PROFILES, INC.
FOR
COMMON STOCK OF ADVANCED LASER PRODUCTS, INC.
DATED SEPTEMBER 28, 1998
TABLE OF CONTENTS
PAGE
PLAN OF REORGANIZATION ................................................. 1
AGREEMENT .............................................................. 1
SECTION 1 TRANSFER OF DIGITAL SHARES ............................... 1
SECTION 2 ISSUANCE OF EXCHANGE STOCK TO DIGITAL
SHAREHOLDERS ............................................. 2
SECTION 3 CLOSING .................................................. 3
SECTION 4 REPRESENTATIONS AND WARRANTIES BY DIGITAL AND
CERTAIN SHAREHOLDERS ..................................... 5
SECTION 5 REPRESENTATIONS AND WARRANTIES BY ADVANCED ............... 9
SECTION 6 ACCESS AND INFORMATION ................................... 14
SECTION 7 COVENANTS OF DIGITAL ..................................... 15
SECTION 8 COVENANTS OF ADVANCED .................................... 17
SECTION 9 ADDITIONAL COVENANTS OF THE PARTIES ...................... 17
SECTION 10 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS ................................................ 18
SECTION 11 CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARTIES ............................................... 18
SECTION 12 TERMINATION, AMENDMENT, WAIVER ........................... 21
SECTION 13 MISCELLANEOUS ............................................ 24
EXHIBIT LIST ........................................................... 27
SCHEDULE LIST .......................................................... 27
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PLAN AND AGREEMENT OF REORGANIZATION
This PLAN AND AGREEMENT OF REORGANIZATION ("Agreement") is entered into on
this 28th day of September, 1998, by and between ADVANCED LASER PRODUCTS, INC.,
a Delaware corporation ("ADVANCED") and DIGITAL CORPORATE PROFILES, INC., a
California corporation ("DIGITAL"), and those persons listed in Exhibit A
hereto, being all of the shareholders of DIGITAL who own individually at least
five percent (5%) of the outstanding stock of DIGITAL and together control over
50% of the outstanding stock of DIGITAL as of the date this Agreement is
executed.
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is intended to be a "tax
free" exchange as contemplated by the provisions of Sections 351 and
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. ADVANCED will
acquire up to 100% of DIGITAL's issued and outstanding common stock, (no par
value per share) (the "DIGITAL Stock" or the "DIGITAL Shares"), in exchange for
approximately 5,191,968 shares of ADVANCED's common stock, $0.001 par value per
share (the "Exchange Stock"). Upon the consummation of the exchange transaction
and the issuance and transfer of the ADVANCED common stock as set forth in
Section 2 hereinbelow, DIGITAL Shareholders would hold approximately 99% of the
then outstanding common stock of ADVANCED. The Exchange Transaction will result
in DIGITAL becoming a subsidiary of ADVANCED.
AGREEMENT
SECTION 1
TRANSFER OF DIGITAL SHARES
1.1 All shareholders of DIGITAL (the "Shareholders" or the "DIGITAL
Shareholders"), as of the date of Closing as such term is defined in Section 3
herein (the "Closing" or the "Closing Date"), shall transfer, assign, convey and
deliver to ADVANCED at the date of Closing, certificates representing
approximately 100% of the DIGITAL Shares or such lesser percentage as shall be
acceptable to ADVANCED, but in no event less than approximately 90% of the
DIGITAL Shares. The transfer of the DIGITAL Shares shall be made free and clear
of all liens, mortgages, pledges, encumbrances or charges, whether disclosed or
undisclosed, except as the DIGITAL Shareholders and ADVANCED shall have
otherwise agreed in writing.
SECTION 2
ISSUANCE OF EXCHANGE STOCK TO DIGITAL SHAREHOLDERS
2.1 As consideration for the transfer, assignment, conveyance and delivery
of the DIGITAL Stock hereunder, ADVANCED shall, at the Closing issue to the
DIGITAL Shareholders, pro rata in accordance with each Shareholder's percentage
ownership of DIGITAL immediately prior to the Closing, certificates for
approximately 5,191,968 shares. (The ADVANCED common stock to be issued are
referred to herein as the "Exchange Stock.") The parties intend that the
Exchange Stock being issued will be used to acquire all outstanding DIGITAL
Shares. To the extent that less than 100% of the DIGITAL Stock is acquired, the
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number of shares issuable to those DIGITAL Shareholders who have elected to
participate in the exchange described in this Agreement (the "Exchange") shall
increase proportionately.
2.2 The issuance of the Exchange Stock shall be made free and clear of all
liens, mortgages, pledges, encumbrances or charges, whether disclosed or
undisclosed, except as the DIGITAL Shareholders and ADVANCED shall have
otherwise agreed in writing. As provided herein, and immediately prior to the
Closing, ADVANCED shall have issued and outstanding: (i) not more than 53,487
shares of Common Stock; (ii) no shares of Preferred Stock; and (iii) no other
capital stock, warrants, options or other securities convertible or exchanged
into Common Stock issued and outstanding, except as may be set forth in Schedule
5.1(b) hereto.
2.3 None of the Exchange Stock issued or to be issued to the DIGITAL
Shareholders, nor any of the DIGITAL Stock transferred to ADVANCED hereunder
shall, at the time of Closing, be registered under federal securities laws but,
rather, shall be issued pursuant to an exemption therefrom and be considered
"restricted stock" within the meaning of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act"). All of such shares shall bear a
legend worded substantially as follows:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 (the "Act") and are 'restricted securities' as
that term is defined in Rule 144 under the Act. The shares may not be
offered for sale, sold or otherwise transferred except pursuant to an
exemption from registration under the Act, the availability of which is to
be established to the satisfaction of the Company."
The respective transfer agents of ADVANCED and DIGITAL shall annotate their
records to reflect the restrictions on transfer embodied in the legend set forth
above. There shall be no requirement that ADVANCED register the Exchange Stock
under the Act, nor shall DIGITAL or the Shareholders be required to register any
DIGITAL Shares under the Act.
SECTION 3
CLOSING
3.1 Closing of Transaction. Subject to the fulfillment or waiver of the
conditions precedent set forth in Section 11 hereof, the Closing shall take
place on the Closing Date at the offices of Pacific Rim Capital, 3233 Xxxxxx
Xxxxxxx Xxxx Xxxxx, Xxxxx X, Xxxxx Xxxxxx, Xxxxxxxxxx 00000 at 1:00 p.m. P.S.T.,
or at such other time on the Closing Date as DIGITAL and ADVANCED may mutually
agree in writing
3.2 Closing Date. The Closing Date of the Exchange shall take place on a
date chosen by mutual agreement of DIGITAL and ADVANCED not later than October
31, 1998, or such later date upon which DIGITAL and ADVANCED may mutually agree
in writing, or as extended pursuant to subsection 12.1(b) hereinbelow.
3.3 Deliveries at Closing.
(a) DIGITAL shall deliver or cause to be delivered to ADVANCED at or
prior to Closing:
(1) certificates representing all shares, or an amount of shares
acceptable to ADVANCED, of the DIGITAL Stock as described in
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Section 1, each endorsed in blank by the registered owner;
(2) an agreement from each Shareholder surrendering his or her
shares agreeing to a restriction on the transfer of the Exchange
Stock as described in Section 2 hereof;
(3) a copy of a consent of DIGITAL's board of directors
authorizing DIGITAL to take the necessary steps toward Closing the
transaction described by this Agreement in the form set forth in
Exhibit B;
(4) a copy of a Certificate of Good Standing for DIGITAL issued
not more than ten (10) days prior to Closing by the California
Secretary of State;
(5) an opinion of the Law Offices of Xxxxxxx X. Xxxxxxx, counsel
to DIGITAL, dated the Closing Date, in a form deemed acceptable by
ADVANCED and its counsel;
(6) Articles of Incorporation and Bylaws of DIGITAL certified as
of the Closing Date by the President and Secretary of DIGITAL;
(7) all of DIGITAL's corporate records;
(8) such other documents, instruments or certificates as shall be
reasonably requested by ADVANCED or its counsel.
(b) ADVANCED shall deliver or cause to be delivered to DIGITAL at
Closing:
(1) a copy of a consent of ADVANCED's board of directors
authorizing ADVANCED to take the necessary steps toward Closing
the transaction described by this Agreement in the form set forth
in Exhibit C;
(2) a copy of a Certificate of Good Standing for ADVANCED issued
not more than thirty days prior to Closing by the Secretary of
State of Delaware.
(3) stock certificate(s) representing the Exchange Stock to be
newly issued by ADVANCED under this Agreement, which certificates
shall be in the names of the appropriate DIGITAL Shareholders,
each in the appropriate denomination as described in Section 2;
(4) an opinion of Xxxxxxx X. Xxxxxx, Xx., special counsel to
ADVANCED, dated the Closing Date, in a form deemed acceptable by
DIGITAL and its counsel;
(5) Articles of Incorporation and Bylaws of ADVANCED certified as
of the Closing Date by the President and Secretary of ADVANCED;
(6) executed bank forms for ADVANCED bank accounts reflecting a
change in management and signatories to said bank accounts;
(7) letters of resignation as an officer and/or director of
ADVANCED from any and all officers or directors of ADVANCED, as
requested by DIGITAL prior to closing;
(8) all of ADVANCED's corporate records;
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(9) such other documents, instruments or certificates as shall be
reasonably requested by DIGITAL or its counsel.
3.4 Filings; Cooperation.
(a) Prior to the Closing, the parties shall proceed with due diligence
and in good faith to make such filings and take such other actions as
may be necessary to satisfy the conditions precedent set forth in
Section 11 below.
(b) On and after the Closing Date, ADVANCED, DIGITAL and the
Shareholders set forth in Exhibit A shall, on request and without
further consideration, cooperate with one another by furnishing or using
their best efforts to cause others to furnish any additional information
and/or executing and delivering or using their best efforts to cause
others to execute and deliver any additional documents and/or
instruments, and doing or using their best efforts to cause others to do
any and all such other things as may be reasonably required by the
parties or their counsel to consummate or otherwise implement the
transactions contemplated by this Agreement.
SECTION 4
REPRESENTATIONS AND WARRANTIES BY
DIGITAL AND CERTAIN SHAREHOLDERS
4.1 Subject to the schedule of exceptions, attached hereto and incorporated
herein by this reference, (which schedules shall be acceptable to ADVANCED),
DIGITAL and those Shareholders listed on Exhibit A represent and warrant to
ADVANCED as follows:
(a) Organization and Good Standing of DIGITAL. The Articles of
Incorporation of DIGITAL and all Amendments thereto as presently in
effect, certified by the Secretary of State of California, and the
Bylaws of DIGITAL as presently in effect, certified by the President and
Secretary of DIGITAL, have been delivered to ADVANCED and are complete
and correct and since the date of such delivery, there has been no
amendment, modification or other change thereto.
(b) Capitalization. DIGITAL's authorized capital stock is 5,000,000
shares of no par value Common Stock (defined as "DIGITAL Common Stock"),
of which no more than 1,730,656 shares will be issued and outstanding
prior to the Closing Date, and held of record by approximately 13
persons. All of such outstanding shares are validly issued, fully paid
and non-assessable. Except as set forth in Schedule 4.1(b), no other
equity securities or debt obligations of DIGITAL are authorized, issued
or outstanding.
(c) Subsidiaries. DIGITAL has no subsidiaries and no other investments,
directly or indirectly, or other financial interest in any other
corporation or business organization, joint venture or partnership of
any kind whatsoever.
(d) Financial Statements. DIGITAL will deliver to ADVANCED, prior to
Closing, a copy of DIGITAL's audited financial statements through
December 31, 1997, and unaudited financial statements for the six months
ended June 30, 1998, which will be true and complete. The unaudited
financial statements through June 30, 1998 will be signed by the
President and Secretary of DIGITAL certifying that, to the best of their
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knowledge, such financial statements are true and complete. Other than
changes in the usual and ordinary conduct of the business since June 30,
1998, there have been, and at the Closing Date there will be, no
material adverse changes in such financial statements.
(e) Absence of Undisclosed Liabilities. DIGITAL has no liabilities which
are not adequately reflected or reserved against in the DIGITAL
Financial Statements or otherwise reflected in this Agreement and
DIGITAL shall not have as of the Closing Date, any liabilities (secured
or unsecured and whether accrued, absolute, direct, indirect or
otherwise) which were incurred after June 30, 1998, and would be
individually or in the aggregate, material to the results of operations
or financial condition of DIGITAL as of the Closing Date.
(f) Litigation. Except as disclosed in Schedule 4.1(f), there are no
outstanding orders, judgments, injunctions, awards or decrees of any
court, governmental or regulatory body or arbitration tribunal against
DIGITAL or its properties. Except as disclosed in Schedule 4.1(f), there
are no actions, suits or proceedings pending, or,to the knowledge of
DIGITAL, threatened against or affecting DIGITAL, any of its officers or
directors relating to their positions as such, or any of its properties,
at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, in connection with the business,
operations or affairs of DIGITAL which might result in any material
adverse change in the operations or financial condition of DIGITAL, or
which might prevent or materially impede the consummation of the
transactions under this Agreement.
(g) Compliance with Laws. To the best of its knowledge, the operations
and affairs of DIGITAL do not violate any law, ordinance, rule or
regulation currently in effect, or any order, writ, injunction or decree
of any court or governmental agency, the violation of which would
substantially and adversely affect the business, financial conditions or
operations of DIGITAL.
(h) Absence of Certain Changes. Except as set forth in Schedule 4.1(h),
or otherwise disclosed in writing to ADVANCED, since June 30, 1998, (i)
DIGITAL has not entered into any material transaction not in the
ordinary course of business; (ii) there has been no change in the
condition (financial or otherwise), business, property, prospects,
assets or liabilities of DIGITAL as shown on the DIGITAL Financial
Statement, other than changes that both individually and in the
aggregate do not have a consequence that is materially adverse to such
condition, business, property, prospects, assets or liabilities; (iii)
there has been no damage to, destruction of or loss of any of the
properties or assets of DIGITAL (whether or not covered by insurance)
materially and adversely affecting the condition (financial or
otherwise), business, property, prospects, assets or liabilities of
DIGITAL; (iv) DIGITAL has not declared, or paid any dividend or made any
distribution on its capital stock, redeemed, purchased or otherwise
acquired any of its capital stock, granted any options to purchase
shares of its stock, or issued any shares of its capital stock; (v)
there has been no material adverse change, except in the ordinary course
of business, in the contingent obligations of DIGITAL by way of
guaranty, endorsement, indemnity, warranty or otherwise; (vi) there have
been no loans made by DIGITAL to its employees, officers or directors;
(vii) there has been no waiver or compromise by DIGITAL of a valuable
right or of a material debt owed to it; (viii) there has been no
extraordinary increase in the compensation of any of DIGITAL's
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employees; (ix) there has been no agreement or commitment by DIGITAL to
do or perform any of the acts described in this Section 4.1(h); and (x)
there has been no other event or condition of any character which might
reasonably be expected either to result in a material and adverse change
in the condition (financial or otherwise) business, property, prospects,
assets or liabilities of DIGITAL or to impair materially the ability of
DIGITAL to conduct the business now being conducted.
(i) Employees. There are, except as disclosed in Schedule 4.1(i), no
collective bargaining, bonus, profit sharing, compensation, or other
plans, agreements or arrangements between DIGITAL and any of its
directors, officers or employees and there is no employment, consulting,
severance or indemnification arrangements, agreements or understandings
between DIGITAL on the one hand, and any current or former directors,
officers or employees of DIGITAL on the other hand.
(j) Assets. All of the assets reflected on the June 30, 1998, DIGITAL
Financial Statements or acquired and held as of the Closing Date, will
be owned by DIGITAL on the Closing Date. Except as set forth in Schedule
4.1(j), DIGITAL owns outright and has good and marketable title, or
holds valid and enforceable leases, to all of such assets. None of
DIGITAL's equipment used by DIGITAL in connection with its business has
any material defects and all of them are in all material respects in
good operating condition and repair, and are adequate for the uses to
which they are being put; none of DIGITAL's equipment is in need of
maintenance or repairs, except for ordinary, routine maintenance and
repair. DIGITAL represents that, except to the extent disclosed in
Schedule 4.1(j) to this Agreement or reserved against on its balance
sheet as of June 30, 1998, it is not aware of any accounts and contracts
receivable existing that in its judgment would be uncollectible.
(k) Tax Matters. DIGITAL represents that, except as set forth in
Schedule 4.1(k) to this Agreement, all federal, foreign, state and local
tax returns, reports and information statements required to be filed by
or with respect to the activities of DIGITAL have been timely filed.
Since June 30, 1998, DIGITAL has not incurred any liability with respect
to any federal, foreign, state or local taxes except in the ordinary and
regular course of business. Such returns, reports and information
statements are true and correct in all material respects insofar as they
relate to the activities of DIGITAL. On the date of this Agreement,
DIGITAL is not delinquent in the payment of any such tax or assessment,
and no deficiencies for any amount of such tax have been proposed or
assessed. Any tax sharing agreement among or between DIGITAL and any
affiliate thereof shall be terminated as of the Closing Date.
(l) Continuation of Key Management. To the best knowledge of DIGITAL,
all key management personnel of DIGITAL intend to continue their
employment with DIGITAL after the Closing. For purposes of this
subsection 4.1(l), "key management personnel" shall include Xxxxx Xxxx,
Xxxxxxx Xxxxx, and Xxxxx Xxxx.
(m) Books and Records. The books and records of DIGITAL are complete and
correct, are maintained in accordance with good business practice and
accurately present and reflect, in all material respects, all of the
transactions therein described, and there have been no material
transactions involving DIGITAL which properly should have been set forth
therein and which have not been accurately so set forth.
(n) Authority to Execute Agreement. The Board of Directors of DIGITAL,
6
pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by DIGITAL of this Agreement, and
has duly authorized each of the transactions hereby contemplated.
DIGITAL has the power and authority to execute and deliver this
Agreement, to consummate the transactions hereby contemplated and to
take all other actions required to be taken by it pursuant to the
provisions hereof. DIGITAL has taken all actions required by law, its
Articles of Incorporation, as amended, or otherwise to authorize the
execution and delivery of this Agreement. This Agreement is valid and
binding upon DIGITAL and those Shareholders listed in Exhibit A hereto
in accordance with its terms. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will constitute a violation or breach of the Articles of Incorporation,
as amended, or the Bylaws, as amended, of DIGITAL, or any agreement,
stipulation, order, writ, injunction, decree, law, rule or regulation
applicable to DIGITAL.
4.2 Disclosure. At the date of this Agreement, DIGITAL and those
Shareholders listed in Exhibit A have, and at the Closing Date they will have,
disclosed all events, conditions and facts materially affecting the business and
prospects of DIGITAL. DIGITAL and such Shareholders have not now and will not
have at the Closing Date, withheld knowledge of any such events, conditions or
facts which they know, or have reasonable grounds to know, may materially affect
DIGITAL's business and prospects. Neither this Agreement nor any certificate,
exhibit, schedule or other written document or statement, furnished to ADVANCED
by DIGITAL and/or by such Shareholders in connection with the transactions
contemplated by this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to be
stated in order to make the statements contained herein or therein not
misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES BY ADVANCED
5.1 Subject to the schedule of exceptions, attached hereto and incorporated
herein by this reference, (which schedules shall be acceptable to DIGITAL),
ADVANCED represents and warrants to DIGITAL and those Shareholders listed in
Exhibit A as follows:
(a) Organization and Good Standing. ADVANCED is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to own or
lease its properties and to carry on its business as now being conducted
and as proposed to be conducted. Further, ADVANCED is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing. The Articles of
Incorporation of ADVANCED and all amendments thereto as presently in
effect, certified by the Secretary of State of Delaware, and the Bylaws of
ADVANCED as presently in effect, certified by the President and Secretary
of ADVANCED, have been delivered to DIGITAL and are complete and correct
and since the date of such delivery, there has been no amendment,
modification or other change thereto.
(b) Capitalization. ADVANCED's authorized capital stock consists of
25,000,000 shares of $.001 par value Common Stock (defined above as
"ADVANCED Common Stock"), approximately 53,487 of which will be issued and
7
outstanding, prior to Closing Date and 1,000,000 shares of $.01 par value
Preferred Stock, of which no shares will be issued and outstanding at the
Closing Date. All authorized and/or outstanding options and warrants are
set forth on Schedule 5.1(b). Except as set forth in Schedule 5.1(b), no
other equity securities, securities convertible into equity securities or
debt obligations of ADVANCED are authorized, issued or outstanding and as
of the Closing, there will be no other outstanding options, warrants,
agreements, contracts, calls, commitments or demands of any character,
preemptive or otherwise, other than this Agreement, relating to any of the
ADVANCED Common Stock, and there will be no outstanding security of any
kind convertible into ADVANCED Common Stock or Preferred Stock. The shares
of ADVANCED Common Stock are free and clear of all liens, charges, claims,
pledges, restrictions and encumbrances whatsoever of any kind or nature
that would inhibit, prevent or otherwise interfere with the transactions
contemplated hereby. All of the outstanding shares of ADVANCED Common Stock
are validly issued, fully paid and nonassessable and there are no voting
trust agreements or other contracts, agreements or arrangements restricting
or affecting voting or dividend rights or transferability with respect to
the outstanding shares of ADVANCED Common Stock;
(c) Issuance of Exchange Stock. All of the ADVANCED Common Stock to be
issued to or transferred to DIGITAL Shareholders pursuant to this
Agreement, when issued, transferred and delivered as provided herein, will
be duly authorized, validly issued, fully paid and nonassessable, and will
be free and clear of all liens, charges, claims, pledges, restrictions and
encumbrances whatsoever of any kind or nature, except those restrictions
imposed by State or Federal corporate and securities regulations.
(d) Subsidiaries. ADVANCED has no subsidiaries and no other
investments, directly or indirectly, or other financial interest in any
other corporation or business organization, joint venture or partnership of
any kind whatsoever.
(e) ADVANCED will use its best efforts to forthwith obtain any
approval of the transaction set forth in this Agreement by its outstanding
shares if required by the General Corporation Law of Delaware;
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by
ADVANCED with any of the provisions hereof will:
(1) violate or conflict with, or result in a breach of any
provisions of, or constitute a default ( or an event which, with
notice or lapse of time or both, would constitute a default)
under, any of the terms, conditions or provisions of the Articles
of Incorporation or Bylaws of ADVANCED or any note, bond,
mortgage, indenture, deed of trust, license, agreement or other
instrument to which ADVANCED is a party, or by which it or its
properties or assets may be bound or affected; or
(2) violate any order, writ, injunction or decree, or any
statute, rule, permit, or regulation applicable to ADVANCED or
any of its properties or assets.
(g) Financial Statements. ADVANCED will deliver to DIGITAL prior to
Closing, a copy of ADVANCED's audited financial statements for the eight
months ended August 31, 1998, all of which are true and complete and have
been prepared in accordance with generally accepted accounting principles.
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(h) Absence of Undisclosed Liabilities. Except as disclosed in
ADVANCED's Financial Statements, ADVANCED did not have, as of the Closing
Date, any liabilities (secured or unsecured and whether accrued, absolute,
direct, indirect or otherwise) which were incurred after August 31, 1998
and would be individually or, in the aggregate, materially adverse to the
results of operation or financial condition of ADVANCED.
(i) Litigation. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory
body or arbitration tribunal against ADVANCED or its properties. There are
no actions, suits or proceedings pending, or, to the knowledge of ADVANCED,
threatened against or relating to ADVANCED. ADVANCED is not, and on the
Closing Date will not be, in default under or with respect to any judgment,
order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental authority, department, commission, board,
agency or other instrumentality; and ADVANCED has, and on the Closing Date
will have, complied in all material respects with all laws, rules,
regulations and orders applicable to it, if any.
(j) Compliance with Laws. To the best of its knowledge, the operations
and affairs of ADVANCED do not violate any law, ordinance, rule or
regulation currently in effect, or any order, writ, injunction or decree of
any court or governmental agency, the violation of which would
substantially and adversely affect the business, financial conditions or
operations of ADVANCED.
(k) Absence of Certain Changes. Except as set forth in Schedule
5.1(k), or otherwise disclosed in writing to DIGITAL, since June 30, 1998,
(i) ADVANCED has not entered into any material transaction not in the
ordinary course of business; (ii) there has been no change in the condition
(financial or otherwise), business, property, prospects, assets or
liabilities of ADVANCED as shown on the ADVANCED Financial Statement, other
than changes that both individually and in the aggregate do not have a
consequence that is materially adverse to such condition, business,
property, prospects, assets or liabilities; (iii) there has been no damage
to, destruction of or loss of any of the properties or assets of ADVANCED
(whether or not covered by insurance) materially and adversely affecting
the condition (financial or otherwise), business, property, prospects,
assets or liabilities of ADVANCED; (iv) ADVANCED has not declared, or paid
any dividend or made any distribution on its capital stock, redeemed,
purchased or otherwise acquired any of its capital stock, granted any
options to purchase shares of its stock, or issued any shares of its
capital stock; (v) there has been no material adverse change, except in the
ordinary course of business, in the contingent obligations of ADVANCED by
way of guaranty, endorsement, indemnity, warranty or otherwise; (vi) there
have been no loans made by ADVANCED to its employees, officers or
directors; (vii) there has been no waiver or compromise by ADVANCED of a
valuable right or of a material debt owed to it; (viii) there has been no
extraordinary increase in the compensation of any of ADVANCED's employees;
(ix) there has been no agreement or commitment by ADVANCED to do or perform
any of the acts described in this Section 5.1(k); and (x) there has been no
other event or condition of any character which might reasonably be
expected either to result in a material and adverse change in the condition
(financial or otherwise) business, property, prospects, assets or
liabilities of ADVANCED or to impair materially the ability of ADVANCED to
conduct the business now being conducted.
(l) Employees. There are, except as disclosed in Schedule 5.1(l), no
collective bargaining, bonus, profit sharing, compensation, or other plans,
9
agreements or arrangements between ADVANCED and any of its directors,
officers or employees and there is no employment, consulting, severance or
indemnification arrangements, agreements or understandings between ADVANCED
on the one hand, and any current or former directors, officers or employees
of ADVANCED on the other hand.
(m) Assets. All of the assets reflected on the June 30, 1998, ADVANCED
Financial Statements or acquired and held as of the Closing Date, will be
owned by ADVANCED on the Closing Date. Except as set forth in Schedule
5.1(m), ADVANCED owns outright and has good and marketable title, or holds
valid and enforceable leases, to all of such assets. None of ADVANCED's
equipment used by ADVANCED in connection with its business has any material
defects and all of them are in all material respects in good operating
condition and repair, and are adequate for the uses to which they are being
put; none of ADVANCED's equipment is in need of maintenance or repairs,
except for ordinary, routine maintenance and repair. ADVANCED represents
that, except to the extent disclosed in Schedule 5.1(m) to this Agreement
or reserved against on its balance sheet as of June 30, 1998, it is not
aware of any accounts and contracts receivable existing that in its
judgment would be uncollectible.
(n) Tax Matters. Except as set forth in Schedule 5.1(n), all federal,
foreign, state and local tax returns, reports and information statements
required to be filed by or with respect to the activities of ADVANCED have
been filed for all the years and periods for which such returns and
statements were due, including extensions thereof. Since August 31, 1998,
ADVANCED has not incurred any liability with respect to any federal,
foreign, state or local taxes except in the ordinary and regular course of
business. Such returns, reports and information statements are true and
correct in all material respects insofar as they relate to the activities
of ADVANCED. On the date of this Agreement, ADVANCED is not delinquent in
the payment of any such tax or assessment, and no deficiencies for any
amount of such tax have been proposed or assessed. ADVANCED is not a party
to any tax sharing agreement among or between ADVANCED and any affiliate
thereof shall be terminated as of the Closing Date.
(o) Authority to Execute Agreement. The Board of Directors of
ADVANCED, pursuant to the power and authority legally vested in it, has
duly authorized the execution and delivery by ADVANCED of this Agreement
and the Exchange Stock, and has duly authorized each of the transactions
hereby contemplated. ADVANCED has the power and authority to execute and
deliver this Agreement, to consummate the transactions hereby contemplated
and to take all other actions required to be taken by it pursuant to the
provisions hereof. ADVANCED has taken all the actions required by law, its
Certificate of Incorporation, as amended, its Bylaws, as amended, or
otherwise to authorize the execution and delivery of the Exchange Stock
pursuant to the provisions hereof. This Agreement is valid and binding upon
ADVANCED in accordance with its terms. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a violation or breach of the Certificate of
Incorporation, as amended, or the Bylaws, as amended of ADVANCED, or any
agreement, stipulation, order, writ, injunction, decree, law, rule or
regulation applicable to ADVANCED.
(p) Finder's Fees. ADVANCED is not, and on the Closing Date will not
be liable or obligated to pay any finder's, agent's or broker's fee arising
out of or in connection with this Agreement or the transactions
contemplated by this Agreement.
10
(q) Books and Records. The books and records of ADVANCED are
materially complete and correct, are maintained in accordance with good
business practice and accurately present and reflect in all material
respects, all of the transactions therein described and there have been no
material transactions involving ADVANCED which properly should have been
set forth therein and which have not been accurately so set forth.
(r) From the date of this Agreement until the Closing Date, ADVANCED
will give DIGITAL and its counsel, accountants, and other representatives
upon reasonable notice full access, during normal business hours, to all of
the properties, books, records, and files of ADVANCED and will furnish
DIGITAL and such representatives during such period with all such
information and data concerning the affairs of ADVANCED and DIGITAL or such
representatives reasonably may request.
(s) Except for the representations and warranties on the part of
ADVANCED set out herein, DIGITAL in entering into this Agreement has not
relied upon or been induced by any warranty, representation, statement, or
description made by or on behalf of ADVANCED, whether or not made orally or
in writing.
5.2 Disclosure. ADVANCED has and at the Closing Date it will have,
disclosed all events, conditions and facts materially affecting the business and
prospects of ADVANCED. ADVANCED has not now and will not have at the Closing
Date, withheld knowledge of any such events, conditions and facts which it
knows, or has reasonable grounds to know, may materially affect ADVANCED's
business and prospects. Neither this Agreement, nor any certificate, exhibit,
schedule or other written document or statement, furnished to DIGITAL or the
DIGITAL Shareholders by ADVANCED in connection with the transactions
contemplated by this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to be
stated in order to make the statements contained herein or therein not
misleading.
SECTION 6
ACCESS AND INFORMATION
6.1 As to DIGITAL. Subject to the protections provided by subsection 9.4
herein, DIGITAL shall give to ADVANCED and to ADVANCED's counsel, accountants
and other representatives full access during normal business hours throughout
the period prior to the Closing, to all of DIGITAL's properties, books,
contracts, commitments, and records, including information concerning products
and customer base, and patents held by, or assigned to, DIGITAL, and furnish
ADVANCED during such period with all such information concerning DIGITAL's
affairs as ADVANCED reasonably may request.
6.2 As to ADVANCED. Subject to the protections provided by subsection 9.4
herein, ADVANCED shall give to DIGITAL, the DIGITAL Shareholders and their
counsel, accountants and other representatives, full access, during normal
business hours throughout the period prior to the Closing, to all of ADVANCED's
properties, books, contracts, commitments, and records, if any, and shall
furnish DIGITAL and the DIGITAL Shareholders during such period with all such
information concerning ADVANCED's affairs as DIGITAL and the DIGITAL
Shareholders reasonably may request.
11
SECTION 7
COVENANTS OF DIGITAL AND CERTAIN SHAREHOLDERS
7.1 No Solicitation. DIGITAL and those Shareholders listed on Exhibit A, to
the extent within each Shareholder's control, will use their best efforts to
cause its officers, employees, agents and representatives not, directly or
indirectly, to solicit, encourage, or initiate any discussions with, or
indirectly to solicit, encourage, or initiate any discussions with, or negotiate
or otherwise deal with, or provide any information to, any person or entity
other than ADVANCED and its officers, employees, and agents, concerning any
merger, sale of substantial assets, or similar transaction involving DIGITAL, or
any sale of any of its capital stock or of the capital stock held by such
Shareholders in excess of 10% of such Shareholder's current stock holdings
except as otherwise disclosed in this Agreement. DIGITAL will notify ADVANCED
immediately upon receipt of an inquiry, offer, or proposal relating to any of
the foregoing. None of the foregoing shall prohibit providing information to
others in a manner in keeping with the ordinary conduct of DIGITAL's business,
or providing information to government authorities.
7.2 Conduct of Business Pending the Transaction. DIGITAL and those
Shareholders listed on Exhibit A, to the extent within each Shareholder's
control, covenant and agree with ADVANCED that, prior to the consummation of the
transaction called for by this Agreement, and Closing, or the termination of
this Agreement pursuant to its terms, unless ADVANCED shall otherwise consent in
writing, and except as otherwise contemplated by this Agreement, DIGITAL and
those Shareholders listed on Exhibit A, to the extent within each Shareholder's
control, will comply with each of the following:
(a) Its business shall be conducted only in the ordinary and usual
course. DIGITAL shall use reasonable efforts to keep intact its business
organization and good will, keep available the services of its respective
officers and employees, and maintain good relations with suppliers,
creditors, employees, customers, and others having business or financial
relationships with it, and it shall immediately notify ADVANCED of any
event or occurrence which is material to, and not in the ordinary and usual
course of business of, DIGITAL;
(b) It shall not declare, set aside, or pay any dividend or other
distribution on any of its outstanding securities.
(c) It shall not (i) issue or agree to issue any additional shares of,
or rights of any kind to acquire any shares of, its capital stock of any
class, or (ii) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing, except as set forth in
this Agreement;
(d) It shall not create, incur, or assume any long-term or short-term
indebtedness for money borrowed or make any capital expenditures or
commitment for capital expenditures, except in the ordinary course of
business and consistent with past practice;
(e) It shall not (i) adopt, enter into, or amend any bonus, profit
sharing, compensation, warrant, pension, retirement, deferred compensation,
employment, severance, termination or other employee benefit plan,
agreement, trust fund, or arrangement for the benefit or welfare of any
officer, director, or employee, or (ii) agree to any material (in relation
to historical compensation) increase in the compensation payable or to
12
become payable to, or any increase in the contractual term of employment
of, any officer, director or employee except, with respect to employees who
are not officers or directors, in the ordinary course of business in
accordance with past practice, or with the written approval of ADVANCED;
(f) It shall not sell lease, mortgage, encumber, or otherwise dispose
of or grant any interest in any of its assets or properties except for: (i)
sales, encumbrances, and other dispositions or grants in the ordinary
course of business and consistent with past practice; (ii) liens for taxes
not yet due; (iii) liens or encumbrances that are not material in amount or
effect and do not impair the use of the property, or (iv) as specifically
provided for or permitted in this Agreement;
(g) It will continue properly and promptly to file when due all
federal, state, local, foreign, and other tax returns, reports, and
declarations required to be filed by it, and will pay, or make full and
adequate provision for the payment of, all taxes and governmental charges
due from or payable by it;
(h) It will comply with all laws and regulations applicable to it and
its operations;
SECTION 8
COVENANTS OF ADVANCED
8.1 No Solicitation. ADVANCED will not discuss or negotiate with any other
corporation, firm or other person or entertain or consider any inquiries or
proposals relating to the possible disposition of its shares of capital stock,
or its assets, and will conduct business only in the ordinary course.
Notwithstanding the foregoing, ADVANCED shall be free to engage in activities
mentioned in the preceding sentence which are designed to further the mutual
interests of the parties to this Agreement.
8.2 Conduct of ADVANCED Pending Closing. ADVANCED covenants and agrees with
DIGITAL that, prior to the consummation of the transactions called for by this
Agreement, and Closing, or the termination of this Agreement pursuant to its
terms, unless DIGITAL shall otherwise consent in writing, and except as
otherwise contemplated by this Agreement, ADVANCED will comply with each of the
following:
(a) No change will be made in ADVANCED's Certificate of Incorporation
or Bylaws or in ADVANCED's authorized or issued shares of stock, except as may
be first approved in writing by DIGITAL.
(b) No dividends shall be declared, no stock options granted and no
employment agreements shall be entered into with officers or directors in
ADVANCED, except as may be first approved in writing by DIGITAL.
SECTION 9
ADDITIONAL COVENANTS OF THE PARTIES
9.1 Cooperation. Both DIGITAL and ADVANCED will cooperate with each other
and their respective counsel, accountants and agents in carrying out the
13
transaction contemplated by this Agreement, and in delivering all documents and
instruments deemed reasonably necessary or useful by the other party.
9.2 Expenses. Each of the parties hereto shall pay all of its respective
costs and expenses (including attorneys' and accountants' fees, costs and
expenses) incurred in connection with this Agreement and the consummation of the
transactions contemplated herein.
9.3 Publicity. Prior to the Closing, any written news releases or public
disclosure by either party pertaining to this Agreement shall be submitted to
the other party for its review and approval prior to such release or disclosure,
provided, however, that (a) such approval shall not be unreasonably withheld,
and (b) such review and approval shall not be required of disclosures required
to comply, in the judgment of counsel, with federal or state securities or
corporate laws or policies.
9.4 Confidentiality. While each party is obligated to provide access to and
furnish information in accordance with Sections 4 and 5 herein, it is understood
and agreed that such disclosure and information subsequently obtained as a
result of such disclosures are proprietary and confidential in nature. Each
party agrees to hold such information in confidence and not to reveal any such
information to any person who is not a party to this Agreement, or an officer,
director or key employee thereof, and not to use the information obtained for
any purpose other than assisting in its due diligence inquiry precedent to the
Closing. Upon request of any party, a confidentiality agreement, acceptable to
the disclosing party, will be executed by any person selected to receive such
proprietary information, prior to receipt of such information.
SECTION 10
SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS
10.1 The representations, warranties and covenants of DIGITAL and those
Shareholders listed in Exhibit A contained herein shall survive the execution
and delivery of this Agreement, the Closing and the consummation of the
transactions called for by this Agreement. The representations, warranties and
covenants of ADVANCED contained herein shall survive the execution and delivery
of this Agreement, the Closing and the consummation of the transactions called
for by this Agreement.
SECTION 11
CONDITIONS PRECEDENT TO
OBLIGATIONS OF PARTIES
11.1 The obligations of ADVANCED, DIGITAL and those Shareholders listed in
Exhibit A under this Agreement shall be subject to the fulfillment, on or prior
to the Closing, of all conditions elsewhere herein set forth, including, but not
limited to, receipt by the appropriate party of all deliveries required by
Sections 4 and 5 herein, and fulfillment, prior to Closing, of each of the
following conditions:
(a) All representations and warranties made by DIGITAL, Shareholders
listed in Exhibit A and ADVANCED in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the
same effect as if such representations and warranties had been made on and
14
as of the Closing Date;
(b) DIGITAL, Shareholders listed in Exhibit A and ADVANCED shall have
performed or complied with all covenants, agreements and conditions
contained in this Agreement on their part required to be performed or
complied with at or prior to the Closing.
(c) All material authorizations, consents or approvals of any and all
governmental regulatory authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have
been obtained and be in full force and effect.
(d) The Closing shall not violate any permit or order, decree or
judgment of any court or governmental body having competent jurisdiction
and there shall not have been instituted any legal or administrative action
or proceeding to enjoin the transaction contemplated hereby or seeking
damages from any party with respect thereto.
(e) Each DIGITAL Shareholder acquiring Exchange Stock will be
required, at Closing, to submit an agreement confirming that all the
Exchange Stock received will be acquired for investment and not with a view
to, or for sale in connection with, any distribution thereof, and agreeing
not to transfer any of the Exchange Stock unless such transfer is pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "Act"), or unless such transfer falls within an exemption from
registration under the Act and any applicable state securities laws. Each
DIGITAL Shareholder acquiring Exchange Stock will be required to transfer
to ADVANCED at the Closing his/her respective DIGITAL Shares, free and
clear of all liens, mortgages, pledges, encumbrances or changes, whether
disclosed or undisclosed.
(f) All schedules, prepared by DIGITAL or ADVANCED shall be current or
updated as necessary as of the Closing Date.
(g) Each party shall have received favorable opinions from the other
party's counsel on such matters in connection with the transactions
contemplated by this Agreement as are reasonable.
(h) Each party shall have satisfied itself that since the date of this
Agreement the business of the other party has been conducted in the
ordinary course. In addition, each party shall have satisfied itself that
no withdrawals of cash or other assets have been made and no indebtedness
has been incurred since the date of this Agreement, except in the ordinary
course of business or with respect to services rendered or expenses
incurred in connection with the Closing of this Agreement, unless said
withdrawals or indebtedness were either authorized by the terms of this
Agreement or subsequently consented to in writing by the parties.
(i) Each party covenants that, to the best of its knowledge, it has
complied in all material respects with all applicable laws, orders and
regulations of federal, state, municipal and/or other governments and/or
any instrumentality thereof, domestic or foreign, applicable to their
assets, to the business conducted by them and to the transactions
contemplated by this Agreement.
(j) ADVANCED shall have provided to DIGITAL through August 31, 1998,
audited financial statements prepared in accordance with generally accepted
accounting principles.
15
(k) DIGITAL shall have provided to ADVANCED unaudited financial
statements of DIGITAL for the six months ended June 30, 1998, prepared in
accordance with generally accepted accounting principles.
(l) Each party shall have granted to the other party (acting through
its management personnel, counsel, accountants or other representatives
designated by it) full opportunity to examine its books and records,
properties, plants and equipment, proprietary rights and other instruments,
rights and papers of all kinds in accordance with Sections 4 and 5 hereof,
and each party shall be satisfied to proceed with the transactions
contemplated by this Agreement upon completion of such examination and
investigation.
(m) If Shareholders, who in the aggregate own more than ten percent
(10%) of the DIGITAL Shares, dissent from the proposed share exchange, or
are unable or for any reason refuse to transfer any or all of their DIGITAL
Shares to ADVANCED in accordance with Section 1 of this Agreement,
ADVANCED, at its option, may terminate this Agreement.
(n) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated by the
exhibits and schedules attached hereto, shall be legal and binding under
applicable statutory and case law of the State of California, including,
but not limited to California securities laws and all other applicable
state securities laws.
(o) DIGITAL and ADVANCED shall agree to indemnify each other against
any liability to any broker or finder to which that party may become
obligated.
(p) The Exchange shall be approved by the Boards of Directors of both
DIGITAL and ADVANCED. Furthermore, the Exchange shall be approved by the
shareholders of DIGITAL and ADVANCED, if deemed necessary or appropriate by
counsel for the same, within thirty (30) days following execution of this
Agreement. If such a meeting is deemed necessary, the management of DIGITAL
and ADVANCED agree to recommend approval to their respective Shareholders
and to solicit proxies in support of the same.
(q) ADVANCED and DIGITAL and their respective legal counsel shall have
received copies of all such certificates, opinions and other documents and
instruments as each party or its legal counsel may reasonably request
pursuant to this Agreement or otherwise in connection with the consummation
of the transactions contemplated hereby, and all such certificates,
opinions and other documents and instruments received by each party shall
be reasonably satisfactory, in form and substance, to each party and its
legal counsel.
(r) Both DIGITAL and ADVANCED shall have the right to waive any or all
of the conditions precedent to its obligations hereunder not otherwise
legally required; provided, however, that no waiver by a party of any
condition precedent to its obligations hereunder shall constitute a waiver
by such party of any other condition.
SECTION 12
TERMINATION, AMENDMENT, WAIVER
12.1 This Agreement may be terminated at any time prior to the Closing, and
the contemplated transactions abandoned, without liability to either party,
16
except with respect to the obligations of ADVANCED, DIGITAL and the DIGITAL
Shareholders under Section 9.4 hereof:
(a) By mutual agreement of ADVANCED and DIGITAL;
(b) If the Closing (as defined in Section 3) shall not have taken
place on or prior to October 31, 1998, this Agreement can be terminated
upon written notice given by ADVANCED or DIGITAL which is not in material
default.
(c) By ADVANCED, if in its reasonable belief there has been a material
misrepresentation or breach of warranty on the part of any Shareholder in
the representations and warranties set forth in the Agreement.
(d) By DIGITAL or a majority of those Shareholders listed in Exhibit A
(as measured by their equity interest) if, in the reasonable belief of
DIGITAL or any such Shareholders, there has been a material
misrepresentation or breach of warranty on the part of ADVANCED in the
representations and warranties set forth in the Agreement;
(e) By ADVANCED if, in its opinion or that of its counsel, the
Exchange does not qualify for exemption from registration under applicable
federal and state securities laws;
(f) By ADVANCED, if, in its opinion or that of its counsel, the
Exchange cannot be consummated under Delaware or other relevant state
corporate law;
(g) By ADVANCED or by a majority of those Shareholders listed in
Exhibit A (as measured by their equity interest) if either party shall
determine in its sole discretion that the Exchange has become inadvisable
or impracticable by reason of the institution or threat by state, local or
federal governmental authorities of material litigation or proceedings
against any party [it being understood and agreed that a written request by
a governmental authority for information with respect to the Exchange,
which information could be used in connection with such litigation or
proceedings, may be deemed to be a threat of material litigation or
proceedings regardless of whether such request is received before or after
the signing of this Agreement];
(h) By ADVANCED if the business or assets or financial condition of
DIGITAL, taken as a whole, have been materially and adversely affected,
whether by the institution of litigation or by reason of changes or
developments or in operations in the ordinary course of business or
otherwise; or, by a majority of those Shareholders listed in Exhibit A (as
measured by their equity interest) if the business or assets or financial
condition of ADVANCED, taken as a whole, have been materially and adversely
affected, whether by the institution of litigation or by reason of changes
or developments or in operations in the ordinary course of business or
otherwise;
(i) By ADVANCED if holders of more than ten percent (10%) of the
DIGITAL Shares fail to tender their stock at the Closing of the Exchange;
(j) By DIGITAL if ADVANCED fails to perform material conditions set
forth in Section 11 herein;
(k) By DIGITAL if examination of ADVANCED's books and records pursuant
to Section 5 herein uncovers a material deficiency;
17
(l) By ADVANCED if DIGITAL fails to perform material conditions set
forth in Section 11 herein; and
(m) By ADVANCED if examination of DIGITAL's books and records pursuant
to Section 4 herein uncovers a material deficiency.
SECTION 13
MISCELLANEOUS
13.1 Entire Agreement. This Agreement (including the Exhibits and Schedules
hereto) contains the entire agreement between the parties with respect to the
transactions contemplated hereby, and supersedes all negotiations,
representations, warranties, commitments, offers, contracts, and writings prior
to the date hereof. No waiver and no modification or amendment of any provision
of this Agreement shall be effective unless specifically made in writing and
duly signed by the party to be bound thereby.
13.2 Binding Agreement.
(a) This Agreement shall become binding upon the parties when, but
only when, it shall have been signed on behalf of all parties.
(b) Subject to the condition stated in subsection (a), above, this
Agreement shall be binding upon, and inure to the benefit of, the
respective parties and their legal representatives, successors and assigns.
This Agreement, in all of its particulars, shall be enforceable by the
means set forth in subsection 13.9 for the recovery of damages or by way of
specific performance and the terms and conditions of this Agreement shall
remain in full force and effect subsequent to Closing and shall not be
deemed to be merged into any documents conveyed and delivered at the time
of Closing. In the event that subsection 13.9 is found to be unenforceable
as to any party for any reason or is not invoked by any party, and any
person is required to initiate any action at law or in equity for the
enforcement of this Agreement, the prevailing party in such litigation
shall be entitled to recover from the party determined to be in default,
all of its reasonable costs incurred in said litigation, including
attorneys' fees.
13.3 Shareholders Owning at Least Five Percent (5%) of the Outstanding
Common Stock of DIGITAL. The Shareholders owning at least 5% of the outstanding
common stock of DIGITAL (see Exhibit A hereto) are only executing this Agreement
with respect to sections 3.4, 4, 7, 9.4, 10, 11, 12.1(d and g ), 13.2, 13.3,
13.4, 13.8, and 13.9.
13.4 Counterparts. This Agreement may be executed in one or more
counterparts, via facsimile signature, each of which may be deemed an original,
but all of which together, shall constitute one and the same instrument.
13.5 Severability. If any provisions hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof.
13.6 Assignability. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto; provided, that
neither this Agreement nor any right hereunder shall be assignable by DIGITAL or
18
ADVANCED without prior written consent of the other party.
13.7 Captions. The captions of the various Sections of this Agreement have
been inserted only for convenience of reference and shall not be deemed to
modify, explain, enlarge or restrict any of the provisions of this Agreement.
13.8 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of California.
13.9 Dispute Resolution. In the event of a dispute between the parties
hereto involving a claim of breach of representation or warranty hereunder, or
to enforce a covenant herein (either or both of which are referred to hereafter
as a "Claim"), if it is the desire of any party for quick resolution, the rights
and obligations of the parties hereto arising under the terms of this Agreement
with respect to such Claims and/or resolution of such disputes will be by the
means of the judgment of an independent third party ("Rent-A-Judge") who has
been selected and hired through the mutual agreement of the parties. The
utilization of this subsection 13.9, if invoked by any party hereto, shall be
the exclusive remedy for resolving a Claim regardless of whether legal action
has or has not been otherwise instituted. If legal action has been instituted by
any party, and this subsection 13.9 is invoked in a timely manner, any such
legal action shall be void ab initio and immediately withdrawn.
(a) In the event of a Claim by any party, any party may make a written
request upon the other parties for a "Rent-A- Judge." A request by any
party for the employment of a "Rent- A-Judge" to resolve the Claim shall be
binding on all other parties to this Agreement in accordance with the terms
hereof.
The parties may agree upon one "Rent-A-Judge," but in the event that
they cannot agree, there shall be three, one named in writing by each of
the parties within twenty (20) days after the initial demand for employment
of a "Rent-A- Judge," and a third chosen by the two appointed. Should
either party refuse or neglect to join in the appointment of the
"Rent-A-Judge(s)" or to furnish the "Rent-A-Judge(s) with any papers or
information demanded, the "Rent-A-Judge(s)" are empowered by all parties to
this Agreement to proceed ex parte.
(b) Claim resolution proceedings shall take place in the City or
County of Los Angeles, State of California, and the hearing before the
"Rent-A-Judge(s)" of the matter to be arbitrated shall be at the time and
place within said city or county as is selected by the "Rent-A-Judge(s)."
The "Rent-A-Judge(s)" shall select such time and place promptly after
appointment and shall give written notice thereof to each party at least
thirty (30) days prior to the date so fixed. At the hearing, any relevant
evidence may be presented by either party, and the formal rules of evidence
applicable to judicial proceedings shall not govern. Evidence may be
admitted or excluded in the sole discretion of the "Rent-A- Judge(s)." Said
"Rent-A-Judge(s)" shall hear and determine the matter and shall execute and
acknowledge their award in writing and cause a copy thereof to be delivered
to each of the parties.
(c) If there is only one (1) "Rent-A-Judge," his or her decision shall
be binding and conclusive on the parties, and if there are three (3)
"Rent-A-Judge(s)" the decision of any two (2) shall be binding and
conclusive.
(d) If three (3) "Rent-A-Judge(s)" are selected under the foregoing
procedure, but two (2) of the three (3) fail to reach an agreement in the
19
determination of the matter in question, the matter shall be decided by
three (3) new "Rent- A-Judge(s)" who shall be appointed and shall proceed
in the same manner, and the process shall be repeated until a decision is
finally reached by two (2) of the three (3) "Rent- A-Judge(s)" selected.
(e) The costs of such Claim resolution shall be borne by the parties
equally and each party shall pay its own attorneys' fees, provided,
however, that in the event either party challenges or in any way seeks to
have the Rent-A- Judge's decision or award vacated or corrected or
modified, if the challenge is denied or the original decision or award is
affirmed, the challenging party shall pay the costs and fees, including
reasonable attorneys' fees, of the non-challenging party, both for the
challenge and for the original Claim resolution process.
13.10 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and delivered in person or sent by
certified mail, postage prepaid and properly addressed as follows:
To DIGITAL:
Xxxxx Xxxx, President
Digital Corporate Profiles, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 0
Xxxxxx, XX 00000
With a Copy to:
Xxxxxxx X. Xxxxxxx, Esq.
00000 Xxxxxxx Xxxxxxxxx Xxxxx 0000
Xxxxxxx Xxxx, XX 00000
To ADVANCED:
Xxxxxx X. Xxxxxx, President
Advanced Laser Products, Inc.
0000 Xx. Xxxxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxx, XX 00000
With a Copy to:
Xxxxxxx X. Xxxxxx, Xx., Esq.
1520 Bank One Center
000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx. XX 00000
Any party may from time to time change its address for the purpose of
notices to that party by a similar notice specifying a new address, but no such
change shall be deemed to have been given until it is actually received by the
respective party hereto.
All notices and other communications required or permitted under this
Agreement which are addressed as provided in this Section 13.10 if delivered
personally, shall be effective upon delivery; and, if delivered by mail, shall
be effective three days following deposit in the United States mail, postage
prepaid.
20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ADVANCED LASER PRODUCTS, INC.
a Delaware corporation
By: ________________________
Xxxxxx X. Xxxxxx
President
DIGITAL CORPORATE PROFILES, INC.
a California corporation
By: _________________________
Xxxxx Xxxx
President
FIVE PERCENT SHAREHOLDERS OF
DIGITAL CORPORATE PROFILES, INC.
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
21
EXHIBIT LIST
Exhibit A: Five Percent Shareholders of Digital Corporate
Profiles, Inc.
Exhibit B: Consent of Board of Directors of Digital Corporate
Profiles, Inc.
Exhibit C: Consent of Board of Directors of Advanced Laser
Products, Inc.
SCHEDULE LIST
Schedule 4.1(b): DIGITAL Common Stock Outstanding
Schedule 4.1(f): Litigation Involving DIGITAL
Schedule 4.1(h): Absence of Certain Changes - DIGITAL
Schedule 4.1(i): DIGITAL Employee Benefit Plans
Schedule 4.1(j): Asset Ownership Exceptions - DIGITAL
Schedule 4.1(k): DIGITAL Tax Matters
Schedule 5.1(b): ADVANCED Options and Warrants Outstanding
Schedule 5.1(k) Absence of Certain Changes - ADVANCED
Schedule 5.1(l) ADVANCED Employee Benefit Plans
Schedule 5.1(m) Asset Ownership Exceptions - ADVANCED
Schedule 5.1(n): ADVANCED Tax Matters
22
EXHIBIT A
FIVE PERCENT SHAREHOLDERS OF DIGITAL
Shareholder No. of Shares Percentage
Xxxx Family Trust 443,500 25.6
Xxxxx Xxxxxx Xxxxxxx Trust 150,000 8.7
First Capital Network 146,664 8.5
Worldwide Insurance Consulting
Services 146,664 8.5
Xxxxx Xxxxxxx 100,000 5.8
23
EXHIBIT "B"
CONSENT OF DIRECTORS OF DIGITAL CORPORATE PROFILES, INC.
A special meeting of the Directors of Digital Corporate Profiles, Inc.
(the "Corporation"), a California corporation, was held by consent and without
an actual meeting. The undersigned, being all of the Directors, do hereby waive
notice of the time, place and purpose of this meeting of the Directors of the
Corporation and, in lieu thereof, hereby agree and consent to the adoption of
the following corporate actions.
WHEREAS, the Corporation entered into a verbal agreement with Advanced
Laser Products, Inc. ("ADVANCED") whereby the Corporation intends to exchange
approximately all of the issued and outstanding capital stock of the Corporation
for a specified number of ADVANCED common shares;
WHEREAS, a formal agreement has been prepared consistent with the
terms of the verbal agreement, which "Plan and Agreement of Reorganization" is
attached hereto;
WHEREAS, it is in the Corporation's best interests to approve the
terms and execution of the Plan and Agreement of Reorganization on behalf of the
Corporation;
NOW, THEREFORE, BE IT RESOLVED, that -the terms and conditions of the
exchange as set forth in the Plan and Agreement of Reorganization be, and the
same hereby are, ratified and confirmed, and the President and Secretary of the
Corporation are authorized to execute the same on behalf of the Corporation.
GENERAL AUTHORIZATION
BE IT RESOLVED that the President and Secretary of the Corporation be,
and they hereby are, authorized, directed and empowered to prepare or cause to
be prepared, execute and deliver all such documents and instruments and to
undertake all such actions as they deem necessary or advisable in order to carry
out and perform any or all of the matters contemplated by the Plan and Agreement
of Reorganization and as authorized in the foregoing resolution.
IN WITNESS WHEREOF, each of the undersigned has executed this written
consent, which shall be effective as of September 28, 1998.
Xxxxx X. Xxxx
Xxxxx Xxxx
Xxxxx Xxxxxxx
24
EXHIBIT "C"
UNANIMOUS WRITTEN CONSENT OF DIRECTORS OF DIGS, INC.
Pursuant to Section 141(f) of the General Corporation Law of the State
of Delaware, which provides that any action permitted to be taken at a meeting
of the directors of a corporation may be taken without a meeting, if the
directors sign an instrument which states the action was so taken, the sole
director of DIGS, Inc. (the "Corporation"), a Delaware corporation, does hereby
adopt the following preambles and resolution:
WHEREAS, the Corporation entered into a verbal agreement with Digital
Corporate Profiles, Inc. ("DIGITAL") whereby the Corporation intends to exchange
5,191,968 of the Corporation's common shares for approximately all of the issued
and outstanding capital stock of DIGITAL;
WHEREAS, a formal agreement has been prepared consistent with the
terms of the verbal agreement, which "Plan and Agreement of Reorganization" is
attached hereto;
WHEREAS, it is in the Corporation's best interests to approve the
terms and execution of the Plan and Agreement of Reorganization on behalf of the
Corporation;
NOW, THEREFORE, BE IT RESOLVED, that the terms and conditions of the
exchange as set forth in the Plan and Agreement of Reorganization be, and the
same hereby are, ratified and confirmed, and the President and Secretary of the
Corporation are authorized to execute the same on behalf of the Corporation.
GENERAL AUTHORIZATION
BE IT RESOLVED that the President and Secretary of the Corporation be,
and they hereby are, authorized, directed and empowered to prepare or cause to
be prepared, execute and deliver all such documents and instruments and to
undertake all such actions as they deem necessary or advisable in order to carry
out and perform any or all of the matters contemplated by the Plan and Agreement
of Reorganization and as authorized in the foregoing resolution.
IN WITNESS WHEREOF, the undersigned has executed this written
consent, which shall be effective as of September 28, 1998.
Xxxxxxx XxXxxxx
Sole Director
25
SCHEDULE 4.1(b)
Digital Common Stock Outstanding
Shareholder Number of Shares
Xxxx Family Trust 443,500
Xxxxx Xxxxxx Xxxxxxx Trust 150,000
First Capital Network 146,664
Worldwide Insurance Consulting Services 146,664
Xxxxx Xxxxxxx 100,000
Xxxxx Xxxxx 73,332
Xxxxx Xxxxx 73,332
Xxxxxxxx Xxxxx 73,332
Xxxxx Xxxxx 73,332
Xxxxxxx Xxxxxx 72,000
Xxxxxx Xxxx Xxxx 60,000
Xxxxx Xxxx 55,000
Xxxxx Xxxxxx 50,000
Xxxxx Xxxxxxx 40,000
Xxxxxx Xxxxxxxx 40,000
Xxx Xxxxxxxx 32,000
Xxxxxxxxx Xxxx 30,000
U.S. Stock Transfer Corp. 21,250
Xxxxxx Xxxx 21,250
Let It Ride Investment Corp. 20,000
Xxxxxxx X. Xxxx, Xx. & Xxxxx X. Xxxxx, JTWRS 10,000
Total: 1,731,656
26
SCHEDULE 4.1(f)
Litigation Involving DIGITAL
None.
27
SCHEDULE 4.1(h)
Absence of Certain Changes - Digital
None.
28
SCHEDULE 4.1(i)
Employee Benefit Plans - Diital
None.
29
SCHEDULE 4.1(j)
Asset Ownership Exceptions - Digital
None.
30
SCHEDULE 4.1(k)
Digital Tax Matters
None.
31
SCHEDULE 5.1(b)
Advanced Options and Warrants Outstanding
None.
32
SCHEDULE 5.1(h)
Absence of Certain Changes - Advanced
None.
33
SCHEDULE 5.1(i)
Advanced Employee Benefit Plans
None.
34
SCHEDULE 5.1(j)
Asset Ownership Exceptions - Advanced
None.
35
SCHEDULE 5.1(k)
Advanced Tax Matters
None.
36