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EXHIBIT 2
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BETWEEN
NETGAIN CORPORATION
(a Georgia corporation),
BROCK INTERNATIONAL, INC.
(a Georgia corporation)
AND
BROCK ACQUISITION, INC.
(a Georgia corporation)
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated this 31st
day of December, by and between NetGain Corporation, a Georgia corporation
("NetGain), Brock International, Inc., a Georgia corporation ("Brock"), and
Brock Acquisition, Inc., a Georgia corporation ("the "Subsidiary") (and,
together with NetGain, the "Constituent Corporations"). Capitalized terms used
in this Agreement without definition shall have the meanings ascribed to them
in the Option Agreement between Brock and NetGain, dated July 25, 1997 (the
"Option Agreement").
WHEREAS, NetGain, Brock and Subsidiary are duly organized and validly
existing corporations incorporated under the laws of the State of Georgia;
WHEREAS, NetGain, Brock and Subsidiary have determined that it is in
the best interest of NetGain, Brock and Subsidiary for NetGain to merge with
and into Subsidiary upon the terms and conditions provided in this Agreement;
WHEREAS, NetGain has authorized capitalization consisting of
10,000,000 shares of common stock, $.01 par value per share ("NetGain Common
Stock"), of which 4,272,000 shares are issued and outstanding;
WHEREAS, Subsidiary has authorized capitalization consisting of 1,000
shares of common stock, $1.00 par value per share ("Subsidiary Common Stock")
of which 100 shares are issued and outstanding;
WHEREAS, the Boards of Directors of NetGain, Brock and Subsidiary have
approved this Agreement and the merger contemplated hereby;
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NOW, THEREFORE, for and in consideration of the promised and mutual
agreements, promises and covenants contained herein, and in accordance with the
applicable provisions of the Georgia Business Corporation Code ("GBCC"), the
parties hereby agree as follows:
1. Merger
1.1 At the Effective Time (as hereinafter defined), NetGain shall
be merged with and into Subsidiary and Subsidiary shall
survive the Merger (the "Merger"); the Merger shall in all
respects have the effect provided for in the GBCC and this
Agreement.
1.2 Subsidiary, the corporation surviving the Merger (sometimes
referred to herein as the "Surviving Corporation"), shall
continue its corporate existence under the laws of the State
of Georgia.
1.3 Without limiting the foregoing, on and after the Effective
Time, the separate existence of NetGain shall cease, and, in
accordance with the terms of this Agreement, the Surviving
Corporation shall possess all the rights and privileges of
each of the Constituent Corporations; and all debts due on
whatever account, including subscriptions to shares, and all
other choses in action and all and every other interest of or
belonging to or due to either of the Constituent Corporations
shall be taken and deemed to be transferred to and invested
in the Surviving Corporation without further act or deed; and
all property, rights and privileges, powers and franchises
and all and every other interest shall thereafter effectively
be the property of the Surviving Corporation as they were of
the respective Constituent Corporations and the title to any
real estate, whether by deed or otherwise, vested in either
of said Constituent Corporations shall not revert or be in
any way impaired by reason of this Merger. The Surviving
Corporation shall thenceforth be responsible and liable for
all the liabilities and obligations of the Constituent
Corporations. Any claim existing or action or proceeding
pending by or against either of said Constituent Corporations
may be persecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in its place.
Neither the rights of creditors nor any liens upon property
of either of the Constituent Corporations shall be impaired
by the Merger.
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1.4 Prior to and from and after the Effective Time, the
Constituent Corporations shall take all such action as shall
be necessary or appropriate in order to effect the Merger. If
at any time the Surviving Corporation shall consider or be
advised that any further assignments or assurances in law or
any other actions are necessary, appropriate or desirable to
vest in said corporation, according to the terms hereof, the
title to any property or rights of NetGain, the last acting
officers of NetGain, or the corresponding officers of the
Surviving Corporation, shall and will execute and make all
such proper assignments and assurances and take all action
necessary and proper to vest title in such property or rights
in the Surviving Corporation, and otherwise to carry out the
purposes of this Agreement.
2. Terms of Transaction
The manner and basis of converting and exchanging the shares of
stock of each of the Constituent Corporations into or for shares of stock
of the Surviving Corporation or of Brock, as the case may be, and the mode
of carrying the Merger into effect, shall be as follows:
2.1 Each share of Subsidiary Common Stock issued and outstanding
at the Effective Time shall be converted into, and shall
remain outstanding as, a fully paid and non-assessable share
of common stock of the Surviving Corporation, without any
action on the part of the holder thereof.
2.2 Each share of NetGain Common Stock (other than Dissenting
Shares (defined in section 2.3 below)) issued and outstanding
at the Effective Time (except treasury shares held by
NetGain) shall by virtue of the Merger, and without any
action on the part of the holder thereof (the holders of
NetGain Common Stock being collectively referred to hereafter
as the "NetGain Stockholders"), be converted into solely the
right to receive a share or shares of common stock of Brock
("Brock Common Stock"), subject to forfeiture, depending upon
the aggregate revenues derived from the sale or license of or
subscription for NetGain Products (and associated service
revenues) realized by the Surviving Corporation, or by Brock
if the Surviving Corporation is merged into Brock, on or
before December 31, 1999, as follows:
(i) Upon the Effective Time, Brock will issue in the
respective names of the NetGain Stockholders other than the holders of
Dissenting Shares (allocated among them as provided in clause (vii)
below) up to 200,000 shares of Brock Common Stock, subject to
forfeiture as herein provided and will deliver such certificates to
the Escrow Agent under the Escrow Agreement (the "Escrow Agreement")
among Brock, the Escrow Agent and the NetGain Stockholders dated the
date on which the Effective Time occurs;
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(ii) When Brock and/or the Surviving Corporation have
recognized aggregate revenues on or prior to December 31, 1998 from
the sale or license of or subscription for NetGain Products (and
associated service revenues) totaling $2 million, computed at the
times and in the manner provided below, Brock will release
restrictions on transfer of 80,000 shares of Brock Common Stock
delivered at the Closing (as hereinafter defined) to the NetGain
Stockholders and such shares will no longer be subject to forfeiture
and certificates thereafter will be delivered by the Escrow Agent to
the NetGain Stockholders;
(iii) For additional aggregate revenues from the sale or
license of or subscription for NetGain Products (and associated
service revenues), recognized by Brock and/or the Surviving
Corporation in excess of $2 million up to $5 million, Brock will
release restrictions on transfer of 10,000 shares of Brock Common
Stock delivered at the Closing to the NetGain Stockholders for each
$250,000 of such revenue recognized on or before December 31, 1998 and
such shares will no longer be subject to forfeiture and certificates
thereafter will be delivered by the Escrow Agent to the NetGain
Stockholders;
(iv) For additional aggregate revenues from the sale or
license of or subscription for NetGain Products (or associated service
revenues) recognized by Brock and/or the Surviving Corporation in
excess of $5 million up to $10 million, Brock will issue to the
NetGain Stockholders, Brock Common Stock having a value (determined by
the average of the closing price for the Brock Common Stock, as
reported in the Wall Street Journal, for the ten trading days
preceding the end of the applicable fiscal quarter) of $30,000 for
each $250,000 of such revenues recognized by Brock and/or the
Surviving Corporation on or prior to December 31, 1999 and Brock
Common Stock having a value (determined in the same manner) of $20,000
for each $250,000 of additional revenues from the sale or license of
or subscription for NetGain Products (or associated service revenues)
in excess of $10 million up to $15 million, recognized by Brock and/or
the Surviving Corporation on or prior to December 31, 1999.
(v) In computing the amount of revenue for purposes of
releasing restrictions on the shares of Brock Common Stock delivered
to NetGain Stockholders or issuing additional shares as provided in
subparagraph (iv) above, such revenues shall be computed by Brock on a
fiscal quarter basis in accordance with generally accepted accounting
principles consistently applied and the amount thereof shall be
reported to the NetGain Stockholders as soon as practicable after the
computation thereof, but in no event later than 30 days after the end
of the first three quarters in a fiscal year and no later than 60 days
after the end of the fourth fiscal quarter. One-half of revenues
recognized by Brock from its distribution of NetGain Products prior to
the Effective Date of the Merger shall be included in the aggregate
amount of such revenues for purposes of this Section 2.2. Revenues
derived from the provision of maintenance, consulting and training
services associated with NetGain Products shall be credited, for
purposes of this
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Agreement, at one-half of the recognized amount thereof for
determining such aggregate revenues; revenues derived from
subscriptions for NetGain Products shall be credited at the total
minimum commitment amount thereof for the first two years of the
subscription; revenues derived from the sale or license of or
subscription for NetGain Products shall be credited at the full amount
thereof; provided, however, that in the event Brock later reverses any
revenues derived from the sale or license of or subscription for
NetGain Products (or from the provision of associated service
revenues) by reason of credit issued by Brock, for nonpayment or
otherwise, such revenues which are reversed shall be deducted from the
aggregate revenues realized by Brock, but in no event shall such
reversal of revenues cause a forfeiture of shares previously released
from restrictions. In the event of a dispute between the NetGain
Stockholders and Brock as to the aggregate amount of such revenues, or
the method of computation thereof, the dispute shall be referred to
the independent public accountants then employed by Brock. If either
the NetGain Stockholders or Brock disagree with the recommendation of
such accountants, either may require that the dispute be settled by an
independent arbitrator (in accordance with the rules of the American
Arbitration Association) whose determination thereof shall be final
and binding on the parties. The losing party in the arbitration shall
bear the reasonable expenses of such arbitration (including expenses
of the other party, which shall include, without limitation, its or
their legal fees and expenses).
(vi) To the extent an aggregate of $5 million in revenues
from the sale or license of or subscription for NetGain Products (or
associated service revenues), computed and determined as provided
above, are recognized by Brock and the Surviving Corporation on or
prior to December 31, 1998, all shares of Brock Common Stock
previously delivered to NetGain Stockholders shall be released to them
and shall no longer be subject to forfeiture. To the extent that such
amount of revenues is not recognized by Brock and the Surviving
Corporation on or before such date, the number of shares not
previously released shall then be forfeited and released by the Escrow
Agent to Brock.
(vii) Each holder of a share of NetGain Common Stock
immediately prior to the Effective Time will be entitled to receive a
number of shares of Brock Common Stock pursuant to this Agreement
determined by multiplying 200,000 by the quotient resulting from
dividing the number of shares of NetGain Common Stock owned by such
holder at the Effective Time by the total number of shares of NetGain
Common Stock outstanding at the Effective Time, subject to forfeiture,
as provided in the Escrow Agreement, in the case of shares of Brock
Common Stock issuable or deliverable in respect of Escrowed Option
Stock, as defined in the Escrow Agreement
(viii) Any shares of NetGain Common Stock held by NetGain in
its treasury at the Effective Time shall be canceled.
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(ix) All outstanding unexercised options to purchase NetGain
Common Stock at the Effective Time shall be canceled.
2.3 Dissenting Shareholders. Any holder of shares of NetGain
Common Stock ("Dissenting Share") who perfects such holder's
dissenters' rights of appraisal in accordance with and as
contemplated by Article 13 of the GBCC shall be entitled to
receive the value of such shares in cash as determined
pursuant to the applicable provisions of the GBCC and any
other applicable provisions of law; provided, that no such
payment shall be made to any dissenting shareholder unless
and until such dissenting shareholder has complied with the
applicable provisions of the GBCC and surrendered to the
Surviving Corporation or Brock, as the case may be, the
certificate or certificates representing the shares for which
payment is being made. Holders of Dissenting Shares who
receive the value of their shares of NetGain Common Stock in
cash as determined pursuant to the applicable provisions of
the GBCC shall not be entitled to any interest in any of the
shares of Brock Common stock to be delivered to the Escrow
Agent pursuant to Section 2.2(i). In the event that after the
Effective Time a holder of Dissenting Shares of NetGain fails
to perfect, or effectively withdraws or loses, such holder's
right to appraisal and of payment for such holder's
Dissenting Shares, Brock shall issue in the name of such
holder of Dissenting Shares shares of Brock Common Stock,
determined pursuant to the formula provided in Section
2.2(vii) above, subject to forfeiture as herein provided and
will deliver such certificates to the Escrow Agent under the
Escrow Agreement.
3. Directors and Officers
At the Effective Time, the persons who are directors and
officers of Subsidiary immediately prior to the Effective
Time shall continue as the directors and officers of the
Surviving Corporation and shall continue to hold office as
provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation until their successors are elected and
qualified or their earlier resignation, removal or death.
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4. Articles of Incorporation and Bylaws
4.1 From and after the Effective Time, the Articles of
Incorporation of Subsidiary as in effect immediately prior to
the Effective Time shall be the Articles of Incorporation of
the Surviving Corporation and shall continue in effect until
the same be altered, amended, or repealed as therein provided
or as provided by law except that upon the Effective Time,
Article I of such Articles of Incorporation shall be amended
to change the name of the Surviving Corporation to "NetGain
Corporation."
4.2 From and after the Effective Time, the Bylaws of Subsidiary
as in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation and shall continue in
effect until the same be altered, amended or repealed or as
therein provided or as provided by law.
5. Closing and the Effective Time
The date on which the delivery and execution of this
Agreement occurs (the "Closing") is referred to in this
Agreement as the Closing Date. If this Agreement is not
terminated and abandoned pursuant to the provisions of
Section 6 hereof, Articles of Merger shall be filed and
recorded in accordance with the laws of the State of Georgia
and a Certificate of Merger shall be filed and recorded in
accordance with the laws of the State of Georgia. The Merger
shall become effective upon the filing of this Agreement with
the Secretary of State of the State of Georgia, which date
and time is hereafter referred to as the "Effective Time".
6. Termination
This Agreement will be terminated or abandoned upon either of
the following:
(a) At any time prior to the filing and
recordation of Articles of Merger with the Secretary
of State of Georgia, the Board of Directors of Brock
or the Board of Directors of Subsidiary may
terminate and abandon this Agreement upon
termination of the Option Agreement in accordance
with its terms; or
(b) The lapse, expiration or otherwise
non-exercise of the option (the "Option") granted to
Brock in the Option Agreement.
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7. Conditions Precedent to the Closing
The Closing is conditional upon the satisfaction of all
conditions to closing set forth in the Option Agreement.
8. Amendments
The Boards of Directors of each of the Constituent
Corporations, prior to the Effective Time, may jointly amend,
modify and supplement this Agreement in such manner as they
may deem appropriate at any time.
9. Miscellaneous
(a) This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original but
all of which together shall constitute one and the same
instrument.
(b) Except as otherwise provided in this Agreement, nothing
contained herein is intended, nor shall be construed, to
confer upon or give any person, firm or corporation, other
than the Constituent Corporations any rights or remedies
under or by reason of this Agreement.
(c) This Agreement and the legal relations between the
parties hereto shall be governed by and construed in
accordance with the laws of the State of Georgia.
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IN WITNESS WHEREOF, each Constituent Corporation has caused
this Agreement to be executed on its behalf as of the date hereinabove first
written.
BROCK ACQUISITION, INC. NETGAIN CORPORATION
By:/s/ R. Douglas MacIntyre By:/s/Mike Barnwell
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Name: R. Douglas MacIntyre Name: Mike Barnwell
Title: President Title: President
BROCK INTERNATIONAL, INC.
By:/s/ R. Douglas MacIntyre
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Name: R. Douglas MacIntyre
Title: CEO