Exhibit 2.2
AGREEMENT OF MERGER
OF
DUNN COMPUTER CORPORATION
(a Virginia corporation),
DUNN MERGER CORP.
(a Delaware corporation)
AND
DUNN COMPUTER CORPORATION
(a Delaware corporation)
AGREEMENT OF MERGER dated as of March 18, 1998, by and
among Dunn Computer Corporation, a Virginia corporation ("Parent"), Dunn
Merger Corp., a Delaware corporation ("Sub"), and Dunn Computer Corporation,
a Delaware corporation ("Company").
WHEREAS the total number of shares of stock which Parent
has authority to issue is 22,000,000, 20,000,000 of which are shares of
common stock with a par value of $.001 each ("Parent Common Stock") and
2,000,000 of which are shares of preferred stock with a par value of $.001
each; and
WHEREAS the total number of shares of stock which Sub has
authority to issue is 100, all of which are of one class and without par
value ("Sub Common Stock"); and
WHEREAS the total number of shares of stock which Company
has authority to issue is 22,000,000, 20,000,000 of which are shares of
common stock with a par value of $.001 each ("Company Common Stock") and
2,000,000 of which are shares of preferred stock with a par value of $.001
each; and
WHEREAS, the respective Boards of Directors of Parent, Sub
and Company each have approved the merger of Sub with and into Company (the
"Merger") upon the terms and subject to the conditions set forth in this
Agreement, whereby (a) each issued and outstanding share of Company Common
Stock owned by Company will be retired and canceled, (b) each issued and
outstanding share of Company Common Stock will be converted into the right to
receive Parent Common Stock, (c) each outstanding option to purchase Company
Common Stock will be converted into an option to purchase a like number of
shares of Parent Common Stock, (d) each warrant to purchase shares of Company
Common Stock will be converted into a warrant to purchase shares of Parent
Common Stock and (e) each issued and outstanding share of Sub Common Stock
will be converted into a share of common stock of the Surviving Corporation
(as defined in Section 1.1); and
WHEREAS, the respective Boards of Directors of Parent, Sub and
Company have determined that the Merger and the other transactions contemplated
hereby are consistent with, and in furtherance of, their respective business
strategies and goals and are in the best interest of their respective
stockholders; and
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the provisions
of the Delaware General Corporation Law ("DGCL"), Sub shall be merged with
and into Company at the Effective Time (as defined in Section 1.2). Following
the Effective Time, Company shall be the surviving corporation (the
"Surviving Corporation") which shall continue to exist under the name Dunn
Computer Corporation and which shall become a wholly-owned subsidiary of
Parent and shall succeed to and assume all the rights and obligations of Sub
in accordance with the DGCL. The separate existence of Sub shall cease at the
Effective Time in accordance with the provisions of the DGCL.
Section 1.2 The Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on the date of the closing under the
Acquisition Agreement dated March 9, 1998 among, inter alia, Parent and Company,
the parties shall cause the Merger to be consummated by filing a certificate of
merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL. The merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such subsequent date
or time as Parent, Sub and Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
Section 1.3 Effect of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
Section 1.4 Certificate of Incorporation of the Surviving
Corporation. The Certificate of Incorporation of the Company as now in force and
effect shall continue to be the Certificate of Incorporation of the Surviving
Corporation,
"1. The name of the corporation is [Dunn Computer Operating Company]."
and said Certificate of Incorporation shall continue in full force and effect
until further amended and changed as provided therein or by applicable law.
Section 1.5 By-laws of the Surviving Corporation. The
present by-laws of the Company as in effect immediately prior to the
Effective Time will become the by-laws of the Surviving Corporation at the
Effective Time and will continue in full force and effect until changed,
altered or amended as provided therein or by applicable law.
Section 1.6 Directors and Officers. The directors and officers
in office of the Company shall, at the Effective Time, become the members of the
first Board of Directors and the first officers of the Surviving Corporation,
all of whom shall hold their directorships and offices until the election and
qualification of their respective successors or until their tenure is otherwise
terminated in accordance with the by-laws of the Surviving Corporation.
Section 1.7 Concurrent Retirement of Share. The share of
Parent Common Stock held by the Company shall be, concurrently with the
Merger, retired and shall cease to be outstanding, and no consideration shall
be delivered in exchange therefor.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OPTIONS AND WARRANTS;
EXCHANGE OF CERTIFICATES
Section 2.1 Effect on Capital Stock, Options and Warrants. As
of the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of Company Common Stock, Company Stock Options
(as hereinafter defined), Bergman Stock Options (as hereinafter defined) or
Warrants (as hereinafter defined):
(a) Cancellation of Treasury Stock. Each share of Company Common Stock
that is owned directly or indirectly by the Company shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(b) Conversion of Company Common Stock. Each issued and outstanding
share of Company Common Stock (other than shares to be canceled in accordance
with Section 2.1(a)) shall be converted into the right to receive one validly
issued, fully paid and nonassessable share of Parent Common Stock. Subject to
2.1(a), as of the Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the same number of shares of Parent Common
Stock upon surrender of such certificate in accordance with Section 2.2 and any
dividends or distributions to which such holder is entitled pursuant to Section
2.2 (c).
(c) Conversion of Company Stock Options. The option holders listed on
Schedule 1 attached hereto each hold outstanding stock options as of the date
hereof, whether or not fully exercisable, to purchase shares of Company Common
Stock (the "Company Stock Options") heretofore granted or assumed by Company
pursuant to a stock option, stock purchase or similar plan adopted, assumed or
maintained at any time by Company, any of its controlled affiliates or
any of their respective predecessors in interest, including but not limited to
the Dunn Computer Corporation 1997 Stock Option Plan, as amended and in effect
on the date hereof (collectively, the "Company Stock Option Plans"). The option
exercise price, the number of shares subject to the option, any related stock
appreciation rights, the dates of grant, vesting, exercisability and expiration
of the option and whether the option is an incentive stock option or a
non-qualified stock option with respect to each Company Stock Option are set
forth in the respective stock option agreement between such option holder and
Company. All rights under the Company Stock Options shall be treated as provided
herein, and to the extent the terms of the Company Stock Option Plans and/or of
any related agreements are inconsistent with the treatment to be accorded to the
Company Stock Options as provided herein, then Company shall cause the Company
Stock Option Plans and/or any related agreements with affected participants to
be amended, and all required third party, governmental and regulatory body
consents or approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time.
Each Company Stock Option outstanding immediately prior to the
Effective Time shall be converted at the Effective Time into an outstanding
option to purchase Parent Common Stock ("Parent Stock Option"), so that (i) from
and after the Effective Time, each such Company Stock Option may be exercised
only for shares of Parent Common Stock notwithstanding any contrary provision of
the Company Stock Option Plans or stock option agreements executed in connection
therewith and (ii) each such Parent Stock Option shall at the Effective Time be,
on substantially the same terms and conditions as were applicable to the Company
Stock Option to which it relates, an option to purchase an equal number of
shares of Parent Common Stock at an exercise price per share equal to the
exercise price per share applicable to the Company Stock Option to which it
relates; provided, however, that in the case of any option to which Section 421
of the Code applies by reason of its qualification under any of Sections 422-424
of the Code, the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be further
adjusted to the extent necessary in order to comply with Section 424(a) of the
Code; and provided further, that the number of shares of Parent Common Stock
that may be purchased upon exercise of such stock option shall not include any
fractional share and, upon exercise of such stock option, a cash payment shall
be made for any fractional share based upon the closing price of a share of
Parent Common Stock on the last trading day of the calendar month immediately
preceding the date of exercise.
(d) Conversion of Bergman Stock Options. Barry D. Bergman and
Jacqueline L. Bergman each hold outstanding stock options as of the date hereof,
whether or not fully exercisable, to purchase shares of Company Common Stock
(the "Bergman Stock Options") heretofore granted by Company pursuant to
Attachment 1 to the Stock Acquisition, Stock Option, Settlement, and Reciprocal
Release Agreement dated September 12, 1997 entitled Dunn Computer Corporation
Common Stock Option (the "Bergman Stock Option Agreement"). The option exercise
price, the number of shares subject to the option, any related stock
appreciation rights and the dates of grant, vesting, exercisability and
expiration of the option with respect to each Bergman Stock Option are set forth
in the Bergman Stock Option Agreement. All rights under the Bergman Stock
Options shall be treated as provided herein, and to the extent the terms of the
Bergman Stock Option Agreement are inconsistent with the treatment to be
accorded to the Bergman Stock Options as provided herein, then Company shall
cause the Bergman Stock
Option Agreement to be amended, and all required third party, governmental and
regulatory body consents or approvals to such amendments to be procured, such
that all such inconsistencies shall be eliminated by the Effective Time.
Each Bergman Stock Option outstanding immediately prior to the
Effective Time shall be converted at the Effective Time into a Parent Stock
Option, so that (i) from and after the Effective Time, each such Bergman Stock
Option may be exercised only for shares of Parent Common Stock notwithstanding
any contrary provision of the Bergman Stock Option Agreement and (ii) each such
Parent Stock Option shall at the Effective Time be, on substantially the same
terms and conditions as were applicable to the Bergman Stock Option to which it
relates, an option to purchase an equal number of shares of Parent Common Stock
at an exercise price per share equal to the exercise price per share applicable
to the Bergman Stock Option to which it relates; provided, however, that the
number of shares of Parent Common Stock that may be purchased upon exercise of
such stock option shall not include any fractional share and, upon exercise of
such stock option, a cash payment shall be made for any fractional share based
upon the closing price of a share of Parent Common Stock on the last trading day
of the calendar month immediately preceding the date of exercise.
(e) Conversion of Warrants. Richard Hunt, Network 1 Financial Services,
Inc., William Hunt and Damon Testaverde each hold outstanding warrants as of the
date hereof, whether or not fully exercisable, to purchase shares of Company
Common Stock (collectively, the "Warrants") heretofore granted or assumed by
Company pursuant to the Underwriting Agreement between Company and Network 1
Financial Securities, Inc. dated April 21, 1997 (the "Underwriting Agreement").
The warrant exercise price, the number of shares subject to the warrant, any
related stock appreciation rights, the dates of grant, vesting, exercisability
and expiration of the warrant are set forth in the respective Underwriter's
Warrant to Purchase 100,000 shares of Company Common Stock. All rights under the
Warrants shall be treated as provided herein, and to the extent the terms of the
Underwriting Agreement and/or of any related agreements are inconsistent with
the treatment to be accorded to the Warrants as provided herein, then Company
shall cause the Underwriting Agreement and/or any related agreements to be
amended, and all required third party, governmental and regulatory body consents
or approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time.
At the Effective Time, the Warrants shall be assumed by
Parent. Notwithstanding any contrary provision of the Underwriting Agreement or
any related agreements executed in connection therewith, the Warrants shall, at
and after the Effective Time, evidence a warrant to purchase 100,000 shares of
Parent Common Stock on the same terms and conditions as stated in the respective
Underwriter's Warrant to Purchase 100,000 shares of Company Common Stock.
(f) Conversion of Sub Common Stock. Each issued and outstanding share
of Sub Common Stock shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving
Corporation.
Section 2.2 Exchange of Certificates. (a) Exchange Agent.
As of the Effective Time, Parent shall enter into an agreement with such bank or
trust company as may be designated by Parent and reasonably satisfactory to
Company (the "Exchange Agent"), which shall provide
that Parent shall deposit with the Exchange Agent as of the Effective Time, for
the benefit of the holders of shares of Company Common Stock, Company Stock
Options, Bergman Stock Options and Warrants, for exchange in accordance with
this Article II, through the Exchange Agent, certificates representing the
shares of Parent Common Stock issuable pursuant to Section 2.1 (b) in exchange
for outstanding shares of Company Common Stock, new option agreements
representing options to purchase Parent Common Stock executed and delivered
pursuant to Sections 2.1(c) and (d) in exchange for outstanding Company Stock
Options and Bergman Stock Options, respectively and new warrants representing
the right to purchase shares of Parent Common Stock pursuant to Section 2.1(e)
in exchange for the Warrants (such shares of Parent Common Stock, together with
any dividends or distributions with respect thereto with a record date after the
Effective Time, new option agreements and new warrants being hereinafter
referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
stock certificate, option agreement or warrant which immediately prior to the
Effective Time represented rights with respect to shares of Company Common Stock
("Certificates") whose shares, options or warrants, as the case may be, were
converted into similar rights with respect to Parent Common Stock pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Company and Parent may
reasonably specify) and (ii) instructions for use in surrendering the
Certificates in exchange for Parent Common Stock, a new option agreement or a
new warrant, as the case may be. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock, a new option agreement or a new warrant which such holder
has the right to receive pursuant to the provisions of this Article II and
dividends or other distributions on such shares of Parent Common Stock which
such holder has the right to receive pursuant to Section 2.2(c), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
surrender of a Certificate which is not registered in the transfer records of
Company or otherwise documented in the books and records of the Company under
the name of the person surrendering such Certificate, a new stock certificate,
new option agreement or new warrant, as the case may be, representing the proper
number of shares of Parent Common Stock to which the Certificate relates may be
issued or delivered, as the case may be, to a person other than the person in
whose name the Certificate so surrendered is registered or recorded if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance and/or delivery shall pay any
transfer or other taxes required by reason of the issuance of shares of Parent
Common Stock or delivery of an option agreement or warrant to purchase Parent
Common Stock to a person other than the registered or recorded holder of such
Certificate or establish to the satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Parent Common Stock,
the new option agreement or the new warrant, as the case may be, in respect of
such Certificate pursuant to the provisions of this Article II and dividends or
other distributions in respect of such Parent Common
Stock which such Certificate holder has the right to receive pursuant to Section
2.2(c). No interest shall be paid or will accrue on any cash payable to holders
of Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock issuable hereunder in respect
thereof, and all such dividends and other distributions shall be paid by Parent
to the Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II,
subject to Section 2.2(e). Subject to the effect of applicable escheat or
similar laws, following surrender of any such Certificate there shall be paid to
the holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time and
with a payment date subsequent to such surrender payable with respect to such
whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock, Company Stock
Options, Bergman Stock Options or Warrants. All shares of Parent Common Stock,
new option agreements and new warrants issued or delivered upon the surrender
for exchange of Certificates in accordance with the terms of this Article II
shall be deemed to have been issued or delivered in full satisfaction of all
rights pertaining to the shares of Company Common Stock theretofore represented
by such Certificates, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock which remain unpaid at the
Effective Time, and there shall be no further registration or recordation of
transfers on the stock transfer books or other records of the Surviving
Corporation of the shares of Company Common Stock, the Company Stock Options,
the Bergman Stock Options and the Warrants which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent for any reason
other than the exchange as provided in this Article II, they shall be canceled
and exchanged as provided in this Article II, except as otherwise provided by
law.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for payment of their claim with respect
to Parent Common Stock or any dividends or distributions with respect to Parent
Common Stock.
(f) No Liability. None of Parent, Sub, Company, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of Parent Common Stock, any dividends or distributions with respect
thereto, any new options, any new warrants or any
cash from the Exchange Fund, in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent (provided that such
cash shall be invested only in high quality short-term instruments with low risk
of loss of principal), on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent. If, as a result of any loss
resulting from such investments, the amount of cash remaining in the Exchange
Fund is insufficient to pay the full amount to which holders of certificates
formerly representing rights with respect to Company Common Stock are entitled,
Parent shall, promptly upon demand by the Exchange Agent, deposit additional
cash into the Exchange Fund in an amount sufficient to satisfy its obligations
to such holders.
(h) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and the posting by
such person of a bond in such reasonable amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the Parent Common Stock, any unpaid dividends and
distributions related thereto, new option agreement or new warrant deliverable
in respect thereof pursuant to this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1 Further Assurances. In the event that this
Agreement shall have been fully approved and adopted upon behalf of Parent, Sub
and Company in accordance with the provisions of DGCL, such corporations agree
that they will cause to be executed and filed and recorded any document or
documents prescribed by the laws of the State of Delaware, and that they will
cause to be performed all necessary acts within the State of Delaware and
elsewhere to effectuate the merger herein provided for.
Section 3.2. Authorization. The Board of Directors and the
proper officers of Parent, Sub and Company are hereby authorized, empowered, and
directed to do any and all acts and things, and to make, execute, deliver, file
and record any and all instruments, papers and documents which shall be or
become necessary, proper, or convenient to carry out or put into effect any of
the provisions of this Agreement or of the merger herein provided for.
Section 3.3. Termination. Notwithstanding the full adoption of
this Agreement, this Agreement may be terminated at any time prior to the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware in the event that such Agreement is abandoned by action of the Board of
Directors of each corporation party hereto, whether before or after approval by
the stockholders of any or all of such corporations.
IN WITNESS WHEREOF, this Agreement of Merger is hereby
executed and acknowledged on behalf of each of the corporations party hereto.
Dated: as of March 18, 1998.
DUNN MERGER CORP.
By: /s/ JOHN D. VAZZANA
---------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer
DUNN COMPUTER CORPORATION
(Delaware)
By: /s/ JOHN D. VAZZANA
---------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer
DUNN COMPUTER CORPORATION
(Virginia)
By: /s/ JOHN D. VAZZANA
---------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer