EXHIBIT 10.2
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
THIS IS AMENDMENT NO. 1 TO THE AGREEMENT AND PLAN OF MERGER (the
"Agreement"),dated as of February 12, 2003, by and among ProtoSource
Corporation, a California corporation ("Acquiror"), ProtoSource Acquisition LLC,
a Delaware limited liability company and wholly owned subsidiary of Acquiror
("Newco"), P2i, Inc., a Pennsylvania corporation ("P2i"), and P2i Newspaper,
Inc., a Delaware corporation ("P2i Newspaper").
Recitals
WHEREAS, Acquiror, P2i and P2i Newspaper have determined that it is in the
best interests of their respective stockholders for P2i Newspaper to merge with
and into Newco upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the respective Boards of Directors of Acquiror, P2i, P2i Newspaper
and Newco have each approved this Agreement and the consummation of the
transactions contemplated hereby and approved the execution and delivery of this
Agreement; and
WHEREAS, the parties wish to amend this Agreement pursuant to the terms of
this Amendment to Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Amendment to Section 1.1. Section 1.1 of the Agreement is hereby
amended such that Newco shall be merged with and into P2i Newspaper.
All other terms and conditions of this section are hereby modified to
reflect the intent of this change.
2. Amendment to Section 1.3. Section 1.3 of the Agreement is hereby
amended to read in its entirety as follows:
1.3 Merger Consideration.
(a) Subject to the provisions of Section 1.3(d) hereafter, the
Merger Consideration, constituting the total purchase price payable to P2i in
connection with the acquisition by merger of P2i Newspaper, shall be delivered
and shall consist exclusively of 193,836 shares of Series A Preferred Stock of
Acquiror (the "Acquiror Stock"). The Merger Consideration shall be reduced by
such number of shares of Acquiror Stock as equal the total fees incurred to
audit the financial statements of P2i or P2i Newspaper, divided by $50.00. In
the event this agreement is terminated for any reason other than a breach solely
by Acquiror or Newco, P2i shall immediately reimburse Acquiror for all
accounting costs incurred in connection with the preparation of financial
statements of P2i or P2i Newspaper which were paid by Acquiror.
It is intended that the delivery of the Merger Consideration shall qualify
as a tax-free exchange under the Code.
(b) The shares constituting the Merger Consideration shall be fully
paid and non-assessable and shall be free and clear of all liens, levies
and encumbrances except that such shares shall be "restricted securities"
pursuant to Rule 144, promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
(c) Acquiror shall deliver certificates evidencing the Merger
Consideration to P2i upon the execution and delivery of a copy of an
investment letter in the form attached hereto as Exhibit 1.3(d) (the
"Investment Letter") to comply with applicable federal and state securities
laws. Certificates representing the Merger Consideration will contain a
customary legend concerning the restricted nature of the securities.
(d) At any time after the Acquiror shall increase its authorized
common stock to 100,000,000 shares, P2i shall be entitled to exchange each
share of Acquiror Stock for 100 shares of Acquiror's common stock.
(e) Except as otherwise set forth herein, the Merger Consideration,
together with any shares of the Acquiror's capital stock issuable upon
conversion or exchange of the Merger Consideration will be subject to a
three year Lock-Up agreement which may be released earlier upon 1) the
common stock of the Acquiror ("Acquiror Common Stock "), closing at or
above $4.50 per share for 20 consecutive trading days, or 2) Acquiror
Common Stock trading 500,000 or more shares per week for 20 consecutive
trading days at the closing price of at least $3.50 per share. Certificates
representing the Merger Consideration will contain a legend evidencing the
foregoing. Notwithstanding the foregoing, at P2i's request, up to 15% of
the Merger Consideration (any shares of the Acquiror's capital stock
issuable upon conversion or exchange of the Merger Consideration) may be
included in a registration statement filed by Acquiror with the Securities
and Exchange Commission, in the event the Acquiror undertakes an
underwritten public offering and the underwriter of such offering approves
the inclusion of the Merger Consideration.
3. Termination Date. The Termination date set forth in Section 7.1(b)(i) shall
be amended to January 31, 2004.
4. Sale of P2i Newspaper. Acquiror shall use its best efforts to cause a proxy
statement to be distributed to its stockholders as soon as practicable, which
seeks approval of an increase in authorized common stock to 100,000,000 shares.
In the event the Acquiror shall not (i) obtain shareholder approval for an
increase in the number of its authorized shares of Acquiror Common Stock to
100,000,000 shares, and (ii) effectuate such increase in its authorized shares
of Acquiror Common Stock no later than December 31, 2004, P2i shall have the
right at anytime thereafter to demand that the Acquiror immediately commence a
sale of the Surviving Corporation. Any such sale shall be made for fair value
and shall only be made with the written consent of P2i. Upon the consummation of
any sale of P2i Newspaper in accordance with the foregoing, all of the proceeds
of such sale shall be delivered to P2i in exchange for all shares of the Merger
Consideration.
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5. Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
6. Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
7. Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
8. Counterparts.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Pennsylvania, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
10. Terms and Conditions of the Agreement.
All other terms and conditions of the Agreement, except as
specifically amended herein, shall remain in full force and effect.
11. Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
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IN WITNESS WHEREOF, each of the undersigned has signed or has caused this
Agreement to be signed by their respective officers hereunto duly authorized,
all as of the date first written above.
Dated: January 1, 2004
PROTOSOURCE CORPORATION,
a California corporation
By: /s/ PETER WARDLE
--------------------
Name: Peter Wardle
Title: Chief Executive Officer
PROTOSOURCE ACQUISITION, LLC,
a Delaware limited liability
corporation
By: /s/ PETER WARDLE
--------------------
Name: Peter Wardle
Title: President
P2I NEWSPAPER, INC.,
a Delaware corporation
By:/s/ THOMAS BUTERA
--------------------
Name: Thomas Butera
Title: President
P2I, INC., a Pennsylvania corporation
By: /s/ THOMAS BUTERA
---------------------
Name: Thomas Butera
Title: President
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