Agreement And Plan Of Merger

EXHIBIT 10.13


AGREEMENT AND


PLAN OF MERGER


BY AND AMONG


DIGITAL VIDEO SYSTEMS, INC.,
DIGITAL VIDEO ACQUISITION CO.,
VICOMP TECHNOLOGY, INC.


AND


THE SHAREHOLDERS
LISTED IN EXHIBIT A HERETO


DATED AS OF OCTOBER 17, 1996


AGREEMENT AND
PLAN OF MERGER


THIS AGREEMENT AND PLAN OF MERGER, dated as of October 17, 1996 is by and among Digital Video Systems, Inc., a Delaware corporation ("Digital"), Digital Video Acquisition Co., a Delaware corporation and wholly owned subsidiary of Digital ("Digital Sub"), ViComp Technology Inc., a Delaware corporation ("ViComp"), and the Shareholders of ViComp listed in Exhibit A hereto (the "Shareholders").


W I T N E S S E T H
- - - - - - - - - -


WHEREAS, the respective Boards of Directors of Digital, Digital Sub and ViComp have approved the acquisition of ViComp by Digital pursuant to this Agreement;


WHEREAS, this Agreement provides for the merger of Digital Sub with and into ViComp with ViComp as the surviving corporation in such merger in a transaction intended to qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Code, all in accordance with the provisions of this Agreement;


WHEREAS, the Shareholders own beneficially and of record all of the issued and outstanding capital stock of ViComp; and


WHEREAS, Digital, Digital Sub, ViComp and each of the Shareholders believe that it is in their best interests to adopt and consummate the Merger (as hereinafter defined);


NOW THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Digital, Digital Sub, ViComp and the Shareholders agree as follows:


ARTICLE I
DEFINITIONS
-----------


1.1 Defined Terms. As used herein, the terms below shall have the
------------- following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference.


"Affiliate" shall mean a Person that directly or indirectly through
--------- one or more intermediaries controls, is controlled by or is under common control with the Person specified. For purposes of this definition, the term "control" (including the terms "controlling" "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to (i) vote or control 50% or more of the voting securities or equity ownership interest of such Person or (ii) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.


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"Agreement" shall mean this Agreement and Plan of Merger, together
--------- with all schedules (including the Disclosure Schedule) and exhibits referenced herein.


"Alternative Transaction" shall mean, with respect to any Person, any
----------------------- merger, consolidation, sale of substantial assets, sale of shares of capital stock or other equity securities, recapitalization, debt restructuring or similar transaction involving such Person or any of its Subsidiaries or any divisions, other than as contemplated by this Agreement.


"Closing" shall mean the consummation of the Merger and the
------- transactions contemplated thereby by Digital, Digital Sub, ViComp and the Shareholders which shall take place on or before the Effective Date.


"Code" shall mean the Internal Revenue Code of 1986, as amended, and
---- the rules and regulations thereunder.


"Digital Common Stock" shall mean the common stock, par value $.0001
-------------------- per share, of Digital.


"Disclosure Schedule" shall mean, collectively, the schedules attached
------------------- hereto and delivered by the parties as of the date hereof which set forth the exceptions to the representations and warranties contained in Article III hereof (as to ViComp and each of the Shareholders) and Article IV hereof (as to Digital) and certain other information called for by this Agreement. Unless otherwise specified, each reference in this Agreement to any numbered schedule is a reference to that numbered schedule which is included in the Disclosure Schedule. Any information disclosed on a particular schedule on the Disclosure Schedule or subparts thereof shall be deemed disclosed on any and all schedules.


"Effective Date" shall mean the date on which the Certificate of
-------------- Merger (as hereinafter defined) is filed with the Secretary of State of the State of Delaware.


"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------ amended.


"Person" shall mean any individual, partnership, joint venture,
------ corporation, limited liability company, trust, unincorporated association, governmental authority or any department or agency thereof or any other entity of any nature whatsoever.


"Representative" shall mean any officer, director, principal,
-------------- attorney, agent, employee or other representative.


"SEC" shall mean the Securities and Exchange Commission.
---


"SEC Reports" shall mean Digital's Registration Statement on Form SB-
----------- 2, which became effective with the SEC on May 9, 1996, and all forms, reports, statements and documents required to be filed by Digital with the SEC under the Exchange Act since March 31, 1996, including, but not limited to, (i) the Digital Quarterly Reports on Form 10-QSB for


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the quarters ended March 31, 1996 and June 30, 1996, (ii) the current report of Digital on Form 8-K filed on August 11, 1996; (iii) all other reports or registrations filed by Digital with the SEC since March 31, 1996, and all amendments thereto through the date of this Agreement.


"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------


"Subsidiaries" shall mean all corporations, partnerships, limited
------------ liability companies, joint ventures or other entities in which a Person has a direct or indirect stock or other equity or ownership interest.


"Tax" shall mean any federal, state, local, foreign or other tax,
--- levy, impost, fee, assessment or other government charge, including without limitation income, estimated income, business, occupation, franchise, property, payroll, personal property, sales, transfer, use, employment, commercial rent, occupancy, franchise or withholding taxes, and interest, penalties and additions to tax in connection therewith.


"ViComp Common Stock" shall mean shares of common stock, par value
------------------- $.001 per share, of ViComp.


"ViComp Preferred Stock" shall mean shares of Series A convertible
---------------------- preferred stock, par value $.001 per share.


ARTICLE II
THE MERGER
----------


2.1 The Merger. Digital has formed Digital Sub as a wholly owned
---------- subsidiary under the laws of the State of Delaware. Upon the terms and subject to the conditions hereof, and in accordance with Delaware General Corporation Law (the "GCL") Digital will cause Digital Sub to execute and deliver, and Digital agrees to execute and deliver an Agreement of Merger substantially in the form of Exhibit B hereto (the "Merger Agreement"), providing for the merger of Digital Sub with and into ViComp (the "Merger"). ViComp shall be the surviving corporation in the Merger (the "Surviving Corporation") and as a result thereof shall become a wholly owned subsidiary of Digital.


2.2 Effects of the Merger. The Merger shall have the effects set forth
--------------------- in Section 259 of the GCL. As of the Effective Date, ViComp shall be a wholly owned subsidiary of Digital.


2.3 Effective Date. As soon as practicable following fulfillment or
-------------- waiver of the conditions specified in Articles VIII and IX hereof, but in no event later than two business days thereafter, unless the parties shall otherwise agree, and provided that this Agreement has not been terminated pursuant to Section 10.1 hereof, the parties hereto will cause an appropriate Certificate of Merger (the "Certificate of Merger"), in the form attached as Exhibit C to be filed with the Secretary of State of the State of Delaware, as provided in Section 251 of the GCL.


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The Merger shall become effective on the date on which the Certificate of Merger is so filed with the Secretary of State of the State of Delaware. Prior to the filing of the Certificate of Merger, a closing shall take place at the offices of Troy & Gould Professional Corporation, 1801 Century Park East, Suite 1600, Los Angeles, California 90067, or such other place, and at such time as the parties shall agree.


2.4 Certificate of Incorporation and Bylaws. From and after the
--------------------------------------- Effective Date, the Certificate of Incorporation of the Surviving Corporation will be in the form attached hereto as Exhibit D. From and after the Effective Date, the Bylaws of Digital Sub set forth in Exhibit E, as in effect immediately prior to the Effective Date, shall be the Bylaws of the Surviving Corporation, and shall thereafter be its Bylaws until changed or amended as provided therein or under Delaware law.


2.5 Directors and Officers. From and after the Effective Date, the
---------------------- directors of the Surviving Corporation shall be the directors of Digital Sub immediately prior to the Effective Date as set forth on Exhibit F, and the officers of the Surviving Corporation shall be the officers of Digital Sub immediately prior to the Effective Date as set forth on Exhibit F, in each case until their successors shall have been elected and shall qualify or until otherwise provided by law or the Certificate of Incorporation or Bylaws of the Surviving Corporation.


2.6 Conversion of Shares. By virtue of the Merger and without any action
-------------------- on the part of the holder thereof, each share of ViComp Common Stock and ViComp Preferred Stock that is issued and outstanding immediately prior to the Effective Date shall be converted into and become .0938403 of one validly issued, fully paid and nonassessable share of Digital Common Stock, subject to a rounding adjustment to a whole share for elimination of fractional shares, and no cash consideration shall be paid in any event.


2.7 Conversion of Digital Sub Common Stock. Each share of common stock,
-------------------------------------- par value $.0001 per share, of Digital Sub issued and outstanding immediately prior to the Effective Date shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and thereafter represent one validly issued, fully paid and nonassessable share of common stock, par value $.001 per share, of the Surviving Corporation.


2.8 Exchange of Certificates. After the Effective Date, each holder of
------------------------ an outstanding certificate or certificates (the "ViComp Stock Certificates") theretofore representing shares of ViComp Common Stock and/or ViComp Preferred Stock, upon surrender thereof to such bank, trust company or other person as shall be designated by Digital (the "Transfer Agent"), shall be entitled to receive in exchange therefor a certificate or certificates representing the number of whole shares of Digital Common Stock into which the shares of ViComp Common Stock and ViComp Preferred Stock theretofore represented by such surrendered certificate or certificates shall have been converted. Until so surrendered, each outstanding certificate theretofore representing shares of ViComp Common Stock and ViComp Preferred Stock shall be deemed for all purposes in respect of Digital Common Stock, to represent the number of whole shares of Digital Common Stock into which the shares of ViComp Common Stock and ViComp Preferred Stock theretofore represented thereby shall have been converted.


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No dividend or distribution, if any, payable to holders of shares of Digital Common Stock shall be paid to the holders of certificates theretofore representing shares of ViComp Common Stock or ViComp Preferred Stock; provided,
-------- however, that upon surrender and exchange of such ViComp Stock Certificates, - ------- there shall be paid to the record holders of the stock certificate or certificates issued in exchange therefor, the amount, without interest thereon, of dividends or other distributions, if any, which theretofore but subsequent to the Effective Date have been declared and become payable with respect to the number of whole shares of Digital Common Stock into which the shares of ViComp Common Stock and ViComp Preferred Stock theretofore represented thereby shall have been converted. The certificate or certificates representing the shares of Digital Common Stock into which the shares of ViComp Common Stock and ViComp Preferred Stock shall have been converted shall bear the following legend:


"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND ARE SUBJECT TO A REGISTRATION
RIGHTS AGREEMENT (A COPY OF WHICH IS ON FILE WITH SECRETARY OF THE
COMPANY). SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS
AGREEMENT AND UNLESS REGISTERED UNDER SAID ACT OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE IN THE OPINION OF COUNSEL FOR THE ISSUER."


2.9 Digital to Make Shares Available. By the Effective Date, Digital
-------------------------------- shall make available, by transferring directly to the Transfer Agent, for the benefit of the Shareholders, such number of shares of Digital Common Stock as shall be required as a result of the conversion of ViComp Common Stock and ViComp Preferred Stock in accordance with this Agreement.


2.10 Further Documents. From time to time, on and after the Effective
----------------- Date, as and when requested by Digital, the appropriate officers and directors of ViComp as of the Effective Date shall, for and on behalf and in the name of ViComp or otherwise, execute and deliver all such deeds, bills of sale, assignments and other instruments, and shall take or cause to be taken such further or other actions as Digital may deem necessary or desirable in order to confirm of record or otherwise to Digital title to and possession of all of the properties, rights, privileges, powers, franchises and immunities of ViComp and otherwise to carry out fully the provisions and purposes of this Agreement.


2.11 Agreement and Plan of Merger. This Agreement is intended by the
---------------------------- parties to constitute an "Agreement of Merger" for the purposes of Section 252 of the GCL, and has been duly adopted by each party as such.


2.12 Internal Revenue Code. The parties hereto intend that the
--------------------- transactions contemplated by this Agreement shall qualify as a reorganization under Section 368(a)(1)(A) of the Code, and each party hereto will take all necessary actions in order to accomplish such


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intent. This Agreement constitutes a "Plan of Reorganization" as required by Treasury Regulation Section 1.368-3(a) and has been duly adopted by each party hereto as such.


2.13 Escrow of Shares. One-half (140,760 shares) of the total 281,520
---------------- shares of Digital Common Stock issued to Dr. Edmund Sun in connection with the Merger shall be placed in an escrow (the "Sun Escrow") pursuant to an escrow agreement in substantially the form attached hereto as Exhibit G (the "Sun Escrow Agreement"). In addition, 10% of the shares of Digital Common Stock issued to each Shareholder, other than Dr. Edmund Sun, in connection with the Merger shall be placed in an escrow (the "Shareholder Escrow") pursuant to an Escrow Agreement substantially in the form attached hereto as Exhibit H ("Shareholder Escrow Agreement"). The shares of Digital Common Stock placed in the Sun Escrow and the Shareholder Escrow, respectively, will be subject to cancellation under the circumstances described therein, but Digital shall retain all other rights and remedies in addition to or, at its sole option, in lieu of cancellation of such shares, in the event of any breach of the terms and conditions or representations and warranties hereunder by ViComp or any of the Shareholders.


ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VICOMP;
-----------------------------------------
AND THE SHAREHOLDERS
--------------------


Except as set forth on the Disclosure Schedules delivered by ViComp hereunder, (i) ViComp and Dr. Edmund Sun hereby jointly and severally represent and warrant, and (ii) each of the other Shareholders hereby severally represents and warrants, to Digital as set forth below. Notwithstanding the foregoing, the liability of each Shareholder (other than Dr. Edmund Sun) under this Article III shall be limited to the shares of Digital Common Stock held in escrow for such Shareholder pursuant to the Shareholder Escrow Agreement; provided, however,
-------- ------- that (i) each Shareholder's maximum liability for the representations and warranties set forth in Sections 3.4, 3.8(b), (c) and 3.23 shall be several, but shall be increased to an amount not to exceed the amount calculated by multiplying the number of shares of Digital Common Stock received by such Shareholder times $8.00 notwithstanding any provisions to the contrary herein or in the Shareholder Escrow Agreement and (ii) each Shareholder's liability with respect to the representation and warranty in Section 3.28 shall be unlimited notwithstanding any provisions to the contrary herein or in the Shareholder Escrow Agreement.


3.1 Organization of ViComp. ViComp is a corporation duly organized,
---------------------- validly existing and in good standing under the laws of the State of Delaware, has full corporate power and authority to conduct its business as it is presently being conducted and to own, lease and operate its properties and assets, and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its property or the conduct of its business requires such qualification, except for jurisdictions in which the failure to be so qualified or to be in good standing would not have a material adverse effect on the business, prospects or financial condition of ViComp. Copies of the Certificate of Incorporation and Bylaws of ViComp, and all amendments thereto, heretofore delivered to Digital are complete and correct and in full force and effect as of the date hereof.


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3.2 Subsidiaries. ViComp has no Subsidiaries and shall not create or
------------ otherwise acquire any subsidiaries prior to the Closing.


3.3 ViComp Capital Stock. The authorized capital stock of ViComp
-------------------- consists of 16,000,000 shares of ViComp Common Stock, 2,235,000 shares of which were issued and outstanding as of the date of this Agreement and 4,000,000 shares of ViComp Preferred Stock, 3,000,000 shares of which were issued and outstanding as of the date of this Agreement. No shares of any other class or series of capital stock are authorized, issued or outstanding. 2,235,000 shares, or 100% of the outstanding shares of ViComp Common Stock are held by the Shareholders and 3,000,000 shares or 100% of the shares of ViComp Preferred Stock are held by Dr. Edmund Sun. All of the outstanding shares of the ViComp Common Stock and ViComp Preferred Stock have been duly and validly authorized and issued, are fully paid and nonassessable and were issued in compliance with the applicable securities laws. Except as set forth in Schedule 3.3, there are no subscriptions, offers, options, warrants, calls, commitments, preemptive rights or other rights of any kind outstanding for the purchase of, nor any securities convertible into or exchangeable for, any securities of ViComp, and prior to the Effective Date, all such securities will be cancelled or exchanged or converted into ViComp Common Stock. There are no restrictions upon the voting or transfer of any shares of ViComp Common Stock or ViComp Preferred Stock pursuant to ViComp's Certificate of Incorporation, Bylaws or other governing documents or any agreement or other instrument to which ViComp is a party or by which ViComp is bound. There are no stock appreciation rights outstanding of ViComp.


There are no restrictions upon the voting or transfer of any shares of ViComp Common Stock or ViComp Preferred Stock pursuant to any agreement or other instrument to which any Shareholder is a party or by which any of them is bound which would affect their ability to consummate the transactions contemplated hereby.


3.4 No Liens on ViComp Capital Stock. Each of the Shareholders is the
-------------------------------- owner of ViComp Common Stock or ViComp Preferred Stock, as the case may be, as reflected on Exhibit A, free and clear of all liens or encumbrances on the shares such Shareholder has contracted to exchange.


3.5 Authorization Relative to this Agreement. ViComp has the requisite
---------------------------------------- corporate power and authority to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of ViComp and each of the Shareholders. ViComp has taken all action necessary, in accordance with Delaware law and its Certificate of Incorporation and Bylaws, to obtain the approval of shareholders of 100% of the ViComp Common Stock and 100% of the ViComp Preferred Stock for this Agreement and the transactions contemplated hereby, and in that connection ViComp has provided the Shareholders with full disclosure of all terms of this transaction. No other corporate proceedings on the part of ViComp are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by ViComp and each Shareholder and, assuming this Agreement constitutes a valid and binding agreement of the other parties hereto,


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constitutes a valid and binding obligation of each of them, enforceable against each of them in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles.


3.6 Absence of Certain Changes or Events. Except as set forth on
------------------------------------ Schedule 3.6, since August 31, 1996, there has not been any change in the financial condition, results of operations or business of ViComp which could be expected to result in a material adverse effect on the business, prospects or financial condition of ViComp, and ViComp has not:


(a) except for the transactions contemplated by this Agreement, entered into any material commitment or transaction (including, but not limited to, any borrowing, capital expenditure or sale of assets), or conducted its business or operations, other than in the ordinary and usual course of business and consistent with past practices;


(b) except as set forth on Schedule 3.6(b), amended or changed its Certificate of Incorporation, Bylaws or other organizational documents;


(c) agreed to take, whether in writing or otherwise, any action which, if taken prior to the date hereof, would have made any representation or warranty in this Article III untrue or incorrect;


(d) declared, set aside, made or paid any dividend in respect of ViComp capital stock or redeemed any ViComp capital stock;


(e) except as set forth on Schedule 3.6(e), increased the annual level of compensation of any employee by an amount greater than 10% over his compensation for the year ended December 31, 1995, or increased at all the annual level of compensation of any person whose compensation from ViComp in the fiscal year ended December 31, 1995 exceeded $75,000, or granted any unusual or extraordinary bonuses, benefits or other forms of direct or indirect compensation to any employee, officer, director or consultant;


(f) increased, terminated, amended or otherwise modified any plan for the benefit of the employees;


(g) issued any equity securities or rights;


(h) borrowed any funds, under existing lines of credit or otherwise, except as reasonably necessary for the ordinary operation of ViComp's business in a manner, and in amounts, in keeping with historical practices;


(i) solicited or initiated the submission of proposals or ...