EXHIBIT 10.3 AGREEMENT AND PLAN OF MERGER

 

                                                                    EXHIBIT 10.3

 

                          AGREEMENT AND PLAN OF MERGER

 

                  THIS   AGREEMENT   AND PLAN OF MERGER is made as of February 24,

2005 (this "MERGER   AGREEMENT")   by and among Patron   Systems,   Inc., a Delaware

corporation   ("PARENT"),   LL   Acquisition I Corp.,   a Delaware   corporation   and

wholly owned subsidiary of Parent ("MERGERCO"), and LucidLine, Inc., an Illinois

corporation    (the    "COMPANY")    (Mergerco   and   the   Company   are   hereinafter

collectively referred to as the "CONSTITUENT CORPORATIONS").

 

                              W I T N E S S E T H:

 

                  WHEREAS,   the   Company   was   incorporated   by   the   filing   of

Articles of   Incorporation   with the Secretary of State of the State of Illinois

on June 18, 2001;

 

                  WHEREAS,   Mergerco was   incorporated by the filing of Articles

of Incorporation with the Secretary of State of the State of Delaware on January

26, 2005;

 

                   WHEREAS,    the   Company   is   an   Illinois   corporation   having

authorized capital consisting of 10,000,000 shares of Common Stock, no par value

per share   (the   "COMPANY   COMMON   STOCK"),   all of which   shall be   issued   and

outstanding immediately prior to the Effective Time (as hereinafter defined).

 

                  WHEREAS,   Mergerco is a Delaware corporation having authorized

capital of 1,000 shares of common stock,   par value $0.001 per share   ("MERGERCO

COMMON STOCK"),   all of which shall be issued and outstanding   immediately prior

to the Effective Time;

 

                  WHEREAS, the respective Board of Directors of each Constituent

Corporation has approved this Merger Agreement and the Merger;

 

                  WHEREAS,    the    Constituent    Corporations    and   Parent   are

concurrently    entering   into   a   Supplemental    Agreement   (the    "SUPPLEMENTAL

AGREEMENT") that, among other things, sets forth certain covenants,   agreements,

representations   and warranties with respect to the Merger and the   transactions

contemplated by this Merger Agreement; and

 

                  WHEREAS,    certain    capitalized   terms   are   defined   in   the

Supplemental   Agreement   and   shall   have the   same   meaning   when   used in this

Agreement unless otherwise defined herein.

 

                  NOW, THEREFORE, the parties hereto agree as follows:

 

                                   ARTICLE I

                                   THE MERGER

 

         SECTION   1.1 THE MERGER.   Upon the terms and subject to the   conditions

hereof and of the   Supplemental   Agreement,   and in accordance with the Delaware

General   Corporation Law ("DGCL") and the Illinois   Business   Corporation Act of

1983, as amended   ("IBCA"),   at the   Effective   Time (as   hereinafter   defined),

Mergerco shall be merged with and into the Company,  

 

 

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which, as the corporation surviving in the Merger (the "SURVIVING Corporation"),

shall   continue   unaffected   and   unimpaired by the Merger to exist under and be

governed by the laws of the State of   Illinois.   Upon the   effectiveness   of the

Merger,   the   separate   existence   of Mergerco   shall cease except to the extent

provided by applicable   law in the case of a   corporation   after its merger into

another corporation.

 

         SECTION   1.2   EFFECTIVE   TIME.   As promptly   as   practicable   after the

satisfaction   or, if permissible,   waiver of the conditions set forth in Article

VI of the Supplemental   Agreement,   the parties hereto shall cause the Merger to

be   consummated   by filing this Merger   Agreement with the Secretary of State of

the State of Delaware   pursuant to Section 252 of the DGCL and the   Secretary of

State of the State of Illinois   pursuant to Section 11.35 of the IBCA. When used

in this Merger Agreement, the term "EFFECTIVE TIME" shall mean the date and time

of receipt of the Merger   Agreement   for filing by the Secretary of State of the

State of Illinois unless a delayed effective time is specified therein.

 

         SECTION 1.3 EFFECTS OF THE   MERGER.   The Merger   shall have the effects

set forth in   Section   252 of the DGCL and   Section   11.35 of the IBCA.   Without

limiting the generality of the foregoing,   and subject thereto, at the Effective

Time,   except   as   otherwise   provided   herein,   all   of the   property,   rights,

privileges,   powers and franchises of Mergerco and the Company shall vest in the

Surviving Corporation, and all debts, liabilities and duties of Mergerco and the

Company   shall   become   the   debts,   liabilities   and   duties   of the   Surviving

Corporation.   The Surviving   Corporation   shall be a wholly owned   subsidiary of

Parent.

 

         SECTION   1.4   ARTICLES   OF   INCORPORATION   AND BYLAWS OF THE   SURVIVING

CORPORATION;   OFFICERS   AND   DIRECTORS.   The   Articles of   Incorporation   of the

Surviving   Corporation shall be amended and restated as of the Effective Time as

set forth in EXHIBIT A attached hereto. From and after the Effective Time, until

their successors are duly elected or appointed and qualified,   the directors and

the officers of the Surviving Corporation shall be as follows:

 

 

                                    DIRECTORS

 

                                  Rafiq Kaswani

                                    Afi Hasan

                                 Mahmoud Ismail

 

 

                                    OFFICERS

 

             NAME                                  OFFICE

             Rafiq Kaswani            President & Chief Executive Officer

             Afi Hasan                Secretary & Treasurer

 

 

         SECTION 1.5 EFFECT ON STOCK. As of the Effective Time, by virtue of the

Merger and   without any action on the part of any   shareholder   of either of the

Constituent Corporations:

 

                  (a)       Each issued and outstanding   share of Mergerco Common

Stock shall be

 

 

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converted   into and   become   one fully   paid and   nonassessable   share of common

stock,   par   value   $0.001   per   share,   of   the   Surviving   Corporation.    Each

certificate   of   Mergerco   evidencing   ownership   of any such shares of Mergerco

Common Stock shall   continue to evidence   ownership of the same number of shares

of common stock of the Surviving Corporation.

 

                  (b)       All shares of Company   Common   Stock that are held in

the treasury of the Company or by a wholly owned Subsidiary of the Company shall

be canceled and no consideration shall be delivered in exchange therefor.

 

                  (c)       All   shares   of   Company    Common   Stock   issued   and

outstanding   immediately   prior to the Effective Time, except shares canceled in

accordance   with Section   1.5(b),   shall be converted,   in the   aggregate,   into

4,400,000   shares of   validly   issued,   fully paid and   nonassessable   shares of

Parent   Common   Stock,   and the right to   receive,   in the   aggregate,   $200,000

(collectively, the "MERGER CONSIDERATION"). Each shareholder of the Company (the

"SHAREHOLDERS")   shall be   entitled   hereunder   to   receive   in   respect of such

Shareholder's   shares of   Company   Common   Stock held   immediately   prior to the

Effective Time such   Shareholder's   portion of such Merger   Consideration as set

forth on ANNEX A to the Supplemental Agreement.

 

                  (d)       All shares of Company Common Stock (other than shares

of Company Common Stock to be canceled in accordance with Section 1.5(b)),   when

so converted as provided in Section   1.5(c),   shall no longer be outstanding and

shall   automatically   be canceled   and retired and each holder of a   certificate

theretofore   representing   any such   shares   shall cease to have any rights with

respect   thereto,   except   the   right to   receive,   upon the   surrender   of such

certificate   in   accordance    with   Section   1.6,   the   portion   of   the   Merger

Consideration attributable to such shares.

 

                  (e)        Any issued and   outstanding   shares of Company Common

Stock held by a Person (a "DISSENTING   SHAREHOLDER") who properly exercises such

Person's   dissenters'   rights under the IBCA ("DISSENTING   SHARES") shall not be

converted as described in Section 1.5(c), but rather shall be converted into the

right to   receive   such   consideration   as may be   determined   to be due to such

Dissenting Shareholder pursuant to the IBCA. Subject to the foregoing, if, after

the Effective Time, such Dissenting Shareholder withdraws his demand for payment

or fails to   perfect   or   otherwise   loses   his   right of   payment,   in any case

pursuant to the IBCA, the Dissenting Shares of such Dissenting Shareholder shall

be deemed to be converted as of the Effective Time into the right to receive the

amount to which such Dissenting   Shareholder   would otherwise have been entitled

to pursuant to Section   1.5(c).   The Company   shall give Parent prompt notice of

any demands for payment received by the Company.   The Company shall not, without

the prior written consent of Parent, make any payment with respect to, or settle

or offer to settle,   any such demands,   and, prior to the Effective Time, Parent

shall have the right to participate in all   negotiations   and   proceedings   with

respect to such demands.

 

         SECTION 1.6 PARENT TO MAKE CERTIFICATES AVAILABLE; DIVIDENDS.

 

                  (a)       As soon as reasonably practicable after the Effective

Time (and in any event within ten (10) business days after the Effective   Time),

Parent   shall use its   commercially   reasonable   efforts to mail to each   record

holder of a certificate or certificates   that   immediately   before the Effective

Time represented outstanding shares of Company Common Stock (the "CERTIFICATES")

(i) a letter of transmittal   that shall specify that delivery shall be effective

and risk

 

 

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of loss and title to the   Certificates   shall   pass only   upon   delivery   of the

Certificates   to Parent,   and which letter   shall be in customary   form and have

such other provisions as Parent may reasonably   specify;   and (ii)   instructions

for   effecting   the   surrender   of   such    Certificates    in   exchange   for   the

consideration   contemplated   by   Section   1.5(c),   including   cash   in   lieu   of

fractional shares.   Upon surrender of a Certificate to Parent together with such

letter of   transmittal,   duly   executed   and   completed in   accordance   with the

instructions   thereto, and such other documents as may reasonably be required by

Parent,   the holder of such Certificate shall be entitled to receive in exchange

therefor (A) shares of Parent Common Stock representing,   in the aggregate,   the

whole   number of shares   that such   holder has the right to receive   pursuant to

Section   1.5(c)   (after   taking into account all shares of Company   Common Stock

then   held by such   holder),   and (B)   cash,   payable   either   by   check or wire

transfer of immediately   available   funds,   in the amount equal to the cash that

such holder has the right to receive   pursuant to this Article I, including cash

in lieu of any dividends and other distributions   pursuant to Section 1.6(d) and

cash in lieu of fractional   shares   pursuant to Section 1.7. No interest will be

paid or will   accrue on any cash   payable as Merger   Consideration   pursuant   to

Section 1.6 and 1.7.

 

                  (b)       If the Merger   Consideration (or any portion thereof)

is to be   delivered   to a   person   other   than   the   person   in   whose   name the

Certificates   surrendered   in exchange   therefor are   registered,   it shall be a

condition to the payment of the Merger   Consideration   that the   Certificates so

surrendered   shall be properly   endorsed or   accompanied   by   appropriate   stock

powers and otherwise in proper form for transfer,   that such transfer   otherwise

be proper and that the person   requesting   such   transfer   pay to the   Surviving

Corporation   any transfer or other taxes   payable by reason of the   foregoing or

establish to the satisfaction of the Surviving   Corporation that such taxes have

been paid or are not required to be paid. For purposes of this Merger Agreement,

the   term   "person"   means an   individual,   a   corporation,   a   partnership,   an

a