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EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PACIFIC RIM ENTERTAINMENT, INC.
▇▇▇▇▇ ACQUISITION CORP.
▇.▇. ▇▇▇▇▇, INC.
AND
▇▇▇▇ ▇. ▇▇▇▇▇
Dated: February 27, 1998
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TABLE OF CONTENTS
ARTICLE I: MERGER OF SUB WITH AND INTO HVJ AND RELATED MATTERS.............1
1.1 The Merger.............................................................1
1.2 Conversion of Stock....................................................2
1.3 Merger Consideration...................................................3
1.4 Escrow Agreement.......................................................6
1.5 Additional Rights; Taking of Necessary Action; Further Action..........6
1.6 No Further Rights or Transfers.........................................6
ARTICLE II: THE CLOSING.....................................................7
2.1 Closing Date...........................................................7
2.2 Closing Transactions...................................................7
ARTICLE III: CERTAIN CORPORATE ACTION......................................10
3.1 HVJ Corporate Action..................................................10
3.2 Acquiror Corporate Action.............................................10
ARTICLE IV: REPRESENTATIONS AND WARRANTIES.................................10
4.1 Representations and Warranties of HVJ and the HVJ Shareholder.........10
4.2 Representations and Warranties of Acquiror and the Sub................22
ARTICLE V: AGREEMENTS OF THE PARTIES.......................................24
5.1 Access to Information.................................................24
5.2 Confidentiality; No Solicitation......................................24
5.3 Interim Operations....................................................26
5.4 Consents..............................................................28
5.5 Filings...............................................................29
5.6 All Reasonable Efforts................................................29
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TABLE OF CONTENTS
5.7 Public Announcements..................................................29
5.8 Notification of Certain Matters.......................................29
5.9 Expenses..............................................................30
5.10 Financial Statements.................................................30
5.11 Documents at Closing.................................................30
5.12 Prohibition on Trading in Acquiror Stock.............................31
5.13 Acknowledgment of Approvals..........................................31
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER.......................31
6.1 Conditions to Obligations of HVJ and the HVJ Shareholder..............31
6.2 Conditions to Acquiror's and the Sub's Obligations....................33
ARTICLE VII: INDEMNIFICATION...............................................34
7.1 Indemnification.......................................................34
ARTICLE VIII: TERMINATION..................................................35
8.1 Termination...........................................................35
8.2 Notice and Effect of Termination......................................36
8.3 Extension; Waiver.....................................................37
8.4 Amendment and Modification............................................37
ARTICLE IX: MISCELLANEOUS..................................................37
9.1 Survival of Representations and Warranties; Remedies..................37
9.2 Notices...............................................................38
9.3 Entire Agreement; Assignment..........................................38
9.4 Binding Effect; Benefit...............................................38
9.5 Headings..............................................................39
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TABLE OF CONTENTS
9.6 Counterparts..........................................................39
9.7 Governing Law.........................................................39
9.8 Arbitration...........................................................39
9.9 Severability..........................................................39
9.10 Release and Discharge................................................39
9.11 Certain Definitions..................................................40
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EXHIBITS AND SCHEDULES
EXHIBITS
1.1(c)(vi) Officers and Directors of Surviving Corporation
1.3(a)(ii) Certificate of Designation
1.4(a) Escrow Agreement
2.2(a)(ii) Investment Letter
2.2(a)(x) Registration Rights Agreement
SCHEDULES
4.1(a) Articles of Incorporation and Bylaws of HVJ and each Subsidiary
4.1(d) Capitalization and Share Ownership
4.1(e) Financial Statements
4.1(f)(i) Location of Leased Property
4.1(f)(ii) Written Notice
4.1(g) No Contingent Liabilities
4.1(h) Litigation
4.1(i) Taxes
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan (for which HVJ has obligation to contribute)
4.1(j)(iv) Material Employment Arrangements, Contracts, etc.
4.1(k) Insurance Coverage
4.1(n) Personal Property
4.1(o) Intellectual Property
4.1(s)(i) Labor Relations; Employees
4.1(s)(ii) List of Employees
4.1(s)(v) Strikes, grievance proceedings, arbitrations, etc.
4.1(t) Suppliers and Clients
4.1(u) Conflicting Interests
4.1(w) Absence of Certain Changes or Events
4.1(x) Product Liability and Warranty Claims
4.2(a) Certificate of Incorporation and Bylaws of Acquiror and Sub
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of February 27, 1998, by and among PACIFIC RIM ENTERTAINMENT, INC., a
Delaware corporation ("Acquiror"), ▇▇▇▇▇ Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Acquiror ("Sub"), ▇.▇. ▇▇▇▇▇, Inc., a
Texas corporation ("HVJ"), and ▇▇▇▇ ▇. ▇▇▇▇▇, as the sole shareholder of HVJ
(the "HVJ Shareholder").
RECITALS
WHEREAS, Acquiror and HVJ have determined that it is in the best interests
of their respective shareholders for Sub to merge with and into HVJ upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the respective Boards of Directors of Acquiror and HVJ have each
approved this Agreement and the consummation of the transactions contemplated
hereby and approved the execution and delivery of this 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:
ARTICLE I
MERGER OF SUB WITH AND INTO HVJ
AND RELATED MATTERS
1.1 THE MERGER.
(a) Upon the terms and conditions of this Agreement, at the
"Effective Time" (as defined herein), the Sub shall be merged with and into HVJ
(the "Merger") in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL") and the Texas Business Corporation Act ("TBCA") and
the separate corporate existence of the Sub shall cease, and HVJ shall continue
as the surviving corporation under the laws of the State of Texas (the
"Surviving Corporation").
(b) The Merger shall become effective as of the filing of a
certificate of merger with the Secretary of State of the State of Delaware and
the filing of articles of merger and receipt of a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Texas, in
accordance with the provisions of Section 252 of the DGCL and Section 5.06 of
the TBCA, and the confirmation by the Certificate of Merger that the Merger is
effective as of such filing date. The date and time when the Merger shall become
effective is referred to herein as the "Effective Time."
(c) At the Effective Time:
(i) HVJ shall continue its existence under the laws of the State
of Texas as the Surviving Corporation;
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(ii) the separate corporate existence of the Sub shall
cease;
(iii) all rights, title and interests to all assets, whether
tangible or intangible and any property or property rights owned by the Sub
shall be allocated to and vested in HVJ as the Surviving Corporation without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of the Sub shall be
allocated to HVJ as the Surviving Corporation, which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than HVJ as the Surviving Corporation, shall be
liable therefor;
(iv) the Certificate of Incorporation of HVJ as in effect
immediately prior to the consummation of the Merger shall be the Certificate of
Incorporation of the Surviving Corporation;
(v) Each of Acquiror, Sub and HVJ shall execute and deliver,
and file or cause to be filed with the Secretary of State of the State of
Delaware, a certificate of merger and with the Secretary of State of the State
of Texas, the Certificate of Merger, with such amendments thereto as the parties
hereto shall deem mutually acceptable;
(vi) the Bylaws of HVJ as in effect immediately prior to the
consummation of the Merger shall be the Bylaws of the Surviving Corporation, and
shall continue in full force and effect until thereafter amended as provided by
law and such Bylaws; and
(vii) the officers and directors of Sub and HVJ shall resign
upon the Effective Time and the officers and directors of the Surviving
Corporation shall consist of those individuals identified on Exhibit
1.1(c)(vii), and such persons shall serve in such positions for their respective
terms provided by law or in the bylaws of the Surviving Corporation and until
their respective successors are elected and qualified.
1.2 CONVERSION OF STOCK.
(a) At the Effective Time:
(i) the shares representing 100% of the issued and outstanding
common stock of HVJ ("HVJ Common Stock") shall, by virtue of the Merger and
without any action on the part of any holder thereof, be converted into and
represent the right to receive, and shall be exchangeable for the merger
consideration identified at Section 1.3 hereafter (the "Merger Consideration");
(ii) each share of capital stock of HVJ held in treasury as of
the Effective Time shall, by virtue of the Merger, be canceled without payment
of any consideration therefor and without any conversion thereof;
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(iii) each share of common stock of the Sub that is issued and
outstanding as of the Effective Time shall be converted into and become one
fully paid and non-assessable share of common stock, par value $.01 per share,
of the Surviving Corporation, which shares shall thereafter constitute all of
the issued and outstanding shares of capital stock of the Surviving Corporation;
and
(iv) each share of capital stock of HVJ outstanding as of the
Effective Time, by virtue of the Merger, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist.
(b) From and after the Effective Time, there shall be no transfers
on the stock transfer books of HVJ of shares of its capital stock (or any
warrants or other rights to acquire any of the same) that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates for shares of HVJ capital stock (or any warrants or other rights to
acquire any of the same) that were outstanding immediately prior to the
Effective Time, they shall be canceled and exchanged for the consideration to be
received therefor in connection with the Merger as provided in this Agreement.
1.3 MERGER CONSIDERATION.
(a) Subject to the provisions of Section 1.4 hereafter, the Merger
Consideration, consisting of the total purchase price payable to the HVJ
Shareholder in connection with the acquisition by merger of HVJ, shall be paid
or delivered, as the case may be, and shall consist exclusively of the
following:
(i) at the Closing (as hereafter defined), $475,000 in cash,
cashier's check or by wire transfer to the accounts specified in writing to
Acquiror at least three (3) days prior to the Closing;
(ii) at the Closing, delivery of 100 newly issued shares of
Acquiror's preferred stock having a liquidation amount of $1,500,000 ("Acquiror
Preferred Stock"), subject to the terms and conditions set forth within the
Certificate of Designation attached hereto as Exhibit 1.3(a)(ii); and
(iii) subsequent to Closing, the HVJ Shareholder may be
entitled to receive additional shares ("Additional Shares") of Acquiror common
stock, par value $.01 per share ("Acquiror Common Stock") depending upon the
achievement of certain levels of gross profit and net income of the Surviving
Corporation during 1998 and 1999 as determined in the manner set forth below:
(A) Gross Profit for 1998:
(1) If during 1998, the Surviving Corporation
achieves gross profits of less than $1,400,000, no Additional Shares shall be
issued pursuant to this subparagraph 1.3(a)(iii)(A).
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(2) If during 1998, the Surviving Corporation
achieved gross profits between $1,400,000 and $2,300,000, Additional Shares
shall be issued having a value equal to the product of $1,000,000 and the
percentage calculated by dividing the amount by which the revenues exceeded
$1,400,000 by 900,000. For example, if gross profits of $2,000,000 are achieved,
then the HVJ Shareholder shall be issued such Additional Shares having a value
equal to $666,000.
(3) If during 1998, the Surviving Corporation
achieved gross profits in excess of $2,300,000, only those Additional Shares
having a value equal to $1,000,000 shall be issued.
(B) Net Income for 1998:
(1) If during 1998, the Surviving Corporation
realized net income below $250,000, no Additional Shares shall be issued
pursuant to this subparagraph 1.3(a)(iii)(B).
(2) If during 1998, the Surviving Corporation
realized net income between $250,000 and $400,000, Additional Shares shall be
issued having a value equal to the product of $350,000 and the percentage
calculated by dividing the amount by which the net income realized exceeded
$250,000 by 150,000. For example, if net income of $350,000 is realized, then
the HVJ Shareholder shall be issued such Additional Shares having a value equal
to $233,333.
(3) If during 1998, the Surviving Corporation
realized net income in excess of $400,000, only those Additional Shares having a
value equal to $350,000 shall be issued.
(C) Gross Profit for 1999:
(1) If during 1999, the Surviving Corporation
achieves gross profits of less than $2,300,000, no Additional Shares shall be
issued pursuant to this subparagraph 1.3(a)(iii)(C).
(2) If during 1999, the Surviving Corporation
achieved gross profits between $2,300,000 and $3,200,000, Additional Shares
shall be issued having a value equal to the product of $1,000,000 and the
percentage calculated by dividing the amount by which the revenues exceeded
$2,300,000 by 900,000. For example, if gross profits of $3,000,000 are achieved,
then the HVJ Shareholder shall be issued such Additional Shares having a value
equal to $777,777.
(3) If during 1999, the Surviving Corporation
achieved gross profits in excess of $3,200,000, only those Additional Shares
having a value equal to $1,000,000 shall be issued.
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(D) Net Income for 1999:
(1) If during 1999, the Surviving Corporation
realized net income below $400,000, no Additional Shares shall be issued
pursuant to this subparagraph 1.3(a)(iii)(D).
(2) If during 1999, the Surviving Corporation
realized net income between $400,000 and $600,000, Additional Shares shall be
issued having a value equal to the product of $350,000 and the percentage
calculated by dividing the amount by which the net income realized exceeded
$400,000 by 200,000. For example, if net income of $500,000 is realized, then
the HVJ Shareholder shall be issued such Additional Shares having a value equal
to $175,000.
(3) If during 1999, the Surviving Corporation
realized net income in excess of $600,000, only those Additional Shares having a
value equal to $350,000 shall be issued.
(b) For purposes of subparagraph (iii)(A) and (iii)(C) above the
term "gross profits" shall be defined as the gross revenues of the Surviving
Corporation less any and all discounts or allowances and less costs of goods
sold (exclusive of internal labor costs). For the purposes of subparagraph
(iii)(B) and (iii)(D) above, the term "net income" shall be computed on a basis
consistent with past practices and accounting methods of the Surviving
Corporation without reduction for administrative/overhead charges or parent
company allocations, except for direct expenses incurred by Acquiror on behalf
of the Surviving Corporation, however, such expenses shall not include any
expenses incurred in connection with the acquisition of HVJ. The "gross profit"
and "net income" of the Surviving Corporation shall be determined within ninety
(90) days after the expiration of each of 1998 and 1999, and at such time the
Acquiror shall deliver such Additional Shares to the HVJ Shareholder,
accompanied by a certificate of Acquiror's Chief Financial Officer attesting to
the method by which the number of Additional Shares were calculated.
(c) The number of Additional Shares to be distributed to the HVJ
Shareholder pursuant to subparagraph 1.3(a)(iii) above shall be determined by
dividing the value of such Additional Shares (as so established) by the price
determined based on the average closing price of Acquiror's common stock for the
ten (10) trading days immediately preceding the date upon which the Additional
Shares are distributed.
(d) The shares of Acquiror Preferred Stock to be delivered at the
Closing, as well as any Additional Shares of Acquiror Common Stock, when and if
delivered, shall be fully paid and non-assessable and shall be free and clear of
all liens, levies and encumbrances except that all of such Acquiror Preferred
Stock, Additional Shares of Acquiror Common Stock and shares of Acquiror Common
Stock issuable upon conversion of the Acquiror Preferred Stock shall be
"restricted securities" pursuant to Rule 144, promulgated under the Securities
Act of 1933, as amended (the "Act").
(e) No fractional shares of stock shall be issued in the Merger, and
the
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HVJ Shareholder shall be entitled to receive as part of the Merger Consideration
that number of shares of stock rounded to the nearest whole number.
1.4 ESCROW AGREEMENT.
(a) At the Closing, Acquiror shall deposit into escrow the
components of the Merger Consideration identified in subparagraph 1.4(b)
hereafter (the "Escrow Consideration") to serve as collateral for the
indemnification obligations of the HVJ Shareholder pursuant to this Agreement.
The deposit, maintenance and ultimate disposition of the Escrow Consideration
shall be governed by the terms of an escrow agreement, the form of which is
attached hereto as Exhibit 1.4(a)(the "Escrow Agreement").
(b) The Escrow Consideration shall consist of:
(i) Two Hundred Thirty Seven Thousand Five Hundred
Dollars ($237,500) of the Merger Consideration identified at subparagraph
1.3(a)(i)(the "Escrow Cash"); and
(ii) 33.33 shares of Acquiror Preferred Stock having a
liquidation amount of $500,000 (the "Escrow Shares"), provided however, that the
Escrow Shares shall constitute those shares of Acquiror Preferred Stock that
shall last convert into Acquiror Common Stock in accordance with the conversion
features contained within the Certificate of Designation of the Acquiror
Preferred Stock. The Escrow Shares shall include those shares of Acquiror Common
Stock which are issued upon conversion, and shall be subject to the terms and
provisions of the Escrow Agreement as though such shares were originally
deposited in escrow upon Closing
1.5 ADDITIONAL RIGHTS; TAKING OF NECESSARY ACTION; FURTHER ACTION.
Each of Acquiror, Sub, HVJ and the HVJ Shareholder, respectively,
shall use their best efforts to take all such action as may be necessary and
appropriate to effectuate the Merger under the TBCA and DGCL as promptly as
possible, including, without limitation, the filing of the Certificate of Merger
consistent with the terms of this Agreement. If at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest in HVJ as the Surviving Corporation full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of Sub, the officers of such corporations are fully authorized in the
name of their corporations or otherwise, and notwithstanding the Merger, to
take, and shall take, all lawful and necessary action.
1.6 NO FURTHER RIGHTS OR TRANSFERS.
At and after the Effective Time, the shares of capital stock of HVJ
outstanding immediately prior to the Effective Time shall cease to provide the
HVJ Shareholder of any rights as a shareholder of HVJ or the Surviving
Corporation, except for the right to surrender the certificate or certificates
representing such shares and to receive the consideration to be received in the
Merger as provided in this Agreement.
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ARTICLE II
THE CLOSING
2.1 CLOSING DATE.
Subject to satisfaction or waiver of all conditions precedent set
forth in Section 6 of this Agreement, the closing of the Merger (the "Closing")
shall take place at the offices of Acquiror, at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, Arizona, at 10:00 a.m., local time on the later of: (i) the first
Business Day following the day upon which all appropriate Acquiror corporate
action and HVJ corporate action has been taken in accordance with Section 3 of
this Agreement; or (ii) the day on which the last of the conditions precedent
set forth in Section 6 of this Agreement is fulfilled or waived, or (b) at such
other time, date and place as the parties may agree, but in no event shall such
date be later than March 18, 1998, unless such date is extended by the mutual
written agreement of the parties.
2.2 CLOSING TRANSACTIONS.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) HVJ and the HVJ Shareholder will deliver, or shall cause to be
delivered, to the Acquiror and Sub, the following documents and shall take the
following actions:
(i) The HVJ Shareholder shall surrender and deliver to the Sub
as the Surviving Corporation the certificate or certificates representing all of
such shares of HVJ Common Stock;
(ii) The HVJ Shareholder shall, to the extent necessary to
comply with applicable federal and state securities laws, execute and deliver at
the Closing a copy of an Investment Letter in a form to be mutually agreed by
the parties at that time and attached to this Agreement as Exhibit 2.2(a)(ii)
("Investment Letter");
(iii) HVJ and the HVJ Shareholder shall execute and deliver,
and file or cause to be filed with the Secretary of State of the State of Texas,
articles of merger with such amendments thereto as the parties hereto shall deem
mutually acceptable;
(iv) A certificate shall be executed by HVJ and the HVJ
Shareholder to the effect that all representations and warranties made by HVJ
and the HVJ Shareholder under this Agreement are true and correct as of the
Closing, as though originally given to Acquiror and Sub on said date;
(v) A certificate of good standing shall be delivered by HVJ
from the Secretary of State of the State of Texas, dated at or about the
Closing, to the effect that such corporation is in good standing under the laws
of such state;
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(vi) An incumbency certificate shall be delivered by HVJ
signed by all of the officers thereof dated at or about the Closing;
(vii) Certified Articles of Incorporation shall be delivered
by HVJ dated at or about the Closing and a copy of the Bylaws of HVJ certified
by the Secretary of HVJ dated at or about the Closing;
(viii) Certified Board and shareholder resolutions shall be
delivered by the Secretary of HVJ dated at or about the Closing authorizing the
transactions contemplated under this Agreement;
(ix) The Registration Rights Agreement, the form of which is
attached hereto as Exhibit 2.2(a)(x), shall be executed and delivered by the HVJ
Shareholder;
(x) The HVJ Shareholder will enter into an employment
agreement on terms and conditions mutually satisfactory to Acquiror and the HVJ
Shareholder;
(xi) The Escrow Agreement, as described in Exhibit 1.4(a),
shall be executed and delivered by the HVJ Shareholder;
(xii) The HVJ Shareholder shall deliver the Escrow
Consideration into escrow pursuant to the terms of the Escrow Agreement;
(xiii) Each of the officers and directors of HVJ shall have
tendered their resignation in form and substance satisfactory to Acquiror;
(xiv) HVJ shall receive from the Secretary of State of the
State of Texas a final Certificate of Merger;
(xv) The delivery of an opinion of counsel of HVJ and the
HVJ Shareholder in form and substance satisfactory to Acquiror and the Sub;
and
(xvi) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and taken all such actions as are required under this Agreement.
(b) Acquiror and Sub will deliver, or shall cause to be delivered,
to HVJ and the HVJ Shareholder, the following documents and shall take the
following actions:
(i) Acquiror shall deliver or shall cause to be delivered to
the HVJ Shareholder a certificate or certificates representing the number of
shares of Acquiror Preferred Stock as such holder is entitled to receive in
connection with the Merger;
(ii) Acquiror shall deliver or shall cause to be delivered to
the HVJ
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Shareholder, the cash component of the Merger Consideration to such location and
in such manner as may be designated in writing by the HVJ Shareholder at least
three (3) days prior to Closing;
(iii) Acquiror and the Sub shall execute and deliver, and file
or cause to be filed with the Secretary of the State of Delaware, the
Certificate of Merger with such amendments thereto as the parties hereto shall
deem mutually acceptable;
(iv) A certificate shall be executed by the Acquiror's and
Sub's President to the effect that all representations and warranties of the
Acquiror and Sub under this Agreement are true and correct as of the Closing, as
though originally given to HVJ on said date;
(v) A certificate of good standing shall be delivered by
Acquiror and Sub from the Secretary of the State of Delaware dated at or about
the Closing that the Acquiror and Sub are in good standing under the laws of
said state;
(vi) An incumbency certificate shall be delivered by Acquiror
and Sub signed by all of the officers thereof dated at or about the Closing;
(vii) Certified Certificates of Incorporation shall be
delivered by Acquiror and Sub dated at or about the Closing, and a copy of the
Bylaws of Acquiror and Sub certified by the Secretary of Acquiror and Sub dated
at or about the Closing;
(viii) Certified Board resolutions shall be delivered by the
Secretary of the Acquiror and Sub dated at or about the Closing authorizing the
transactions contemplated under this Agreement;
(ix) Acquiror will execute and deliver an employment agreement
to the HVJ Shareholder upon terms and conditions mutually satisfactory to
Acquiror and the HVJ Shareholder;
(x) Acquiror will execute and deliver the Registration Rights
Agreement to the HVJ Shareholder, the form of which is attached hereto as
Exhibit 2.2(a)(x);
(xi) Each of the officers and directors of the Sub shall have
tendered their resignation in form and substance satisfactory to HVJ and the HVJ
Shareholder;
(xii) The delivery of an opinion of counsel of Acquiror and
the Sub in form and substance satisfactory to HVJ and the HVJ Shareholder; and
(xiii) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and shall have taken all such actions as are required under this
Agreement.
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ARTICLE III
CERTAIN CORPORATE ACTION
3.1 HVJ CORPORATE ACTION.
HVJ and the HVJ Shareholder shall cause to occur all corporate
action necessary to effect the Merger and to consummate the other transactions
contemplated hereby.
3.2 ACQUIROR CORPORATE ACTION.
Acquiror and the Sub shall cause to occur all corporate action
necessary on behalf of either of them to effect the Merger and to consummate the
other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF HVJ AND THE HVJ SHAREHOLDER.
As a material inducement to Acquiror and Sub to execute this
Agreement and consummate the Merger and other transactions contemplated hereby,
HVJ and the HVJ Shareholder, jointly and severally, hereby make the following
representations and warranties to Acquiror and Sub. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all materials on the Closing as though made on and as of
such date.
(a) CORPORATE EXISTENCE AND POWER.
(i) HVJ is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Texas, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except where the failure to
have any of the foregoing would not have a Material Adverse Effect. HVJ is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect. True, correct and complete
copies of the Articles of Incorporation and Bylaws of HVJ as amended to date are
attached hereto as Schedule 4.1(a) and are made a part hereof. There are
currently no subsidiaries of HVJ.
(b) DUE AUTHORIZATION. This Agreement has been duly authorized,
executed and delivered by HVJ and the HVJ Shareholder and constitutes a valid
and binding agreement of HVJ and the HVJ Shareholder, enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting
or affecting the enforcement of creditors rights generally or by
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the application of equitable principles. As of the Closing all corporate action
on the part of HVJ required under applicable law in order to consummate the
Merger will have occurred.
(c) NO CONTRAVENTION. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated hereby will not:
(i) conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of HVJ; or (ii) conflict with or result in any violation
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of a right or
obligation or loss under, any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to HVJ or the HVJ Shareholder or their properties or assets, or
result in the creation or imposition of any mortgage, lien, pledge, charge or
security interest of any kind ("Encumbrance") on any assets of HVJ, except such
as is not reasonably likely to have a Material Adverse Effect or prevent HVJ or
the HVJ Shareholder from consummating the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to HVJ in connection with the execution and delivery
of this Agreement by HVJ and the HVJ Shareholder or the consummation by HVJ and
the HVJ Shareholder of the transactions contemplated hereby, except the filing
of the Articles of Merger.
(d) CAPITALIZATION AND SHARE OWNERSHIP. The authorized capital
stock of HVJ consists solely of One Hundred Thousand (100,000) shares of common
stock, $1.00 par value per share ("HVJ Common Stock"). There are currently 1,000
shares of HVJ Common Stock outstanding, of which the HVJ Shareholder is the sole
record and beneficial owner. The outstanding shares of capital stock of HVJ have
been duly authorized and validly issued and are fully paid and nonassessable and
free of preemptive rights. Except as set forth in this Section 4.1(d) and on
Schedule 4.1(d), there are outstanding (A) no shares of capital stock or other
voting securities of HVJ, (B ) no securities of HVJ convertible into or
exchangeable for shares of capital stock or voting securities of HVJ and (C) no
options, warrants or other rights to acquire from HVJ, and no obligation of HVJ
to issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of HVJ, and there are no
agreements or commitments to do any of the foregoing. There are no voting trusts
or voting agreements applicable to any capital stock of HVJ. The HVJ Common
Stock to be surrendered in the Merger will be owned of record and beneficially,
by the HVJ Shareholder, free and clear of all liens and encumbrances of any kind
and nature, and have not been sold, pledged, assigned or otherwise transferred.
There are no agreements (other than this Agreement) to sell, pledge, assign or
otherwise transfer such securities.
(e) FINANCIAL STATEMENTS. HVJ shall prepare and deliver to
Acquiror and Sub, no less than ten (10) days prior to Closing, copies of
unaudited financial statements of HVJ for the fiscal years ended December 31,
1997 and December 31, 1996 (collectively, the "Financial Statements"). Such
Financial Statements will have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
reported upon and will fairly present in all material respects the financial
position of HVJ as of the date thereof and the results of operations for the
periods then ended (subject to normal year-end adjustments). The Financial
Statement for the fiscal year ended December 31, 1997 shall
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reflect revenues not less than $5,500,000 and gross profits not less than
$1,200,000.
(f) REAL PROPERTIES.
(i) HVJ currently leases real property at those locations
identified on Schedule 4.1(f)(i) hereto pursuant to the true, correct and
complete copies of the lease agreements attached to Schedule 4.1(f)(i). HVJ owns
or leases no other real estate. None of the leasehold interests held by HVJ are
subject to any Encumbrance, except (a) liens for ad valorem taxes not yet due or
being contested in good faith; and (b) contractual or statutory mechanics or
materialmen's liens or other statutory or common law Encumbrances relating to
obligations of HVJ that are not delinquent or are being contested in good faith.
There are no Encumbrances which materially interfere with the present use of
such leasehold interests.
(ii) Except as described on Schedule 4.1(f)(ii) hereto, HVJ
has not received any written notice from any governmental entity having
jurisdiction over HVJ or over any of the real property leased by HVJ of any
violation by HVJ of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by HVJ or of any condemnation or eminent
domain proceeding.
(iii) Except such as has not had and is not reasonably likely
to have a Material Adverse Effect, all of the buildings leased by HVJ and all
plumbing, HVAC, electrical, mechanical and similar systems are in good repair
and adequate for their current use, ordinary wear and tear excepted.
(iv) Except as described on Schedule 4.1(f)(iv), HVJ is not a
party to any lease, sublease, lease assignment or other agreement for the use or
occupancy of any of the leasehold premises wherein HVJ is the landlord,
sub-landlord or assignor, whether by name, as successor-in-interest or
otherwise. There are no outstanding agreements with any party to acquire the
leasehold premises or any portion thereof or any interest therein.
(v) All certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by HVJ have been issued, are fully paid for and are in full force and
effect, will survive the Closing and will not be invalidated, violated or
otherwise adversely affected by the Merger or the other transactions
contemplated by this Agreement.
(g) NO CONTINGENT LIABILITIES. Except as described on Schedule
4.1(g) and as set forth in the Financial Statements, at the Closing, HVJ shall
have no liabilities, whether related to tax or non-tax matters, known or
unknown, due or not yet due, liquidated or unliquidated, fixed or contingent,
determined or determinable in amount or otherwise and, to the knowledge of HVJ
after due inquiry, there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability,
except as and to the extent reflected on: (i) the Financial Statements; (ii)
this Agreement or any Schedule or Exhibit hereto; or (iii) liabilities incurred
since the date of the Financial Statements solely in the ordinary course of
business and as accurately reflected on the books and records of HVJ; provided,
however, that no liability shall be incurred from and after the date hereof
which is in contravention of any negative covenant contained herein and
applicable to HVJ.
(h) LITIGATION. Except as described on Schedule 4.1(h) hereto
there is no
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action, suit, investigation or proceeding (or, to the knowledge of HVJ, any
basis therefor) pending against, or to the knowledge of HVJ threatened, against
or affecting HVJ or any of its properties before any court or arbitrator or any
governmental body, agency or official that (i) if adversely determined against
HVJ, would have a Material Adverse Effect or (ii) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or any of the
other transactions contemplated by the Agreement.
(i) TAXES. Except as disclosed on Schedule 4.1(i), HVJ has timely
filed all tax returns required to be filed by it, or will timely file when due
all tax returns required to be filed by it between the date hereof and the
Closing. HVJ has paid in a timely fashion or will pay when due in a timely
fashion, all taxes required to be paid in respect of the periods covered by such
returns, and the books and the financial statements of reflect, or will reflect,
adequate reserves for all taxes payable by HVJ which have been, or will be,
accrued but are not yet due. HVJ is not delinquent in the payment of any
material tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted or assessed against HVJ, HVJ and the HVJ
Shareholder are not aware of any facts which would constitute the basis for the
proposal or assertion of any such deficiency and there is no action, suit,
proceeding, audit or claim now pending or threatened against HVJ. All taxes
which HVJ is required by law to withhold and collect have been duly withheld and
collected, and have been timely paid over to the proper authorities to the
extent due and payable. For the purposes of this Agreement, the term "tax" shall
include all federal state, local and foreign income, property, sales, excise and
other taxes of any nature whatsoever. Neither HVJ nor any member of any
affiliated or combined group of which HVJ is or has been a member has granted
any extension or waiver of the limitation period applicable to any tax returns.
There are no Encumbrances for taxes upon the assets of HVJ, except Encumbrances
for current taxes not yet due. There are no tax sharing or tax allocation
agreements to which HVJ is now or ever has been a party. HVJ will not be
required under Section 481(c) of the Internal Revenue Code of 1986, as amended
(the "Code"), to include any material adjustment in taxable income for any
period subsequent to the Merger. HVJ (a) has not been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was HVJ) and (b) has no liability for the taxes of any
person (other than HVJ) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(j) ERISA.
(i) Schedule 4.1(j)(i) identifies each "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to any provision of ERISA, and
either (i) is maintained, administered or contributed to by HVJ or any affiliate
(as defined below), (ii) covers any employee or former employee of HVJ or any
affiliate or (iii) under which HVJ or any affiliate has any liability. Copies of
such plans and, if applicable, related trust agreements) and all amendments
thereto and any written interpretations thereof have been furnished to Acquiror,
together, if applicable, with (x) the most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan and (y) the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are referred to collectively herein as
the "Employee Plans." Any Form 5500 for any plan year of any Employee Plan that
has not been filed, but for which the filing date has passed on the date of this
Agreement, shall be filed prior to the date of the Merger. For purposes of this
Section, "affiliate" of any Person means any
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other Person which, together with such Person, would be treated as a single
employer for any purpose under Section 414 of the Code.
(ii) Schedule 4.1(j)(ii) identifies all Employee Plans to
which HVJ currently has any obligation to contribute. HVJ is not a party to any
multiemployer plan as defined in Section 4001(a) (3) of ERISA ("Multiemployer
Plans"), and neither HVJ nor any affiliate has any outstanding liability to
contribute to any Multiemployer Plan, for delinquent contributions or for
withdrawal liability pursuant to Section 4201 of ERISA.
(iii) There are no Employee Plans that are intended to be
qualified plans under Section 401(a) of the Code, except as may have been shown
and identified as such on the list referred to in subparagraphs (i) or (ii)
above. Each Employee Plan has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Plan, other than any failure to comply
that is not reasonably likely to have a Material Adverse Effect.
(iv) Schedule 4.1(j)(iv) identifies each material employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits that is not an Employee Plan and (A) is
entered into, maintained or contributed to, as the case may be by HVJ or any of
its affiliates or (B) covers any employee or former employee of HVJ or any of
its affiliates or (C) under which HVJ or any affiliate has liability. Such
contracts, plans and arrangements as are described above, copies of all of which
have been furnished previously to Acquiror, are referred to collectively herein
as the "Benefit Arrangements." Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations that are applicable to such
Benefit Arrangement other than any failure to comply that is not reasonably
likely to have a Material Adverse Effect.
(v) Neither HVJ nor any affiliate has or maintains and has
maintained any Employee Plan or Benefit Arrangement providing post-retirement
health or medical benefits in respect of any active or former employee of HVJ or
any affiliate or former affiliate, except as may be required pursuant to the
provisions of COBRA
(vi) HVJ is not a party to or subject to any union contract or
any employment contract (other than as set forth on Schedule 4.1(j)(iv) hereto)
or arrangement providing for annual future compensation to any officer,
consultant, director or employee in excess of $50,000.
(k) INSURANCE COVERAGE. Schedule 4.1(k) sets forth a list of all
HVJ key-man life insurance policies. HVJ maintains insurance covering its
assets, business, equipment, properties, operations, employees, officers and
directors with such coverage, in such amounts, and with such deductibles and
premiums as are consistent with insurance coverage provided for other companies
of comparable size and in comparable industries. All of such policies are in
full force and effect and all premiums payable have been paid in full and HVJ is
in full compliance with the terms and conditions of such policies. HVJ has not
received any notice from any issuer of such policies of its intention to cancel
or refusal to renew any policy issued by it or of
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its intention to renew any such policy based on a material increase in premium
rates other than in the ordinary course of business. None of such policies are
subject to cancellation by virtue of the Merger or the consummation of the other
transactions contemplated by this Agreement. There is no claim by HVJ pending
under any of such policies as to which coverage has been questioned or denied.
(l) COMPLIANCE WITH LAWS. HVJ is not in violation of, and has not
violated, any applicable provisions of any laws, statues, ordinances or
regulations, other than as would not be reasonably likely to have a Material
Adverse Effect or constitute a felony. No such laws, statutes, ordinances or
regulations require or are reasonably expected to require capital expenditures
by HVJ that are reasonably likely to have a Material Adverse Effect. Without
limiting the generality of the foregoing, HVJ has all licenses, permits,
certificates and authorizations needed or required for the conduct of HVJ's
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a licenses, permit,
certificate or authorization would not have a Material Adverse Effect.
(m) INVESTMENT BANKING FEES. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by, HVJ or the HVJ Shareholder to act on its behalf who might be
entitled to any fee or commission from HVJ, the HVJ Shareholder, Acquiror or the
Sub or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(n) PERSONAL PROPERTY. HVJ has good and valid title to all of its
personal property, tangible and intangible, reflected on the Financial
Statements and to all other personal property owned by it, free and clear of any
Encumbrance. Except as set forth on Schedule 4.1(n), HVJ is the owner of all of
the personal property, equipment, furniture and fixtures now located in or upon
its leased premises and of all personal property which is used in the operation
of its business. All such personal property, equipment, furniture and fixtures
and other tangible personal property are in good operating condition and repair
and do not require any repairs other than normal routine maintenance to maintain
such property in good operating condition and repair. All inventory as reflected
on the Financial Statements is useable in the ordinary course of business free
from material defects. HVJ owns no motor vehicles.
(o) INTELLECTUAL PROPERTY; INTANGIBLE PROPERTY. The corporate names
of HVJ and the trade names and service marks listed on Schedule 4.1(o) are the
only names and service marks which are used by HVJ in the operation of its
business (the "Names and Service Marks"). HVJ has not done business and has not
been known by any other name other than by its Names and Service Marks. HVJ owns
and has the exclusive right within Texas, and the states in which it operates,
to use all intellectual property presently in use by it and necessary for the
operation of its business as now being conducted, which intellectual property
includes, but is not limited to, patents, trademarks, trade names, service
marks, copyrights, trade secrets, customer lists, inventions, formulas, methods,
processes and other proprietary information. There are no outstanding licenses
or consents granting third parties the right to use any intellectual property
owned by HVJ. No royalties or fees are payable by HVJ to any third party by
reason of the use of any of its intellectual property. HVJ has received no
notice of any adversely held patent, invention, trademark, copyright, service
▇▇▇▇ or tradename of any person, or any claims of any other person relating to
any of the intellectual property subject hereto, and there is no
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reasonable basis for any such charge or claim. There is no presently known
threatened use or encroachment of any such intellectual property. The
manufacture, sale or use of any products now or heretofore manufactured or sold
by HVJ did not and does not infringe (nor has any claim been made that any such
action infringes) the intellectual property rights of others.
(p) ACCOUNTS RECEIVABLE. Each of the accounts receivable of HVJ
referred to on the Financial Statements constitutes a valid claim in the full
amount thereof against the debtor charged therewith on the books of HVJ to which
each such account is payable and has been acquired in the ordinary course of
business. Each account receivable is fully collectible to the extent of the face
value thereof (less the amount of the allowance for the doubtful accounts
reflected on the Financial Statements) no later than ninety (90) days after such
account receivable is due. No account debtor has any valid setoff, deduction or
defense with respect thereto, and no account debtor has asserted any such
setoff, deduction or defense. There are no accounts receivable which arise
pursuant to an agreement with the United States Government or any agency or
instrumentality thereof.
(q) INVENTORIES. All inventory of HVJ: (i) was acquired and has
been maintained in the ordinary course of the operations of HVJ; (ii) is of good
and merchantable quality; (iii) consists substantially of a quality, quantity
and condition usable, leaseable or saleable in the ordinary course of the
operations of HVJ; and (iv) is valued on the Financial Statements at the lower
of cost (determined on a first in, first out basis) or market value on a basis
consistent with Generally Accepted Accounting Principles.
(r) CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. HVJ is
not a party to or bound by any oral, written or implied contracts, agreements,
leases, powers of attorney, guaranties, surety arrangements or other commitments
excluding equipment and furniture leases entered into in the ordinary course of
business (which do not exceed $100,000 in liabilities or commitments in the
aggregate), except for the following (which are hereinafter collectively called
the "Material Contracts"):
(i) The leases and agreements described on Schedules
4.1(f), 4.1(j)(i) and (ii) and 4.1(s)(i); and
(ii) Agreements involving a maximum possible liability or
obligation on the part of HVJ of less than Twenty-Five Thousand Dollars
($25,000) separately or less than Fifty Thousand Dollars ($50,000) in the
aggregate.
The Material Contracts constitute all of the agreements and instruments
which are necessary and desirable to operate the business as currently conducted
by HVJ. True, correct and complete copies of each Material Contract described
and listed under subsection 4.1(r)(i) have been made available to Acquiror
within ten (10) business days prior to the date hereof. The term "Corporation
Agreement" excludes purchase orders entered into in the ordinary course for
personality or inventory which may be returned to the vendor without penalty.
All of the Corporation Agreements are valid, binding and enforceable against the
respective parties thereto in accordance with their respective terms. Following
the Merger, the Surviving Corporation shall become entitled to all rights of HVJ
under such of the Corporation Agreements as if the Surviving Corporation were
the original party to such Corporation Agreements. All parties to
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all of the Corporation Agreements have performed all obligations required to
be performed to date under such Corporation Agreements, and no party is in
default or in arrears under the terms thereof, and no condition exists or event
has occurred which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. The consummation of this Agreement and the
Merger will not result in an impairment or termination of any of the rights of
HVJ under any Corporation Agreement. None of the terms or provisions of any
Corporation Agreement materially adversely affects the business, prospects,
financial condition or results of operations of HVJ.
(s) LABOR RELATIONS; EMPLOYEES.
(i) Set forth on Schedule 4.1(s)(i) is a list of:
(A) All collective bargaining agreements and other
agreements requiring arbitration of employment disputes, and any written
amendments thereto, as well as all arbitration awards decided under any such
agreements, and all oral assurances or modifications, past practices, and/or
arrangements made in relation thereto, to which HVJ is a party or by which it is
bound; and
(B) All employment agreements, and all severance
agreements which have not been fully performed, to which HVJ is a party or by
which it is bound.
(ii) Set forth on Schedule 4.1(s)(ii) is a list of all key
management employees of HVJ, broken down by location, together with their rate
of compensation and title.
(iii) HVJ will deliver to Acquiror true and correct copies
of all of the documents referred to on Schedule 4.1(s)(i) hereof and all of the
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications relating to the employees of HVJ.
(iv) There is no union representing or purporting to
represent any of the employees of HVJ, and HVJ is not subject to or currently
negotiating any collective bargaining agreements with any union representing or
purporting to represent the employees of any of the foregoing.
(v) Except as set forth on Schedule 4.1(s)(v):
(A) There are no strikes, slow downs or other work
stoppages, grievance proceedings, arbitrations, labor disputes or
representation questions pending or, to the best knowledge of HVJ, threatened;
(B) HVJ has complied in all material respects with
all laws relating to labor, employment and employment practices, including
without limitation, any provisions thereof relating to wages, hours and other
terms of employment, collective bargaining, nondiscrimination and the payment of
social security, unemployment compensation and similar taxes, and HVJ is not (1)
liable for any arrearages of wages or any taxes or penalties
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for failure to comply with any of the foregoing or (2) delinquent in the payment
of any severance, salary, bonus, commission or other direct or indirect
compensation for services performed by any employee to the date hereof, or any
amount required to be reimbursed to any employee or former employee; and
(C) There are no charges, suits, actions,
administrative proceedings, investigations and/or claims pending or threatened
against HVJ, whether domestic or foreign, before any court, governmental agency,
department, board or instrumentality, or before any arbitrator (collectively
"Actions"), concerning or in any way relating to the employees or employment
practices of HVJ, including, without limitation, Actions involving unfair labor
practices, wrongful discharge and/or any other restrictions on the right of HVJ
to terminate its respective employees, employment discrimination, occupational
safety and health, and workers' compensation.
(vi) There are no express or implied agreements, policies,
practices, or procedures, whether written or oral, pursuant to which any
employee of HVJ is not terminable at will and except as required by law, no
employee is entitled to any benefit or to participate in any employee benefit
plan of HVJ following such termination of employment.
(vii) HVJ is not a party to any oral or written (A) agreement
with any executive officer or other key employee of HVJ (1) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving HVJ of the nature of the transactions
contemplated by this Agreement, (2) providing any term of employment or
compensation guarantee extending for a period longer than one year, or (3)
providing severance benefits or other benefits after the termination of
employment of such executive officer or key employee regardless of the reason
for such termination of employment; or (B) agreement or plan which will remain
in effect after the Closing, including, without limitation, any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
(viii) HVJ has not taken any action which requires or, taken
together with the transactions contemplated hereby, would require the giving of
any notice under the Worker Adjustment Retraining and Notification Act or any
comparable state or local law or regulation.
(t) SUPPLIERS AND CUSTOMERS. Set forth on Schedule 4.1(t) is a
list of the five largest customers of HVJ based on the percentage of revenue
represented by those customers for the fiscal year ended December 31, 1997 and
the five largest customers in terms of volume of contracts. The relationship of
HVJ with its suppliers and customers are good commercial working relationships
and no supplier or customer of HVJ has canceled, curtailed or otherwise
terminated or threatened to cancel or otherwise terminate, his or its
relationship with HVJ. HVJ has no knowledge, or reason to believe, that the
Merger or any other transaction contemplated hereby would adversely affect any
such supplier or customer relationship.
(u) CONFLICTING INTERESTS. Except as set forth on Schedule 4.1(u),
no
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director, officer, employee or HVJ Shareholder, and no relative or affiliate
of any of the foregoing (i) sells or purchases goods or services from HVJ or has
any pecuniary interest in any supplier or client of any of the foregoing or in
any other business enterprise with which HVJ conducts business or with which any
of the foregoing is in competition, or (ii) is indebted to HVJ except for money
borrowed and as set forth on the Financial Statements.
(v) ENVIRONMENTAL PROTECTION. Neither HVJ nor the HVJ Shareholder
has been notified by any governmental authority, agency or third party, and HVJ
and the HVJ Shareholder has no knowledge, of any violation by HVJ of any
Environmental Statute (as defined below). All registrations by HVJ with,
licenses from or permits issued by governmental agencies pursuant to
environmental, health and safety laws are in full force and effect. The term
"Environmental Statutes" means all statutes, ordinances, regulations, orders and
requirements of common law concerning discharges to the air, soil, surface water
or groundwater and concerning the storage, treatment or disposal of any waste or
hazardous substance. There is no hazardous substance at any premises currently
or previously occupied by HVJ. HVJ has not received any notice or any request
for information, notice of claim, demand or other notification that it may be
potentially responsible with respect to any investigation or clean-up of any
threatened or actual release of hazardous substances. All hazardous wastes and
substances have been stored, treated, disposed of and transported in conformance
with all requirements applicable to such hazardous substances and wastes.
(w) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to the
extent set forth on the Financial Statements, to the extent contained in this
Agreement, or as set forth on Schedule 4.1(w), there has not been (i) any
material adverse change in the business, assets, properties, results of
operations, financial condition or prospects of HVJ; (ii) any entry by HVJ into
any material commitment or transaction which is not in the ordinary course of
business; (iii) any change by HVJ in accounting principles or methods except
insofar as may be required by a change in generally accepted accounting
principles; (iv) any declaration, payment or setting aside for payment of any
dividends or other distributions (whether in cash, stock or property) in respect
of capital stock of HVJ or any Subsidiary, or any direct or indirect redemption,
purchase or any other type of acquisition by HVJ of any shares of its capital
stock or any other securities for an aggregate sum not in excess of $5,000; (v)
any agreement by HVJ, whether in writing or otherwise, to take any action which,
if taken prior to the date of this Agreement, would have made any representation
or warranty in this Section 4.1 untrue or incorrect; (vi) any acquisition of the
assets of HVJ other than in the ordinary course of business and consistent with
past practice and not in excess of $5,000 in the aggregate; or (vii) any
execution of any agreement with any executive officer of HVJ providing for his
or her employment, or any increase in the compensation or in severance or
termination benefits payable or to become payable by HVJ to its officers or key
employees, or any material increase in benefits under any collective bargaining
agreement or in benefits under any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan or arrangement or
understanding (whether or not legally binding) providing benefits to any present
or former employee of HVJ Since the date of the Financial Statements, there has
not been and there is not threatened, any material adverse change in financial
condition, business, results of operations or prospects of the business or any
material physical damage or loss to any of the properties or assets of the
business or to the premises occupied in connection with the
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business, whether or not such loss is covered by insurance.
(x) PRODUCT LIABILITY AND WARRANTY CLAIMS. Except as set forth on
Schedule 4.1(x), there are no liabilities of or claims against HVJ or the HVJ
Shareholder, and, to the best of their knowledge, no liabilities or claims are
threatened against HVJ or the HVJ Shareholder, with respect to any product
liability (or similar claim) or product warranty (or similar claim) claim that
relates to any product manufactured or sold by HVJ or the HVJ Shareholder in the
operations of HVJ, except for standard warranty and maintenance obligations made
in the ordinary course of the operations of HVJ to purchasers of its products
and services. There are no facts or circumstances which might reasonably give
rise to any such material liabilities or claims, except for such standard
warranty and maintenance obligations.
(y) PURCHASE COMMITMENTS AND OUTSTANDING BIDS. All accepted and
unfulfilled orders for the sale of merchandise or services entered into by HVJ
in the operation of its business, and the aggregate of all commitments for the
purchase of merchandise or supplies by HVJ were made in the ordinary course of
the operations of HVJ There are no claims against HVJ or the HVJ Shareholder to
return merchandise by reason of alleged overshipments, defective merchandise or
otherwise, or of merchandise in the hands of customers under an understanding
that such merchandise would be returnable. There is no outstanding bid,
proposal, commitment or unfulfilled order which relates to the operations of HVJ
which is or would, if accepted, reasonably be expected to result in a net loss
to HVJ
(z) PAYMENTS. Neither HVJ nor the HVJ Shareholder has directly,
nor has any current agent, current representative or current employee of any of
them has, directly or indirectly, paid or delivered any fee, commission or other
sum of money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is any manner related to the operations of HVJ which is, or may be with
the passage of time or discovery, illegal under any federal, state or local law
(including, without limitation, the U.S. Foreign Corrupt Practices Act) or any
other country having jurisdiction; and HVJ and the HVJ Shareholder have not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers and the HVJ Shareholder has
at all times done business in an open and ethical manner.
(aa) INVESTMENT INTENT.
(i) Except with respect to the registration rights granted
to the HVJ Shareholder pursuant to the terms of this Agreement, the shares of
Acquiror Common Stock are not being registered under the Act on the basis of the
statutory exemption provided by Section (4)2 thereof, relating to transactions
not involving a public offering, and the Acquiror's reliance on the statutory
exemption thereof is based in part on the representations contained in this
Agreement;
(ii) The HVJ Shareholder represents (a) that he has reviewed
such quarterly, annual and periodic reports of the Acquiror as have been filed
with the Securities and Exchange Commission (the "Reports") and that he has such
knowledge and experience in
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financial and business matters that he is capable of utilizing the information
set forth therein, concerning Acquiror to evaluate the risk of investing in the
Acquiror; (b) that he has been advised that the shares of Acquiror Common Stock
to be issued to him by the Acquiror will not be registered under the Act, except
as otherwise provided in this Agreement, and accordingly, the HVJ Shareholder
may only be able to sell or otherwise dispose of such shares in accordance with
Rule 144 or except as otherwise provided in this Agreement; (c) that the shares
of Acquiror Common Stock will be held for investment and not with a view to, or
for resale in connection with the public offering or distribution thereof; (d)
that the shares of Acquiror Common Stock so issued will not be sold without
registration thereof under the Act (unless such shares are subject to
registration or in the opinion of counsel to the Acquiror an exemption from such
registration is available), or in violation of any law; and (e) that the
certificate or certificates representing the shares of Acquiror Preferred Stock,
and the shares of Acquiror Common Stock which may be issued upon conversion of
the Acquiror Preferred Stock, will be imprinted with a legend in form and
substance substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
BASED ON AN OPINION LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
and Acquiror is hereby authorized to notify its transfer agent of the
status of the Shares and to take such other action including, but not limited
to, the placing of a "stop-transfer" order on the transfer agent's books and
records to assure compliance with the Act, as amended.
(iii) HVJ and the HVJ Shareholder have been afforded the
opportunity to review and is familiar with the Reports and have based their
decision to invest solely on the information contained therein, and the
information contained within this Agreement and the associated exhibits and
schedules, and have not been furnished with any other literature, prospectus or
other information except as included in the Reports or this Agreement;
(iv) The HVJ Shareholder is able to bear the economic risks
of an investment in the shares of Acquiror Common Stock and that his overall
commitment to his investments which are not readily marketable is not
disproportionate to his net worth; and
(v) The HVJ Shareholder understands that no federal or state
agency has approved or disapproved the shares of Acquiror Common Stock, passed
upon or endorsed the merits of the transfer of such shares set forth within this
Agreement or made any finding or determination as to the fairness of such shares
for investment.
(bb) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
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Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by HVJ or the HVJ Shareholder to Acquiror or Sub in
connection with the Merger or the other transactions contemplated hereby,
contains or will contain any untrue statement of any material fact or omit or
will omit to state any material fact required to be stated in order to make such
statement, information, document or other instruments, in light of the
circumstances in which they are made, not misleading. There is no fact known to
HVJ or the HVJ Shareholder which may have a Material Adverse Effect on the
business, prospects, financial condition or results of operations of HVJ or of
any of its properties or assets which has not been set forth in this Agreement
as an exhibit or schedule hereto.
4.2 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND THE SUB.
As a material inducement to HVJ and the HVJ Shareholder to execute
this Agreement and to consummate the Merger and the other transactions
contemplated hereby, Acquiror and Sub hereby make the following representations
and warranties to HVJ and the HVJ Shareholder.
(a) CORPORATE EXISTENCE AND POWER. Acquiror is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and the Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. Each of Acquiror
and the Sub has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any of the foregoing would not have
a Material Adverse Effect. Each of Acquiror and the Sub is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect. Acquiror owns all of the issued and
outstanding shares of capital stock of the Sub, and there are no other rights or
obligations of Acquiror or the Sub to issue any other shares of capital stock of
the Sub. The Sub has conducted no business activity other than in connection
with the transactions contemplated by this Agreement. True, complete and correct
copies of the Articles of Incorporation and Bylaws of Acquiror as amended to
date are attached hereto as Schedule 4.2(a) and are made a part hereof.
(b) DUE AUTHORIZATION. This Agreement has been duly authorized,
executed and delivered by Acquiror and the Sub and constitutes a valid and
binding agreement of Acquiror and the Sub, enforceable in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally or by the application of
equitable principles. As of the Closing all corporate action on the part of
Acquiror and the Sub required under applicable law in order to consummate the
Merger will have occurred.
(c) NO CONTRAVENTION. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated thereby will not
(i) conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of Acquiror or Sub or (ii) conflict with or result in
any violation or default (with or without notice or
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lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of an right or obligation or to loss or a benefit
under, any provision of the charter or Bylaws of Acquiror or the Sub or any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Acquiror or its
properties or assets. or result in the creation or imposition of any Encumbrance
on any asset of Acquiror, except, only as to clause (ii) above, such as is not
reasonably likely to have a Material Adverse Effect or prevent Acquiror or Sub
from consummating the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by or with
respect to Acquiror or the Sub in connection with the execution and delivery of
this Agreement by either of them or the consummation by either of them of the
transactions contemplated hereby, except the filing of the Certificate of Merger
with the Secretary of the State of Delaware.
(d) CAPITALIZATION.
(i) As of the date hereof, the outstanding capital stock of
the Acquiror consists solely of shares of: (A) 5,420,000 shares of common stock,
par value $.01 per share ("Acquiror Common Stock"); (B) 50 shares of Series B
$3.00 Convertible Preferred Stock; (C) 122 shares of Series A $3.00 Convertible
Preferred Stock; and (D) Options to purchase 1,300,000 shares of Acquiror Common
Stock. All outstanding shares of capital stock of Acquiror have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights, and upon the issuance of the shares of Acquiror Common Stock
which may be issued upon conversion of the Acquiror Preferred Stock, such shares
will be duly authorized, validly issued, fully paid and nonassessable shares of
Acquiror Common Stock.
(e) SEC FILINGS. As of the Closing, Acquiror shall have filed all
of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and, to the
knowledge of Acquiror, Current Reports on Form 8-K required pursuant to the
Securities Exchange Act of 1934. The documents referred to in the preceding
sentence shall hereafter be referred to as the "SEC Documents". Upon request
Acquiror will make available to HVJ and the HVJ Shareholder the SEC Documents.
(f) INVESTMENT BANKING FEES. There is no investment banker,
broker, finder or other similar intermediary which has been retained by, or is
authorized by, either Acquiror or the Sub to act on its behalf who might be
entitled to any fee or commission from HVJ the HVJ Shareholder, Acquiror or the
Sub or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(g) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Acquiror or Sub to HVJ and the HVJ Shareholder in
connection with the Merger or the other transactions contemplated hereby, or any
information furnished by Acquiror and Sub taken as a whole contains or will
contain any untrue statement of any material fact or omit or will omit to
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state any material fact required to be stated in order to make such statement,
information, document or other instruments, in light of the circumstances in
which they are made, not misleading. There is no fact known to Acquiror and Sub
taken as a whole which may have a Material Adverse Effect on the business,
prospects, financial condition or results of operations of Acquiror and Sub
taken as a whole or of any of its properties or assets which has not been set
forth in this Agreement as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 ACCESS TO INFORMATION.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Section 8, and in each case
subject to Section 5.2 below, each of the parties hereto shall provide to the
other parties (and the other parties' authorized representatives) full access
during normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such party.
5.2 CONFIDENTIALITY; NO SOLICITATION.
(a) CONFIDENTIALITY OF HVJ RELATED INFORMATION. With respect to
information concerning HVJ that is made available to Acquiror pursuant to the
terms of this Agreement, Acquiror agrees that, except in connection with the
private placement and other securities purchase agreements associated therewith,
it shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the Merger and related
transactions and shall not disseminate or disclose any of such information other
than to its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger and the related transactions (each of whom shall be
informed in writing by Acquiror of the confidential nature of such information
and directed by Acquiror in writing to treat such information confidentially).
If this Agreement is terminated pursuant to the provisions of Section 7,
Acquiror shall immediately return all such information, all copies thereof and
all information, all copies thereof and all information prepared by Acquiror
based upon the same; provided, however, that one copy of all such material may
be retained by Acquiror's outside legal counsel for purposes only of resolving
any disputes under this Agreement. The above limitations on use, dissemination
and disclosure shall not apply to information that (i) is learned by Acquiror
from a third party entitled to disclose it; (ii) become known publicly other
than through Acquiror or any party who received the same through Acquiror,
provided that Acquiror has no knowledge that the disclosing party was subject to
an obligation of confidentiality; (iii) is required by law or court order to be
disclosed by Acquiror; or (iv) is disclosed with the express prior written
consent thereto of HVJ and the HVJ Shareholder. Acquiror shall undertake all
necessary steps to ensure that the
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secrecy and confidentiality of such information will be maintained in accordance
with the provisions of this paragraph (a). Notwithstanding anything contained
herein to the contrary, in the event a party is required by court order or
subpoena to disclose information which is otherwise deemed to be confidential or
subject to the confidentiality obligations hereunder, prior to such disclosure,
the disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(b) CONFIDENTIALITY OF ACQUIROR-RELATED INFORMATION. With respect to
information concerning Acquiror that is made available to HVJ and the HVJ
Shareholder pursuant to the provisions of this Agreement, HVJ and the HVJ
Shareholder agree that they shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating the
Merger and the related transactions and shall not disseminate or disclose any of
such information other than to their directors, officers, employees,
shareholders, affiliates, agents and representatives who need to know such
information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by HVJ or the HVJ
Shareholder of the confidential nature of such information and directed by such
party in writing to treat such information confidentially). If this Agreement is
terminated pursuant to the provisions of Section 8, HVJ and the HVJ Shareholder
agree to return immediately all such information, all copies thereof and all
information prepared by either of them based upon the same; provided, however,
that one copy of all such material may be retained by HVJ's outside legal
counsel for purposes only of resolving any disputes under this Agreement. The
above limitations on use, dissemination and disclosure shall not apply to
information that (i) is learned by HVJ or the HVJ Shareholder from a third party
entitled to disclose it; (ii) becomes known publicly other than through HVJ, the
HVJ Shareholder or any party who received the same through HVJ or the HVJ
Shareholder, provided that HVJ or the HVJ Shareholder have no knowledge that the
disclosing party was subject to an obligation of confidentiality; (iii) is
required by law or court order to be disclosed by HVJ or (iv) is disclosed with
the express prior written consent thereto of Acquiror. HVJ or the HVJ
Shareholder agree to undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (b). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party at the
expense of the non-disclosing party in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(c) NONDISCLOSURE. Neither HVJ, the HVJ Shareholder, the Sub or
Acquiror shall disclose to the public or to any third party the existence of
this Agreement or the transactions contemplated hereby or any other material
non-public information concerning
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or relating to the other party hereto, other than with the express prior written
consent of the other party hereto, except as may be required by law or court
order or to enforce the rights of such disclosing party under this Agreement, in
which event the contents of any proposed disclosure shall be discussed with the
other party before release; provided, however, that notwithstanding anything to
the contrary contained in this Agreement, any party hereto may disclose this
Agreement to any of its directors, officers, employees, shareholders,
affiliates, agents and representative who need to know such information for the
sole purpose of evaluating the Merger, and to any party whose consent is
required in connection with the Merger or this Agreement. The parties anticipate
issuing a mutually acceptable, joint press release announcing the execution of
this Agreement and the consummation of the Merger.
(d) NO SOLICITATION. In consideration of the substantial expenditure
of time, effort and money to be undertaken by Acquiror in connection with the
transactions contemplated by this Agreement, the HVJ Shareholder, HVJ or any
affiliate thereof will not, prior to the earlier of the Closing, or ninety (90)
days after the termination of this Agreement, directly or indirectly, through
any officer, director, agent or otherwise: (i) solicit, initiate or encourage
the submission of inquiries, proposals or offers from any person or entity
relating to any acquisition or purchase of assets of or any equity interest in
HVJ or any affiliate thereof or any tender offer (including a self-tender
offer), exchange offer, merger, consolidation, business combination, sale of a
substantial amount of assets or sale of securities, liquidation, dissolution or
similar transaction involving HVJ or its affiliates (a "Transaction Proposal");
(b) enter into or participate in any discussions or negotiations regarding a
Transaction Proposal, or furnish to any other person or entity any information
with respect to the business, properties or assets of HVJ or its affiliates in
connection with a Transaction Proposal; or (c) otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage any effort or attempt
by any other person to do or seek a Transaction Proposal. HVJ or the HVJ
Shareholder shall promptly notify Acquiror if any such proposal or offer, or any
inquiry or contact with any person or entity with respect thereto is made.
5.3 INTERIM OPERATIONS.
During the period from the date of this Agreement and continuing
until the Closing:
(a) INTERIM OPERATIONS OF HVJ. HVJ agrees (except as expressly
contemplated by this Agreement, including any Exhibits and Schedules hereto, or
to the extent that Acquiror shall otherwise consent in writing) that as to HVJ:
(i) Ordinary Course. HVJ shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(ii) Dividends; Changes in Stock. HVJ shall not and shall not
propose to (a) declare, set aside or pay any dividend, on, or make other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue, authorize or
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propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (c) redeem, repurchase or otherwise
acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(iii) Issuance of Securities. Except as contemplated by this
Agreement, HVJ shall not sell, issue, pledge, authorize or propose the sale or
issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(iv) Governing Documents. HVJ shall not amend its articles of
incorporation or its Bylaws.
(v) No Dispositions. HVJ shall not sell, lease, pledge, encumber
or otherwise dispose of or agree to sell, lease, pledge, encumber or otherwise
dispose of, any of its assets that are material or any other assets except in
the ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $25,000.
(vi) Indebtedness. HVJ shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
instruments of HVJ or guarantee any debt of others other than in the ordinary
course of business consistent with prior practice and in no event amounting in
the aggregate to more than $25,000 without the prior written consent of
Acquiror.
(vii) Disposition of Personal Property. HVJ shall not dispose of
any of its personal property, equipment, furniture and fixtures now located in
or upon its leased premises or any of its personal property which is used in the
operation of its business.
(viii) Benefit Plans; Etc. HVJ shall not adopt or amend in any
material respect any collective bargaining agreement or Employee Benefit Plan
(as defined herein).
(ix) Executive Compensation. HVJ shall not grant to any
executive officer any increase in compensation or in severance or termination
pay, or enter into any employment agreement with any executive officer.
(x) Acquisitions. HVJ shall not acquire (by merger,
consolidation or acquisition of stock or assets or otherwise) any corporation,
partnership or other business organization or subdivision thereof, or make any
investment by either purchase of stock or securities, contributions to capital ,
property transfer or, except in the ordinary course of business, purchase of any
property or assets, of any other individual or entity.
(xi) Tax Elections. HVJ shall not make any material tax election
or settle or compromise any material federal, state, local or foreign tax
liability.
(xii) Waivers and Releases. HVJ shall not waive, release, grant
or transfer any rights of material value or modify or change in any material
respect any Corporation Agreement other than in the ordinary course of business
and consistent with past practice.
(xiii) Other Actions. HVJ shall not enter into any agreement or
arrangement to do any of the foregoing. HVJ shall not take any action, or fail
to take any action, that is reasonably likely to result in any of the
representations and warranties of HVJ set forth in this Agreement becoming
untrue in any material respect.
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(b) INTERIM OPERATIONS OF ACQUIROR AND SUB. Acquiror and Sub jointly
and severally agree (except as expressly contemplated by this Agreement,
including any Exhibits and Schedules hereto, or to the extent that HVJ and the
HVJ Shareholder shall otherwise consent in writing or to the extent required to
permit Acquiror to meet its obligations under Section 5) that:
(i) Ordinary Course. Acquiror shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization
(provided that such obligation shall not relate to the officers and employees of
Acquiror or any of its subsidiaries including the Sub) and preserve its
relationships with customers, suppliers and others having business dealings with
it. The Sub shall conduct no business activity other than in connection with the
transactions contemplated by this Agreement in connection with the Merger.
(ii) Potential Acquisitions and Issuance of Securities. As part
of its overall business strategy, Acquiror is presently in negotiations with
other companies that may be suitable acquisition targets. Acquiror may,
therefore, make one or more acquisitions prior to the Closing, and in connection
therewith, may be caused to issue additional securities, of whatever nature and
number, in connection with such acquisitions. In addition, Acquiror may also be
caused to issue additional securities, of whatever nature and number, in
connection with certain private placement transactions which may be undertaken
between the date hereof and the Closing.
(iii) Dividends; Changes in Stock. Neither Acquiror nor the Sub
shall (and shall not propose to) (a) declare or pay any dividend, on, or make
other distributions in respect of, any of its capital stock, (b) split, combine
or reclassify any of its capital stock or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (c) repurchase or otherwise acquire any shares
of its capital stock or (d) otherwise change its capitalization.
(iv) No Dispositions. Acquiror shall not sell, lease, pledge,
encumber or otherwise dispose of, or agree to sell, lease, pledge, encumber or
otherwise dispose of, any of its assets that are material, or any other assets
except in the ordinary course of business consistent with prior practice.
(v) Benefit Plans, Etc. Neither Acquiror nor the Sub shall adopt
or amend in any material respect any collective bargaining agreement or Employee
Benefit Plan (as defined herein).
(vi) Other Actions. Neither Acquiror nor the Sub shall enter
into any agreement or arrangement to do any of the foregoing. Neither Acquiror
nor the Sub shall take any action, or fail to take any action, that is
reasonably likely to result in any of their representations and warranties set
forth in this Agreement becoming untrue in any material respect.
5.4 CONSENTS.
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Acquiror, Sub, HVJ and the HVJ Shareholder shall cooperate and use
their best efforts to obtain, prior to the Closing, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts as are necessary for the consummation of
the transactions contemplated by this Agreement; provided, however, that no loan
agreement or contract for borrowed monies shall be repaid and no contract shall
be amended materially to increase the amount payable thereunder or otherwise to
be materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto.
5.5 FILINGS.
Acquiror, the Sub, HVJ and the HVJ Shareholder shall, as promptly as
practicable, make any required filing, and any other required submissions, under
any law, statute, order rule or regulation with respect to the Merger and the
related transactions and shall cooperate with each other with respect to the
foregoing.
5.6 ALL REASONABLE EFFORTS.
Subject to the terms and conditions of this Agreement and to the
fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.7 PUBLIC ANNOUNCEMENTS.
Acquiror, the Sub, HVJ and the HVJ Shareholder shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this agreement or the other transactions
contemplated by this Agreement and shall not issue any other press release or
make any other public statement without prior consultation with the other
parties, except as may be required by law or, with respect to Acquiror, by
obligations pursuant to any listing agreement with an national securities
exchange.
5.8 NOTIFICATION OF CERTAIN MATTERS.
HVJ and the HVJ Shareholder shall give prompt notice to Acquiror,
and Acquiror and the Sub shall give prompt notice to HVJ and the HVJ
Shareholder, of (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which would cause any of its representations or
warranties in this Agreement to be untrue or inaccurate in any material respect,
as to HVJ and the HVJ Shareholder, at or prior to the Closing, and, as to
Acquiror and Sub, as of the Closing and (b) any material failure of HVJ and the
HVJ Shareholder, on the one hand, or Acquiror or the Sub, on the other hand, as
the case may be, to comply with or satisfy any
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covenant, condition or agreement to be complied with or satisfied by them under
this Agreement; provided, however, the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available to the party
receiving such notice under this Agreement as expressly provided in this
Agreement.
5.9 EXPENSES.
All costs and expenses incurred in connection with the Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated, provided that, the costs and
expenses of HVJ incurred in connection with the contemplated transactions shall
be borne by the HVJ Shareholder.
5.10 FINANCIAL STATEMENTS.
(a) Within seventy-five (75) days of the Closing, the Surviving
Corporation shall cause to be prepared an audit of the Financial Statements of
HVJ (the "Audited Financial Statements"). The Audited Financial Statements shall
not reflect any material adverse changes from the Financial Statements or
reflect any material contractions in the operations of the business. If the
stockholder's equity reflected on the Audited Financial Statements is more than
the amount reflected on the Financial Statements, or if the product of dividing
the stockholders equity reflected on the Audited Financial Statements by the
stockholder's equity reflected on the Financial Statements is greater than
Ninety Five Percent (95%), then there shall exist no deficiency. If the product
of dividing the stockholder's equity reflected on the Audited Financial
Statements by the stockholder's equity reflected on the Financial Statements is
less than Ninety Five Percent (95%), then the entire amount of such difference
between the stockholder's equity reflected on each of the Audited Financial
Statements and the Financial Statements shall constitute a deficiency hereunder
(the "Deficiency"), and shall be applied against, on a dollar for dollar basis,:
(i) first, the Escrow Cash; and
(ii) second, the Escrow Shares.
(b) The cost of the Audited Financial Statements shall be borne by
the Acquiror. The HVJ Shareholder shall take all reasonable actions and provide
whatever cooperation is necessary to facilitate the prompt preparation of the
Audited Financial Statements.
5.11 DOCUMENTS AT CLOSING.
Each party to this Agreement agrees to execute and deliver at the
Closing those documents identified in Section 2.2.
5.12 RELEASE AND PAYMENT OF CERTAIN LOANS.
(a) Acquiror agrees to release, remise and forever discharge certain
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indebtedness of the HVJ Shareholder which is owed to HVJ, as reflected on the
Financial Statements of HVJ, which amount shall not exceed $60,000.
(b) Acquiror agrees to use its best efforts to remove the HVJ
Shareholder as guarantor to any of the outstanding indebtedness of the Company
reflected on the Financial Statements, which he may have personally guaranteed.
(c) Each party to this Agreement agrees to take all actions
necessary to satisfy at Closing that promissory note from HVJ to ▇▇▇▇▇ ▇▇▇▇▇,
(the "Colby Note"); provided however, the amount necessary to satisfy the Colby
Note shall not exceed $63,000.
5.13 PROHIBITION ON TRADING IN ACQUIROR STOCK.
HVJ and the HVJ Shareholder acknowledge that the United States
Securities Laws prohibit any person who has received material non-public
information concerning the matters which are the subject matter of this
Agreement from purchasing or selling the securities of the Acquiror, or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of the Acquiror. Accordingly, the HVJ Shareholder agrees that he will not
purchase or sell any securities of the Acquiror, or communicate such information
to any other person under circumstances in which it is reasonably foreseeable
that such person is likely to purchase or sell securities of the Acquiror, until
no earlier than 72 hours following the dissemination of a Current Report on Form
8-K to the SEC announcing the Closing pursuant to this Agreement.
5.14 ACKNOWLEDGMENT OF APPROVALS.
By virtue of their respective signatures to this Agreement,
Acquiror, Sub, HVJ and the HVJ Shareholder acknowledge their approval of this
Agreement and their consent to the consummation of the transactions identified
herein.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF HVJ AND THE HVJ SHAREHOLDER.
The obligations of HVJ and the HVJ Shareholder to consummate the
Merger and the other transactions contemplated to be consummated by it at the
Closing are subject to the satisfaction (or waiver by HVJ and the HVJ
Shareholder) at or prior to the Closing (or at such other time prior thereto as
may be expressly provided in this Agreement) of each of the following
conditions:
(a) The representations and warranties of Acquiror and the Sub set
out in this Agreement shall be true and correct in all material respects at and
as of the time of the
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Closing as though such representations and warranties were made at and as of
such time.
(b) Each of Acquiror and the Sub shall have complied in a timely
manner and in all material respects with the respective covenants and agreements
set out in this Agreement.
(c) The Merger shall have been approved by Acquiror and Sub in
accordance with the provisions of the DGCL. The Board of Directors of Acquiror
and the Board of Directors of Sub and Acquiror, as sole shareholder of Sub,
shall have approved the execution of this Agreement and the Merger thereby.
(d) Acquiror shall enter into an Employment Agreement with the HVJ
Shareholder upon terms and conditions mutually satisfactory to Acquiror and the
HVJ Shareholder.
(e) Acquiror shall enter into a Registration Rights Agreement the
form of which is attached hereto as Exhibit 2.2(a)(x).
(f) There shall be delivered to HVJ and the HVJ Shareholder an
officer's certificate of Acquiror and Sub to the effect that all of the
representations and warranties of Acquiror and Sub set forth herein are true and
complete in all material respects as of the Closing, and the Acquiror and Sub
have complied in all material respects with their covenants and agreements set
forth herein that are required to be complied with by the Closing.
(g) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(h) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
(i) Acquiror shall use its best efforts to remove the HVJ
Shareholder as guarantor to any of the outstanding indebtedness of the Company
reflected on the Financial Statements, which he may have personally guaranteed.
(j) Acquiror shall release, remise and forever discharge certain
indebtedness of the HVJ Shareholder which is owed to HVJ, as reflected on the
Financial Statements of HVJ, which amount shall not exceed $60,000.
(k) Acquiror shall satisfy the Colby Note; provided however, the
amount necessary to satisfy the Colby Note shall not exceed $63,000.
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(l) HVJ and the HVJ Shareholder shall have received an opinion of
counsel issued by counsel to Acquiror in satisfactory form and content.
6.2 CONDITIONS TO ACQUIROR'S AND THE SUB'S OBLIGATIONS.
The obligations of Acquiror and the Sub to consummate the Merger and
the other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by Acquiror) at or prior to the Closing
(or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) The HVJ Shareholder shall not have filed with HVJ, prior to the
HVJ shareholder meeting at which a vote is to be taken with respect to a
proposal to approve this Agreement, a written objection to such proposed action,
as required by Section 5.12 of the TBCA in order for such shareholder to perfect
the right to dissent from such proposed action.
(b) The representations and warranties of HVJ and the HVJ
Shareholder set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations and
warranties were made at and as of such time.
(c) HVJ and the HVJ Shareholder shall have complied in a timely
manner and in all material respects with its covenants and agreements set out in
this Agreement.
(d) There shall be delivered to Acquiror and Sub an officer's
certificate of HVJ to the effect that all of the representations and warranties
of HVJ set forth herein are true and complete in all material respects as of the
Closing, and that HVJ has complied in all material respects with covenants and
agreements set forth herein required to be complied with by the Closing; and
there shall be delivered to Acquiror and Sub a certificate signed by the HVJ
Shareholder to the effect that the representations and warranties of the HVJ
Shareholder set forth herein are true and correct in all material respects and
that the HVJ Shareholder has complied in all material respects with its
covenants and agreements set forth herein required to be complied with by
Closing.
(e) The HVJ Shareholder shall have entered into an Employment
Agreement upon terms and conditions mutually satisfactory to Acquiror and the
HVJ Shareholder.
(f) The HVJ Shareholder shall have entered into a Registration
Rights Agreement, the form of which is attached hereto as Exhibit 2.2(a)(x).
(g) The HVJ Shareholder shall have entered into an Escrow Agreement,
the form of which is attached hereto as Exhibit 1.4(a).
(h) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this
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Agreement) to complete the Merger shall have been secured.
(i) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
(j) The Board of Directors of HVJ and the HVJ Shareholder shall have
approved the Merger in accordance with the TBCA.
(k) Any interim period subsequent to the fiscal year ended December
31, 1997 up to the Closing, shall reflect no contraction in HVJ's level of
revenues, income and net worth as determined on a basis consistent with HVJ's
past practices and accounting methods.
(l) Acquiror shall have received an opinion of counsel issued by
counsel to HVJ and the HVJ Shareholder in satisfactory form and content.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION.
(a) HVJ Shareholder. The HVJ Shareholder shall indemnify, defend and
hold harmless Acquiror and Sub from and against any and all demands, claims,
actions or causes of action, judgments, assessments, losses, liabilities,
damages or penalties and reasonable attorneys' fees and related disbursements
(collectively, "Claims") incurred by Acquiror or Sub which arise out of or
result from a misrepresentation, breach of warranty, or breach of any covenant
or agreement of HVJ or the HVJ Shareholder contained herein or in the Schedules
annexed hereto or in any deed, exhibit, closing certificate, schedule or any
ancillary certificates or other documents or instruments furnished by HVJ or the
HVJ Shareholder pursuant hereto or in connection with the transactions
contemplated hereby or thereby.
(b) Acquiror and Sub. Acquiror and Sub shall indemnify, defend and
hold harmless HVJ and the HVJ Shareholder from and against any and all Claims,
as defined at subsection 7.1(a) above, incurred by HVJ and/or the HVJ
Shareholder which arise out of or result from a misrepresentation, breach of
warranty or breach of any covenant of Acquiror and Sub contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by Acquiror or the Sub pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any Claim for which
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a party (the "Indemnitee") would be entitled to indemnification under this
Agreement is asserted against or sought to be collected from the Indemnitee by a
third party the Indemnitee shall promptly notify the other party (the
"Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document is
required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control, any
such defense or settlement, it may do so at its sole cost and expense. If the
Indemnitor has disputed the Claim, as provided above, and shall not defend such
Claim, the Indemnitee shall have the right to control the defense or settlement
of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor
for its reasonable costs and expenses of such defense.
(ii) Non-Third Party Claims. In the event that the Indemnitee
should have a Claim for indemnification hereunder which does not involve a Claim
being asserted against it or sought to be collected by a third party, the
Indemnitee shall promptly send a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice
Period that it disputes such Claim, the Indemnitor shall pay the amount thereof
to the Indemnitee. If the Indemnitor disputes the amount of such Claim, the
controversy in question shall be submitted to arbitration pursuant to Section
9.8 hereafter.
(iii) Right of Set-Off. In the event a Claim arises pursuant to
subparagraph 7.1(a), in addition to any of its other rights under this Section
7, Acquiror shall have the right to apply the amount of the Claim against the
amounts identified at subparagraph 1.4(b); provided, however, that this
subparagraph shall not be the exclusive remedy of Acquiror in the event a Claim
arises pursuant to subparagraph 7.1(a).
ARTICLE VIII
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated and the Merger may be abandoned at
any time prior to or at the Closing:
(a) by mutual written consent of the board of directors of
Acquiror, the Sub,
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HVJ and the HVJ Shareholder;
(b) by any of Acquiror, the Sub, HVJ or the HVJ Shareholder;
(i) if the Closing shall not have occurred on or before [MARCH
18, 1998], unless otherwise extended in writing by all of the parties hereto;
provided, however, that the right to terminate this Agreement under this Section
8.1(b)(i) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any governmental
body, regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or filing or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by HVJ and the HVJ Shareholder if any of the conditions
specified in Section 6.1 have not been met or if satisfaction of such a
condition is or becomes impossible (other than through the failure of HVJ or the
HVJ Shareholder to comply with their respective obligations under this
Agreement) and HVJ and the HVJ Shareholder have not waived such conditions on or
before the Closing; or
(d) by Acquiror and Sub if any of the conditions specified in
Section 6.2 have not been met or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Acquiror or Sub to comply
with their respective obligations under this Agreement) and Acquiror and Sub
have not waived such condition on or before the Closing.
8.2 NOTICE AND EFFECT OF TERMINATION.
In the event of the termination and abandonment of this Agreement
pursuant to Section 8.1, written notice thereof shall forthwith be given to the
other party or parties specifying the provision pursuant to which such
termination is made. In the event of termination pursuant to Section 8.1(a),
8.1(b), Section 8.1(c) in respect of the conditions specified in Sections
6.1(h), and (i), or Section 8.1(d) in respect of the conditions specified in
Sections 6.2(i) and (j), upon termination, this Agreement shall forthwith become
void and all obligations of the parties under this Agreement will terminate
without any liability on the part of any party or its directors, officers or
shareholders and none of the parties shall have any claim or action against any
other party, except that the provisions of this Section 8.2 and Section 5.2, 5.7
and 5.9, shall survive any termination of this Agreement. Notwithstanding the
foregoing, if the Agreement is terminated by a party pursuant to Section 8.1(c)
in respect of conditions specified in Sections 6.1 other than Section 6.1(h) and
(i) or pursuant to Section 8.1(d) in respect of the conditions specified in
Section 6.2 other than Section 6.2(i) and (j), the terminating party's right to
pursue all legal remedies will survive such termination unimpaired. Nothing
contained in this Section 8.2 shall relieve any party from any liability for any
breach of this Agreement other than in the event of a termination pursuant to
Section 8.1.
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8.3 EXTENSION; WAIVER.
Any time prior to the Closing, the parties may (a) extend the time
for the performance of any of the obligations or other acts of any other party
under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
8.4 AMENDMENT AND MODIFICATION.
This Agreement may be amended, whether before or after the vote of
the HVJ Shareholder or shareholders of Acquiror, by written agreement of
Acquiror, the Sub, HVJ and the HVJ Shareholder; provided, however, that after
the approval, if any, of this Agreement by the HVJ Shareholder, no such
amendment shall reduce or change the consideration to be received by any HVJ
Shareholder in connection with the Merger as set out in Section 1.3 hereof or
shall otherwise adversely affect the rights under this Agreement of the HVJ
Shareholder without the approval of such adversely affected shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of Acquiror, the Sub, HVJ and the HVJ Shareholder.
ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES.
All representations, warranties, covenants, and obligations in this
Agreement, the schedules and any other certificate or document delivered
pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
The rights and remedies of the parties to this Agreement are
cumulative, not alternative. In addition to their respective rights to damages
or other remedies they may have, and without limitation thereof, Acquiror and
Sub shall have the right to obtain injunctive relief to restrain any breach or
otherwise to specifically enforce the provisions of this Agreement, it being
agreed by the parties that money damages alone would be inadequate to compensate
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Acquiror and Sub for such breach or other failure to perform the obligations of
HVJ and the HVJ Shareholder under this Agreement.
9.2 NOTICES.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date if delivered personally, or
upon the second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to HVJ to it at: with a copy to:
▇.▇. ▇▇▇▇▇, Inc. ▇▇▇▇ ▇▇▇▇▇▇, Esquire
1626 ▇▇▇▇ ▇▇▇ Houston ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
Parkway North ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
(b) if to Acquiror or the Sub to it at: with a copy to:
Pacific Rim Entertainment, Inc. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
1661 E. Camelback Road ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, P.C.
Suite 245 Eleven Penn Center, 14th Floor
Phoenix, AZ 85016 ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.3 ENTIRE 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.
9.4 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.
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9.5 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.
9.6 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.
9.7 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
9.8 ARBITRATION.
If a dispute arises as to the interpretation of this Agreement, it
shall be decided finally in an arbitration proceeding conforming to the Rules of
the American Arbitration Association applicable to commercial arbitration then
in effect at the time of the dispute. The arbitration shall take place in
Phoenix, Arizona. The decision of the Arbitrators shall be conclusively binding
upon the parties and final, and such decision shall be enforceable as a judgment
in any court of competent jurisdiction. The parties shall share equally the
costs of the arbitration.
9.9 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.
9.10 RELEASE AND DISCHARGE.
By virtue of their execution of this Agreement, as of the Closing
and thereafter, the HVJ Shareholder hereby agrees to release, remise and forever
discharge HVJ from and against any and all debts, obligations, liabilities and
amounts owing from HVJ to the HVJ Shareholder prior to the Closing, and HVJ is
not obligated to take any action or make any payments to third parties on behalf
of the HVJ Shareholder.
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9.11 CERTAIN DEFINITIONS.
As used herein:
(a) "AFFILIATE" shall have the meanings ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended to date (the "Exchange Act");
(b) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or a day on which federally chartered financial institutions are not open for
business in the City of Phoenix, Arizona.
(c) "KNOWLEDGE" shall mean the actual current knowledge of the
executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities.
(d) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(e) "PERSON" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof; and
(f) "SUBSIDIARY" shall mean, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which is
owned directly or indirectly, or a majority of the board of directors of which
may be elected, by such entity.
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IN WITNESS WHEREOF, Acquiror, the Sub, HVJ and the HVJ Shareholder
have caused this Agreement to be signed by their respective officers hereunto
duly authorized, all as of the date first written above.
Attest: PACIFIC RIM ENTERTAINMENT, INC.
By: ▇▇▇▇▇ ▇▇▇▇▇ By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------- -----------------------------------
Name:
Title: President
Attest: ▇▇▇▇▇ ACQUISITION CORP.
By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------- -----------------------------------
Name:
Title: President
Attest: ▇.▇. ▇▇▇▇▇, INC.
By: ▇▇▇▇ ▇. ▇▇▇▇▇ By: ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------- -----------------------------------
Name:
Title:President
HVJ SHAREHOLDER:
Witness
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------- -----------------------------------
Name: Signature
--------------------------------- Name:
Address: Address:
------------------------------ -----------------------------
---------------------------------- -----------------------------------
Percentage of Ownership:
--------------
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