STOCK ACQUISITION AND OPTION
AGREEMENT
This Stock Acquisition and Option Agreement (the "Agreement") dated effective
as of the day of November 1999, is made by and between MERCHANT CAPITAL
HOLDINGS, a British Virgin Islands corporation ("MCH")(MCH is sometimes
referred to as the "Purchaser") and XXXXXXX INTERNATIONAL, INC., a Delaware
corporation ("HII") and is joined in by Xxxxxx X. Xxxxx, an individual
resident of Texas ("Marks") and Xxxx X. Xxxxxx, an individual resident of
Texas ("Xxxxxx"), Xxxxxxxx Xxxx, an individual resident of United Kingdom
("Dart") and Xxxxxx Xxxxxxxx, an individual resident of the United Kingdom
("Xxxxxxxx") and provides as follows:
RECITALS
HII desires to sell, and the Purchaser desires to purchase 1,000,000 shares
(the "Shares") of the authorized Class A $.O1 par value voting common capital
stock of HII (the "Stock");
As part of the agreement of the Purchaser to purchase the Shares, Purchaser
requires that HII issue options to Purchaser to purchase additional shares of
Stock;
Dart and Xxxxxxxx are affiliated with or are consultants and advisors to MCH;
Xxxxxx and Marks are the current executive officers and management of HII;
Purchaser also requires that Xxxxxx and Marks enter into three year employment
agreements with HII with appropriate noncompetition and confidentiality
covenants and as an inducement to provide for certain options for Xxxxxx and
Marks to purchase additional shares of Stock;
In consideration of the mutual promises of the parties; in reliance on the
representations, warranties, covenants, and conditions contained in this
Agreement; and for other good and valuable consideration, the parties agree as
follows:
ARTICLE 1
PURCHASE OF STOCK
1.01. Purchase of Stock. HII agrees to sell, convey, transfer, assign, and
deliver to MCH 1,000,000 (One Million) shares of the Stock, and MCH agrees to
purchase such Shares from HII for the sum of $US 1.00 per share ($1,000,000.00
in total)(the purchase price of the entire 1,000,000 shares of Stock is
sometimes hereinafter referred to as the "Full Purchase Price").
1.02. Closing of Purchases. On or before ten days after execution of this
Agreement (the "Initial Closing Date"), MCH shall purchase 250,000 Shares. MCH
agrees to close the purchase of an additional 250,000 Shares not later than
seven months after the Initial Closing Date. MCH agrees to close the purchase
of the remaining 500,000 Shares not later than eleven months after the Initial
Closing Date. After the Initial Closing Date, there may be multiple closings,
provided that each closing is for not less than 25,000 shares. At the
closings, the Purchaser shall tender certified funds in US$ by wire transfer
or cashier's check to HII, and HII shall tender to the Purchaser the original
certificate(s) evidencing the Shares being purchased. The shares, when
delivered to and accepted by Purchaser, shall be free and clear of all adverse
claims, security interests, liens, claims and encumbrances (other than
restrictions under applicable securities laws and Section V - Voting
Agreements of the Shareholders Agreement, hereafter defined). As an
alternative, at the request of either party, HII shall engage a bank local to
HII, having assets of at least US$ 1.0 billion, to serve as escrow agent (the
"Escrow Agent") for the receipt of the purchase price and delivery of the
original Share certificate(s). Purchaser shall be deemed to be in default
under this Agreement if HII does not receive the full purchase price for the
Shares being purchased according to the schedule set forth in this Paragraph
1.02 by the close of business on the dates specified, subject to Paragraph
1.06 hereof. (The date of the timely receipt by HII of the Full Purchase Price
pursuant to this Paragraph 1.02 is referred to hereinafter as the "Final
Closing Date").
1.03 Option of HII to Repurchase the Shares. In the event that Purchaser
fails to tender the Full Purchase Price in accordance with the timetable and
procedures set forth in Paragraph 1.02 above, HII shall have the exclusive
continuing two-year option (but not the obligation) to repurchase all Shares
sold to Purchaser pursuant to this Agreement for a purchase price of $US 1.00
per share. This option shall be the exclusive remedy of HII for the failure of
Purchaser to purchase the Shares.
1.04 Compliance with Securities Laws. Purchaser and HII agree to comply with
all securities laws applicable to each in the performance of this Agreement,
including U.S. federal securities laws and the laws of any other jurisdiction
to which each may be subject. Purchaser acknowledges that within ten (10) days
of the Initial Closing Date Purchaser may be required to file a Form 13D with
the Securities Exchange Commission (the "SEC").
1.05 Restrictions on Transfer. Purchaser understands and agrees that,
notwithstanding the registration of the Shares by HII, Purchaser may be deemed
an affiliate of 1111 and its Shares deemed "restricted securities" subject to
the resale restrictions of the Securities Act of 1933 (the "Act") and Rule 144
promulgated thereunder. In addition, the Shares shall be subject to the
Shareholders Agreement (hereafter defined) which imposes certain agreements
and restrictions on the voting of the Shares.
1.06 Subsequent Closings and Recision Rights. The obligation of MCH to
purchase the Shares after the Initial Closing Date is subject to the truth and
accuracy (in all material respects) of the representations and warranties of
HII under Article 6 hereof as of the Initial Closing Date. !n the event that
there is pending or threatened litigation by a third party shareholder against
HII or management of HII relating to this Agreement, the Shares, the Purchaser
Options or the Employee Options on or prior to the Final Closing Date, MCH may
elect, by written notice to HII prior to the Final Closing Date, to terminate
this Agreement and any future obligations and rights to acquire Shares or
Purchaser Options hereunder and rescind the transactions already consummated
by such time. In the event of such recision, MCH shall return all
certificates evidencing the Shares properly endorsed to HII, the Purchaser
Options shall be canceled and HII shall return to MCH (without interest
thereon) all funds received by HII for the Shares. Such funds shall be
returnable in a lump sum within forty-five (45) days of the notice of
recision from MCH, provided that HII has adequate cash reserves and liquidity
to make such lump sum payment and continue its normal operations with a
reasonable liquid reserve. If HII does not have such liquid reserves when the
notice of recision is received, HII may return to MCH such funds pursuant to
a promissory note bearing ten percent (10%) interest and having a final
maturity date of not more than three years. Upon the closing of such
recision, the parties shall execute a mutual release and termination
agreement.
ARTICLE 2
PURCHASER STOCK OPTIONS
2.01 Issuance of Options to Purchaser. Upon a closing of the issuance of
Shares to MCH pursuant to Paragraph 1.02 hereof, HII shall grant to MCH the
right to purchase one share of Stock for each US$1.00 received by HII at such
closing. Upon receipt of the Full Purchase Price on the Final Closing Date,
HII shall grant to MCH the right to purchase an additional 1,000,000 shares of
Stock (such option shares are collectively referred to as the "Purchaser
Option Shares", and the right to purchase the Purchaser Option Shares is
called the "Purchaser Options").
2.02 Exercise of Purchaser Options. The Purchaser Options are exercisable
commencing on January 1, 2000, and, if not exercised by Purchaser shall
automatically expire on December 31, 2005 (the period during which the
Purchaser Options may be exercised is called the ("Purchaser Option Period").
The Purchaser Options may be exercised in whole or in part at any time during
the Purchaser Option Period by written notice to HII. (the "Notice")
accompanied by a tender of the Purchaser Exercise Price (as hereafter defined)
for the number of shares being purchased.
2.03 Exercise Price. The price payable to HII for the shares issued upon
exercise of Purchaser Options (the "Purchaser Exercise Price") is determined
based on the later of the date of the Notice or the tender of the full
Purchaser Exercise Price for the number of shares being purchased, as follows:
January 1, 2000 to December 31, 2000: $US 1.00 per share
January 1, 2001 to December 31, 2001: $US 1.10 per share~
January 1, 2002 to December 31, 2002: $US 1.20 per share
January 1, 2003 to December 31, 2003: $US 1.30 per share
January 1, 2004 to December 31, 2004: $US 1.40 per share
January 1, 2005 to December 31, 2005: $US 1.50 per share
2.04 Closing. Closing shall occur as soon as possible following receipt of
the Notice by HII and shall be effected through HII or the Escrow Agent.
2.05 Restrictions on Transfer. The Purchaser Option Shares shall be
registered with the SEC, but Purchaser acknowledges that the Purchaser may be
deemed an affiliate of HII and the Purchaser Option Shares may be deemed
"restricted securities" subject to the resale restrictions of the Act and Rule
144 promulgated thereunder unless such shares are registered in accordance
with Article 5 hereof. In addition, the Purchaser Options and the Purchaser
Option Shares shall be subject to the Shareholders Agreement (hereafter
defined) which imposes certain restrictions on transfer and voting.
ARTICLE 3
AGREEMENTS WITH MANAGEMENT
3.01 Employment Agreement. HII, Xxxxxx and Marks agree to enter into three
(3) year employment agreements (the "Employment Agreements"), effective as of
the Initial Closing Date. The Employment Agreements shall contain
noncompetition covenants, confidentiality provisions and shall be
substantially in the form of Exhibit "A" attached hereto and made a part
hereof. In connection with and as a condition to the Employment Agreements,
HII shall grant to Xxxxxx and Marks certain Employee Stock Options in
accordance with Article 4 hereof.
3.02 Board of Directors. On the Initial Closing Date, Xxxxxx and Marks agree
to increase the board of directors of HII to four (4) members. Xxxxxx and
Marks agree to appoint Dart and Xxxxxxxx to the board, with Dart becoming
Chairman of the Board. Xxxxxx and Marks also agree to cause HII to modify its
bylaws such that one director, on a rotating quarterly basis, shall be
designated to cast a deciding vote in the event of a director deadlock.
However, any proposal before the board of directors that would have the effect
of modifying this Agreement shall require unanimous consent of the directors.
The designated director for the three months following the Initial Closing
Date shall be Marks, who will then be followed in the next three month periods
by Dart, Xxxxxx and Xxxxxxxx respectively.
3.03 Shareholders Agreement. The Purchaser, Xxxxxx, and Marks (or the
affiliates of any of them, including without limitation, Marks & Associates,
Inc., Xxxxxx Family Interests,
Inc., Dart, and Xxxxxxxx) agree to enter into a shareholders and voting
agreement, substantially in the form of Exhibit "B" attached hereto and made a
part hereof (the "Shareholders Agreement"). The Shareholders Agreement shall
cover any shares of Stock currently owned or hereafter acquired by or
controlled by any of the parties thereto, including any shares of Stock issued
by virtue of any Purchaser Options or Employee Options referenced in this
Agreement.
ARTICLE 4
EMPLOYEE STOCK OPTIONS
4.01 Issuance of Options to Xxxxxx and Marks. The Employment Agreements shall
provide that HII shall grant to Xxxxxx (or his family interests) the right to
purchase 1,000,000 shares of Stock (the "Xxxxxx Option Shares") and shall
grant to Marks (or his family interests) the right to purchase 1,000,000
shares of Stock (the "Marks Option Shares") (collectively, the Xxxxxx Option
Shares and the Marks Option Shares are collectively called the "Employee
Option Shares"; the right to purchase the Employee Option Shares is called the
"Employee Options"). The Employee Options shall be nontransferable, except to
family interests of Xxxxxx and Marks.
4.02 Exercise of Employee Options. The Employee Options are exercisable
commencing on January 1, 2000, and, if not exercised by Employees shall
automatically expire on December 31, 2005 (the period during which the
Employee Options may be exercised is called the ("Employee Option Period").
The Employee Options may be exercised in whole or in part at any time during
the Employee Option Period by written notice to HII from the respective holder
of the Employee Options (the "Notice") accompanied by a tender of the Employee
Exercise Price (as hereafter defined) for the number of shares being
purchased.
4.03 Exercise Price. The price payable to HII for the shares issued upon
exercise of Employee Options (the "Employee Exercise Price") is determined
based on the later of date of the Notice or the tender in full of the Employee
Exercise Price, as follows:
January 1, 2000 to December 31, 2000: $US 1.00 per share
January 1, 2001 to December 31, 2001: $US 1.10 per share
January 1, 2002 to December 31, 2002: $US 1.20 per share
January 1, 2003 to December 31, 2003: $US 1.30 per share
January 1, 2004 to December 31, 2004: $US 1.40 per share
January 1, 2005 to December 31, 2005: $US 1.50 per share
4.04 Closing. Closing shall occur as soon as possible following receipt of the
Notice by HII and shall be effected through HII or the Escrow Agent.
4.05 Restrictions on Transfer. Employees acknowledge that the Employees may be
deemed affiliates of HII and the Employee Option Shares may be deemed
"restricted securities" subject to the resale restrictions of the Act and Rule
144 promulgated thereunder, unless such Shares are registered in accordance
with Article 5 hereof. In addition, the Employee Option Shares shall be
subject to the Shareholders Agreement which imposes certain restrictions on
transfer.
ARTICLE 5
REGISTRATION RIGHTS
5.01 Registrable Securities. "Registrable Securities" means the Shares,
Purchaser Option Shares and Employee Option Shares.
5.02 Demand Registration Rights. After the initial Closing Date (the
"Effective Date"), HII hereby agrees to file, at HII's cost and expense, upon
demand by any holder of Registrable Securities ("Demand Rights"), a
registration statement on any appropriate form under the Act with respect to
all of the Registrable Securities (the "Registration Statement"). HII agrees
to use its best efforts to have the Registration Statement declared effective
as soon as reasonably practicable after such filing and to keep the
Registration Statement continually effective for a period of two (2) years
following the date on which the Registration Statement is declared effective
by the Securities and Exchange Commission ("SEC") or until all Registrable
Securities included in the Registration Statement can be publicly offered and
sold without registration, whichever is earlier.
5.03 Incidental Registration Rights. Holders of the Registrable Securities
("Holders") and HII agree that if HII files a Registration Statement on a form
suitable for secondary offering whereby HII is offering shares to the public
for its own account (the "Secondary Offering"), and the Registrable Securities
are not covered by an effective Registration Statement or the Registrable
Securities cannot be publicly sold without registration, said Secondary
Offering will include, at HII's cost and expense (except underwriting
discounts, commissions ans filing fees relating to the Registrable Securities
held by the Holders and included therein), that the number of Registrable
Securities on a one-for-one basis with all other shares registered in the
Secondary Offering by HII, which inclusion is subject to the sole and absolute
discretion of the underwriter if the Secondary Offering is underwritten.
Holder's right to register shares in a subsequent Secondary Offering shall
also be on a one-for-one basis with all shares registered on behalf of HII up
to and until Holders have had an opportunity to register and sell all the
Registrable Securities, subject to the discretion of the underwriter involved
in the Second Offering.
5.04 Notice to Holders. HII shall promptly notify Holder of the occurrence of
any event as a result of which any prospectus included in a Registration
Statement filed pursuant to this Article 5 includes any misstatement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing.
5.05 Limitations on Obligations of HII. HII's obligations under this Article 5
with respect to Holders are expressly conditioned upon Holders promptly
furnishing to Hl! in writing such information concerning each Holder as HII
shall reasonably request for inclusion in the Registration Statement. If any
Registration Statement including the Registrable Securities is filed, HII
shall indemnify the Holders (and each underwriter for such holder and each
person, if any, who controls such underwriter within the meaning of the Act)
from any loss, claim, damage or liability arising out of or based upon any
untrue statement of a material fact contained in such Registration Statement
or any omissions to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except for
such statement or omission based on information furnished in writing by the
Holders expressly for use in such Registration Statement, each director and
each person, if any, who controls HII within the meaning of the Act against
any loss, claim, damage or liability arising from any such statement or
omission which was made in reliance upon information furnished in writing to
HII by the Holders expressly for use in such Registration Statement.
If all of the Registrable Securities are not included in the Secondary
Offering, the included Registrable Securities for each Holder shall be
determined on a pro rata basis between the Holders based on the percentage of
the Registrable Securities owned by each Holder.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF HII
In order to induce MCH to enter into this Agreement, except as disclosed in
writing to MCH, HII represents, warrants, and covenants to Purchaser,
effective as of the date of this Agreement and again as of the Initial Closing
Date, as follows:
6.01. Corporate Existence: Qualification. HII is a corporation duly organized,
validly existing and in good standing under the laws of the state in which it
is incorporated and is qualified or licensed and in good standing in all
jurisdictions in which the nature of its business or the properties owned by
it require or will require it to be qualified or licensed to do business. HII
has one wholly owned subsidiary, Hotel Management Group, Inc., which has six
wholly owned subsidiaries, Hotel Management Group (California), Hotel
Management Group (Tennessee), Hotel Management Group (Oklahoma), Hotel
Management Group (Virginia), HM Group (Alabama), and Hotel Management Group
(Mississippi)(collectively, the "Subsidiaries"). The term "HII" shall also
include the Subsidiaries, as applicable.
6.02. Capitalization. Hil has 9,000,000 shares of Class A, $.01 par value
Common Stock authorized, of which, HII believes 976,580 shares are issued and
outstanding. This number of shares has been repeatedly reported to HII by the
previous transfer agent for HH, Xxxxx Xxxxxx, and has been consistently
reported to the SEC as the number of shares outstanding. However, last
year HII changed transfer agents, and Xxxxx Xxxxxx delivered some shareholder
information to the new transfer agent that conflicts with all previous
reports. This information, which HII management believes to be erroneous,
indicates an additional approximately 54,000 of Class A shares outstanding.
HII has disputed this report and demanded that Xxxxx Xxxxxx provide supporting
documentation. Thus far, Xxxxx Xxxxxx has not provided any response or
explanation of the other than the letter attached as Exhibit "C" hereto. To
the best of HII's current knowledge, all issued and outstanding shares of
stock have been duly authorized and validly issued and are fully paid and
nonassessable. HII has 1,000,000 shares of Preferred Stock, $1.00 per share
par value, authorized, of which 243,331 preferred shares are issued and
outstanding. The outstanding preferred shares are nonvoting, noncumulative,
noneonvertible and provide for a 10% dividend (annually). There are no
outstanding subscriptions, options, contracts, commitments, warrants, calls,
agreements, understandings or other arrangements or rights of any character
affecting or relating in any manner to the issuance of stock or other
securities of HII (whether by subscription, option, exchange, right of
conversion, right of refusal or otherwise) or entitling anyone to acquire
shares of stock or other securities of any kind of HII.
6.03. Authority. HII has all requisite right, power and authority to own,
lease and operate its properties, and to carry on its business as its business
has previously been carried on. The execution, delivery and performance by Hil
of this Agreement and any other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, have been
duly authorized by HII. This Agreement and any other agreement contemplated
hereby and thereby have been or will be as of the Initial Closing Date and any
subsequent closing, duly executed and delivered by HII and constitutes or will
constitute a valid and legally binding obligation of HII, enforceable against
them in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
6.04 Absence of Certain Changes. Events or Conditions. Since June 30, 1999,
HII has:
(a) conducted its business in the ordinary course, not engaged or agreed to
engage in any extraordinary transactions or distributions, and not engaged or
agreed to engage in any other transaction except at arm's length and for fair
consideration; (b) not disposed of any of its assets, except in the ordinary
course of business; (c) not materially increased the level of compensation of
any employee; (d) not issued any stock or securities or rights with respect to
any stock or securities, or paid any dividends, redeemed any securities or
otherwise caused any assets to be distributed to any of its owners; (e) not
borrowed any funds under existing lines of credit or otherwise, except as
reasonably necessary for the ordinary operation of its business in a manner,
and in amounts, in keeping with historical practices, or made any loans or
guaranteed the obligations of any other persons; (t) not suffered any material
and adverse change in its assets, business, or operations, nor have any of its
assets suffered any material and adverse change in value other than ordinary
wear and depreciation; (g) not changed or amended its charter documents or
bylaws; (h) not entered into any contract, commitment, or transaction which is
not in the ordinary course of its business; and (i) not failed to keep its
properties and assets insured with at least as much liability and property
damage, fire, and other casualty coverage as was effective during 1998.
6.05. Tax Returns and Audits. To the best of its knowledge and belief, HII
has: (a) filed in accordance with applicable laws all federal, state, and
local tax returns required to be filed by it; (b) paid all taxes, assessments,
penalties, and interest charges shown to be due and payable on each such
return or otherwise due or to become due or required to be paid; and (c)
accrued or created reserves for all taxes due or to become due by it for all
periods ending before, on or with the date of this Agreement. To the best of
its knowledge and belief, the income tax liabilities of H!I have been
satisfied or properly accrued and reflected on its financial statements for
all taxable years prior to and including the taxable year ended September 30,
1999. HII has not been delinquent in the payment of any tax, assessment or
governmental charge, nor has any tax deficiency been proposed or assessed
against it which has not been satisfied. HII has not executed any waiver of
the statute of limitations on the assessment or collection of any tax.
6.06 Litigation. HII is not subject to or bound by any court, regulatory
commission, board or administrative judgment, order or decree, and no suit,
action, proceeding or other litigation in any court or before any
administrative or arbitration panel or commission or before or by any
governmental department or agency to which it is a party is pending.
6.07 Rights and Authorizations, HII owns or holds all licenses, permits,
approvals, and other authorizations (collectively "Authorizations") which are
used in or required in connection with HII's business. HII have no knowledge
and have not received any notice that any such Authorization is not valid or
sufficient or in full force and effect. Neither the execution and delivery nor
the consummation of the transactions contemplated hereby will cause a
termination of, or interfere in any respect with, the operation under any such
Authorizations.
6.08. Disclosure. No representation or warranty made by HII in this
Agreement or in any filings with the SEC as required under the Act or the
Securities Exchange Act of 1934 (the "Exchange Act") contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein not misleading.
6.09. Compliance with Laws. HII has conducted its business and used its
property in substantial compliance with all applicable federal, state and
local environmental, land use, and zoning laws and regulations, except where
the failure to comply with such laws and regulations, in the aggregate, has
not and will not have a material adverse effect on HII.
6.10 Indemnification. HII agrees to indemnify and hold harmless MCH, and its
directors, officers, agents and employees, from and against any and all loss,
damage or liability due to or arising out of a breach by the indemnifying
party of any representation or warranty contained in this Agreement.
Notwithstanding the foregoing, however, no representation, warranty,
acknowledgment or agreement made by HII shall in any manner be deemed to
constitute a waiver of any rights granted to HII under federal or state
securities laws.
6.11 Documents Genuine. All originals and/or copies of HII's articles of
incorporation and bylaws, each amended to date, and all minutes of meetings
and written consents in lieu of meetings of shareholders, directors and
committees of directors of HII, financial data and any and all other
documents, material, data, files or information which have been or upon
request will be furnished to Purchaser, are true, complete, correct and
unmodified originals and/or copies of such documents, information, data, files
or materials.
6.12 Consents/Approvals/Conflicts. Except for the compliance with applicable
federal and state securities laws, no consent, approval, authorization or
order of any court or governmental agency or other body is required for HII to
consummate the sale of the Shares. Neither the execution, delivery,
consummation or performance of this Agreement shall conflict with, constitute
a breach of HII's and its Subsidiaries' respective articles of incorporation
or bylaws, as amended to date, or any note, mortgage, indenture, deed of trust
or other agreement or instrument to which HII or any Subsidiaries are a party
or by which they are bound nor, to the best of HII's knowledge and belief, any
existing law, rule, regulation or any decree of any court or governmental
department, agency, commission, board or bureau, domestic or foreign, having
jurisdiction over HII, nor result in creation of any lien or other encumbrance
upon the Shares.
6.13 Environmental Matters. HII has received no written notice of any
investigation or inquiry by any governmental entity under any applicable laws
pertaining to the health or the environment, including without limitation (i)
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments ans Reauthorization Act of 1986,
as amended, and (ii) the Resource Conservation and recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
amended. To the actual knowledge of HII, HII has not disposed of any hazardous
substance on any property owned or leased by HII or its Subsidiaries and no
condition exists on such property which would subject HII or its Subsidiaries
or such property to any remedial obligations under any applicable
environmental laws.
6.14 Labor Relations. HII has not experienced and is not currently
experiencing, nor does HII know of any reason to expect, any labor troubles or
strikes, work stoppages, slow-downs or other material interference with
impairment of the business of HIl by labor, nor has HII committed any unfair
labor practice. HII is not currently experiencing, nor does HII know of, any
current or contemplated union organization effort or negotiations, or requests
for negotiations, for any representation or any labor contract relating to the
employees of HII.
6.15 Finder's Fee. HII is not, and neither HII not the Purchaser shall become,
obligated with respect to any finder's, broker's or agent's fee in connection
with the transaction contemplated hereby.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF MCH
MCH represents, warrants, and covenant to HII, effective as of the date of
this Agreement and again as of the Initial Closing Date, as follows:
7.01 Corporate Organization. MCH is a corporation duly organized, validly
existing and in good standing under the laws of the British Virgin Islands,
and has all requisite corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
7.02. Authorization. MCH has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
At Closing, the Board of Directors of MCH shall have duly authorized the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and no other corporate proceedings on the
part of MCH will be necessary to approve and authorize the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement shall have been duly executed and
delivered by MCH and constitute the valid and binding agreement of MCH,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium
and other similar laws affecting the enforcement of creditors' rights
generally and except as such enforceability may be affected by equitable
principles (whether considered in a proceeding at law or in equity).
7.03 Compliance with Securities Laws. MCH has complied with all securities
laws applicable to it in connection with the transactions contemplated by this
Agreement, including any applicable laws of any jurisdiction under which MCH
is incorporated or authorized to do business.
7.04 Experience and Knowledg~. MCH has such knowledge and experience in
financial and business matters that MCH is capable of evaluating the merits
and risks of an investment in the Company and the suitability of the
securities subscribed for as an investment for MCH.
7.05 Information Provided. MCH has received and has read H!I's most recent
Form 10-KSB annual report for the fiscal year ended September 30, 1998 and
Form 10-QSB quarterly report for the nine month period ended June 30, 1999, on
file with the SEC (all such reports, the "Public Information"). MCH has
received and read this Agreement, including all exhibits annexed hereto, and
MCH confirms that all documents, records and books pertaining to MCH's
proposed investment in H!I have been made available to MCH. MCH has had an
opportunity to ask questions of and received satisfactory answers from HII or
any person or persons acting on HII' s behalf, concerning the terms and
conditions of this investment, and all such questions have been answered to
the full satisfaction of the MCH. MCH has received no representations or
warranties from HII or its directors, officers, employees or agents, other
than those contained in the Public Information or this Agreement.
7.06 Speculative Investment. MCH represents that (i) it has been called to
MCH's attention, by those individuals with whom MCH has dealt in connection
with MCH ' s investment in HII, that MCH's investment in HII is speculative
and involves a high degree of risk of loss by MCH of MCH's entire investment
in HII and that MCH must bear the economic risk of such investment for an
indefinite period of time because there is currently no market for the Shares,
(ii) no assurances are or have been made regarding any economic advantages
(including tax) that may inure to the benefit of the MCH, (iii) no assurances
are or have been made concerning dividends or capital distributions by HII of
cash to its shareholders, and (iv) MCH is aware that MCH's subscription
constitutes an obligation of MCH, subject to Paragraph 1.06 hereof. MCH is
able to bear the economic risk of the investment in the securities subscribed
for, and MCH has sufficient net worth to sustain a loss of MCH' s entire
investment in HII without economic hardship if such a loss should occur;
7.07 No Assurance of Profit. MCH acknowledges and is aware that it never has
been represented, guaranteed, or warranted to MCH by any broker, HII, its
directors or officers, its agents or employees, or any other person, expressly
or by implication, any of the following: (i) the approximate or exact length
of time that MCH will be required to remain as owner of the Shares; (ii) the
percentage of profit and/or amount of or type of consideration, profit or loss
to be realized, if any, as a result of the investment in the Shares; or (iii)
that any future projections of HII will in any way indicate the predictable
results of the ownership of securities or of the overall financial performance
of HII.
7.08 Indemnification. MCH agrees to indemnify and hold harmless HII, and its
directors, officers, agents and employees, from and against any and all loss,
damage or liability due to or arising out of a breach by the indemnifying
party of any representation or warranty contained in this Agreement.
Notwithstanding the foregoing, however, no representation, warranty,
acknowledgment or agreement made herein by the MCH shall in any manner be
deemed to constitute a waiver of any rights granted to MCH under federal or
state securities laws.
ARTICLE 8
COVENANTS
HII hereby covenants and promises to Purchaser as follows:
8.01 Conduct of Business of HII. During the period from the date of this
Agreement to the !nitial Closing Date, HII will conduct its business and
operations according to its ordinary and usual course and consistent with past
practice.
8.02. Access to Information. H!I will afford Purchaser and its
representatives access, during normal business hours, to all of its business,
operations, properties, books, files and records and will cooperate in
Purchaser's examination thereof. Purchaser agrees that all information,
including the existence and contents of this Agreement and the other
agreements among the parties, so provided will be treated as confidential
(except for necessary disclosures to professional advisors, and except for
securities law disclosures), that Purchaser will not disclose or make any use
of such onfidential information unless the same is or shall become available
to it through nonconfidential means or shall otherwise come into the public
domain. If the transactions contemplated by this Agreement are not consummated
for any reason, then after this Agreement is terminated, Purchaser will
continue to hold in confidence all information obtained from HII and will
return to HII all copies of any confidential documents obtained by Purchaser
in connection with the transactions contemplated by this Agreement.
ARTICLE 9
GENERAL
9.01. Notices. All notices required or permitted herein must be in writing
and shall be deemed to have been duly given the first business day following
the date of service if served personally or by telecopier, telex or other
similar communication to the party or parties to whom notice is to be given,
or on the third business day after mailing if mailed to the party or parties
to whom notice is to be given by registered or certified mail, return receipt
requested, postage prepaid, to the party to whom notice is to be given at the
address set forth below or to such other addresses as either party hereto may
designate to the other by notice from time to time for this purpose. All
notices and other communications shall be given as follows:
MCH:
Merchants Capital Holdings, Ltd.
c/o Xxxxxx Xxxxxxx
Xxxxxxx & Associates
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
HII:
Xxxxxxx International, Inc.
000 X Xxxx Xxxxxxxxx Xxxxxx
XxXxxxxx, Xxxxx 00000
Xxxxxx: Xxxx Xxxxxx
0000 Xxxxxxxxxxx
Xxxxxxxxx, Xxxxx 00000
Marks:
Xxxxxx Xxxxx
0000 Xxxxxx Xxxxx Xxxxx
Xxxxx, Xxxxx 00000
Dart:
Xxxxxxxx Xxxx
c/o Xxxxxx Xxxxxxx
Xxxxxxx & Associates
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Xxxxxxxx:
Xxxxxx Xxxxxxxx
0xx Xxxxx Xxxxxxxx Xxxxx
00-00 Xxxxxxxxx
Xxxxxx, Xxxxxx Xxxxxxx WIVONB
9.02. Integrated Agreement. This instrument contains and constitutes the
entire agreement between and among the parties herein and supersedes all prior
agreements and understandings between the parties hereto relating to the
subject matter hereof. There are no agreements, understandings, restrictions,
warranties or representations among the parties relating to the subject matter
hereof other than those set forth or referred to herein. All exhibits attached
hereto and all schedules delivered pursuant hereto are hereby incorporated
herein and made a part of this Agreement. This instrument is not intended to
have any legal effect whatsoever, or to be a legally binding agreement or any
evidence thereof, until it has been signed by all parties hereto. Any
reference to this Agreement shall be deemed to also refer to the exhibits,
schedules, and attachments hereof.
9.03. Construction. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter gender thereof or to the
plurals of each, as the identity of the person or persons or the context may
require. The descriptive headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, defme or
limit the scope, extent or intent of this Agreement or any provision contained
herein.
9.04. Invalidity. If any provision contained in this Agreement shall for
any reason be held to be invalid, illegal, void or unenforceable in any
respect, such provisions shall be deemed modified so as to constitute a
provision conforming as nearly as possible to such invalid, illegal, void or
unenforceable provisions while still remaining valid and enforceable, and the
remaining terms or provisions contained herein shall not be affected thereby.
9.05. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
heirs, executors, personal representatives, successors and assigns.
9.06 Litigation Expense. In any action brought by a party hereto to enforce
the obligations of any other party hereto, the prevailing party shall be
entitled to collect from the other parties to such action such party's
reasonable attorneys' and accountants' fees, court costs and other expenses
incidental to such litigation.
9.07 Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
9.08 Amendment and Waiver. This Agreement may be amended at any time, but
only by an instrument in writing executed by both parties hereto. A party
hereto may waive any requirement to be performed by the other party, provided
that such waiver shall be in writing and executed by the party waiving the
requirement.
9.09. Time of Essence. Time shall be of the essence with respect to the
performance by the parties hereto of their respective obligations hereunder.
9.10. Negation of Third-Party Beneficiary. Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any person, other
than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement, nor is anything in
this Agreement intended to relieve or discharge the obligation or liability of
any third person to any party to this Agreement.
9.11. Survival of Representations and Warranties. The representations,
covenants, and warranties contained in this Agreement shall survive the
Initial Closing Date for a period of two (2) years and shall be true on and as
of the Initial Closing Date and any subsequent closing as provided herein as
if specifically made thereon. However, the survival period shall be tolled and
suspended at such time and for any period of time at or during which (i) any
party hereto gives notice of a claim for a breach of a representation,
warranty, covenant, or indemnity prior to the expiration date of the survival
period, or (ii) any such breach of a representation, warranty, covenant, or
indemnity occurs and involves fraud or willfulness, and (iii) the breach of
any such representation, warranty, covenant, or indemnity has been within the
actual knowledge of the offending as to the nature and extent of the matter
giving rise to the breach.
9.12. Governing Law. This Agreement has been made and entered into in
Collin County, Texas, and shall be governed by and construed in accordance
with the laws of the State of Texas, and the obligations of the parties
hereunder are performable in Collin County, Texas. Each of the parties hereby
irrevocably consents and submits to the exclusive jurisdiction of the courts
of Collin County, Texas in any proceeding brought to construe or enforce, or
otherwise affecting, this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed below.
HII:
XXXXXXX INTERNATIONAL, INC.,
a Delaware corporation
By:______________________
Xxxx Xxxxxx, Chief Financial Officer
MCH
MERCHANTS CAPITAL HOLDINGS, LTD.,
a British Virgin Islands corporation
By:_________________________
Printed Name: X.X.Xxxx
Title: Director
____________________________
Xxxx X. Xxxxxx
____________________________
Xxxxxx X. Xxxxx
____________________________
Xxxxxxxx Xxxx
____________________________
Xxxxxx Xxxxxxxx
