AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
January 20, 2003, is between HESPERIA HOLDING CORP., a California corporation
("Hesperia"), and XXXXXXXXXXX.XXX, INC., a Nevada corporation ("SCI").
Whereas, the Boards of Directors of Hesperia and SCI each have, in light
of and subject to the terms and conditions set forth herein, (i) determined
that the Merger (as defined below) is fair to their respective stockholders
and in the best interests of such stockholders and (ii) approved the Merger
in accordance with this Agreement;
Whereas, for Federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, Hesperia and SCI desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger.
Now, therefore, in consideration of the promises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Hesperia and SCI hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State of Nevada (the
"NGCL") and the General Corporation Law of the State of California (the
"CGCL"), Hesperia shall be merged with and into SCI (as defined below) (the
"Merger"). Following the Merger, SCI shall continue as the surviving
corporation (the "Surviving Corporation"), shall continue to be governed by
the laws of the jurisdiction of its incorporation or organization and the
separate corporate existence of Hesperia shall cease to exist. Prior to the
Effective Time, the parties hereto shall mutually agree as to the name of the
Surviving Corporation; however, initially the Surviving Corporation shall be
named Hesperia Holding Inc., a Nevada corporation. The Merger is intended to
qualify as a tax-free reorganization under Section 368(a)(1)(A) of the Code.
Section 1.2 Effective Time. Subject to the terms and conditions set
forth in this Agreement, a Certificate of Merger (the "Merger Certificate")
shall be duly executed and acknowledged by each of SCI and Hesperia, and
thereafter the Merger Certificate reflecting the Merger shall be delivered to
the Secretary of State of the State of Nevada and the Secretary of State of
the State of California for filing pursuant to the NGCL and CGCL on the
Closing Date (as defined in Section 1.3). The Merger shall become effective
at such time as a properly executed and certified copy of the Merger
Certificate is duly filed by the Secretary of State of the State of Nevada in
accordance with the NGCL and the Secretary of State of the State of
California in accordance with the CGCL or such later time as the parties may
agree upon and set forth in the Merger Certificate (the time at which the
Merger becomes effective shall be referred to herein as the "Effective
Time").
Section 1.3 Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Article 5
(the "Closing Date"), at the offices of the Xxxxxxxxxx Law Group, 000 Xxxx
Xxxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, unless another time, date
or place is agreed to in writing by the parties hereto.
Section 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the NGCL and CGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, and powers of Hesperia shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Hesperia shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Board of Directors and Officers of Surviving Corporation.
The directors and officers of Hesperia immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation from
and after the Effective Time, until their successors shall have been duly
elected or appointed and qualified, or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
Section 1.6 Conversion of Shares. At the Effective Time, each share
of common stock, $.001 par value per share of Hesperia (individually a
"Hesperia Share" and collectively, the "Hesperia Shares") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of SCI, Hesperia, or the holder
thereof, be converted into and shall become fully paid and nonassessable SCI
Common Stock determined by dividing (i) Ten Million Four Hundred Fifteen
Thousand Eight Hundred Forty-Five (10,415,845), by (ii) the total number of
shares of Hesperia, Ten Million Four Hundred Fifteen Thousand Eight Hundred
Forty-Five (10,415,845) outstanding immediately prior to the Effective Time
(such quotient, the "Exchange Ratio"). The holder of one or more shares of
Hesperia Common Stock shall be entitled to receive in exchange therefore a
number of shares of SCI Common Stock equal to the product of (x) (the number
of shares of Hesperia Common Stock (10,415,845)), times (y) (the Exchange
Ratio). By way of example, 10,415,845/10,415,845= 1.00 (the Exchange Ratio).
The number of shares of Hesperia Common Stock held by a stockholder (1,000)
times the Exchange Ratio of 1.00 equals 1,000 shares of SCI Shares to be
issued.
Section 1.7 Exchange of Certificates.
(a) Prior to the Effective Time, SCI shall enter into an agreement
with, and shall deposit with the Xxxxxxxxxx Law Group or such other agent or
agents as may be satisfactory to Hesperia and SCI (the "Exchange Agent"), for
the benefit of the holders of Hesperia Shares, for exchange through the
Exchange Agent in accordance with this Article I: (i) certificates
representing the appropriate number of SCI Shares to be issued to holders of
Hesperia Shares issuable pursuant to Section 1.6 in exchange for outstanding
Hesperia Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Hesperia Shares (the "Certificates") whose shares were converted
into the right to receive SCI Shares pursuant to Section 1.6: (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as SCI and Hesperia may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing SCI Shares. Upon surrender of a
Certificate to the Exchange Agent, together with such letter of transmittal,
duly executed, and any other required documents, the holder of such
Certificate shall be entitled to receive in exchange therefore a certificate
representing that number of whole SCI Shares, which such holder has the right
to receive pursuant to the provisions of this Article I, and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Hesperia Shares which are not registered in the transfer records
of Hesperia, a certificate representing the proper number of SCI Shares may
be issued to a transferee if the Certificate representing such Hesperia
Shares is presented to the Exchange Agent accompanied by all documents
required by the Exchange Agent or SCI to evidence and effect such transfer
and by evidence that any applicable stock transfer or other taxes have been
paid. Until surrendered as contemplated by this Section 1.7, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
SCI Shares as contemplated by this Section 1.7.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to SCI Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the Hesperia Shares represented thereby until the holder of
record of such Certificate shall surrender such Certificate.
(d) In the event that any Certificate for SCI Shares or Hesperia Shares
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefore, upon the making of an affidavit of that fact by the
holder thereof such Hesperia Shares and cash in lieu of fractional Hesperia
Shares, if any, as may be required pursuant to this Agreement; provided,
however, that SCI or the Exchange Agent, may, in its respective discretion,
require the delivery of a suitable bond, opinion or indemnity.
(e) All SCI Shares issued upon the surrender for exchange of Hesperia
Shares in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such Hesperia Shares.
There shall be no further registration of transfers on the stock transfer
books of Hesperia of the Hesperia Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates of
Hesperia are presented to SCI for any reason, they shall be canceled and
exchanged as provided in this Article I.
(f) No fractional SCI Shares shall be issued in the Merger, but in lieu
thereof each holder of Hesperia Shares otherwise entitled to a fractional SCI
Share shall, upon surrender of its, his or her Certificate or Certificates,
be entitled to receive an additional share to round up to the nearest round
number of shares.
Section 1.8 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, SCI or Hesperia reasonably determines that any
deeds, assignments, or instruments or confirmations of transfer are necessary
or desirable to carry out the purposes of this Agreement and to vest SCI with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of SCI, the officers and directors of Hesperia and SCI
are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary or desirable
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SCI
Except as set forth on the Disclosure Schedule delivered by SCI to
Hesperia (the "SCI Disclosure Schedule"), SCI hereby represents and warrants
to Hesperia as follows:
Section 2.1 Organization and Qualification.
(a) SCI is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, and
has all requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, except
where the failure to be so organized, existing and in good standing or to
have such power and authority would not have a Material Adverse Effect (as
defined below) on SCI. When used in connection with SCI, the term "Material
Adverse Effect" means any change or effect (i) that is or is reasonably
likely to be materially adverse to the business, results of operations,
condition (financial or otherwise) or prospects of SCI, other than any change
or effect arising out of general economic conditions unrelated to any
business in which SCI is engaged, or (ii) that may impair the ability of SCI
to perform its obligations hereunder or to consummate the transactions
contemplated hereby.
(b) SCI has heretofore delivered to Hesperia accurate and complete
copies of the Certificate of Incorporation and Bylaws (or similar governing
documents), as currently in effect, of SCI. SCI is duly qualified or
licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect on SCI.
Section 2.2 Capitalization of SCI.
(a) The authorized capital stock of SCI consists of: Twenty
Million (20,000,000) Authorized Shares of Common Stock, $0.001 par value,
6,504,370 Common shares are issued and outstanding as of the date hereof; and
Five Million (5,000,000) Authorized Shares of Preferred Stock, $0.001 par
value, no Preferred shares have been issued. The offers and sales of all of
the outstanding shares of capital stock of SCI were at all relevant times
either registered under the Securities Act of 1933, as amended, and
applicable state securities laws or exempt from such requirements. Pursuant
to the Merger Agreement SCI will issue Ten Million Four Hundred Fifteen
Thousand Eight Hundred Forty-Five (10,415,845) shares of un-restricted common
stock to the stockholders of SCI. All of the outstanding SCI Shares have
been duly authorized and validly issued, and are fully paid, nonassessable
and free of preemptive rights. Except as set forth herein, as of the date
hereof, there are no outstanding (i) shares of capital stock or other voting
securities of SCI, (ii) securities of SCI convertible into or exchangeable
for shares of capital stock or voting securities of SCI, (iii) options,
warrants, calls, rights, commitments, agreements, arrangements, or
undertakings of any kind to which SCI is a party or by which it is bound
obligating SCI to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of SCI or
obligating SCI to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking, or other rights to acquire from SCI, and, no obligations of SCI
to issue, any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of SCI, and (iv)
equity equivalents, interests in the ownership or earnings of SCI or other
similar rights (collectively, "SCI Securities"). As of the date hereof,
except there are no outstanding obligations of SCI or its subsidiaries to
repurchase, redeem or otherwise acquire any SCI Securities or stockholder
agreements, voting trusts or other agreements or understandings to which SCI
is a party or by which it is bound relating to the voting or registration of
any shares of capital stock of SCI. There are no bonds, debentures, notes or
other indebtedness of SCI having the right to vote (or convertible into
securities having the right to vote) on any matters on which stockholders of
SCI may vote. For purposes of this Agreement, "Lien" means, with respect to
any asset (including, without limitation, any security) any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset.
(b) The SCI Shares constitute the only class of equity
securities of SCI registered or required to be registered under the Exchange
Act.
(c) SCI does not own directly or indirectly more than fifty
percent (50%) of the outstanding voting securities or interests (including
membership interests) of any entity.
Section 2.3 Authority Relative to this Agreement; Recommendation.
SCI has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of SCI (the "SCI
Board") and by requisite vote of the then outstanding SCI Shares and no other
corporate proceedings on the part of SCI are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by SCI and
constitutes a valid, legal and binding agreement of SCI, enforceable against
SCI in accordance with its terms.
Section 2.4 SEC Reports; Financial Statements.
(a) SCI has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since March 2000, each of
which has complied in all material respects with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act (and the rules and regulations promulgated thereunder,
respectively), each as in effect on the dates such forms, reports and
documents were filed. SCI has heretofore delivered to SCI true and correct
copies, in the form filed with the SEC (including any amendments thereto but
excluding any exhibits) of each registration statement, report, definitive
proxy statement, or definitive information statement and all exhibits thereto
filed (including exhibits and any amendments thereto), including without
limitation, (i) its initial Registration Statement on Form 10-SB12G filed
March 24, 2000 and amended September 22, 2000, (ii) its quarterly report on
Form 10-QSB filed for September 30, 2002, (iii) its annual report on Form 10-
KSB filed for the year ending December 31, 2001, (iv) all definitive proxy
statements relating to SCI's meetings of stockholders (whether annual or
special) held since March 24, 2000, if any, and (v) all other reports or
registration statements filed by SCI with the SEC since March 2000 (all of
the foregoing, collectively, the "SCI SEC Reports"). None of such SCI SEC
Reports, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any
untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements of
SCI included in the SCI SEC Reports comply in all material respects with
applicable accounting requirements in the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP, and
fairly present, in conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes
thereto), the financial position of SCI as of the dates thereof and its
results of operations and changes in financial position for the periods then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the SCI SEC Reports have been so filed.
(b) SCI has heretofore made available or promptly will make
available to SCI a complete and correct copy of any amendments or
modifications which are required to be filed with the SEC but have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by SCI with the SEC pursuant to the Exchange Act.
Section 2.5 Information Supplied. None of the information supplied
or to be supplied by SCI for inclusion or incorporation by reference in
connection with the Merger will at the date presented to the stockholders of
SCI and at the times of the meeting or meetings of stockholders of SCI to be
held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 2.6 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1916, as amended (the "HSR Act"), the rules of the
National Association of Securities Dealers, Inc. ("NASD"), the filing and
recordation of the Merger Certificate as required by the NGCL, and no permit,
authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution, delivery and
performance by SCI of this Agreement or the consummation by SCI of the
transactions contemplated hereby, except (i) a permit authorizing the
issuance of securities pursuant to Section 25121 of the California Corporate
Securities Law of 1968, as amended and (ii) where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or
give such notice would not have a Material Adverse Effect on SCI.
Neither the execution, delivery and performance of this Agreement by SCI
nor the consummation by SCI of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Articles of Incorporation or Bylaws (or similar governing documents) of SCI,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which SCI is a party or by which any of its properties or assets may be
bound, or (iii) violate any order, writ, injunction, decree, law, statute,
rule or regulation applicable to SCI or any of its properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults
which would not have a Material Adverse Effect on SCI.
Section 2.7 No Default. SCI is not in breach, default or violation
(and no event has occurred which with notice or the lapse of time or both
would constitute a breach default or violation) of any term, condition or
provision of (i) its Articles of Incorporation or Bylaws (or similar
governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which SCI
is now a party or by which any of its respective properties or assets may be
bound or (iii) any order, writ, injunction, decree, law, statute, rule or
regulation applicable to SCI or any of its respective properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults that
would not have a Material Adverse Effect on SCI. Each note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which SCI is now a party or by which its respective properties
or assets may be bound that is material to SCI and that has not expired is in
full force and effect and is not subject to any material default thereunder
of which SCI is aware by any party obligated to SCI thereunder.
Section 2.8 No Undisclosed Liabilities; Absence of Changes. Except
as and to the extent disclosed in the December 31, 2001 audited and September
30, 2002 unaudited financial statements, none of SCI or its subsidiaries had
any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of SCI
and its consolidated subsidiaries (including the notes thereto) or which
would have a Material Adverse Effect on SCI Except as disclosed by SCI, none
of SCI or its subsidiaries has incurred any liabilities of any nature,
whether or not accrued, contingent or otherwise, which could reasonably be
expected to have, and there have been no events, changes or effects with
respect to SCI or its subsidiaries having or which could reasonably be
expected to have, a Material Adverse Effect on SCI. Except as and to the
extent disclosed by SCI there has not been (i) any material change by SCI in
its accounting methods, principles or practices (other than as required after
the date hereof by concurrent changes in generally accepted accounting
principles), (ii) any revaluation by SCI of any of its assets having a
Material Adverse Effect on SCI, including, without limitation, any write-down
of the value of any assets other than in the ordinary course of business or
(iii) any other action or event that would have required the consent of any
other party hereto pursuant to Section 4.1 of this Agreement had such action
or event occurred after the date of this Agreement.
Section 2.9 Litigation. There is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of SCI, threatened against SCI
or any of its subsidiaries or any of their respective properties or assets
before any Governmental Entity which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on SCI or could
reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as disclosed by SCI, none
of SCI or its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen in the
future, could reasonably be expected to have a Material Adverse Effect on SCI
or could reasonably be expected to prevent or delay the consummation of the
transactions contemplated hereby. For purposes of this Section 2,
"knowledge" shall mean the knowledge of the officers and directors of SCI,
after due inquiry.
Section 2.10 Compliance with Applicable Law. SCI and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "SCI Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which would
not have a Material Adverse Effect on SCI. SCI is in compliance with the
terms of the SCI Permits, except where the failure so to comply would not
have a Material Adverse Effect on SCI. The businesses of SCI is not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for violations or possible violations which do
not, have a Material Adverse Effect on SCI. Except as disclosed by SCI no
investigation or review by any Governmental Entity with respect to SCI is
pending or, to the knowledge of SCI, threatened, nor, to the knowledge of
SCI, has any Governmental Entity indicated an intention to conduct the same.
Section 2.11 Employee Benefit Plans; Labor Matters.
(a) Except as disclosed by SCI with respect to each
employee benefit plan, program, policy, arrangement and contract
(including, without limitation, any "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or contributed to at any time by SCI
or any entity required to be aggregated with SCI pursuant to Section 414
of the Code (each, a "SCI Employee Plan"), no event has occurred and to
the knowledge of SCI, no condition or set of circumstances exists in
connection with which SCI could reasonably be expected to be subject to
any liability which would have a Material Adverse Effect on SCI.
(b) (i) No SCI Employee Plan is or has been subject to
Title IV of ERISA or Section 412 of the Code; and (ii) each SCI Employee
Plan intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code is the subject of a
favorable Internal Revenue Service determination letter, and nothing has
occurred which could reasonably be expected to adversely affect such
determination.
(c) SCI has made available to Hesperia (i) a true and
complete description of the terms of employment and compensation
arrangements of all officers of SCI and a copy of each such agreement
currently in effect; (ii) copies of all agreements with consultants who
are individuals obligating SCI to make annual cash payments in an amount
exceeding $10,000; (iii) a schedule listing all officers of SCI who have
executed a confidentiality and non-competition agreement with SCI and a
copy of each such agreement currently in effect; (iv) copies (or
descriptions) of all severance agreements, programs and policies of SCI
with or relating to its employees; and (v) copies of all plans,
programs, agreements and other arrangements of SCI with or relating to
its employees which contain change in control provisions.
(d) Except as disclosed by SCI there shall be no
payment, accrual of additional benefits, acceleration of payments, or
vesting in any benefit under any SCI Employee Plan or any agreement or
arrangement disclosed under this Section 2.11 solely by reason of
entering into or in connection with the transactions contemplated by
this Agreement.
(e) There are no controversies pending or, to the
knowledge of SCI, threatened, between SCI and any of their employees,
which controversies have or could reasonably be expected to have a
Material Adverse Effect on SCI. Neither SCI nor any of its subsidiaries
is a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by SCI or any of its
subsidiaries (and neither SCI nor any of its subsidiaries has any
outstanding material liability with respect to any terminated collective
bargaining agreement or labor union contract), nor does SCI know of any
activities or proceedings of any labor union to organize any of its or
employees. SCI has no knowledge of any strike, slowdown, work stoppage,
lockout or threat thereof, by or with respect to any of its employees.
Section 2.12 Environmental Laws and Regulations.
(a) Except as publicly disclosed by SCI in the SCI SEC Reports,
(i) SCI is in material compliance with all applicable federal, state, local
and foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance that would
not have a Material Adverse Effect on SCI, which compliance includes, but is
not limited to, the possession by SCI of all material permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof; (ii) SCI has not received
written notice of, or, to the knowledge of SCI, is the subject of, any
action, cause of action, claim, investigation, demand or notice by any person
or entity alleging liability under or non-compliance with any Environmental
Law (an "Environmental Claim"), and (iii) to the knowledge of SCI, there are
no circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) Except as publicly disclosed by SCI in the SCI SEC Reports,
there are no Environmental Claims pending or, to the knowledge of SCI,
threatened against SCI or, to the knowledge of SCI, against any person or
entity whose liability for any Environmental Claim SCI has or may have
retained or assumed either contractually or by operation of law.
Section 2.13 Title to Property. SCI has good and marketable title to
all of its properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby
or which individually, or in the aggregate, would not have a Material Adverse
Effect on SCI, and, to the knowledge of SCI, all leases pursuant to which SCI
leases from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of SCI, under any of such leases, any existing material default or
event of default (or event which with notice of lapse of time, or both, would
constitute a default and in respect of which SCI has not taken adequate steps
to prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness, or the existence of such default or
event, would not have a Material Adverse Effect on SCI.
Section 2.14 Intellectual Property.
(a) SCI owns, or possesses adequate licenses or other valid rights to use,
all existing United States and foreign patents, trademarks, trade names,
service marks, copyrights, trade secrets and applications therefore that are
material to its business as currently conducted (the "SCI Intellectual
Property Rights").
(b) The validity of the SCI Intellectual Property Rights and the title
thereto of SCI is not being questioned in any litigation to which SCI is a
party.
(c) The conduct of the business of SCI as now conducted does not, to SCI's
knowledge, infringe any valid patents, trademarks, trade names, service marks
or copyrights of others. The consummation of the transactions completed
hereby will not result in the loss or impairment of any SCI Intellectual
Property Rights.
(d) SCI has taken steps it believes appropriate to protect and maintain its
trade secrets as such, except in cases where SCI has elected to rely on
patent or copyright protection in lieu of trade secret protection.
(e) SCI has no interests in retaining any of the intellectual property
rights currently owned, maintained or used by SCI or the Directors of SCI
prior to the Merger including domain names, web sites, or trademarks.
Section 2.15 Insurance. SCI currently does not maintain general
liability and other business insurance.
Section 2.16 Vote Required. SCI shall provide Hesperia with copies of
all proxy materials and/or information statements prepared in compliance with
the Securities Act and Exchange Act provided to Stockholders of SCI, and
evidence of approval of the Merger by the Stockholders of SCI.
Section 2.17 Tax Treatment. Neither SCI nor, to the knowledge of SCI,
any of its affiliates has taken or agreed to take action that would prevent
the Merger from constituting a reorganization qualifying under the provisions
of Section 368(a) of the Code.
Section 2.18 Affiliates. Except for the directors and executive
officers of SCI there are no persons who, to the knowledge of SCI, may be
deemed to be affiliates of SCI under Rule 1-02(b) of Regulation S-X of the
SEC (the "SCI Affiliates").
Section 2.19 Certain Business Practices. None of SCI or any
directors, officers, agents or employees of SCI has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended (the "FCPA"), or (iii) made any
other unlawful payment.
Section 2.20 Insider Interests. Neither any officer or director of
SCI has any interest in any property, real or personal, including without
limitation, any computer software or SCI Intellectual Property Rights, used
in or pertaining to the business of SCI, expect for the ordinary rights of a
stockholder or employee stock option holder.
Section 2.21 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of SCI.
Section 2.22 Disclosure. No representation or warranty of SCI in this
Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to SCI pursuant hereto or in connection herewith
contains, as of the date of such representation, warranty or instrument, or
will contain any untrue statement of a material fact or, at the date thereof,
omits or will omit to state a material fact necessary to make any statement
herein or therein, in light of the circumstances under which such statement
is or will be made, not misleading.
Section 2.23 No Existing Discussions. As of the date hereof, SCI is
not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to any Third Party Acquisition.
Section 2.24 Material Contracts.
(a) SCI has delivered or otherwise made available to SCI true, correct and
complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which SCI is a
party affecting the obligations of any party thereunder) to which SCI is a
party or by which any of its properties or assets are bound, that are
material to the business, properties or assets of SCI taken as a whole,
including, without limitation, to the extent any of the following are,
individually or in the aggregate, material to the business, properties or
assets of SCI taken as a whole, all: (i) employment, product design or
development, personal services, consulting, non-competition, severance,
golden parachute or indemnification contracts (including, without limitation,
any contract to which SCI is a party involving employees of SCI); (ii)
licensing, publishing, merchandising or distribution agreements; (iii)
contracts granting rights of first refusal or first negotiation; (iv)
partnership or joint venture agreements; (v) agreements for, other than in
the ordinary course of business, the acquisition, sale or lease of material
properties or assets or stock or otherwise entered into since its formation,
(vi) contracts or agreements with any Governmental Entity, and (vii) all
commitments and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with Section 4.1
hereof, the "SCI Contracts"). SCI is not a party to or bound by any
severance, golden parachute or other agreement with any employee or
consultant pursuant to which such person would be entitled to receive any
additional compensation or an accelerated payment of compensation as a result
of the consummation of the transactions contemplated hereby.
(b) Each of the SCI Contracts is valid and enforceable in accordance with
its terms, and there is no default under any SCI Contract so listed either by
SCI or, to the knowledge of SCI, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by SCI or, to the knowledge of SCI, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on SCI.
(c) No party to any such SCI Contract has given notice to SCI of or made a
claim against SCI with respect to any breach or default thereunder.
Section 2.25 Financial Statements. SCI has delivered to SCI a true
and complete copy of the following financial statements.
(a) the audited financial statements of SCI as of December 31,
2001, December 31, 2000; and
(b) the unaudited financial statements of SCI as of September 30,
2002 (collectively, the "SCI Financial Statements").
As of their respective dates and for the respective periods then ended,
the audited financial statements and unaudited interim financial statements
(including, in each case, the notes, if any, thereto) included in the SCI
financial statements (a) were prepared in accordance with generally accepted
accounting principals applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and (b)
fairly present (subject, in the case of unaudited interim financial
statements, to normal, recurring year-end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to SCI
and to the absence of certain footnote disclosures) the financial position of
SCI as at the respective dates thereof and the results of its operations and
cash flows for the respective periods then ended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SCI
Except as set forth on the Disclosure Schedule delivered by Hesperia to
SCI (the "Hesperia Disclosure Schedule"), Hesperia hereby represents and
warrants to Hesperia as follows:
Section 3.1 Organization and Qualification.
(a) Hesperia is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power and authority would not have a Material Adverse Effect (as
defined below) on Hesperia. When used in connection with Hesperia, the term
"Material Adverse Effect" means any change or effect (i) that is or is
reasonably likely to be materially adverse to the business, results of
operations, condition (financial or otherwise) or prospects of Hesperia,
taken as a whole, other than any change or effect arising out of general
economic conditions unrelated to any businesses in which Hesperia is engaged,
or (ii) that may impair the ability of Hesperia to consummate the
transactions contemplated hereby.
(b) Hesperia has heretofore delivered to Hesperia accurate and
complete copies of the Certificate of Incorporation and Bylaws (or similar
governing documents), as currently in effect, of Hesperia. Hesperia is duly
qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect on Hesperia.
Section 3.2 Capitalization of Hesperia.
(a) As of July 31, 2002, the authorized capital stock of Hesperia consists
of Fifteen Million (15,000,000) Hesperia common Shares, $0.001 par value, of
which 10,415,845 common Shares are issued and outstanding. All of the
outstanding Hesperia Shares have been duly authorized and validly issued, and
are fully paid, nonassessable and free of preemptive rights.
(b) Except as set forth in Schedule 3.2(b) of the Hesperia Disclosure
Schedule, between January 17, 2003 and the date hereof, no shares of
Hesperia's capital stock have been issued and no Hesperia Stock options have
been granted. Except as set forth in Section 3.2(a) above, as of the date
hereof, there are no outstanding (i) shares of capital stock or other voting
securities of Hesperia, (ii) securities of Hesperia convertible into or
exchangeable for shares of capital stock or voting securities of Hesperia,
(iii) options or other rights to acquire from Hesperia, or obligations of
Hesperia to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Hesperia, or (iv) equity equivalents, interests in the ownership or earnings
of Hesperia or other similar rights (collectively, "Hesperia Securities").
Except as set forth in Schedule 3.2(b) of the Hesperia Disclosure Schedule,
as of the date hereof, there are no outstanding obligations of Hesperia to
repurchase, redeem or otherwise acquire any Hesperia Securities. Except as
set forth in Section 3.2(b), there are no stockholder agreements, voting
trusts or other agreements or understandings to which Hesperia is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of Hesperia.
(c) Except as set forth in Schedule 3.2(c) of the Hesperia Disclosure
Schedule, there are no securities of Hesperia convertible into or
exchangeable for, no options or other rights to acquire from Hesperia, and no
other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of
any capital stock or other ownership interests in Hesperia.
(d) The Hesperia Shares constitute the only class of equity securities of
Hesperia.
(e) Except as set forth in Schedule 3.2(e) of the Hesperia Disclosure
Schedule, Hesperia does not own directly or indirectly more than fifty
percent (50%) of the outstanding voting securities or interests (including
membership interests) of any entity.
Section 3.3 Authority Relative to this Agreement; Recommendation.
Hesperia has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Hesperia (the "Hesperia Board"), and no other
corporate proceedings on the part of Hesperia are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby, except, as
referred to in Section 3.16, the approval and adoption of this Agreement by
the holders of at least a majority of the then outstanding Hesperia Shares.
Subject to obtaining the requisite shareholder approval, this Agreement has
been duly and validly executed and delivered by Hesperia and constitutes a
valid, legal and binding agreement of Hesperia, enforceable against Hesperia
in accordance with its terms.
Section 3.4 Information Supplied. None of the information supplied
or to be supplied by Hesperia for inclusion or incorporation by reference to
the 8-K will, at the time the 8-K is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
Section 3.5 Consents and Approvals; No Violations. Except as set
forth in Schedule 3.5 of the Hesperia Disclosure Schedule, and for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, the rules of the NASD, and the
filing and recordation of the Merger Certificate as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution and delivery by
Hesperia of this Agreement or the consummation by Hesperia of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect on Hesperia.
Subject to obtaining requisite shareholder approval, neither the
execution, delivery and performance of this Agreement by Hesperia nor the
consummation by Hesperia of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of
Hesperia, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Hesperia is a party or by which Hesperia or any of its
respective properties or assets may be bound or (iii) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to
Hesperia or any of its properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which would not have a Material
Adverse Effect on Hesperia.
Section 3.6 No Default. Except as set forth in Schedule 3.6 of the
Hesperia Disclosure Schedule, Hesperia is not in breach, default or violation
(and no event has occurred which with notice or the lapse of time or both
would constitute a breach, default or violation) of any term, condition or
provision of (i) its Certificate of Incorporation or Bylaws, (ii) any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Hesperia is now a party or by which any of
its properties or assets may be bound, or (iii) any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Hesperia or any of its
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults that would not have a Material Adverse Effect on
Hesperia. Each note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Hesperia is now a party
or by which any of its properties or assets may be bound that is material to
Hesperia taken as a whole and that has not expired is in full force and
effect and is not subject to any material default thereunder of which
Hesperia is aware by any party obligated to Hesperia.
Section 3.7 No Undisclosed Liabilities; Absence of Changes. Except
as set forth in Schedule 3.7 of the Hesperia Disclosure Schedule, as of July
31, 0000, Xxxxxxxx does not have any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
balance sheet of Hesperia (including the notes thereto) or which would have a
Material Adverse Effect on Hesperia. Except as disclosed by Hesperia, since
July 31, 0000, Xxxxxxxx has not incurred any liabilities of any nature,
whether or not accrued, contingent or otherwise, which could reasonably be
expected to have, and there have been no events, changes or effects with
respect to Hesperia having or which reasonably could be expected to have, a
Material Adverse Effect on Hesperia. Except as and to the extent disclosed
by Hesperia on Schedule 3.7 of the Hesperia Disclosure Schedule, since July
31, 2002, there has not been (i) any material change by Hesperia in its
accounting methods, principles or practices (other than as required after the
date hereof by concurrent changes in generally accepted accounting
principles), (ii) any revaluation by Hesperia of any of its assets having a
Material Adverse Effect on Hesperia, including, without limitation, any write-
down of the value of any assets other than in the ordinary course of business
or (iii) any other action or event that would have required the consent of
any other party hereto pursuant to Section 4.2 of this Agreement had such
action or event occurred after the date of this Agreement.
Section 3.8 Litigation. Except as disclosed by Hesperia on Schedule
3.8 of the Hesperia Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Hesperia,
threatened against Hesperia or any of its properties or assets before any
Governmental Entity which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on Hesperia or could reasonably
be expected to prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as disclosed by Hesperia, Hesperia is
not subject to any outstanding order, writ, injunction or decree which,
insofar as can be reasonably foreseen in the future, could reasonably be
expected to have a Material Adverse Effect on Hesperia or could reasonably be
expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.9 Compliance with Applicable Law. Except as disclosed by
Hesperia on Schedule 3.9 of the Hesperia Disclosure Schedule, Hesperia holds
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of its business (the
"Hesperia Permits"), except for such failures to hold Hesperia Permits that
would not have a Material Adverse Effect on Hesperia. Except as disclosed on
Schedule 3.9, Hesperia is in compliance with the terms of the Hesperia
Permits, except where the failure so to comply would not have a Material
Adverse Effect on Hesperia. Except as disclosed in Schedule 3.9, the
business of Hesperia is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity and except for violations
or possible violations which do have a Material Adverse Effect on Hesperia.
Except as disclosed by Hesperia, no investigation or review by any
Governmental Entity with respect to Hesperia is pending or, to the knowledge
of Hesperia, threatened, nor, to the knowledge of Hesperia, has any
Governmental Entity indicated an intention to conduct the same.
Section 3.10 Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program, policy, arrangement
and contract (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of ERISA), maintained or contributed to at any time
by Hesperia or any entity required to be aggregated with Hesperia pursuant to
Section 414 of the Code (each, a "Hesperia Employee Plan"), no event has
occurred and, to the knowledge of Hesperia, no condition or set of
circumstances exists in connection with which Hesperia or any of its
subsidiaries could reasonably be expected to be subject to any liability
which would have a Material Adverse Effect on Hesperia.
(b) (i) No Hesperia Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code; and (ii) each Hesperia Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended
to qualify under Section 501(a) of the Code is the subject of a favorable
Internal Revenue Service determination letter, and nothing has occurred which
could reasonably be expected to adversely affect such determination.
(c) Schedule 3.10(c) of the Hesperia Disclosure Schedule sets forth a true
and complete list, as of the date of this Agreement, of each person who holds
any Hesperia Stock Options, together with the number of Hesperia Shares which
are subject to such option, the date of grant of such option, the extent to
which such option is vested (or will become vested as a result of the
Merger), the option price of such option (to the extent determined as of the
date hereof), whether such option is a nonqualified stock option or is
intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code, and the expiration date of such option. Schedule
3.10(c) of the Hesperia Disclosure Schedule also sets forth the total number
of such incentive stock options and such nonqualified options. Hesperia has
furnished Hesperia with complete copies of the plans pursuant to which the
Hesperia Stock Options were issued. Other than the automatic vesting of
Hesperia Stock Options that may occur without any action on the part of
Hesperia or its officers or directors, Hesperia has not taken any action that
would result in any Hesperia Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(d) Hesperia has made available to Hesperia: (i) a description of the terms
of employment and compensation arrangements of all officers of Hesperia and a
copy of each such agreement currently in effect; (ii) copies of all
agreements with consultants who are individuals obligating Hesperia to make
annual cash payments in an amount exceeding $60,000; (iii) a schedule listing
all officers of Hesperia who have executed a non-competition agreement with
Hesperia and a copy of each such agreement currently in effect; (iv) copies
(or descriptions) of all severance agreements, programs and policies of
Hesperia with or relating to its employees, except programs and policies
required to be maintained by law; and (v) copies of all plans, programs,
agreements and other arrangements of the Hesperia with or relating to its
employees which contain change in control provisions.
(e) Except as disclosed by Hesperia on Schedule 3.10(e) of the Hesperia
Disclosure Schedule, there shall be no payment, accrual of additional
benefits, acceleration of payments, or vesting in any benefit under any
Hesperia Employee Plan or any agreement or arrangement disclosed under this
Section 3.10 solely by reason of entering into or in connection with the
transactions contemplated by this Agreement.
(f) Except as disclosed by Hesperia on Schedule 3.10(f) of the Hesperia
Disclosure Schedule, there are no controversies pending or, to the knowledge
of Hesperia threatened, between Hesperia and any of its employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on Hesperia. Hesperia is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by
Hesperia (and Hesperia does not have any outstanding material liability with
respect to any terminated collective bargaining agreement or labor union
contract), nor does Hesperia know of any activities or proceedings of any
labor union to organize any of its employees. Hesperia has no knowledge of
any strike, slowdown, work stoppage, lockout or threat thereof by or with
respect to any of its employees.
Section 3.11 Environmental Laws and Regulations.
(a) Except as disclosed by Hesperia on Schedule 3.11(a) of the
Hesperia Disclosure Schedule, (i) Hesperia is in material compliance with all
Environmental Laws, except for non-compliance that would not have a Material
Adverse Effect on Hesperia, which compliance includes, but is not limited to,
the possession by Hesperia of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof; (ii) Hesperia has not received written
notice of, or, to the knowledge of Hesperia, Hesperia is not the subject of,
any Environmental Claim that could reasonably be expected to have a Material
Adverse Effect on Hesperia; and (iii) to the knowledge of Hesperia, there are
no circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) Except as disclosed by Hesperia on Schedule 3.11(b) of the
Hesperia Disclosure Schedule, there are no Environmental Claims which could
reasonably be expected to have a Material Adverse Effect on Hesperia that are
pending or, to the knowledge of Hesperia, threatened against Hesperia or, to
the knowledge of Hesperia, against any person or entity whose liability for
any Environmental Claim Hesperia has or may have retained or assumed either
contractually or by operation of law.
Section 3.12 Tax Matters. Except as set forth on Schedule 3.12 of the
Hesperia Disclosure Schedule: (i) Hesperia has filed or has had filed on its
behalf in a timely manner (within any applicable extension periods) with the
appropriate Governmental Entity all income and other Tax Returns with respect
to Taxes of Hesperia and all Tax Returns were in all material respects true,
complete and correct; (ii) all Taxes with respect to Hesperia have been paid
in full or have been provided for in accordance with GAAP on Hesperia's most
recent balance sheet which is part of the Hesperia Documents; (iii) there are
no outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local or foreign income or
other material Tax Returns required to be filed by or with respect to
Hesperia; (iv) to the knowledge of Hesperia none of the Tax Returns of or
with respect to Hesperia is currently being audited or examined by any
Governmental Entity; and (v) no deficiency for any income or other Taxes has
been assessed with respect to Hesperia which has not been abated or paid in
full.
Section 3.13 Title to Property. Except as disclosed by Hesperia on
Schedule 3.13 of the Hesperia Disclosure Schedule, Hesperia has good and
marketable title to all of its properties and assets, free and clear of all
liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would
not have a Material Adverse Effect on Hesperia; and, to Hesperia's knowledge,
all leases pursuant to which Hesperia leases from others real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, to the knowledge of Hesperia, under any
of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default and in respect of which Hesperia has not taken adequate steps to
prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness, or the existence of such default or
event of default would not have a Material Adverse Effect on Hesperia.
Section 3.14 Intellectual Property.
(a) Hesperia owns, or possesses adequate licenses or other valid
rights to use, all existing United States and foreign patents, trademarks,
trade names, services marks, copyrights, trade secrets, and applications
therefore that are material to its business as currently conducted (the
"Hesperia Intellectual Property Rights").
(b) Except as set forth on Schedule 3.14(b) of the Hesperia
Disclosure Schedule the validity of the Hesperia Intellectual Property Rights
and the title thereto of Hesperia, is not being questioned in any litigation
to which Hesperia is a party.
(c) The conduct of the business of Hesperia as now conducted does
not, to Hesperia's knowledge, infringe any valid patents, trademarks,
tradenames, service marks or copyrights of others, the consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any Hesperia Intellectual Property Rights, other than, in each case, those
which Hesperia reasonably believes will not have a Material Adverse Effect on
Hesperia.
(d) Hesperia has taken steps it believes appropriate to protect
and maintain its trade secrets as such, except in cases where Hesperia has
elected to rely on patent or copyright protection in lieu of trade secret
protection.
Section 3.15 Insurance. Hesperia currently does not maintain general
liability and other business insurance.
Section 3.16 Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding Hesperia Shares is the only vote of the
holders of any class or series of Hesperia's capital stock necessary to
approve and adopt this Agreement and the Merger.
Section 3.17 Tax Treatment. Neither Hesperia nor, to the knowledge of
Hesperia, any of its affiliates has taken or agreed to take any action that
would prevent the Merger from constituting a reorganization qualifying under
the provisions of Section 368(a) of the Code.
Section 3.18 Affiliates. Except for the directors and executive
officers of Hesperia, each of whom is listed in Schedule 3.18 of the Hesperia
Disclosure Schedule, there are no persons who, to the knowledge of Hesperia,
may be deemed to be affiliates of Hesperia under Rule 1-02(b) of Regulation S-
X of the SEC (the "Hesperia Affiliates").
Section 3.19 Certain Business Practices. None of Hesperia, any of its
directors, officers, agents or employees has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or campaigns or violated any provision of the FCPA, or (iii) made any other
unlawful payment.
Section 3.20 Insider Interests. Except as set forth in Schedule 3.20
of the Hesperia Disclosure Schedule, no officer or director of Hesperia has
any interest in any material property, real or personal, including without
limitation, any computer software or Hesperia Intellectual Property Rights,
used in or pertaining to the business of Hesperia or any subsidiary, except
for the ordinary rights of a stockholder or employee stock optionholder.
Section 3.21 Brokers. Except as set forth in Schedule 3.21 of the
Hesperia Disclosure Schedule, no broker, finder or investment banker (other
than the Hesperia Financial Adviser, a true and correct copy of whose
engagement agreement has been provided to Hesperia) is entitled to any
brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Hesperia.
Section 3.22 Disclosure. No representation or warranty of Hesperia in
this Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to Hesperia pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty or
instrument, or will contain any untrue statement of a material fact or, at
the date thereof, omits or will omit to state a material fact necessary to
make any statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
Section 3.23 No Existing Discussions. As of the date hereof, Hesperia
is not engaged, directly or indirectly, in any discussions or negotiations
with any other party with respect to any Third Party Acquisition.
Section 3.24 Material Contracts.
(a) Hesperia has delivered or otherwise made available to Hesperia
true, correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to
which Hesperia is a party affecting the obligations of any party thereunder)
to which Hesperia is a party or by which any of their properties or assets
are bound that are, material to the business, properties or assets of
Hesperia taken as a whole, including, without limitation, to the extent any
of the following are, individually or in the aggregate, material to the
business, properties or assets of Hesperia taken as a whole, all: (i)
employment, product design or development, personal services, consulting, non-
competition, severance, golden parachute or indemnification contracts
(including, without limitation, any contract to which Hesperia is a party
involving employees of Hesperia); (ii) licensing, publishing, merchandising
or distribution agreements; (iii) contracts granting rights of first refusal
or first negotiation; (iv) partnership or joint venture agreements; (v)
agreements for the acquisition, sale or lease of material properties or
assets or stock or otherwise; (vi) contracts or agreements with any
Governmental Entity; and (vii) all commitments and agreements to enter into
any of the foregoing (collectively, the "Hesperia Contracts"). Hesperia is
not a party to or bound by any severance, golden parachute or other agreement
with any employee or consultant pursuant to which such person would be
entitled to receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions contemplated
hereby.
(b) Each of the Hesperia Contracts is valid and enforceable in
accordance with its terms, and there is no default under any Hesperia
Contract so listed either by Hesperia or, to the knowledge of Hesperia, by
any other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default thereunder by
Hesperia or, to the knowledge of Hesperia, any other party, in any such case
in which such default or event could reasonably be expected to have a
Material Adverse Effect on Hesperia.
(c) No party to any such Hesperia Contract has given notice to
Hesperia of or made a claim against Hesperia with respect to any breach or
default thereunder, in any such case in which such breach or default could
reasonably be expected to have a Material Adverse Effect on Hesperia.
ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business of Hesperia. Except as contemplated
by this Agreement or as described in Schedule 4.1 of the Hesperia Disclosure
Schedule, during the period from the date hereof to the Effective Time,
Hesperia will conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with
no less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing,
except as otherwise expressly provided in this Agreement or as described in
Schedule 4.1 of the Hesperia Disclosure Schedule, prior to the Effective
Time, Hesperia will not, without the prior written consent of Hesperia:
(a) amend its Articles of Incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock, make
any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
Hesperia (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
(iii) make any loans, advances or capital contributions to, or investments
in, any other person; (iv) pledge or otherwise encumber shares of capital
stock of Hesperia; or (v) mortgage or pledge any of its material assets, or
create or suffer to exist any material Lien thereupon (other than tax Liens
for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent Hesperia from (i) entering into employment
agreements or severance agreements with employees in the ordinary course of
business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for
employees for fiscal 2003 in the ordinary course of year-end compensation
reviews consistent with past practice and paying bonuses to employees for
fiscal 2003 in amounts previously disclosed to Hesperia (to the extent that
such compensation increases and new or amended bonus arrangements do not
result in a material increase in benefits or compensation expense to
Hesperia);
(g) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions (other than in the ordinary course of
business);
(h) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(i) revalue in any material respect any of its assets including, without
limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract
or agreement other than in the ordinary course of business consistent with
past practice which would be material to Hesperia; (iii) authorize any new
capital expenditure or expenditures which, individually is in excess of
$10,000 or, in the aggregate, are in excess of $50,000; provided, however
that none of the foregoing shall limit any capital expenditure required
pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax liability
material to Hesperia;
(l) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
Hesperia;
(m) commence any material research and development project or terminate any
material research and development project that is currently ongoing, in
either case, except pursuant to the terms of existing contracts or in the
ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(m) or any action which would make
any of the representations or warranties of contained in this Agreement
untrue or incorrect.
Section 4.2 Conduct of Business of SCI. Except as contemplated by
this Agreement or as described in Schedule 4.2 of the SCI Disclosure Schedule
during the period from the date hereof to the Effective Time, SCI will
conduct its operations in the ordinary course of business consistent with
past practice and, to the extent consistent therewith, with no less diligence
and effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organization, keep available the service
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement or as described in Schedule 4.2 of the
SCI Disclosure Schedule, prior to the Effective Time, SCI will not, without
the prior written consent of Hesperia:
(a) amend its Articles of Incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock, make
any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger
consolidation, restructuring, recapitalization or other reorganization of SCI
(other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
(iii) make any loans, advances or capital contributions to or investments in,
any other person; (iv) pledge or otherwise encumber shares of capital stock
of SCI; or (v) mortgage or pledge any of its material assets, or create or
suffer to exist any material Lien thereupon (other than tax Liens for taxes
not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent SCI from (i) entering into employment
agreements or severance agreements with employees in the ordinary course of
business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for
employees for fiscal 2003 in the ordinary course of year end compensation
reviews consistent with past practice and paying bonuses to employees for
fiscal 2003 in amounts previously disclosed to Hesperia (to the extent that
such compensation increases and new or amended bonus arrangements do not
result in a material increase in benefits or compensation expense to SCI);
(g) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions other than in the ordinary course of
business;
(h) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(i) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory of writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract
or agreement other than in the ordinary course of business consistent with
past practice which would be material to SCI; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of $1,000 or,
in the aggregate, are in excess of $5,000; provided, however that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts;
(k) make any tax election or settle or compromise any income tax liability
material to SCI;
(l) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
SCI;
(m) commence any material research and development project or terminate any
material research and development project that is currently ongoing, in
either case, except pursuant to the terms of existing contracts or except in
the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(m) or any action which would make
any of the representations or warranties of the SCI contained in this
Agreement untrue or incorrect.
Section 4.3 Preparation of the 8-K. SCI and Hesperia shall promptly
prepare and file with the SEC an 8-K disclosing this merger with audited
financials of SCI along with pro forma combined statements.
Section 4.4 Other Potential Acquirers. SCI, its affiliates and their
respective officers, directors, employees, representatives and agents shall
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any Third Party Acquisition.
Section 4.5 Meetings of Stockholders. Hesperia shall take all action
necessary, in accordance with the General Corporation Law of its state of
incorporation, and its Certificate of Incorporation and bylaws, to duly call,
give notice of, convene and hold a meeting of its stockholders as promptly as
practicable, to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby. Hesperia will, through
its Board of Directors, recommend to its shareholders approval of such
matters.
Section 4.6 NASD OTC:BB Listing. The parties shall use all
reasonable efforts to obtain the quotation of the SCI Shares on the National
Association of Securities Dealers, Inc. (NASD) Over-the-Counter Bulletin
Board (OTC:BB) or other national stock exchange.
Section 4.7 Access to Information.
(a) Between the date hereof and the Effective Time, Hesperia will
give SCI and its authorized representatives, and SCI will give Hesperia and
its authorized representatives, reasonable access to all employees, plants,
offices, warehouses and other facilities and to all books and records of
itself, will permit the other party to make such inspections as such party
may reasonably require and will cause its officers to furnish the other party
with such financial and operating data and other information with respect to
the business and properties of itself as the other party may from time to
time reasonably request.
(b) Between the date hereof and the Effective Time, Hesperia shall furnish
to SCI, and SCI will furnish to Hesperia, within 25 business days after the
end of each quarter, quarterly statements prepared by such party in
conformity with its past practices) as of the last day of the period then
ended.
(c) Each of the parties hereto will hold and will cause its consultants and
advisers to hold in confidence all documents and information furnished to it
in connection with the transactions contemplated by this Agreement.
Section 4.8 Additional Agreements, Reasonable Efforts. Subject to
the terms and conditions herein provided, each of the parties hereto agrees
to use all reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) cooperating in the preparation and filing of the 8-K, any
filings that may be required under the HSR Act, and any amendments to any
thereof; (ii) obtaining consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement; (iii) contesting any legal
proceeding relating to the Merger and (iv) the execution of any additional
instruments necessary to consummate the transactions contemplated hereby.
Subject to the terms and conditions of this Agreement, SCI and Hesperia agree
to use all reasonable efforts to cause the Effective Time to occur as soon as
practicable after the stockholder votes with respect to the Merger. In case
at any time after the Effective Time any further action is necessary to carry
out the purposes of this Agreement, the proper officers and directors of each
party hereto shall take all such necessary action.
Section 4.9 Indemnification; Releases
(a) Subject to obtaining a Release in form reasonably acceptable
by the parties from each officer and director of Hesperia, and provided that
all such Releases are obtained, Hesperia agrees, to the extent, if any, not
provided by an existing right under one of the parties' directors and
officers liability insurance policies, from and after the Effective Time, to
the fullest extent permitted by applicable law and Hesperia's Certificate of
Incorporation and Bylaws, to indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof, or who becomes
prior to the Effective Time, a director or officer of SCI (each an
"Indemnified Party" and, collectively, the ``Indemnified Parties") against
all losses, expenses (including reasonable attorneys' fees and expenses),
claims, damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement arising out of actions or
omissions occurring at or prior to the Effective Time and whether asserted or
claimed prior to, at or after the Effective Time) that are in whole or in
part based on the Merger or arising out of the business of the Surviving
Corporation after the Merger, provided, however, in no event shall SCI have
the obligation to indemnify and hold harmless any Indemnified Party or
Indemnified Parties for any breach of their duty of loyalty to SCI or its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law (including, without
limitation, any federal or state securities laws), for unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in NGCL,
or for any transaction from which the Indemnified Person derived an improper
personal benefit. In the event of any such loss, expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) SCI shall
advance to such Indemnified Party upon request reimbursement of documented
expenses reasonably incurred, to the extent not prohibited by the NGCL or its
Certificate of Incorporation or Bylaws, (ii) SCI will cooperate in the
defense of any such matter and (iii) any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the NGCL and SCI's Certificate of Incorporation or
Bylaws shall be made by independent counsel mutually acceptable to SCI and
the Indemnified Party; provided, however, that SCI shall not be liable for
any settlement effected without its written consent (which consent shall not
be unreasonably withheld). The Indemnified Parties as a group may retain only
one law firm with respect to each related matter.
(b) In the event SCI or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity or such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to
any person, then and in either such case, proper provision shall be made so
that the successors and assigns of SCI shall assume the obligations set forth
in this Section 4.9.
(c) The provisions of this Section 4.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 4.10 Information Statement. As soon as practicable after the
execution of this Agreement, Hesperia will prepare an Information Statement
or other applicable filing for mailing to its stockholders, in accordance
with the requirements of all federal and state securities laws and other
applicable laws. Hesperia will file the Information Statement with the
Commissioner of Corporations for the State of California as part of its
Application for Qualification of Securities filed with the Department of
Corporation.
Each party will provide the other on a timely basis with all such
information as may be required to be included in the Information Statement.
The parties will cooperate with each other in connection with the preparation
of documentation for submission to regulatory authorities and holders of
their respective securities and will keep each other informed of any requests
or comments made by regulatory authorities in connection with such
documentation. Hesperia will, through its Board of Directors, recommend to
its stockholders, approval of such matters.
Section 4.11 Press Releases. No press release or other public
announcement concerning the proposed transactions contemplated by this
Agreement will be made by any party hereto without the prior consent of the
other party, such consent not to be unreasonably withheld; provided, however,
that any party may without such consent make such disclosure about itself as
may be required by any stock exchange on which its securities are listed or
by federal and state securities laws or any regulatory authority having
jurisdiction over such party and, if such disclosure is required, the party
making the disclosure will use reasonable efforts to give prior oral or
written notice to the other party and an opportunity to allow the other party
to comment on the proposed disclosure provided the party required to make the
disclosure has reasonable time to do so before such regulatory authorities
require such disclosure to be made.
Section 4.12 Other Filings. At all times from and after the date
hereto until the Effective Time, SCI covenants and agrees to make all filings
it is required to make pursuant to the Exchange Act on a timely basis.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1 Conditions to Each Party's Obligations to Effect the
Merger. The
respective obligations of each party hereto to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of SCI and Hesperia;
(b) this Agreement shall have been approved and adopted by the
Board of Directors of Hesperia and SCI;
(c) no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced by
any United States court or United States governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
and
(d) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received.
Section 5.2 Conditions to the Obligations of Hesperia. The
obligation of Hesperia to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations of SCI contained in this Agreement or in any other
document delivered pursuant hereto shall be true and correct (except to the
extent that the breach thereof would not have a Material Adverse Effect on
SCI) at and as of the Effective Time with the same effect as if made at and
as of the Effective Time (except to the extent such representations
specifically related to an earlier date, in which case such representations
shall be true and correct as of such earlier date), and at the Closing SCI
shall have delivered to Hesperia a certificate to that effect;
(b) each of the covenants and obligations of SCI to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time
and at the Closing SCI shall have delivered to Hesperia a certificate to that
effect;
(c) SCI shall have obtained the consent or approval of each person whose
consent or approval shall be required in order to permit the Merger as
relates to any obligation, right or interest of SCI under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or instrument,
except those for which failure to obtain such consents and approvals would
not, in the reasonable opinion of Hesperia, individually or in the aggregate,
have a Material Adverse Effect on SCI; and
(d) there shall have been no events, changes or effects with respect to SCI
having or which could reasonably be expected to have a Material Adverse
Effect on SCI.
(e) Hesperia and SCI's Application for Qualification of Securities filed
with the Department of Corporation shall be approved.
(f) effective as of the Closing, Xxxxxxx X. XxXxxx will surrender to SCI,
for cancellation, certificates totaling 6,454,370 shares of SCI's Common
Stock;
Section 5.3 Conditions to the Obligations of SCI. The obligation of
SCI to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of Hesperia contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct
(except to the extent that the breach thereof would not have a Material
Adverse Effect on Hesperia) at and as of the Effective Time with the same
effect as if made at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date), and at
the Closing Hesperia shall have delivered to SCI a certificate to that
effect;
(b) each of the covenants and obligations of Hesperia to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or
before the Effective Time and at the Closing Hesperia shall have delivered to
SCI a certificate to that effect;
(c) Hesperia shall have obtained the consent or approval of each
person whose consent or approval shall be required in order to permit the
Merger as relates to any obligation, right or interest of Hesperia under any
loan or credit agreement, note, mortgage, indenture, lease or other agreement
or instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of SCI, individually or in the
aggregate, have a Material Adverse Effect on Hesperia;
(d) there shall have been no events, changes or effects with
respect to Hesperia having or which could reasonably be expected to have a
Material Adverse Effect on Hesperia;
(e) The stockholders of Hesperia and the stockholders of SCI shall
have approved the principal terms of this Agreement, the Merger and the
transactions contemplated herein in accordance with applicable law and their
Certificate of Incorporation and Bylaws,
(f) At the Closing, Hesperia shareholders holding in the aggregate
less than one percent (1%) of the Hesperia Common Stock shall have perfected
dissenter's or appraisal rights.
(g) Hesperia shall have received such additional documents, certificates,
covenants, representations and warranties as may be reasonably necessary, in
the opinion of its legal counsel, to ensure that the Hesperia stockholders
will receive good title to 10,415,845 Hesperia Common Shares, which shares
shall represent at least Ninety-five percent (95%) of the issued and
outstanding capital stock of Hesperia as of the Effective Date.
(h) Hesperia and SCI's Application for Qualification of Securities filed
with the Department of Corporation shall be approved.
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
Section 6.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval and adoption of this Agreement by Hesperia's or
SCI's stockholders:
(a) by mutual written consent of Hesperia and SCI;
(b) by SCI or Hesperia if (i) any court of competent jurisdiction in the
United States or other United States Governmental Entity shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling
or other action is or shall have become nonappealable or (ii) the Merger has
not been consummated by March 15, 2003; provided, however, that no party may
terminate this Agreement pursuant to this clause (ii) if such party's failure
to fulfill any of its obligations under this Agreement shall have been the
reason that the Effective Time shall not have occurred on or before said
date;
(c) by Hesperia if (i) there shall have been a breach of any material
representation or warranty on the part of SCI set forth in this Agreement, or
if any representation or warranty of SCI shall have become untrue, in either
case such that the conditions set forth in Section 5.2(a) would be incapable
of being satisfied by March 15, 2003 (or as otherwise extended), (ii) there
shall have been a breach by SCI of its covenants or agreements hereunder
having a Material Adverse Effect on SCI or materially adversely affecting (or
materially delaying) the consummation of the Merger, and SCI, has not cured
such breach within 20 business days after notice by Hesperia thereof,
provided that Hesperia has not breached any of its obligations hereunder, or
(iii) Hesperia shall have convened a meeting of its stockholders to vote upon
the Merger and shall have failed to obtain the requisite vote of its
stockholders; or
(d) by SCI if (i) there shall have been a breach of any material
representation or warranty on the part of Hesperia set forth in this
Agreement, or if any representation or warranty of Hesperia shall have become
untrue, in either case such that the conditions set forth in Section 5.3(a)
would be incapable of being satisfied by March 15, 2003 (or as otherwise
extended), (ii) there shall have been a breach by Hesperia of its covenants
or agreements hereunder having a Material Adverse Effect on Hesperia or
materially adversely affecting (or materially delaying) the consummation of
the Merger, and Hesperia has not cured such breach within 20 business days
after notice by SCI thereof, provided that SCI has not breached any of its
obligations hereunder, or (iii) SCI shall have convened a meeting of its
stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders.
Section 6.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 6.1, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, directors, officers or
stockholders, other than the provisions of this Section 6.2 and Sections
4.7(c) and 6.3 hereof. Nothing contained in this Section 6.2 shall relieve
any party from liability for any breach of this Agreement.
Section 6.3 Fees and Expenses. Except as specifically provided in
this Section 6.3, each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby; provided, however,
that notwithstanding anything herein to the contrary, Hesperia's fees and
expenses shall not be paid or reimbursed by the Surviving Corporation.
Section 6.4 Amendment. This Agreement may be amended by action taken
by Hesperia and SCI at any time before or after approval of the Merger by the
stockholders of Hesperia and SCI (if required by applicable law) but, after
any such approval, no amendment shall be made which requires the approval of
such stockholders under applicable law without such approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 6.5 Extension; Waiver. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of any other party, (ii) waive any inaccuracies
in the representations and warranties of any other party contained herein or
in any document, certificate or writing delivered pursuant hereto or (iii)
waive compliance by any other party with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall
not limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.2 Entire Agreement; Assignment. This Agreement and the
exhibits and schedules attached hereto (a) constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements and understandings both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise.
Section 7.3 Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be severable.
Section 7.4 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person,
by facsimile or by registered or certified mail (postage prepaid, return
receipt requested), to each other party as follows:
If to SCI: XXXXXXXXXXX.XXX, INC.
Attn: Xxxxxxx X. XxXxxx
0000 X. Xxxxxxxx Xx.
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
if to Hesperia: Hesperia Holding Corp.
Attn: Xxxxxx Xxxxx
0000 X Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
with a copy to: Xxxxxx X. Xxxxxxxxxx
Xxxxxxxxxx Law Group
Emerald Plaza
000 Xxxx Xxxxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without regard
to the principles of conflicts of law thereof.
Section 7.6 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 7.7 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors
and permitted assigns, and except as provided in Sections 4.9, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under
or by reason of this Agreement.
Section 7.8 Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19 and
3.18 a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
the first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(e) "subsidiary" or "subsidiaries" of Hesperia, SCI or any other person,
means any corporation, partnership, limited liability company, association,
trust, unincorporated association or other legal entity of which Hesperia,
SCI or any such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50% or
more of the capital stock, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
Section 7.9 Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part
of any direct or indirect stockholder of Hesperia, SCI or any officer,
director, employee, agent, representative or investor of any party hereto.
Section 7.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
XXXXXXXXXXX.XXX, INC. Hesperia Holding Corp.
By:/s/ XXxxxxx XxXxxx By:/s/ Xxxxxx Xxxxx
Name: Xxxxxxx X. XxXxxx Name: Xxxxxx Xxxxx
Title: President Title: President
SAVEYOUTIME DISCLOSURE SCHEDULE
Schedule 2.1 Organization See Amended
Articles/Bylaws/Minutes
Schedule 2.6 Consents & Approvals
None Required
Schedule 2.7 No Default Not
Applicable
Schedule 2.9 Litigation None Exist
Schedule 2.10 Compliance with Applicable
Law Not Applicable - full
disclosed in 10KSB
Schedule 2.11 Employee Benefit Plans Section 2.11(a) Not
Applicable - None Exist
Section 2.11( c)No
Options Exist
Section 2.11(d) No
Agreements Exist
Schedule 2.19 Affiliates Xxxxxxx XxXxxx
Schedule 2.21 Insider Interest None Exist
Schedule 4.2 Conduct of Business See Amended & Restated
Articles
HESPERIA DISCLOSURE SCHEDULE
Schedule 3.2(b) Subsidiary Stock None Exist
Schedule 3.2(c) Capital Stock Rights None Exist other than as in
Articles
Schedule 3.2 (e) Subsidiaries Hesperia Truss - all
information supplied
Schedule 3.5 Consents & Approvals
None Required
Schedule 3.6 No Default Not
Applicable
Schedule 3.7 No Undisclosed Liability
None Exist
Schedule 3.8 Litigation None Exist
Schedule 3.9 Compliance with Applicable
Law Not Applicable
Schedule 3.10 Employee Benefit Plans Section 3.10 (c)No Options
Exist
Section3.10(e)Copy of
Agreement Supplied)
Schedule 3.11 Environmental Laws and Regs Not Applicable
Schedule 3.12 Tax Matters None Exist
Schedule 3.13 Title to Property None Exist
Schedule 3.14(b) Intellectual Property None Exist
Schedule 3.18 Affiliates Xxxxxx Xxxxxx
Xxxx Xxxxxxxxxx
Xxxx Xxxxx
Schedule 3.20 Insider Interest None Exist
Schedule 4.1 Conduct of Business See Amended & Restated
Articles
