AGREEMENT AND PLAN
OF
REORGANIZATION
Dated November 9, 1998
By and Among
Mercristo Developments, Inc.
Hungarian Ferroalloys, Inc.
and the shareholders of
Hungarian Ferroalloys, Inc.
who are Parties to this Agreement
INDEX
ARTICLE I -- SALE AND TRANSFER OF HFI STOCK
1.1 HFI Stock; Power of Attorney............................................1
1.2 Purchase Price..........................................................1
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF HFI
2.1 Valid Corporate Existence, Qualification................................2
2.2 Capitalization..........................................................2
2.3 Consents................................................................3
2.4 Corporate Authority Binding Nature of Agreement;
Title to HFI Stock, etc.................................................3
2.5 Financial Statements and Liabilities....................................3
2.6 Adverse Developments....................................................4
2.7 Taxes...................................................................4
2.8 Ownership of Assets;
Trademarks, etc.........................................................4
2.9 Insurance...............................................................4
2.10 Litigation; Compliance with Law ........................................5
2.11 Permits and Lice .......................................................5
2.12 Real Property ..........................................................5
2.13 Agreements and Obligations; Performance ................................5
2.14 Conditions of Assets ...................................................6
2.15 Banking Arragements ....................................................6
2.18 No Breach ..............................................................7
2.19 Brokers.................................................................7
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF
MERCRISTO DEVELOPMENTS, INC.
3.1 Valid Corporate Existence; Qualification................................7
3.2 Capitalization..........................................................8
3.3 Consents................................................................8
3.4 Corporate Authority;
Binding Nature of Agreement, etc........................................8
3.5 Financial Statements and Liabilities....................................9
3.6 Securities and Exchange Commission Filings.............................10
3.7 Adverse Developments...................................................10
3.8 Taxes..................................................................10
3.9 Ownership of Assets....................................................10
3.10 Insurance..............................................................10
3.11 Litigation; Compliance with law........................................11
3.12 Permits and Licenses...................................................11
3.13 Real Property..........................................................12
3.14 Agreements and Obligations; Performance................................12
3.15 Banking Arrangements...................................................13
3.16 Salary Information.....................................................13
3.17 Employment Benefit Plans...............................................13
3.18 No Breach..............................................................13
ii
3.19 Brokers................................................................14
ARTICLE IV -- PRE-CLOSING COVENANTS
4.1 HFI Covenants..........................................................14
4.2 Mercristo Developments, Inc. Covenants.................................15
ARTICLE V -- MERCRISTO DEVELOPMENTS, INC. STOCK
5.1 Acquisition of Mercristo Developments, Inc. Stock......................16
5.2 Restrictive Legend.....................................................17
ARTICLE VI -- CONDITIONS PRECEDENT TO THE OBLIGATION OF
MERCRISTO DEVELOPMENTS, INC. TO CLOSE
6.1 Representations and Warranties.........................................17
6.2 Covenants..............................................................17
6.3 No Actions.............................................................17
6.4 Consents; Licenses and Permits.........................................17
6.5 Certificate............................................................17
6.6 Additional Documents...................................................17
6.7 Approval of Counsel....................................................17
ARTICLE VII -- CONDITIONS PRECEDENT TO THE OBLIGATION OF
HFI AND THE STOCKHOLDERS TO CLOSE
7.1 Representations and Warranties.........................................18
7.2 Covenants..............................................................19
7.3 Surrender of Mercristo Developments, Inc.
Shares to Treasury................................................19
7.4 HFI Board Designations.................................................19
7.5 No Actions.............................................................19
7.6 Certificate............................................................19
7.7 Additional Documents...................................................19
7.8 Approval of Counsel....................................................19
ARTICLE VIII -- CLOSING
8.1 Location...............................................................19
8.2 Items to be Delivered by HFI and the
HFI Stockholders..................................................20
8.3 Items to be Delivered by
Mercristo Developments, Inc.......................................20
8.4 Other Items to be Delivered by
Mercristo Developments, Inc.......................................20
ARTICLE IX -- SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1 Survival...............................................................20
9.2 Indemnification........................................................21
9.3 Defense of Claims......................................................21
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9.4 Rights Without Prejudice..............................................21
ARTICLE X -- TERMINATION AND WAIVER
10.1 Termination...........................................................21
10.2 Waiver................................................................22
ARTICLE XI -- MISCELLANEOUS PROVISIONS
11.1 Expenses..............................................................22
11.2 Confidential Information..............................................23
11.3 Modification, Termination or Waiver...................................23
11.4 Publicity.............................................................23
11.5 Notices...............................................................23
11.6 Binding Effect and Assignment.........................................24
11.7 Entire Agreement......................................................24
11.8 Exhibits..............................................................24
11.9 Governing Law.........................................................24
11.10 Counterparts..........................................................25
11.11 Section Headings......................................................25
EXHIBITS
1.1A Hungarian Ferroalloys, Inc. - Stockholders.
1.1B Power of Attorney for Agreement Execution
1.2 Mercristo Developments, Inc.- Shares to be Issued in
Exchange for Shares of HFI.
2.1 Hungarian Ferroalloys Minutes
2.5(b) Hungarian Ferroalloys, Inc. - Liabilities to be
Reflected or Reserved Against
2.5(c) Hungarian Ferroalloyws, Inc. - Indebtedness,
Related Liens and Instruments
and/or Agreements Relating Thereto
2.5(d) Hungarian Ferroalloys, Inc. - Assumed, Guaranteed
or Endorsed Indebtedness
2.7 Hungarian Ferroalloyws, Inc. - Unpaid Taxes
2.8 Hungarian Ferroalloys, Inc. - Assets Subject to
Liens or Other Interests
2.12 Hungarian Ferroalloys, Inc. - Real Property Leases
2.13 Hungarian Ferroalloys, Inc. - Listed Agreements
2.15 Hungarian Ferroalloys, Inc. - Banking Arrangements
2.16 Hungarian Ferroalloys, Inc. - Salary Information
2.17 Hungarian Ferroalloys, Inc. - Employment Benefit Plan
3.5(b) Mercristo Developments, Inc.- Liabilities to be
Reflected or Reserved Against
3.5(c) Mercristo Developments, Inc.- Indebtedness, Related
Liens and Instruments and/or Agreements
Relating Thereto
3.5(d) Mercristo Developments, Inc. - Assumed, Guaranteed or
Endorsed Indebtedness
iv
3.8 Mercristo Developments, Inc. - Unpaid Taxes
3.9 Mercristo Developments, Inc. - Intellectual Property/
Intangible Assets
3.10 Mercristo Developments, Inc. - Insurance Policies
3.13 Mercristo Developments, Inc. - Real Property Leases
3.14 Mercristo Developments, Inc. - Listed Agreements
3.15 Mercristo Developments, Inc. - Banking Arrangements
3.16 Mercristo Developments, Inc. - Salary Information
3.17 Mercristo Developments, Inc. - Employee Benefit Plans
v
AGREEMENT AND PLAN OF REORGANIZATION dated as of November 9, 1998 (the
"Agreement") by and among Mercristo Developments, Inc., a Delaware
Corporation ("Mercristo"), Hungarian Ferroalloys, Inc., a Delaware
Corporation ("HFI"), and the HFI shareholders who are parties to this
Agreement (collectively, the "HFI Stockholders")
-----------------------------------------
The HFI Stockholders all of the outstanding shares of capital
stock of HFI (the "Minimum Shares"). Mercristo desires to acquire the Shares in
a tax-free reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986 (the "Reorganization").
NOW, THEREFORE, in consideration of the mutual benefits to be
derived hereby and the representations, warranties, covenants and agreements
herein contained, Mercristo, HFI and the HFI Stockholders agree as follows:
ARTICLE I
Sale and Transfer of HFI Stock
------------------------------
1.1 HFI Stock; Power of Attorney. Upon the terms and subject
to the conditions hereinafter set forth, at the Closing (as hereinafter defined
in Section 8.1), the HFI Stockholders shall sell, transfer and deliver to
Mercristo and Mercristo shall acquire from the HFI Stockholders, shares of
Common Stock of HFI, in the denominations set forth opposite their names on
Exhibit 1.1A hereto, being all of the issued and outstanding shares of capital
stock of HFI as of the date hereof (collectively, the "HFI Stock"), free and
clear of all liens, pledges, encumbrances, charges and claims thereon.
Certificates evidencing the HFI Stock will be delivered to Mercristo duly
endorsed in blank or accompanied by appropriate stock powers endorsed in blank.
Exhibit 1.1B hereto are one or more Powers of Attorney (and corporate
resolutions, as applicable) by the, HFI Stockholders for execution of this
Agreement.
1.2 Purchase Price. Upon the sale, transfer and delivery to
Mercristo by the HFI Stockholders of the HFI Stock as set forth in Section 1.1A,
and in consideration therefor, Mercristo shall deliver to the HFI Stockholders
(and among them in proportion to their ownership of the HFI Stock) certificates
evidencing 15,867,510 shares of Mercristo Common Stock par value
$.001 per share (the "Mercristo Stock") (6 shares of Mercristo for each of HFI
share tendered). All said Mercristo Stock shall be issued in the names and
denominations as set forth on Exhibit 1.2 hereto.
ARTICLE II
Representations and Warranties of HFI
-------------------------------------
HFI makes the following representations and warranties to
Mercristo and the HFI Shareholders make the representations set forth in Section
2.4 as they relate to them, as Shareholders, to Mercristo.
2.1 Valid Corporate Existence; Qualification. HFI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. HFI has the corporate power to carry on its business
as now conducted and to own its assets. HFI is not qualified to conduct business
in any other jurisdiction, except in the State of Delaware, there being no other
jurisdiction in which failure to qualify would have a material adverse effect on
HFI, and its assets, properties or business, and there has not been any claim by
any other jurisdiction to the effect that HFI is required to qualify or
otherwise be authorized to do business as a foreign corporation therein. Copies
of HFI's Certificate of Incorporation, good standing certificate (certified by
the appropriate official of the State of Delaware) and By-Laws (certified by
HFI's Secretary), as amended to date, which will be delivered to Mercristo at or
prior to the Closing, are true and complete copies of those documents as now in
effect. The minute books of HFI contain accurate records of all meetings of its
Board of Directors, and stockholders since its incorporation, and accurately
reflect all transactions referred to therein. A true copy of HFI's Minute Book
with the foregoing is enclosed as Exhibit 2.1 hereto.
HFI's subsidiary, Salgotarjan Ferroallowys Works Kereskedelmi,
KFT, a Hungarian corporation ("SWF"), is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation; has the
corporate power to own manage, lease and hold its properties and to carry on its
business as such business is presently conducted; and is duly qualified to do
business in each jurisdiction where the character of its properties or nature of
its business requires it to be so qualified.
2.2 Capitalization. The authorized capital stock of HFI
consists of 11,000,000 shares of which 10,000,000 shares are Common Stock, $.01
par value of which 2,644,585 shares are issued
2
and outstanding and 1,000,000 shares of Preferred Stock, none of which are
presently outstanding. All of such shares of Common Stock are duly authorized
and validly issued and outstanding, fully paid and nonassessable. There are no
subscriptions, options, warrants, rights or calls or other commitments or
agreements to which HFI is a party or by which it is bound, calling for the
issuance, transfer, sale or other disposition of any class of securities of HFI.
There are no outstanding securities of HFI convertible or exchangeable, actually
or contingently, into shares of Common Stock or any other securities of HFI.
2.3 Consents. There are no consents of governmental and other
regulatory agencies, foreign or domestic, and of other parties required to be
received by or on the part of HFI, or the HFI Stockholders, to enable each of
such persons to enter into and carry out this Agreement in all material
respects.
2.4 Corporate Authority; Binding Nature of Agreement; Title to
HFI Stock, etc. HFI and each of the HFI Stockholders have the power to enter
into this Agreement and to carry out its, his or her obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of HFI and no other corporate proceedings on the part of HFI are
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement constitutes
the valid and binding obligation of each of HFI and the HFI Stockholders and is
enforceable in accordance with its terms. The HFI Stockholders individually
represent and warrant to Mercristo that they are, and at the Closing will be,
the sole record and beneficial owners of the respective shares of HFI Stock held
by them, free and clear of all liens, charges, encumbrances and claims. The HFI
Stockholders further represent and warrant to Mercristo that they have, and at
the Closing will have, good and marketable title to their respective shares of
HFI Stock and subject to pertinent federal and state rules and regulations,
pertaining to the sale of unregistered securities, the absolute and unqualified
right to sell, transfer and deliver the HFI Stock to Mercristo. The delivery of
the HFI Stock to Mercristo at the Closing pursuant to the provisions of this
Agreement will transfer valid title thereto, free and clear of all manner of
liens, pledges, encumbrances, charges and claims.
2.5 Financial Statements and Liabilities
(a) HFI has delivered to Mercristo true and complete copies of
its draft audited financial statements as of and for the year ended July 31,
1996. HFI represents and warrants as to the audit delay that it is caused by a
late start on the work and is not due to any problem or possible exception from
the audit
3
report. All future financial statements will be prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved, except as may be indicated in the notes thereto.
(b) Exhibit 2.5(b) sets forth (i) the amount of all
indebtedness for borrowed money of HFI outstanding on the date hereof, (ii) any
lien with respect to such indebtedness and (iii) a list of each instrument or
agreement governing such indebtedness (true and correct copies of which will be
provided to Mercristo at or before Closing). Except as set forth on Exhibit
2.5(c),no default (or event which with the giving of notice or passage of time
would constitute a default) exists with respect to or under any such
indebtedness or any instrument or agreement relating thereto.
(c) Except as set forth on Exhibit 2.5(c), other than in the
normal course of business, HFI has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any indebtedness of
any other person or entity.
2.6 Adverse Developments. HFI knows of no material adverse
changes in the assets, properties, operations or financial condition of HFI, and
no event has occurred which could be reasonably expected to have a materially
adverse effect upon the business of HFI, including, without limitation, the loss
of any licenses or permits, suppliers, customers or employees, which loss would
be of a materially adverse nature.
2.7 Taxes. Except as set forth on Exhibit 2.7, HFI has filed
all tax returns and reports required to be filed within the applicable periods
for such filings. Except as set forth on Exhibit 2.7, HFI has paid all taxes
(including any foreign, federal, state or local taxes)through the years ended
December 31, 1997 required to be paid. Except as set forth on Exhibit 2.7 no
deficiencies for any tax have been proposed or assessed against HFI and, to the
knowledge of HFI, there are no tax audits pending or contemplated. Other than
for taxes which are not yet due, there is no tax lien, whether imposed by any
federal, state, local or foreign taxing authority outstanding against HFI's
business or assets.
2.8 Ownership of Assets; Trademarks, etc. Except as set forth
in Exhibit 2.8, HFI owns outright, and has good and marketable title to all of
its assets, properties and businesses, free and clear of all liens, mortgages,
pledges, conditional sales agreements, restrictions on transfer or other
encumbrances or charges.
2.9 Insurance. Neither HFI nor its subsidiary have any
insurance policies.
4
2.10 Litigation; Compliance with Law. Except as set forth in
Exhibit 2.10, there are no actions, suits, proceedings or governmental
investigations relating to HFI or its properties, assets or business pending or,
to the knowledge of HFI, after reasonable inquiry, threatened, or any order,
injunction, award or decree outstanding, against HFI or against or relating to
its properties, assets or business; and HFI, after reasonable inquiry, does not
know of any basis for any such actions, suits or proceedings. To the best of
HFI's knowledge, as it relates to compliance with laws, it is not in violation
of any law, regulation, ordinance, order, injunction, decree, award, or other
requirement of any governmental body, court or arbitrator relating to its
properties, assets or business, the violation of which would have a material
adverse effect on HFI.
2.11 Permits and Licenses. HFI has all material permits,
licenses, orders and approvals of all federal, state, local and foreign
governmental or regulatory bodies required of it to carry on its business as
presently conducted; all such permits, licenses, orders, franchises and
approvals are in full force and effect, and to the knowledge of HFI, after
reasonable inquiry, no suspension or cancellation of any of such permits,
licenses, etc., is threatened; and HFI is in compliance in all material respects
with all requirements, standards and procedures of the federal, state, local and
foreign governmental bodies which have issued such permits, licenses, orders,
franchises and approvals.
2.12 Real Property. Exhibit 2.12 sets forth a brief
description of the real property owned by HFI and/or SFW. A description of the
lease of SWF is described in Exhibit 2.12 which lease is now in full force and
effect, and all amounts payable thereunder have been paid. All uses of the
leased real property by HFI and/or SWF conform, in all material respects, to all
the terms of the lease relating thereto.
2.13 Agreements and Obligations; Performance. Exhibit 2.13
sets forth a list of agreements to which HFI is a party. (the "Listed
Agreements"). Other than the Listed Agreements, HFI is not party to, or bound by
any: (i) written or oral agreement or other contractual commitment,
understanding or obligation which involves aggregate payments or receipts in
excess of $10,000; (ii) contract, arrangement, commitment or understanding which
involves aggregate payments or receipts in excess of $10,000 that cannot be
canceled on thirty (30) days or less notice without penalty or premium or any
continuing obligation or liability; (iii) contractual obligation or contractual
liability of any kind to any of the HFI Stockholders except in such instances
that any HFI stockholders are also noteholders of HFI; (iv) contract of
employment with any officer or employee not terminable at will without penalty
or premium or any continuing obligation or liability; (v) deferred compensation,
bonus or
5
incentive plan or agreement not cancelable at will without penalty or premium or
any continuing obligation or liability; (vi) management or consulting agreement
not terminable at will without penalty or premium or any continuing obligation
or liability; (vii) lease for real or personal property (including borrowings
thereon), license or royalty agreement; (viii) union or other collective
bargaining agreement; (ix) agreement, commitment or understanding relating to
indebtedness for borrowed money; (x) contract containing covenants limiting the
freedom of HFI to engage or compete in any line or business or with any person
in any geographical area; or (xi) other contract, agreement, commitment or
understanding which materially affects any of its properties, assets or
business, whether directly or indirectly, or which was entered into other than
in the ordinary course of business. A true and correct copy of each of the
written Listed Agreements requested by Mercristo has been delivered to
Mercristo. To the best of its knowledge, HFI has in all material respects
performed all obligations required to be performed by it to date under all of
the Listed Agreements, is not in default in any material respect under any of
the Listed Agreements and has received no notice of any default or alleged
default thereunder which has not heretofore been cured or which notice has not
heretofore been withdrawn. HFI knows of no material default under any of the
Listed Agreements by any other party thereto or by any other person, firm or
corporation bound thereunder.
2.14 Condition of Assets. Exhibit 2.14(A) contains the report
of Belcan Engineering Group, Inc., dated August 17, 1995 and Exhibit 2.14(B)
contains the environmental report of Golden Associates dated September 12, 1995.
HFI and SWF are relying on said report with respect to the condition of its
assets and makes no representations and warranties relating thereto.
2.15 Banking Arrangements. Exhibit 2.15 sets forth the name of
each bank in or with which HFI or its subsidiaries has an account, credit line
or safety deposit box, and a brief description of each such account, credit line
or safety deposit box, including the names of all persons currently authorized
to draw thereon or having access thereto; and the names of all persons, if any,
now holding powers of attorney from HFI and a summary statement of the terms
thereof.
2.16 Salary Information. Exhibit 2.16 contains a list of the
names and current salary rates of and bonus commitments to all present officers
of HFI, and the names and current annual salary rates of all other persons
employed by HFI whose annual salaries exceed $50,000.
2.17 Employee Benefit Plans. Except as set forth in Exhibit
2.17 HFI does not maintain or make any employer contributions under any
"pension" or "welfare" benefit plans, as
6
such term is defined by the Employee Retirement Income Security Act of 1974, as
amended.
2.18 No Breach. Neither the execution and delivery of this
Agreement nor compliance by HFI with any of the provisions hereof, nor the
consummation of the transactions contemplated hereby, will:
(a) violate or conflict with any provision of the
Certificate of Incorporation or By-laws of HFI;
(b) violate or, alone or with notice or the passage of time,
result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a default under, the terms
of any agreement or other document or undertaking, oral or written to which HFI
is a party or by which HFI or any of its properties or assets may be bound;
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of HFI pursuant to
the terms of any such agreement or instrument;
(d) violate any judgement, order, injunction, decree or award
against, or binding upon, HFI or upon its properties or assets; or
(e) violate any law or regulation of any jurisdiction relating
to HFI, its securities, assets or properties.
2.19 Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on directly with
Mercristo, HFI and the HFI Stockholders, without the intervention of any broker,
finder, investment banker or other third party. HFI agrees to indemnify
Mercristo against, and to hold it harmless from any claim for brokerage or
similar commissions or other compensation which may be made against Mercristo by
any third party in connection with any of the transactions contemplated hereby
which claim is based upon any action by HFI.
ARTICLE III
Representations and Warranties of Mercristo
-------------------------------------------
Mercristo makes the following representations and warranties
to HFI and each of the HFI Stockholders:
3.1 Valid Corporate Existence; Qualification. Mercristo is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
7
Mercristo has the corporate power to carry on its business as now conducted and
to own its assets. Mercristo is not qualified to conduct business in any other
jurisdiction except for its business being currently conducted in Ottawa,
Canada, there being no other jurisdiction in which failure to qualify would have
a material adverse effect on Mercristo and its assets, properties or business,
and there has not been any claim by any jurisdiction to the effect Mercristo is
required to qualify or otherwise be authorized to do business as a foreign
corporation therein. The copies of Mercristo's Certificate of Incorporation (as
certified by the Secretary of the State of Delaware) and By-Laws (as certified
by the Secretary of Mercristo, as the case may be), as amended to date, which
will be delivered to HFI prior to the Closing, are true and complete copies of
those documents as now in effect. Mercristo's subsidiary, Xxxxxxx Arabians,
Inc., a Canadian corporation, is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; has the corporate
power to own manage, lease and hold its properties and to carry on its business
as such business is presently conducted; and is duly qualified to do business in
each jurisdiction where the character of its properties or nature of its
business requires it to be so qualified.
3.2 Capitalization. The authorized capital stock of Mercristo
consists of 100,000,000 shares of common stock, par value $.001 per share, of
which 13,193,022 shares are issued and outstanding on the date hereof (after
taking into account the surrender of 4,647,498 shares to Mercristo's treasury)
Upon the closing, Mercristo shall issue and declare outstanding 15,867,510
shares is for 2,664,585 shares of HFI to be tendered. All of such shares are and
will be duly authorized and validly issued and outstanding, fully paid and
non-assessable. Except as contemplated by this Agreement and in connection with
the transactions to be consummated hereby, there are no subscriptions, options,
warrants, rights or calls or other commitments or agreements to which Mercristo
is a party or by which it is bound, calling for the issuance, transfer, sale or
other disposition of any class of security of Mercristo, nor are there any
outstanding securities of Mercristo convertible or exchangeable, actually or
contingently, into shares of Mercristo Stock or any other securities of
Mercristo.
3.3 Consents. No consents of governmental and other regulatory
agencies, foreign or domestic, and of other third parties is required to be
received by or on the part of Mercristo to enable it to enter into and carry out
this Agreement in all material respects.
3.4 Corporate Authority; Binding Nature of Agreement; etc.
Mercristo has the corporate power to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement and the
consummation of
8
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Mercristo prior to the Closing. No other corporate proceedings on
the part of Mercristo are necessary to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
This Agreement constitutes the valid and binding obligation of Mercristo and is
enforceable in accordance with its terms.
3.5 Financial Statements and Liabilities
(a) Mercristo has delivered to HFI true and complete
copies of its audited financial statements as of and for the years ended January
31, 1998 and 1997 and unaudited financial statements for the six months ended
July 31, 1998. All of such financial statements have been prepared in accordance
with GAAP, applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto and, as to the July 31 interim financial
statements, except for the absence of notes thereto) and present fairly in all
material respects the financial position of Mercristo as of the dates thereof
and the results of Mercristo's operations for the periods then ended (subject,
in the case of the July 31, 1998 interim financial statements to year-end
adjustments, all of which adjustments will consist of normal recurring accruals
consistent with past practice).
(b) Mercristo has no liabilities or obligations (whether
accrued, absolute, contingent, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with GAAP) except (i) liabilities reflected in the financial
statements (ii) liabilities expressly set forth on Exhibit 3.5(b) which includes
material liabilities (over 10% of prior liabilities) and obligations incurred by
the Company since July 31, 1998 (the "Mercristo Balance Sheet Date"), whether or
not incurred in the ordinary course of business consistent with past practices.
(c) Exhibit 3.5(c) sets forth (i) the amount of all
indebtedness for borrowed money of Mercristo outstanding on the date hereof,
(ii) any lien with respect to such indebtedness and (iii) a list of each
instrument or agreement governing such indebtedness (true and correct copies of
which will be provided to HFI at or before Closing). Except as set forth on
Exhibit 3.5(c),no default (or event which with the giving of notice or passage
of time would constitute a default) exists with respect to or under any such
indebtedness or any instrument or agreement relating thereto.
(d) Except as set forth on Exhibit 3.5(d), since the
Mercristo Balance Sheet Date, Mercristo has not assumed,
9
guaranteed, endorsed or otherwise become directly or contingently liable on or
for any indebtedness of any other person or entity.
3.6. Securities and Exchange Commission Filings. Mercristo has
heretofore delivered to HFI copies of Mercristo's report on Form 10-K for the
year ended January 31, 1998 and reports on Form 10-Q for the three months ended
July 31, 1998. As of their respective dates, such reports complied in all
material respects with all applicable requirements of the Securities Exchange
Act of 1934, as amended and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited financial statements and unaudited
interim financial statements of Mercristo included in such reports have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto and as to
unaudited statements, except for the absence of notes thereto), and present
fairly in all material respects the financial position of Mercristo as of the
dates thereof and the results of Mercristo's operations for the periods then
ended (subject, in all cases of unaudited interim financial statements, to
year-end adjustments, all of which adjustments will consist of normal recurring
accruals consistent with past practice).
3.7 Adverse Developments. Since the Mercristo Balance Sheet
Date, there have been no material adverse changes in the assets, properties,
operations or financial condition of Mercristo, and no event has occurred other
than in the ordinary and usual course of business which could be reasonably
expected to have a materially adverse effect upon the business of Mercristo, and
Mercristo, after reasonable inquiry, knows of no development or threatened
development of a nature that is, or which could be reasonably expected to have,
a materially adverse effect upon the business of Mercristo or upon any of its
assets, properties, operations or financial condition.
3.8 Taxes. Except as set forth on Exhibit 3.8, Mercristo has
filed all tax returns and reports required to be filed within the applicable
periods for such filings. Except as set forth on Exhibit 3.8, Mercristo has paid
all taxes (including any foreign, federal, state or local taxes through the
years ended January 31, 1998 required to be paid. Except as set forth on Exhibit
3.8 no deficiencies for any tax have been proposed or assessed against Mercristo
and, to the knowledge of Mercristo, there are no tax audits pending or
contemplated. Other than for taxes which are not yet due, there is no tax lien,
whether imposed by any federal, state, local or foreign taxing authority
outstanding against Mercristo's business or assets.
10
3.9 Ownership of Assets. Mercristo owns outright, and
has good and marketable title to all of its assets and properties reflected in
the Mercristo balance sheet, except as the same may have been disposed of in the
ordinary course of business since the Mercristo Balance Sheet Date, free and
clear of all liens, mortgages, pledges, conditional sales agreements,
restrictions on transfer or other encumbrances or charges whatsoever. Exhibit
3.9 sets forth a list of all patents, copyrights, trademarks, trade names or
other similar intangible assets owned by Mercristo.
3.10 Insurance. Exhibit 3.10 hereto is a complete and correct
list of all insurance polices presently in effect that relate to Mercristo and
its subsidiaries, their assets or employees. All such policies have been in full
force and effect from and after the date(s) set forth on Exhibit 3.10 and all
premiums due and payable with respect to such policies have been paid. To the
knowledge of Mercristo, there is no inaccuracy in any application for any such
policy which may reasonably be expected to form a basis for termination of any
such policy. Mercristo has complied in all material respects with the provisions
of such policies, and such polies (i) provide insurance covering risks in
amounts customary for Mercristo's business, and (ii) are sufficient for
compliance in all material respects with all contracts which Mercristo is a
party and all requirements of law.
3.11 Litigation, Compliance with Law. There are no actions,
suits, proceedings or governmental investigations relating to Mercristo or its
properties, assets or business pending or, to the knowledge of Mercristo, after
reasonable inquiry, threatened, or any order, injunction, award or decree
outstanding, against Mercristo or against or relating to its properties, assets
or business; and Mercristo, after reasonable inquiry, does not know of any basis
for any such actions, suits or proceedings. To the best of Mercristo's
knowledge, as it relates to compliance with laws, it is not in violation of any
law, regulation, ordinance, order, injunction, decree, award, or other
requirement of any governmental body, court or arbitrator relating to its
properties, assets or business, the violation of which would have a material
adverse effect on Mercristo.
3.12 Permits and Licenses. Mercristo has all material permits,
licenses, orders and approvals of all federal, state, local and foreign
governmental or regulatory bodies required of it to carry on its business as
presently conducted; all such permits, licenses, orders, franchises and
approvals are in full force and effect, and to the knowledge of Mercristo, after
reasonable inquiry, no suspension or cancellation of any of such permits,
licenses, etc., is threatened; and Mercristo is in compliance in all material
respects with all requirements, standards and procedures of the federal, state,
local and foreign governmental bodies which have issued such permits, licenses,
orders, franchises and approvals.
11
3.13 Real Property. Exhibit 3.13 sets forth a brief
description of all real property owned and leased by Mercristo. Except as set
forth on Exhibit 3.13. All leases of real property described in Exhibit 3.13 are
now in full force and effect, and all amounts payable thereunder have been paid.
All uses of the leased real property by Mercristo conform, in all material
respects, to all the terms of the lease relating thereto.
3.14 Agreements and Obligations; Performance. Exhibit 3.14
sets forth a list of agreements to which Mercristo is a party. (the "Listed
Agreements"). Other than the Listed Agreements, Mercristo is not party to, or
bound by any: (i) written or oral agreement or other contractual commitment,
understanding or obligation which involves aggregate payments or receipts in
excess of $10,000; (ii) contract, arrangement, commitment or understanding which
involves aggregate payments or receipts in excess of $10,000 that cannot be
canceled on thirty (30) days or less notice without penalty or premium or any
continuing obligation or liability; (iii) contractual obligation or contractual
liability of any kind to any of the Mercristo stockholders except in such
instances that any Mercristo stockholders are also noteholders of Mercristo;
(iv) contract of employment with any officer or employee not terminable at will
without penalty or premium or any continuing obligation or liability; (v)
deferred compensation, bonus or incentive plan or agreement not cancelable at
will without penalty or premium or any continuing obligation or liability; (vi)
management or consulting agreement not terminable at will without penalty or
premium or any continuing obligation or liability; (vii) lease for real or
personal property (including borrowings thereon), license or royalty agreement;
(viii) union or other collective bargaining agreement; (ix) agreement,
commitment or understanding relating to indebtedness for borrowed money; (x)
contract containing covenants limiting the freedom of Mercristo to engage or
compete in any line or business or with any person in any geographical area; or
(xi) other contract, agreement, commitment or understanding which materially
affects any of its properties, assets or business, whether directly or
indirectly, or which was entered into other than in the ordinary course of
business. A true and correct copy of each of the written Listed Agreements
requested by HFI has been delivered to HFI. To the best of its knowledge,
Mercristo has in all material respects performed all obligations required to be
performed by it to date under all of the Listed Agreements, is not in default in
any material respect under any of the Listed Agreements and has received no
notice of any default or alleged default thereunder which has not heretofore
been cured or which notice has not heretofore been withdrawn. Mercristo knows of
no material default under any of the Listed Agreements by any other party
thereto or by any other person, firm or corporation bound thereunder.
12
3.15 Banking Arrangements. Exhibit 3.15 sets forth
the name of each bank in or with which Mercristo and its subsidiaries has an
account, credit line or safety deposit box, including the names of all persons
currently authorized to draw thereon or having access thereto; and the names of
all persons, if any, now holding powers of attorney from Mercristo and a summary
statement of the terms thereof.
3.16 Salary Information. Exhibit 3.16 contains a list of the
names and current salary rates of and bonus commitments to all present officers
of Mercristo, and the names and current annual salary rates of all other persons
employed by Mercristo whose annual salaries exceed $50,000.
3.17 Employment Benefit Plans. Except as set forth in Exhibit
3.17 Mercristo does not maintain or make any employer contributions under any
"pension" or "welfare" benefit plans, as such term is defined by the Employee
Retirement Income Security Act of 1974, as amended.
3.18 No Breach. Neither the execution and delivery of this
Agreement nor compliance by Mercristo with any of the provisions hereof nor the
consummation of the transactions contemplated hereby, will:
(a) violate or conflict with any provision of the
Articles of Incorporation or By-laws of Mercristo;
(b) violate or, alone or with notice or the passage of
time, result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a default under, the terms
of any agreement or other document or undertaking, oral or written to which
Mercristo or any of the Mercristo stockholders is a party or by which any of
them or any of their respective properties or assets may be bound (except for
such violations, conflicts, breaches or defaults as to which required waivers or
consents by other parties have been, or will, prior to the Closing, be
obtained);
(c) result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Mercristo pursuant to the terms of any such agreement or instrument;
(d) violate any judgement, order, injunction, decree or
award against, or binding upon, Mercristo or upon their respective properties or
assets; or
(e) violate any law or regulation of any jurisdiction
relating to Mercristo, its securities, assets or properties.
3.19 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been
13
carried on directly with HFI and the HFI Stockholders, without the intervention
of any broker, finder, investment banker or other third party. Mercristo agrees
to indemnify HFI against, and to hold it harmless from any claim for brokerage
or similar commissions or other compensation which may be made against HFI by
any third party in connection with any of the transactions contemplated hereby
which claim is based upon any action by Mercristo.
ARTICLE IV
Pre-Closing Covenants
---------------------
4.1 HFI Covenants. HFI, hereby covenants that, from and after
the date hereof and until the Closing or earlier termination of this Agreement
(the "Pre-Closing Period"):
(a) Access. HFI shall afford to the officers, attorneys,
accountants and other authorized representatives of Mercristo free and full
access, during regular business hours and upon reasonable notice, to all of its
books, records, personnel and properties so that Mercristo, at its own expense,
may have full opportunity to make such review, examination and investigation as
Mercristo may desire of HFI's business and affairs. HFI will cause its
employees, accountants and attorneys to cooperate fully with said review,
examination and investigation and to make full disclosure to Mercristo of all
material facts affecting its financial condition and business operations.
(b) Conduct of Business. HFI shall conduct its business
only in the ordinary and usual course and make no material change in any of its
business practices and policies without the prior written consent of Mercristo,
which shall not be unreasonably withheld or delayed.
(c) Liabilities. HFI shall not incur any obligation or
liability, absolute or contingent, except for non-material ones incurred in the
ordinary and usual course of its business.
(d) Preservation of Business. HFI will use its best
efforts to preserve its business organization intact, to keep available the
services of its present officers, employees and consultants and to preserve its
good will.
(e) No Breach. HFI will (i) use its best efforts to assure
that all of its representations and warranties contained herein are true in all
material respects as of the Closing as if repeated at and as of such time, and
that no material breach or default shall occur with respect to any of its
covenants, representations or warranties contained herein that has not been
14
cured by the Closing; (ii) not voluntarily take any action or do anything which
will cause a breach of or default respecting such covenants, representations or
warranties; and (iii) promptly notify Mercristo of any event or fact which
represents or is likely to cause such a breach or default.
(f) No Negotiations. For so long as this Agreement shall
remain in effect, neither HFI nor any of its officers or directors nor any of
their respective affiliates, employees, agents or representatives shall enter
into or conduct negotiations, or enter into any agreement or understanding, for
the sale or possible sale of any of HFI's securities or business or a material
amount of its assets with anyone other than Mercristo.
4.2 Mercristo Covenants. Mercristo, hereby covenants
that, during the Pre-Closing Period:
(a) Access. Mercristo shall afford to the officers,
attorneys, accountants and other authorized representatives of HFI free and full
access, during regular business hours and upon reasonable notice, to all of its
books, records, personnel and properties so that any of such persons, at their
own expense, may have full opportunity to make such review, examination and
investigation as any of them may desire of the business and affairs of
Mercristo. Mercristo will cause its employees, accountants and attorneys to
cooperate fully with said review, examination and investigation and to make full
disclosure to each of HFI and the HFI Stockholders of all material facts
affecting their respective financial conditions and business operations.
(b) Conduct of Business. Mercristo shall conduct its
business only in the ordinary and usual course and make no material change in
any of its business practices and policies without the prior written consent of
HFI, which shall not be unreasonably withheld or delayed.
(c) Liabilities. Mercristo shall not incur any obligation
or liability, absolute or contingent, except for non-material ones incurred in
the ordinary and usual course of its business.
(d) Preservation of Business. Mercristo will use its best
efforts to preserve its business organization intact, keep available the
services of its present officers, employees and consultants and to preserve good
will.
(e) No Breach. Mercristo will (i) use its best efforts to
assure that all of its representations and warranties contained herein are true
in all material respects as of the closing as if repeated at and as of such
time, and that no material breach or default shall occur with respect to any of
its
15
covenants, representations or warranties contained herein that has not been
cured by the Closing; (ii) not voluntarily take any action or do anything which
will cause a breach of or default respecting such covenants, representations or
warranties; and (iii) promptly notify HFI of any event or fact which represents
or is likely to cause such a breach or default.
4.3 Legal Fees. HFI, its shareholders and Mercristo shall each
bear their own costs and expenses if this transaction is abandoned at any time.
ARTICLE V
Mercristo Stock
---------------
5.1 Acquisition of Mercristo Stock. Each of the HFI
Stockholders represents and warrants that the Mercristo Stock to be acquired
pursuant to the terms of Section 1.2 hereof is being acquired for his own
account, with no intention of assigning any participation or interest therein,
and without a view to the distribution of any portion thereof, except in
accordance with the Securities Act of 1933, as amended (the "1933 Act"). Each
HFI Stockholder agrees not to sell, assign, transfer or encumber any of such
shares unless (i) a registration statement under the 1933 Act with respect
thereto is in effect and the prospectus included therein meets the requirements
of Section 10 of the 1933 Act, or (ii) a no-action letter is obtained from the
staff of the Securities and Exchange Commission (the "Commission") with respect
to such proposed sale, assignment, transfer or encumbering, or (iii) Mercristo
has received a written opinion of counsel, reasonably satisfactory to Mercristo
that, after an investigation of the relevant facts, such counsel is of the
opinion that such proposed sale, assignment, transfer or encumbering does not
require registration under the Act.
Each HFI Stockholder understands that, the Mercristo Stock is
not being registered under the 1933 Act and must be held indefinitely unless it
is subsequently registered thereunder or an exemption from such registration is
available. Each HFI Stockholder understands that, except as otherwise provided
in this Agreement, the Mercristo Stock is not being registered under the 1933
Act in part on the ground that the issuance thereof is exempt under Section 4(2)
of the 1933 Act as a transaction by an issuer not involving a public offering;
that Mercristo's reliance on such exemption is predicated in part on the
foregoing representation and warranty of such HFI Stockholder and that in the
view of the Commission, the statutory basis for the exemption claimed would not
be present if, notwithstanding such representation and warranty, such HFI
Stockholder contemplates acquiring any of the Mercristo Stock for sale upon the
occurrence or non-occurrence of some predetermined event.
16
5.2 Restrictive Legend. Each HFI Stockholder understands that
Mercristo will have an appropriate stop order placed on its stock records
indicating the existence of the terms of this Agreement, and that the
certificates representing the Mercristo Stock shall bear a legend in
substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE SOLD, TRANSFERRED OR ENCUMBERED
ONLY PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO A NO-ACTION LETTER FROM THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION OR PURSUANT TO AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS UNNECESSARY.
ARTICLE VI
Conditions Precedent to the Obligation
of Mercristo to Close
--------------------------------------
The obligation of Mercristo to enter into and complete the
Closing is subject to the fulfillment, prior to or on the Closing Date, of each
of the following conditions, any one or more of which may be waived by Mercristo
(except when the fulfillment of such condition is a requirement of law):
6.1 Representations and Warranties. All representations and
warranties of HFI and the HFI Stockholders contained in this Agreement and in
any written statement (except financial statements), exhibit, certificate,
schedule or other document delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects as at the Closing Date, as if made at the Closing and as of the Closing
Date.
6.2 Covenants. HFI and each of the HFI Stockholders shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by each
of them prior to or at the Closing.
6.3 No Actions. No action, suit, proceeding or investigation
shall have been instituted, and be continuing before a court or before or by a
governmental body or agency, or
17
shall have been threatened and be unresolved, to restrain or to prevent or to
obtain damages in respect of, the carrying out of the transactions contemplated
hereby, or which might materially affect the right of Mercristo to own the HFI
Stock or to operate or control the assets, properties and business of HFI after
the Closing Date, or which might have a materially adverse effect thereon.
6.4 Consents; Licenses and Permits. HFI, Mercristo, and the
HFI Stockholders shall have each obtained all consents, licenses and permits of
third parties necessary for the performance by each of them of all of their
respective obligations under this Agreement.
6.5 Certificate. Mercristo shall have received a certificate
dated the Closing Date, signed by the President and Secretary of HFI as to the
satisfaction of the conditions contained in Sections 6.1 and 6.2.
6.6 Additional Documents. HFI and Mercristo shall have
delivered all such other certificates and documents as Mercristo or its counsel
may have reasonably requested.
6.7 Approval of Counsel. All actions, proceedings, instruments
and documents required to carry out this Agreement, or incidental thereto, and
all other related legal matters shall have been approved as to the form and
substance by counsel to Mercristo, which approval shall not be unreasonably
withheld or delayed.
ARTICLE VII
Conditions Precedent to the Obligation
of HFI and the HFI Stockholders to Close
----------------------------------------
The obligation of HFI and the HFI Stockholders to enter into
and complete the Closing is subject to the fulfillment, prior to or on the
closing Date, of each of the following conditions, any one or more of which may
be waived by HFI and the HFI Stockholders (except when the fulfillment of such
condition is a requirement of law):
7.1 Representations and Warranties. All representations and
warranties of Mercristo and contained in this Agreement and in any written
statement, schedule or other document delivered pursuant hereto or in connection
with the transactions contemplated hereby shall be true and correct in all
material respects as at the Closing Date, as if made at the Closing and as of
the Closing Date.
18
7.2 Covenants. Mercristo shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by each of them prior to or at the
Closing.
7.3 Surrender of Mercristo Treasury Shares. Shareholders of
Mercristo shall have surrendered to Mercristo's treasury,4,647,498 shares of
Mercristo's common stock.
7.4 HFI Board Designations. The Board of Directors of
Mercristo shall have appointed three (3) members to its Board of Directors
designated by HFI and such number of Mercristo's Board of Directors shall
thereafter resign, so that the Mercristo Board of Directors shall consist of
three (3) members designated by HFI and two (2) members designated by Mercristo.
7.5 No Actions. No action, suit, proceeding, or investigation
shall have been instituted, and be continuing, before a court or before or by a
governmental body or agency, or have been threatened, and be unresolved, by any
governmental body or agency to restrain or prevent, or obtain damages in respect
of, the carrying out of the transactions contemplated hereby.
7.6 Certificate. HFI and the HFI Stockholders shall have
received a certificate dated the Closing Date, signed by the President and
Secretary of Mercristo as to the satisfaction of the conditions contained in
Sections 7.1, 7.2 and 7.3.
7.7 Additional Documents. Mercristo shall have delivered all
such certified resolutions, certificates and documents with respect to Mercristo
as HFI, the HFI Stockholders or their counsel may have reasonably requested.
7.8 Approval of Counsel. All actions, proceedings, instruments
and documents required to carry out this Agreement or incidental thereto, and
all other related legal matters, shall have been approved as to form and
substance by counsel to HFI, which approval shall not be unreasonably withheld
or delayed.
ARTICLE VIII
Closing
-------
8.1 Location. The Closing provided for herein shall take place
at the offices of Xxxxx & Xxxxxxx LLP, 0 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000,
at 12:00 o'clock noon, November 13, 1998 or at such other time and place as may
be mutually agreed to by the parties hereto. Such date is referred to in this
Agreement as the "Closing Date."
19
8.2 Items to be Delivered by HFI and the HFI Stockholders. At
the Closing, the HFI Stockholders will deliver or cause to be delivered to
Mercristo:
(a) Certificates representing the HFI Stock in accordance
with Section 1.1 hereof, accompanied by all instruments and documents as in the
opinion of Mercristo's counsel shall be necessary to effect the transfer of and
to vest title in and to the HFI Stock in Mercristo, free and clear of all liens,
pledges, encumbrances, charges and claims thereon;
(b) The certificates required by Section 6.5; and
(c) Such other certified resolutions, documents and
certificates as are required to be delivered by HFI and the HFI Stockholders
pursuant to the provisions of the Agreement.
8.3 Items to be Delivered by Mercristo. At the Closing,
Mercristo will deliver or cause to be delivered to the HFI Stockholders:
(a) Certificates evidencing the Mercristo Stock in
accordance with Section 1.2 hereof;
(b) The certificate required by Section 7.5;
(c) Resolutions appointing three (3) HFI designees to the
Mercristo board of directors and resignations of such number of Mercristo board
members so that the Mercristo board of directors shall consist of five (5)
members at closing; and
(d) Such other certified resolutions, documents and
certificates as are required to be delivered by Mercristo pursuant to the
provisions of this Agreement.
ARTICLE IX
Survival of Representations; Indemnification
--------------------------------------------
9.1 Survival. Any provision of this Agreement which
contemplates performance or the existence of obligations after the Closing Date,
and any and all representations and warranties set forth in this Agreement,
shall not be deemed to be merged into or waived by the execution and delivery of
the instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitation expressly set forth in
this Agreement unless any such performance and/or obligation is waived in
writing by the party to whom it is owed.
20
9.2 Indemnification.
Mercristo on the one hand, and HFI on the other hand, each
agrees to indemnify and hold harmless the other from and against any and all
obligations or liabilities, of every kind, nature and description, fixed or
contingent (including, without limitation, counsel fees and expenses in
connection with any action, claim or proceeding relating to such liabilities)
arising out of any act or omission of the indemnifying party or for which it is
otherwise responsible, commencing or occurring on or prior to the Closing Date,
which is not fully disclosed or provided for in the indemnifying party's balance
sheet, this Agreement or the several exhibits hereto, including, without
limitation, any tax liabilities to the extent not so reflected or reserved
against in said balance sheet and any liability arising out of Federal and State
securities laws.
9.3 Defense of Claims. A party entitled to Indemnification
hereunder (an "Indemnified Party") agrees to notify each party required to
indemnify hereunder (an "Indemnifying Party") with reasonable promptness of any
claim asserted against it in respect of which any Indemnifying Party may be
liable under this Agreement, which notification shall be accompanied by a
written statement setting forth the basis of such claim and the manner of
calculation thereof. An Indemnifying Party shall have the right to defend any
such claim at its or his own expense and with counsel of its or his choice;
provided, however, that such counsel shall have been approved by the Indemnified
Party prior to engagement, which approval shall not be unreasonably withheld or
delayed; and provided further, that the Indemnified Party may participate in
such defense, if it so chooses, with its own counsel and at its own expense.
9.4 Rights Without Prejudice. The rights of the parties under
this Article are without prejudice to any other rights or remedies that it may
have by reason of this Agreement or as otherwise provided by law.
ARTICLE X
Termination and Waiver
----------------------
10.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing Date:
(a) By mutual consent of the Board of Directors of
Mercristo and HFI;
(b) By Mercristo if any of the conditions set forth in
21
Article VI hereof shall not have been fulfilled on or prior to [November 30,
1998], or shall become incapable of fulfillment, and shall not have been waived;
(c) By HFI and the HFI Stockholders if any of the
conditions set forth in Article VII hereof shall not have been fulfilled on or
prior to [November 30, 1998], or shall have become incapable of fulfillment, and
shall not have been waived;
(d) By either party if any legal action or proceeding
shall have been instituted or threatened seeking to restrain, prohibit,
invalidate or otherwise affect the consummation of the transactions contemplated
by this Agreement which makes it inadvisable, in the judgement of the
terminating party, to consummate same.
In the event that this Agreement is terminated as described
above, this Agreement shall be void and of no force and effect, without any
liability or obligation on the part of any of the parties hereto except for any
liability which may arise pursuant to Section 11.2.
10.2 Waiver. Any condition to the performance of HFI, the HFI
Stockholders and/or Mercristo which legally may be waived on or prior to the
Closing Date may be waived at any time by the party entitled to the benefit
thereof by action taken or authorized by an instrument in writing executed by
the relevant party or parties. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such party at a later time to enforce the same. No waiver by any party of the
breach of any term, covenant, representation or warranty contained in this
Agreement as a condition to such party's obligations hereunder shall release or
affect any liability resulting from such breach, and no waiver of any nature,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such condition or of
any breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE XI
Miscellaneous Provisions
------------------------
11.1 Expenses. Except as otherwise provided herein, each of
the parties hereto shall bear his or its own expenses in connection herewith.
11.2 Confidential Information. Each party agrees that such
party and its representatives will hold in strict confidence all information and
documents received from the other parties
22
and, if the transactions herein contemplated shall not be consummated, each
party will continue to hold such information and documents in strict confidence
and will return to such other parties all such documents (including the exhibits
attached to this Agreement) then in such receiving party's possession without
retaining copies thereof; provided, however, that each party's obligations under
this Section to maintain such confidentiality shall not apply to any information
or documents that are in the public domain at the time furnished by the others
or that become in the public domain thereafter through any means other than as a
result of any act of the receiving party or of its agents, officers, directors
or stockholders which constitutes a breach of this Agreement, or that are
required by applicable law to be disclosed. The parties agree that the remedy at
law for any breach of this Section will be inadequate and a non-breaching party
will be entitled to injunctive relief to compel the breaching party to perform
or refrain from action required or prohibited hereunder.
11.3 Modification, Termination or Waiver. This Agreement may
be amended, modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by the party waiving compliance. The failure of any
party at any time or times to require performance of any provision hereof shall
in no manner affect the right of such party at a later time to enforce the same.
11.4 Publicity. The parties agree that no publicity, release
or other public announcement concerning the transactions contemplated by this
Agreement shall be issued by either party without the advance approval of both
the form and substance of the same by the other party and its counsel, which
approval, in the case of any publicity, release or other public announcement
required by applicable law, shall not be unreasonably withheld or delayed.
11.5 Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and either be delivered
personally or be mailed, certified or registered mail, postage prepaid, and
shall be deemed given when so delivered personally, or if mailed, two days after
the date of mailing, as follows:
If to Mercristo, to:
Mercristo Developments, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxxxx A6
with a copy to:
Xxxxx Xxxxxx, Esq.
0000 Xxxx Xxxxxxxx Xxxx #000X
Xxxxxxxx, XX 00000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
23
and if to HFI and the HFI
Stockholders, to each of them at:
Hungarian Ferroalloys, Inc.
x/x X.X. Xxxxx & Xx.
Xxxxxxxxxxx Xxxxx
000 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxx, XX0 0XX
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx & Xxxxxxx LLP
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
The parties may change the persons and addresses to which the
notices or other communications are to be sent by giving written notice of any
such change in the manner provided herein for giving notice.
11.6 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto; provided, however, that no assignment of any rights or
delegation of any obligations provided for herein may be made by any party
without the express written consent of the other parties.
11.7 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof.
11.8 Exhibits. All exhibits annexed hereto and the documents
and instruments referred to herein or required to be delivered simultaneously
herewith or at the Closing are expressly made a part of this Agreement as fully
as though completely set forth herein, and all references to this Agreement
herein or in any of such exhibits, documents, or instruments shall be deemed to
refer to and include all such exhibits, documents and instruments.
11.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within that State, excluding the
choice of law rules thereof.
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11.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but which
together shall constitute one and the same instrument.
11.11 Section Headings. The section headings contained in this
Agreement are inserted for conveniences of reference only and shall not affect
the meaning or interpretation of this Agreement.
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IN WITNESS the parties have executed this Agreement as of the
date first above written.
Hungarian Ferroalloys, Inc.
By: /s/ Xxxxx X.X. Xxxxxxxx
---------------------------
Xxxxx X.X. Xxxxxxxx
Chairman
Mercristo Developments, Inc.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx
Chief Executive Officer
Hungarian Ferroalloys, Inc.
Shareholders
By: /s/ Xxxxx X.X. Xxxxxxxx
------------------------
Xxxxx X.X. Xxxxxxxx
(Attorney in Fact)
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