1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXX CORPORATION
AND
XXXXX INLAND MARINE, INC.
AND
HOLLYWOOD MARINE, INC.
AND
THE SHAREHOLDERS OF HOLLYWOOD MARINE, INC.,
C. XXXXXX XXXXXXXX AND
XXXXXX X. XXXX AND XXXX X. XXXXXX, XX.,
AS CO-TRUSTEES UNDER CERTAIN XXXXXX XXXXXXXX TRUSTS
DATED AND EFFECTIVE AS OF
JULY 28, 1999
2
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGER............................................................................................2
1.1. The Merger...............................................................................2
1.2. Effective Time...........................................................................2
1.3. Effects of the Merger....................................................................2
1.4. Conversion of Shares.....................................................................3
1.5. Merger Consideration Adjustment..........................................................4
1.6. Payment of Estimated AAA Account and Distribution of Assets to Xxxxxxxx at the
Effective Time...........................................................................5
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF HOLLYWOOD AND THE SHAREHOLDERS....................................6
2.1. Organization and Qualification...........................................................6
2.2. Capital Stock and Other Securities.......................................................6
2.3. Investments..............................................................................7
2.4. Financial Statements.....................................................................7
2.5. Charter Documents and Records............................................................7
2.6. Absence of Undisclosed Liabilities.......................................................7
2.7. Tax Returns and Payments.................................................................8
2.8. Consents.................................................................................9
2.9. Authority; Validity; Conflicts...........................................................9
2.10. Absence of Certain Changes or Events.....................................................9
2.11. Title and Condition of Assets and Related Matters.......................................11
2.12. Lists of Properties, Loan Agreements, Employee Plans....................................12
2.13. Material Contracts......................................................................13
2.14. Material Defaults.......................................................................13
2.15. Licenses................................................................................13
2.16. Litigation, Proceedings and Compliance With Law.........................................13
2.17. Insurance...............................................................................13
2.18. Self-Insured Claims.....................................................................14
2.19. Employee Benefits.......................................................................14
2.20. Absence of Certain Transactions.........................................................14
2.21. Labor Matters...........................................................................15
2.22. Patents, Trade Names, Trademarks........................................................15
2.23. Year 2000 Compliance....................................................................15
2.25. Qualification; Purchase for Investment..................................................16
2.26. Broker Fees Payable.....................................................................17
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT...........................................................17
3.1. Organization............................................................................17
3.2. Authority...............................................................................17
3.3. Parent Shares...........................................................................17
3.4. SEC Reports.............................................................................18
3.5. Consents................................................................................18
i
3
3.6. Brokers.................................................................................18
3.7. Changes in Capital Stock; Market Activity...............................................18
ARTICLE IV. COVENANTS...........................................................................................18
4.1. Shareholders and Hollywood..............................................................18
4.2. Parent..................................................................................22
ARTICLE V. ADDITIONAL AGREEMENTS................................................................................23
5.1. Employment Agreement....................................................................23
5.2. Termination of Xxxxxxxx Pledge at Closing; Release of Xxxxxxxx Pledge...................23
5.3. Dividends and Distribution of Assets to the Shareholders................................23
5.4. Additional Tax Basis....................................................................23
5.5. Non-Competition Agreement...............................................................23
5.6. Disclosure Supplements..................................................................24
5.7. No Implied Representations or Warranties................................................24
5.8. Employee Benefit Matters................................................................24
5.9. Resignation of Directors................................................................25
5.10. Registration Rights.....................................................................25
5.11. Cooperation of the Shareholders.........................................................25
5.12. Access to Information...................................................................26
5.13. Action Prejudicial to Tax Treatment.....................................................26
5.14. Final Federal Tax Return of Hollywood as a Subchapter S Corporation.....................26
5.15. Corporate Name..........................................................................26
5.16. Voting..................................................................................27
5.17. Parent's Board of Directors.............................................................27
ARTICLE VI. CONDITIONS PRECEDENT TO PARENT'S OBLIGATIONS........................................................27
6.1. Confirmation of Representations and Warranties..........................................27
6.2. Compliance with Agreement...............................................................27
6.3. Shareholders and Officer Certificate....................................................27
6.4. Consents................................................................................27
6.5. HSR Act.................................................................................27
6.6. Confirmation of Representations and Warranties..........................................28
6.7. No Violation............................................................................28
6.8. Absence of Material Changes.............................................................28
6.9. Disclosure Schedule.....................................................................28
6.10. Deliveries. At the Closing:............................................................28
ARTICLE VII. CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS..............................................28
7.1. Confirmation of Representations and Warranties..........................................28
7.2. Compliance with Agreement...............................................................29
7.3. Parent Certificate......................................................................29
7.4. Absence of Material Changes.............................................................29
ii
4
7.5. Consents................................................................................29
7.6. HSR Act.................................................................................29
7.7. Confirmation of Representations and Warranties..........................................29
7.8. Deliveries. At the Closing:............................................................29
ARTICLE VIII. CLOSING PROCEDURES................................................................................30
8.1. Closing.................................................................................30
ARTICLE IX. ACCESS TO INFORMATION AND CONFIDENTIALITY...........................................................30
ARTICLE X. NON-SURVIVAL OF REPRESENTATIONS AND RELEASE OF LIABILITY.............................................31
10.1. Non-Survival of Representations and Warranties by HMI and the Shareholders..............31
10.2. Release of Liability....................................................................31
10.3. Indemnification by Shareholders.........................................................31
10.4. Limitations on Indemnification by Shareholders..........................................32
10.5. Notice of Claims; Defense...............................................................32
10.6. Notice of Governmental Actions; Defense.................................................33
10.7. Performance After Effective Date........................................................33
10.8. Disputes................................................................................33
ARTICLE XI. MISCELLANEOUS.......................................................................................34
11.1. Memorandum; Disclaimer of Projections...................................................34
11.2. Knowledge...............................................................................34
11.3. Expenses................................................................................34
11.4. Parties Bound...........................................................................34
11.5. Notices.................................................................................34
11.6. CHOICE OF LAW...........................................................................35
11.7. Jurisdiction and Venue..................................................................35
11.8. Disclosure Schedule.....................................................................36
11.9. Entire Agreement; Amendments and Waivers................................................36
11.10. Termination.............................................................................36
11.11. Liability for Termination...............................................................37
11.12. Assignment..............................................................................37
11.13. Attorneys' Fees.........................................................................37
11.14. Further Assurances......................................................................37
11.15. Announcements and Press Releases........................................................38
11.16. Multiple Counterparts...................................................................38
11.17. Headings................................................................................38
11.18. Severability............................................................................38
iii
5
EXHIBITS
Exhibit A -Assets to be Distributed to Xxxxxxxx
Exhibit B - Form of Employment Agreement
Exhibit C - Form of Registration Rights Agreement
SCHEDULES
Disclosure Schedule
iv
6
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement"), dated and effective as
of July 28, 1999, is by and among (i) Xxxxx Corporation, a Nevada corporation
("Parent"); (ii) Xxxxx Inland Marine, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"); (iii) Hollywood Marine, Inc., a Texas
corporation ("Hollywood") and (iv) C. Xxxxxx Xxxxxxxx ("Xxxxxxxx"), the Xxxxxx
Xxxxxxxx 1999 Retained Annuity Trust, and the Xxxxxx Xxxxxxxx GST Trusts, as
defined in that certain Agreement Creating the Xxxxxx Xxxxxxxx GST Trusts (the
"Shareholders").
RECITALS
A. The respective Boards of Directors of Parent and Sub and the
Shareholders have determined that the acquisition of Hollywood by Parent is
desirable and in the best interests of the shareholders of the respective
companies.
B. The respective Boards of Directors of Parent and Sub, and the
Parent, acting as the sole shareholder of Sub, have approved the merger of
Hollywood with and into Sub upon the terms and subject to the conditions set
forth herein.
C. The sole Director of Hollywood and the Shareholders, who have
represented to Parent that they own one hundred percent (100%) of the
outstanding capital stock of Hollywood (the "Shares"), have approved the merger
of Hollywood with and into Sub upon the terms and subject to the conditions set
forth herein.
D. The parties intend that the merger shall be treated for United
States federal income tax purposes as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended, and that this
Agreement, as it relates to the merger , shall constitute a "plan of
reorganization" within the meaning of the regulations promulgated under Section
368.
E. The parties desire to set forth certain representations, warranties
and covenants made by each to the other as an inducement to the consummation of
the merger.
F. Hollywood and the Subsidiaries (as defined in Article II) are
collectively referred to in this Agreement as "HMI."
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Shareholders and Parent hereby agree as follows:
7
ARTICLE I.
THE MERGER
1.1. The Merger. At the Effective Time (as defined below), and on the
terms and subject to the conditions set forth in this Agreement, Hollywood shall
be merged with and into Sub (the "Merger"), Sub shall continue its corporate
existence as the surviving corporation in the Merger (the "Surviving
Corporation"), and the separate corporate existence of Hollywood shall cease.
1.2. Effective Time. The Merger shall become effective when the
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of applicable state law, is filed with the applicable
governmental authorities; provided, however, that, upon mutual consent of Sub
and Hollywood, the Certificate of Merger may provide for a later date of
effectiveness of the Merger not more than one business day after the date the
Certificate of Merger is filed. When used in this Agreement, the term "Effective
Time" shall mean the later of the time at which the Certificate of Merger is
accepted for record or such later time so established by the Certificate of
Merger. The day of the Effective Time shall be the "Effective Date" and shall be
the day of Closing as defined in Article VIII. The filing of the Certificate of
Merger shall be made as soon as practicable after the satisfaction or waiver of
the conditions to the Merger set forth herein.
1.3. Effects of the Merger.
(a) The Merger shall have the effects set forth in Article
5.06 of the Texas Business Corporation Act, as amended, and Section 259
of the Delaware General Corporation Law, as amended.
(b) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, all of the shares
of capital stock of Hollywood issued and outstanding immediately prior
to the Effective Time shall be converted into the Merger Consideration
(as defined below).
(c) On and after the Effective Time, the Shareholders shall
cease to have any rights as shareholders of Hollywood, except their
right to receive Merger Consideration (as defined below), and, until
surrendered in the manner herein provided, each outstanding certificate
which prior to the Effective Time represented shares of common stock of
Hollywood shall be deemed for all corporate purposes to evidence the
right to receive the Merger Consideration. Each share of Hollywood
stock held in treasury immediately prior to the Effective Time shall,
by virtue of the Merger, be canceled and retired and cease to exist,
without any conversion thereof.
(d) As of the Effective Time, the Certificate of Incorporation
of Sub shall be the Certificate of Incorporation of the Surviving
Corporation, and the Bylaws of Sub shall be the Bylaws of the Surviving
Corporation.
2
8
(e) Until successors are duly elected or appointed and
qualified in accordance with applicable law, the directors and officers
of Sub immediately prior to the Effective Time shall be, upon the
effectiveness of the Merger, the directors and officers of the
Surviving Corporation.
1.4. Conversion of Shares. At the Effective Time, each Share will be
converted into the right to receive from Parent, as merger consideration, a pro
rata portion of the shares of stock in the Parent and cash in the amounts
described below and aggregating $325,000,000, subject to the adjustment for
changes in working capital stated in Section 1.4(a) below and less (a) the
amount of Funded Indebtedness of Hollywood and subsidiaries that are
consolidated with Hollywood in the financial statements described in clauses (a)
and (b) of Section 2.4 (as named on Section 2.3 of the Disclosure Schedule (as
defined below), the "Consolidated Subsidiaries") at the Effective Time, (b) the
amount of liabilities with respect to minority interests in Consolidated
Subsidiaries at the Effective Time and (c) the Estimated AAA Account, as defined
below (the "Merger Consideration"). The Merger Consideration shall be further
adjusted pursuant to Section 1.5 below. Hollywood shall estimate, reasonably and
in good faith, the amount of the accumulated adjustments account of Hollywood
(the "AAA Account") at the Effective Time, computed in accordance with good
accounting and tax practices applicable to corporations electing Subchapter S
treatment under the Internal Revenue Code and consistent with Hollywood's
historical practices, and prior to deduction of the fair value of the assets to
be distributed to Xxxxxxxx pursuant to the terms of this Agreement and listed in
Exhibit A hereto (the "Xxxxxxxx Distributions"), the fair value of which shall
be determined by the Shareholders (the "Estimated AAA Account") , subject to the
consent of Parent, such consent not to be unreasonably withheld. The calculation
amount of such Estimated AAA Account and the fair value of the Xxxxxxxx
Distributions shall be delivered to Parent three (3) days prior to the Closing.
Each Shareholder shall be entitled to receive a portion of the Merger
Consideration pro rata in the proportion that such Shareholder's Shares bears to
all the Shares.
The Merger Consideration shall be as follows:
(a) First Hollywood shall estimate, reasonably and in good
faith, the amount of the Effective Date Net Current Assets (as defined
below) of Hollywood and Consolidated Subsidiaries as of the close of
business on the Effective Date (the "Estimated Effective Date Net
Current Assets"). In the event that the Net Current Assets of Hollywood
and Consolidated Subsidiaries as of the Financial Statement Date (the
"April 30 Net Current Assets") exceed the Estimated Effective Date Net
Current Assets, such excess amount shall be subtracted from the Merger
Consideration; similarly in the event that the Estimated Effective Date
Net Current Assets exceed the April 30 Net Current Assets such excess
amount shall be added to the Merger Consideration.
(b) Forty per cent (40%) of the sum of the Merger
Consideration calculated pursuant to this Section 1.4 plus an amount
equal to the Estimated AAA Account shall be paid at Closing in the form
of shares of common stock, par value $0.10 per share, of the Parent
("Parent Shares") valued at a price per share equal to the average
trading price on the New York Stock Exchange for the 20 trading days
preceding three (3) days prior to
3
9
the Closing ("the Parent Share Price"); provided that if such price is
less than $17.50, then the Parent Share Price shall be equal to $17.50
or greater than $21.50, then the Parent Share Price shall be equal to
$21.50.
(c) The balance of the Merger Consideration shall be paid at
Closing in cash by wire transfer of same-day funds.
"Funded Indebtedness" of Hollywood and Consolidated
Subsidiaries shall include any amounts for borrowed money and amounts
owed under capital leases and shall be determined in accordance with
generally accepted accounting principles, consistently applied with
Hollywood's historical practices. The Funded Indebtedness of Hollywood
and Consolidated Subsidiaries as of April 30, 1999, has been included
in the Disclosure Schedule.
1.5 Merger Consideration Adjustment.
(a) The Shareholders shall prepare and deliver to the Parent
within sixty (60) days after the Effective Date a statement (the "Net
Current Assets Statement") that shows the Net Current Assets (as
defined below) of Hollywood and Consolidated Subsidiaries as of the
close of business on the Effective Date (the "Effective Date Net
Current Assets"). Parent and Sub shall participate and cooperate with
the Shareholders in preparation of the Net Current Assets Statement and
shall permit the Shareholders to have full and complete access to the
books and records of Hollywood and Consolidated Subsidiaries in order
to prepare such statement.
(i) In the event that the Estimated Effective Date Net
Current Assets exceed the Effective Date Net Current
Assets, the Shareholders (in proportion to their
ownership of the Shares) shall, within six (6)
business days of the delivery of the Net Current
Assets Statement, pay to the Parent the amount of
such excess in cash, less the Parent Adjustments (as
defined below), if any, and subject to the last two
sentences of Subsection (b) below;
(ii) In the event that the Effective Date Net Current
Assets exceed the Estimated Effective Date Net
Current Assets, the Parent shall, within six (6)
business days of the delivery of the Net Current
Asset Statement, pay to the Shareholders the amount
of such excess by delivery of an additional number of
Parent Shares equal to such excess divided by the
Parent Share Price and rounded to the nearest
integer, less the Parent Adjustments (as defined
below), if any, and subject to the last two sentences
of Subsection (b) below;
(b) Should the Parent believe that the Net Current Assets
Statement does not accurately state the Effective Date Net Current
Assets, the Parent shall give written notice to the Shareholders within
five (5) business days following the receipt of the Net Current Assets
Statement from the Shareholders that it disputes the amount of the
Effective Date
4
10
Net Current Assets determined by the Shareholders, and the amount,
nature and basis for specific adjustments to such statement (the
"Parent Adjustments"). The Shareholders will have five (5) business
days following receipt of the Parent's notice proposing Parent
Adjustments to review such notice and to prepare and submit to the
Parent a written response thereto. Within and during the period ending
thirty (30) days after submission to the Parent of such response, the
Parent and the Shareholders and their respective accountants shall meet
and use their best efforts to resolve the Parent Adjustments and agree
upon the amount of the Effective Date Net Current Assets. If the
parties are unable to reach an agreement during such period, the Parent
and the Shareholders shall select an independent, nationally recognized
accounting firm (which shall not be an accounting firm engaged for any
purpose within the past five (5) years by either the Parent or the
Shareholders) to determine the amount of the Effective Date Net Current
Assets, which determination shall be binding on the Parent and the
Shareholders. If the parties are unable to agree on the selection of
such other accounting firm within ten (10) days, either the Parent or
the Shareholders may request the American Arbitration Association to
select a nationally recognized accounting firm (which shall not be an
accounting firm engaged for any purpose within the past five (5) years
by either the Parent or the Shareholders) to determine the amount of
the Effective Date Net Current Assets, and such determination shall be
binding and conclusive on all parties hereto. On the first (1st)
business day after the determination of the Effective Date Net Current
Assets, whether by agreement of the Parent and the Shareholders or
determination by a nationally recognized accounting firm, the Parent
shall pay to the Shareholders, or the Shareholders shall pay to the
Parent, as the case may be, the excess in accordance with Sections
1.5(a)(i) and 1.5(a)(ii) above, determined in Parent Shares at the
Parent Share Price, or cash, as the case may be. The expenses of any
independent accounting firm selected (and the American Arbitration
Association, if necessary) shall be shared equally by the Shareholders,
on the one hand, and the Parent, on the other.
(c) For purposes of Section 1.4 and this Section 1.5, the term
"Net Current Assets" shall mean the amount by which net current assets
exceed net current liabilities, all as determined in accordance with
generally accepted accounting principles, consistently applied in
accordance with Hollywood's accounting policies; provided, however,
that the current portion of long term indebtedness (to the extent
included in Funded Indebtedness) shall be eliminated as a current
liability; and provided further that all fees and expenses (including
without limitation investment banking, accounting and legal) incurred
by Hollywood in connection with the transaction contemplated by this
Agreement and in connection with the process of identifying and
negotiating with parties interested in acquiring Hollywood shall be
considered current liabilities of Hollywood as of the close of business
on the Effective Date (to the extent not paid prior to the Effective
Date).
1.6. Payment of Estimated AAA Account and Distribution of Assets to
Xxxxxxxx at the Effective Time. At the Effective Time, Hollywood shall pay a
dividend to the Shareholders in an aggregate amount equal to the Estimated AAA
Account, consisting of (i) the Xxxxxxxx Distributions and (ii) cash equal to the
balance of the estimated AAA Account after subtracting the fair value of the
Xxxxxxxx Distributions. Hollywood shall pay the
5
11
Shareholders, other than Lawrence, in cash and shall pay cash and distribute the
Xxxxxxxx Distributions to Xxxxxxxx. The cash dividend payment required by this
Section 1.6 shall be eliminated in any calculations required by this Article I,
including any calculations of Funded Indebtedness or Net Current Assets, as if
the payment required by this Section 1.6 was made after the Closing and
Effective Time.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF HOLLYWOOD AND THE SHAREHOLDERS
The Shareholders and Hollywood have delivered to Parent on or prior to
the execution hereof a disclosure schedule (the "Disclosure Schedule") that
contains appropriate references to identify the representations and warranties
herein to which the information in such Disclosure Schedule relates. The
information in the Disclosure Schedule shall be deemed a part of the
representations and warranties herein. Hollywood owns all the stock of one
subsidiary, Hollywood Acquisition Company; is a member of a Louisiana limited
liability company; and is the general partner of certain Texas limited
partnerships, all as described in the Disclosure Schedule. Such subsidiary,
limited liability company and limited partnerships are referred to herein as
"Subsidiaries". Except for the matters set forth on the Disclosure Schedule,
Hollywood and the Shareholders represent and warrant to Parent as follows:
2.1. Organization and Qualification. Hollywood is a corporation duly
organized, validly existing and in good standing under the laws of Texas, has
all requisite power and authority, corporate and otherwise, to own, lease and
operate its assets and to carry on its business as it is now being conducted.
Hollywood is duly qualified to do business in each jurisdiction in which
qualification is required, except where its failure to be qualified would not
have a Material Adverse Effect. The Subsidiaries are duly organized, validly
existing and in good standing under the laws governing their formation, have all
requisite power and authority, corporate and otherwise, to own, lease and
operate each of their assets and to carry on their respective businesses as they
are now being conducted. The Subsidiaries are duly qualified to do business in
each jurisdiction in which qualification is required, except where the failure
to be qualified would not have a Material Adverse Effect. For purposes of this
Agreement, a "Material Adverse Effect," with respect to any person or entity,
shall mean a material adverse effect on the financial condition, business,
properties, assets, liabilities (including contingent liabilities), or results
of operations of such person or entity and its subsidiaries or other entities
(as to Hollywood, the Subsidiaries), taken as a whole, other than any such
adverse effects relating to general economic or market conditions or to
conditions affecting such person or entity's industry in general.
2.2 Capital Stock and Other Securities. The authorized capitalization
of Hollywood consists of 300,000 shares of common stock, par value $.10 per
share ("Common Stock"), of which 83,334 are issued and outstanding and 33,333
shares are held in treasury. The Shares constitute all of the issued and
outstanding shares of Common Stock. The Shares are validly issued and
outstanding, fully paid and non-assessable. The Shareholders own all such
outstanding shares of Common Stock, free and clear of all liens, options,
charges, equities,
6
12
encumbrances or claims of any kind, except that 12,500 of the Shares are pledged
to Xxxx Xxxxxxxx to secure indebtedness of Xxxxxxxx to Xx. Xxxxxxxx pursuant to
a pledge agreement (the "Xxxxxxxx Pledge"), a true and complete copy of which
has been furnished to Parent, and the Xxxxxx Xxxxxxxx GST Trusts have pledged an
aggregate of 17,000 Shares to secure the indebtedness of such trusts to Xxxxxxxx
pursuant to a pledge agreement (the "Xxxxxxxx Pledge"), a true and complete copy
of which has been furnished to Parent. There is no restriction on the voting of
the Shares in favor of the Merger and the consummation thereof. Except for the
Shares, there are no equity securities of Hollywood outstanding, and no options,
warrants, calls, commitments or other rights to purchase or otherwise acquire,
or other obligations to issue, or other rights to convert any obligations into,
any shares of capital stock of Hollywood.
2.3. Investments. Except for the matters set forth on the Disclosure
Schedule, HMI does not have any subsidiaries or any advances to, or investments
in, any securities of, or other equity interest in, any other corporation,
partnership, business entity, joint venture, enterprise or organization, public
or private.
2.4. Financial Statements. The Shareholders have delivered to Parent
(a) audited financial statements of Hollywood and the Consolidated Subsidiaries
for the years ended December 31, 1997 and 1998, in each case audited by KPMG
Peat Marwick LLP, (b) unaudited financial statements of Hollywood and the
Consolidated Subsidiaries for the four months ended April 30, 1999, and (c)
unaudited financial statements of each Subsidiary that is not a Consolidated
Subsidiary (each an "Unconsolidated Subsidiary") for the years ended December
31, 1997 and 1998 and the four months ended April 30, 1999, in each case
consisting of financial statements as of the end of each such period and the
related statements of operations, retained earnings and cash flows for the
period then ended (such financial statements including all notes and schedules
thereto, are collectively referred to herein as the "Financial Statements" and
the most recent date thereon is referred to as the "Financial Statement Date").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles, consistently applied (except that the unaudited
Financial Statements do not contain footnotes and do not contain normal year end
adjustments), and are true, correct and complete in all material respects and
present fairly the financial condition of HMI, as of their respective dates.
2.5. Charter Documents and Records. Hollywood has caused true, complete
and correct copies of its charter documents and the charter documents,
partnership, limited liability company regulations or agreements and other
governing documents of the Subsidiaries (including the articles of
incorporation, bylaws and each document setting forth the designation, amount
and relative rights, limitations and preferences of any class or series of
Hollywood's capital stock or of any rights in respect of Hollywood's capital
stock), each as in effect on the date hereof, and the minute books and similar
corporate or other records of Hollywood and the Subsidiaries to be delivered or
otherwise made available to Parent.
2.6. Absence of Undisclosed Liabilities. Except to the extent disclosed
or adequately reflected or reserved against in the Financial Statements or on
the Disclosure Schedule, other than liabilities incurred in the ordinary course
of business and consistent with
7
13
past practices subsequent to the Financial Statement Date, as of the Effective
Date, HMI will not have any material liabilities or obligations, secured or
unsecured, whether accrued, absolute, contingent, inchoate or otherwise.
2.7. Tax Returns and Payments.
(a) Hollywood is an "S Corporation" under the Internal Revenue
Code of 1986, as amended, and the rules and regulations thereunder (the
"Code") and validly elected treatment as an "S Corporation" in 1991 and
since then has maintained its status as an S Corporation. Hollywood
Acquisition Company is, and has been since its formation, a qualified
subchapter S subsidiary (as defined in Section 1361(b)(3) of the Code).
Since Hollywood elected treatment as an S corporation, it has not owned
any interest in any corporation other than Hollywood Acquisition
Company.
(b) Parent has been provided with copies of HMI's federal
income tax returns and all applicable state and local tax returns that
have been filed for any period during the last three (3) years by HMI,
which returns in all material respects are true and complete and
accurately set forth all the information required to be set forth
therein.
(c) All material tax returns and reports of HMI required by
law to be filed have been duly filed, and all ad valorem taxes,
property taxes, corporate franchise taxes, capital taxes, unemployment
taxes, occupation taxes, withholding taxes, income taxes, sales and use
taxes, inland waterway user fees, harbor service fees and all other
taxes and levies of every kind, character or description of HMI or upon
any of its properties, assets, income or franchises that are due and
payable (regardless of whether such taxes have been reflected in the
tax returns filed) have been paid, other than those currently payable
without penalty or interest or those being contested in good faith and
for which adequate reserve has been made.
(d) Except for the matters set forth on the Disclosure
Schedule, HMI is not at present the subject of any audit, has not
received any notice of any unpaid tax, is not contesting any tax
assessment, and has not been advised by any taxing authority of any
scheduled audit.
(e) The charges, accruals and reserves on the books of HMI in
respect of accrued taxes for all periods to date are, and for all
periods through the Effective Date will be, adequate to provide fully
for all such taxes, and, except as stated above, there is no unpaid
assessment for additional federal, state, local or other taxes for any
such fiscal period and the Shareholders know of no basis therefor.
(f) There are no actions, suits, proceedings, investigations,
inquiries or claims now pending or made or, to the knowledge of
Hollywood or the Shareholders, threatened against HMI in respect of
such taxes.
(g) Hollywood is not required to include in income any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method initiated by HMI
8
14
and the Internal Revenue Service has not proposed any adjustment or
change in accounting method for Hollywood.
(h) As of the Closing, Hollywood's "net unrealized built-in
gain," as such term is defined in Section 1374(d)(1) of the Code, will
not exceed $80 million.
(i) There are no outstanding requests, agreements, consents or
waivers to extend the statute of limitations applicable to the
assessments of any subchapter S items for Hollywood.
(j) Hollywood has not filed a consent to the application of
Section 341(f) of the Code.
2.8. Consents. Except for the matters set forth on the Disclosure
Schedule, no consent, approval or authorization of, or registration, declaration
or filing with, any department, commission, or agency of the U.S. Government or
any subdivision thereof is required to be obtained by the Shareholders or
Hollywood to authorize the execution and delivery by the Shareholders or
Hollywood of this Agreement or the performance by them of its terms other than
(i) pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) requirements of Federal and State securities laws,
(iii) those which are not reasonably likely to have a Material Adverse Effect.
2.9. Authority; Validity; Conflicts. The Shareholders have all
requisite power, authority and capacity to enter into this Agreement and all
other agreements, certificates and documents contemplated hereby to which they
are parties, to consummate the transactions contemplated hereby and to perform
his obligations hereunder. This Agreement has been duly authorized, executed and
delivered by the Shareholders and Hollywood and constitutes the valid and
legally binding agreement and obligation of the Shareholders and Hollywood,
enforceable against them in accordance with its terms. Upon execution and
delivery of the agreements, certificates or other documents contemplated hereby
to be executed by the Shareholders or Hollywood, such agreements, certificates
or documents will be enforceable against such Shareholders or Hollywood, as the
case may be, in accordance with their respective terms. The execution and
delivery by the Shareholders and Hollywood of this Agreement does not, and the
execution and delivery by the Shareholders and Hollywood of the agreements,
certificates and other documents contemplated hereby and the consummation by the
Shareholders and Hollywood of the transactions contemplated hereby will not,
violate any provision of, or create any conflict with or result in the
acceleration of any obligation under or constitute a default under, any loan
agreement, indenture, lease, mortgage, deed of trust, financing statement,
contract, instrument or any other commitment or agreement (oral or written) of
any kind to which the Shareholders or HMI are a party, or by which any of the
Shares or the assets of HMI is bound.
2.10. Absence of Certain Changes or Events. Since the Financial
Statement Date:
(a) There has not been (i) any material adverse change in the
business, operations, properties, assets or condition of HMI or (ii)
any damage, destruction or loss
9
15
(whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or condition of
HMI; and
(b) HMI has not:
(i) except for renewals of indebtedness existing as of
the Financial Statement Date, issued or agreed to
issue or deliver any bonds, notes or other similar
evidences of indebtedness,
(ii) borrowed or agreed to borrow any funds or, to the
knowledge of Hollywood, incurred or become subject to
any obligation or liability (absolute, accrued,
contingent, inchoate or otherwise) except obligations
recorded on the books of HMI and incurred in the
ordinary course of business,
(iii) paid or incurred any material obligation or liability
(absolute or contingent) other than current
liabilities reflected in or shown on the Financial
Statements and current liabilities incurred since the
date thereof in the ordinary course of business and
properly recorded on the books of HMI,
(iv) except in the ordinary course of business, sold,
transferred, leased, pledged or mortgaged or agreed
to sell, transfer, lease, pledge, or mortgage any of
HMI's assets, property, licenses or rights or
canceled, or agreed to cancel, any debts or claims,
(v) entered into or agreed to enter into any agreement or
arrangement granting any rights to purchase or lease
any of the material assets, property or rights of HMI
or requiring the consent of any party to the
transfer, assignment or lease of any such assets,
property or rights, or, other than in the ordinary
course of business, waived any rights of value that
in the aggregate are material to the business of HMI,
(vi) except in the ordinary course of business, made or
permitted any amendment or termination of, or been
prepaid for services not yet performed under, any
contract, lease, agreement or license if such action
(individually or in the aggregate) is material to
HMI,
(vii) except for the matters set forth in the Disclosure
Schedule, made any accrual or arrangement for or
announcement, award or payment of bonuses or special
compensation of any kind or any severance or
termination pay to any present or former officer,
employee or agent of HMI,
(viii) materially increased either the rate or level
(however determined) of compensation payable or to
become payable or the benefits, perquisites
10
16
or other remuneration provided or to be provided by
HMI to any of its respective officers, employees or
agents,
(ix) made any significant change in any method of
management, operation or accounting of HMI,
(x) made any significant change in the method of
expensing and accruing for self-insured claims,
(xi) declared or paid any dividend or distribution to
holders of capital stock of Hollywood or purchased
any shares of capital stock other than as disclosed
or permitted under this Agreement,
(xii) entered into any other transaction other than in the
ordinary course of business,
(xiii) had any union organizational activities among HMI's
employees, or
(xiv) made any capital expenditures not within the 1999
Capital Expenditures Budget which is a part of the
Disclosure Schedule in excess of $1,000,000 in the
aggregate or entered into any commitment therefor.
2.11. Title and Condition of Assets and Related Matters.
(a) Except for the matters set forth on the Disclosure
Schedule and except for real property owned by it, HMI has good and
marketable title to all its personal property (other than those leased
by it), free and clear of all liens, charges and encumbrances, except
liens for taxes not yet due and payable and such imperfections of
title, if any, as do not in the aggregate have a Material Adverse
Effect. Except for the matters set forth on the Disclosure Schedule,
HMI has good and indefeasible title to all its real property, free and
clear of all liens, charges and encumbrances, except liens for taxes
not yet due and payable and such imperfections of title, if any, as do
not in the aggregate have a Material Adverse Effect. The Disclosure
Schedule contains a legal description of all real property owned by
HMI.
(b) Except for the matters set forth on the Disclosure
Schedule, the buildings, facilities, terminals, boats, barges,
machinery and equipment owned, operated or leased by HMI, taken as a
whole, are in all material respects in good operating condition,
ordinary wear and tear excepted. All vessels required to be certified
by the United States Coast Guard have valid certificates of inspection.
The Disclosure Schedule contains a schedule of vessels owned or
chartered by HMI, and if chartered, the identity of the owner.
(c) The items of inventory owned by HMI that are reflected on
the Financial Statements as of the date thereof were, and as of the
date hereof are, in good condition and free from any known or
reasonably discoverable defect and of a quality and quantity
11
17
usable in the ordinary course of business. The quantities of inventory
are reasonable and warranted in the present and anticipated
circumstances and scope of HMI's business.
(d) The accounts receivable of all kinds of HMI, net of any
reserve applicable thereto set forth in the Financial Statements,
represent amounts due in respect of bona fide transactions and
operations in the ordinary course of business as currently conducted by
HMI in accordance with normal credit practices and are collectible in
the normal course of HMI's business net of reserves included in the
Financial Statements.
(e) HMI is a "United States citizen" as defined in Section 2
of the Shipping Act of 1916, as amended; Section 905(c) of the Merchant
Marine Act of 1936, as amended; and Title 46 of the Code of Federal
Regulations, Part 355 and has been for as long as it has owned or
chartered any vessels. Each Shareholder is a United States citizen.
2.12. Lists of Properties, Loan Agreements, Employee Plans. The
Disclosure Schedule attached hereto provides a true and complete list of all of
the following:
(a) Each lease of real property to which HMI is a party;
(b) (i) All loan and credit agreements or instruments of
indebtedness to which HMI is a party; and (ii) all other agreements or
commitments (other than agreements or commitments resulting in trade
accounts receivable or payable) having payment terms of more than sixty
(60) days, or involving payment by or to HMI of more than $100,000 in
each case;
(c) The name of each bank in which HMI has an account or safe
deposit box, the name in which the account or box is held and the names
of all persons authorized to draw thereon or to have access thereto;
and
(d) All environmental and other governmental permits,
authorizations or licenses material to the business of HMI.
Hollywood has also separately delivered to a senior officer of Parent a
true and complete list of (i) each written employment, severance, retention,
termination, or consulting contract related to any employee or consultant
pursuant to which HMI paid during calendar year 1998 (or is expected to pay in
calendar year 1999) more than $25,000 in total compensation; any collective
bargaining agreements; bonus, commission or incentive compensation plans or
bonus or other incentive compensation arrangements, including any stock
purchase, stock option, stock award or other equity-based compensation
arrangements; or any other employment arrangements, (ii) the name and current
annual salary of each director and officer of HMI and any other employee or
consultant pursuant to which HMI paid during calendar year 1998 (or is expected
to pay in calendar year 1999) more than $100,000 in salary and bonuses and the
profit sharing, bonus or other form of compensation (other than salary) paid or
payable by HMI to or for the benefit of such employee or consultant for the
immediately preceding fiscal year and (iii) all benefit arrangements that are
the subject of Section 5.8(a).
12
18
2.13. Material Contracts. Set forth on the Disclosure Schedule are all
contracts, agreements, or commitments to which HMI is a party (other than real
property leases and contracts terminable on 90 days' or less notice) involving
the payment or receipt of amounts in excess of $100,000 per year ("Material
Contracts"). All Material Contracts are valid and enforceable, and HMI has not
received any notice that any party is asserting or intends to assert the
invalidity or unenforceability, in whole or in part, of any such Material
Contracts.
2.14. Material Defaults. HMI is not in default under the terms of its
corporate charter or bylaws, which default would have a Material Adverse Effect
on HMI, and no default has occurred under any Material Contract that would have
a Material Adverse Effect nor has any event occurred under any Material Contract
which would (with or without notice or the lapse of time) have a Material
Adverse Effect.
2.15 Licenses. Except for the matters set forth in the Disclosure
Schedule, HMI holds each license, permit or other governmental authorization
(hereinafter referred to as "Licenses") which is required for the operation of
its business, and all such Licenses are in full force and effect and will remain
in full force and effect notwithstanding the closing of the transactions
contemplated hereby.
2.16 Litigation, Proceedings and Compliance With Law. Except for the
matters set forth on the Disclosure Schedule, there are no private or
governmental actions, suits, claims or other proceedings pending or, to the
knowledge of Hollywood, threatened, against HMI or affecting its property or
assets or the consummation of the transactions contemplated hereby, and, to the
knowledge of Hollywood, no events have occurred and no conditions exist that
could reasonably be expected to result in any such actions, suits, claims or
other proceedings. HMI has conducted its business in material compliance with
all applicable laws, regulations, orders, permits, ordinances or decrees of
government authority, except for such instances of non-compliance that would not
have a Material Adverse Effect. No letter or communication has been received by
HMI or, to the knowledge of HMI, received by any of its former directors,
officers or employees, from any governmental agency or instrumentality
requesting information concerning the transactions contemplated by this
Agreement. Parent has been given copies or written notification of all written
and oral communications received by HMI from any governmental agency or
instrumentality materially affecting the operation of HMI under environmental or
health and safety laws and regulations. HMI is not in default with respect to
any order, judgment, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality that would have a
Material Adverse Effect on HMI, and no event has occurred which with notice or
lapse of time or both would constitute such a default.
2.17. Insurance. The Disclosure Schedule includes a true and correct
description of the insurance policies maintained by HMI, including the amounts
and type of coverage and applicable deductibles. No claims have been made under
any such policies of insurance maintained by HMI in excess of coverage or the
financial resources of HMI. No insurer is contesting or, to the knowledge of
HMI, intends to contest the validity, enforceability or collectability of any
such insurance contract or intends to deny any coverage thereunder.
13
19
Except as set forth on the Disclosure Schedule, HMI has no liability for any
premium expense for expired policies.
2.18. Self-Insured Claims. The Financial Statements reflect reserves
for self-insured claims exposure (including reserves for incurred but not
reported claims) that were determined in accordance with consistently applied
practices of Hollywood in amounts that Hollywood's management believes are
adequate.
2.19. Employee Benefits. The Disclosure Schedule sets forth a true and
complete list of each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including any written or oral retirement contracts and each medical,
fringe benefit, leave or vacation plan, program, agreement or arrangement or
other company-wide employee policy (other than any governmental program) and any
related trust, as to which HMI has any obligation or liability, contingent or
otherwise (collectively, "Employee Benefit Plans"). True, correct and complete
copies of the following documents with respect to each of the Employee Benefit
Plans have been provided to Parent: (i) each Employee Benefit Plan and related
trust documents, and amendments thereto, (ii) the most recent Form 5500, (iii)
the last Internal Revenue Service determination letter, (iv) summary plan
descriptions and modifications thereto, (v) all enrollment, distribution and
other participant forms, and (vi) any PBGC filings made in the last 4 years.
Each such Employee Benefit Plan (and related trust, insurance contract,
or fund) complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code, except where the failure to comply would not
have a Material Adverse Effect on HMI. Each Employee Benefit Plan has complied
with all applicable reporting and disclosure requirements. All contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been timely paid to each such Employee Benefit
Plan which is an employee pension benefit plan (as defined in Section 3(2) of
ERISA and not exempted under Section 4(b) of ERISA, herein an "Employee Pension
Plan") and no "accumulated funding deficiencies" (as defined in Section
302(a)(2) of ERISA) exist. Each Employee Pension Plan has received a favorable
determination letter from the Internal Revenue Service to the effect that the
plan and all amendments meet the requirements of Code Section 401(a). HMI has
funded each Employee Pension Plan in accordance with reasonable actuarial
assumptions and all applicable law and regulation, including those promulgated
under ERISA and the Code. HMI has no multi-employer or multiple employer
Employee Benefit Plans. Except as shown on the Disclosure Schedule, there are no
unfunded or unaccrued liabilities relating to any Employee Benefit Plan. HMI
provides no post termination health benefits beyond those required by Code
Section 4980B (COBRA) nor have any promises been made by it to any employee or
former employee to do so. The closing of the Merger will not increase or
accelerate any benefit or payment to any HMI employee. Except as shown on the
Disclosure Statement, there are no claims or suits involving any Employee
Benefit Plan.
2.20. Absence of Certain Transactions. The Shareholders and HMI have
not, and to the knowledge of HMI none of the directors, officers, employees or
agents of HMI have, directly or indirectly, used funds or other assets of HMI
for (i) illegal contributions, gifts,
14
20
entertainment or other expenses relating to political activity, (ii) illegal
payments to or for the benefit of governmental officials or employees, (iii)
illegal payments to or for the benefit of any person, firm, corporation or other
entity, or any director, officer, employee, agent or representative thereof,
(iv) gifts, entertainment or other expenses that jeopardize the normal business
relations between HMI and any of its customers, or (v) the establishment or
maintenance of a secret or unrecorded fund (except for an immaterial
confidential compensation account controlled by Xxxxxxxx); and there have been
no false or fictitious entries made in the books or records of HMI.
2.21. Labor Matters. HMI is and at all times has been in compliance
with all applicable federal, state or other labor laws, together with all
applicable regulations, except where the failure to comply would not have a
Material Adverse Effect on HMI. There are no agreements with, or pending
petitions for the recognition of, a labor union or association as the exclusive
bargaining agent for any of HMI's employees. No such petitions have been pending
at any time within two (2) years of the date of this Agreement and, to the
knowledge of HMI, there has not been any organizing effort by any union or other
group seeking to represent any employees of HMI as their exclusive bargaining
agent at any time within two (2) years prior to the date of this Agreement.
2.22. Patents, Trade Names, Trademarks. The term "Intellectual
Property" includes all patents and patent applications, trade names, trademarks,
service marks, copyrights and trade secrets and registrations (issued or
pending) for any of the foregoing. HMI has good and valid title to all of the
Intellectual Property set forth on the Disclosure Schedule, free and clear of
any and all encumbrances, which Intellectual Property is the only material
Intellectual Property used in its business. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual Property on the
Disclosure Schedule have been granted or licensed to HMI have been provided to
the Parent. No royalty or other fee is required to be paid by HMI to any other
person in respect of the use of any of the Intellectual Property on the
Disclosure Schedule except as disclosed in such agreements. To the knowledge of
HMI, HMI is not infringing on the Intellectual Property rights of third parties,
nor is any third party known to be infringing on HMI's Intellectual Property.
2.23. Year 2000 Compliance. All of the material proprietary computer
programs owned by HMI are "Year 2000 Compliant." Year 2000 Compliant, for the
purposes of this Agreement, means that (i) such computer programs are designed
to be used before, during and after the calendar Year 2000 A.D.; and (ii) such
designs include the capability of performing date data century recognition and
calculations that accommodate same century and multi-century formulas and date
values, and using date data interface values that reflect the century (and where
a two-digit year is used, provides a clear definition of the assumptions used
for determining the proper century); and (iii) such computer programs, when used
during each such time period, will accurately receive, provide and process
date/time data (including calculating, comparing, and sequencing) from, into,
and between the twentieth and twenty-first centuries, including the years 1999
and 2000, and leap year calculations. To the knowledge of HMI, no material
Intellectual Property licensed from third parties nor any embedded date
sensitive technology will cause a Material Adverse Effect on and after January
1, 2000.
15
21
2.24. Environmental Matters. Except for the matters set forth in the
Disclosure Schedule, and except for matters which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect,
(A) neither HMI, nor any facility, vessel, or property currently or formerly
owned, leased or operated by HMI (a "Site"), is in violation of or has violated
any Environmental Laws (as defined below); (B) HMI has obtained and is in
material compliance with all permits, licenses, authorizations, registrations
and other governmental consents required under Environmental Laws and HMI does
not know of any reason why any Site cannot continue to be operated in compliance
with such permits, licenses, authorizations, registrations and other
governmental consents; (C) there have been no Releases of Hazardous Materials
(both as defined below) in, on, under, from or affecting any Site; (D) there are
no pending or threatened actions, suits, claims or other legal proceedings based
on (i) the current or past presence on any Site of Hazardous Materials, (ii) the
current or past Release or threatened Release into the environment of Hazardous
Materials from any Site, (iii) the off-site disposal, transport, or arrangement
for disposal of Hazardous Materials originating on or from any Site or the
business or assets of HMI or (iv) any violation or alleged violation of
Environmental Laws by HMI, nor are there any facts or circumstances which could
give rise to any such action, suit, claim or other proceedings; (E) HMI is not,
and on the Effective Date will not be, subject to any actual or contingent
liability or any remediation requirements in connection with any Release or
threatened Release of Hazardous Materials into the environment and there are no
conditions or occurrences which could result in any such liability or
requirement; and (F) there are no and have not been any underground storage
tanks or underground piping associated with any such tanks at or under any Site.
HMI has provided Parent all information, documents and reports, in its
possession and control relating to the environmental condition of all Sites. As
used herein, "Environmental Laws" means all federal, state and local laws
(including common law), rules and regulations, permits, treaties, orders,
enforceable requirements, decrees, judgements, injunctions, variances,
authorizations, or agreements promulgated or entered into, or as interpreted by,
any governmental entity relating to pollution or protection of human health or
welfare or the environment, including without limitation the Clean Water Act (33
U.S.C. Section 1251 et seq.), as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. Section 7401 et seq.
("CERCLA"), and all other laws and regulations relating to Hazardous Materials.
As used herein, "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, asbestos, PCBs, urea formaldehyde, oils, petroleum and
petroleum substance, or fractions thereof, or byproducts or other toxic or
hazardous wastes, materials or substances, as those or any similar terms are
defined in any Environmental Laws, or any other substance or waste regulated
pursuant to any Environmental Law. As used herein, the term "Release" means any
spilling, leaking, pumping, pouring, emitting, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment.
2.25. Qualification; Purchase for Investment. The Shareholders are each
an "accredited investor" (as defined in Regulation D promulgated under the
Securities Act of 1933, as amended; hereinafter, the "Securities Act"). Each
Shareholder is acquiring the Parent Shares for his or its own account for
investment and not with a view toward any resale or distribution thereof. Each
Shareholder acknowledges that the Parent Shares are restricted securities and
have not been registered under the Securities Act or any state securities laws
by
16
22
reason of specific exemptions under the provisions thereof, and that any
certificates issued to the Shareholders evidencing the Parent Shares shall bear
appropriate legends to that effect.
2.26. Broker Fees Payable. No brokerage fees, finders' fees, agents'
commissions or other forms of compensation (excluding legal and accounting fees)
in connection with this Agreement or the transactions contemplated hereby will
be due to any party as a result of any actions or obligations on the part of the
Shareholders or Hollywood, other than to Banc of America Securities LLC, the
liability for which shall remain with Hollywood.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Shareholders and Hollywood
as follows:
3.1. Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
3.2. Authority. Parent and Sub each have all requisite power and
authority to enter into this Agreement and all other agreements, certificates
and documents contemplated hereby, to consummate the transactions contemplated
hereby and to perform its obligations hereunder. Parent and Sub each have taken
all action required by law, its certificate of incorporation and its bylaws to
authorize the execution, delivery and performance of this Agreement and all
other agreements, certificates and documents contemplated hereby and to
authorize the consummation of the transactions contemplated hereby. This
Agreement and all other agreements contemplated hereby have been duly
authorized, executed and delivered by Parent and Sub and constitutes the valid
and legally binding agreement and obligation of each of Parent and Sub,
enforceable against each of them in accordance with its terms. Upon execution
and delivery of the agreements, certificates or other documents contemplated
hereby to be executed by each of Parent and Sub, such agreements, certificates
or documents will be enforceable against Parent and Sub, as the case may be, in
accordance with their respective terms. The authorization, execution and
delivery by Parent and Sub of this Agreement does not, and the execution and
delivery by Parent and Sub of the agreements, certificates and other documents
contemplated hereby and the consummation by Parent and Sub of the transactions
contemplated hereby will not, violate any provision of the certificate of
incorporation or bylaws of Parent, or violate any provision of, or create any
conflict with, or result in the acceleration of any obligation under or
constitute a default under, any material loan agreement, indenture, lease,
mortgage, deed of trust, financing agreement, contract, instrument or any other
commitment or agreement to which either the Parent or Sub is subject.
3.3. Parent Shares. As of the date hereof, the authorized capital stock
of Parent consists of 60,000,000 shares of common stock, par value $0.10, of
which 30,906,602 shares were issued and 20,119,489 shares were outstanding on
July 26, 1999, and 20,000,000 shares of preferred stock, par value $1.00, none
of which were issued or outstanding on July 26, 1999. The Parent Shares to be
issued to the Shareholders pursuant to Article I above have been duly
17
23
authorized and, when issued and delivered on the Effective Date in accordance
with the terms of this Agreement, will be validly issued, fully paid,
non-assessable and free and clear of any lien, claim or encumbrance. The Parent
Shares upon issuance will have been issued in full compliance with all
applicable law and regulation.
3.4. SEC Reports. Since June 30, 1998, the Parent has filed in a timely
manner with the Securities and Exchange Commission (the "SEC") all forms,
financial statements, documents and reports (collectively the "SEC Reports")
required to be filed by the Parent pursuant to the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"). Such SEC Reports were prepared in all
material respect in accordance with the Exchange Act and do not contain any
untrue statement of a material fact or facts or omit to state a material fact or
facts necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since Parent's
Quarterly Report on Form 10-Q for the three months ended March 31, 1999, the
Parent has not suffered any change, event, or condition that alone or together
with other changes, events or conditions could have a Material Adverse Effect.
3.5. Consents. No consent, approval or authorization of, or
registration, declaration or filing with, any department, commission, or agency
of the U.S. Government or any subdivision thereof is required to be obtained by
Parent to authorize the execution and delivery by Parent of this Agreement or
the performance by Parent of its terms other than (i) pursuant to the HSR Act,
(ii) requirements of Federal and State Securities Laws, (iii) those which are
not reasonably likely to have a Material Adverse Effect.
3.6. Brokers. Neither Parent nor Sub has engaged the services of any
broker or finder or incurred any liability for brokerage fees, finders' fees,
agents' commissions or other forms of compensation in connection with the
transactions set forth in this Agreement in a manner that will result in any
liability on the part of the Shareholders.
3.7. Changes in Capital Stock; Market Activity. Except as a result of
the exercise of stock options, there have been no changes in the number of
outstanding shares of Parent's capital stock from May 5, 1999 through and
including the date of this Agreement, and there will be no additional changes
prior to and through the Effective Date. Neither Parent nor any affiliate nor
any other person at their direction has engaged in any trading activities in
Parent Shares (including any repurchase of Parent Shares) from May 5, 1999
through and including the Effective Date.
ARTICLE IV.
COVENANTS
4.1. Shareholders and Hollywood. The Shareholders and Hollywood agree
that pending the Closing and except as otherwise consented to or approved by
Parent in writing, they shall cause the following covenants to be satisfied:
18
24
(a) HMI will allow Parent and its employees and agents, at
reasonable times and upon reasonable notice, access to HMI's books and
records, properties, facilities, terminals, machinery, equipment,
vessels and management (including without limitation for the purpose of
conducting Phase I and, if deemed necessary by Parent, Phase II
environmental assessments and conducting of inspection of vessels), all
for the sole purpose of confirming the truth and accuracy of the
representations and warranties of Hollywood and not for the performance
of due diligence; provided however, that Parent shall not be entitled
access to customer lists, pricing information and customer contracts as
determined in the reasonable judgment of Hollywood until the conditions
set forth in Articles VI and VII with respect to the HSR Act have been
satisfied.
(b) HMI shall carry on its business in the normal course and
substantially in the same manner as heretofore conducted, including
entering into contracts in the ordinary course for providing barge
services; provided, that HMI may distribute to Xxxxxxxx the Xxxxxxxx
Distributions.
(c) HMI shall use commercially reasonable efforts to preserve
its organization intact, to retain its present employees and to
preserve for Parent the goodwill of HMI's suppliers, customers and
others having business relations with HMI including, but not limited
to, payment of all obligations to trade creditors consistent with past
business practices.
(d) HMI shall perform all its material obligations under
agreements relating to or affecting its assets, properties and rights
and will duly comply with all applicable laws that if violated might
materially impair the conduct of the business of HMI or impose material
liability on the owner of such business including, but not limited to,
the payment of all taxes and charges applicable to the business of HMI.
(e) HMI shall continue all normal repairs, servicing,
replacement, and upkeep of its equipment, properties and facilities, so
as to maintain such equipment, properties and facilities in as good
working order and condition as at present, ordinary wear and tear
excepted and will maintain in full force and effect all insurance now
in force covering HMI and its assets and properties.
(f) HMI shall deliver to Parent, prior to the Closing, such
financial information pertaining to HMI as is reasonably necessary to
comply with Parent's financial and other reporting requirements, and
HMI shall make available to Parent all other documents and information
that Parent has requested relating to the transactions contemplated by
this Agreement.
(g) HMI shall not:
(i) Amend its articles of incorporation or bylaws or
amend any material agreement governing its operation
in such a way that would have a material adverse
impact on the transactions contemplated by this
Agreement;
19
25
(ii) Issue or sell any shares of capital stock of any
class or any securities convertible into or
exchangeable for any such shares or any options
(including options that otherwise may be granted
pursuant to stock option plans), warrants or other
rights calling for or permitting the issuance,
transfer, sale or delivery of any such shares or
securities, or otherwise enter into any arrangement
or contract with respect to any such shares or
securities or make any other changes in its capital
structure;
(iii) Merge or consolidate or agree to a merger or
consolidation with or into any corporation or other
entity;
(iv) Borrow or agree to borrow any funds or incur, or
assume or become subject to, whether directly or by
way of guarantee or otherwise, any obligation or
liability, including without limitation indebtedness
for money borrowed or purchase money indebtedness,
except obligations and liabilities incurred in the
ordinary course of business and consistent with past
practice or as otherwise consented to or approved by
Parent in writing, which consent or approval shall
not be unreasonably withheld;
(v) Except as contemplated by this Agreement, pay,
discharge or satisfy any claim, liability or
obligation other than the payment, discharge or
satisfaction in the ordinary course of business and
consistent with past practice of paying liabilities
and obligations;
(vi) Permit or allow any of its properties or assets to be
subject to any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any
kind, or sell, assign, lease, transfer or otherwise
dispose of any such properties or assets, except, in
each case, in the ordinary course of business and
consistent with past practice, and excluding the
Xxxxxxxx Distributions;
(vii) Write down or up the value of the inventory of HMI,
except for adjustments and write-offs in the ordinary
course of business and consistent with past practice;
(viii) Cancel or amend any debts or waive any claims or
rights of material value, except in the ordinary
course of business and consistent with past practice;
(ix) Adopt or amend any compensation plan, or grant, or
become obligated to grant, any general increase in
the compensation of officers or employees (including
any such increase pursuant to any compensation plan)
or any increase in the compensation payable or to
become payable to any such officer, employee or
agent, make any change in any compensation plan or
other employee welfare or benefit arrangement except
pursuant to existing compensation plans or enter into
any employment or similar
20
26
agreement or arrangement (excluding at will
employment or consulting agreements or arrangements)
with any employee;
(x) Make any capital expenditure in excess of the Capital
Expenditure Budget of 1999 which is a part of the
Disclosure Schedule or make any other commitment
therefor or incur or agree to incur any liability
therefore, except as incurred in the ordinary course
of business (provided such expenditures or
commitments therefor do not exceed $500,000 in the
aggregate prior to Closing) or as otherwise consented
to or approved by Parent in writing, which consent or
approval shall not be unreasonably withheld;
(xi) Enter into any other transaction or take any action
which would knowingly result in any of the
representations and warranties of the Shareholders or
Hollywood contained in this Agreement not being true
and correct at and as of any time after such
transaction or action was entered into or event
occurred, until and including the Closing;
(xii) Declare or pay, or agree to declare or pay any
dividend or distribution to holders of capital stock
of Hollywood, or purchase any shares of capital stock
of Hollywood, except for dividends provided for in
this Agreement and except that Hollywood may pay to
Shareholders the estimated amount of their federal
income tax liability as the owners of shares in an "S
Corporation", when such payments are payable; and
(xiii) Agree, whether in writing or otherwise, to do any of
the foregoing.
(h) The Shareholders and Hollywood shall not, and shall not
permit or cause any of Hollywood's officers, directors, employees,
representatives or agents to, directly or indirectly, encourage,
solicit or initiate or engage in discussions or negotiations with,
provide any information to, or enter into any agreement with, any
corporation, partnership, person or other entity or group (the "Third
Party") concerning (or concerning the business of HMI in connection
with) any purchase offer, exchange offer, merger, consolidation, sale
of substantial assets or of a significant amount of assets, sale of
securities, liquidation, dissolution or similar transactions involving
HMI; provided, however, that the foregoing shall not prohibit HMI from
discussing joint venture, "partnering" or participation arrangements
with third parties in the ordinary course of business and which are
disclosed to Parent in writing or in the Disclosure Schedule.
(i) HMI agrees to use commercially reasonable efforts to
secure, prior to Closing, written approvals, consents and
authorizations of required under the terms of all Material Contracts,
leases, partnership agreements and limited liability company agreements
to which HMI is a party in order for Hollywood to consummate the Merger
without giving the other party to any such contracts the right to
terminate or renegotiate the contract or assert a breach of contract
claim ("Third Party Consents"). Any such approvals, consents and
authorizations shall be in such form as is acceptable to Parent,
21
27
provided that this provision shall not be interpreted to require or
permit HMI to pay any premiums or agree to an extended or additional
guarantee of any of such leases or similarly to enter into any
agreement increasing its obligations under any such leases.
(j) The Shareholders and Hollywood shall assist the Parent in
obtaining any and all government approvals or authorizations and in
effecting all necessary registrations and filings (including filings
under the HSR Act) necessary or appropriate to carry out the
transactions contemplated hereby.
(k) Subject to the terms and conditions herein, Hollywood and
the Shareholders agree to use reasonable efforts to take, or cause to
be taken, all appropriate action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective,
as soon as practicable, the transactions contemplated by this
Agreement.
(l) At or prior to the Closing, Hollywood shall have been
released from all liabilities relating to the assets included in the
Xxxxxxxx Distributions (including with respect to the leases associated
with the "Hollywood Camp Hunting/Grazing leases" set forth in Section
2.12(a) of the Disclosure Schedule).
(m) At or prior to the Closing, Hollywood shall have taken all
appropriate actions with respect to the Supplemental Employee
Retirement Plan to eliminate all benefits to be paid thereunder to
Xxxxxxxx and Xxxxxxxx shall have waived any and all rights thereto.
4.3. Parent. Parent agrees that pending the Closing and except as
otherwise consented to or approved by Hollywood in writing, it shall cause the
following covenants to be satisfied:
(a) Parent will allow Hollywood and its employees and agents,
at reasonable times and upon reasonable notice, access to Parent's
books and records, properties, facilities, terminals, machinery,
equipment, vessels and management; provided however, that Hollywood
shall not be entitled access to customer lists, pricing information and
customer contracts as determined in the reasonable judgment of Parent
until the conditions set forth in Articles VI and VII with respect to
the HSR Act have been satisfied.
(b) The Parent shall use its reasonable efforts to obtain such
approvals and authorizations and to effect such registrations and
filings referred to in Section 4.1(j). The Parent shall pay all
required filing and other fees, including those that would otherwise be
payable by the Shareholders or HMI.
(c) Subject to the terms and conditions herein, the Parent and
Sub agree to use reasonable efforts to take, or cause to be taken, all
appropriate action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as
soon as practicable, the transactions contemplated by this Agreement.
22
28
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1. Employment Agreement. At or prior to the Closing, Xxxxxxxx shall
enter into an Employment Agreement with Parent in substantially the form
attached hereto as Exhibit B ("Employment Agreement").
5.2. Termination of Xxxxxxxx Pledge at Closing; Release of Xxxxxxxx
Pledge. At or prior to Closing, Xxxxxxxx shall cause the Xxxxxxxx Pledge to be
terminated or released and all claims against the Shares to be released in full.
Further, at Closing, Xxxxxxxx shall release the Xxxxxxxx pledge and security
interest secured by Shares against delivery of the proceeds therefrom as
substitute security under the Xxxxxxxx Pledge.
5.3. Dividends and Distribution of Assets to the Shareholders. At least
one day prior to the Closing, Hollywood shall declare a dividend payable to the
Shareholders in an amount equal to the AAA Account pursuant to Section 1.6,
consisting of the (i) Xxxxxxxx Distributions and (ii) cash equal to the balance
of the AAA Account after subtracting the fair value of the Xxxxxxxx
Distributions.
5.4. Additional Tax Basis. To the extent that at any time prior to
three years after the filing of the final federal income tax return by the
Shareholders with respect to Hollywood and Hollywood Acquisition Company (which
time period shall be automatically extended if any determination described in
this section is commenced but has not yet been concluded), Hollywood's aggregate
adjusted tax basis in its assets, as of the Closing, is determined by the
Internal Revenue Service to be greater than the adjusted tax basis reported on
the final tax return for the period ending on the Effective Date (the "Final Tax
Basis"), then Parent shall pay Shareholders as additional Purchase Price an
amount equal to the net present value, discounted at 8% per annum, of the
depreciation tax benefit using the maximum applicable corporate tax rate in
effective on the date of computation resulting from the Xxxxx Step-up (as
defined below), using the MACRS tax depreciation method with half-year
convention and a 10-year recovery period. The "Xxxxx Step-up" shall be defined
as the amount by which the Final Tax Basis exceeds the adjusted tax basis
reported on the final tax return for the period ending on the Effective Date.
Any payment due hereunder shall not exceed $3,000,000 and shall be paid in
Parent Shares valued at a price per share equal to the average trading price on
the New York Stock Exchange for the 20 trading preceding 3 days prior to such
payment being made. The Parent Shares shall be delivered within thirty (30) days
after the delivery by the Shareholders to Parent of a notice that the
determination of any additional tax basis has been made by or reported to the
Internal Revenue Service.
5.5. Non-Competition Agreement. As a material inducement to Parent to
purchase the Shares, Xxxxxxxx agrees that for a period of two (2) years from and
after the Effective Date, neither Xxxxxxxx nor any person or entity controlled
by Xxxxxxxx (an "affiliate") shall (i) accept employment with or render service
to any person, firm or corporation that is engaged in a business directly
competitive with the Business (as defined below); (ii) directly or indirectly,
own, manage, control, or have any interest (other than an equity interest of
five percent (5% or less) in
23
29
any corporation, partnership, or other entity that carries on a business similar
to and that would be competitive with the Business; or (iii) directly or
indirectly call on, solicit or perform services for or aid any other person,
entity or organization, other than the Parent or its employees or agents, in
calling on, soliciting or performing services for any person that at that time
is, or at any time within one year prior to that time was, an actual or proposed
customer, supplier, development partner, or acquiree of the Parent. "Business"
shall mean providing barge transportation services primarily in the inland
waterways of the United States. Should any court of competent jurisdiction
determine that public policy requires a more limited restriction in the
territory, duration, nature of restricted activity, or any combination thereof,
it would be in furtherance of the intentions of the parties hereto for the court
to so interpret and construe the terms of this Section to apply to only such
more limited restriction to an appropriate degree.
5.6. Disclosure Supplements. From time to time prior to the Closing,
Hollywood and the Shareholders will supplement or amend the Disclosure Schedule
delivered in connection herewith with respect to any matter which, if existing
or occurring at or prior to the date of this Agreement, would have been required
to be set forth or described in such Disclosure Schedule or which is necessary
to correct any information in such Disclosure Schedule which has been rendered
inaccurate by an event occurring after the date hereof. If the Closing occurs,
Parent waives any right or claim it may otherwise have or have had on account of
any matter so disclosed in such supplement or amendment.
5.7. NO IMPLIED REPRESENTATIONS OR WARRANTIES. PARENT AND SUB EACH
HEREBY ACKNOWLEDGE AND AGREE THAT HOLLYWOOD AND THE SHAREHOLDERS ARE NOT MAKING
ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, EXCEPT THOSE
REPRESENTATIONS AND WARRANTIES EXPLICITLY SET FORTH IN THIS AGREEMENT OR IN THE
DISCLOSURE SCHEDULE OR IN ANY CERTIFICATE CONTEMPLATED HEREBY AND DELIVERED BY
HOLLYWOOD AND THE SHAREHOLDERS IN CONNECTION HEREWITH. EXCEPT AS SET FORTH IN
SUCH REPRESENTATION OR WARRANTY, THE ASSETS AND BUSINESS OF HMI BEING ACQUIRED
BY PARENT AND SUB ON THE EFFECTIVE DATE AS A RESULT OF THE MERGER AND THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE ACQUIRED BY SUB ON
AN "AS IS, WHERE IS" BASIS AND IN THEIR THEN PRESENT CONDITION, AND PARENT AND
SUB SHALL RELY SOLELY UPON THEIR OWN EXAMINATION THEREOF. IN ANY EVENT, EXCEPT
AS EXPLICITLY SET FORTH HEREIN, NONE OF THE SHAREHOLDERS, HOLLYWOOD OR ANY OF
THEIR RESPECTIVE OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES, AFFILIATES OR
REPRESENTATIVES, AS THE CASE MAY BE, HAS MADE OR IS MAKING ANY REPRESENTATION,
EXPRESS OR IMPLIED, AS TO THE VALUE OF ANY ASSET OR BUSINESS BEING SO ACQUIRED,
OR ANY WARRANTY OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR QUALITY, WITH RESPECT TO ANY OF THE TANGIBLE ASSETS BEING SO
ACQUIRED, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF, OR AS TO THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT.
5.8. Employee Benefit Matters.
(a) Benefit Arrangements. Parent agrees that on and after the
Effective Date it will honor, and will cause Sub to honor, promptly and
in good faith all written employment, severance, retention,
termination, consulting, retirement and early retirement agreements and
plans to which HMI is a party or which it has adopted, and which have
been disclosed in Section 5.8(a) of the Disclosure Schedule. The
parties have
24
30
negotiated the Merger Consideration amount taking into account that
such benefits will be honored.
(b) Indemnification. Parent agrees that all rights to
indemnification or exculpation now existing in favor of the employees,
agents, directors or officers of Hollywood (the "Hollywood Indemnified
Parties") as provided in the Articles of Incorporation or Bylaws or
similar governing documents of Hollywood (the "Governing Instruments"),
or as provided in any agreements between an Hollywood Indemnified Party
and Hollywood that are identified in the Disclosure Schedule (the
"Indemnification Agreements"), except with respect to any claims that
may be asserted against the Hollywood Indemnified Parties by any
Shareholder, shall continue in full force and effect for a period of
not less than seven years from the Effective Date or such shorter
period as may be provided in any such agreement; provided, however,
that, in the event any claim or claims are asserted or made within such
period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims.
(c) Binding on Successors. In the event HMI 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 of such consolidation or merger, or (ii) transfers all or
substantially all of its properties, assets or stock to any person,
then and in each such case, proper provision shall be made so that the
successors and assigns of HMI (or their successors and assigns) shall
assume the obligations set forth in this Section.
5.9. Resignation of Directors. At the Closing, Xxxxxxxx will resign as
the sole director of Hollywood effective as of the Closing.
5.10. Registration Rights and Holding Period. At the Closing the
Shareholders and the Parent shall execute and deliver the Registration Rights
Agreement attached hereto as Exhibit C, pursuant to which the Parent (a) grants
to Shareholders two demand registrations under the Securities Act of 1933, as
amended (the fees and expenses of which shall be paid by the Parent), (b) grants
to Shareholders unlimited "piggyback" rights to have their Parent Shares
registered for sale so long as the Shareholders, in the aggregate, own at least
10% of the Parent Shares issued pursuant to this Agreement; and (c) has agreed
to file timely reports pursuant to the Exchange Act and such other reports, if
any, as are required to permit the sale of securities by an affiliate under Rule
144 promulgated by the Securities and Exchange Commission. The Shareholders will
not, for a period of one (1) year following the Closing, offer, sell or
otherwise transfer any of the Parent Shares without the prior written consent of
the Parent (to be given or withheld in the Parent's sole discretion); provided,
however, that the Shareholders may pledge any of the Parent Shares upon
receiving the written agreement of the pledgee to comply with the restrictions
set forth in this sentence.
5.11. Cooperation of the Shareholders. Following the Closing, the
Shareholders will cooperate with Parent in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings or
disputes involving the business of HMI based upon contracts, arrangements, acts
or omissions of HMI that were in effect or carried on, at or prior to the
Effective Date.
25
31
5.12. Access to Information. Following the Closing, the Parent will
allow Shareholders reasonable access to all of HMI's books, records, papers and
instruments of whatever nature and wherever located that relate to the business
operations, income and expenses of HMI existing on, accruing or arising prior to
or occurring prior to the Effective Date for the purpose of resolving federal or
state tax disputes or any claims for which the Shareholders will be liable under
the indemnification provisions of this Agreement.
5.13. Action Prejudicial to Tax Treatment. Prior to and following the
Closing, neither the Parent, Sub, Hollywood nor the Shareholders shall take any
action that could impair or destroy the qualification of the Merger and the
transactions contemplated hereby as a reorganization under Section 368(a)(2)(D)
of the Code.
5.14. Final Federal Tax Return of Hollywood as a Subchapter S
Corporation. Within sixty (60) days after the Effective Date, the Shareholders
shall prepare a final federal tax return for Hollywood and Hollywood Acquisition
Company for the taxable year ended on the Effective Date consistent with past
accounting practices and elections and shall deliver a draft thereof to the
Parent at least 30 days prior to the due date of such return (as extended, if
applicable). In connection with such tax return the Shareholders shall also
calculate the actual AAA (the "Final AAA Account") at the Effective Time. Parent
shall cooperate with the Shareholders in preparation of such tax return and
shall permit the Shareholders to have reasonable access to the books and records
needed to prepare such statement. In the event that the Estimated AAA Account
exceeds the Final AAA Account, the Merger Consideration shall be deemed
increased by the amount of such excess, and the AAA Account distribution called
for by Section 1.6 shall be deemed reduced by a like amount; similarly, in the
event that the Final AAA Account exceeds the Estimated AAA Account, the AAA
Account distribution called for by Section 1.6 shall be deemed increased by the
amount of such excess, and Merger Consideration shall be deemed reduced by a
like amount. Unless Parent notifies Shareholders in writing within twenty (20)
days of receipt of such proposed tax return, stating a reasonable basis for
objection to any items contained in such tax return, Parent shall cause to be
signed and filed on behalf of Hollywood and Hollywood Acquisition Company such
proposed tax return, and Xxxxxxxx is hereby granted a power of attorney to
execute and file such return in accordance with the terms of this Section 5.14.
If there is any disagreement between Parent and the Shareholders with respect to
such proposed tax return, Parent and the Shareholders shall submit such
disagreement to a mutually acceptable independent certified accounting firm in
Houston, Texas, whose determination shall be final with respect to matters
related to such return.
5.15. Corporate Name. After the Effective Time, Parent and Sub shall
have the right to use the corporate name, Hollywood Marine, Inc., and any
derivatives or combinations thereof in connection with the business of the
Surviving Corporation for a period of five (5) years after the Effective Date
and no Shareholder shall use or attempt to use such name or any derivative of
combination thereof during such period as the name of a corporation, partnership
or other entity, an assumed name, or a trade name.
26
32
5.16. Voting. Subject to the terms and conditions of this Agreement,
Parent and Shareholders agree to vote their respective shares of Sub and
Hollywood in favor of the Merger.
5.17. Parent's Board of Directors. As of the Effective Time, Parent's
Board of Directors shall cause (i) Xxxxxxxx to be designated as Chairman of the
Board of Parent, (ii) the size of the Board to be increased by 2 members and
(iii) Xxxxxxxx and one other person (who shall be mutually agreeable to Xxxxxxxx
and the Board of Parent) to be elected by the Board to fill such newly created
directorships.
ARTICLE VI.
CONDITIONS PRECEDENT TO PARENT'S OBLIGATIONS
All obligations of Parent and Sub under this Agreement relating to the
Merger on the Effective Date are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions (all or any of which may be waived
in whole or in part by Parent):
6.1. Confirmation of Representations and Warranties. Each of the
representations and warranties of the Shareholders and Hollywood set forth in
this Agreement (without regard to any exceptions for materiality or Material
Adverse Effect) shall be true and correct both on the date hereof and on the
Effective Date as if made at that time, except for inaccuracies in any such
representations and warranties that could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and except
insofar as changes shall have occurred after the date hereof which are permitted
by the Agreement.
6.2. Compliance with Agreement. Each of the Shareholders and Hollywood
shall have performed and complied in all material respects with all agreements,
undertakings and obligations which are required to be performed or complied with
by such person at or prior to the Closing.
6.3. Shareholders and Officer Certificate. At the Closing the
Shareholders shall have delivered to Parent a certificate dated the Effective
Date and signed by the Shareholders and a duly authorized officer of Hollywood
to the effect that the conditions specified in Sections 6.1 and 6.2 have been
fulfilled.
6.4. Consents. There shall have been received by the Shareholders and
HMI, in form and substance satisfactory to Parent, all Third Party Consents and
all consents and approvals of, or indications of no action by, any court or
governmental authority deemed necessary or appropriate by Parent to the
consummation of the transactions contemplated by this Agreement other than those
that if not obtained would not have a Material Adverse Effect.
6.5. HSR Act. Any waiting period (and any extension thereof) applicable
to the consummation of the transactions contemplated hereby under the HSR Act
shall have expired or been terminated.
27
33
6.6. Confirmation of Representations and Warranties. The Shareholders
and HMI shall have furnished, or given sufficient access to, all information
requested by Parent for it to confirm the truth and accuracy of the
representations and warranties of Hollywood and the Shareholders contained
herein.
6.7. No Violation. Parent shall be satisfied that neither the
consummation of the transactions contemplated hereby nor the ownership of any or
all of the Shares would result in any violation of applicable law, regulation,
rule, judgement, decree or order of any federal or state or provincial
governmental authority or court.
6.8. Absence of Material Changes. Since the date hereof, there shall
have been no material adverse change in the business, financial condition,
assets or liabilities of HMI, or discovery of a condition or occurrence of any
event which might result in a material adverse change in the business, financial
condition, assets or liabilities of HMI.
6.9. Disclosure Schedule. All supplements or amendments to the
Disclosure Schedule made by Hollywood or the Shareholders prior to the Closing
that could reasonably be expected to have a Material Adverse Effect shall be
acceptable to Parent in its sole discretion.
6.10. Deliveries. At the Closing:
(a) Xxxxxxxx shall have executed and delivered the Employment
Agreement attached hereto as Exhibit B;
(b) the Shareholders shall have executed and delivered the
Registration Rights Agreement attached hereto as Exhibit C;
(c) The Shareholders and Hollywood shall have executed and
delivered such other documents and instruments necessary or appropriate
to consummate the transactions contemplated hereby; and
(d) Counsel for Hollywood, Mayor, Day, Xxxxxxxx and Xxxxxx,
L.L.P., shall have delivered its opinion regarding the good standing of
HMI, the authorization and enforceability of this Agreement,
Hollywood's authorized and outstanding capital stock, and litigation
known to such counsel, all in the form reasonably satisfactory to
Parent and its counsel.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
All obligations of the Shareholders under this Agreement relating to
the Merger on the Effective Date are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions (all or any of which may be
waived in whole or in part by the Shareholders):
7.1. Confirmation of Representations and Warranties. Each of the
representations and warranties of Parent and Sub set forth in this Agreement
(without regard to any exceptions
28
34
for materiality or Material Adverse Effect) shall be true and correct both on
the date hereof and on the Effective Date as if made at that time, except for
inaccuracies in any such representations and warranties that could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, and except insofar as changes shall have occurred after the date
hereof which are permitted by the Agreement.
7.2. Compliance with Agreement. Each of Parent and Sub shall have
performed and complied with all agreements, undertakings and obligations that
are required to be performed or complied with by it at or prior to the Closing.
7.3. Parent Certificate. At the Closing, Parent and Sub shall have
delivered to the Shareholders the Parent's certificate and the Sub's certificate
dated the Effective Date and signed by a duly authorized officer of Parent and
the Sub, as the case may be, to the effect that the conditions specified in
Section 7.1 and 7.2 have been fulfilled.
7.4. Absence of Material Changes. Since the date hereof, there shall
have been no material adverse change in the business, financial condition,
assets or liabilities of Parent or of the Sub, or discovery of a condition or
occurrence of any event which might result in a material adverse change in the
business, financial condition, assets or liabilities of Parent or of the Sub.
7.5. Consents. There shall have been received by the Shareholders and
Hollywood in form and substance satisfactory to the Shareholders, all Third
Party Consents and all consents and approvals of, or indications of no action
by, any court or governmental authority and all approvals, consents and
authorizations of lessors deemed necessary or appropriate by the Shareholders to
the consummation of the transactions contemplated by this Agreement, other than
those that if not obtained would not have a Material Adverse Effect.
7.6. HSR Act. Any waiting period (and any extension thereof) applicable
to the consummation of the transactions contemplated hereby under the HSR Act
shall have expired or been terminated.
7.7. Confirmation of Representations and Warranties. Parent shall have
furnished, or given sufficient access to, all information requested by Hollywood
and the Shareholders for them to confirm the truth and accuracy of the
representations and warranties of Parent contained herein.
7.8. Deliveries. At the Closing:
(a) The Parent shall have delivered the Merger Consideration;
(b) The Parent and Xxxxxxxx shall have executed and delivered
the Employment Agreement attached hereto as Exhibit B;
(c) The Parent shall have executed and delivered the
Registration Rights Agreement attached hereto as Exhibit C;
29
35
(d) The Parent and Sub shall have executed and delivered such
other documents and instruments necessary or appropriate to consummate
the transactions contemplated hereby;
(e) Counsel for the Parent, Jenkens & Xxxxxxxxx, P.C., shall
have delivered its opinion regarding the good standing of the Parent
and the Sub, the authorization and enforceability of this Agreement,
Parent's authorized and outstanding capital stock, and the due issuance
and delivery of the Parent Shares, all in the form reasonably
satisfactory to Hollywood and its counsel.
ARTICLE VIII.
CLOSING PROCEDURES
8.1. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place following the satisfaction (or waiver) of all
conditions precedent to Closing (the "Satisfaction of Conditions") on the later
of the dates set forth below:
(i) the fifth business day following the date on which
the Parent has obtained financing for the Merger that
is satisfactory to the Parent, provided that such
date is not later than October 15, 1999, or
(ii) the fifth business day following Satisfaction of
Conditions, or
(iii) such other date as the parties mutually agree upon
(as appropriate, the "Effective Date"), at 10:00 a.m. at such place as may be
mutually agreed upon by the parties. Simultaneously with and at the Closing,
Parent, Sub and Hollywood shall execute and file the Articles of Merger with the
Texas Secretary of State and the Certificate of Merger with the Delaware
Secretary of State, upon which filing the Effective Time shall occur and the
parties hereto shall make the deliveries contemplated by Sections 6.10 and 7.8.
All documents to be delivered at the Closing shall, (a) if such documents are
attached hereto as exhibits, be in substantially the form attached hereto,
except as agreed by the parties, and (b) if such documents are not attached as
exhibits, be in such form and contain such terms as the parties shall mutually
reasonably agree upon.
ARTICLE IX.
ACCESS TO INFORMATION AND CONFIDENTIALITY
The parties agree that the Confidentiality Agreements dated March 10,
1999 ("Confidentiality Agreements") shall remain in full force and effect.
30
36
ARTICLE X.
NON-SURVIVAL OF REPRESENTATIONS AND RELEASE OF LIABILITY
10.1. Non-Survival of Representations and Warranties by HMI and the
Shareholders. Except as provided in the following sentence, the representations
and warranties made in this Agreement by Hollywood and the Shareholders shall
terminate at the Closing and the Shareholders shall have no further liability
after Closing except for written statements made by the Shareholders that were
known to be untrue at the time that they were made. Notwithstanding the prior
sentence, (i) the representations and warranties contained in Section 2.7(a)
("S-Corp Reps") shall survive the Closing and (ii) the representations and
warranties contained in Section 2.24 with respect to, and only with respect to,
the properties currently owned or leased by HMI that are known as the Matagorda,
Red River, Channelview and Harahan properties ("Environmental Reps") shall
survive the Closing until the date that is one year after the Effective Date.
10.2. Release of Liability. Parent agrees that on and after the
Effective Date (the "Liability Termination Date") Shareholders shall have no
liability or responsibility whatsoever to any person, including without
limitation Parent or the Sub for, and Parent and Sub each unconditionally
releases Shareholders from, any liability or obligation of, or relating to, HMI
of whatever kind or nature, whether contingent or absolute, whether arising
prior to, on or after, and whether determined or indeterminable on, the
Liability Termination Date, and whether or not specifically referred to in this
Agreement, including without limitation, liabilities and obligations (x)
relating to this Agreement and the transactions contemplated hereby, (y) arising
out of or due to any breach of any representation or warranty made by
Shareholders or the breach of any covenant or warranty made by Shareholders or
the breach of any covenant, undertaking or other agreement of Shareholders
contained in this Agreement and (z) relating to any violation of any present or
future environmental law or regulation; provided that this Section shall not
constitute a release of the Shareholders from any liability for a breach of the
S-Corp Reps and Environmental Reps to the extent that they survive pursuant to
Section 10.1 (subject to any limitations in Sections 10.3 and 10.4).
10.3. Indemnification by Shareholders. Subsequent to the Effective
Time, the Shareholders, jointly and severally, shall indemnify and hold harmless
Parent, Sub and the Surviving Corporation (and their respective directors,
officers, employees, agents, affiliates and assigns) from and against all
losses, liabilities, damages, deficiencies, costs or expenses, including
interest and penalties imposed or assessed by any judicial or administrative
body and reasonable attorneys' fees, whether or not arising out of third-party
claims and including all amounts paid in investigation, defense or settlement of
the foregoing, including under CERCLA, ("Losses") based upon any breach of the
S-Corp Reps or Environmental Reps. No person shall have a right to recovery
against the Shareholders for any Losses other than through the exercise of the
indemnification rights set forth in this Section, which shall constitute the
sole and exclusive remedy after the Effective Date for any breach by Hollywood
or the Shareholders of any representation or warranty contained herein or in any
certificate or other instrument delivered pursuant hereto, other than a
fraudulent or intentional breach.
31
37
10.4. Limitations on Indemnification by Shareholders. The indemnity
pursuant to Section 10.3 is subject to the following limitations:
(a) Following the expiration of the period of the Environmental
Reps, the Parent may not bring any action or present any claim
for indemnification for a breach of the Environmental Reps
(including those relating to CERCLA); provided that Parent may
pursue any claim or action after the expiration of the period
if it has first given the Shareholders notice of such claim
prior to the expiration of such period.
(b) The Shareholders shall have no liability for any breach of the
Environmental Reps unless and until Losses therefor exceed
$1,000,000 in the aggregate, and then only to the extent of
such Losses in excess thereof.
(c) The maximum liability of the Shareholders for any breach of
the Environmental Reps shall be $10,000,000 in the aggregate.
10.5. Notice of Claims; Defense. Promptly after receipt of notice of
any third-party claim that could result in Losses for which a party may seek
indemnification hereunder (which for purposes of this Section 10.5 shall be
defined as "Parent"), Parent shall give written notice thereof to the
Shareholders, but such notification shall not be a condition to indemnification
hereunder except to the extent of actual prejudice to the Shareholders. The
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted. If within 30 days after receiving such notice the Shareholders give
written notice to the Parent stating that they intend to defend against such
claim, liability or expense at their own cost and expense, then defense of such
matter, including selection of counsel (subject to the consent of the Parent,
which consent shall not be unreasonably withheld), shall be by the Shareholders
and the Parent shall make no payment on such claim, liability or expense as long
as the Shareholders are conducting a good faith and diligent defense.
Notwithstanding the foregoing, the Parent shall at all times have the right to
fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the Shareholders and the Parent and representation of both parties
by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of separate counsel for the Parent shall be
paid by the Shareholders. Notwithstanding any participation of the Parent in
such defense, the Shareholders shall control any compromise or settlement of a
claim, which will only be entered into following reasonable, prior written
notice to the Parent for its consent, which consent shall not be unreasonably
withheld. If no such notice of intent to dispute and defend is given by the
Shareholders, or if such diligent good faith defense is not being or ceases to
be conducted, the Parent shall, at the expense of the Shareholders, undertake
the defense of such claim, liability or expense with counsel selected by the
Parent, and shall have the right to compromise or settle the same, which will
only be entered into following reasonable, prior written notice to the
Shareholders for their consent, which consent shall not be unreasonably
withheld. Each party shall make available all information and assistance that
32
38
the other party may reasonably request and shall cooperate with the other party
in such defense.
10.6. Notice of Governmental Actions; Defense. Promptly after receipt
of notice of any governmental investigation or claim that could result in Losses
based on Environmental Reps for which Parent may seek indemnification hereunder,
Parent shall give written notice thereof to the Shareholders, but such
notification shall not be a condition to indemnification hereunder except to the
extent of actual prejudice to the Shareholders. The notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense. The negotiation and defense of such matter, including
selection of counsel (subject to the consent of the Shareholders, which consent
shall not be unreasonably withheld), shall be by the Parent, and the
Shareholders shall make no payment on any claim, liability or expense until such
matter is concluded and Losses, if any, are determined. Notwithstanding the
foregoing, the Shareholders shall at all times have the right to fully
participate in such matter at their own expense directly or through counsel.
Notwithstanding any participation of the Shareholders in such matter, the Parent
shall control any compromise or settlement, which will only be entered into
following reasonable, prior written notice to the Shareholders for their
consent, which consent shall not be unreasonably withheld. If Parent fails to
act or resolve such matter, then the Shareholders shall, at their own expense,
undertake the resolution of such matter with counsel selected by the
Shareholders, and shall have the right to compromise or settle the same, which
will only be entered into following reasonable, prior written notice to the
Parent for its consent, which consent shall not be unreasonably withheld. Each
party shall make available all information and assistance that the other party
may reasonably request and shall cooperate with the other party in such defense.
10.7. Performance After Effective Date. This Article X shall not limit
the additional agreements of the parties hereto referred to in Section 1.5 or
any Section in Article V which by its terms explicitly contemplates performance
after the Effective Date, and the liability of Parent or Sub to Shareholders for
its representations, warranties and covenants contained herein shall survive the
Effective Date.
10.8. Disputes. Any disputes under this Article X between the parties
hereto shall be settled by arbitration in Houston, Texas under the auspices of,
and in accordance with the rules of the American Arbitration Association by an
arbitrator who is mutually agreeable to the parties hereto, or, if the parties
cannot agree on the selection of the arbitrator, then before three arbitrators,
one of which shall be appointed by Parent, one of which shall be appointed by
the Shareholders acting together, and the third of which shall be chosen by the
American Arbitration Association (such arbitrator or arbitrators hereinafter
referred to as the "Arbitrator"). The decision in such arbitration shall be
final and binding on the parties, and judgment upon such decision may be entered
in any court having jurisdiction thereof. The parties hereby agree that the
Arbitrator shall be empowered to enter an equitable decree mandating specific
enforcement of the terms of this Article X. The Parent and the Shareholders
(take together) shall each pay one-half of all expenses of the Arbitrator
incurred in any arbitration hereunder, provided, however that a party shall bear
all expenses of the Arbitrator and all of the legal fees and out-of-pocket
expenses of the other party if the Arbitrator determines that the claim or
position of such party was frivolous.
33
39
ARTICLE
MISCELLANEOUS
11.1. Memorandum; Disclaimer of Projections. The Shareholders and
Hollywood make no representation or warranty to Parent or Sub except as
specifically made in this Agreement. In particular, the Shareholders make no
representation or warranty to Parent or Sub with respect to (a) the information
set forth in the Confidential Information Memorandum dated March 1999
distributed by Banc of America Securities LLC on behalf of Hollywood in
connection with the transactions contemplated hereby or (b) any financial
projection or forecast relating to HMI. With respect to any such projection or
forecast delivered to Parent or Sub, Parent and Sub each acknowledges that (i)
there are uncertainties inherent in attempting to make such projections and
forecasts, (ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
such projections and forecasts so furnished to it and (iv) it shall have no
claim against the Shareholders, Hollywood or Banc of America Securities LLC with
respect thereto.
11.2. Knowledge. When used in this Agreement, the phrase "to the
knowledge of" or variants thereof shall mean the actual knowledge of Xxxxxxxx,
Xxxxx Xxxxxxxx and Xxxxxx X. Xxxx, or any of them, as of the applicable date
after reasonable investigation or inquiry.
11.3. Expenses. Except as otherwise specifically provided in this
Agreement, Hollywood shall bear its and the Shareholders' expenses incurred
incident to the negotiation and preparation of this Agreement and related
documents and the Merger contemplated hereunder. Parent shall bear its expenses
in connection therewith.
11.4. Parties Bound. Except to the extent otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, representatives, administrators,
guardians, successors and assigns; and no other person shall have any right,
benefit or obligation hereunder.
11.5. Notices. Any notice, request, instruction or other document to be
given hereunder by either party to the other shall be in writing, and delivered
personally or mailed by certified or registered mail, postage prepaid, at the
following addresses (or at such other address for a party or shall be specified
by like notice):
If to Parent or Sub, addressed to:
Xxxxx Corporation
0000 Xx. Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: X.X. Xxxx, President
34
40
With a copy (which shall not constitute notice) to:
Jenkens & Xxxxxxxxx, a Professional Corporation
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
If to the Shareholders, addressed to:
C. Xxxxxx Xxxxxxxx
0000 Xxxxxxxxx
Xxxxxxx, XX 00000
Xxxxxx Xxxxxxxx 1999 Retained Annuity Trust
c/o Xxxxxx X. Xxxx and Xxxx X. Xxxxxx, Xx., Co-Trustees
00 Xxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Xxxxxx Xxxxxxxx GST Trusts
c/o Xxxxxx X. Xxxx and Xxxx X. Xxxxxx, Xx., Co-Trustees
00 Xxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
If to Hollywood, addressed to:
00 Xxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Attention: C. Xxxxxx Xxxxxxxx, President
With a copy (which shall not constitute notice) to:
Mayor, Day, Xxxxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Xx.
11.6. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED,
AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, EXCEPT WITH RESPECT TO
MATTERS OF LAW CONCERNING THE INTERNAL AFFAIRS OF ANY CORPORATE ENTITY WHICH IS
A PARTY TO OR THE SUBJECT OF THIS AGREEMENT, AND AS TO THOSE MATTERS THE LAW OF
THE STATE OF INCORPORATION OR ORGANIZATION OF THE RESPECTIVE ENTITY SHALL
GOVERN.
11.7. Jurisdiction and Venue. The parties hereto agree that any suit,
action or proceeding arising out of or relating to this Agreement shall be
instituted only in the United States District Court for the Southern District of
Texas or in a Texas state court located in
35
41
Xxxxxx County. Each party waives any objection it may have now or hereafter to
the laying of the venue of any such suit, action or proceeding, and irrevocably
submits to the jurisdiction of any such court in any such suit, action or
proceeding.
11.8. Disclosure Schedule. Certain agreements and other matters are
listed in the Disclosure Schedule for informational purposes only,
notwithstanding the fact that, because they do not rise above applicable
materiality thresholds or otherwise, they are not required to be listed therein
by the terms of this Agreement. In no event shall the listing of such agreements
or other matters in the Disclosure Schedule be deemed or interpreted to broaden
or otherwise amplify the Shareholders' or Hollywood's representations and
warranties, covenants or agreements contained in this Agreement, and nothing in
the Disclosure Schedule shall influence the construction, interpretation or
survival of any of the representations and warranties contained in this
Agreement. The headings contained in the Disclosure Schedule are for convenience
of reference only and shall not be deemed to modify or influence the
interpretation of the information contained in the Disclosure Schedule or this
Agreement. Furthermore, the disclosure of a particular item of information in
the Disclosure Schedule shall not be taken as an admission by the Shareholders
that such disclosure is required to be made under the terms of any of such
representations and warranties. All disclosures in the Disclosure Schedule made
against representations and warranties in this Agreement are made generally, and
none of such disclosures relates to any particular Section. Where any
information set forth in the Disclosure Schedule comprises expressions of
opinions, no warranty is given as to their accuracy, but unless otherwise stated
therein, such opinions are bona fide held by HMI or, to the knowledge of HMI, by
such other person to whom they are attributed. Terms defined in this Agreement
and not otherwise defined in the Disclosure Schedule are used therein as defined
in this Agreement.
11.9. Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, including the Disclosure
Schedule (including the disclosure materials and cover letter with respect
thereto delivered pursuant to Section 2.12), constitutes the entire Agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties except for the
Confidentiality Agreements and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as set forth specifically herein or contemplated hereby. No supplement,
modification or waiver of this Agreement shall be binding unless it shall be
specifically designated to be a supplement, modification or waiver of this
Agreement and shall be executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
11.10. Termination. Prior to the Closing, this Agreement may be
terminated by the mutual consent of Parent (for itself and on behalf of Sub) and
the Shareholders, or upon the following conditions:
36
42
(i) by the Shareholders or Parent because of the institution by
state, local, or federal governmental authorities or by any
other person of material litigation or proceedings against any
of the parties seeking (A) to restrain, enjoin or otherwise
limit the ability of the parties to enter into or consummate
the transaction or, (B) to restrict HMI's ability to conduct
its business as presently conducted;
(ii) by the Shareholders or Parent if Closing has not been
scheduled in accordance with Section 8.1 by October 15, 1999
and such Closing does not thereafter take place as scheduled,
unless the sole reason for the Closing not being scheduled is
because any waiting period (and any extension thereof)
applicable to the consummation of the transactions
contemplated hereby under the HSR Act shall have not have
expired or been terminated, in which case the Shareholders or
the Parent may not terminate this Agreement pursuant to this
clause (iv) until after December 15, 1999.
11.11. Liability for Termination. The parties hereto agree that the
termination of this Agreement shall constitute the sole and exclusive remedy of
each party in the event that the other party breaches any term or condition
hereof or fails to meet the conditions precedent hereto; provided however, (i)
if all of the conditions of Closing set forth in Article VI are satisfied and
Parent and Sub fail to consummate the transactions contemplated by this
Agreement in accordance with Section 8.1, Parent shall pay Hollywood the cash
sum of $8,000,000 as liquidated damages to compensate it for the breach of this
Agreement by the Parent or Sub, and (ii) the foregoing remedies shall not
preclude the pursuit of additional remedies by any party for a willful breach of
this Agreement by another party hereto that occasions the termination hereof.
11.12. Assignment. The Agreement may not be assigned by operation of
law or otherwise.
11.13. Attorneys' Fees. If any action or proceeding is brought by any
party with respect to this Agreement or the transactions referred to herein, or
with respect to the interpretation, enforcement or breach hereof, the prevailing
party in such action shall be entitled to an award of all reasonable costs of
litigation, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding.
11.14. Further Assurances. From time to time hereafter and without
further consideration, the Shareholders and Hollywood shall execute and deliver
such additional or further instruments of conveyance, assignment and transfer
and take such actions as Parent may reasonably request in order to more
effectively consummate the Merger as shall be reasonably necessary or
appropriate in connection with the carrying out of the obligations of the
Shareholders and Hollywood hereunder or the purposes of this Agreement. From
time to time hereafter and without further consideration, Parent and Sub shall
execute and deliver such additional or further instruments of assumption and
take such actions as the Shareholders may
37
43
reasonably request or as shall be reasonably necessary or appropriate in
connection with the carrying out of Parent's or the Sub's obligations hereunder,
by virtue of the Merger, or to effectuate the purposes of this Agreement.
11.15. Announcements and Press Releases. The initial public
announcement concerning this Agreement shall be approved by the Shareholders,
Hollywood and the Parent. Any further press releases or any other public
announcements concerning this Agreement or the transactions contemplated hereby
shall be approved by the Shareholders, Hollywood and the Parent; provided,
however, that if Parent reasonably believes that it has a legal obligation to
make a press release, it will consult with Hollywood and the Shareholders to the
extent reasonably possible, but it may make a release without such approval.
11.16. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.17. Headings. The headings of the several articles and sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
11.18. Severability. Each article, section, subsection and lesser
section of this Agreement constitutes a separate and distinct undertaking,
covenant or provision hereof. In the event that any provision of this Agreement
shall finally be determined to be unlawful, such provision shall be deemed
severed from this Agreement, but every other provision of this Agreement shall
remain in full force and effect.
[Remainder of Page Intentionally Left Blank]
38
44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
XXXXX CORPORATION
By: /s/ X.X. XXXX
-----------------------------------
X.X. Xxxx, President
XXXXX INLAND MARINE, INC.
By: /s/ X.X. XXXX
-----------------------------------
X.X. Xxxx, President
HOLLYWOOD MARINE, INC.
By: /s/ XXXXXXX XXXXXX XXXXXXXX
-----------------------------------
C. Xxxxxx Xxxxxxxx, President
/s/ XXXXXXX XXXXXX XXXXXXXX
-------------------------------------------------
C. Xxxxxx Xxxxxxxx
/s/ XXXXXX X. XXXX
-------------------------------------------------
Xxxxxx X. Xxxx, Co-Trustee for the Xxxxxx
Xxxxxxxx 1999 Retained Annuity Trust
/s/ XXXX X. XXXXXX, XX.
-------------------------------------------------
Xxxx X. Xxxxxx, Xx., Co-Trustee for the Xxxxxx
Xxxxxxxx 1999 Retained Annuity Trust
/s/ XXXXXX X. XXXX
-------------------------------------------------
Xxxxxx X. Xxxx, Co-Trustee for the Xxxxxx
Xxxxxxxx GST Trusts
/s/ XXXX X. XXXXXX
-------------------------------------------------
Xxxx X. Xxxxxx, Xx., Co-Trustee for the Xxxxxx
Xxxxxxxx GST Trusts
39
