Exhibit 2.06
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AGREEMENT AND PLAN OF MERGER
AMONG
XXXXX NATURALS / 4HEALTH, INC.
HEALTH & VITAMIN EXPRESS, INC.
XXXXX XXXXXX
XXXXXXX X. XXXXX
AND
XXXXXX X. XXXXXX
FEBRUARY 15, 1999
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TABLE OF CONTENTS
ARTICLE I
MERGER
ARTICLE I
THE MERGER ................................................................ -3-
SECTION 1.01. The Merger ........................................... -3-
SECTION 1.02. Closing; Closing Date; Effective Time ................ -3-
SECTION 1.03. Effect the Merger .................................... -3-
SECTION 1.04. Articles of Incorporation; Bylaws .................... -4-
SECTION 1.05. Directors and Officers ............................... -4-
ARTICLE II
CONVERSION OF SECURITIES; CONSIDERATION;
REPURCHASE OPTION ......................................................... -4-
SECTION 2.01. Merger Consideration; Conversion and
Cancellation of Securities ........................... -4-
SECTION 2.02. Merger Consideration ................................. -5-
SECTION 2.03. Right of Repurchase .................................. -6-
SECTION 2.04. Exchange and Surrender of Certificates ............... -7-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 3.01. Organization and Qualification; Subsidiaries ......... -8-
SECTION 3.02. Articles of Incorporation and Bylaws ................. -8-
SECTION 3.03. Capitalization ....................................... -9-
SECTION 3.04. Authority ............................................ -10-
SECTION 3.05. No Conflict; Required Filings and Consents ........... -10-
SECTION 3.06. Permits; Compliance .................................. -11-
SECTION 3.07. Financial Statements; Financial Results .............. -11-
SECTION 3.08. Absence of Certain Changes or Events ................. -12-
SECTION 3.09. Absence of Litigation ................................ -13-
SECTION 3.10. Employee Benefit Plans; Labor Matters ................ -13-
SECTION 3.11. Taxes ................................................ -14-
SECTION 3.12. Tax and Accounting Matters ........................... -18-
SECTION 3.13. Certain Business Practices ........................... -00-
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XXXXXXX 3.14. Environmental Matters ................................ -19-
SECTION 3.15. Vote Required ........................................ -22-
SECTION 3.16. Brokers .............................................. -22-
SECTION 3.17. Insurance ............................................ -22-
SECTION 3.18. Properties ........................................... -22-
SECTION 3.19. Certain Contracts and Restrictions ................... -22-
SECTION 3.20. Futures Trading and Fixed Price Exposure ............. -23-
SECTION 3.21. Information Supplied ................................. -23-
SECTION 3.22. Securities Laws Representations ...................... -23-
SECTION 3.23. Intellectual Property ................................ -24-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IN ...................................... -25-
SECTION 4.01. Organization and Qualifications; Subsidiaries ........ -25-
SECTION 4.02. Articles of Incorporation and Bylaws ................. -26-
SECTION 4.03. Capitalization ....................................... -26-
SECTION 4.04. Authority ............................................ -26-
SECTION 4.05. No Conflict: Required Filings and Consents ........... -27-
SECTION 4.06. Permits; Compliance .................................. -27-
SECTION 4.07. Financial Statements ................................. -27-
SECTION 4.08. Absence of Certain Changes or Events ................. -28-
SECTION 4.09. Absence of Litigation ................................ -29-
SECTION 4.10. Taxes ................................................ -29-
SECTION 4.11. Tax Matters .......................................... -30-
SECTION 4.12. NSM Listing .......................................... -31-
SECTION 4.13. Certain Business Practices ........................... -31-
SECTION 4.14. Environmental Matters ................................ -31-
SECTION 4.15. Brokers .............................................. -32-
SECTION 4.16. Properties ........................................... -32-
SECTION 4.17. Certain Contracts and Restrictions ................... -32-
SECTION 4.18. Information Supplied ................................. -33-
SECTION 4.19. Exempt Transaction ................................... -33-
SECTION 4.20. No Violation of Securities Laws ...................... -33-
SECTION 4.21. No Investigation ..................................... -33-
SECTION 4.22. No Convictions ....................................... -33-
SECTION 4.23. No Restraint ......................................... -33-
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ARTICLE V
COVENANTS................................................................... 34
SECTION 5.01. Affirmative Covenants of HVE......................... 34
SECTION 5.02. Negative Covenants of HVE............................ 34
SECTION 5.03. Covenants and Consent of the Selling Shareholders.... 38
SECTION 5.04. Affirmative Covenants of IN.......................... 38
SECTION 5.05. Access and Information............................... 39
ARTICLE VI
ADDITIONAL AGREEMENTS....................................................... 40
SECTION 6.01. Stockholder Approval................................. 40
SECTION 6.02. Registration Statement; Information.................. 40
SECTION 6.03. Appropriate Action; Consents; filings;
Indemnification ................................... 42
SECTION 6.04. Tax and Accounting Treatment......................... 44
SECTION 6.05. Public Announcements................................. 44
SECTION 6.06. No Interference...................................... 40
SECTION 6.07. Form D Filing........................................ 41
ARTICLE VII
CLOSING CONDITIONS.......................................................... 44
SECTION 7.01. Conditions to Obligations of Each Party Under
This Agreement..................................... 44
SECTION 7.02. Additional conditions to Obligations of IN........... 45
SECTION 7.03. Additional Conditions to Obligations of Sellers...... 46
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER........................................... 47
SECTION 8.01. Termination.......................................... 47
SECTION 8.02. Effect of Termination................................ 48
SECTION 8.03. Amendment............................................ 48
SECTION 8.04. Waiver............................................... 49
SECTION 8.05. Fees, Expenses and Other Payments.................... 49
ARTICLE IX
INDEMNIFICATION............................................................. 50
SECTION 9.02. Indemnification of IN................................ 50
SECTION 9.04. Notice to Indemnifying Party......................... 51
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SECTION 9.05. Compromise of Claims................................. 52
SECTION 9.06. Right of Set-Off..................................... 53
ARTICLE X
GENERAL PROVISIONS.......................................................... 53
SECTION 10.01. Notices.............................................. 53
SECTION 10.02. Certain Definitions.................................. 54
SECTION 10.03. Headings............................................. 55
SECTION 10.04. Severability......................................... 55
SECTION 10.05. Entire Agreement..................................... 55
SECTION 10.06. Assignment........................................... 55
SECTION 10.07. Parties in Interest.................................. 55
SECTION 10.08. Failure or Indulgence Not Waiver; Remedies
Cumulative ........................................ 55
SECTION 10.09. Governing Law........................................ 55
SECTION 10.10. Counterparts......................................... 56
SCHEDULES
Schedule 1.05 Directors and Officers of Surviving Corporation
Schedule 2.02(a) Allocation of Consideration
SELLERS DISCLOSURE SCHEDULE
Schedule 3.03(a) Reservation of HVE Common Stock
Schedule 3.03(b) Options, Warrants, etc.
Schedule 3.03(b)(iii) Investments
Schedule 3.03(b)(iv) Revenue Sharing Agreements
Schedule 3.03(c) Outstanding Stock Awards
Schedule 3.05 Conflicts
Schedule 3.06 Notifications from Governmental Entities
Schedule 3.07 Contingent Liabilities
Schedule 3.08 Certain Changes
Schedule 3.09 Litigation
Schedule 3.10(d) Severance Agreements
Schedule 3.11(a) Tax Exceptions
Schedule 3.11(b) Tax Proceedings
Schedule 3.11(c) Tax Elections and Consents, etc.
Schedule 3.14 Environmental Matters
Schedule 3.16 Brokers
Schedule 3.17 Insurance
Schedule 3.18 Properties
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, effective as of February 15, 1999
(this "Agreement"), by and among Xxxxx Naturals/4Health, Inc., a Utah
corporation (together with HZ (as defined below), "IN"), Health & Vitamin
Express, Inc., a California corporation ("HVE") and Mr. Xxxxx Xxxxxx
("Xxxxxx"), Xx. Xxxxxxx X. Xxxxx ("Xxxxx") and Xx. Xxxxxx X. Xxxxxx ("Xxxxxx",
and together with Xxxxxx and Xxxxx, the "Selling Shareholders"; the Selling
Shareholders and HVE are hereinafter collectively referred to as the
"Sellers").
RECITALS
1) HVE, upon the terms and subject to the conditions of this Agreement
and in accordance with the General Corporation Law of the State of
California ("California Law"), will merge (the "Merger"), with and into
XxxxxxXxxx.xxx, a California corporation and wholly-owned subsidiary of
IN ("HZ") and pursuant thereto, the shares (the "HVE Shares") of common
stock, no par value per share of HVE ("HVE Common Stock"), issued and
outstanding immediately prior to the Effective Time (as defined herein)
of the Merger, not owned directly or indirectly by IN or HVE, will be
converted at the Effective Time into the right to receive the Merger
Consideration (as defined below).
2) For federal income tax purposes, it is intended that the Merger
qualify as a tax-free reorganization under the provisions of Section
368(a) of the United States International Revenue Code on 1986 as amended
(the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confirmed, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with California Law, at the
Effective Time, HVE shall be merged with and into HZ (each a "Constituent
Corporation"). As a result of the Merger, the separate corporate existence of
HVE shall cease and HZ shall continue as the surviving corporation of the
Merger (the "Surviving Corporation"). Certain terms used in this Agreement are
defined in Section 10.02 hereof.
SECTION 1.02. CLOSING; CLOSING DATE; EFFECTIVE TIME. Unless this
Agreement shall have been terminated pursuant to Section 8.01, and subject to
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the consummation of the Merger and the closing
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of the transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of IN at 00000 Xxxx Xxxxxxxxx Xxxxxxxxx, Xxxxxx Xxxx, XX
00000 as soon as practicable (but in any event within five business days)
after the satisfaction or, if permissible, waiver of the conditions set forth
in Article VII, or at such other date, time and place as HVE and IN may agree.
The date on which the Closing takes place is referred to herein as the
"Closing Date". As promptly as practicable on the Closing Date, the parties
hereto shall cause the Merger to be consummated by executing and filing
Agreement of Merger, in substantially the form of Exhibit A attached hereto,
with the Secretary of State of the State of California (the date and time of
such filing, or such later date or time agreed upon by HVE and IN and set
forth therein, being the "Effective Time"). For all tax purposes, the Closing
shall be effective at the end of the day on the Closing Date.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, to the full
extent provided under California Law, the Surviving Corporation shall possess
all the rights, privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and any and all rights,
privileges, powers and franchises of each of the Constituent Corporations,
and all property, real, personal and mixed, and all debts due to either of
the Constituent Corporations on whatever account, as well as stock
subscriptions and all other things in action belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation; and
all property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth
attach to the Surviving Corporation and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
SECTION 1.04. ARTICLES OF INCORPORATION: BYLAWS. At the Effective Time,
the articles of incorporation of HZ shall be the articles of incorporation of
the Surviving Corporation and thereafter shall continue to be its articles of
incorporation until amended as provided therein and pursuant to California Law.
The bylaws of HZ shall be the bylaws of the Surviving Corporation and
thereafter shall continue to be its bylaws until amended as provided therein
and in the articles of incorporation and pursuant to California Law.
SECTION 1.05. DIRECTORS AND OFFICERS. Immediately after the Effective
Time, the officers and directors of the Surviving Corporation shall be the
individuals identified as such in Schedule 1.05, each of such directors and
officers to hold office in accordance with the articles of incorporation and
bylaws of the Surviving Corporation, in each case until his successor is duly
elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES; CONSIDERATION; REPURCHASE OPTION
SECTION 2.01. MERGER CONSIDERATION: CONVERSION AND CANCELLATION OF
SEECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of HVE, HZ or their respective stockholders:
(a) Subject to the other provisions of this Article II, each share
of HVE Common Stock issued and outstanding immediately prior to the Effective
Time (excluding any HVE Common Stock described in Section 2.01(c) of this
Agreement) shall be converted into the right to receive the Merger
Consideration.
(b) Notwithstanding any provision of this Agreement to the
contrary, each share of HVE Common Stock held in the treasury of HVE, and
each share of HVE Common Stock owned by IN or any direct or indirect wholly
owned subsidiary of IN immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof and no payment shall
be made with respect thereto.
(c) All shares of HVE Common Stock shall cease to be outstanding
and shall automatically be canceled and retired, and each certificate
previously evidencing HVE Common Stock, immediately prior to the Effective
Time (other than HVE Common Stock described in Section 2.01(b) of this
Agreement) (the "Converted Shares" or "Converted Share Certificates," as the
case may be) shall thereafter represent the right to receive, subject to
Section 2.02(d) of this Agreement, (the Merger Consideration). The holders of
Converted Share Certificates shall cease to have any rights with respect to
such Converted Shares except as otherwise provided herein or by law.
(d) All shares of IN Common Stock issued to holders of HVE Common
Stock in the Merger shall be issued in a transaction intended to qualify for
the exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act") and Regulation D promulgated
thereunder ("Regulation D") and shall be deemed "restricted securities" as
defined in Rule 144 promulgated under the Securities Act.
SECTION 2.02. MERGER CONSIDERATION.
(a) In consideration for the HVE Shares:
(i) at the Closing, IN shall issue to the Selling
Shareholders and aggregate of 363,636 shares (the "Initial HVE Shares") of IN
Common Stock, to be allocated among the Selling Shareholders as set forth in
Schedule 2.02(a) hereto;
(ii) for each $1,000,000.00 of Net Revenues (as defined below)
from
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Internet sales received by the Internet Division (as defined below) during
any period of twelve consecutive months during the first forty-two
consecutive months after the Closing Date, IN shall issue up to the Selling
Shareholders 90,909 shares (the "Revenues Earn-Out Shares"), of IN Common
Stock up to a maximum aggregate amount of 272,727 shares of IN Common Stock,
such shares to be allocated among the Selling Shareholders as set forth on
Schedule 2.02(a) hereto; as used herein, the "Internet Division" shall mean
the division of IN making sales of products out of IN or Internet Division
Inventory on-line or in e-commerce, and "Net Revenues" shall mean the gross
revenues (including, without limitation, advertising revenues) of the
Internet Division less returns; and
(iii) if the Division Pre-Tax Profits (as defined below) for
any calendar year after the Closing Date during the first seven (7) years
after the Closing Date shall equal or exceed $2,000,000.00, IN shall, once
and only once, issue to the Selling Shareholders an aggregate of 90,909
shares (the "Profits Earn-Out Shares") of IN Common Stock, to be allocated
among the Selling Shareholders as set forth on Schedule 2.02(a) hereto;
as used herein, "Division Pre-Tax Profits" shall mean the net income of the
Internet Division, including only those expenses properly attributable to the
activities of the Internet Division, as computed without deduction for any
federal, state or other income taxes, as determined by IN's accountants in
accordance with GAAP (as defined below).
The Initial HVE Shares, the Revenues Earn-Out Shares and the Profits
Earn-Out Shares are collectively referred to herein as the "Merger
Consideration."
(b) Notwithstanding the provisions of subsection (a) of Section
2.02, if IN does not invest or contribute to the Internet Division at least
(A) $4,000,000.00 during the eighteen month period following the Closing Date
and (B) $10,000,000.00 (inclusive of the $4,000,000.00 provided in clause (A)
above) during the thirty six months period following the Closing Date(each, a
"Funding Failure"), then the Selling Shareholders shall automatically be
entitled to receive at the time of such Funding Failure the maximum allowable
number of Revenues Earn-Out Shares and the Profits Earn-Out Shares without
regard to the revenue or profits of the Internet Division.
(c) Any revenue and income of IN attributable to on-line or
e-commerce sales generated as a result of the purchase by IN of any mail
direct to consumer catalog order wholesale vitamin or health related
companies after the Closing and the conversion of telephone orders from such
companies to on-line or e-commerce orders, shall be included in the
calculation of Net Revenues and Division Pre-Tax Profits, respectively.
(d) In the event that IN acquires any company with on-line and
e-commerce sales, IN shall provide the Internet Division with access to the
customer database of such company.
(e) In the event that a third-party (i) acquires all or
substantially all of the assets of IN or (ii) acquires more than 50% of the
issued and outstanding capital stock of IN, or that IN
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is merged or consoliated with a third-party and the holders of IN Common
Stock immediately prior to such merger or consolidation do not own more than
50% of the capital stock of the surviving corporation of such merger or
consolidation, then the Selling Shareholders shall automatically be entitled
to receive the maximum allowable number of Revenues Earn-Out Shares and
Profits Earn-Out Shares without regard to the revenues or profits of the
Internet Division.
SECTION 2.03. RIGHT OF REPURCHASE.
(a) Subject to subsections (b), (c), (d), (e) and (f) of this
Section 2.03, IN shall have the right (the "Repurchase Option"), in its sole
discretion, to repurchase from the Selling Shareholders pro-rata all or any
portion, up to 65%, of the Merger Consideration that has been issued to the
Selling Shareholders, for a period of one (1) year following the date of
issuance (the "Repurchase Period"), at a purchase price of $13.75 per share
(the "Repurchase Price"); PROVIDED, HOWEVER, that for the purpose of
determining the termination of the Repurchase Period with respect to the
Initial HVE Shares, the Initial HVE Shares shall be deemed to have been
issued contemporaneously with the issuance of an equivalent number of
Revenues Earn-Out Shares and the Profits Earn-Out Shares. For example, if the
first 90,909 Revenues Earn-Out shares are issued to the Selling Shareholders
on August 1, 2000 and the second 90,909 Revenues Earn-Out Shares are issued
to the Selling Shareholders on November 15, 2001 and no Profits Earn-Out
Shares have been issued prior to November 15, 2001, then the Repurchase
Period for the first 90,909 Initial HVE Shares will terminate on July 31,
2001 and the Repurchase Period for the second 90,909 Initial HVE Shares will
terminate on November 14, 2002. In all cases, the Repurchase Period with
respect to the Initial HVE Shares shall begin on the Closing Date. As used in
this Agreement, pro-rata with respect to the Selling shareholders shall mean
in proportion to their respective percentage allocations of the Merger
Consideration as set forth in Schedule 2.02(a). In the event that no Profits
Earn-Out Shares and/or no Revenues Earn-Out Shares are issued pursuant to
this Agreement, the Repurchase Period with respect to Xxxxxx'x portion of the
Initial HVE Shares shall expire thirty-six months following the Closing Date.
(b) Notwithstanding the provisions of subsection (a) of this Section
2.03 and subject to the provisions of subsection (c) of this Section 2.03, (i)
if IN exercisers the Repurchase Option during the first twelve months
following the Closing Date, the Repurchase Option shall be applied pro-rata
among the Selling Shareholders and (ii) at any time that IN shall exercise
the Repurchase Option after twelve months from the Closing Date, the
Repurchase Option shall be exercisable as to Xxxxxx only with respect up to a
maximum of 73% of his Merger Consideration.
(c) Notwithstanding the provisions of subsection (a) of this Section
2.03, the maximum number of Initial HVE Shares subject to the Repurchase
Option shall be 213,636 shares and the other 150,000 Initial HVE Shares shall
not be subject to the Repurchase Option and such 150,000 Initial HVE Shares
which are not subject to the Repurchase Option and shall be allocated among
the Selling Shareholders in the same proportions as are set forth in Schedule
2.02(a).
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(d) Notwithstanding the provisions of subsection (a) of this Section
2.03, the Repurchase Period with respect to the Initial HVE Shares, the
Revenues Earn-Out Shares and the Profits Earn-Out Shares allocated to Xxxxx or
Xxxxxx shall, in all cases, expire one year from the Closing Date
notwithstanding the fact that some or all of the Revenues Earn-Out Shares or
the Profits Earn-Out Shares may not have been issued by such date.
(e) If on date that IN shall exercise the Repurchase Option, the
closing bid price of IN Common Stock on a national securities exchange or the
NASDAQ National Market System (the "Market Price") shall be greater than
$20.00 per share, then IN shall pay to the Selling Shareholders pro-rata an
amount (the "Market Profit") equal to fifty percent (50%) of the product of
(x) the difference of the Market Price less $20.00 multiplied by (y) the
number of shares repurchased by IN pursuant to the Repurchase Option.
(f) Notwithstanding the provisions of subsection (a) of this
Section 2.03, in the event that the Selling Shareholders receive their
Revenues Earn-Out Shares and Profits Earn-Out Shares because of a Funding
Failure and the Net Revenues and Division Pre-Tax Profits thresholds set forth
in clauses (ii) and (iii) of Section 2.02 have not been met, then the
Repurchase Price with respect to such shares and the equivalent amount of
Initial HVE Shares shall be reduced from $13.75 per share to $9.63 per share.
(g) At any time that IN shall be entitled to exercise the
Repurchase Option, it may do so by sending a written notice (the "Repurchase
Notice") to each Selling Shareholder setting forth (i) the number of shares
with respect to which IN is exercising the Repurchase Option, (ii) the
purchase price therefor, (iii) the closing date on which the Selling
Shareholders shall deliver share certificates evidencing the indicated number
of shares together with stock powers duly executed in blank and IN shall
deliver the purchase price and (iv) if applicable, the amount of Market Profit
payable by IN to such Selling Shareholder at the closing of the repurchase.
The closing date for any exercise of the Repurchase Option shall be no more
than five business days and no less than three business days after IN shall
have sent the Repurchase Notice to the Selling Shareholders; PROVIDED that
notwithstanding anything to the contrary contained herein, in no event shall
IN be entitled, to designate a closing date for the exercise of the Repurchase
Option with respect to any Merger Consideration that is after the expiration
of the related Repurchase Period.
SECTION 2.04. EXCHANGE AND SURRENDER OF CERTIFICATES.
(a) At the Closing, IN shall deliver to each registered holder of a
Converted Share Certificate against delivery by such holder of all of his
Converted Share Certificates representing issued and outstanding shares of HVE
Common Stock a certificate representing that number of whole shares of IN
Common Stock which such holder has the right to receive in exchange for the
Converted Share Certificates surrendered pursuant to the provisions of this
Article II (after taking into account all Converted Shares then held by such
holder), and the
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Converted Share Certificates so surrendered shall forthwith be canceled. The
certificate representing the IN Common Stock shall bear a restrictive legend
in the form set forth in Exhibit B. Until surrendered as contemplated by this
Section 2.04, each Converted Share Certificate shall be deemed at any time
after the Effective Time to represent only the IN Common Stock into which the
Converted Shares represented by such Converted Share Certificate have been
converted as provided in this Article II.
(b) After the Effective Time, there shall be no further
registration of transfers of HVE Common Stock. If, after the Effective Time,
certificates representing shares of HVE Common Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration provided for in this Agreement in accordance with the procedures
set forth herein.
(c) Any portion of the Merger Consideration that remains unclaimed
by the holders of shares of HVE Common Stock, one year after the Effective
Time shall be returned to the Surviving Corporation, upon demand, and any
such holder who has not exchanged his shares of HVE Common Stock in
accordance with this Section 2.04 prior to that time shall thereafter look
only to the Surviving Corporation for payment of the Merger Consideration in
respect of his shares of HVE Common Stock. Notwithstanding the foregoing, the
Surviving Corporation shall not be liable to any holder of Converted Shares
for any amount paid to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends, interest or other distributions with respect to
shares of IN Common Stock shall be paid to the holder of any unsurrendered
Converted Share Certificates unless and until such Converted Share
Certificates are surrendered as provided in this Section 2.04. Upon such
surrender, IN shall pay, without interest, all dividends and other
distributions payable in respect of such shares of IN Common Stock on a date
subsequent to, and in respect of a record date after, the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers (other than Xxxxxx, whose representations hereunder
are limited to the last sentence of Section 3.03(a)), individually with
respect to the representations with respect to the Selling Shareholders set
forth in Sections 3.03(c), 3.04, 3.05 and 3.22, and jointly and severally with
respect to all other representations, hereby represent and warrant to IN that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION. HVE has no subsidiaries.
HVE is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted and is duly qualified
and in good standing to do business in each jurisdiction in which the nature
of the
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business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so duly
qualified and in good standing would not have an HVE Material Adverse Effect.
The term "HVE Material Adverse Effect" as used in this Agreement shall mean
any change or effect that, individually or when taken together with all other
such changes or effects, would be reasonably likely to be materially adverse
to the assets, liabilities, financial condition, results of operations or
current or future business of HVE.
SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS. HVE has heretofore
furnished to IN complete and correct copies of the articles of incorporation
and the bylaws or the equivalent organizational documents as presently in
effect of HVE. HVE is not in violation of any of the provisions of its
articles or any material provision of its bylaws (or equivalent organizational
documents).
SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of HVE consists of 100,000,000
shares of HVE Common Stock, of which 10,250,000 shares are issued
and outstanding and 10,000,000 shares of preferred stock, no par value, none of
which are issued and outstanding. No shares of capital stock of HVE are
reserved for any purpose. Each of the outstanding shares of capital stock of,
or other equity interests in, HVE is duly authorized, validly issued, and, in
the case of shares of capital stock, fully paid and nonassessable, and has not
been issued in violation of (nor are any of the authorized shares of capital
stock of, or other equity interests in, such entities subject to) any
preemptive or similar rights created by statute, the charter or bylaws (or the
equivalent organizational documents) of HVE or any agreement to which HVE or
any Selling Shareholder is a party or bound, and such outstanding shares or
other equity interests owned by HVE or any Selling Shareholder are owned free
and clear of all security interests, liens, claims, pledges, agreements,
limitations on HVE's or any Selling Shareholder's voting rights, charges or
other encumbrances of any nature whatsoever.
(b) Except as disclosed in Schedule 3.03(b), there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which HVE or any Selling
Shareholder is a party relating to the issued or unissued capital stock of HVE
or any of its subsidiaries or obligating HVE or any Selling Shareholder to
grant, issue or sell any shares of the capital stock of HVE, by sale, lease,
license or otherwise. There are no obligations, contingent or otherwise, of
HVE or any Selling Shareholder to repurchase, redeem or otherwise acquire any
shares of HVE Common Stock or other capital stock of HVE; or provide material
funds to, or make any material investment in (in the form of a loan, capital
contribution or otherwise), or provide any guarantee with respect to the
obligations of, or any other person. No 5 percent or more owned affiliate of
any of the Selling Shareholders has been involved in any business arrangement
with HVE within the past 12 months. Except as set forth in Schedule
3.03(b)(iv) to the HVE Disclosure Schedule, there are no agreements,
arrangements or commitments of any character (contingent or otherwise)
pursuant to which any person is or may be entitled to receive any payment
based on the revenues or earnings, or calculated in accordance therewith, of
HVE. Except as contemplated hereby, there are no voting
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trusts, proxies or other agreements or understandings to which HVE or any
Selling Shareholder is a party or by which HVE or any Selling Shareholder is
or will be bound with respect to the voting of any shares of capital stock of
HVE.
(c) Each Selling Shareholder is the record and beneficial owner of
the number of shares of HVE Common Stock set forth opposite such Selling
Shareholder's name below, and each Selling Shareholder has full power and
legal right to sell, assign, transfer and deliver such shares to IN in
accordance with the terms of this Agreement and all such shares, together,
constitute all of the issued and outstanding shares of voting capital stock
of HVE:
Name Number of Shares
---- ----------------
Xxxxx Xxxxxx 7,500,000
Xxxxxxx Xxxxx 2,500,000
Xxxxxx Xxxxxx 250,000
SECTION 3.04. AUTHORITY. HVE and each Selling Shareholder have all
requisite corporate power and authority and legal capacity, respectively, to
execute and deliver this Agreement, to perform its and their obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by HVE and the consummation by HVE
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
HVE are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each Seller, and, assuming the due authorization, execution and
delivery thereof by IN constitutes the legal, valid and binding obligation of
each Seller enforceable against each Seller in accordance with its terms,
except that such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS.
(a) The execution and delivery of this Agreement by the Sellers
does not, and the consummation of the transactions contemplated hereby in
accordance with its terms will not conflict with or violate the articles of
incorporation or bylaws, or the equivalent organizational documents, in
each case as amended or restated, of HVE, or conflict with or violate any
federal, state, foreign or local law, statute, ordinance, rule, regulation,
order, judgement or decree (collectively, "Laws") applicable to HVE or any
Selling Shareholder or by or to which any of their respective properties is
bound or subject or except as described in Schedule 3.05 to the HVE Disclosure
Schedule.
(b) The execution and delivery of this Agreement by Sellers does
not, and
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consummation of the transactions contemplated hereby will not, require any
Seller to obtain any consent, license, permit, approval, waiver,
authorization or order of, or to make any filing with or notification to, any
governmental or regulatory authority, domestic or foreign (collectively,
"Governmental Entities"), except for filing appropriate merger documents as
required by California Law; and where the failure to obtain such consents,
licenses, permits, approvals, waivers, authorizations or orders, or to make
such filings or notifications, would not, either individually or in the
aggregate, materially interfere with HVE's performance of its obligations
under this Agreement and would not have an HVE Material Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of HVE and, to each Seller's
knowledge, each third party operator of any of HVE's properties, is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "HVE Permits"), and
there is no action, proceeding or investigation pending or, to the knowledge
of any Seller, threatened regarding suspension or cancellation of any of the
HVE Permits, except where the failure to possess, or the suspension or
cancellation of, such HVE permits would not have an HVE Material Adverse
Effect. HVE is not in conflict with, or in default or violation of any Law
applicable to HVE or by or to which any of its properties is bound or
subject, including, without limitation, the provisions of the Dietary
Supplemental Health Education Act of 1994, all consumer product safety Laws,
all product labeling Laws and all truth in advertising Laws, or any of the
HVE Permits, except for any such conflicts, defaults or violations that would
not have a HVE Material Adverse Effect. HVE has not received from any
Governmental Entity any written notification with respect to possible
conflicts, defaults or violations of Laws, except as set forth in Schedule
3.06 of the HVE Disclosure Schedule and except for written notices relating
to possible conflicts, defaults or violations that would not have an HVE
Material Adverse Effect.
SECTION 3.07. Financial Statements; Financial Results. (a) HVE's audited
financial statements (including the related notes thereto) for the fiscal
years ended December 31, 1996, and December 31, 1997 and unaudited financial
statements for the fiscal year ended December 31, 1998 (the "HVE Financial
Statements") to be furnished to IN pursuant to Section 5.01(d) will (i) (x)
in the case of the audited Financial Statements, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved ("GAAP")(except(A) to the
extent required by changes in generally accepted accounting principles and
(B) as may be indicated in the notes thereto) and (y) in the case of the
unaudited Financial Statements, in conformity with past practice consistently
applied and (ii) fairly present the financial position of HVE as of the
respective dates thereof and the result of operations and cash flows for the
periods indicated (including reasonable estimates of normal and recurring
year-end adjustments), expect that any pro forma financial information
contained in such financial statements will not necessarily be indicative of
the financial position of HVE as of the respective dates thereof and the
results of operations and cash flows for the periods indicated. Except as set
forth in Schedule 3.07 of the HVE Disclosure Schedule, HVE has no liabilities
or obligations of any nature (whether known or unknown and whether accrued or
contingent) except for liabilities or obligations reflected or reserved
against in the unaudited balance sheet dated as of December
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31, 1998 including the notes thereto (the "HVE Balance Sheet") to be
furnished to IN pursuant to Section 5.01(d) and current liabilities incurred
in the ordinary course of business consistent with past practice since the
date of the HVE Balance Sheet.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
contemplated by this Agreement or as set forth in Schedule 3.08 to the HVE
Disclosure Schedule, since December 31, 1998 HVE has conducted its business
only in the ordinary course and in a manner consistent with past practice and
there has not been: any material damage, destruction or loss (whether or not
covered by insurance) with respect to any material assets of HVE; any
material change by HVE in its accounting methods, principles or practices; any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of HVE Common Stock, or any redemption, purchase or other
acquisition by HVE of any of HVE's securities; any increase in the benefits
under, or the establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any increase in the compensation
payable or to become payable to directors, officers or employees of HVE; any
revaluation by HVE of any of its assets, including the writing down of the
value of inventory or the writing down or off of notes or accounts
receivable, other than in the ordinary course of business and consistent with
past practices; any entry by HVE into any commitment or transaction material
to HVE (other than this Agreement and the transactions contemplated hereby);
any material increase in indebtedness for borrowed money; or an HVE Material
Adverse Effect.
SECTION 3.09. ABSENCE OF LITIGATION. Except as disclosed on Schedule
3.09, there is no claim, action, suit, litigation, proceeding, arbitration
or, to the knowledge of any Seller, investigation of any kind, at law or in
equity (including actions or proceedings seeking injunctive relief), pending
or, to the knowledge of any Seller, threatened against HVE or any properties
or rights of HVE (except for claims, actions, suits, litigation, proceedings,
arbitrations or investigations which in the aggregate would not have an HVE
Material Adverse Effect), and HVE is not subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of any Seller continuing investigation by, any
Governmental Entity, or any judgement, order, writ, injunction, decree or
award of any Government Entity or arbitrator, including, without limitation,
cease-and-desist or other orders, except for matters that would not have an
HVE Material Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Neither HVE nor any member of any ERISA Group has maintained or
contributed to any employee benefit plan (as such term is defined in ERISA
Section 3(3)) during the past five years and neither HVE nor any member of
its ERISA Group has any liability under Sections 4063, 4069, 4212(c) or 4204
of ERISA with respect to any such employee benefit plan, and HVE does not
maintain and has not contributed to any other retirement, pension, stock
option, stock appreciation rights, profit sharing, incentive compensation,
deferred compensation, savings,
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thrift, vacation pay, severance pay, insurance, health, welfare or other
employee compensation or benefit plan, agreement, practice, or arrangement,
whether written or unwritten, whether or not legally binding (collectively,
the "HVE Benefit Plans"). For purposes of the Agreement, "ERISA Group" means
a controlled or affiliated group within the meaning of Code Section 414(b),
(c), (m), or (o) of which HVE is or may be a member.
(b) No event has occurred and, to the knowledge of any Seller, there
exists no condition or set of circumstances, in connection with which HVE or
any member of its ERISA Group could be subject to any liability under the
terms of any HVE Benefit Plans, ERISA, the Code or any other applicable Law
which would have an HVE Material Adverse Effect.
(c) Neither HVE nor any member of its ERISA Group, including,
without limitation, any of its subsidiaries, is or has ever been a party to
any collective bargaining or other labor union contracts. No collective
bargaining agreement is being negotitated by HVE. There is no pending or
threatened labor dispute, strike or work stoppage against HVE which may
interfere with the respective business activities of HVE. None of HVE or any
of its representatives or employees has committed any unfair labor practices
in connection witht he operation of the busineeses of HVE, and there is no
pending or threatened charge or complaint against HVE by the National Labor
Relations Board or any comparable state agency. HVE is are in compliance
with all applicable wage and hours Laws, age, race, religious and gender
anti-discrimination laws, employee health and saftey Laws and all immigration
Laws as regards their respective employees and, there is no pending or, to
any Seller's knowledge, threatended clain, investigations or proceeding
involving any alleged violation of any such Law.
(d) HVE is not a party to nor is it bound by any severance agreements,
programs or policies. Schedule 3.10(d) to the HVE Disclosure Schedule sets
forth, and HVE has made available to IN true and correct copies of, all
employment agreements with officers or HVE; all agreements with consultants
of HVE obligating HVE to make annual cash payments in an amount exceeding
$25,000; all non-competition agreements with HVE executed by officers of HVE;
and all plans, programs, agreements and other arrangements of HVE with or
relating to its directors.
(e) Neither HVE nor any member of its ERISA Group provides retiree
medical or retiree life insurance benefits to any person and (y) HVE is not
contractually or otherwise obligated (whether or not in writing) to provide
any person with life insurance or medical benefits upon retirement or
termination of employement, other than as required by the provisions of
Sectons 601 through 608 ERISA and Section 4980B of the Code and each such HVE
Benefit Plan or arrangment may be amended or terminated by HVE at any time
without liability.
(f) Neither HVE nor any member of its ERISA Group including, without
limitation, any of its subsidiaries, contributes to or has an obligation to
contribute to, and has not within six years prior to the date of this
Agreement contributed to or had an obligation to contribute to or has any
secondary liability under ERISA Section 4204 to, a multiemployer plan within
the meaning of Section 3(37) of ERISA.
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SECTION 3.11 TAXES. Except when a failure of any representation
made in this Section 3.11 to be true and correct would not result in a
liability to HVE in excess of $10,000 in the case of representation known to
any Seller to be untrue or incorrect or $25,000 in the case of a
representation not known to any Seller to be untrue or incorrect.
(a) Except as set forth in Schedule 3.11(a) of the HVE Disclosure
Scheudle:
(i) Except to the extent that the applicable statue of
limitations has expired, all Returns required to be filed by or on behalf of
HVE have been duly filed on a timely basis with the appropriate Governmental
Entities and such Returns (including all attached statements and schedules)
are ture, correct and complete. Except tot he extent that the applicable
statue of limitations with respect thereto has expired, all Taxes (as defined
in (f) below) have been paid in full on a timely basis, and no other Returns
(whether or not shown on or reportable on such Returns) or with respect to
any period prior to the Effective Time;
(ii) HVE has complied in all respects with all applicable
Laws relating to the payment and withholding of Taxes (including any
estimated Taxes and withholding of Taxes pursuant to Sections 1441 and 1442
of the Code or similar provisions under foreign laws) and has, within the
time and in the manner prescribed by Law, withheld from employee wages and
paid over all amound withheld under applicable Laws;
(iii) HVE has disclosed on its income tax returns all
positions taken therin that could rise to a substantial understatement
penalty within the meaning of COde Section 6662;
(iv) There are no liens on any of the assets of HVE with
respect to Taxes, other than liens for Taxes not yet due and payable for
Taxes that are being contested in good faith through appropriate proceedings
and for which appropriate reserves have been established;
(v) HVE does not have any liability under Treasury
Regulation SECTION 1.1502-6 or any analogous stae, local or foreign law by
reason of having been a member of any consolidated, combined or unitary
group, other than in the current affiliated group of which HVE is the common
parent corporation;
(vi) Except to the extent that the applicable statue of
limitations has expired, HVE has made available tot IN complete copies of:
(i) all federal, state and local, as well as any other taxing authority,
income tax, sales and use tax, employment tax and franchise tax returns of
HVE for all periods since the formation of HVE and (ii) all tax audit
reports, work papers statements of deficiencies, closing or other agreements
received by HVE or on its behalf or relating to Taxes;
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(vii) HVE does not do business in or derive income from any
state, local, territorial or foreign taxing jurisdiction so as to be subject
to Return filing requirments of such jurisdiction, other that those for which
Returns have been furnished to IN; and
(viii) HVE has neven been a subchapter S corporation; the
business of HVE has always been conducted by HVE as subchapter C corporation
and the Selling Shareholders have not conducted the business of HVE as an
unicorporated entity.
(b) Except as disclosed in Schedule 3.11(b) of the HVE Disclosure
Schedule:
(i) There is no audit of any Returns of HVE by a governmental
or taxing authority in process, pending or, to the knowledge of any Seller,
threatened (formally or informally) and no Governmental Entity of any
jurisdiction in which HVE does not file a Return has claimed that HVE is or
may be subject to tax in that jurisdiction;
(ii) Except to the extent that the applicable statue of
limitations has expired and except as to matters that have been resolved, no
deficiencies exist or have been asserted (either formally or informally) or
are expected to be asserted with respect to Taxes of HVE, and no notice
(either formally or informally) has been received by HVE that HVE has not
filed a Return or paid Taxes required to be filed or paid by it;
(iii) HVE is not a pary to any pending action or proceeding
for assessment or collection of Taxes, nor has such action or proceeding been
asserted or threatened (either formally or informally) against it or any of
its assets, except to the extent that the applicable statue of limitations
has expired and except as to matters that been resolved;
(iv) No waiver or extension of any statue of limitations is
in effect with respect to Taxes or Returns of HVE;
(v) No action has been taken taht would have the effect of
deferring any liability for Taxes for IN from any period prior to the
Effective Time to any period after the Effective Time;
(vi) There are no requests for rulings, subpoenas or
requests for information pending with respect to the Taxes of HVE;
(vii) No power of attorney has been granted by HVE, with
respect to any matter relating to Taxes;
(viii) HVE is not and has never been included in an affiliated
group of corporation, within the meaning of Section 1504 of the Code;
(ix) HVE is not (nor has it ever been) a party to any tax
allocation or sharing agreement between affiliated corporations; and
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(x) The amount of liability for unpaid Taxes of HVE for all
periods ending on or before the Effective Time will not, in the aggregate,
materially exceed the amount of the liability accruals for Taxes reflected on
the HVE Balance Sheet.
(c) Except as disclosed on Schedule 3.11(c) of the HVE Disclosure
Schedule:
(i) HVE is not required to treat any of its assets as owned by
another person for federal income tax purposes or as tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of the
Code;
(ii) HVE has not issued or assumed any corporate acquisition
indebtedness that is subject to Sections 279(a) and (b) of the Code;
(iii) HVE has not entered into any compensatory agreements with
respect to the performance of services under which payment would result in a
nondeductible expense pursuant Section 280G of the Code or an excise tax to
the recipient of such payment pursuant to Section 4999 of the Code;
(iv) No election has been made under Section 338 of the Code with
respect to HVE and no action has been taken that would result in any income
tax liability to HVE as a result of a deemed election within the meaning of
Section 338 of the Code;
(v) No consent under Section 341(t) of the Code has been filed
with respect to HVE;
(vi) HVE has not agreed, nor is it required to make, any adjustment
under Code Section 481(a) by reason of a change in accounting method or
otherwise;
(vii) HVE has not disposed of any property that is presently being
accounted for under the installment method;
(viii)HVE is not a party to any interest rate swap or currency swap;
(ix) HVE has not participated in any international boycott as
defined in Code Section 999;
(x) HVE is not subject to any joint venture, partnership or other
arrangement or contract that is treated as a partnership for federal income
tax purposes;
(xi) HVE has not made any of the foregoing elections and is not
required to apply any of the foregoing rules under any comparable state,
local or foreign income tax provisions; and
(xii) HVE does not have and has never had a permanent establishment in
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any foreign country, as defined in any applicable tax treaty or conventions
between the United States and such foreign country,
(d) The books and records of HVE, including the Returns of HVE made
available to IN contain accurate and complete information with respect to:
(i) All material tax elections in effect with respect to HVE;
(ii) The current tax basis of the assets for HVE;
(iii) The current and accumulated earnings and profits of HVE, if
any;
(iv) The net operating losses of HVE by taxable year, if any;
(v) The capital losses of HVE by taxable year, if any;
(vi) The tax credit carry overs of HVE, if any; and
(vii) The overall foreign losses of HVE under Section 904(f) of
the Code that are subject to recapture, if any.
(e) The Returns provided by HVE to IN contain accurate and complete
information with respect to any net operating losses and net operating loss
carry forwards, if any, and other tax attributes of HVE, and the extent to
which they are subject to any limitation under Code Sections 381, 382, 383,
or 384, or any other provision of the Code or the federal consolidated return
regulations (or any predecessor provision of any Code Section or the
regulations) and, apart from any such limitations and apart from any
limitation that would be imposed as a result of the Merger, there is nothing
that would prevent HVE from utilizing these net operating losses, net
operating loss carry forwards or other tax attributes, if any, as so limited
if it has sufficient income.
(f) (i) For purposes of this Agreement the term "Taxes" shall mean
all taxes, however, denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income or profit taxes,
payroll and employee withholding taxes, unemployment insurance, social
security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, worker's compensation, Pension Benefit Guaranty Corporation
premiums and other governmental charges, and other obligations of the same or
of a similar nature to any of the foregoing, required to be paid, withheld or
collected.
(ii) For the purposes of this Agreement, the term "Returns" shall
mean
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all reports, estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection with, any
Taxes, including information returns or reports with respect to backup
withholding and other payments to third parties.
SECTION 3.12 TAX AND ACCOUNTING MATTERS.
(a) Neither HVE nor, to the knowledge of any Seller, any of its
affiliates has taken or agreed to take any action, other than any action
taken in accordance with the terms of this Agreement, that would prevent the
Merger from constituting a tax-free reorganization qualifying under the
provisions of Section 368(a) of the Code.
(b) HVE has no plan or intention to acquire the IN Common Stock issued
in the Merger,
(c) Subject to Section 8.05(a), HVE and the holders of HVE Common Stock
will each pay their respective expenses, if any, incurred in connection with
the Merger.
(d) There is no intercorporate indebtedness existing between HVE and IN
that was issued, acquired or will be settled at a discount.
(e) HVE is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) Except as contemplated by this Agreement, HVE will take no action
prior to the Effective Time to cease operations or, except in the ordinary
course of business, dispose of any of its assets of any of its subsidiaries
or current lines of business.
SECTION 3.13. CERTAIN BUSINESS PRACTICES. To the best of its
knowledge, none of HVE, or any directors, officers, agents or employees of
HVE has used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, made any unlawful
payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended, or made any other
unlawful payment.
SECTION 3.14 ENVIRONMENTAL MATTERS.
(a) Except for matters disclosed in Schedule 3.14 to the HVE Disclosure
Schedule and except for matters that would not have or are reasonably not
likely to have an HVE Material Adverse Effect, to the best knowledge of
Sellers:
(i) The properties, operations and activities of HVE are in
compliance with all applicable Environmental Laws and there are no
circumstances which could reasonably be expected to prevent or interfere with
their continued compliance with applicable Environmental Laws.
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(i) HVE and the properties and operations of HVE are not
subject to any existing, pending, or, to any Seller's knowledge, threatened
civil, criminal or administrative action suit, claim, notice of violation,
investigation, notice of potential liability, request for information,
inquiry, demand or proceeding under applicable Environmental Laws.
(ii) HVE has not agreed, whether by contract or by consent
agreement with Governmental Entities or private persons, to undertake
investigation, clean up, or remedial activities.
(iii) All notices, permits, licenses, or similar
authorizations required to be obtained or filed by HVE under any
Environmental Laws in connection with any aspect of the business of HVE,
including without limitation those relating to the treatment, storage,
disposal or discharge of Hazardous Materials, have been duly obtained or
filed and will remain valid and in effect after the Merger, and HVE is in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations.
(iv) HVE has not received any notice of noncompliance with
respect to any financial responsibility requirements applicable to their
operations and imposed by any Governmental Entity under any Environmental
Laws.
(v) There are no physical or environmental conditions existing
on any leased property of HVE or resulting from HVE's operations or
activities, past or present, at any location, including without limitation,
releases and disposal of Hazardous Materials, that would give rise to any
on-site or off-site investigation, reporting, or remedial obligations or
other Environmental Liability.
(vi) To the extent required by applicable Environmental Laws,
all Hazardous Materials generated by HVE have been transported only by
persons authorized under applicable Environmental Laws to transport such
materials, and disposed of only at treatment, storage and disposal facilities
authorized under applicable Environmental Laws to treat, store or dispose of
such Hazardous Materials.
(vii) There has been no exposure of any person or property to
Hazardous Materials or any release of Hazardous Materials into the
environment by HVE or in connection with its present or prior properties or
operations that could reasonably be expected to give rise to any
Environmental Liability.
(viii) No release or cleanup of Hazardous Materials has
occurred at HVE leased properties which could reasonably be expected to
result in the assertion or creation of any lien on the properties by any
governmental body or agency or other Governmental Entity with respect
thereto, nor has any such lien been asserted or made by any governmental
body, agency or entity with respect thereto.
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(ix) The operations of each third party operator of any of
HVE properties are in compliance with the terms of this Section 3.14.
(b) HVE has made available to IN all internal and external environmental
audits, studies, documents and correspondence on environmental matters in the
possession of HVE, if any, relating to any of the present or prior properties
or operations of HVE.
(c) For purposes of this Agreement, the following terms shall be
defined as follows:
(i) "Environmental Laws" shall mean any and all laws,
statutes, ordinances, rules, regulations or orders of any Governmental Entity
pertaining to pollution, health, safety, or the environment, including,
without limitation, the Clean Air Act, the Comprehensive Environmental,
Response, Compensation, and Liability Act ("CERCLA"), the Clean Water Act,
the Occupational Safety and Health Act, the Resource Conservation and
Recovery Act, the Solid Waste Disposal Act, the Emergency Planning and
Community Right-To-Know Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Hazardous Materials Transportation Act, the Oil
Pollution Act, all as amended, any state laws implementing the foregoing
federal laws, any state laws pertaining to, health, safety and waste
management including, without limitation, the handling of asbestos, medical
waste or disposable products, hydrocarbon products, PCBs or other Hazardous
Materials or processing or disposing of wastes or the use, maintenance and
closure of pits and impoundments, all other federal, state or local
environmental conservation or protection and health and safety laws, and any
common law creating liability for environmental conditions. Environmental
Laws shall include, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements, guidelines, obligations,
schedules and timetables contained in Environmental Laws or contained in any
regulation, plan, code, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(ii) "Hazardous Materials" shall mean any materials that are
regulated by or form the basis of liability under Environmental Laws, and
include, without limitation, asbestos, wastes, including, without limitation,
medical wastes or disposable products, hazardous substances, pollutants or
contaminants, hazardous or solid wastes, hazardous constituents, hazardous
materials, toxic substances, petroleum, including crude oil or any fraction
thereof, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel (or mixtures of natural gas and such synthetic
gas).
(iii) "Environmental Liability" shall mean liabilities, fines,
penalties, obligations, consequential damages, responsibilities, response
costs, natural resource damages, corrective action costs, reclamation costs,
and costs and expenses, known or unknown, absolute or contingent, past,
present or future, resulting from any requirement, claim or demand under
Environmental Laws or contract.
SECTION 3.15. VOTE REQUIRED. The only vote or written consent of the
holders of
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any class or series of HVE capital stock necessary to approve the Merger and
adopt this Agreement is the affirmative vote or written consents from the
Selling Shareholders.
SECTION 3.16. BROKERS. Except as set forth in Schedule 3.16 to the HVE
Disclosure Schedule, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of HVE. HVE has made or will make available prior to Closing to
IN a complete and correct copy of all agreements referenced in Schedule 3.16
to the HVE Disclosure Schedule pursuant to which any such firm or individual
will be entitled to any payment relating to the transactions contemplated by
this Agreement.
SECTION 3.17. INSURANCE. Schedule 3.17 to the HVE Disclosure Schedule
will set forth a true and complete listing of all material policies currently
in force, and all other policies under which a claim could be made as of the
date hereof (I.E., all incurrence-based policies), for fire, products and
environmental or pollution control liability, general liability, vehicle,
workers' compensation, directors and officers' liability, title and other
insurance owned or held by or covering HVE or any of its property, assets, or
activities, past or present. As of the date hereof, all of such policies are
in full force and effect, and HVE has not received any outstanding notice of
cancellation or termination with respect to any policy of fire, products or
environmental or pollution control liability, general liability, vehicle,
workers' compensation, directors' and officers' liability, title and other
insurance owned or held by or covering HVE or any of its property, assets, or
activities, past or present. To the knowledge of Sellers, neither the Merger
nor any of the transactions contemplated hereby shall cause the termination
or may form the basis for terminating any such insurance policies or
insurance coverages presently maintained by HVE.
SECTION 3.18. PROPERTIES. Except as set forth in Schedule 3.18 to
the HVE Disclosure Schedule, except for liens arising in the ordinary course
of business after the date hereof and assets disposed of in the ordinary
course of business after the date of the HVE Balance Sheet, HVE has good and
marketable title free and clear of all liens, the existence of which would
have an HVE Material Adverse Effect, to all their material assets, whether
tangible or intangible, personal or mixed, reflected in the HVE Balance Sheet
as being owned by HVE as of the date thereof or purported to be owned on the
date hereof. All buildings, and all fixtures, equipment and other property
and assets which are material to its business on a consolidated basis held
under leases by HVE are held under valid instruments enforceable by HVE in
accordance with their respective terms. Substantially all of HVE's equipment
in regular use has been well maintained and is in good and serviceable
condition, reasonable wear and tear excepted. HVE owns no real property and
all of HVE's interests in real property are subject to valid and binding
leases, all of which are in full force and effect, are not in breach by HVE
or, to any Seller's knowledge, by the lessor thereunder.
SECTION 3.19. CERTAIN CONTRACTS AND RESTRICTIONS. Other than
agreements, contracts or commitments listed elsewhere in the HVE Disclosure
Schedule, Schedule 3.19 to the HVE Disclosure Schedule lists, as of the date
hereof, each agreement, contract or commitment (including any amendments
thereto) to which HVE is a party or by which HVE is bound (i)
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involving consideration during the next twelve months in excess of $10,000 or
(ii) which is otherwise material to the assets, liabilities, financial
condition, results of operations or current or future business of HVE, taken
as a whole. As of the date of this Agreement and except as indicated on the
HVE Disclosure Schedule, (i) HVE has fully complied with all material terms
and conditions of all agreements, contracts and commitments listed in the HVE
Disclosure Schedule and all such agreements, contracts and commitments are in
full force and effect, (ii) no Seller has any knowledge of any defaults
thereunder or any cancellations or modifications thereof, and (iii) such
agreements, contracts and commitments are not subject to any memorandum or
other written document or understanding permitting cancellation. HVE has
provided IN with a true and complete copy of the Shopping Channel Promotional
Agreement dated as of September 1, 1997 (the "AOL Agreement") between HVE and
America Online, Inc. ("AOL"). The AOL Agreement is in full force and effect
and has not been canceled, amended or modified in any way except pursuant to
an Addendum dated July 30, 1998. No party to the AOL Agreement has breached
any representation, covenant, term or condition thereof, except that certain
payments required to be made by HVE pursuant to the AOL Agreement are
presently past due, as disclosed in Schedule 3.19.
SECTION 3.20. FUTURE TRADING AND FIXED PRICE EXPOSURE. HVE is not
presently engaged in any futures or options trading or is a party to any
price, interest rate or currency swaps, xxxxxx, futures or other derivative
instruments.
SECTION 3.21. INFORMATION SUPPLIED. Without limiting any of the
representations and warranties contained herein, the representations and
warranties of HVE contained in this Agreement and the information set forth
in the HVE Disclosure Schedule is complete and accurate and does not contain
any untrue statement of material fact, or omit a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which such statements are or were made, not misleading.
SECTION 3.22. SECURITIES LAWS REPRESENTATIONS. Without limiting any
of the representations and warranties of Sellers contained herein, each
Selling Shareholder hereby acknowledges and agrees with IN that he is
familiar with IN assets, business, financial condition, results of
operations, and prospects. He is aware of the risks attendant to an
investment in the IN Common Stock. He has relied solely upon the independent
investigations made by him and his representatives and IN's representations
and warranties set forth herein in making a decision to approve the Merger
and to acquire the IN Common Stock and has a full understanding and
appreciation of the risks inherent in such a speculative investment. In
connection with such investigation, he and his advisors, if any, have had the
opportunity to ask, to the extent he considered necessary, questions of, and
have received answers from, officers of IN concerning the affairs of IN and
have had access to reports filed by IN with the Commission (as hereinafter
defined), all documents, records, books and additional information which he
has deemed necessary to make an informed investment decision to acquire the
IN Common Stock. He recognizes that the offer and sale by IN to him of the
IN Common Stock has not been registered under the Securities Act or any other
domestic or foreign securities laws (the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any such other
applicable domestic
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and foreign securities laws are hereinafter collectively referred to herein
as the "Securities Laws") and, except as set forth in 6.02 hereof, will not
be registered under any such Securities Laws, in reliance upon exemptions
from the registration requirements thereof. He is acquiring the IN Common
Stock solely for his own account for investment and not with a view to, or
for offer or resale in connection with, a distribution thereof in violation
of any Securities Laws. He understands that the effect of such
representations and warranties is that such Stock must be held indefinitely
unless the sale or transfer thereof is subsequently registered under
applicable Securities Laws or an exemption from such registration is
available at the time of the proposed sale or transfer thereof. Except as
provided in Section 6.02 hereof, IN is under no obligation to file a
registration statement under the Securities Act covering the sale or transfer
of the IN Common Stock or otherwise to register such Stock for sale under
applicable Securities Laws. Each Selling Shareholder represents and warrants
that he has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of approving the Merger
and investing in the IN Common Stock; he is an "accredited investor" as
defined in Rule 501 of Regulation D, in the case of Xxxxxx, based on among
other things his ownership of HVE Common Stock; and that the statements
contained in this Section 3.22 are true, correct and complete in all material
respects and do not omit any material fact necessary to make such statements
not misleading. No Selling Shareholder shall make any sale or other
disposition of his IN Common Stock unless (a) IN shall have received an
opinion of counsel satisfactory in form and substance to it that the sale or
other disposition may be made without registration under the then applicable
provisions of the Securities Laws and the rules and regulations promulgated
thereunder, or (b) such Stock is included in a currently effective
registration statement under the Securities Act. No Selling Shareholder has
been convicted of any felony or misdemeanor in connection with the purchase
and sale of any security or involving the making of any false filing with the
Securities and Exchange Commission ("Commission"). No Selling Shareholder
nor HVE, nor any officer, director and/or shareholder of HVE, is subject to
any order, judgment or decree of any court of competent jurisdiction,
permanently restraining or enjoining, such person from engaging in or
continuing any conduct or practice in connection with the purchase and sale
of any security or involving the making of any false filing with the
Commission. Each Selling Shareholder agrees to secure and furnish to IN
prior to the Effective Time investment representation letters from any other
holder of Converted Shares, if any, addressed to IN containing the same
representations and warranties made by each Selling Shareholder in this
Section 3.22.
SECTION 3.23. INTELLECTUAL PROPERTY. Schedule 3.23 lists all the
registered patents, trademarks, service marks, copyrights, trade names and
applications for any of the foregoing owned by HVE, as of the date of this
Agreement (the "Registered Intellectual Property"). To Sellers' knowledge,
HVE has good and marketable title to the Registered Intellectual Property and
has good and marketable title to, or valid licenses or rights to use, all
patents, copyrights, trademarks, trade names, brand names, proprietary and
other technical information, technology and software (collectively,
"Intellectual Property") which are used in the operation of its business as
presently conducted, free from any liens and free from any requirement of any
past, present or future royalty payments, license fees, charges or other
payments or conditions or restrictions,
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whatsoever, except as set forth on Schedule 3.23. Immediately after the
Effective Time, the Surviving Corporation will own or will have the right to
use all Intellectual Property free from liens and on the same terms and
conditions as in effect prior to the Effective Time. Except as set forth in
Schedule 3.23, there are no claims or proceedings pending or, to any Seller's
knowledge, threatened, against HVE asserting that HVE is infringing or
engaging in the unauthorized use of any Intellectual Property of any other
person or entity. Schedule 3.23 sets forth all agreements and arrangements
(i) pursuant to which HVE has licensed Intellectual Property to, or the use
of Intellectual Property in other areas permitted (through non-assertion,
settlement or similar agreements or otherwise) by, any other person and (ii)
pursuant to which HVE has had Intellectual Property licensed to it, or has
otherwise been permitted to use Intellectual Property (through non-assertion,
settlement or similar agreements or otherwise). All of the agreements or
arrangements to the extent set forth on Schedule 3.23 (w) are in full force
and effect in accordance with their terms and no Seller is aware that any
default exists thereunder by HVE or by any other party thereto; (x) are free
and clear of liens; and (y) do not contain any change of control or other
terms or conditions that will become applicable or inapplicable as a result
of the consummation of the Merger and the transactions contemplated by this
Agreement. HVE has delivered to IN true and complete copies of all
agreements and arrangements set forth on Schedule 3.23. There are no
royalties, license fees, charges or other amounts payable by, or on behalf of
HVE in respect of any Intellectual Property other than as set forth on
Schedule 3.23.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IN
IN hereby represents and warrants to each Seller that:
SECTION 4.01. ORGANIZATION AND QUALIFICATIONS; SUBSIDIARIES. IN is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Utah and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
other than where the failure to be so duly qualified and in good standing
would not have a IN Material Adverse Effect. The term "IN Material Adverse
Effect" as used in this Agreement shall mean any change or effect that,
individually or when taken together with all such other changes or effects,
would be reasonably likely to be materially adverse to the assets,
liabilities, financial condition, results of operations or current or future
business of IN and its subsidiaries, taken as a whole.
SECTION 4.02. ARTICLES OF INCORPORATION AND BYLAWS. IN has heretofore
furnished Sellers with access to a complete and correct copy of the articles
of incorporation and bylaws or the equivalent organizational documents as
presently in effect of IN. IN is not in violation of any of the provisions
of its articles or any material provision of its bylaws.
SECTION 4.03. CAPITALIZATION. Except as set forth in Schedule 4.03(a)
or as
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contemplated by this Agreement, the authorized capital stock of IN consists
of 50,000,00 shares of IN Common Stock as of the date hereof, of which
27,753,000 shares are issued and outstanding; and (ii) 5,000,000 shares of
series preferred stock, par value $1.00 per share, none of which are issued
and outstanding. Except as described in this Section 4.03 or Schedule 4.03(a)
of the disclosure schedule to be delivered to HVE by IN and which is attached
hereto and made a part hereof (the "IN Disclosure Schedule"), no shares of
capital stock of IN are reserved for any purpose. Each of the outstanding
shares of capital stock of, or other equity interests in IN is duly
authorized, validly issued, and, in the case of shares of capital stock,
fully paid and nonassessable, and has not been issued in violation of (nor
are any of the authorized shares of capital stock of, or other equity
interests in, such entities subject to) any preemptive or similar rights
created by statute, the charter or bylaws (or the equivalent organizational
documents) of IN, or any agreement to which IN is a party or bound, and such
outstanding shares or other equity interests owned by IN are owned free and
clear of all security interests, liens, claims, pledges, agreements,
limitations on IN's voting rights, charges or other encumbrances of any
nature whatsoever.
SECTION 4.04. AUTHORITY. IN has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by IN and the consummation by IN of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
IN are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by IN and, assuming the due authorization, execution and delivery
there of by each Seller constitutes the legal, valid and binding obligation
of IN enforceable against IN in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by IN does not,
and the consummation of the transaction contemplated hereby will not (i)
conflict with or violate the articles of incorporation or bylaws, or the
equivalent organizational documents, in each case as amended or restated, of
IN, (ii) conflict with or violate any Laws applicable to IN or by which any
of its properties is bound or subject, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the the creation of
a lien or encumbrance on any of the properties or assets of IN pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which IN is a party or
by or to which IN or any of its properties is bound or subject, except for
any such conflicts or violations described in clause (ii) or breaches,
defaults, events, rights of termination, amendment, acceleration or
cancellation, payments obligations or liens or
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encumbrances described in clause (iii) that would not have a IN Material
Adverse Effect.
(b) The execution and delivery of this Agreement by IN does not,
and consummation of the Merger will not, require IN to obtain any consent,
license, permit, approval, waiver, authorization or order of, or to make any
filing with or notification to, any Governmental Entity, except for filing
appropriate merger documents as required by California Law; and where the
failure to obtain such consents, licenses, permits, approvals, waivers,
authorizations or orders, materially interfere with IN's performance of its
obligations under this Agreement and would not have a IN Material Adverse
Effect.
SECTION 4.06. PERMITS; COMPLIANCE. IN and, to IN's knowledge, each
third party operator of any of IN's properties, is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own,
lease and operate its properties and to carry on its business as it is now
being conducted (collectively, the "IN Permits"), and there is no action,
proceedings or investigation pending or, to the knowledge of IN, threatened
regarding suspension or cancellation of any of the IN Permits, except where
the failure to possess, or the suspension or cancellation of any of the
Permits would not have a IN Material Adverse Effect. Except as set forth in
Schedule 4.06 to the IN Disclosure Schedule, IN has not received from any
Governmental Entity any written Notification with respect to possible
conflicts, defaults or violations of Laws, except for written notices
relating to possible conflicts, defaults or violations of Laws, except for
written notices relating to possible conflicts, defaults or violations that
would not have a IN Material Adverse Effect.
SECTION 4.07. FINANCIAL STATEMENTS.
(a) since March 31, 1996, IN and its subsidiaries have filed all
forms, reports, statements and other documents required to be filed with (A)
the Commission including, without limitation, (1) all Registration Statements
filed under the Securities Act, (2) all Annual Reports on Form 10-K, (3) all
Quarterly Reports on Form 10-Q, (4) all proxy statements relating to meetings
of stockholders (whether annual or special), (5) all Current Reports on Form
8-K and (6) all other reports, schedules, registration statements or other
documents (collectively referred to as the "IN Commission Reports") and (B)
any applicable state securities authorities and all forms, reports,
statements and other documents required to be filed with any other applicable
federal or state regulatory authorities, except where the failure to file any
such forms, reports, statements or other documents would not have an IN
Material Adverse Effect (all such forms, reports, statements and other
documents in clauses (i) and (ii) of this Section 3.07(a) being referred to
herein, collectively, as the "IN Reports"). The IN Reports, including all IN
Reports filed after the date of this Agreement and prior to the Effective
Time, (x) were or will be prepared in accordance with the requirements of
applicable Law (including, with respect to IN Commission Reports, the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such IN Commission
Reports) and (y) did not at the time they were filed, or will not at the time
they are filed, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
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to make the statements therein, in the light of the circumstances under which
they are made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in IN Commission Reports
filed prior to the Effective Time, have been or will be prepared in
accordance with the published rules and regulations of the Commission and
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (a) to the extent required by changes
in generally accepted accounting principles; (b) with respect to IN
Commission Reports filed prior to the date of this Agreement, as may be
indicated in the notes thereto; and (c) with respect to interim financial
statements as may be permitted by Article 10 of Regulation S-X) and fairly
present or will fairly present the consolidated financial position of IN and
its subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated (including
reasonable estimates of normal and recurring year-end adjustments), except
that (x) any unaudited interim financial statements were or will be subject
to normal and recurring year-end adjustments and (y) any pro forma financial
statements contained in such consolidated financial statements are not
necessarily indicative of the consolidated financial position of IN and its
subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated.
SECTION 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the IN Commission Reports, or in the IN Disclosure Schedule or
as contemplated by this Agreement, since September 30, 1998, IN has conducted
its business in the ordinary course of business consistent with past
practice. Since September 30, 1998, there has not been (i) any event, change,
or effect (including the occurrence of any liabilities of any nature, whether
or not accrued, contingent or otherwise) having or, which be reasonably
likely to have, individually or in the aggregate, a IN Material Adverse
Effect; (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of IN or any redemption, purchase or other acquisition by IN
or any of IN's subsidiaries of any of IN's securities or any of the
securities of any subsidiary of IN; (iii) any revaluation by IN of its
assets, including the writing down of the value of inventory or the writing
down or off of notes or accounts receivable, other than in the ordinary
course of business and consistent with past practices; (iv) any change by IN
in accounting principles or methods, except insofar as may be required by a
change in generally accepted accounting principles; (v) a fundamental change
in the nature of IN's business; or (vi) a IN Material Adverse Effect.
SECTION 4.09. ABSENCE OF LITIGATION. There is no claim, suit,
litigation, proceeding, arbitration or, to the knowledge of IN, investigation
of any kind, at law or in equity (including actions or proceedings seeking
injunctive relief) pending or, to the knowledge of IN, threatened against IN
or any of its properties or rights (except for claims, actions, suits,
litigation, proceedings, arbitrations or investigations which would not have
a IN Material Adverse Effect), and IN is not subject to any continuing order
of, consent decree, settlement agreement or other similar written agreement
with, or, to the knowledge of IN, continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or
award of any
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Government Entity or arbitrator, including, without limitation, cease-and-
desist, or other orders, except for matters that would not have a IN Material
Adverse Effect.
SECTION 4.10. TAXES. Except as such failure of any representation
or warranty made in this Section 4.11 to be true and correct which would not
have a IN Material Adverse Effect:
(a) Except to the extent that the applicable statute of
limitations has expired, all Returns required to be filed by or on behalf of
IN have been duly filed on a timely basis with the appropriate Governmental
Entities and such Returns are true, correct and complete. Except to the
extent that the applicable statute of limitations with respect thereto has
expired, all Taxes have been duly paid in full or a provision has been made
in accordance with generally accepted accounting principles for the payment
of all Taxes for all periods covered by such Returns or with respect to any
period prior to the Effective Time. IN has disclosed on its income tax
returns all positions taken therein which could give rise to a substantial
understatement penalty within the meaning of Code Section 6662. No waiver or
extension of any statute of limitations is in effect with respect to Taxes or
Returns of IN.
(b) IN has complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including any estimated Taxes and the withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign
laws) and have, within the time and the manner prescribed by law, withheld
from employee wages and paid over all amounts withheld under applicable laws.
(c) There is no audit of any of the Returns of IN by a
Governmental Entity in process or threatened and there is no material dispute
or claim concerning any liabilities for Taxes of IN either raised or
reasonably expected to be raised by any taxing authority. There are no liens
on any assets of IN with respect to Taxes, other than liens set forth in
Schedule 4.11 of the IN Disclosure Schedule for Taxes that are being
contested in good faith through appropriate proceedings and for which
appropriate reserves have been established.
(d) IN has made available to HVE complete copies of (i) all
federal income tax returns of IN for all periods open under the statute of
limitations for assessments and (ii) examination reports, and statements of
deficiencies assessed against IN.
(e) No consent under Section 341(f) of the Code has been filed
with respect to IN.
(f) IN has not entered into any compensatory agreements with
respect to the performance of services under which payment would result in a
nondeductible expense pursuant to Section 280G of the Code.
(g) IN has not agreed, nor is it required to make, prior to the
Effective Time, any adjustment under Code Section 481(a) by reason of a
change in accounting method or
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otherwise.
(h) IN has not issued or assumed any corporate acquisition
indebtedness that is subject to Sections 279(a) and (b) of the Code.
(i) The amount of liability for unpaid Taxes of IN for all
periods ending on or before the Effective Time will not, in the aggregate,
materially exceed the amount of the liability accruals for Taxes reflected on
the balance sheet of IN filed in it Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998 (the "IN Balance Sheet").
(j) The tax returns provided by IN to HVE contain accurate and
complete information with respect to the net operating losses, net operating
loss carry forwards and other tax attributes of IN, and the extent to which
they are subject to any limitation under Code Sections 381, 382, 383 or 384,
or any other provision of the Code or the federal consolidated return
regulations (or any predecessor provision of any Code section or the
regulations) and, apart from any such limitations and apart from any
limitation that would be imposed as a result of the Merger, there is nothing
that would prevent IN from utilizing these net operating losses, net
operating loss carry forwards or other tax attributes as so limited if
sufficient income were realized.
(k) IN is not required to treat any of its assets as owned by
another person for federal income tax purposes or as tax-exempt bond property
or as tax-exempt use property with the meaning of Section 168 of the Code.
SECTION 4.11. TAX MATTERS. Neither IN, nor, to the knowledge of IN,
any of IN's affiliates, has taken or agreed to take any action, including,
without limitation, any action taken or to be taken pursuant to this
Agreement, that would prevent the Merger from constituting a tax-free
reorganization qualifying under the provisions of Section 368(a) of the Code.
All of the Merger Consideration to be delivered by IN to the Selling
Shareholders herewith shall constitute stock eligible for non-recognition
treatment pursuant to Section 354(a) of the Code.
SECTION 4.12. NSM LISTING. The IN Common Stock is traded in the
NSM, and, IN has not received any current notice from the NSM or the NASD that
it intends to delist the IN Common Stock from the NSM.
SECTION 4.13. CERTAIN BUSINESS PRACTICES. To the best of IN's
knowledge, none of IN, or any directors, offices, agents or employees of IN
has used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or made any other unlawful
payment.
SECTION 4.14. ENVIRONMENTAL (a)Except for matters that would not
have or are reasonably not likely to have a IN Material Adverse Effect, to
the best knowledge of IN:
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(i) the properties, operations and activities of IN are in
compliance with all applicable Environmental Laws and there are no
circumstances which could reasonably be expected to prevent or interfere with
their continued compliance with applicable Environmental Laws;
(ii) IN and the properties and operations of IN are not subject
to any existing, pending, or, to IN's knowledge, threatened civil, criminal
or administrative action, suit, claim, notice of violation, investigation,
notice of potential liability, request for information, inquiry, demand or
proceeding under applicable Environmental Laws;
(iii) IN has not agreed, whether by contract or by consent
agreement with governmental authorities or private persons, to undertaken
investigation, clean up, or remedial activities;
(iv) All notices, licenses, or similar authorizations
required to be obtained or filed by IN under any Environmental Law in
connection with any aspect of the business of IN, including without
limitation those relating to the treatment, storage, disposal or discharge of
Hazardous Materials, have been duly obtained or filed and will remain valid
and in effect after the Merger, and IN is in compliance with the terms and
conditions of all such notices, permits, licenses and similar authorizations;
(v) IN has not received any notice of noncompliance with
respect to any financial responsibility requirements applicable to its
operations and imposed by any Governmental Entity under any Environmental
Laws.
(vi) There are no physical or environmental conditions
existing on any property of IN or resulting from IN's operations or
activities, past or present, at any location including without limitation,
releases and disposal of Hazardous Materials, that would give rise to any
on-site or off-site investigation, reporting, or remedial obligations or
other Environmental Liability;
(vii) To the extent required by applicable Environmental Laws,
all Hazardous Materials generated by IN have been transported only by persons
authorized under applicable Environmental Laws to transport such materials,
and disposed of only at treatment, storage and disposal facilities authorized
under applicable Environmental Laws to treat, store or dispose of such
Hazardous Materials;
(viii) There has been no exposure of any person or property to
Hazardous Materials or any lease of Hazardous Materials into the environment
by IN or in connection with their present or prior properties or operations
that could reasonably be expected to give rise to any Environmental Liability;
(ix) No release or clean up of Hazardous Materials has
occurred at IN's properties which could reasonably be expected to in the
assertion or creation of any lien on the
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properties by any governmental body or agency with respect thereto, no has
any such lien been asserted or made by any governmental body or agency with
respect thereto; and
(x) The operations of each third party operator of any of
IN's properties are in compliance with the terms of this Section 4.15.
(b) IN has made available to HVE all material internal and external
environmental audits, studies, documents and correspondence on environmental
matters in the possession of IN relating to any of the present or prior
properties or operations of IN.
SECTION 4.15. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of IN.
SECTION 4.16. PROPERTIES. Except for liens arising in the ordinary
course of business after the date hereof and properties and assets disposed
of in the ordinary course of business after the date of the IN Balance Sheet,
IN has good and marketable title free and clear of all liens, the existence
of which would have a IN Material Adverse Effect, to all their material
properties and assets, whether tangible or intangible, real, personal or
mixed, reflected in the IN Balance Sheet as being owned by IN as of the date
thereof or purported to be owned on the date hereof.
SECTION 4.17. CERTAIN CONTRACTS AND RESTRICTIONS. As of the date of
this Agreement and except as indicated on the IN Disclosure Schedule, IN has
fully complied with all material terms and conditions of all of its material
agreements, contracts and commitments and all such agreements, contracts and
commitments are in full force and effect, IN has no knowledge of any defaults
thereunder or any cancellations or modifications thereof, and such
agreements, contracts and commitments are not subject to any memorandum or
other written document or understanding permitting cancellation.
SECTION 4.18. INFORMATION SUPPLIED. Without limiting any of the
representations and warranties contained herein, no representation or
warranty of IN and no statement by IN or other information contained in or
documents referred to in the IN Disclosure Schedule, as of the date of such
representation, warranty, statement or document, contains or contained any
untrue statement of material fact, or, at the date thereof, omits or omitted
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements are or
were made, not misleading.
SECTION 4.19. EXEMPT TRANSACTIONS. Assuming the accuracy and
completeness of Seller's representations and warranties hereunder, and
assuming further that IN and Sellers have not taken and will not take any
action that would render unavailable the exemption from registration under
the Securities Act provided by Rule 506 of Regulation D and Section 4(2)
thereof and applicable state securities laws, the shares of IN Common Stock
issued as a result of the Merger will be offered and sold pursuant to the
registration exemption provided by Rule 506
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of Regulation D and Section 4(2) of the Securities Act as a transaction not
involving a public offering and the requirements of the applicable state
securities laws of the State of California and respective rules and
regulations thereunder.
SECTION 4.20. NO VIOLATION OF SECURITIES LAWS. No injunction, stop
order, cease and desist order or other judgment, writ, or decree denying,
revoking or suspending the registration of shares of IN Common Stock or
prohibiting or restricting the offer or sale of shares of IN Common Stock has
been issued and, to the knowledge of IN, there are no private or governmental
suits, actions, investigations or other proceedings pending or threatened,
seeking such a judgment, order, writ or decree or alleging any violation of
Federal or state securities laws.
SECTION 4.21. NO INVESTIGATION. No formal or informal investigation
or examination by the Commission or by the securities administrator of any
state is pending, or to the knowledge of IN, threatened against IN, or any
director, officer or shareholder of IN, or any of its subsidiaries.
SECTION 4.22. NO CONVICTIONS. Neither IN nor any officer, director
or shareholder of IN or any of its subsidiaries, has been convicted of any
felony or misdemeanor in connection with the purchase and sale of any
security or involving the making of any false filing with the Commission.
SECTION 4.23. NO RESTRAINT. Neither IN nor any subsidiary of IN, nor
any officer, director and/or shareholder of IN or any subsidiary of IN, is
subject to any order, judgment or decree of any court of competent
jurisdiction, temporarily or preliminarily restraining or enjoining, or
subject to any order, judgment or decree of any court of competent
jurisdiction, permanently restraining or enjoining, such person from engaging
in or continuing any conduct or practice in connection with the purchase and
sale of any security or involving the making of any false filing with the
Commission.
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SECTION 4.24. MERGER CONSIDERATION. The Merger Consideration to be
issued to the Selling Shareholders will be validly and legally issued shares
of IN voting common stock, each of which, when issued pursuant to this
Agreement, shall be free and clear of liens and encumbrances other than the
Repurchase Option and from preemptive rights and other similar rights,
fully-paid and non-assessable and shall possess such voting, dividend and
liquidation distribution rights equivalent in all respects to the shares of
voting common stock of IN which are issued and outstanding on the date hereof.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF HVE. HVE hereby covenants and
agrees that, at or prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by IN, HVE will:
(a) continue to operate its business in all material respect in the
usual and ordinary course, consistent with prior practice and to use all
reasonable efforts to preserve substantially intact its business
organization, maintain its material rights and franchises, retain the
services of its respective officers and employees and maintain its
relationships with its material customers and suppliers;
(b) maintain and keep its material properties and assets in as good
repair and conditions as at present, ordinary wear and tear excepted, and
maintain supplies and inventories of products in quantities consistent with
its customary business practice;
(c) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(d) furnish to IN copies of the HVE Financial Statements and HVE
Balance Sheet, in the case of the audited HVE Financial Statements, certified
by HVE's independent auditors, and the HVE Disclosure Schedule on or prior to
the Closing Date; and
(e) prior to the Closing, HVE shall take all necessary steps to
ensure that there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any
character to which HVE or any Selling Shareholder is a party relating to the
issued or unissued capital stock of HVE or any of its subsidiaries or
obligating HVE or any Selling Shareholder to grant, issue or sell any shares
of the capital stock of HVE, by sale, lease, license or otherwise.
(f) take all such steps as are commercially reasonable in order to
consummate
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the Merger and all other transactions contemplated hereby.
SECTION 5.02. NEGATIVE COVENANTS OF HVE. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by IN,
from the date of this Agreement until the Effective Time, HVE will not do,
and will not permit any of its subsidiaries to do, any of the foregoing:
(a) (i) except as set forth on in Schedule 5.02(a) to the HVE
Disclosure Schedule, increase the compensation payable to or to become
payable to any director or executive officer; (ii) grant any severance or
termination pay to, or enter into or amend any employment or severance
agreement with, any director, officer or employee; (iii) establish, adopt or
enter into any employee benefit plan or arrangement; or (iv) except as may be
required by applicable law, adopt, amend, or take any other actions with
respect to, any HVE Benefit Plans or any of the plans, programs, agreements,
policies or other arrangements described in Section 3.10(d) of this Agreement;
(b) except as set forth on Schedule 5.02(b) to the HVE Disclosure
Schedule, declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(c) except as contemplated by this Agreement, (i) redeem,
purchase or otherwise acquire any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of
its capital stock or any options, warrants or conversion or other rights to
acquire any shares of its or its subsidiaries' capital stock or any such
securities or obligations (except in connection with the exercise of
outstanding stock options in accordance with their terms); (ii) effect any
reorganization or recapitalization; or (iii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of
its capital stock;
(d) except as contemplated by this Agreement, issue, deliver,
award, grant or sell, or authorize or propose the issuance, delivery, award,
grant or sale (including the grant of any security interests, liens, claims,
pledges, limitations in voting rights, charges or other encumbrances) of, any
shares of any class of its capital stock (including shares held in treasury),
any securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options to acquire any such shares (except
for the issuance of shares upon the exercise of outstanding stock options or
the vesting of restricted stock in accordance with the terms of outstanding
HVE Stock Awards); amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof; or take any action to accelerate the
exercisability of stock options;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
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otherwise acquire or agree to acquire any assets of any other person (other
than the purchase of assets from suppliers or vendors in the ordinary course
of business and consistent with past practice);
(f) except as disclosed in Schedule 5.02(f) to the HVE Disclosure
Schedule, sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its material assets or any except for the sale of
inventory or other dispositions in the ordinary course;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal relating to, or that may reasonably
be expected to lead to, any Competing Transaction (as defined below), or
enter into discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to or endorse
any Competing Transaction, or authorize or permit any of the officers,
directors or employees of HVE or any investment banker, financial advisor,
attorney, accountant or other representative retained by HVE to take any such
action, and HVE shall promptly notify IN of all relevant terms of any such
inquiries and proposals received by HVE or by any such officer, director,
investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and if such inquiry or proposal
is in writing, HVE shall promptly deliver or cause to be delivered to IN a
copy of such inquiry or proposal. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following (other than the transactions
contemplated by this Agreement) involving a party hereto or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination or similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 20% or more of the assets of a party
hereto and its subsidiaries, taken as a whole, (iii) any tender offer or
exchange offer for 20% or more of the outstanding shares of capital stock of
a party hereto or the filing of a registration statement under the Securities
Act in connection therewith; (iv) any person (other than stockholders as of
the date of this Agreement) having acquired beneficial ownership of, or any
group (as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 20% or
more of the outstanding shares of capital stock of a party hereto; or (v) any
public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(h) release any third party from its obligations, or grant any consent,
under any existing standstill provision relating to a Competing Transaction
or otherwise under any confidentiality or other agreement, or fail to enforce
any such agreement in all material respects;
(i) adopt or propose to adopt any amendments to its articles of
incorporation or bylaws, which would alter the terms of its capital stock or
would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(j) (A) change any of its methods of accounting in effect at December 31,
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1998, or (B) make or rescind any express or deemed election relating to Taxes,
settle or compromise any claim, action, suit, litigation, audit or
controversy relating to Taxes (except where the amount of such settlements or
controversies, individually or in the aggregate, does not exceed $10,000), or
change any of its methods of reporting income or deductions for federal income
tax purposes from those employed in the preparation of the federal income tax
returns for the taxable year ended December 31, 1998, except in each case,
as may be required by Law or generally accepted accounting principles;
(k) except as set forth in schedule 5.02(k) of the HVE Disclosure
Schedule, incur any obligations for borrowed money or purchase money
indebtedness or guarantee, whether or not evidenced by a note, bond,
debenture or similar instrument, except in the ordinary course of business
consistent with past practice and in no event in excess of $10,000 in the
aggregate, other than legal fees which shall not exceed $25,000;
(l) enter into any material arrangement, agreement or contract with
any third party which provides for an exclusive arrangement with that third
party or is substantially more restrictive on HVE or substantially less
advantageous to HVE than arrangements, agreements or contracts existing on
the date hereof;
(m) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other material
reorganization of HVE;
(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities or
obligations, (x) reflected on, or reserved against in, or contemplated by,
the HVE Balance Sheet (including the notes thereto) of HVE, (y) incurred
in the ordinary course of business consistent with past practice or (z) which
are legally required to be paid, discharged or satisfied;
(o) knowingly take, or agree to commit to take, any action that would
make any representation or warranty of HVE contained herein inaccurate in any
respect at, or as of any time prior to, the Effective Time.
(p) except to the extent described in Schedule 5.02(p) of the HVE
Disclosure Schedule, HVE will not engage in any transaction with, or enter
into any agreement, arrangement, or understanding with, directly or
indirectly, any of HVE's affiliates, including, without limitation, any
transactions, agreements, arrangements or understanding with any affiliate or
other person covered under Item 404 of Regulation S-K promulgated under the
Securities Act, other than pursuant to such agreement, arrangements or
understandings existing on the date of this Agreement (which are set forth on
Section 5.02(p) of the HVE Disclosure Schedule) or as disclosed in writing to
IN on the date hereof or which are contemplated under this Agreement;
provided, that HVE provides IN with all information concerning any such
agreement, arrangement or understanding that IN may reasonably request;
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(q) except as may be set forth in Schedule 5.02(q) to the HVE
Disclosure Schedule, agree to or approve any commitment, including any
authorization for expenditure or agreement to acquire property, obligating
HVE for an amount in excess of $10,000;
(r) engage in any futures or options trading or be a party to any
price or currency swaps, xxxxxx, futures or derivative instruments; or
(s) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. COVENANTS AND CONSENT OF THE SELLING SHAREHOLDERS. In
lieu of a meeting of stockholders, the Merger, this Agreement and the
transactions contemplated hereby shall be approved upon written consent,
without a meeting, in accordance with the provisions of California Law, and
the execution and delivery of this Agreement by the Selling Shareholders shall
constitute their written consent to the Merger, this Agreement and the
consummation of the transactions contemplated hereby for all purposes
required by the applicable provisions of California Law in order to approve
and effectuate the Merger. Each Selling Shareholder hereby irrevocably waives
any and all rights to assert any dissenters' rights and appraisal rights
granted under the provisions of any Law with respect to the Merger, this
Agreement or the transactions contemplated hereby. HVE hereby agrees to
secure similar proxies and written consents from all other HVE stockholders,
if any, and deliver them to IN prior to the Effective Time in sufficient time
to meet all applicable procedural requirements of California Law regarding
stockholder approval of mergers or other business combinations. Prior to the
Closing Date, the Selling Shareholders shall not, directly or indirectly,
sell, transfer, convey, encumber, pledge, assign, hypothecate, or otherwise
dispose of or lose possession of any of their shares of HVE Common Stock.
SECTION 5.04. AFFIRMATIVE COVENANTS OF IN.
(a) IN hereby covenants and agrees that, at or prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by HVE, IN will:
(i) continue to operate its business in all material respects
in the usual and ordinary course, consistent with past practice;
(ii) use all reasonable efforts to preserve substantially
intact its business organization, maintain its material rights and
franchises, retain the services of its respective officers and IN employees
and maintain its relationships with its material customers and suppliers;
(iii) maintain and keep its material properties and assets in
as good repair and condition as at present, ordinary wear and tear excepted,
and maintain supplies and inventories in quantities consistent with its
customary business practice;
(iv) use all reasonable efforts to keep in full force and
effect insurance
36
and bonds comparable in amount and scope of coverage to that currently
maintained;
(v) take all such steps as are commercially reasonable in
order to consummate the Merger and all other transactions contemplated
hereby, including, without limitation, securing all requisite consents
thereto.
SECTION 5.05. ACCESS AND INFORMATION
(a) Except for HVE's proprietary product and customer databases,
HVE shall afford IN and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
the "IN Representatives") reasonable access at reasonable times, upon
reasonable prior notice, to the officers, employees, agents, properties,
offices and other facilities of HVE and to the books and records thereof and
furnish promptly to IN and the IN Representatives such information concerning
the business, properties, contracts, records and personnel of HVE (including,
without limitation, financial, operating and other data and information) as
may be reasonably requested, from time to time, by IN or such Representatives.
(b) IN shall (i) afford to HVE and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "HVE Representatives") reasonable access
at reasonable times, upon reasonable prior notice, to the officers,
employees, accountants, agents, properties, offices and other facilities of
IN and to its books and records and (ii) furnish promptly to HVE and HVE
Representatives such information concerning the business, properties,
contracts, records and personnel of IN (including, without limitation,
financial, operating and other data and information) as may be reasonably
requested, from time to time, by HVE or such Representatives.
(c) Notwithstanding the foregoing provisions of this Section 5.05,
neither party shall be required to grant access or furnish information to the
other party to the extent that such access to or the furnishing of such
information is prohibited by Law. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and warranties of
the parties which are herein contained and each such representation and
warranty shall survive such investigation.
(d) Each of the parties hereto will treat and hold as confidential
any information ("Confidential Information") concerning the business and
affairs of IN or HVE that is not already generally available to the public,
refrain from using any of the Confidential Information except in connection
with this Agreement, and deliver promptly to the party providing such
information or destroy, at the request and option of such party, all tangible
embodiments (and all copies) of the Confidential Information which are in his
or its possession. In the event that any party hereto is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such person will
notify the other parties promptly of the request or requirement so that the
other parties may seek an appropriate protective order or waive compliance
37
with the provisions of this Section 5.05(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any party hereto is,
on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, such person may disclose
the Confidential Information to the tribunal; PROVIDED, HOWEVER, that the
disclosing person shall use his or its best efforts to obtain, at the request
of the other parties, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to
be disclosed as the other parties shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available
to the public immediately prior to the time of disclosure.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDER APPROVAL.
HVE shall, promptly after the date hereof, take all actions
necessary in accordance with California Law, and its articles of
incorporation and bylaws to solicit written consents of stockholders, to act
on this Agreement. HVE shall solicit from stockholders of HVE written
consents in favor of the approval and adoption of this Agreement required by
California Law and its articles of incorporation and bylaws to approve and
adopt this Agreement, the Merger and the consummation of the transactions
contemplated hereby.
SECTION 6.02. REGISTRATION STATEMENT: INFORMATION
(a) If at any time IN proposes to register any of its Common Stock
under the Securities Act for sale to the public (such sale being hereinafter
referred to as a "Public Offering"), except with respect to registration
statements on Forms X-0, X-0 or their then equivalents, until such time as
the Merger Consideration shall become transferable under the Securities Act
pursuant to Rule 144 promulgated thereunder, IN shall give written notice to
each Selling Shareholder of its intention to do so. Upon the written request
of any Selling Shareholder, received by IN within thirty (30) days after the
giving of any such notice by IN to include in the registration statement with
respect to such Public Offering (each, a "Piggyback Registration Statement")
any of his Merger Consideration (which request shall state the intended
method of disposition thereof), IN shall use its best efforts to cause such
shares to be included in the securities to be sold in such Public Offering,
all to the extent requisite to permit the sale or other disposition by each
requesting Selling Shareholder (in accordance with his written request) of
his shares.
(b) Once and only once, as promptly as practicable after the receipt
of a written demand from a majority in number of the Selling Shareholders
(provided they continue to hold beneficially at least 70,000 issued and
outstanding shares of IN Common Stock and such shares are not freely
transferable under Rule 144 without any discount in price due to the volume
or other
38
limitations imposed by such Rule), IN shall prepare and file with the
Commission a registration statement on Form X-0, X-0 or S-3, or their then
equivalent (the "Demand Registration Statement", and together with any
Piggyback Registration Statements, the "Registration Statements") registering
the shares of IN Common Stock issued in connection with the Merger. IN shall
use its best efforts to cause such Demand Registration Statement to be
declared effective by the Commission as promptly as practicable.
(c) IN shall furnish each Selling Shareholders whose shares
are being registered on any Registration Statement with a reasonable number
of copies of the prospectus included in such Registration Statement for use
in connection with any sales of his shares as soon as practicable after such
Registration Statement is declared effective by the Commission. IN agrees to
bear all of the costs associated with the preparation and filing of any
Registration Statement, including all filing fees, legal, accounting and
printing costs but shall not be required to pay the legal or accounting costs
or underwriting fees and expenses, if any, incurred by any Selling
Shareholder. If a Demand Registration Statement is on Form S-1 or S-2, IN
shall prepare and file with the Commission all Post-Effective Amendments
necessary to keep such Registration Statement current for the period ending
on the earlier of (i) the sale of all the shares of IN Common Stock included
in such Registration Statement or (ii) the second anniversary of the Effective
Time. The inclusion of any Selling Shareholders shares of IN Common Stock in
any Registration Statement shall be contingent upon the receipt from such
Selling Shareholder of all such information required to be disclosed in the
Registration Statement under the Securities Act by the Selling Shareholder
pursuant to applicable rules and regulations promulgated by the Commission.
(d) IN hereby represents and warrants to each Selling
Shareholder that the information contained in any Registration Statement
including Merger Consideration (other than information to be furnished by the
Selling Shareholders) shall not, at the time the Registration Statement is
declared effective by the Commission mailed to IN stockholders contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All documents that IN is responsible for filing with the
Commission in connection with the transactions contemplated herein shall
comply as to form in all material respects with the applicable requirements
of the Securities Act and the rules and regulations thereunder and the
Exchange Act and the rules and regulations thereunder.
(e) Each Selling Shareholder represents and warrants to IN
that the information to be supplied by such Selling Shareholder for inclusion
any Registration Statement shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) If any offering of IN Common Stock pursuant to a
Registration Statement is an underwritten public offering and the managing
underwriter determines in good faith and advises IN in writing that the
number of shares of IN Common Stock which IN proposes to offer
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under such Registration Statement, together with the Merger Consideration and
other shares of Common Stock requested to be included in such Registration
Statement by the holders of securities having registration rights similar to
those of this Section 6.02, exceeds the number of shares of equity securities
it is advisable to offer and sell at such time, then the number of shares to
be sold by IN, each Selling Shareholder and such other shareholders shall be
reduced pro-rata; provided that the number of shares to be sold by IN, each
requesting Selling Shareholder and such other shareholders after such
reduction shall be allocated among IN, each requesting Selling Shareholder
and such other shareholders such that IN shall have the right to have offered
no less than 75% of the original number of shares proposed or requested by IN
to be registered. Notwithstanding the foregoing provisions, IN may withdraw
any Piggyback Registration Statement referred to in this Section 6.02 without
thereby incurring any liability to any Selling Shareholder provided that IN
withdraws the entire registration statement to which such Piggyback
Registration Statement relates.
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS; INDEMNIFICATION.
(a) HVE and IN shall each use all reasonable efforts to (i)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions contemplated by
this Agreement, (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to
be obtained or made by IN or HVE in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the Merger,
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act and the rules and regulations
thereunder, and any other applicable federal or state securities laws, and
(B) any other applicable Law; provided that IN and HVE shall cooperate with
each other in connection with the making of all such filings, including
providing copies of all such documents to the nonfiling party and its
advisors prior to such filings and, if requested, shall accept all reasonable
additions, deletions or changes suggested in connection therewith. HVE and IN
shall furnish all information required for any application or other filing to
be made pursuant to the rules and regulations of any applicable Law
(including, without limitation, all information required to be included in
the Registration Statement) in connection with the transactions contemplated
by this Agreement.
(b) IN and HVE agree to cooperate with respect to, and shall
cause each of their respective subsidiaries to cooperate with respect to, and
agree to use all reasonable efforts vigorously to contest and resist, any
action, including legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") of any
Governmental Entity that is in effect and that restricts, prevents or
prohibits the consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. Each of IN and HVE also agree to take any and
all actions, including, without limitation, the disposition of assets or the
withdrawal from doing business in particular jurisdictions, required
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by regulatory authorities as a condition to the granting of any approvals
required in order to permit the consummation of the Merger or as may be
required to avoid, lift, vacate or reverse any legislative or judicial action
which would otherwise cause any condition to Closing not to be satisfied;
provided, however, that in no event shall IN be required to take any action
that would or could reasonably be expected to have a IN Material Adverse
Effect, and HVE shall not be required to take any action which would or could
reasonably be expected to have an HVE Material Adverse Effect.
(c) Each of IN and HVE shall promptly notify the other of
(w) any material change in its current or future business, assets,
liabilities, financial condition or results of operations, (x) any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Governmental Entities with respect to its
business or the transactions contemplated hereby, (y) the institution or the
threat of material litigation involving it or any of its subsidiaries or (z)
any event or condition that might reasonably be expected to cause any of its
representations, warranties, covenants or agreements set forth herein not to
be true and correct at the Effective Time. As used in the preceding sentence,
"material litigation" means any case, arbitration or adversary proceeding or
other matter which would have been required to be disclosed on the HVE
Disclosure Schedule pursuant to Section 3.09 or the IN Disclosure Schedule
pursuant to Section 4.09, as the case may be, if in existence on the date
hereof, or in respect of which the legal fees and other costs to HVE might
reasonably be expected to exceed $10,000 over the life of the matter or to IN
(or its subsidiaries) might reasonably be expected to exceed $10,000 over the
life of the matter.
(d) In the event of any threatened, pending or completed
claim, action, suit, investigation or any legal, administrative or other
proceeding ("proceeding") by any governmental entity or other person which
questions the validity or legality of the transactions contemplated by this
Agreement or seeks to enjoin, restrain or prohibit such transactions, or
seeks damages in connection therewith, whether before or after the Effective
Time of the Merger, IN and IN agree, to the fullest extent permissible by
law, to vigorously defend and respond thereto.
SECTION 6.04. TAX AND ACCOUNTING TREATMENT. Each party hereto shall
use all reasonable efforts to cause the Merger to qualify, and shall not
take, and shall use all reasonable efforts to prevent any affiliate of such
party from taking, any actions that could prevent the Merger from qualifying,
as a reorganization under the provisions of section 368(a) of the Code or
from qualifying for the "pooling of interests" method of accounting as
provided in APB 16.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. Neither party shall issue any
press release or otherwise make any public statements with respect to the
Merger without the approval of the other.
SECTION 6.06. NO INTERFERENCE. Pending the Closing, neither party
shall take any action which would unreasonably be expected to interfere with
the business or operations of the other.
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SECTION 6.07. FORM D FILING. At or immediately after the Closing, IN
shall file with the Commission an appropriately completed, dated and executed
Form D reflecting the issuance of the Merger Consideration.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions, any
or all of which may be waived in writing by the parties hereto, in whole or
in part to the extent permitted by applicable Law:
(a) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issues, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect
and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(b) GOVERNMENTAL APPROVALS. All approvals, waivers and/or consents
required to be issues by any Governmental Entity or otherwise respecting the
Merger, this Agreement and the consummations of the transactions contemplated
hereby shall have been timely obtained.
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF IN. The
obligations of IN to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in writing by IN, in whole or in part, to the extent permitted by applicable
law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Sellers contained in this Agreement shall be true and correct
as of the Closing Date as though made on and as of the Closing Date (except
to the extent such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties shall be ture
an correct as of such earlier date). IN shall have received a certificate of
the President and the Chief Financial Officer of HVE and each Selling
Shareholder, dated the Closing Date, to such effect.
(b) AGREEMENTS AND COVENANTS. Sellers shall have performed or
compiled with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, including,
without limitation, the receipt of the approval and adoption by the requisite
vote of the HVE stockholders of the Merger, this Agreement and the
consummation of the transactions contemplated thereby. IN shall have
received a certificate of the President and Chief Financial Officer of HVE
and each Selling Shareholder, dated the
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Closing Date, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the current or
future business, assets, liabilities, financial condition or results of
operations of HVE having or reasonably likely to have, individually or in the
aggregate, an HVE Material Adverse Effect. IN shall have received a
certificate of the President and Chief Financial Officer of HVE, and Xxxxxx,
dated the Closing Date, to such effect.
(d) ABSENCE OF REGULATORY CONDITIONS. There shall not be any action
taken, or any statute rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, by any Governmental Entity in connection
with the grant of a regulatory approval necessary, in the reasonable business
judgment of IN, to the continuing operation of the current or future business
of HVE, which imposes any condition or restriction upon IN or the business or
operations of HVE which, in the reasonable business judgment of IN, would be
materially burdensome in the context of the transactions contemplated by this
Agreement.
(e) HVE COUNSEL'S OPINION. IN shall have received from Xxxxxxx &
Xxxxxx, a favorable opinion dated the Closing Date in form and substance
reasonably satisfactory to IN and its counsel.
(f) WITHHOLDING. HVE must not have determined to withhold any amount
from the Merger Consideration pursuant to the tax withholding provisions of
section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code, or of
any other provision of law.
(g) DISSENTER' RIGHTS. No dissenters' rights have been asserted by
any HVE stockholders.
(h) HVE FINANCIAL STATEMENTS AND BALANCE SHEET. HVE shall have
furnished IN with the IN Financial Statements and HVE Balance Sheet, each
certified by HVE's independent auditors, and the HVE Disclosure Schedule at
the Closing Date which shall be reasonably satisfactory in form and substance
to IN.
(i) STOCKHOLDER APPROVAL. The Merger, this Agreement and the
consummation of the transactions contemplated hereby shall have been approved
and adopted upon written consent of the stockholders of HVE.
(j) RESIGNATIONS. IN shall have received the resignations of Xxxx
Xxxxxx, Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxx as directors of HVE, effective
on or prior to the Effective Time.
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLERS. The
obligations of Sellers to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may
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be waived in writing by Sellers, in whole or in part, to the extent permitted
by applicable law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of IN contained in this Agreement shall be true and correct as of
the Closing Date as though made on and as of the Closing Date (except to the
extent such representations and warranties specifically relate to an earlier
date, in which such representations and warranties shall be true and correct
as of such earlier date). HVE shall have received a certificate of the
President and Chief Financial Officer of IN, dated the Closing Date, to such
effect.
(b) AGREEMENTS AND COVENANTS. IN shall have performed or complied
with all agreements and covenants required by this Agreement to be performed
or complied with by it on or prior to the Closing Date.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall have been no change, occurrence or circumstance in the current or
future business, assets, liabilities, financial condition or results of
operations of IN or any of its subsidiaries having or reasonably likely to
have, individually or in the aggregate, a IN Material Adverse Effect.
(d) ABSENCE OF REGULATORY CONDITIONS. There shall not be any action
taken, or any statute rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, by any Governmental Entity in connection
with the grant of a regulatory approval necessary, in the reasonable business
judgment of HVE, to the continuing operation of the current or future
business of IN, which imposes any condition or restriction upon IN or the
business or operations of IN which, in the reasonable business judgment of
HVE, would be materially burdensome in the context of the transactions
contemplated by this Agreement.
(e) IN DISCLOSURE SCHEDULE. IN shall have furnished HVE with the IN
Disclosure Schedule which shall be reasonably satisfactory in form and
substance to HVE.
(f) EMPLOYMENT AGREEMENT. IN shall have executed and delivered to
Xxxxxx at the Closing an Employment Agreement, dated the Closing Date, in
substantially the form of Exhibit D.
(g) IN COUNSEL'S OPINION. HVE shall have received from Gay Harwin,
Esq. a favorable opinion dated the Closing Date in form and substance
reasonably satisfactory to HVE and its counsel.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of IN and HVE;
(b) by IN, upon a material breach of any representation, warranty,
covenant or agreement on the part of HVE set forth in this Agreement, or if
any representation or warranty of HVE shall have become untrue, in either
case such that the conditions set forth in Section 7.02(a) or Section 7.02(b)
of this Agreement, as the case may be, would be incapable of being satisfied
by February 28, 1999 (or as otherwise extended as described in Section
8.01(e)); provided, that in any case, a wilful breach shall be deemed to case
such condition as to be incapable of being satisfied for purposes of this
Section 8.01(b);
(c) by HVE, upon a material breach of any representation, warranty,
covenant or agreement on the part of IN, set forth in this Agreement, or if
any representation or warranty of IN shall have become untrue, in either case
such that the conditions set forth in Section 7.03, (a) or Section 7.03(b) of
this Agreement, as the case may be, would be incapable of being satisfied by
February 28, 1999 (or as otherwise extended as described in Section 8.01(e));
provided, that in any case, a wilful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of Section 8.01(c);
(d) by either IN or HVE, if there shall be any Order which is final
and nonappealable preventing the consummation of the Merger, except if the
party relying on such Order to terminate this Agreement has not complied
with its obligations under Section 6.03(b) of this Agreement;
(e) by either IN or HVE, if the Merger shall not have been
consummated before February 28, 1999; provided, however, that this Agreement
may be extended by written notice of either IN or HVE to a date not later
than March 15, 1999, if the Merger shall not have been consummated as a
direct result of HVE or IN having failed by February 28, 1999 to receive all
required regulatory approvals or consents with respect to the Merger; or
(f) by IN, if this Agreement and the Merger shall fail to be
approved and adopted by the requisite numbers of stockholders of HVE in
accordance with California Law.
The right of any party hereto to terminate this Agreement pursuant
to this Section 8.01 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, representatives or agents, whether prior to or alter the execution
of this Agreement.
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SECTION 8.02. EFFECT OF TERMINATION. Except as provided in Section 8.05
or Article IX of this Agreement, in the event of the termination of this
Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, there shall be no liability on the part of IN or HVE to the other and
all rights and obligations of any party hereto shall cease, except that
nothing herein shall relieve any party of any liability for any material
breach of such party's covenants or agreements contained in this Agreement,
or any willful breach of such party's representations or warranties contained
in this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto at any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the stockholders of HVE, no amendment, which
under applicable Law may not be made without the approval of the stockholders
of HVE, may be made without such approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any
party hereto may extend the time for the performance of any of the
obligations or other acts of the other party hereto, waive any inaccuracies
in the representations and warranties of the other party contained herein
or in any document delivered pursuant hereto and waive compliance by the other
party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument i9n
writing signed by the party or parties to be bound thereby.
SECTION 8.05. FEES, EXPENSES AND OTHER PAYMENTS.
(a) Except as provided in Section 8.05(c) of this AGreement, in the
event the Merger is not consummated all Expenses (as defined in paragraph (b)
of this Section 8.05) incurred by the parties hereto shall be borne solely
and entirely by the party that has incurred such Expenses.
(b) "Expenses" as used in this Agreement shall include all
out-of-pocket expenses (including, without limitation, all fees and expenses
of counsel, accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, and all other matters related to
the consummation of the transactions contemplated hereby.
(c) If the Merger is consummated, IN shall pay any sales or
transfer taxes payable with respect to the exchange and surrender of the HVE
Shares.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except to
the extent otherwise specified herein to the contrary, the rights of the
respective parties hereto to enforce or assert a claim for breach of any of
the representations, warranties, covenants and agreements herein shall
survive the execution and delivery of this Agreement and the Closing
hereunder and shall thereafter terminate and expire with respect to any
theretofore unasserted claim by IN against any Selling Shareholder for
indemnification pursuant to Section 9.02 hereof, or with respect to any
theretofore unasserted claim by any Selling Shareholder against IN for
indemnification pursuant to Section 9.03 hereof, on the date which is
twenty-four (24) months after the Closing Date, except for the
representations and warranties contained in Sections 3.01, 3.02, 3.11, 3.12,
3.13, 3.14, 3.22, 4.11 and 4.24 and the provisions of Sections 5.05(d), 6.02,
8.02, 8.05 and this Article IX, which shall survive and continue in full
force and effect as provided therein until the expiration of the applicable
statute of limitation. Notwithstanding the foregoing, the right to enforce or
assert a claim for damages for breach of any representation, warranty,
covenant or agreement in respect of which indemnity may be sought under
Section 9.02 or 9.03 shall survive the time at which it would otherwise
terminate if notice of the inaccuracy or breach thereof giving rise to such
right to indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time. The right to indemnification,
payment of Losses (as defined below) or other remedy based on such
representations, warranties, covenants and obligations will not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement on the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Losses, or other remedy based on such
representations, warranties, covenants and obligations. In respect of any
matter for which indemnifications may be claimed hereunder, no claim for
indemnification hereunder of less than $1,000 shall be made unless and until
the aggregate amount of such claims against IN or any Selling Shareholder
exceeds $15,000, in which case such aggregate amount, and any subsequent such
claims, may be claimed hereunder.
SECTION 9.02. INDEMNIFICATION OF IN. (a) Subject to the provisions of
Section 9.01, each Selling Shareholder (other than Xxxxxx, with respect to
whom the Indemnity provisions hereunder are limited to Xxxxxx'x express
representations in this Agreement hereby agrees, individually with respect to
the representations with respect to the Selling Shareholders set forth in
Sections 3.03(c), 3.04, 3.05 and 3.22, and jointly and severally with respect
to all other representations and covenants, to indemnify and hold IN and its
officers, directors, employees, agents, attorneys and other representatives
(collectively, "Representatives"), stockholders and controlling persons
harmless against any and all damages, losses, settlement payments,
liabilities, judgments, penalties, interest, and reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements (collectively, "Losses")) suffered, sustained, incurred
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or required to be paid by IN or its Representatives, stockholders or
controlling persons, and affiliates relating to, arising, directly or
indirectly, out of, or in connection with:
(a) the claims of brokers or finders hired by or claiming to have been
hired by any Seller; or
(b) the breach of any representation or warranty made by any Seller in
this Agreement either when made or as if such representation or warranty were
made on and as of the Closing Date (in each case, without giving effect to
any supplement to the Schedules made after the date hereof), or breach of any
covenant or agreement of any Seller contained in this Agreement.
(c) The remedies provided in this Section 9.02 shall not be exclusive
of or limit any other remedies that may be available to any Indemnified Party
(as defined below in Section 9.04).
Notwithstanding any other provision of this Agreement, the Indemnity
obligations of each of the Selling Shareholders shall be limited to the
amount of Merger Consideration actually received by such Selling Shareholder.
SECTION 9.03. INDEMNIFICATION OF SELLERS. Subject to the provisions of
Section 9.01, IN hereby agrees to indemnify and hold each Selling Shareholder
and its Representatives harmless against any and all Losses suffered,
sustained, incurred or required to be paid by such Selling Shareholder and
its Representatives relating to, arising, directly or indirectly, out of, or
in connection with:
(i) the claims of brokers or finders hired by or claiming to have
been hired by IN; or
(ii) the breach by IN of any of its obligations under this
agreement or the breach by IN of any of the representations, warranties or
covenants of IN hereunder.
SECTION 9.04. NOTICE TO INDEMNIFYING PARTY. Promptly after any Selling
Shareholder or IN, as the case may be, (i) receives notice of any claim or
the commencement of any investigation, action or proceeding against any of
them or (ii) has knowledge of any claim, investigation, action or proceeding
brought against them, or of circumstances which are likely to give rise to
any such claim, investigation, action or proceeding, or rights to
indemnification hereunder, such party (the "Indemnified Party") shall, if a
claim for reimbursement or setoff with respect thereto is to be made against
a party hereto obligated to provide indemnification (the "Indemnifying
Party") under Section 9.02 or 9.03 above or Section 9.06 below, give the
Indemnifying Party written notice of such claim, threatened claim or
circumstances or of the commencement of such investigation, action or
proceeding. Such written notice shall be given within thirty (30) days after
receipt of written notice, or a summons and complaint or other legal process,
or within sixty (60) days after receipt of knowledge of any other claim,
investigation, action or proceeding or of circumstances which are likely to
give rise to any such claim, investigation, action or proceeding or rights to
indemnification hereunder. The failure to so notify the Indemnifying Party
will not relieve the Indemnifying Party of any liability that it may have to
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any Indemnified Party hereunder, except to the extent that the Indemnifying
Party demonstrates that the defense of such action is prejudiced by such
failure by the Indemnifying Party to give such notice.
SECTION 9.05. COMPROMISE OF CLAIMS. (a) If a claim under this Article IX
involves a claim by a third party against the Indemnified Party, the
Indemnifying Party shall have thirty (30) days after receipt of written
notice thereof to decide whether the Indemnifying Party will undertake,
conduct and control, through counsel of its own choosing and at its own
expense, the settlement or defense thereof, and if it so decides, the
Indemnified Party may cooperate with it in connection therewith; PROVIDED,
that the Indemnified Party may participate in such settlement or defense
through counsel chosen by it; and PROVIDED FURTHER, that the fees and
expenses of such counsel shall be borne by the Indemnified Party. If the
Indemnifying Party assumes the defense of a proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made
in that proceeding are within the scope of and subject to indemnification;
(ii) no compromise or settlement of such claims may be effected by the
Indemnifying Party without the Indemnified Party's consent, which shall not
be unreasonably withheld, unless (A) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect on
any other claims that may be made against the Indemnified Party, (B) the sole
relief provided is monetary damages and (C) such compromise or settlement
does not contemplate or result in any monetary damages that are to be paid by
the Indemnified Party; and (iii) the Indemnified Party will have no liability
with respect to any compromise or settlement of such claims effected without
its consent. If notice is given to an Indemnifying Party of the commencement
of any proceeding and the Indemnifying Party does not, within ten days after
the Indemnifying Party's notice is given, give notice to the Indemnified
Party of its election to assume the defense of such proceeding, the
Indemnifying Party will be bound by any determination made in such proceeding
or any compromise or settlement effected by the Indemnified Party.
(b) The Indemnified Party shall cooperate fully in all aspects of any
investigation, defense, pretrial activities, trial, compromise, settlement or
discharge of any claim in respect of which indemnity is sought pursuant to
this Article IX, including, but not limited to, providing the other party
with reasonable access to physical facilities and offices, books and records
and employees and officers (including as witnesses) and other information.
(c) Notwithstanding the foregoing, if an Indemnified Party determines
in good faith that there is a reasonable probability that a proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise or settle such proceeding,
but the Indemnifying Party will not be bound by any determination of a
proceeding so defended or any compromise or settlement effected without its
consent (which shall not be unreasonably withheld).
(d) Each Indemnifying Party hereby consents to the non-exclusive
jurisdiction of any court in which a proceeding is brought by a third party
against any Indemnified Party for purposes of any claim that an Indemnified
Party may have under this Agreement with
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respect to such proceeding or the matters alleged therein, and agrees that
process may be served on such Indemnifying Party with respect to such a claim
anywhere in the world.
SECTION 9.06. RIGHT OF SET-OFF. Upon notice to the Selling
Shareholders specifying in reasonable detail the basis for such set-off, IN
may set off any amount to which it may be entitled under this Article IX
against amounts otherwise payable to any Selling Shareholder hereunder as
Merger Compensation. The exercise of such right of set-off by IN in good
faith will not constitute a breach of this Agreement. In the event that IN
shall exercise its right of set off hereunder with respect to a portion of
the Merger Consideration (the "Set-Off Shares"), and it is finally determined
by a court of competent jurisdiction (including all appellate counts) that IN
is not, in fact, entitled to the Set-Off Shares under this Article IX, then
IN shall issue the Set-Off Shares to the Selling Shareholders, together with
additional shares of IN Common Stock in the amount equal to 10% of the amount
of the Set-Off Shares, such additional shares to serve as liquidated damages
for the delay suffered by the Selling Shareholders in receiving their Set-Off
Shares. Neither the exercise of nor the failure to exercise such right of
set-off will constitute an election of remedies or limit IN in any manner in
the enforcement of any other remedies that may be available to it; nor will
the exercise, failure to exercise or existence of IN's right hereunder to
exercise such right of set-off prejudice in any way the adjudication of the
merits of any claim asserted by IN in any subsequent proceeding. Nothing
contained herein shall prevent the Selling Shareholders from seeking or
obtaining all of their damages from IN as a result of the wrongful set-off by
IN of the Set-Off Shares.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given upon receipt, if delivered personally or by air courier, or mailed
by registered or certified mail (postage prepaid, return receipt requested),
to the parties at the following addresses (or at such other address for a
party as shall be specified by like changes of address) or sent by facsimile
transmission to the telecopier number specified below (to be followed
promptly by personal or air courier delivery or mailing as hereinafter
provided):
If to IN, to:
00000 X. Xxxxxxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Attn: Mr. Xxxx Xxxxx
Facsimile Number: (000) 000-0000
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with copy to: Xxxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
If to HVE or Xxxxxx, to:
Xxxxx Xxxxxx
0000 Xxxxxxxx Xxx
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
If to Xxxxx to:
Xxxxxxx X. Xxxxx, Esq.
00000 Xxxxx Xxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile (000) 000-0000
If to Xxxxxx to:
Xxxxxx X. Xxxxxx
000 X.X. 00xx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile (000) 000-0000
with copy of Notices to HVE, or any of the Selling Shareholders to:
Law Offices of Xxxxxxx & Revitz
10390 Santa Xxxxxx Boulevard 0xx Xxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxx Xxxxxxx, Esq.
Facsimile Number: (000) 000-0000
SECTION 10.02. CERTAIN DEFINITIONS. For the purposes of this
Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mention person;
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(b) a person shall be deemed a "beneficial owner" of or to have
"beneficial ownership" of HVE Common Stock or IN Common Stock, as the case
may be, in accordance with the interpretation of the term "beneficial
ownership" as defined in Rule 13d-3 under the Exchange Act, as in effect on
the date hereof; provided that a person shall be deemed to be the beneficial
owner of, and to have beneficial ownership of, HVE Common Stock or IN Common
Stock, as the case may be, that such person or any affiliate of such person
has the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise;
(c) "business day" means any day other than a day on which banks in
the State of California are authorized or obligated to be closed;
(d) "control" (including the terms "controlled," "controlled by"
and "under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise;
(e) "knowledge" or "known" shall mean, with respect to any matter
in question, if an executive officer of IN or HVE, as the case may be, has
actual knowledge of such matter;
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act).
SECTION 10.03. HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 10.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 10.05. ENTIRE AGREEMENT. This Agreement (together with the
Exhibits, the IN Disclosure Schedule and the HVE Disclosure Schedule)
constitutes the entire agreement of the parties, and supersedes all prior
agreements and undertakings, including that certain Letter of Intent dated
January 23, 1999, both written and oral, among the parties or between any of
them, with
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respect to the subject matter hereof.
SECTION 10.06. ASSIGNMENT. This Assignment shall not be assigned by
operation of law or otherwise.
SECTION 10.07. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy or any nature whatsoever under or
by reason of this Agreement.
SECTION 10.08. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 10.09. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law.
SECTION 10.10. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
SECTION 10.11 LEGAL FEES. In the event of any dispute or disagreement
arising out of or in connection with this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and court costs.
SECTION 10.12 FACSIMILE SIGNATURES. If a copy or counterpart of this
Agreement is originally executed and such copy or counterpart is thereafter
transmitted electronically by facsimile or similar device, such facsimile
document will for all purposes be treated as if manually signed by the party
whose facsimile signature appears.
-53-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first written above by their respective
officers thereunto duly authorized.
XXXXX NATURALS/4HEALTH, INC.
By: /s/ Xxxx Xxxxx
------------------------
Name: Xxxx Xxxxx
Title: President
By: /s/ Xxxxxx Xxxxxx
------------------------
Name: Xxxxxx Xxxxxx
Title: Secretary
HEALTH & VITAMIN EXPRESS, INC.
By: /s/ Xxxxx Xxxxxx
------------------------
Name: Xxxxx Xxxxxx
Title: President
By: /s/ Xxxxxxx X. Xxxxx
------------------------
Name: Xxxxxxx X. Xxxxx
Title: Secretary
/s/ Xxxxx Xxxxxx
------------------------
Xxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxx
------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxx
------------------------
Xxxxxx X. Xxxxxx
-54-
Schedule 1.05
Director's and Officers of the surviving corporation
Sole Director Xxxx Xxxxx
President, Secretary Xxxx Xxxxx
and Treasurer
-55-
[LOGO]
SECRETARY OF STATE
I, XXXX XXXXX, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 4 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it
is full, true and correct.
[SEAL] IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California
this day of
MAR - 3 1999
--------------------------------
/s/ Xxxx Xxxxx
Secretary of State
AGREEMENT OF MERGER
OF
HEALTH & VITAMIN EXPRESS, INC.
(A California Corporation)
WITH AND INTO
XXXXXXXXXX.XXX
(A California Corporation)
This Agreement of Merger is entered into by HEALTH & VITAMIN EXPRESS,
INC., a California corporation (hereafter the "Merging Corporation"), and
XXXXXXXXXX.XXX, a California corporation (hereafter the "Surviving
Corporation").
1. The Merging Corporation shall be merged into the Surviving
Corporation.
2. Each outstanding share of the Merging Corporation shall be
converted into the right to receive up to .07095337 shares of common voting
stock of XXXXX NATURALS/4 HEALTH, INC., a Utah corporation, which is the
parent corporation of the Survivor Corporation, subject to and in accordance
with the terms and provisions of that certain Agreement and Plan of Merger
dated as of February 15, 1999.
3. The outstanding shares of the Surviving Corporation shall remain
outstanding and are not affected by the merger.
4. The Merging Corporation shall from time to time, as and when
requested by the Surviving Corporation, execute and deliver all such
documents and instruments and take all such action necessary or desirable to
evidence or carry out this merger.
5. The effect of the merger and the effective date of the merger are
as prescribed by law.
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
XXXX X. XXXXX certifies that:
1. He is the President and the Secretary of XXXXXXXXXX.XXX, a
California corporation.
2. The Agreement of Merger in the form attached was duly approved
by the board of directors and shareholders of the Corporation.
3. The merger agreement was entitled to be and was approved by the
board alone under the provisions of Section 1201 of the California
Corporations Code.
4. Equity securities of the parent corporation of the Corporation
are to be issued in the merger and no vote of the shareholders of the parent
corporation was required.
I further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true
and correct of my own knowledge.
Date: February 15, 1999
/s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx, President
/s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx, Secretary
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
XXXXX XXXXXX and XXXXXXX X. XXXXX certify that:
1. They are the President and the Secretary, respectively, of
HEALTH & VITAMIN EXPRESS, INC., a California corporation.
2. The Agreement of Merger in the form attached was duly approved by
the board of directors and shareholders of the Corporation.
3. The shareholder approval was by the holders of 100 percent of the
outstanding shares of the Corporation.
4. There is only one class of shares and the number of outstanding
shares is 10,250,000.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true
and correct of our own knowledge.
Date: February 15, 1999
/s/ Xxxxx Xxxxxx
---------------------------
Xxxxx Xxxxxx, President
/s/ Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx, Secretary
[SEAL]
IN WITNESS WHEREOF, the parties have executed this Agreement.
HEALTH & VITAMIN EXPRESS, a
California corporation
By: /s/ Xxxxx Xxxxxx
---------------------------
Xxxxx Xxxxxx, President
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx, Secretary
XXXXXXXXXX.XXX, a California
corporation
By: /s/ Xxxx Xxxxx
------------------------------
Xxxx Xxxxx, President
By: /s/ Xxxx Xxxxx
------------------------------
Xxxx Xxxxx, Secretary
