Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of the 5th day of
June, 2003, by and among HBOA HOLDINGS, INC., a Florida corporation bearing
document number P00000095861 ("HBOA"), LEXSYS SOFTWARE CORP., a Florida
corporation bearing document number P94000007829 ("LSC") and the LSC
shareholders listed on the signature page hereof (collectively the "LSC
Shareholders"). HBOA and LSC are sometimes hereinafter referred to collectively
as the "Companies," or individually as a "Company." The Companies and the LSC
Shareholders are sometimes hereinafter referred to collectively as the
"Parties".
WHEREAS, the respective Boards of Directors of the Companies deem it
advisable and in the best interests of their respective shareholders that LSC be
acquired by and become a wholly owned subsidiary of HBOA, and in furtherance
thereof, the Boards of Directors of the Companies have approved the merger of a
Florida corporation (to be formed as a wholly owned subsidiary of HBOA
("Acquisition Sub")) with and into LSC, upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the Parties intend that this Agreement constitute a "plan of
reorganization" and that such plan qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), as a reverse triangular merger under Code Sections 368(a)(1)(A) and
368(a)(2)(E), and provide for the representations, warranties, agreements and
conditions applicable to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein, the
Parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.2 hereof), Acquisition Sub shall
be merged with and into LSC (the "Merger"), with LSC being the surviving
corporation in the Merger (the "Surviving Corporation") and the separate
existence of Acquisition Sub shall thereupon cease. The name of the Surviving
Corporation will be LexSys Corporation or any other name agreed upon by the
parties hereto. The Merger shall have the effects set forth in the Florida
Business Corporation Act (the "FBCA").
1.2 Effective Time of the Merger. The Merger shall become effective
(the "Effective Time") upon the completion of the filing of properly executed
Articles of Merger with the Secretary of State of the State of Florida, which
filing shall be made at the Closing which shall take place after satisfaction of
the conditions set forth herein.
1.3 Merger Consideration. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of capital stock of LSC,
HBOA or Acquisition Sub, the shares of common stock of LSC (the "LSC Share(s)")
issued and outstanding immediately prior to the Effective Time, shall be
exchangeable for and converted at the Effective Time into the right to receive
in the aggregate 1,000,000 validly issued, fully paid and non-assessable shares
of restricted common stock of HBOA (the "HBOA Shares"). The HBOA Shares will be
placed in escrow, pursuant to the terms and conditions of an escrow agreement
attached hereto as Exhibit 1.3, until the Closing.
1.4 Escrow of Shares of the Principals. Xxxxxx Xxx and Xxxxxxx Xxxxxx
each agree that they will each place 186,844 and 186,915, respectively, shares
of HBOA's common stock (the "Escrowed Shares), an aggregate of 373,759 shares of
HBOA's common stock in escrow, on the Closing Date, pursuant to the terms and
conditions of certain escrow agreements attached hereto as Exhibit 1.4A and
1.4B.
1.5 Funding of LexSys and Liabilities. LSC and its shareholders have
represented and warranted that their liabilities do not exceed $150,000 and
these liabilities and the creditors are listed on Schedule 3.6 attached hereto.
Within one hundred twenty (120) days after the Closing, HBOA has agreed that it
will pay these liabilities on behalf of LexSys.
1.6 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of Acquisition Sub shall be the Articles of
Incorporation of the Surviving Corporation.
1.7 Bylaws of the Surviving Corporation. The Bylaws of Acquisition Sub
as in effect at the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.8 Directors and Officers of the Surviving Corporation and Board Seat
on HBOA.
(a) The directors of Acquisition Sub at the Effective Time
shall be the initial directors of the Surviving Corporation of the Merger and
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the Articles
of Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by law.
(b) The officers of Acquisition Sub at the Effective Time
shall be the initial officers of the Surviving Corporation of the Merger and
shall hold office from the Effective Time until removed or until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
(c) LexSys shall have the right to appoint one person to
HBOA's Board of Directors for a period of one year after the Closing.
ARTICLE II
CONVERSION OF SHARES
2.1 Exchange Ratio. At the Effective Time by virtue of the Merger and
without any action on the part of the holder thereof:
(a) Each LSC Share issued and outstanding immediately prior to
the Effective Time shall be converted into and represent the right to receive,
and shall be exchangeable for, .1428 validly issued, fully paid and
non-assessable shares of restricted common stock of HBOA (the "LSC Exchange
Ratio").
(b) At the Effective Time, all LSC Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such Shares shall
thereafter represent the HBOA Shares, into which such LSC Shares have been
converted. Certificates representing LSC Shares shall be exchanged for
certificates representing HBOA Shares.
(c) If, prior to the Effective Time, HBOA should split or
combine the HBOA Shares, or pay a stock dividend or other stock distribution in
HBOA Shares, then the LSC Exchange Ratio shall be appropriately adjusted to
reflect such split, combination, dividend, or other distribution.
(d) Each LSC Share held in treasury (or a subsidiary, as such
term is defined in Article IV hereof) and each such LSC Share held by HBOA or
any subsidiary of HBOA immediately prior to the Effective Time shall be canceled
and retired and cease to exist, and no HBOA Shares shall be issued in exchange
therefor.
(e) Each share of common stock of Acquisition Sub issued and
outstanding immediately prior to the Effective Time shall by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and be exchangeable for one share of stock of Surviving Corporation.
2.2 Exchange of Shares
(a) Prior to the Effective Time, HBOA shall select and enter
into an agreement with a bank or trust company to act as Exchange Agent
hereunder (the "Exchange Agent"). No later than the Effective Time, HBOA shall
cause the Exchange Agent, pursuant to irrevocable instructions, to make
available and deliver, and each holder of LSC Shares shall be entitled to
receive, upon surrender to the Exchange Agent of one or more certificates
representing such LSC Shares for cancellation, certificates representing the
number of HBOA Shares into which such LSC Shares are converted in the Merger.
The HBOA Shares into which the LSC Shares shall be converted in the Merger shall
be deemed to have been issued at the Effective Time.
2
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding LSC Shares (the "Certificates") whose LSC Shares were converted into
HBOA Shares pursuant to Section 2.1, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as HBOA may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing HBOA Shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate representing that
number of whole HBOA Shares which such holder has the right to receive in
respect of the Certificates surrendered pursuant to the provisions of this
Article II.
(c) In the event that any stock certificate representing LSC
Shares shall have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen, or destroyed, HBOA shall issue or cause to be issued in exchange for
such lost, stolen, or destroyed certificate the number of HBOA Shares into which
such shares are converted in the Merger in accordance with this Article II. When
authorizing such issuance in exchange therefor, the Board of Directors of HBOA
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate to give HBOA a
standard form of indemnity against any claim that may be made against HBOA with
respect to the certificate alleged to have been lost, stolen, or destroyed.
2.3 Stock Options, Warrants, Debentures, Preferred Stock and other
Agreements. As of the Effective Time, any stock options, warrants, convertible
securities or other contractual commitments or agreements of any kind to
purchase or issue LSC Shares that are outstanding both as of the date hereof and
at the Effective Time (whether or not contingent or otherwise requiring further
shareholder approval) shall terminate as of the Effective Time, and prior to the
Effective Time, LSC shall take or cause to be taken all necessary actions to
ensure that following the Effective Time no participant in any such plan,
program or arrangement shall have any right thereunder to acquire any equity
securities of LSC or the Surviving Corporation or any subsidiary thereof. Any
outstanding shares of LSC preferred stock shall have been converted into shares
of LSC common stock prior to the Effective Time.
2.4 Dividends; Transfer Taxes. No dividends that are declared on HBOA
Shares shall be paid to persons entitled to receive certificates representing
HBOA Shares until such persons surrender their certificates representing LSC
Shares. Upon such surrender, there shall be paid to the person in whose name the
certificates representing such HBOA Shares shall be issued any dividends which
shall have become payable with respect to such HBOA Shares between the Effective
Time and the time of such surrender. In no event shall the person entitled to
receive such dividends be entitled to receive interest on such dividends. If any
certificates for any HBOA Shares are to be issued in a name other than that in
which the certificate representing LSC Shares surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such HBOA Shares in
a name other than that of the registered holder of the Certificate surrendered,
or shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of HBOA Shares
for any HBOA Shares or dividends thereon or, in accordance with Section 2.4
hereof, the cash payment for fractional interests, delivered to a public
official pursuant to applicable escheat laws.
2.5 No Fractional Securities. No certificates or scrip representing
fractional HBOA Shares shall be issued upon the surrender for exchange of
certificates representing Shares pursuant to this Article II and no dividend,
stock split-up, or other change in the capital structure of HBOA shall relate to
any fractional security, and such fractional interests shall not entitle the
owner thereof to vote or to any rights of a security holder. In lieu of any such
fractional securities, each holder of Shares who would otherwise have been
entitled to a fraction of an HBOA Share upon surrender of stock certificates for
exchange pursuant to this Article II shall be paid cash upon such surrender in
an amount equal to the product of such fraction multiplied by the average
closing price for a HBOA Share on the OTCBB or principal exchange on which its
common stock is listed for the five (5) trading days immediately following the
Closing (as defined below).
3
2.6 Closing of Transfer Books. At the Effective Time, the stock
transfer books of LSC shall be closed and no transfer of Shares shall thereafter
be made. If, after the Effective Time, certificates representing Shares are
presented to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing HBOA Shares in accordance with the terms hereof. At
and after the Effective Time, the holders of Shares to be exchanged for HBOA
Shares pursuant to this Agreement shall cease to have any rights as shareholders
of LSC except for the right to surrender such stock certificates in exchange for
HBOA Shares as provided hereunder.
2.7 Dissenting Shares. If holders of LSC Shares are entitled to dissent
from the Merger and demand appraisal of any such LSC Shares in accordance with
the provisions of the FBCA concerning the right of such holders to dissent from
the Merger and demand appraisal of their shares ("Dissenting Holders"), any LSC
Shares held by a Dissenting Holder as to which appraisal has been so demanded
("Excluded Shares") shall not be converted as described in Section 2.1, but
shall from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due to such Dissenting Holder pursuant
to the FBCA; provided, however, that each LSC Share held by a Dissenting Holder
who shall, after the Effective Time, withdraw his demand for appraisal or lose
his right of appraisal with respect to such LSC Shares, in either case pursuant
to the FBCA, shall not be deemed Excluded Shares but shall be deemed to be
converted, as of the Effective Time, into the right to receive HBOA Shares in
accordance with the LSC Exchange Ratio, as applicable.
2.8 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Xxxx,
P.A., 000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, on or
before July 15, 2003 (the "Closing Date"), unless a change of date or time is
agreed to in writing by the parties.
2.9 Supplementary Action. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either HBOA or LSC, or
otherwise to carry out the provisions of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered on
behalf of each, in the name of and on behalf of them as appropriate, to execute
and deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LSC AND THE LSC SHAREHOLDERS
As used in this Agreement, (i) the term "Material Adverse Effect"
means, with respect to HBOA or LSC, as the case may be, a material adverse
effect on the business, assets, results of operations, or financial condition of
such party and its subsidiaries taken as a whole or in the ability of such party
to materially perform its obligations hereunder, and (ii) the word "subsidiary"
when used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party or any other
subsidiary of such party is a general partner (excluding partnerships the
general partnership interests of which held by such party or any subsidiary of
such party do not have a majority of the voting interests in such partnership)
or of which at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporations or
other organizations is directly or indirectly owned or controlled by such party
and/or by any one or more of the subsidiaries.
LSC and the LSC Shareholders represent and warrant jointly and
severally, with respect to itself and its subsidiaries, except as disclosed to
HBOA in the LSC Schedule of Exceptions identified herein and attached hereto and
incorporated herein by this reference, as follows:
3.1 Organization. Each of LSC and its subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or presently proposed to be conducted.
Each of LSC and its subsidiaries is duly qualified as a foreign corporation to
do business, and is in good standing (to the extent the concept of good standing
exists), in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified shall not have a Material
Adverse Effect.
4
3.2 Capitalization. The authorized capital stock of LSC and each of its
subsidiaries is as set forth in Schedule 3.2. As of the date hereof, the number
of LSC Shares which are issued and outstanding is as set forth in Schedule 3.2.
Except as set forth in Schedule 3.2, all of the issued and outstanding LSC
Shares are validly issued, fully paid, and non-assessable and free of preemptive
rights or similar rights created by statute, the Articles of Incorporation or
Bylaws of LSC or any agreement by which LSC or any of its subsidiaries or the
LSC Shareholders is a party or by which it is bound. Except (a) as set forth
above or, (b) as disclosed in Schedule 3.2, there are not as of the date of this
Agreement any shares of capital stock of LSC issued or outstanding or any
options, warrants, subscriptions, calls, rights, convertible securities, or
other agreements or commitments obligating LSC to issue, transfer, or sell any
shares of its capital stock.
3.3 Authority Relative to this Agreement. LSC has the corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by LSC and the consummation by LSC of
the transactions contemplated hereby have been duly authorized by its Board of
Directors, and, except for approval by the requisite votes cast by LSC's
shareholders at the meeting provided for herein, no other corporate proceedings
on the part of LSC are necessary to approve this Agreement or the transactions
contemplated hereby.
3.4 Consents and Approvals; No Violations. Except filing and
recordation of Articles of Merger under the FBCA, no filing with, and no permit,
authorization, consent, or approval of, any public body or authority is
necessary for the consummation by LSC of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by LSC, nor the
consummation by it of the transactions contemplated hereby, nor compliance by
LSC with any of the provisions hereof, shall (a) result in any breach of the
Articles of Incorporation or Bylaws of LSC, (b) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any fight of termination, cancellation, or
acceleration) under, any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, contract, agreement, or other instrument or
obligation to which LSC or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or (c) violate any order,
writ, injunction, decree, statute, rule, or regulation applicable to LSC, any of
its subsidiaries or any of their properties or assets, except in the case of
clauses (b) and (c) for violations, breaches and defaults, that would not have a
material adverse effect on LSC.
3.5 Financial Statements. The audited balance sheets dated [12/3101 and
12/31/02], fairly present in all material respects the consolidated financial
position of LSC and its subsidiaries as of the respective dates thereof, and the
other related statements included therein fairly present in all material
respects the results of operations, changes in stockholders' equity and cash
flows of LSC and its subsidiaries for the respective periods or as of the
respective dates set forth therein, all in conformity with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein.
5
3.6 Absence of Certain Changes or Events; Undisclosed Liabilities.
(a) As of the date of this Agreement, LCS's liabilities do not
exceed $150,000 and a list of each liability and the creditor's name is listed
on Schedule 3.6, which is attached hereto. Since 1/1/01 neither LSC nor any of
its subsidiaries has: (i) incurred any liability material to LSC and its
subsidiaries on a consolidated basis, except in the ordinary course of its
business, consistent with past practices; (ii) suffered a change, or any event
involving a prospective change, in the business, assets, financial condition, or
results of operations of LSC or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect, (other than as a result of changes or proposed changes in federal or
state regulations of general applicability or interpretations thereof, changes
in generally accepted accounting principles, and changes that could, under the
circumstances, reasonably have been anticipated in light of disclosures made in
writing by LSC to HBOA pursuant hereto); or (iii) subsequent to the date hereof,
except as permitted by Section 6.1 hereof, conducted its business and operations
other than in the ordinary course of business and consistent with past
practices.
(b) Neither LSC nor its subsidiaries has any liability (and
LSC is not aware of any basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rising to any liability which individually or is in the
aggregate are reasonably likely to have a Material Adverse Effect on LSC) except
for any items identified in Schedule 3.6.
3.7 Litigation. As of the date of this Agreement, except as set forth
in Schedule 3.7, (i) there is no action, suit, judicial, or administrative
proceeding, arbitration or investigation pending or to LSC's knowledge
threatened against or involving LSC or any of its subsidiaries, or any of their
properties or rights, before any court, arbitrator, or administrative or
governmental body; (ii) there is no judgment, decree, injunction, rule, or order
of any court, governmental department, commission, agency, instrumentality, or
arbitrator outstanding against LSC or any of its subsidiaries; and (iii) LSC and
its subsidiaries are not in violation of any term of any judgments, decrees,
injunctions, or orders outstanding against them, except to the extent that such
events, violations or incidents set forth in (i) through (ii) above in the
aggregate would not have a Material Adverse Effect on LSC. LSC will furnish to
HBOA preceding the Closing, in writing, a description of all litigation,
actions, suits, proceedings, arbitrations, investigations known to it,
judgments, decrees, injunctions or orders pending; or to its best knowledge,
threatened against or involving LSC or any of its subsidiaries, or any of their
properties or rights as of the date hereof. All such litigation descriptions are
set forth in Schedule 3.7.
3.8 Contracts.
(a) Each of the material contracts, instruments, mortgages,
notes, security agreements, leases, agreements, or understandings, whether
written or oral, to which LSC or any of its subsidiaries is a party that relates
to or affects the assets or operations of LSC or any of its subsidiaries or to
which LSC or any of its subsidiaries or their respective assets or operations
may be bound or subject is a valid and binding obligation of LSC and in full
force and effect (with respect to LSC or such subsidiary), except for where the
failure to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect. Schedule 3.8 sets forth a complete
list of all material contracts. For purposes of this Agreement a material
contract shall be any contract or agreement which involves consideration in
excess of $25,000. Except to the extent that the consummation of the
transactions contemplated by this Agreement may require the consent of third
parties, as disclosed in Schedule 3.1, there are no existing defaults by LSC or
any of its subsidiaries thereunder or, to the knowledge of LSC, by any other
party thereto, which defaults, individually or in the aggregate, would have a
Material Adverse Effect except as set forth in Schedule 3.8.
(b) Except for this Agreement and any agreement listed in
Schedule 3.8, neither LSC nor any of its subsidiaries is a party to any oral or
written (i) consulting agreement not terminable on 30 days' or less notice
involving the payment of more than $25,000 per annum, in the case of any such
agreement with an individual; (ii) joint venture agreement; (iii) noncompetition
or similar agreements that restricts LSC or its subsidiaries from engaging in a
line of business; (iv) agreement with any executive officer or other employee of
LSC or any subsidiary the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving LSC
of the nature contemplated by this Agreement and which provides for the payment
of in excess of $25,000; (v) agreement with respect to any executive officer of
LSC or any subsidiary providing any term of employment or compensation guaranty
in excess of $25,000 per annum; or (vi) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan, or stock
purchase plan, any of the benefits of which shall be increased, or the vesting
of the benefits of which shall be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which shall be calculated on the basis of any of the transactions
contemplated by this Agreement.
6
3.9 Employee Benefit Plans.
(a) Disclosed in Schedule 3.9 is a true and complete list of
each written or formal employee benefit plan (including, without limitation, any
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) policy or agreement that is
maintained (all of the foregoing, the "Benefit Plans"), or is or was contributed
to by LSC or pursuant to which LSC or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with LSC would be deemed a
"single employer" within the meaning of Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), is still potentially liable
for payments, benefits, or claims. A copy of each Benefit Plan as currently in
effect and, if applicable, the most recent Annual Report, Actuarial Report or
Valuation, Summary Plan Description, Trust Agreement, and a Determination Letter
issued by the IRS for each Benefit Plan have heretofore been delivered to HBOA.
No Benefit Plan was or is subject to Title IV of ERISA or Section 412 of the
Code (including any "multiemployer plan," as defined in Section 3(37) of ERISA).
(b) Each of the Benefit Plans that are subject to ERISA is in
compliance with ERISA; each of the Benefit Plans intended to be "qualified"
within the meaning of Section 401 (a) of the Internal Revenue Code of 1986, as
amended (the "Code") is so qualified; and no event has occurred, and to LSC's
knowledge, there exists no condition or set of circumstances, in connection with
which LSC or any ERISA Affiliate is or could be subject to liability (except
liability for benefit claims and funding obligations payable in the ordinary
course) under ERISA, the Code, or any other applicable law with respect to any
Benefit Plan.
(c) All contributions or other amounts payable by LSC or its
subsidiaries through December 31, 2002 with respect to each Benefit Plan in
respect of current or prior plan years have been either paid or accrued on the
most recent financial statements of LSC made available to XXXX.xxx. Any
contributions or other amounts payable by LSC or its subsidiaries for periods
between December 31, 2001 and the Effective Time with respect to each Benefit
Plan in respect of current or prior plan years have been or shall be either paid
or accrued in the normal course of business on the books and records of LSC at
or prior to the Effective Time. There are no pending, or, to the knowledge of
LSC, threatened or anticipated claims (other than routine claims for benefits)
by or on behalf of or against any of the Benefit Plans or any trusts or other
funding vehicles related thereto.
(d) No Benefit Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees for periods extending beyond their retirement or
other termination of service (other than (i) coverage mandated by Part 6 of
Subtitle B of Title I of ERISA, Section 4980B of the Code or any comparable
state law, (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of LSC or the ERISA
Affiliates, or (iv) benefits the full cost of which is borne by the current or
former employee or his or her beneficiary).
3.10 Taxes. For the purposes of this section, the term "tax" shall
include all taxes, charges, withholdings, fees, levies, penalties, additions,
interest, or other assessments imposed by any United States federal, state, or
local authority or any other taxing authority on LSC or any of its Tax
Affiliates (as hereinafter defined) as to their respective income, profit,
franchise, gross receipts, payroll, sales, employment, worker's compensation,
use, property, withholding, excise, occupancy, environmental, and other taxes,
duties, or assessments of any nature, whatsoever. LSC has filed or caused to be
filed timely and accurately in all material respects all federal, state, local,
and foreign tax returns required to be filed or requests for extensions to file
such returns have been timely filed, by each of its and any member of its
consolidated, combined, unitary, or similar group (each such member a "Tax
Affiliate"), except to the extent that any failure to file or inaccuracies in
filed returns would not individually or in the aggregate reasonably be expected
to have a Material Adverse Effect on LSC. LSC has paid or caused to be paid or
has made adequate provision or set up an adequate accrual or reserve for the
7
payment of, all taxes shown to be due in respect of the periods for which
returns are due, and has established (or shall establish at least quarterly) an
adequate accrual or reserve for the payment of all taxes payable in respect of
the period subsequent to the last of said periods required to be so accrued or
reserved. Neither LSC nor any of its Tax Affiliates has any liability for taxes
in excess of the amount so paid or accruals or reserves so established. Neither
LSC nor any of its Tax Affiliates is delinquent in the payment of any tax in
excess of the amount reserved or provided therefor, and no deficiencies for any
tax, assessment, or governmental charge in excess of the amount reserved or
provided therefor have been threatened, claimed, proposed, or assessed. No
waiver or extension of time to assess any taxes has been given or requested. The
Internal Revenue Service or comparable state agencies have never audited LSC's
federal and state income tax returns.
3.11 Compliance With Applicable Law. LSC and each of its subsidiaries
holds all licenses, permits, and governmental authorizations necessary for the
lawful conduct of its business under and pursuant to, and the business of each
of LSC and its subsidiaries is not being conducted in violation of, any
provision of any federal, state, local, or foreign statute, law, ordinance,
rule, regulation, judgment, decree, order, concession, grant, franchise, permit
or license, or other governmental authorization or approval applicable to LSC or
any of its subsidiaries except for such licenses, permits, governmental
authorizations, the failure of which, and violations which, would not have in
the aggregate a Material Adverse Effect on LSC.
3.12 Subsidiaries. Schedule 3.12 lists all the subsidiaries of LSC as
of the date of this Agreement and indicates for each such corporate subsidiary
as of such date the jurisdiction of incorporation or organization. All of the
outstanding shares of capital stock or other equity interests of each of the
subsidiaries are (i) held by LSC or one of such wholly-owned subsidiaries; (ii)
fully paid and non-assessable; and (iii) owned by LSC or one of such wholly
owned subsidiaries free and clear of any claim, lien, or encumbrance.
3.13 Labor and Employment Matters. Except as set forth in Schedule
3.13, (a) LSC and its subsidiaries are and have been in compliance in all
respects with all applicable laws respecting employment and employment
practices, terms, and conditions of employment and wages and hours, including,
such laws respecting employment discrimination, equal opportunity, affirmative
action, worker's compensation, occupational safety, and health requirements and
unemployment insurance and related matters, and are not engaged in and have not
engaged in any unfair labor practice; (b) no investigation or review by or
before any governmental entity concerning any violations of any such applicable
laws is pending nor, to the knowledge of LSC is any such investigation
threatened or has any such investigation occurred during the last three years,
and no governmental entity has provided any notice to LSC or any of its
subsidiaries or otherwise asserted an intention to conduct any such
investigation; (c) there is no labor strike, dispute, slowdown, or stoppage
actually pending or threatened against LSC or any of its subsidiaries; (d) no
union representation question or union organizational activity exists respecting
the employees of LSC or any of its subsidiaries; (e) no collective bargaining
agreement exists which is binding on LSC or any of its subsidiaries; (f) neither
LSC nor any of its subsidiaries has experienced any work stoppage or other labor
difficulty; and (g) in the event of termination of the employment of any of the
current officers, directors, employees, or agents of LSC or any of its
subsidiaries, neither LSC nor any of its subsidiaries shall pursuant to any
agreement or by reason of anything done prior to the Effective Time by LSC or
any of its subsidiaries be liable to any of said officers, directors, employees,
or agents for so-called "severance pay" or any other similar payments or
benefits, including, without limitation, post-employment healthcare (other than
pursuant to COBRA) or insurance benefits, except to the extent that any matter
in Items (a), (b), (f) and (g) could reasonably be expected individually or in
the aggregate to have a Material Adverse Effect on LSC.
3.14 Intellectual Property.
(a) Except to the extent that any inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
LSC: (i) LSC and each of its subsidiaries owns, or is licensed or otherwise has
the legally enforceable right to use (in each case, clear of any liens or
encumbrances of any kind), all Intellectual Property (as hereinafter defined)
used in or necessary for the conduct of its business as currently conducted;
(ii) no claims are pending or, to the knowledge of LSC, threatened that LSC or
any of its subsidiaries is infringing on or otherwise violating the rights of
any person with regard to any Intellectual Property used by, owned by, and/or
licensed to LSC or any of its subsidiaries; (iii) as of the date of this
Agreement, to the knowledge of LSC, no person is infringing on or otherwise
violating any right of LSC or any of its subsidiaries with respect to any
Intellectual Property owned by and/or licensed to LSC or any of its
subsidiaries; and (iv) as of the date of this Agreement, neither LSC nor any of
its subsidiaries have received any notice of any claim challenging the ownership
or validity of any Intellectual Property owned by LSC or any of its subsidiaries
or challenging LSC's or any of its subsidiaries' license or legally enforceable
right to use any Intellectual Property licensed by it.
8
(b) For purposes of this Agreement, "Intellectual Property"
means trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names, and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable, or not in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works of authorship, whether
copyrighted, copyrightable, or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights and computer programs and software (including source code, object code,
and data); licenses, immunities, covenants not to xxx, and the like relating to
the foregoing; and any claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing Schedule 3.14(b).
(c) Schedule 3.14(c) sets forth a list of Intellectual
Property owned by LSC.
3.15 Insurance. Except to the extent that the lack of an insurance
policy would not reasonably be expected to have a Material Adverse Effect on
LSC, LSC and each of its subsidiaries have insurance policies, including fire
and casualty policies, that LSC believes are necessary to conduct its business.
All policies of insurance insuring LSC or any of its subsidiaries or their
respective businesses, assets, employees, officers, and directors are in full
force and effect. As of the date hereof, there are no claims by LSC or any of
its subsidiaries under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights clause.
At the Closing, all LSC insurance policies continue in full force and effect.
Schedule 4.15 lists all of LSC and each of its subsidiaries' insurance policies.
3.16 Accounts Receivable. Except to the extent that any inaccuracy
would not reasonably be expected to have a Material Adverse Effect on LSC, all
accounts receivable of LSC and its subsidiaries are reflected properly on their
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with the terms
at the recorded amounts, subject only to the reserve for bad debts set forth on
the face of the December 31, 2002 balance sheet as adjusted for passage of time
with the Effective Date in accordance with past custom and practice of LSC and
its subsidiaries.
3.17 No Liens. All of the assets, both tangible and intangible of LSC,
except as set forth in Schedule 3.17 are and will be free and clear of any
security interests, liens, claims, charges or other encumbrances of any nature.
3.18 HBOA Shares. The LSC Shareholders acknowledge that each
certificate representing a HBOA Share shall contain a restrictive legend,
representing that the Shares have not been registered under the Securities Act.
The Shares may not be sold or offered for sale or otherwise distributed without
an effective registration statement for the Shares under the Securities Act or
an opinion of counsel satisfactory to HBOA that such registration is not
required as to the sale, offer or distribution thereof.
3.19 No Undisclosed Information. No provision of this Article or for
any Schedule or any document agreement furnished by LSC contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make this statement contained herein or therein in light of the
circumstances under which such statements were made, not misleading. No
preclosing investigation of LSC, its subsidiaries, their respective assets for
their businesses shall relieve the LSC Shareholder of its indemnification and
obligation under this Agreement.
3.20 Required Vote of LSC Shareholders. The affirmative vote of the
holders of a majority of outstanding shares of LSC common stock is required to
approve the Merger. No other vote of the stockholders of LSC is required by law,
the articles of incorporation or bylaws of LSC or otherwise in order for LSC to
consummate the Merger and the transactions contemplated hereby.
9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HBOA
HBOA represents, warrants and agrees, with respect to itself and its
subsidiaries, except as disclosed to LSC in the HBOA Schedule of Exceptions
identified herein and attached hereto and incorporated herein by this reference,
as follows:
4.1 Organization. Each of HBOA and its subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or presently proposed to be conducted.
Each of HBOA and its subsidiaries is duly qualified as a foreign corporation to
do business, and is in good standing (to the extent the concept of good standing
exists), in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified shall not have a Material
Adverse Effect.
4.2 Capitalization. As of the date hereof, the authorized capital stock
of HBOA and each of its subsidiaries is as set forth in Schedule 4.2. As of the
date hereof, the number of HBOA Shares which are issued and outstanding is as
set forth in Schedule 4.2. All of the issued and outstanding HBOA Shares are
validly issued, fully paid, and non-assessable and free of preemptive rights or
similar rights created by statute, the Articles of Incorporation or Bylaws of
HBOA or any agreement by which HBOA or any of its subsidiaries is a party or by
which it is bound. Except (a) as set forth above or, as disclosed in Schedule
4.2, there are not as of the date of this Agreement any shares of capital stock
of HBOA issued or outstanding or any options, warrants, subscriptions, calls,
rights, convertible securities, or other agreements or commitments obligating
HBOA to issue, transfer, or sell any shares of its capital stock.
4.3 Authority Relative to this Agreement. HBOA has the corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by HBOA and the consummation by HBOA of
the transactions contemplated hereby have been duly authorized by its Board of
Directors, no other corporate proceedings on the part of HBOA are necessary to
approve this Agreement or the transactions contemplated hereby.
4.4 Consents and Approvals; No Violations. Except for applicable
requirements, the Securities Act of 1933, the Securities Exchange Act of 1934,
the OTCBB or principal exchange on which its common stock is listed, state law
relating to takeovers, if applicable, state securities or blue sky laws, and, as
applicable, filing and recordation of Articles of Merger under the FBCA, no
filing with, and no permit, authorization, consent, or approval of, any public
body or authority is necessary for the consummation by HBOA of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by HBOA, nor the consummation by it of the transactions contemplated
hereby, nor compliance by HBOA with any of the provisions hereof, shall (a)
result in any breach of the Articles of Incorporation or Bylaws of HBOA, (b)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any fight of termination,
cancellation, or acceleration) under, any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license, contract, agreement,
or other instrument or obligation to which HBOA or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (c) violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to HBOA, any of its subsidiaries or any of their properties or
assets, except in the case of clauses (b) and (c) for violations, breaches, or
defaults that would not have a Material Adverse Effect.
4.5 Reports and Financial Statements. HBOA has filed all reports
required to be filed by it with the SEC pursuant to the Exchange Act since
December 31, 1999, including, without limitation, an Annual Report on Form
10-KSB for the year ended December 31, 2002 (collectively, the "HBOA SEC
Reports"), and has previously furnished or made available to LSC true and
complete copies of all such HBOA SEC Reports. None of such HBOA SEC Reports, as
of their respective dates (as amended or supplemented through the date hereof),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. the
absence of any notes thereto.
10
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business Pending the Merger. LSC agrees on its own
behalf and on behalf of its subsidiaries that, except as may be agreed to by the
Parties hereto or may be permitted by this Agreement, during the period from the
date of this Agreement and continuing until the Effective Time:
(a) the respective businesses of LSC and its subsidiaries
shall be conducted only in the ordinary and usual course of business and
consistent with past practices;
(b) LSC and its subsidiaries shall not (i) sell or pledge or
agree to sell or pledge any stock owned by it in any of its subsidiaries; (ii)
amend its Articles of Incorporation or Bylaws; or (iii) split, combine, or
reclassify any shares of its outstanding capital stock or declare, set aside, or
pay any dividend or other distribution payable in cash, stock, or property in
respect of its capital stock, or directly or indirectly redeem, purchase, or
otherwise acquire any shares of its capital stock or other securities or shares
of the capital stock or other securities of any of its subsidiaries;
(c) LSC and its subsidiaries shall not (i) authorize for
issuance, issue, sell, pledge, dispose of, encumber, deliver, or agree or commit
to issue, sell, pledge, or deliver any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class or exchangeable
into shares of stock of any class or any Voting Debt (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase, or otherwise), except that LSC may issue Shares required to be issued
upon exercise of existing stock options, warrants, or similar plans, or under
other contractual commitments previously made, which options, warrants, plans,
or commitments have been disclosed in writing to HBOA in the LSC Schedule; (ii)
acquire, dispose of, transfer, lease, license, mortgage, pledge, or encumber any
fixed or other substantial assets other than in the ordinary course of business
and consistent with past practices; (iii) incur, assume, or prepay any material
indebtedness, liability, or obligation or any other material liabilities or
issue any debt securities other than in the ordinary course of business and
consistent with past practices; (iv) assume, guarantee, endorse, or otherwise
become liable or responsible (whether directly, contingently, or otherwise) for
the obligations any other person (other than a subsidiary) in a material amount
other than in the ordinary course of business and consistent with past
practices; (v) make any material loans, advances, or capital contributions to,
or investments in, any other person, other than to subsidiaries, other than in
the ordinary course of business and consistent with past practices; (vi) fail to
maintain adequate insurance consistent with past practices for their businesses
and properties; or (vii) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing;
(d) LSC shall use its reasonable efforts, consistent with
prudent business practice, to preserve intact the business organization of LSC
and its subsidiaries, to keep available the services of its and their present
officers and key employees, and to preserve the goodwill of those having
business relationships with it and their respective subsidiaries and LSC shall
use its reasonable efforts to reduce expenses where applicable;
(e) LSC and its subsidiaries shall not knowingly take or allow
to be taken or fail to take any action which act or omission would jeopardize
qualification of the Merger as a "reorganization" within the meaning of Section
368(a) of the Code; and
(f) LSC and its subsidiaries shall use reasonable efforts to
prevent any representation or warranty of LSC herein from becoming untrue or
incorrect in any material respect.
5.2 Compensation Plans. During the period from the date of
this Agreement and continuing until the Effective Time, LSC agrees as to itself
and its subsidiaries that, it shall not, without the prior written consent of
HBOA (a) enter into, adopt, or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment, severance,
or other employee benefit plan, agreement, trust, plan, fund or other
arrangement between LSC and one or more of its officers, directors, or
employees, in each case so as to materially increase the benefits thereunder
(collectively, "Compensation Plans"), (b) grant or become obligated to grant any
increase in the compensation or fringe benefits of directors, officers, or
employees (including any such increase pursuant to any Compensation Plan) or any
increase in the compensation payable or to become payable to any officer,
11
except, with respect to employees other than officers, for increases in
compensation in the ordinary course of business consistent with past practice,
or enter into any contract, commitment, or arrangement to do any of the
foregoing, except for normal increases and non-stock benefit changes in the
ordinary course of business consistent with past practice, (c) institute any new
employee benefit, welfare program, or Compensation Plan, (d) make any change in
any Compensation Plan or other employee welfare or benefit arrangement or enter
into any employment or similar agreement or arrangement with any employee, or
(e) enter into or renew any contract, agreement, commitment, or arrangement
providing for the payment to any director, officer, or employee of LSC of
compensation or benefits contingent, or the terms of which are materially
altered in favor of such individual, upon the occurrence of any of the
transactions contemplated by this Agreement.
5.3 Current Information. From the date of this Agreement to
the Effective Time, each of LSC and HBOA shall cause one or more of their
designated representatives to confer with each other on a regular and frequent
basis and to report the general status of each Company's ongoing operations and
financial condition and financing/funding activities and to deliver to each
other monthly unaudited consolidated balance sheets and related consolidated
statements of income for the period since the last such report. LSC and HBOA
shall promptly notify each other of any material change in the normal course of
business or in its or its subsidiaries' properties.
5.4 Legal Conditions to Merger. Each of HBOA and LSC shall,
and shall cause their subsidiaries to, use all reasonable efforts (a) to take,
or cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party or its subsidiaries with respect
to the Merger and to consummate the transactions contemplated by this Agreement,
subject to the appropriate vote or consent of shareholders, and (b) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any governmental entity and/or any
other public or private third party which is required to be obtained or made by
such party or any of its subsidiaries in connection with the Merger and the
transactions contemplated by this Agreement; provided, however, that a party
shall not be obligated to take any action pursuant to the foregoing if the
taking of such action or such compliance or the obtaining of such consent,
authorization, order, approval, or exemption would, in such party's reasonable
opinion, (i) be materially burdensome to such party and its subsidiaries taken
as a whole or impact in such a materially adverse manner the economic or
business benefit of the transactions contemplated by this Agreement as to render
inadvisable the consummation of the Merger, or (ii) result in the imposition of
a condition or restriction on such party or on the Surviving Corporation of the
type referred to herein. Each of HBOA and LSC shall promptly cooperate with and
furnish information to the other in connection with any such burden suffered by,
or requirement imposed upon, any of them or any of their subsidiaries in
connection with the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access and Information.
(a) LSC shall afford HBOA and its financial advisors, legal
counsel, accountants, consultants, and other representatives access during
normal business hours throughout the period from the date hereof to the Closing
all of its books, records, properties, facilities, personnel commitments, and
records (including but not limited to Tax Returns) and, during such period,
shall furnish promptly all information concerning its business, properties, and
personnel as may be reasonably requested in order for the requesting party to
fully investigate the business and affairs of LSC prior to the Effective Time.
(b) All information furnished by a party pursuant hereto shall
be treated as the sole property of the furnishing party until consummation of
the Merger contemplated hereby.
6.2 Acquisition Proposals. Until the Effective Time or the Termination
of this Agreement, LSC and its subsidiaries shall not, and shall use its best
efforts to cause their respective directors, officers, employees, financial
advisors, legal counsel, accountants, and other agents and representatives (for
purposes of this Section 6.2 only, being referred to as "affiliates") not to,
initiate, solicit, or encourage, directly or indirectly, or take any other
action to facilitate any inquiries or the making of any proposal with respect
to, engage or participate in negotiations concerning, provide any nonpublic
information or data to, or have any discussions with any person other than HBOA
relating to, any acquisition, tender offer (including a self-tender offer),
exchange offer, merger, consolidation, acquisition of beneficial ownership of or
12
the right to vote securities representing 10% or more of the total voting power
of such entity or any of its subsidiaries, dissolution, business combination,
purchase of all or any significant portion of the assets or any division of, or
any equity interest in, such entity or any subsidiary, or similar transaction
other than the Merger (such proposals, announcements, or transactions being
referred to as "Acquisition Proposals"). LSC shall promptly notify the others
orally and in writing if any such Acquisition Proposal (including the terms
thereof and identity of the persons making such proposals) is received and
furnish to the other Parties hereto a copy of any written proposal.
6.3 Stock Exchange Listing. HBOA shall take such action as may be
necessary or desirable to timely list the HBOA Shares to be issued pursuant to
the Merger on the OTCBB, the principal exchange on which its common stock is
listed.
6.4 Public Announcements. So long as this Agreement is in effect, each
Company agrees that it shall obtain the approval of the other party prior to
issuing any press release and shall use its best efforts to consult with the
others before otherwise making any public statement or responding to any press
inquiry with respect to this Agreement or the transactions contemplated hereby,
except as may be required by law or any governmental agency if required by such
agency or the rules of the OTCBB or principal exchange on which its common stock
is listed.
6.5 Expenses. Subject to Section 8.1 hereof, whether or not the Merger
is consummated, HBOA shall pay all legal and accounting fees incurred in
connection with the Merger.
6.6 Additional Agreements.
(a) Subject to the terms and conditions herein provided,
including without limitation those set forth in Section 5.4 hereof, each of the
Parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper,
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents, and approvals, and
to effect all necessary registrations and filings. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of the
Companies shall take all such necessary action.
(b) Subject to the terms and conditions herein provided,
including without limitation those set forth in the proviso to Section 5.4
hereof, each Company shall cooperate with the others and use all reasonable
efforts to prepare all necessary documentation to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders, and
authorizations of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by this Agreement.
6.7 Survival of Representations and Warranties. The respective
representations and warranties of HBOA, LSC and the LSC Shareholders contained
in this Agreement shall survive the Closing for a period of two (2) years (the
"Survival Period"), at the end of which Survival Period no claim may be made
with respect to any such representation or warranty unless such claim shall have
been asserted in writing to the Indemnifying Party during such period, except
for the representations and warranties contained in Section 3.10, which shall
survive until the expiration of the applicable statute of limitations.
6.8 Indemnification. LSC and the LSC Shareholders, jointly and
severally, agree to indemnify and hold HBOA, the Surviving Corporation and their
officers, directors, affiliates, representatives, trustees, grantors,
beneficiaries and any successors thereto (the "HBOA Indemnities") harmless from
any and all damages, losses, costs or reasonable expenses (including without
limitation, reasonable fees and expenses of investigation and reasonable
attorneys' fees and consultant's fees and expenses in connection with any
action, suit or proceeding (collectively "Damages")) incurred or suffered as a
result of or arising out of the breach of any representation or warranty on
behalf of LSC or the LSC Shareholders expressly as set forth in this Agreement,
the nonfulfillment or nonperformance of any agreement, covenant or condition set
forth in this Agreement or any claim by a third party that, if true, would mean
that a condition for indemnification set forth in this Section 6.8 had been
satisfied.
13
HBOA agrees to indemnify and hold the LSC Shareholders and their
affiliates, representatives, trustees, grantors, beneficiaries and any
successors thereto (the "LSC Indemnities") harmless from any and all damages,
losses, costs or reasonable expenses (including without limitation, reasonable
fees and expenses of investigation and reasonable attorneys' fees and
consultant's fees and expenses in connection with any action, suit or proceeding
(collectively "Damages")) incurred or suffered as a result of or arising out of
the breach of any representation or warranty on behalf of HBOA expressly as set
forth in this Agreement, the nonfulfillment or nonperformance of any agreement,
covenant or condition set forth in this Agreement or any claim by a third party
that, if true, would mean that a condition for indemnification set forth in this
Section 6.8 had been satisfied.
Any party seeking indemnification (the "Indemnified Party") from any
other party (the "Indemnifying Party") with respect to any claim, demand,
action, proceeding or other matter (the "Claim") pursuant to this Section 6.8
shall promptly notify the Indemnifying Party in writing of the existence of the
Claim, setting forth in reasonable detail the facts and circumstances pertaining
thereto and the basis for the Indemnified Party's right to indemnification.
In the event that any third party notifies any Indemnified Party with
respect to any matter which may give rise to a Claim for indemnification against
the Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify the Indemnifying Party of such Claim; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party is prejudiced by
such failure to give notice. The Indemnifying Party, upon waiver of its right to
contest the liability for which indemnification is being sought and
demonstration by the Indemnifying Party of its financial ability to satisfy any
resulting judgment to the reasonable satisfaction of the Indemnified Party,
shall have the right to assume defense of the Claim if notice is given to the
Indemnified Party within ten (10) days after receipt of notice of such Claim. If
the Indemnifying Party assumes defense of the Claim as provided in the preceding
sentence, then: (i) the Indemnifying Party will diligently defend the
Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party; (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
(a) to the extent the Indemnified Party concludes reasonably based upon advice
of counsel that a conflict of interest exists between the Indemnified Party and
Indemnifying Party or (b) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party and such Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to the Indemnified Party which are
not available to the Indemnifying Party, or available to the Indemnifying Party,
but the assertion of which would be adverse to the interest of the Indemnified
Party); (iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably; it being understood and agreed that failure to consent to a
judgment or settlement that provides for relief other than monetary damages or
does not provide an unconditional release of the Indemnifying Party from
liability shall not be deemed unreasonable); and (iv) The Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement,
without the written consent of the Indemnified Party (not to be withheld or
delayed unreasonably; it being understood and agreed that failure to consent to
a judgment or settlement that provides for relief other than monetary damages or
does not provide an unconditional release of the Indemnified Party from
liability shall not be deemed unreasonable).
If no Indemnifying Party notifies the Indemnified Party within ten (10)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it reasonably may deem appropriate, without prejudice to any of its
rights hereunder.
The Indemnified Party shall be entitled to reimbursement of reasonable
expenses included in Damages with respect to any Claim (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party; provided,
however, that the Indemnified Party shall undertake to repay any amounts arising
solely from the fault of such Indemnified Party.
6.9 Shareholders' Meeting. LSC shall, as soon as reasonably practicable
following the date hereof, establish a record date for, duly call, give notice
of, convene and hold (and reconvene and hold if adjourned for any reason) a
special meeting of its Shareholders or acting by majority of the LSC
Shareholders for the purpose of voting or consenting to approve this Agreement
and the Merger and the other transactions contemplated hereby. LSC shall,
through its Board of Directors, recommend to its shareholders approval of such
matters.
14
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to the Companies' Obligation to Effect the
Merger/Reorganization Representations. The respective obligations of the
Companies to effect the transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
one of which may be waived by a writing signed by HBOA and LSC:
(a) This Agreement and the transactions contemplated hereby
shall have been approved and adopted by the requisite vote of the shareholders
of LSC in accordance with applicable law.
(b) No preliminary or permanent injunction or other order by
any federal, state, or foreign court of competent jurisdiction which prohibits
the consummation of any Merger shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated, or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Merger.
(c) Other than the filing of Articles of Merger with the
Department of State for the State of Florida, all authorizations, consents,
orders or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any governmental entity (all of the foregoing,
"Consents") which are reasonably necessary for the consummation of the Merger,
shall have been filed, occurred, or been obtained (all such permits, approvals,
filings, and consents and the lapse of all such waiting periods being referred
to as the "Requisite Regulatory Approvals") and all such Requisite Regulatory
Approvals shall be in full force and effect.
(d) All state securities or blue sky permits and other
authorizations necessary to issue the HBOA Shares (including satisfactory
evidence of the nature of the LSC Shareholders) in exchange for the Shares of
LSC and to consummate the Merger shall have been received.
(e) There shall not be any action taken, or any statute, rule,
regulation, or order enacted, entered, enforced, or deemed applicable to any
Merger, by any federal or state governmental entity which, in connection with
the grant of a Requisite Regulatory Approval, imposes any condition or
restriction upon any Surviving Corporation or its subsidiaries (or, in the ease
of any disposition of assets required in connection with such Requisite
Regulatory Approval, upon any Company or its subsidiaries), including, without
limitation, requirements relating to the disposition of assets, which in any
such case would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
(f) The other Company shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Effective Time and the representations and warranties of the
other Company contained in this Agreement shall be true and at and as of the
Effective Time as if made at and as of such time, except as contemplated by this
Agreement, and each Company shall have received a certificate of the Chairman of
the Board, the President, or an Executive Vice President of the other Company as
to the satisfaction of this condition.
(g) Prior to the Effective Time, HBOA will be in control of
Acquisition Sub within the meaning of Section 368(c) of the Code. HBOA and
Acquisition Sub have no present plan or intention to reacquire any of the HBOA
Shares issued in the merger, other than as a result of the terms and conditions
of this Agreement. No stock of Acquisition Sub has been distributed to LSC or to
the LSC Shareholders pursuant to this Agreement.
(h) HBOA has no present plans or intention to liquidate the
Surviving Corporation or to merge the Surviving Corporation with and into
another corporation, to sell or otherwise dispose of the stock of the Surviving
Corporation or to cause the Surviving Corporation to sell or otherwise dispose
of its assets except for dispositions made in the ordinary course of a business.
HBOA and Acquisition Sub are participating in the Merger for good and valid
15
business reasons and not for tax purposes. Following the Effective Time, the
Surviving Corporation has no present plan or intent to issue additional shares
of its stock that would result in HBOA losing control of Surviving Corporation
within the meaning of Section 368(c)(1) of the Code, and will not do so
voluntarily prior to one year following the Effective Time. Following the
Effective Time, HBOA and Surviving Corporation intend to continue substantially
all the historic business of LSC.
(i) Dundas Systems, Inc. agrees that it will surrender
warrants to purchase 432,452 shares of common stock of HBOA and Xxxxxx Xxxxxxxxx
will surrender options to purchase 80,000 shares of HBOA's common stock.
7.2 Conditions to Obligations of HBOA. The obligations of HBOA to carry
out the transactions contemplated by this Agreement are subject, at the option
of HBOA, to the satisfaction, or waiver by HBOA, of the following conditions:
(a) No proceeding which LSC shall be a debtor, defendant, or
party seeking an order for its own relief or reorganization shall have been
brought or be pending by or against such person under any United States or state
bankruptcy or insolvency law.
(b) HBOA shall have received audited financial statements of
LSC for the periods ended December 31, 2001 and 2002 and any interim periods
required by SEC regulations for acquisitions that are required to be report on
Form 8-K in form and substance reasonably satisfactory to HBOA.
(c) HBOA shall have received evidence satisfactory to it that
the LSC Shareholders are accredited investors or sophisticated investors, as
those terms are defined in Rule 501 (a) of Regulation D of the Securities Act.
(d) Conversion of the LSC preferred stock (if any) and
evidence of cancellation of all outstanding options and warrants of LSC, (if
any).
(e) HBOA shall be satisfied with the results of its due
diligence investigation, as determined by HBOA in its sole discretion.
7.3 Conditions to Obligations of LSC. The obligations of LSC to carry
out the transactions contemplated by this Agreement are subject to the
satisfaction, or waiver by LSC, of the following conditions: No proceeding which
HBOA shall be a debtor, defendant, or party seeking an order for its own relief
or reorganization shall have been brought or be pending by or against such
person under any United States or state bankruptcy or insolvency law.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby abandoned at any time prior to the Effective Time, whether
before or after approval by the LSC Shareholders, as follows:
(a) By mutual written consent of all of the Parties.
(b) By LSC or HBOA if the Effective Time shall not have
occurred on or before the close of business on July 15, 2003, unless extended by
the written consent of all the parties.
(c) By HBOA if it is not satisfied with the results of its due
diligence investigation, as determined by HBOA in its sole discretion.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no further
effect and, except for a termination resulting from a breach by a party of this
Agreement, there shall be no liability or obligation on the part of any Party or
its respective officers or directors (except as set forth in Section 6.8 hereof
which shall survive the termination). Nothing contained in this Section 8.2
16
shall relieve any party from liability for willful breach of this Agreement that
results in termination of this Agreement. Upon request therefor, each party
shall redeliver all documents, work papers, and other material of any other
party relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the party furnishing same.
8.3 Amendment. This Agreement may be amended by action taken at any
time before or after approval hereof by the LSC Shareholders, but, after any
such approval, no amendment shall be made which alters the Exchange Ratio or
which in any way materially adversely affects the rights of such shareholders,
without the further approval of such shareholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
Parties hereto.
8.4 Waiver. At any time prior to the Effective Time, the Parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other Parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Such extensions or waivers shall be in
writing, executed by each of HBOA and LSC. Such waiver shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure
ARTICLE IX
GENERAL PROVISIONS
9.1 Brokers. Each Company represents and warrants to the others that no
broker, finder, or financial advisor is entitled to any brokerage, finder's, or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
any party hereto, except as reflected in Schedule 9.1 hereto.
9.2 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by telex or telecopy or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the respective Parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to HBOA, to:
0000 XX 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: President
with a copy to:
Xxxxxx & Xxxx, P.A.
Suite 1700
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx, Esq.
If to LSC, to:
Lexsys Software Corp.
0000 Xxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: President
with a copy to:
17
9.3 Descriptive 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.
9.4 Entire Agreement: Assignment. This Agreement (including the
Exhibits, Schedules, and other documents and instruments referred to herein) and
the Letter Agreement constitute the entire agreement and supersede all other
prior agreements and understandings, both written and oral, among the Parties or
any of them, with respect to the subject matter hereof; HBOA can assign the
Agreement without the consent of any third parties. LSC cannot assign this
Agreement unless it has obtained written consent from HBOA.
9.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
provisions thereof relating to conflicts of law.
9.6 Parties in Interest. Except for Section 6.8, hereof, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefit, or remedies of any nature whatsoever or by
reason of this Agreement.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
9.8 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not effect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
9.9 Jurisdiction and Venue. Each Party hereto hereby agrees that any
proceeding relating to this Agreement and the Merger shall be brought in a state
or federal court of Florida. Each party hereto hereby consents to personal
jurisdiction in any such action brought in any such Florida court, consents to
service of process by registered mail made upon such party and such party's
agent and waives any objection to venue in any such Florida court or to any
claim that such Florida court is an inconvenient form.
9.10 Investigation. The respective representations and warranties of
each Company contained herein or in the certificates or other documents
delivered prior to the Closing shall not be deemed waived or otherwise affected
by any investigation made by any party hereto.
9.11 Consents. For purposes of any provision of this Agreement
requiring, permitting, or providing for the consent of any or Company, the
written consent of the President or Chief Executive Officer of a Company shall
be sufficient to constitute such consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, each Company and the LSC Shareholders have caused
this Agreement and Plan of Merger to be executed as of the 5th day of
June, 2003.
HBOA HOLDINGS, INC., a Florida Corporation LEXSYS SOFTWARE CORP., a Florida corporation
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxx, Xx.
----------------------------------------- ----------------------------------------------
Name: Xxxx Xxxxxxx Name: Xxxxxxx X. Xxxxxx, Xx.
Title: President Title: President
LSC SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxxx
----------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxx
--------------
Xxxxxx Xxx
19
