EXHIBIT 10.5
SHARE EXCHANGE AGREEMENT
BY AND AMONG
PHOENIX INTERNATIONAL INDUSTRIES, INC., AND
HDX 9000, INC. AND SHAREHOLDERS OF HDX 9000 INC.
FOR THE EXCHANGE OF CAPITAL STOCK OF HDX 9000, INC.
DATED AS OF ________________________________, 1997
THIS SHARE EXCHANGE AGREEMENT, dated as above, by and among PHOENIX
INTERNATIONAL INDUSTRIES, INC., a Florida corporation ("Phoenix") and HDX 9000,
INC., a Delaware corporation and the Shareholders of HDX 9000, INC. ("HDX") as
set forth on Schedule "A" attached hereto and made a part hereof (individually a
"Shareholder" and collectively, the "Shareholders"),
WHEREAS, Phoenix is a corporation organized under the laws of the State of
Florida and is responsible for filing certain reports with the Securities and
Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934;
WHEREAS, HDX is a corporation organized under the laws of the State of
Delaware;
WHEREAS, HDX believes it is in the best interest of its shareholders (and the
shareholders of Phoenix after giving effect to the transactions contemplated
hereby) to avail itself of the advantages of being part of a "publicly traded
corporation", and
WHEREAS, the Shareholders own 100% the issued and outstanding shares of
common stock (the "Shares") of HDX; and
WHEREAS, the Shareholders desire to exchange the Shares for shares of the common
stock, par value $.01 per share, of PHOENIX INTERNATIONAL INDUSTRIES, INC., upon
the terms and subject to the conditions set forth in this Agreement, and
WHEREAS, the parties desire this to be a tax-free exchange under the Internal
Revenue Code.
NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
EXCHANGE OF SHARES FOR COMMON STOCK
SECTION 1.1 Agreement to Exchange Shares for Common Stock: On the Closing
Date (as hereinafter defined) and upon the terms and subject to the conditions
set forth in this Agreement, the Shareholders shall sell, assign, transfer,
convey and deliver the Shares (representing 1,500 shares or 100% of the common
stock of HDX) to Phoenix, and Phoenix shall accept the Shares from the
Shareholders in exchange for the shares of Common Stock of Phoenix as defined
below.
SECTION 1.2 Closing: The closing of such exchange (the "Closing") shall
take place at 10:00 a.m. EST on the second business day after the conditions to
closing set forth in Articles VI and VII have been satisfied or waived, or at
such other time and date as the parties hereto shall agree in writing (the
"Closing Date"), at the offices of Phoenix, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇. At the Closing, the Shareholders shall deliver to Phoenix or its
designee(s) stock certificates representing the Shares, duly endorsed in blank
for transfer or accompanied by appropriate stock powers duly executed in blank.
In full consideration and exchange for the Shares, Phoenix shall exchange with
the Shareholders the Exchange Consideration as provided for in Section 1.3
hereof.
SECTION 1.3 Exchange Consideration: In exchange for the Shares, Phoenix
will exchange with the Shareholders on the Closing Date, or at a time mutually
agreed upon by both parties, not to exceed 30 days; 500,000 shares of the common
stock of Phoenix, restricted pursuant to rule 144 of the Securities and Exchange
Commission (the Exchange Consideration).
SECTION 1.4 Performance Bonus: Additionally, HDX will receive as a
performance bonus, 1.5 PHXU shares of the restricted common stock of Phoenix,
for every $1.00 in net profit produced by HDX in the first 12 months after
acquisition, to a maximum of 1,000,000 shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HDX
HDX hereby represents, warrants and agrees as follows:
SECTION 2.1 Corporate Organization:
(a) HDX is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own its properties and assets and to conduct
its business as now conducted and is duly qualified to do business in good
standing in each jurisdiction in where the nature of the business conducted by
HDX or the ownership or leasing of its properties makes such qualification and
being in good standing necessary, except where the failure to be so qualified
and in good standing will not have a material adverse effect on the business,
operations, properties, assets, condition or results of operation of HDX (a "HDX
Material Adverse Effect");
(b) Copies of the Articles of Incorporation and By-laws of HDX, with
all amendments thereto to the date hereof, have been furnished to Phoenix, and
such copies are accurate and complete as of the date hereof. The minute books of
HDX are current as required by law, contain the minutes of all meetings of the
Board of Directors, committees of the Board of Directors and Shareholders from
date of incorporation to this date, and adequately reflect all material actions
taken by the Board of Directors, committees of the Board of Directors and
Shareholders of HDX.
SECTION 2.2 Capitalization of the Company: The authorized capital stock of
HDX consists of; 1,500 shares of common stock, with a par value of $.01 per
share, of which 1,500 shares are outstanding. All of the shares of capital stock
have been duly authorized and validly issued, and are fully paid and
non-assessable and no personal liability attaches to the ownership thereof.
Except as set forth in this Section 2.2, the Shares are the sole outstanding
shares of capital stock of HDX, and there are no outstanding options, warrants,
agreements, commitments, conversion rights, preemptive rights or other rights to
subscribe for, purchase or otherwise acquire any of the shares of capital stock
or any unissued or treasury shares of capital stock of HDX.
SECTION 2.3 Subsidiaries and Equity Investments: HDX has equity
investments as set out in Schedule 2.3.
SECTION 2.4 Authorization and Validity of Agreements: HDX has all
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 HDX and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of HDX
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby.
SECTION 2.5 No Conflict or Violation: The execution, delivery and
performance of this Agreement by HDX and each Shareholder does not and will not
violate or conflict with any provision of the Articles of Incorporation or
By-laws of HDX, and does not and will not violate any provision of law, or any
order, judgment or decree of any court or other governmental or regulatory
authority, nor violate nor will result in a breach of or constitute (with due
notice or lapse of time or both) a default under or give to any other entity any
right of termination, amendment, acceleration or cancellation of any contract,
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which HDX or any Shareholder is a party or by which
any of them is bound or to which any of its or their respective properties or
assets is subject, nor will result in the creation or imposition of any lien,
charge or encumbrance of any kind whatsoever upon any of the properties or
assets of HDX, nor will result in the cancellation, modification, revocation or
suspension of any of the licenses, franchises, permits to which HDX is bound.
SECTION 2.6 Consents and Approvals: If applicable, each party to this
agreement will set forth as Schedule 2.6; a true and complete list of each
consent, waiver, authorization or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or corporation, and
each declaration to or filing or registration with any such
governmental or regulatory authority, that is required in connection with the
execution and delivery of this Agreement by HDX and each Shareholder or the
performance by HDX and each Shareholder of its or their obligations hereunder.
SECTION 2.7 Financial Statements: HDX has heretofore furnished to Phoenix
audited balance sheets as of June 30, 1997, accompanied by the reports thereon
of HDX's Accountants, (the audited balance sheets being hereinafter referred to
as the "balance sheet"). The balance sheet, including the notes thereto, (i)
were prepared in accordance with generally accepted accounting principles, (ii)
present fairly, in all material aspects, the financial position, results of
operations and changes in financial position of HDX as of such dates and for the
periods then ended, (iii) are complete, correct and in accordance with the books
of account and records of HDX, (iv) can be reconciled with the financial
statements and the financial records maintained and the accounting methods
applied by HDX for federal income tax purposes, (v) and contain all entries
recommended by HDX's Accountants.
SECTION 2.8 Absence of Certain Changes or Events: Since June 30, 1997 and
except as set forth on Schedule 2.8, if applicable:
(a) HDX has operated in the ordinary course of business consistent
with past practice and there has not been any material adverse change in the
assets, properties, business, operations, prospects, net income or conditions
financial or otherwise of HDX. HDX does not know or has reason to know of any
event, condition, circumstance or prospective development which threatens or may
threaten to have a material adverse effect on the assets, properties,
operations, prospects, net income or financial condition of HDX;
(b) there has not been any substantive change in any method of
accounting or accounting practice of HDX;
(c) there has not been any declarations, setting aside or payment of
dividends or distributions with respect to shares of HDX or any redemption,
purchase or other acquisition of any other HDX's securities; and
(d) there has not been an increase in the compensation payable or
due any director or officer of HDX.
SECTION 2.9 Tax Matters: Except as reflected in HDX's audited balance
sheets, all returns, reports, or information return or other document (including
any relating or supporting information) required to be filed before the Closing
in respect of HDX has been filed, and HDX has paid, accrued or otherwise
adequately reserved for the payment of all Taxes required to be paid in respect
of the periods covered by such returns and has adequately reserved for the
payment of all Taxes with respect to periods ended on or before the Closing for
which tax returns have not yet been filed. All Taxes of HDX have been paid or
adequately provided for and HDX knows of no proposed additional tax assessment
against HDX not adequately provided for in the Financial Statements. No
deficiency for any Taxes has been asserted or assessed by a taxing authority
against HDX, there is no outstanding audit examination, deficiency or refund
litigation with respect to any Taxes of HDX. In the ordinary course, HDX makes
adequate provision on its books for the payment of Taxes (including for the
current fiscal period) owed by HDX. HDX has not executed an extension or waiver
of any statute of limitations on the assessment or collection of tax that is
currently in effect. "Taxes" shall, for purposes of this Agreement, mean all
taxes however denominated, including any interest, penalties or addition to tax
that may become payable in respect thereof, imposed by any governmental body
which taxes shall include, without
limiting the generality of the foregoing, all income taxes, payroll and employee
withholding taxes, unemployment insurance, social security, sales and use taxes,
excise taxes, franchise taxes, receipts taxes, occupations taxes, real and
personal property taxes, stamp taxes, transfer taxes, ▇▇▇▇▇▇▇'▇ compensation
taxes and any other obligation of the same or a similar nature.
SECTION 2.10 Absence of Undisclosed Liabilities: Except as set forth on
Schedule 2.10, or as disclosed in its audited balance sheets of June 30, 1997,
HDX has no indebtedness or liability, absolute or contingent, known or unknown,
which is not shown or provided for on the balance sheet of HDX as of that date
included in the Financial Statements other than liabilities incurred or accrued
in the ordinary course of business since June 30, 1997. Except as shown in such
balance sheets or in the notes to the Financial Statements, HDX is not directly
or indirectly liable upon or with respect to (by discount, repurchase agreements
or otherwise), or obligated in any other way to provide funds in respect of, or
to guarantee or assume, any debt, obligation or dividend of any person.
SECTION 2.11 Interests in Real Property: Schedule 2.11 sets forth an
accurate and complete list of the location of each item of real property ("Real
Property") owned or leased by HDX. HDX as of the closing date, owns no "Real
Property". Schedule 2.11 sets forth an accurate and complete list (by lessee) in
the summary description of all leases of Real Property to which HDX is a party.
HDX has a valid leasehold interest in each Real Property lease held by it as
lessee or sub-lessee as of the date hereof, in each case free and clear of all
Liens, except for those Liens described in Schedule 2.11. All such Real Property
leases are in full force and effect and HDX has received no notice of any
default thereunder or waived or is aware of any event or circumstances with
which the giving of notice or lapse of time or both would constitute a default
hereunder. HDX has received no notice nor has any knowledge of any pending,
threatened or contemplated condemnation proceeding affecting any Real Property
owned or leased by it or any part thereof or of any sale or other disposition
thereof in lieu of condemnation. All of the buildings, fixtures and other
improvements described in Schedule 2.11 are in good operating condition, subject
to ordinary wear and tear.
SECTION 2.12 Personal Property: HDX owns all personal property (including
properties that may be deemed to be a mix of personal property and Real
Property, ("Personal Property")) purported to be owned by it as of the date
hereof, in each case free and clear of all Liens, except for those Liens
described in Schedule 2.12. All of the Personal Property owned or leased by, and
commonly used or necessary for or in the operations of HDX: (i) is in such
operating condition repair as may be necessary to carry on the business of HDX
as it is now being conducted, subject only to ordinary wear and tear; and (ii)
is sufficient, in the aggregate, for all purposes of the business of HDX as
presently conducted.
SECTION 2.13 Licenses, Permits and Governmental Approvals: Schedule 2.13
sets forth a true and complete list of all licenses, permits, franchises,
authorizations and approvals issued or granted to HDX by any federal, state or
local government, or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing (the "Licenses and Permits"), and all
pending applications therefore. Each License and Permit is valid and in full
force and effect, and, to HDX's best knowledge, is not subject to any pending or
threatened administrative or judicial proceeding to revoke, cancel, suspend or
declare such License and Permit invalid in any respect. The Licenses and Permits
are sufficient and adequate in all material respects to permit the
continued lawful conduct of HDX's business in the manner now conducted and as
has been proposed by HDX to be conducted. Except as set forth in Schedule 2.13,
no such License and Permit will in any way be affected by, or terminate or lapse
by reason of the transactions contemplated by this Agreement.
SECTION 2.14 Compliance with Law: The operations of HDX have been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of all courts and other governmental or regulatory authorities
having jurisdiction over HDX and its assets, properties and operations,
including, without limitation, all such laws, regulations, orders and
requirements promulgated by or relating to consumer protection, equal
opportunity, health, environmental protection, architectural barriers to the
handicapped, fire, zoning and building and occupation safety except where such
non-compliance would not have a HDX Material Adverse Effect. HDX has not
received notice of any violation of any such law, regulation, order or other
legal requirement, and is not in default with respect to any order, writ,
judgment, award, injunction or decree of any national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
applicable to HDX or any of its assets, properties or operations.
SECTION 2.15 Litigation: Except as set forth on Schedule 2.15, there are
no claims, actions, suits, proceedings, labor disputes or investigations pending
or, to the best of the HDX's knowledge, threatened before any federal, state or
local court or governmental or regulatory authority, domestic or foreign, or
before any arbitrator of any nature, brought by or against HDX or any of its
officers, directors, employees, agents or affiliates involving, affecting or
relating to any assets, properties or operations of HDX or the transactions
contemplated by this Agreement, nor is any basis known to it for any such
action, suit, proceeding or investigation. Schedule 2.15 sets forth a list and a
summary description of all such pending actions, suits, proceedings, disputes or
investigations. Neither HDX nor any of its assets or properties is subject to
any order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority or arbitrator, that would
have a HDX Material Adverse Effect on its assets, properties, operations,
prospects, net income or financial condition or which would or might interfere
with the transactions contemplated by this Agreement.
SECTION 2.16 Contracts: Schedule 2.16 sets forth a true and complete list
of all material contracts, agreements and other instruments to which HDX is a
party or otherwise relating to or affecting any of its assets, properties or
operations, including, without limitation, all written or oral, express or
implied, material, (a) contracts, agreements and commitments not made in the
ordinary course of business; (b) purchase and supply contracts; (c) contracts,
loan agreements, repurchase agreements, mortgages, security agreements, trust
indentures, promissory notes and other documents or arrangements relating to the
borrowing of money or for lines of credit; (d) leases and subleases of real or
personal property; (e) agreements and other arrangements for the sale of any
assets other than in the ordinary course of business or for the grant of any
options or preferential rights to purchase any assets, property or rights; (f)
contracts or commitments limiting or restraining HDX from engaging or competing
in any lines of business or with any person, firm, or corporation; (h)
partnership and joint venture agreements; and (i) all amendments, modifications,
extensions or renewals of any of the foregoing (the foregoing contracts,
agreements and documents are hereinafter referred to collectively as the
"Commitments" and individually as a "Commitment"). Each Commitment is valid,
binding and
enforceable against the parties thereto in accordance with its terms, and in
full force and effect on the date hereof. HDX has performed all obligations
required to be performed by it to date under, and is not in default in respect
of, any Commitment, and to HDX's best knowledge no event has occurred which,
with due notice or lapse of time or both, would constitute such a default. To
the best of HDX's knowledge, no other party to any Commitment is in default in
respect thereof, and no event has occurred which, with due notice or lapse of
time or both, would constitute such a default.
SECTION 2.17 Employee Plans: HDX has complied in all material respects
with the requirements of Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code"), and Sections 601 to 608 of ERISA relating to continuation
coverage for group health plans. Schedule 2.17 lists every pension, savings,
retirement, severance health, insurance or other employee benefit plan
(collectively referred to herein as the "Plans") which HDX maintains, or has any
obligation to contribute to.
SECTION 2.18 Insurance: Schedule 2.18 lists the fidelity bonds and the
aggregate coverage amount and type and generally applicable deductibles of all
policies of title, liability, fire, casualty, business interruption, workers'
compensation, disability and other forms of insurance insuring the properties,
assets and operations of the business of HDX. Except as set forth in Schedule
2.18, all such policies and bonds are in full force and effect, underwritten by
financially sound and reputable insurers (to HDX's best knowledge) and
sufficient for all applicable requirements of law and will not in any way be
effected by or terminated or lapsed by reason of the consummation of the
transactions contemplated by this Agreement. HDX is not in material default
under any provisions of any such policy of insurance and has not received notice
of cancellation of any such insurance. Except as set forth in Schedule 2.18,
there is no claim by HDX pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds.
SECTION 2.19 Environmental Matters: HDX has obtained and maintained in
effect all licenses, permits and other authorizations required under all
applicable laws, regulations and other requirements of governmental or
regulatory authorities relating to pollution or to the protection of the
environment ("Environmental Laws") and is in compliance with all Environmental
Laws and with all such licenses, permits and authorizations except where the
failure to comply would not have a HDX Material Adverse Effect. HDX has not
performed or suffered any act which could give rise to, or has otherwise
incurred liability to any person (governmental or not) under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.S 9601 et seq.
or any other Environmental Laws, nor has HDX received notice of any such
liability or any claim therefore or submitted notice pursuant to Section 103 of
such Act to any governmental agency with respect to any of its respective
assets.
SECTION 2.20 Labor Matters:
(a) Except as set forth in Schedule 2.20: (i) HDX is not a party to
any outstanding employment agreements or contracts with officers or employees
that are not terminable at will, or that provide for the payment of any bonus or
commission; (ii) HDX is not a party to any agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law); (iii) HDX is not a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by
HDX nor does HDX know of any activities or proceedings of any labor union to
organize any such employees. HDX has not breached or otherwise failed to comply
with any provisions of any employment or labor agreement, and there are no
grievances outstanding thereunder.
(b) Except as set forth in Schedule 2.20: (i) HDX is in compliance
in all material respects with all applicable laws relating to employment and
employment practices, wages, hours, and terms and conditions of employment; (ii)
there is no unfair labor practice charge or complaint pending before the
National Labor Relations Board ("NLRB"); (iii) there is no labor strike,
material slowdown or material work stoppage or lockout actually pending or, to
HDX's best knowledge, threatened against or affecting HDX, and HDX has not
experienced any strike, material slow down or material work stoppage, lockout or
other collective labor action by or written respect to employees of HDX since
its inception; (iv) there is no representation claim or petition pending before
the NLRB and no question concerning representation exists relating to the
employees of HDX; (v) there are no charges with respect to or relating to HDX
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment
practices; (vi) HDX has received no formal notice from any federal, state, local
or foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of HDX and no such investigation is in
progress.
SECTION 2.21 Disclosure: This Agreement, the schedules hereto and any
certificate attached hereto or delivered in accordance with the terms hereby by
or on behalf of HDX in connection with the transactions contemplated by this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit any material fact necessary in order to make the
statements contained herein and/or therein not misleading.
SECTION 2.22 Survival: Each of the representations and warranties set
forth in this Article II shall be deemed represented and made by HDX at the
Closing as if made at such time and shall survive the Closing for a period
terminating on the third anniversary.
ARTICLE III
(not applicable, purposely left out)
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PHOENIX
Phoenix represents, warrants and agrees as follows:
SECTION 4.1 Corporate Organization: Phoenix is a publicly traded, non
reporting corporation (listed on the NASDAQ Over the Counter Bulletin Board
under the trading symbol "PHXU") duly organized, validly existing and in good
standing under the laws of the State of Florida, and has all requisite corporate
power and authority to own its properties and assets and to conduct its business
as now conducted and is duly qualified to do business in good standing in each
jurisdiction in where the nature of the business conducted by Phoenix or the
ownership or leasing of its properties makes such qualification and being in
good standing necessary, except where the failure to be so qualified and in good
standing will not have a material adverse effect on the business, operations,
properties, assets, condition or results of operation of Phoenix (a "Phoenix
Material Adverse Effect").
SECTION 4.2 Capitalization of the Company: Title to the Shares. The
authorized capital stock of Phoenix consists of (a) 20,000,000 shares of common
stock, par value $.01 per share, of which approximately 7,000,000 shares are
outstanding and (b) 1,000 shares of preferred stock, none of which is issued or
outstanding (the "Phoenix Shares"). All of the outstanding shares of capital
stock have been duly authorized and validly issued, and are fully paid and
non-assessable and no personal liability attaches to the ownership thereof.
Exceptions, if any, are set forth on Schedule 4.2, the Phoenix Shares currently
are the sole outstanding shares of capital stock of Phoenix, and there are no
outstanding warrants, agreements, commitments, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any of
the shares of capital stock or any unissued or treasury shares of capital stock
of Phoenix. Phoenix reserves the right to issue additional shares as desired.
SECTION 4.3 Subsidiaries and Equity Investments: As of the date of closing
Phoenix has only one subsidiary, Intuitive Technology Consultants, Inc. of
Atlanta, Georgia, which is wholly owned by Phoenix, prior to the date of closing
of this Agreement, Phoenix has no other subsidiaries or equity investments.
SECTION 4.4 Authorization and Validity of Agreements: Phoenix has all
corporate power and authority to execute and deliver this Agreement to perform
its obligations hereunder and to consummate the transactions the transactions
contemplated hereby. The execution and delivery of this Agreement by Phoenix and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Phoenix are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby.
SECTION 4.5 No Conflict or Violation: Except as otherwise set forth on
Schedule 4.6, the execution, delivery and performance of this Agreement by
Phoenix does not and will not violate or conflict with any provision of the
Articles of Incorporation or by-laws of Phoenix, and does not and will not
violate any provision of law, or any order, judgment or decree of any court or
other governmental or regulatory authority, nor violate nor will result in a
breach of or constitute (with due notice or lapse of time or both) a default
under or give to any other entity any right of termination, amendment,
acceleration or cancellation of any contract, lease, loan agreement, mortgage,
security agreement , trust indenture or other agreement or instrument to which
Phoenix is a party or by which it is bound or to which any of its respective
properties or assets is subject, nor will result in the creation or imposition
any lien, charge or encumbrance of any kind whatsoever upon any of the
properties or assets of Phoenix, nor will result in the cancellation,
modification, revocation or suspension of any of the licenses, franchises,
permits to which Phoenix is bound.
SECTION 4.6 Consents and Approvals: Schedule 4.6 sets forth a true and
complete list, if applicable, of each consent, waiver, authorization or approval
of any governmental or regulatory authority, domestic or foreign, or of any
other person, firm or corporation, and each declaration to or filing or
registration with any such governmental or regulatory authority, that is
required in connection with the execution and delivery of this Agreement by
Phoenix or the performance by Phoenix of its obligations hereunder.
SECTION 4.7 Financial Statements: Phoenix has heretofore furnished to HDX
(a) financial statements as of and for the year ended on December 31, 1996,
accompanied by the reports thereon of Phoenix's Accountants, (the financial
statement listed above being hereinafter referred to as the "Financial
Statement"). The Financial Statement, including the notes thereto, (i) were
prepared in accordance with generally accepted accounting principles, (ii)
present fairly, in all material respects, the financial position, results of
operations and changes in financial position of Phoenix as of such dates and for
the periods then ended, (iii) are complete, correct and in accordance with the
books of account and records of Phoenix, (iv) can be reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by Phoenix for federal income tax purposes, and (v) contain all
entries recommended by Phoenix's Accountants.
SECTION 4.8 Absence of Certain Changes or Events: Since December 31, 1996,
and except (i) as contemplated by this Agreement or(ii) as set forth on Schedule
4.8:
(a) Phoenix has operated in the ordinary course of business
consistent with past practice and there has not been any material adverse change
in the assets, properties, business, operations, prospects, net income or
conditions financial or otherwise of Phoenix. Phoenix does not know or has
reason to know of any event, condition, circumstance or prospective development
which threatens or may threaten to have a material adverse effect on the assets,
properties, operations, prospects, net income or financial condition of Phoenix;
(b) there has not been any substantive change in any method of
accounting or accounting practice of Phoenix;
(c) there have not been any declarations, setting aside or payment
of dividends or distributions with respect to shares of Phoenix or any
redemption, purchase or other acquisition of any other Phoenix's securities; and
(d) there has not been an increase in the compensation payable or to
become payable to any director or officer of Phoenix other than pursuant to
employment agreements or consistent with prior past practices.
SECTION 4.9 Tax Matters: All returns, reports, or information return or
other document (including any relating or supporting information) required to be
filed before the Closing in respect of Phoenix has been filed, and Phoenix has
paid, accrued or otherwise adequately reserved for the payment of all Taxes
required to be paid in respect of the periods covered by such returns and has
adequately reserved for the payment of all Taxes with respect to periods ended
on or before the Closing for which tax returns have not yet been filed. All
Taxes of Phoenix have been paid or adequately provided for and Phoenix knows of
no proposed additional tax assessment against Phoenix not adequately provided
for in the Financial Statements. No deficiency for any Taxes has been asserted
or assessed by a taxing authority against Phoenix, there is no outstanding audit
examination, deficiency or refund litigation with respect to any Taxes of
Phoenix. In the ordinary course, Phoenix makes adequate provision on its books
for the payment of Taxes (including for the current fiscal period) owed by
Phoenix. Phoenix has not executed an extension or waiver of any statute of
limitations on the assessment or collection of tax that is currently in effect.
Taxes shall for purposes of this Agreement mean all taxes however denominated,
including any interest, penalties or addition to tax that may become payable in
respect thereof, imposed by any governmental body which taxes shall include,
without limiting the generality of the foregoing, all income taxes, payroll and
employee withholding taxes, unemployment insurance, social security, sales and
use taxes, excise taxes, franchise taxes,
receipts taxes, occupations taxes, real and personal property taxes, stamp
taxes, transfer taxes, ▇▇▇▇▇▇▇'▇ compensation taxes and any other obligation of
the same or a similar nature. Schedule 4.9 sets forth an accurate and complete
list of all tax loss carry-forwards.
SECTION 4.10 Absence of Undisclosed Liabilities: Except as set forth on
Schedule 4.10 or 4.16, Phoenix has no indebtedness or liability, absolute or
contingent, known or unknown, which is not shown or provided for on the balance
sheet of Phoenix as of December 31, 1996, other than liabilities incurred or
accrued in the ordinary course of business since December 31, 1996. Except as
shown in such balance sheets or in the notes to the Financial Statements,
Phoenix is not directly or indirectly liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obligated in any other way to
provide funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of any person, except endorsements in the ordinary course of business
in connection with the deposit of items for collection.
SECTION 4.11 Interests in Real Property: Other than the office lease
relating to the property located at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇, Phoenix does not own or lease any real property.
SECTION 4.12 Personal Property: Phoenix owns all personal property
(including properties that may be deemed to be a mix of personal property and
Real Property, ("Personal Property")) purported to be owned by it as of the date
hereof, in each case free and clear of all Liens, except for those Liens
described in Schedule 4.12. All of the Personal Property owned or leased by, and
commonly used or necessary for or in the operations of, any of, Phoenix: (i) is,
in the aggregate, in such operating condition repair as may be necessary to
carry on the business of Phoenix as it is now being conducted, subject only to
ordinary wear and tear; and (ii) is sufficient, in the aggregate, for all
purposes of the business of Phoenix.
SECTION 4.13 Licenses, Permits and Governmental Approvals: Schedule 4.13
sets forth a true and complete list of all licenses, permits, franchises,
authorizations and approvals issued or granted to Phoenix by any federal, state
or local government, or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing (the "Licenses and Permits"), and all
pending applications therefore. Each License and Permit is valid and in full
force and effect, and, to Phoenix's best knowledge, is not subject to any
pending or threatened administrative or judicial proceeding to revoke, cancel,
suspend or declare such License and Permit invalid in any respect. The Licenses
and Permits are sufficient and adequate in all material respects to permit the
continued lawful conduct of Phoenix's business in the manner now conducted and
as has been proposed by Phoenix to be conducted. Except as set forth in Schedule
4.13, no such License and Permit will in any way be affected by, or terminate or
lapse by reason of the transactions contemplated by this Agreement.
SECTION 4.14 Compliance with Law: The operations of Phoenix have been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of all courts and other governmental or regulatory authorities
having jurisdiction over Phoenix and its assets, properties and operations,
including, without limitation, all such laws, regulations, orders and
requirements promulgated by or relating to consumer protection, equal
opportunity, health, environmental protection, architectural barriers to the
handicapped, fire, zoning and building and occupation safety except where such
non-compliance would not have a Phoenix Material Adverse
Effect. Phoenix has not received notice of any violation of any such law,
regulation, order or other legal requirement, and is not in default with respect
to any order, writ, judgment, award, injunction or decree of any national, state
or local court or governmental or regulatory authority or arbitrator, domestic
or foreign, applicable to Phoenix or any of its assets, properties or
operations.
SECTION 4.15 Litigation: Except as disclosed its financial statement there
are no claims, actions, suits, proceedings, labor disputes or investigations
pending or, to the best of the Phoenix's knowledge, threatened before any
federal, state or local court or governmental or regulatory authority, domestic
or foreign, or before any arbitrator of any nature, brought by or against
Phoenix or any of its officers, directors, employees, agents or affiliates
involving, affecting or relating to any assets, properties or operations of
Phoenix or the transactions contemplated by this Agreement, nor is any basis
known to Phoenix for any such action, suit, proceeding or investigation.
Schedule 4.15 sets forth a list and a summary description of all such pending
actions, suits, proceedings, disputes or investigations. Neither Phoenix nor any
of its assets or properties is subject to any order, writ, judgment, award,
injunction or decree of any federal, state or local court or governmental or
regulatory authority or arbitrator, that would have a Phoenix Material Adverse
Effect on its assets, properties, operations, prospects, net income or financial
condition or which would or might interfere with the transactions contemplated
by this Agreement.
SECTION 4.16 Contracts: Schedule 4.16 sets forth a true and complete list
of all material contracts, agreements and other instruments to which Phoenix is
a party or otherwise relating to or affecting any of its assets, properties or
operations, including, without limitation, all written or oral, express or
implied, material, (a) contracts, agreements and commitments not made in the
ordinary course of business; (b) purchase and supply contracts; (c) contracts,
loan agreements, repurchase agreements, mortgages, security agreements, trust
indentures, promissory notes and other documents or arrangements relating to the
borrowing of money or for lines of credit; (d) leases and subleases of real or
personal property; (e) agreements and other arrangements for the sale of any
assets other than in the ordinary course of business or for the grant of any
options or preferential rights to purchase any assets, property or rights; (f)
contracts or commitments limiting or restraining Phoenix from engaging or
competing in any lines of business or with any person, firm, or corporation; (h)
partnership and joint venture agreements; and (i) all amendments, modifications,
extensions or renewals of any of the foregoing (the foregoing contracts,
agreements and documents are hereinafter referred to collectively as the
"Commitments" and individually as a "Commitment"). Each Commitment is valid,
binding and enforceable against the parties thereto in accordance with its
terms, and in full force and effect on the date hereof. Phoenix has performed
all obligations required to be performed by it to date under, and is not in
default in respect of, any Commitment, and to Phoenix's best knowledge no event
has occurred which, with due notice or lapse of time or both, would constitute
such a default. To the best of Phoenix's knowledge, no other party to any
Commitment is in default in respect thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default.
SECTION 4.17 Employee Plans: Phoenix has complied in all material respects
with the requirements of Section 4980B of the Code and Sections 601 to 608 of
ERAS relating to continuation coverage for group health plans. Schedule 4.17
lists every pension, savings, retirement, severance health, insurance or other
employee benefit plan (collectively referred to herein as the "Plans") which
Phoenix maintains, or has any obligation to contribute to.
SECTION 4.18 Insurance: Schedule 4.18 lists the fidelity bonds and the
aggregate coverage amount and type and generally applicable deductibles of all
policies of title, liability, fire, casualty, business interruption, workers'
compensation, disability and other forms of insurance insuring the properties,
assets and operations of the business of Phoenix. Except as set forth in
Schedule 4.18, all such policies and bonds are in full force and effect,
underwritten by financially sound and reputable insurers (to Phoenix's best
knowledge) and sufficient for all applicable requirements of law and will not in
any way be effected by or terminated or lapsed by reason of the consummation of
the transactions contemplated by this Agreement. Phoenix is not in material
default under any provisions of any such policy of insurance and has not
received notice of cancellation of any such insurance. Except as set forth in
Schedule 4.18, there is no claim by Phoenix pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds.
SECTION 4.19 Environmental Matters: Phoenix has obtained and maintained in
effect all licenses, permits and other authorizations required under all
applicable laws, regulations and other requirements of governmental or
regulatory authorities relating to pollution or to the protection of the
environment ("Environmental Laws") and is in compliance with all Environmental
Laws and with all such licenses, permits and authorizations except where the
failure to comply would not have a Phoenix Material Adverse Effect. Phoenix has
not performed or suffered any act which could give rise to, or has otherwise
incurred liability to any person (governmental or not) under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. S 9601 et seq.
or any other Environmental Laws, nor has Company received notice of any such
liability or any claim therefore or submitted notice pursuant to Section 103 of
such Act to any governmental agency with respect to any of its respective
assets.
SECTION 4.20 Labor Matters:
(a) Except as set forth in Schedule 4.20: (i) Phoenix is not a party
to any outstanding employment agreements or contracts with officers or employees
that are not terminable at will, or that provide for the payment of any bonus or
commission; (ii) Phoenix is not a party to any agreement, policy or practice
that requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law); (iii) Phoenix is not a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by Phoenix nor does Phoenix know of any activities or
proceedings of any labor union to organize any such employees. Phoenix has not
breached or otherwise failed to comply with any provisions of any employment or
labor agreement, and there are no grievances outstanding thereunder.
(b) Except as set forth in Schedule 4.20:
(i) Phoenix is in compliance in all material respects with all
applicable laws relating to employment and employment practices, wages, hours,
and terms and conditions of employment;
(ii) there is no unfair labor practice charge or complaint
pending before the National Labor Relations Board ("NLRB");
(iii) there is no labor strike, material slowdown or material
work stoppage or lockout actually pending or, to Phoenix's best knowledge,
threatened against or affecting Phoenix, and Phoenix has not experienced any
strike, material slow down or material work stoppage, lockout or other
collective labor action by or written respect to employees of Phoenix since
September 30, 1995;
(iv) there is no representation claim or petition pending
before the NLRB and no question concerning representation exists relating to the
employees of Phoenix; (v) there are no charges with respect to or relating to
Phoenix pending before the Equal Employment Opportunity Commission or any state,
local or foreign agency responsible for the prevention of unlawful employment
practices;
(vi) Phoenix has received no formal notice from any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of Phoenix and no
such investigation is in progress.
SECTION 4.21 Investment Intent: The Shares will be acquired hereunder
solely for the account of Phoenix and its specified designees, for investment,
and not with a view to the resale or distribution thereof.
SECTION 4.22 Disclosure: This Agreement, the schedules hereto and any
certificate attached hereto or delivered in accordance with the terms hereby by
or on behalf of Phoenix in connection with the transactions contemplated by this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit any material fact necessary in order to make the
statements contained herein and/or therein not misleading.
SECTION 4.23 Survival: Each of the representations and warranties set
forth in this Article IV shall be deemed represented and made by Phoenix at the
Closing as if made at such time and shall survive the Closing for a period
terminating on the third anniversary.
ARTICLE V
COVENANTS
SECTION 5.1 Certain Changes and Conduct of Business: From and after the
date of this Agreement and until the Closing Date, HDX shall conduct, its
business solely in the ordinary course consistent with past practices and, in a
manner consistent with all representations or warranties of HDX and,
(a) without the prior written consent of Phoenix, HDX will not,
except as required or permitted pursuant to the terms hereof:
(i) make any material change in the conduct of its businesses
and operations enter into any transaction other than in the ordinary course of
business consistent with past practices;
(ii) make any change in its Articles of Incorporation or
By-laws; issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for its
capital stock or alter in any material term of any of its outstanding securities
or make any change in its outstanding shares of capital stock or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate securities
or grant any option, warrant or right to purchase any thereof, except pursuant
to transactions in the ordinary course of business consistent with past
practices, or (B) issue any securities convertible or exchangeable for debt
securities of HDX;
(iv) subject any of its assets, or any part thereof, to any
Lien or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation of law
which will not have a material adverse effect on HDX;
(v) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(vi) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment) or grant any
increase in the compensation payable or to become payable to any employee,
except in accordance with pre-existing contractual provisions or consistent with
past practices;
(vii) make or commit to make any material capital expenditure;
(viii) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or arrangement
with, any of its affiliates;
(ix) guarantee any indebtedness for borrowed money or any
other obligation of any other person;
(x) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it) on the
date hereof;
(xi) take any other action that would cause any of the
representations and warranties made by it in this Agreement not to remain true
and correct in all material;
(xii) make any loan, advance or capital contribution to or
investment in any person;
(xiii) make any change in any method of accounting or
accounting principle, method, estimate or practice;
(xiv) settle, release or forgive any claim or litigation or
waive any right;
(xv) commit itself to do any of the foregoing
(b) HDX will commit itself to,
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for its
current use;
(ii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due all
taxes, assessments, fees and other
charges lawfully levied or assessed against it, unless the validity thereof is
contested in good faith and by appropriate proceedings diligently conducted;
(iii) continue to conduct its business in the ordinary course
consistent with past practices;
(ix) keep its books of account, records and files in the
ordinary course and in accordance with existing practices; and
(v) continue to maintain existing business relationships with
suppliers and client.
SECTION 5.2 Access to Properties and Records: HDX shall afford Phoenix,
its accounts, counsel and representatives and Phoenix shall afford to HDX, its
accountants, counsel and representatives full access during normal business
hours throughout the period prior to the Closing Date (or the earlier
termination of this Agreement) to all of such parties properties, books,
contracts, commitments and records and, during such period, shall furnish
promptly to the requesting party all other information concerning the other
party's business, properties and personnel as the requesting party may
reasonably request, provided that no investigation or receipt of information
pursuant to this Section 5.2 shall affect any representation or warranty of or
the conditions to the obligations of any party.
SECTION 5.3 Negotiations: From and after the date hereof until the earlier
of the Closing or the termination of this Agreement, no party to this Agreement
nor its officers or directors (subject to such director's fiduciary duties) nor
anyone acting on behalf of party or persons shall, directly or indirectly,
encourage, solicit, engage in discussions or negotiations with, or provide any
information to, any person, firm, or other entity or group concerning any
merger, sale of substantial assets, purchase or sale of shares of common stock
or similar transaction involving any party thereof. A party shall promptly
communicate to any other party any inquiries or communications concerning any
such transaction which they may receive or of which they may become aware of.
SECTION 5.4 Consents and Approvals: The parties, (i) shall use their
reasonable commercial efforts to obtain all necessary consents, waivers,
authorizations and approvals of all governmental and regulatory authorities,
domestic and foreign, and all other persons, firms or corporations required in
connection with the execution, delivery and performance by them of this
Agreement, and (ii) shall diligently assist and cooperate with each party in
preparing and filing all documents required to be submitted by a party to any
governmental or regulatory authority, domestic or foreign, in connection with
such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained connection with
such transactions .
SECTION 5.5 Public Announcement: Unless otherwise required by applicable
law, the parties hereto shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
and shall not issue any such press release or make any such public statement
prior to such consultation.
SECTION 5.6 Employment Contract: Phoenix hereby acknowledges and accepts
all terms and conditions of the existing employment contract dated
______________________1997, between HDX and ▇▇▇▇ ▇▇▇▇▇.
SECTION 5.7 Resignations of HDX's Officers and Directors: On the Closing
Date, Phoenix shall receive the resignations of all officers and directors of
HDX and Phoenix shall cause ▇▇▇▇ ▇▇▇▇▇ to be appointed to as President of HDX.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PHOENIX
The obligations of PHOENIX to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or before the Closing Date, of the
following conditions, any one or more of which may be waived by Phoenix in its
sole discretion:
SECTION 6.1 Representations and Warranties of HDX: All representations and
warranties made by HDX in this Agreement shall be true and correct on and as of
the Closing Date as if again made by HDX on and as of such date.
SECTION 6.2 Agreements and Covenants: HDX and the Shareholders shall have
performed and complied in all material respects to all agreements and covenants
required by this Agreement to be performed or complied with by any of them on or
prior to the Closing Date.
SECTION 6.3 Consents and Approvals: All consents, waivers, authorizations
and approvals of any governmental or regulatory authority, domestic or foreign,
and of any other person, firm or corporation, required in connection with the
execution, delivery and performance of this Agreement shall be in full force and
effect on the Closing Date.
SECTION 6.4 No Violation of Orders: No preliminary or permanent injunction
or other order issued by any court or governmental or regulatory authority,
domestic or foreign, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any government or governmental or regulatory
authority, which declares this Agreement invalid in any respect or prevents the
consummation of the transactions contemplated hereby, or which materially and
adversely affects the assets, properties, operations, prospects, net income or
financial condition of HDX shall be in effect; and no action or proceeding
before any court or governmental or regulatory authority, domestic or foreign,
shall have been instituted or threatened by any government or governmental or
regulatory authority, domestic or foreign, or by any other person, or entity
which seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement.
SECTION 6.5 Employment Contract: On or before the Closing Date, ▇▇▇▇ ▇▇▇▇▇
shall have entered into an employment agreement with HDX.
SECTION 6.6 Opinion of Counsel: Phoenix shall have received a favorable
opinion, dated as of the Closing Date from legal counsel to HDX, in form and
substance reasonably satisfactory to Phoenix and its counsel.
SECTION 6.7 Other Closing Documents: Phoenix shall have received such
other certificates, instruments and documents in confirmation of the
representations and warranties of HDX or in furtherance of the transactions
contemplated by this Agreement as Phoenix or its counsel may reasonably request.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF HDX
The obligations of HDX and the Shareholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by HDX and the Shareholders in their sole discretion, as the case may be.
SECTION 7.1 Representations and Warranties of Phoenix: All representations
and warranties made by Phoenix in this Agreement shall be true and correct on
and as of the Closing Date as if again made by Phoenix on and as of such date.
SECTION 7.2 Agreements and Covenants: Phoenix shall have performed and
complied in all material respects to all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
SECTION 7.3 Consents and Approvals: All consents, waivers, authorizations
and approvals of any governmental or regulatory authority, domestic or foreign,
and of any other person, firm or corporation, required in connection with the
execution, delivery and performance of this Agreement, shall have been duly
obtained and shall be in full force and effect on the Closing Date.
SECTION 7.4 No Violation of Orders: No preliminary or permanent injunction
or other order issued by any court or other governmental or regulatory
authority, domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or governmental or
regulatory authority, domestic or foreign, that declares this Agreement invalid
or unenforceable in any respect or which prevents the consummation of the
transactions contemplated hereby, or which materially and adversely affects the
assets, properties, operations, prospects, net income or financial condition of
Phoenix and its subsidiaries, taken as a whole, shall be in effect; and no
action or proceeding before any court or government or regulatory authority,
domestic or foreign, shall have been instituted or threatened by any government
or governmental or regulatory authority, domestic or foreign, or by any other
person, or entity which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement.
SECTION 7.5 Opinion of Counsel: Phoenix shall have received a favorable
opinion, dated as of the Closing Date from legal counsel to Phoenix in form and
substance reasonably satisfactory to HDX and its counsel.
SECTION 7.6 Other Closing Documents: HDX shall have received such other
certificates, instruments and documents in confirmation of the representations
and warranties of
Phoenix or in furtherance of the transactions contemplated by this Agreement as
HDX or its counsel may reasonably request.
SECTION 7.7 NASDAQ, OTCBB Listing: HDX shall have received satisfactory
confirmation that upon the Closing of the transaction contemplated by this
Agreement the shares of Phoenix's Common Stock will continue to be listed as a
publicly traded company.
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.1 Methods of Termination: This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time before the
Closing:
(a) by the mutual written consent of the Shareholders, HDX, and
Phoenix.
(b) by Phoenix, upon a material breach of any representation,
warranty, covenant or agreement on the part of HDX and the Shareholders set
forth in this Agreement, or if any representation or warranty of HDX or the
Shareholders shall become untrue, in either case such that any of the conditions
set forth in Article VI hereof would not be satisfied (a "HDX Breach"), and such
breach shall, if capable of cure, have not been cured within ten (10) days after
receipt by the party in breach of a notice from the non-breaching party setting
forth in detail the nature of such breach;
(c) by the Shareholders and HDX, upon a material breach of any
representation, warranty, covenant or agreement on the part of Phoenix set forth
in this Agreement, or, if any representation or warranty of Phoenix shall become
untrue, in either case such that any of the conditions set forth in Article VII
hereof would not be satisfied (a "Phoenix Breach"), and such breach shall, if
capable of cure, not have been cured within ten (10) days after receipt by the
party in breach of a notice from the non-breaching party setting forth in detail
the nature of such breach;
(d) by either the Shareholders and HDX or Phoenix, if the Closing
shall not have consummated before thirty (30) days after the date hereof;
provided, however, that this Agreement may be extended by written notice of
either HDX or Phoenix, if the Closing shall not have been consummated as a
result of Phoenix, the Shareholders or HDX having failed to receive all required
regulatory approvals or consents with respect to this transaction or as the
result of the entering of an order as described in this Agreement; and further
provided, however, that the right to terminate this Agreement under this Section
8.1(d) shall not be available to any party whose failure to fulfill any
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before this date.
(e) by either the Shareholders and HDX or Phoenix if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use its best
efforts to lift), which permanently restrains, enjoins or otherwise prohibits
the transactions contemplated by this Agreement.
SECTION 8.2 Procedure Upon Termination: In the event of termination and
abandonment of this Agreement by HDX, the Shareholders or Phoenix pursuant to
Section 8.1, written notice thereof shall forthwith be given to the other
parties and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action. If this Agreement is
terminated as provided herein, no party to this Agreement shall have any
liability or further obligation to any other party to this Agreement except as
provided in Sections 11.1, 11.4 hereof; provided, however, that no termination
of this Agreement pursuant to this Article VIII shall relieve any party of
liability for a breach of any provision of this Agreement occurring before such
termination.
ARTICLE IX
SHAREHOLDERS' REPRESENTATIVE
SECTION 9.1. Shareholders' Representative. Each of the Shareholders
hereby irrevocably makes, constitutes and appoints ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇ as his agent
and representative and attorney-in-fact (the "Shareholders' Representative") for
all purposes under this Agreement. Each Shareholder hereby authorizes the
Shareholders' Representative, on behalf and in the name of such Shareholder, to:
(a) receive all notices or documents given or to be given to him by
Phoenix pursuant hereto or in connection herewith and to receive and accept
service of legal process in connection with any suit or other proceeding arising
under this Agreement. The Shareholders' Representative promptly shall forward a
copy of such notice or process to each Shareholder ;
(b) deliver at the Closing the certificates for the Shares of each
Shareholder in exchange for his portion of the Exchange Consideration;
(c) sign and deliver to Phoenix at the Closing a receipt for his
portion of the Exchange Consideration and transmit the Exchange Consideration to
each Shareholder;
(d) deliver to Phoenix at the Closing all certificates and documents
to be delivered to Phoenix by the Shareholders pursuant to this Agreement,
together with any other certificates and documents executed by each Shareholder
and deposited with the Shareholders' Representative for such purpose;
(e) engage such legal counsel, and such accountants and other
advisors for Shareholders and incur such other expenses on behalf of
Shareholders in connection with this Agreement and the transactions contemplated
hereby as the Shareholders' Representative may deem appropriate; and
(f) take such action on behalf of such Shareholders as the
Shareholders' Representative may deem appropriate in respect of:
(i) waiving any inaccuracies in the representations or
warranties of Phoenix contained in this Agreement or in any document delivered
by it pursuant hereto;
(ii) waiving the fulfillment of any of the conditions
precedent to the Shareholders' obligations hereunder;
(iii) taking such other action as he is authorized to take
under this Agreement;
(iv) receiving all documents or certificates and making all
determinations on behalf of the Shareholders required under this Agreement; and
(v) all such other matters as the Shareholders' Representative
may deem necessary or appropriate to consummate this Agreement and the
transactions contemplated hereby. The appointment of the Shareholders'
Representative hereunder is irrevocable and is deemed coupled with an interest
and any action taken by Shareholders' Representative pursuant to the authority
granted in this Section 9.1 shall be effective and absolutely binding on each
Shareholder notwithstanding any contrary action of or direction from a
Shareholder. The death or incapacity of any Shareholder shall not terminate the
prior authority and agency of the Shareholders' Representative.
ARTICLE X
POST-CLOSING AGREEMENTS
SECTION 10.1 Consistency in Reporting: Each party hereto agrees that: (i)
the transaction is intended to qualify as a tax-free transaction under the Code;
(ii) the transaction shall be reported for Federal income tax purposes as a
tax-free transaction; (iii) for purposes of all financial statements, tax
returns and reports, and communications with third parties, the transactions
contemplated in this agreement and ancillary or collateral transactions will be
treated as a tax-free transaction; and (iv) if the characterization of any
transaction contemplated in this agreement or any ancillary or collateral
transaction is challenged, each party hereto will testify, affirm and ratify
that the characterization contemplated in such agreement was with the
characterization intended by the party; provided, however, that nothing herein
shall be construed as giving rise to any obligation if the reporting position is
determined to be incorrect by final decision of a court of competent
jurisdiction.
SECTION 10.2 Indemnity: Phoenix shall honor the terms and conditions of
the indemnification agreements listed on Schedule 4.16 as in effect on the date
of Closing.
SECTION 10.3 Funding of HDX by Phoenix: Phoenix agrees to fund HDX in the
manner set forth in the "HDX Twelve (12) Month Budget commencing August 1,
1997", a copy of which is attached hereto as Exhibit "A". All funding and
"Receivable Financing" will be done by or through Phoenix, and HDX is not
authorized to borrow against any of its assets without the written consent of
Phoenix. Other than by or through Phoenix, HDX is not authorized to pledge,
hypothecate or receive loans against its receivables. All assets of HDX,
including but not limited to receivables, are the property of Phoenix.
Phoenix will use its best efforts to provide receivable financing of
up to seventy five percent (75%) for approved, creditworthy, accounts (as
evidenced by the lenders and lending institution, based upon the reasonable and
necessary standards of the industry). Accounts deemed to be non-creditworthy,
will be reviewed by Phoenix and HDX, on an individual basis, in an attempt to
find alternative financing. Should said review find the account(s) to be
non-financeable, the account(s) would be rejected by HDX and not be considered
as revenue.
SECTION 10.4 Performance of HDX: HDX asserts that the "HDX Twelve (12)
Month Budget" (Exhibit "A") is sound and that the projected revenues and profits
are reasonable and will be attained. Based on the limited operating history of
HDX, monthly performance reviews will be
conducted by Phoenix and should HDX fail to achieve at least eighty five percent
(85%) of the revenues and profits, cumulative year to date as projected per
Exhibit "A", notwithstanding that the foregoing would constitute a breach of
this agreement, changes and adjustments may be implemented by Phoenix to reduce
HDX's funding requirements and Phoenix's capital exposure.
SECTION 10.5 Remedies for Breach of Agreement by Phoenix: Should Phoenix
breach any term or condition of this agreement, the following shall, at the
option of HDX, occur;
(a) Phoenix shall execute a stock swap with the former shareholders
of HDX, whereby such shareholders shall return all Phoenix stock to Phoenix, and
shall receive one hundred percent (100%) of the capital stock, voting and
nonvoting of HDX. Phoenix shall guarantee that HDX shall be returned to the
Shareholders in the same or greater net worth determined in accordance with
standard accounting principles, as of the date of Phoenix's acquisition of HDX.
Any deficiency shall be funded by Phoenix as a capital contribution to HDX.
(b) These remedies shall not be exclusive.
SECTION 10.6 Remedies for Breach of Agreement by HDX: Should HDX breach
any term or condition of this agreement, the following shall, at the option of
Phoenix, occur;
(a) HDX and the former Shareholders of HDX shall execute a stock
swap with Phoenix, whereby such shareholders shall return all Phoenix stock to
Phoenix, and shall receive one hundred percent (100%) of the capital stock,
voting and nonvoting of HDX. Phoenix shall not guarantee that HDX shall be
returned to the Shareholders in the same or greater net worth determined in
accordance with standard accounting principles, as of the date of Phoenix's
acquisition of HDX. Any outstanding notes or unpaid loans to HDX by Phoenix,
unless otherwise agreed upon by both parties, will immediately become due and
payable.
(b) These remedies shall not be exclusive.
SECTION 10.7 Divestiture of the Assets of HDX: Phoenix agrees not to sell,
remove or divest in any manner the real or personal property of HDX that would
prohibit HDX from performing its normal business.
SECTION 10.8 Diversion of Funds of HDX: Phoenix agrees not to divert any
funds generated by HDX in any manner that would prohibit HDX from attaining its
goals of revenue and/or profit as projected in Exhibit "A" of this agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Survival of Provisions: The respective representations,
warranties, covenants and agreements of each of the parties to this Agreement
(except covenants and agreements which are expressly required to be performed
and are performed in full on or before the Closing Date) shall survive the
Closing Date and the-consummation of the transactions contemplated by this
Agreement, subject to Sections 2.22 and 4.25. In the event of a breach of any of
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach available to it under the provisions of this
Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of such party on or before
the Closing Date.
SECTION 11.2 Publicity: Neither party shall cause the publication of any
press release or other announcement with respect to this Agreement or the
transactions contemplated hereby without the consent of the other party, unless
a press release or announcement is required by law. If any such announcement or
other disclosure is required by law, the disclosing party agrees to give the
non-disclosing party prior notice and an opportunity to comment on the proposed
disclosure.
SECTION 11.3 Successors and Assigns: No Third-Party Beneficiaries. This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns; provided, however, that no party
shall assign or delegate any of the obligations created under this Agreement
without the prior written consent of the other party.
SECTION 11.4 Fees and Expenses: Except as otherwise expressly provided in
this Agreement, all legal and other fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs or expenses.
SECTION 11.5 Notices: All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally or sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to Phoenix, to:
Phoenix International Industries, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President.
(b) If to HDX and/or Shareholders, to:
HDX 9000 Inc.
17D ▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, President.
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 10.6 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 10.6.
SECTION 11.7 Entire Agreement: This Agreement, together with the exhibits
hereto, represents the entire agreement and understanding of the parties with
reference to the transactions set forth herein and no representations or
warranties have been made in connection with this Agreement other than those
expressly set forth herein or in the exhibits, certificates and other documents
delivered in accordance herewith. This Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and
agreements between the parties relating to the subject matter of this Agreement
and all prior drafts of this Agreement, all of which are merged into this
Agreement. No prior drafts of this Agreement and no words or phrases from any
such prior drafts shall be admissible into evidence in any action or suit
involving this Agreement.
SECTION 11.8 Severability: This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 11.9 Titles and Headings: The Article and Section headings
contained in this Agreement are solely for convenience of reference and shall
not affect the meaning or interpretation of this Agreement or of any term or
provision hereof.
SECTION 11.10 Counterparts: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
SECTION 11.11 Convenience of Forum: Consent to Jurisdiction. Any dispute
arising out of this agreement shall be resolved by binding arbitration in
accordance with the Civil Arbitration Rules of the American Arbitration
Association. The arbitration will be held in West Palm Beach, Florida and will
be conducted by one arbitrator mutually agreeable to HDX, Shareholders and
Phoenix. If the parties cannot agree within thirty (30) days of a written demand
by a party for arbitration, the arbitrator shall be selected by the American
Arbitration Association. Arbitration is final without appeal. Judgment upon any
arbitration award may be entered in any court of competent jurisdiction.
SECTION 11.12 Enforcement of the Agreement: The parties hereto agree that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 11.13 Governing Law: This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Florida
without giving effect to the choice-of-law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
FOR: PHOENIX INTERNATIONAL INDUSTRIES, INC.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Date
President
FOR: HDX 9000, INC.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Date
Chairman
