AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of Feb. 20, 2003(the "Agreement"),
between Highway One-OWeb, a Utah corporation, ("Highway"), and Xxxxxxx Audio
Corporation, a New Jersey corporation (the "Company"). Highway and the
Company are collectively referred to herein as the "Parties."
RECITALS:
WHEREAS, the respective boards of directors of each of Highway and the
Company have approved the merger of the Company with and into Highway (the
"MERGER") and approved the Merger upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, it is intended that, for federal income tax purposes, the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "CODE");
WHEREAS, the Company and Highway desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement; and
WHEREAS, Highway currently has 2,348,000 shares of Common Stock issued
and outstanding. After giving effect to the exchange of shares herein, the
total capitalization of Highway shall be 11,740,000 shares of Common Stock
outstanding.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein made, and in consideration of the representations, warranties,
covenants and agreements herein contained, and intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINITIONS.
The following terms shall, when used in this Agreement, have the
following meanings:
"Affiliate" means, with respect to any Person: (i) any Person directly or
indirectly owning, controlling, or holding with power to vote 10% or more of
the outstanding voting securities of such other Person (other than passive or
institutional investors)j (ii) any Person 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held with
power to vote, by such other Person (iii) any Person directly or indirectly
controlling, controlled by, or under common control with such other person and
(iv) any officer, director or partner of such other Person. "Control" for the
foregoing purposes shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting
interests, by contract or otherwise.
"Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Los Angeles, Delaware, are required or authorized to
be closed.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Collateral Documents" mean the Exhibits, Schedules and any other documents,
instruments and certificates to be executed and delivered by the Parties
hereunder or thereunder.
"Commission" means the Securities and Exchange Commission or any Regulatory
Authority that succeeds to its functions.
"Commissioner" means the Commissioner of Corporations of the State of
Delaware.
"Company Assets" mean all properties, assets, privileges, powers, rights,
interests and claims of every type and description that are owned, leased,
held, used or useful in the Company Business and in which the Company has any
right, title or interest or in which the Company acquires any right, title or
interest on or before the Closing Date, wherever located, whether known or
unknown, and whether or not now or on the Closing Date on the books and
records of the Company, but excluding any of the foregoing, if any,
transferred prior to the Closing pursuant to this Agreement or any Collateral
Documents.
"Company Business" means production and marketing of both music and spoken
word recordings and cassette duplication and packaging.
"Company Common Stock" means the common shares of the Company.
"Company Shareholders" means, as of any particular date, the holders of
Company Common Stock on that date.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, charge, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, option, assessment, restrictive agreement, restriction,
adverse interest, restriction on transfer or exception to or material defect
in title or other ownership interest (including restrictive covenants, leases
and licenses).
"Exchange Act" means the securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Highway Assets" mean all properties, assets, privileges, powers, rights,
interests and claims of every type and description that are owned, leased,
held, used or useful in the Highway Business and in which Highway or any of
its Subsidiaries has any right, title or interest or in which Highway or any
of its Subsidiaries acquires any right, title or interest on or before the
Closing Date, wherever located, whether known or unknown, and whether or not
now or on the Closing Date on the books and records of Highway or any of its
subsidiaries.
"Highway Business" means the business conducted by Highway and its
Subsidiaries.
"Highway Common Stock" means the common shares of Highway par value $0.001.
"Highway Securities Filings" means Highway's annual report on Form 10-KSB for
the year ended December 31, 2000, its quarterly reports on Form 10-QSB, and
all other reports filed and to be filed with the Commission prior to the
Effective Time.
"Legal Requirement" means any statute, ordinance, law, rule, regulation, code,
injunction, judgment, order, decree, ruling, or other requirement enacted,
adopted or applied by any Regulatory Authority, including judicial decisions
applying common law or interpreting any other Legal Requirement.
"Losses" shall mean all damages, awards, judgments, assessments, fines,
sanctions, penalties, charges, costs, expenses, payments, diminutions in value
and other losses, however suffered or characterized, all interest thereon, all
costs and expenses of investigating any claim, lawsuit or arbitration and any
appeal therefrom, all actual attorneys', accountants' investment bankers' and
expert witness' fees incurred in connection therewith, whether or not such
claim, lawsuit or arbitration is ultimately defeated and, subject to Section
9.4, all amounts paid incident to any compromise or settlement of any such
claim, lawsuit or arbitration.
"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on (i) the assets,
Liabilities, properties or business of the Parties, (ii) the validity, binding
effect or enforceability of this Agreement or the Collateral Documents or
(iii) the ability of any Party to perform its obligations under this Agreement
and the Collateral Documents; provided, however, that none of the following
shall constitute a Material Adverse Effect on the Company: (i) the filing,
initiation and subsequent prosecution, by or on behalf of shareholders of any
party, of litigation that challenges or otherwise seeks damages with respect
to the Merger, this Agreement and/or transactions contemplated thereby or
hereby, (ii) occurrences due to a disruption of a Party's business as a result
of the announcement of the execution of this Agreement or changes caused by
the taking of action required by this Agreement, (iii) general economic
conditions, or (iv) any changes generally affecting the industries in which a
Party operates.
"Merger Shares" means the shares of Highway Common Stock deliverable by
Highway in exchange for Company Common Stock pursuant to Section 2.6.
"Person" means any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Regulatory Authority or other entity.
"Regulatory Authority" means: (i) the United States of America; (ii) any
state, commonwealth, territory or possession of the United States of America
and any political subdivision thereof (including counties, municipalities and
the like);
(iii) Canada and any other foreign (as to the United States of America)
sovereign entity and any political subdivision thereof; or (iv) any agency,
authority or instrumentality of any of the foregoing, including any court,
tribunal, department, bureau, commission or board.
"Representative" means any director, officer, employee, agent, consultant,
advisor or other representative of a Person, including legal counsel,
accountants and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
"Subsidiary" of a specified Person means (a) any Person if securities having
ordinary voting power (at the time in question and without regard to the
happening of any contingency) to elect a majority of the directors, trustees,
managers or other governing body of such Person are held or controlled by the
specified Person or a Subsidiary of the specified Person; (b) any Person in
which the specified Person and its subsidiaries collectively hold a 50% or
greater equity interest; (c) any partnership or similar organization in which
the specified Person or subsidiary of the specified Person is a general
partner; or (d) any Person the management of which is directly or indirectly
controlled by the specified Person and its Subsidiaries through the exercise
of voting power, by contract or otherwise.
"Tax" means any U.S. or non U.S. federal, state, provincial, local or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, intangible
property, recording, occupancy, sales, use, transfer, registration, value
added minimum, estimated or other tax of any kind whatsoever, including any
interest, additions to tax, penalties, fees, deficiencies, assessments,
additions or other charges of any nature with respect thereto, whether
disputed or not.
1.2 OTHER DEFINITIONS.
The following terms shall, when used in this Agreement, have the meanings
assigned to such terms in the Sections indicated.
TERM SCHEDULE
"Agreement" Preamble
"Certificate of Merger" 2.5
"URS" 2.1
"Closing" 2.11
"Closing Date" 2.11
"Company Common Stock" 2.7(a)
"Company Certificates" 2.7(a)
"Company Financial Statements" 3.8
"Company Intellectual Property Rights" 3.6
"Current Market Price" 2.7(a)
"Dissenting Shares" 2.9
"Effective Time" 2.5
"Excluded Shares" 2.6 (a)
"Highway parties" Preamble
"Material Company Contract" 3.4
"Material Highway Contract" 4.4
"Merger" 2.1
"Options" 3.2 (b)
"Parties" Preamble
"Preferred Stock" 3.2 (a)
"Shareholders' Meeting" 5.4
"Surviving Corporation" 2.1
ARTICLE II
THE MERGER
2.1 MERGER; SURVIVING CORPORATION.
In accordance with and subject to the provisions of this Agreement and
the Utah Revised Statues ("URS"), at the Effective Time, the Company shall be
merged with and into Highway (the "Merger"), and Highway shall be the
surviving corporation in the Merger (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Utah. At the Effective Time, the separate existence of
the Company shall cease. All properties, franchises and rights belonging to
the Company, by virtue of the Merger and without further act or deed, shall be
vested in the Surviving Corporation, which shall thenceforth be responsible
for all the liabilities and obligations of the Company.
2.2 ARTICLES OF INCORPORATION.
The Company's articles of incorporation, as in effect at the Effective
Time, shall be amended and restated effective at the Effective Time to be as
set forth in Exhibit A attached hereto, and, as so amended and restated shall
thereafter continue in full force and effect as the articles of incorporation
of the Surviving Corporation until altered or amended as provided therein or
by law.
2.3 BY-LAWS.
The Company's by-laws, as in effect at the Effective Time, shall be the
by-laws of the Surviving Corporation until altered, amended or repealed as
provided therein or by law.
2.4 DIRECTORS AND OFFICERS.
The directors of the Company prior to the Effective Time shall be the
directors of the Surviving Corporation. The members of the board of directors
of the Surviving Corporation shall serve thereafter in accordance with the
articles of incorporation and by-laws of the Surviving Corporation and the
URS. The officers of the Company prior to the Effective Time shall continue to
serve as officers of the Surviving Corporation in accordance with the articles
of incorporation and by-laws of the Surviving Corporation and the URS.
2.5 EFFECTIVE TIME.
The Merger shall become effective at the time and date that the agreement
of merger with an officers' certificate of each of Highway and the Company
(the "Certificate of Merger"), in form and substance acceptable to the
Parties, is accepted for filing by the Secretary of State of the State of
Utah. The Certificate of Merger shall be executed by the Company and delivered
to the Secretary of State of the State of Utah for filing on the Closing Date.
The date and time when the Merger becomes effective are referred to herein as
the "Effective Time.
2.6 MERGER SHARES; CONVERSION AND CANCELLATION OF SECURITIES.
(a) CONVERSION OF COMPANY COMMON STOCK. At the Effective Time, all
shares of Company Common Stock outstanding immediately before the Effective
Time, other than shares described in Section 2.6(b} and other than Dissenting
Shares, collectively, the "Excluded Shares", shall be converted, by virtue of
the Merger, into 9,392,000 shares of Highway Common Stock (the "Merger
Shares") on a post-split basis or 80% of Highway's issued and outstanding
capital stock on a fully diluted basis, subject to the following:
Each Excluded Share shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding, shall be cancelled
and retired without payment of any consideration therefore and shall cease to
exist and each certificate of such shares shall thereafter represent only the
right to the Merger Shares and any distribution or dividend pursuant to
Section 2.7(b}.
(b) TREASURY SHARES, ETC. Each share of Company Common Stock held in
the treasury of the Company and each share of Company Common Stock, if any,
held by Highway or any Subsidiary of Highway or of the Company immediately
before the Effective Time shall be cancelled and extinguished, and nothing
shall be issued or paid in respect thereof.
(c) FRACTIONAL SHARES. No certificates or scrip evidencing fractional
shares of Highway Common Stock shall be issued in exchange for Company Common
Stock. All fractional shares amounts shall be rounding up to the nearest whole
share.
2.7 SURRENDER OF COMPANY CERTIFICATES.
(a) EXCHANGE PROCEDURES. Promptly after the Effective Time, Highway or
its appointed designee shall mail to each holder of a certificate or
certificates of Company Common Stock ("Company Certificates") whose shares are
converted into the right to receive the Merger Shares, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Certificates shall pass to Highway, only upon
delivery of the Company Certificates to Highway and which shall be in such
form and have such other provisions as Highway may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Company
Certificates in exchange for the Merger Shares and any dividends or other
distributions pursuant to Section 2.7(b). Upon surrender of Company
Certificates for cancellation to Highway, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Company Certificates shall be
entitled to receive the Merger Shares in exchange therefor and any dividends
or distributions payable pursuant to Section 2.7(b), and the Company
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Company Certificates will be deemed from and after the Effective
Time, for all corporate purposes, subject to Section 2.9, to evidence the
ownership of the number of full shares of Highway Common Stock into which such
shares of the Company Common Stock shall have been so converted and any
dividends or distributions payable pursuant to Section 2.7(b). Notwithstanding
the foregoing, if any Company Certificate is lost, stolen, destroyed or
mutilated, such holder shall provide evidence reasonably satisfactory to
Highway as to such loss, theft, destruction or mutilation and an affidavit in
form and substance satisfactory to Highway, and, thereupon, such holder shall
be entitled to receive the Merger Shares in exchange therefor and any
dividends or distributions payable pursuant to Section 2.7(b), and the Company
Certificates so surrendered shall forthwith be canceled.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Highway Common Stock with a record date after the Effective Time,
will be paid to the holders of any unsurrendered Company Certificates with
respect to the shares of Highway Common Stock represented thereby until the
holders of record of such Company Certificates shall surrender such Company
Certificates or, in the case of any Company Certificate which is lost, stolen,
destroyed or mutilated, an affidavit in form and substance satisfactory to
Highway. Subject to applicable law, following surrender of any such Company
Certificates or delivery of such affidavit, Highway shall deliver to the
record holders thereof, without interest, the Merger Shares hereof and the
amount of any such dividends or other distributions with a record date after
the Effective Time payable with respect to such whole shares of Highway Common
Stock.
(c) TRANSFERS OF OWNERSHIP. If certificates for shares of Highway
Common Stock are to be issued in a name other than that in which the Company
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Company Certificates so surrendered
will be properly endorsed and otherwise in proper form for transfer and that
the persons requesting such exchange will have paid to Highway or any agent
designated by it any transfer or other taxes required by reason of the
issuance of certificates for shares of Highway Common Stock in any name other
than that of the registered holder of the Company Certificates surrendered, or
established to the satisfaction of Highway or any agent designated by it that
such tax has been paid or is not payable.
(d) REQUIRED WITHHOLDING. In connection with any payment to any holder
or former holder of the Company Common Stock, each of Highway and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of the Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable
laws. To the extent such amounts are so deducted or withheld, such amounts
shall be treated for all purposes under this Agreement as having been paid to
the person to whom such amounts would otherwise have been paid.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Schedule 2.7, neither Highway, the Surviving Corporation nor any party hereto
shall be liable to any Person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law. If any Company Certificate shall not have been surrendered prior to the
date immediately prior to the date on which such property would otherwise
escheat to or become the property of any Governmental or Regulatory Authority,
any such property, to the extent permitted by applicable law, shall become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(f) TERMINATION. Any holders of the Company Certificates who have not
complied with this ARTICLE II shall look only to Highway or the Surviving
Corporation for, and Highway and the Surviving Corporation shall remain liable
for, payment of their claim for Merger Shares and any dividends or
distributions with respect to Highway Common Stock, without interest thereon.
2.8 STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company.
2.9 DISSENTING SHARES.
Shares of Company Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by persons who have
properly exercised, and not withdrawn or waived, appraisal rights with respect
thereto in accordance with N.J.S.A. 14A:11-1, (the "Dissenting Shares"), will
not be converted into the right to receive the Merger Shares, and holders of
such shares of Company Common Stock will be entitled, in lieu thereof, to
receive payment of the appraised value of such shares of Company Common Stock
in accordance with the provisions of N.J.S.A. 14A:11-1 unless and until such
holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the_____________. If, after the Effective Time,
any such holder fails to perfect or effectively withdraws or loses such right,
such shares of Company Common Stock will thereupon be treated as if they had
been converted at the Effective Time into the right to receive the Merger
Shares, without any interest thereon. The Company will give Highway prompt
notice of any demands received by the Company for appraisal of shares of
Company Common Stock. Prior to the Effective Time, the Company will not,
except with the prior written consent of Highway make any payment with respect
to, or settle or offer to settle, any such demands.
2.10 RESTRICTIVE LEGEND.
All certificates representing the Merger Shares shall contain the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE, INCLUDING CERTAIN VOTING AND
TRANSFER RIGHTS WITH RESPECT THERETO, ARE SUBJECT TO THE TERMS OF AN AGREEMENT
AND PLAN OF MERGER, BY AND BETWEEN HIGHWAY ONE-OWEB, AND XXXXXXX AUDIO
CORPORATION, A COPY OF WHICH IS ON FILE IN THE PRINCIPAL OFFICE OF THE
ISSUER."
2.11 CLOSING.
The closing of the transactions contemplated by this Agreement and the
Collateral Documents ("Closing") shall take place at the offices of
Sonnenblick, Xxxxxx & Selvers, PC, 0000 Xxxxx 0 Xxxxx, Xxxxxxxx, Xxx Xxxxxx,
xx at such other location as the parties may agree, at 11:00 a.m., March 14,
2003, on a Business Day specified by Highway on at least two business days
notice to the Company that may be on, but shall not be more than five Business
Days after, all conditions precedent to the Closing set forth in ARTICLE VII
and ARTICLE VIII have been satisfied or waived, or on such other date and at
such other time as the Parties may agree, provided that all such conditions
precedent have been satisfied or waived. The date on which the Closing
actually occurs is referred to herein as the "Closing Date."
2.12 REGISITRATION OF HIGHWAY SHARES
After the closing of this transaction and the merger accomplished,
Highway and the Company agree to file a registration statement, if requested
by the current president of Highway, to register the shares of any officers,
directors, promoters or affiliates for whom an exemption from registration
pursuant to Rule 144 may not be available.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Highway that the statements
contained in this ARTICLE III are correct and complete as of the date of this
Agreement and, except as provided in Section 7.1, will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this ARTICLE III,
except in the case of representations and warranties stated to be made as of
the date of this Agreement or as of another date and except for changes
contemplated or permitted by this Agreement).
3.1 ORGANIZATION AND QUALIFICATION.
The Company and each of its Subsidiaries, collectively referred to herein
as the Company, is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization. The
Company has all requisite power and authority to own, lease and use its assets
as they are currently owned, leased and used and to conduct its business as it
is currently conducted. The Company is duly qualified or licensed to do
business in and is in good standing in each jurisdiction in which the
character of the properties owned, leased or used by it or the nature of the
activities conducted by it make such qualification necessary, except any such
jurisdiction where the failure to be so qualified or licensed would not have a
Material Adverse Effect on the Company or a material adverse effect on the
validity, binding effect or enforceability of this Agreement or the Collateral
Documents or the ability of the Company to perform its obligations under this
Agreement or any of the Collateral Documents.
3.2 CAPITALIZATION.
(a) As of the date hereof, the authorized, issued and outstanding
capital stock and other ownership interests of the Company consists of 100
shares of common stock no par value of which 100 shares are outstanding. All
of the outstanding Company Common Stock and Preferred Stock has been duly
authorized and are validly issued, fully paid and nonassessable.
(b) Schedule 3.2(b) (i) lists all outstanding or authorized options,
warrants, purchase rights, preemptive rights or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock or other ownership interests
(collectively "Options").
(c) All of the issued and outstanding capital stock of Company has been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable and have been issued in compliance with applicable securities
laws and other applicable Legal Requirements or transfer restrictions under
applicable securities laws.
3.3 AUTHORITY AND VALIDITY.
The Company has all requisite corporate power to execute and deliver, to
perform its obligations under, and to consummate the transactions contemplated
by, this Agreement (subject to the approval of the Company Shareholders as
contemplated by Section 5.4 and to receipt of any consents, approvals,
authorizations or other matters). The execution and delivery by the Company
of, the performance by the Company of its obligations under, and the
consummation by the Company of the transactions contemplated by, this
Agreement have been duly authorized by all requisite action of the Company
(subject to the approval of the Company Shareholders as contemplated by
Section 5.4). This Agreement has been duly executed and delivered by the
Company and (assuming due execution and delivery by Highway and approval by
the Company Shareholders) is the legal, valid, and binding obligation of the
Company, enforceable against it in accordance with its terms. Upon the
execution and delivery of the Collateral Documents by each Person that is
required by this Agreement to execute, or that does execute, this Agreement or
any of the Collateral Documents, and assuming due execution and delivery
thereof by Highway, the Collateral Documents will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
3.4 NO BREACH OR VIOLATION.
Subject to obtaining the consents, approvals, authorizations, and orders
of and making the registrations or filings with or giving notices to
Regulatory Authorities and Persons identified herein, the execution, delivery
and performance by the Company of this Agreement and the Collateral Documents
to which it is a party, and the consummation of the transactions contemplated
hereby and thereby in accordance with the terms and conditions hereof and
thereof, do not and will not conflict with, constitute a violation or breach
of, constitute a default or give rise to any right of termination or
acceleration of any right or obligation of the Company under, or result in the
creation or imposition of any Encumbrance upon the Company, the Company
Assets, the Company Business or the Company Common Stock.
3.5 CONSENTS AND APPROVALS.
Except for requirements described in Section 5.4, and other than the
consent of Xxxxx Fargo Business Credit, Inc., no consent, approval,
authorization or order of, registration or filing with, or notice to, any
Regulatory Authority or any other Person is necessary to be obtained, made or
given by the Company in connection with the execution, delivery and
performance by the Company of this Agreement or any Collateral Document or for
the consummation by the Company of the transactions contemplated hereby or
thereby, except to the extent the failure to obtain any such consent,
approval, authorization or order or to make any such registration or filing
would not have a Material Adverse Effect on the Company or a material adverse
effect on the validity, binding effect or enforceability of this Agreement or
the Collateral Documents or the ability of the Company to perform its
obligations under this Agreement or any of the Collateral Documents.
3.6 INTELLECTUAL PROPERTY.
To the knowledge of the Company, the Company has good title to or the
right to use all material company intellectual property rights and all
material inventions, processes, designs, formulae, trade secrets and know-how
necessary for the operation of the Company Business without the payment of any
royalty or similar payment.
3.7 COMPLIANCE WITH LEGAL REQUIREMENTS.
The Company has operated the Company Business in compliance with all
Legal Requirements applicable to the Company except to the extent the failure
to operate in compliance with all material Legal Requirements would not have a
Material Adverse Effect on the Company or Material Adverse Effect on the
validity, binding effect or enforceability of this Agreement or the Collateral
Documents.
3.8 FINANCIAL STATEMENTS.
The Company's financial statements dated August 31, 2002 (including the
notes thereto) ("Company Financial Statements") have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated in the notes thereto) and present
fairly in all material respects the financial condition of the Company and its
results of operations as of the dates and for the periods indicated (except as
may be indicated in the notes thereto), subject in the case of the interim
unaudited financial statements only to normal year-end adjustments (none of
which will be material in amount) and the omission of footnotes.
3.9 ORDINARY COURSE.
The Company conducted its business, marketed its real property and
equipment and kept its books of accounts, records and files, substantially in
the same manner as previously conducted.
3.10 LITIGATION.
Except as set forth on Schedule 3.10, as of the date of this Agreement
there are no outstanding judgments or orders against or otherwise affecting or
related to the Company, the Company Business or the Company Assets; (ii) there
is no action, suit, complaint, proceeding or investigation, judicial,
administrative or otherwise, that is pending or, to the Company's knowledge,
threatened that, if adversely determined, would have a Material Adverse Effect
on the Company or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents. Any reference
herein to the Company's "knowledge" shall be deemed to be the actual knowledge
of the Company, without independent investigation.
3.11 TAXES.
The Company has duly and timely filed in proper form all Tax Returns for
all Taxes required to be filed with the appropriate Regulatory Authority,
except where such failure would not have a Material Adverse Effect on the
Company and except where such Tax Returns are on extension.
3.12 BOOKS AND RECORDS.
The books and records of the Company accurately and fairly represent the
Company Business and its results of operations in all material respects. All
accounts receivable and inventory of the Company Business are reflected
properly on such books and records in all material respects.
3.13 BROKERS OR FINDERS.
No broker or finder has acted directly or indirectly for the Company, the
Company or any of its Affiliates in connection with the transactions
contemplated by this Agreement, and neither the Company, nor any of its
Affiliates has incurred any obligation to pay any brokerage or finder's fee or
other commission in connection with the transaction contemplated by this
Agreement.
3.14 PROXIES.
Company management holds, or prior to the Closing will hold, irrevocable
proxies from the Company Shareholders adequate to ensure Company Shareholder
approval of the Merger as required by applicable law.
3.15 DISCLOSURE.
No representation or warranty of the Company in this Agreement or in the
Collateral Documents and no statement in any certificate furnished or to be
furnished by the Company pursuant to this Agreement contained, contains or
will contain on the date such agreement or certificate was or is delivered, or
on the Closing Date, any untrue statement of a material fact, or omitted,
omits or will omit on such date to state any material fact necessary in order
to make the statements made, in light of the circumstances under which they
were made, not misleading.
3.16 FILINGS.
The Company has made all of the filings required by the Securities Act of
1933, as amended, and the Exchange Act of 1934, as amended, required to be
made and no such filing contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements made, as a
result of the transactions described herein, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HIGHWAY
Highway represents and warrant to the Company that the statements
contained in this ARTICLE IV are correct and complete as of the date of this
Agreement and, except as provided in Section 8.1, will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this ARTICLE IV,
except in the case of representations and warranties stated to be made as of
the date of this Agreement or as of another date and except for changes
contemplated or permitted by the Agreement).
4.1 ORGANIZATION AND QUALIFICATION.
Highway is a corporation duly organized, validly existing and in good
standing under the laws of Utah and each Subsidiary of Highway is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation. Highway has, and each Subsidiary
of Highway has all requisite power and authority to own, lease and use its
assets as they are currently owned, leased and used and to conduct its
business as it is currently conducted. Highway is, and each of its
Subsidiaries is, duly qualified or licensed to do business in and is in good
standing in each jurisdiction in which the character of the properties owned,
leased or used by it or the nature of the activities conducted by it makes
such qualification necessary, except any such jurisdiction where the failure
to be so qualified or licensed and in good standing would not have a Material
Adverse Effect on Highway or a Material Adverse Effect on the validity,
binding effect or enforceability of this Agreement or the Collateral Documents
or the ability of the Company or Highway to perform their obligations under
this Agreement or any of the Collateral Documents.
4.2 CAPITALIZATION.
(a) As of the date hereof, Highway's authorized capital stock of
100,000,000 shares of common stock, $0.001 par value of which there are
2,348,000 shares outstanding. The shares of Highway Common Stock included in
the Merger Shares, when issued in accordance with this Agreement, will have
been duly authorized, validly issued and outstanding and will be fully paid
and nonassessable.
(b) Schedule 4.2(b) lists all outstanding or authorized options,
warrants, purchase rights, preemptive rights or other contracts or commitments
that could require Highway or any of its Subsidiaries to issue, sell, or
otherwise cause to become outstanding any of its capital stock or other
ownership interests.
(c) All of the issued and outstanding shares of Highway Capital Stock,
and all outstanding ownership interests of each of Highway's Subsidiaries have
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable (with respect to Subsidiaries that are corporations) and have
been issued in compliance with applicable securities laws and other applicable
Legal Requirements.
4.3 AUTHORITY AND VALIDITY.
Highway has all requisite power to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement and the Collateral Documents. The execution and delivery by Highway
of, its respective obligations under, and the consummation by Highway of the
transactions contemplated by, this Agreement and the Collateral Documents have
been duly authorized by all requisite action of Highway. This Agreement has
been duly executed and delivered by Highway and (assuming due execution and
delivery by the Company) is the legal, valid and binding obligation of each
Highway Party, enforceable against each of them in accordance with its terms.
Upon the execution and delivery by Highway of the Collateral Documents to
which each of them is a party, and assuming due execution and delivery thereof
by the other parties thereto, the Collateral Documents will be the legal,
valid and binding obligations of each such Person, as the case may be,
enforceable against each of them in accordance with their respective terms.
4.4 NO BREACH OR VIOLATION.
Subject to obtaining the consents, approvals, authorizations, and orders
of and making the registrations or filings with or giving notices to
Regulatory Authorities and Persons identified herein, the execution, delivery
and performance by Highway of this Agreement and the Collateral Documents to
which each is a party and the consummation of the transactions contemplated
hereby and thereby in accordance with the terms and conditions hereof and
thereof, do not and will not conflict with, constitute a violation or breach
of, constitute a default or give rise to any right of termination or
acceleration of any right or obligation of Highway under, or result in the
creation or imposition of any Encumbrance upon the property of Highway.
4.5 CONSENTS AND APPROVALS.
Except for requirements under applicable United States or state
securities laws, no consent, approval, authorization or order of, registration
or filing with, or notice to, any Regulatory Authority or any other Person is
necessary to be obtained, made or given by Highway in connection with the
execution, delivery and performance by them of this Agreement or any
Collateral Documents or for the consummation by them of the transactions
contemplated hereby or thereby, except to the extent the failure to obtain
such consent, approval, authorization or order or to make such registration or
filings or to give such notice would not have a Material Adverse Effect on
Highway or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents or the ability of
the Company or Highway to perform its obligations under this Agreement or any
of the Collateral Documents.
4.6 COMPLIANCE WITH LEGAL REQUIREMENTS.
Highway and its Subsidiaries have operated Highway Business in compliance
with all material Legal Requirements applicable to Highway and its
Subsidiaries, except to the extent the failure to operate in compliance with
all material Legal Requirements would not have a Material Adverse Effect on
Highway or a Material Adverse Effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents.
4.7 LITIGATION.
Except as set forth on Schedule 4.7 or in the Highway Securities Filings
filed through the date hereof, (i) there are no outstanding judgments or
orders against or otherwise affecting or related to Highway, any of its
Subsidiaries, or their business or assets; and (ii) there is no action, suit,
complaint, proceeding or investigation, judicial, administrative or otherwise,
that is pending or, to the best knowledge of Highway, threatened that, if
adversely determined, would have a Material Adverse Effect on Highway or a
material adverse effect on the validity, binding effect or enforceability of
this Agreement or the Collateral Documents.
4.8 ORDINARY COURSE.
Since the date of the balance sheet included in the most recent Highway
Securities Filings filed through the date hereof, there has not been any
occurrence, event, incident, action, failure to act or transaction involving
Highway or any of its Subsidiaries which is reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on Highway.
4.9 ASSETS AND LIABILITIES.
As of the date of this Agreement, neither Highway nor any of its
Subsidiaries has any Assets or Liability, except for the (i) Assets and
Liabilities disclosed on Schedule 4.9 and (ii) Liabilities incurred in
connection with the consummation of the transaction contemplated by this
Agreement.
4.10 TAXES.
Highway has, and each of its Subsidiaries has, duly and timely filed in
proper form all Tax Returns for all Taxes required to be filed with the
appropriate Governmental Authority, except where such failure to file would
not have a Material Adverse Effect on Highway.
4.11 BOOKS AND RECORDS.
The books and records of Highway and its Subsidiaries accurately and
fairly represent the Highway Business and its results of operations in all
material respects. All accounts receivable and inventory of the Highway
Business are reflected properly on such books and records in all material
respects.
4.12 ENVIRONMENTAL MATTERS.
Neither Highway nor any of the Highway Subsidiaries has violated any
Environmental Laws, lacks any permits, licenses or other approvals required of
them under applicable Environmental Laws or is violating any term or condition
of any such permit, license or approval, except in each case as would not,
individually or in the aggregate, result in a Material Adverse Effect on
Highway.
4.13 FINANCIAL AND OTHER INFORMATION.
(a) The historical financial statements (including the notes thereto)
contained (or incorporated by reference) in the Highway Securities Filings
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except as may be indicated in the
notes thereto) and resent fairly the financial condition of Highway and its
results of operations as of the dates and for the periods indicated, subject
in the case of the unaudited financial statements only to normal year-end
adjustments (none of which will be material in amount) and the omission of
footnotes.
(b) Highway Securities Filings did not, as of their filing dates,
contain (directly or by incorporation by reference) any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein (or incorporated therein by
reference), in light of the circumstances under which they were or will be
made, not misleading.
4.14 TRADING.
No order suspending the sale or ceasing the trading or quotation of the
Highway Common Stock on the Over-The-Counter Bulletin Board has been issued by
any court, securities commission or regulatory authority in the United States,
and no proceedings for such purpose are pending or, to the knowledge of
Highway, after reasonable inquiry, threatened.
4.15 BROKERS OR FINDERS.
No broker or finder has acted directly or indirectly for Highway, in
connection with the transactions contemplated by this Agreement, and Highway
has not incurred any obligation to pay any brokerage or finder's fee or other
commission in connection with the transaction contemplated by this Agreement.
4.16 DISCLOSURE.
No representation or warranty of Highway in this Agreement or in the
Collateral Documents and no statement in any certificate furnished or to be
furnished by Highway pursuant to this Agreement contained, contains or will
contain on the date such agreement or certificate was or is delivered, or on
the Closing Date, any untrue statement of a material fact, or omitted, omits
or will omit on such date to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading.
4.17 FILINGS.
Highway has made all of the filings required by the Securities Act of
1933, as amended, and the Exchange Act of 1934, as amended, required to be
made and no such filing contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements made, not
misleading.
4.18 TAX CONSEQUENCES.
Highway make no representation or warranty with respect to the tax
consequences of the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
Between the date of this Agreement and the Closing Date:
5.1 ADDITIONAL INFORMATION.
The Company shall provide to Highway and its Representatives such
financial, operating and other documents, data and information relating to the
Company, the Company Business and the Company Assets and Liabilities of the
Company, as Highway or its Representatives may reasonably request.
5.2 CONTINUITY AND MAINTENANCE OF OPERATIONS.
The Company shall, and shall cause each of its subsidiaries to use its
commercially reasonable efforts to promote the financial success of the
Company Business and promptly notify Highway of any material adverse change in
the condition (financial or otherwise) of the Company Business and use its
commercially reasonable efforts to promote, develop and preserve its
relationships with its present employees as well as the goodwill of its
customers and promptly notify Highway of any material adverse change in such
relationships.
5.3 CONSENTS AND APPROVALS.
As soon as practicable after execution of this Agreement, the Company
shall use commercially reasonable efforts to obtain any necessary consent,
approval, authorization or order of, make any registration or filing with or
give any notice to, any Regulatory Authority or Person as is required to be
obtained, made or given by the Company to consummate the transactions
contemplated by this Agreement and the Collateral Documents.
5.4 MEETING OF THE COMPANY SHAREHOLDERS.
(a) Promptly after the execution of this Agreement, the Company will
take all action necessary in accordance its Certificate of Incorporation and
by-laws to convene a meeting of the Company's shareholders to consider
adoption and approval of this Agreement and approval of the Merger (the
"Shareholders' Meeting") to be held as promptly as practicable. The Company
will use its reasonable efforts to solicit from its shareholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary or advisable to secure the
vote or consent of its shareholders required by the DGCL to obtain such
approvals.
(b) (i) The Board of Directors of the Company shall recommend that the
Company's shareholders vote in favor of and adopt and approve this Agreement
and approve the Merger at the Shareholders' Meeting.
5.5 NOTIFICATION OF CERTAIN MATTERS.
The Company shall promptly notify Highway of any fact, event,
circumstance or action known to it that is reasonably likely to cause the
Company to be unable to perform any of its covenants contained herein or any
condition precedent in ARTICLE VII not to be satisfied, or that, if known on
the date of this Agreement, would have been required to be disclosed to
Highway pursuant to this Agreement or the existence or occurrence of which
would cause any of the Company's representations or warranties under this
Agreement not to be correct and/or complete. The Company shall give prompt
written notice to Highway of any adverse development causing a breach of any
of the representations and warranties in ARTICLE III as of the date made.
5.6 COMPANY SCHEDULES.
The Company shall, from time to time prior to Closing, supplement its
Schedules with additional information that, if existing or known to it on the
date of delivery to the Highway Parties, would have been required to be
included therein.
5.7 ADDITIONAL INFORMATION.
Highway shall provide to the Company and its Representatives such
financial, operating and other documents, data and information relating to
Highway and its Subsidiaries, the Highway Business and the Highway Assets and
the Liabilities of Highway and its Subsidiaries, as the Company or its
Representatives may reasonably request.
ARTICLE VI
COVENANTS OF THE HIGHWAY
Between the date of this Agreement and the Closing Date,
6.1 NO SOLICITATIONS.
From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to ARTICLE X, the Company will not nor
will it authorize or permit any of its officers, directors, affiliates or
employees or any investment banker, attorney or other advisor or
representative retained by it, directly or indirectly, (i) solicit or initiate
the making, submission or announcement of any other acquisition proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to any other acquisition
proposal, (iii) engage in discussions with any Person with respect to any
other acquisition proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any other acquisition proposal or (v) enter
into any letter of intent or similar document or any contract agreement or
commitment contemplating or otherwise relating to any other acquisition
proposal.
6.2 CONTINUITY AND MAINTENANCE OF OPERATIONS.
Highway shall, and shall cause each of its Subsidiaries to operate the
Highway Business in a commercially reasonable manner and promptly notify the
Company of any material adverse change in the condition (financial or
otherwise) of the Highway Business.
6.3 CONSENTS AND APPROVALS.
As soon as practicable after execution of this Agreement, the Highway
Parties shall use their commercially reasonable efforts to obtain any
necessary consent, approval, authorization or order of, make any registration
or filing with or give notice to, any Regulatory Authority or Person as is
required to be obtained, made or given by Highway to consummate the
transactions contemplated by this Agreement and the Collateral Documents.
6.4 MEETING OF HIGHWAY SHAREHOLDERS.
(a) Promptly after the execution of this Agreement, Highway will take
all action necessary in accordance its Articles of Incorporation and by-laws
to convene a meeting of Highway's shareholders to consider adoption and
approval of this Agreement, approval of the Merger, approval of a 10:1 forward
stock split, approval of a change of domicile from the State of Utah or
Nevada, as requested by the Company, to the State of Delaware or Nevada, as
requested by the Company, and approval of a name change to such name as
designated by the Company (the "Highway's Shareholders' Action") to be held as
promptly as practicable. Highway will use its reasonable efforts to solicit
from its shareholders proxies in favor of the adoption and approval of this
Agreement and the approval of the Merger and will take all other action
necessary or advisable to secure the vote or consent of its shareholders
required by the Utah revised statues to obtain such approvals.
(b) (i) The Board of Directors of Highway shall recommend that Highway's
shareholders vote in favor of and adopt and approve this Agreement, approve a
10:1 forward stock split, a change of domicile from the State of Utah to the
State of Delaware or Nevada, as requested by the Company and a name change to
such name as designated by the Company and approve the Merger at the
Shareholders' Meeting or pursuant to written consent; (ii) Highway's proxy
statement or information statement shall include a statement to the effect
that the Board of Directors of Highway has recommended that Highway's
shareholders vote in favor of and adopt and approve this Agreement and the
Merger at Highway Shareholders' Meeting or pursuant to written consent; and
(iii) neither the Board of Directors of Highway nor any committee thereof
shall withdraw, amend or modify, or propose or resolve to withdraw, amend or
modify in a manner adverse to Highway, the recommendation of the Board of
Directors of Highway that Highway Shareholders vote in favor of and adopt and
approve this Agreement and the Merger.
6.5 NOTIFICATION OF CERTAIN MATTERS.
Highway shall promptly notify the Company of any fact, event,
circumstance or action known to it that is reasonably likely to cause Highway
to be unable to perform any of its covenants contained herein or any condition
precedent in ARTICLE VIII not to be satisfied, or that, if known on the date
of this Agreement, would have been required to be disclosed to the Company
pursuant to this Agreement or the existence or occurrence of which would cause
Highway representations or warranties under this Agreement not to be correct
and/or complete. Highway shall give prompt written notice to the Company of
any adverse development causing a breach of any of the representations and
warranties in ARTICLE IV.
6.6 HIGHWAY SCHEDULES.
Highway shall, from time to time prior to Closing, supplement the Highway
Schedules with additional information that, if existing or known to it on the
date of this Agreement, would have been required to be included therein.
6.7 SECURITIES FILINGS.
Highway will timely file all reports and other documents required to be
filed with the Securities and Exchange Commission, which reports and other
documents do not and will not contain any misstatement of a material fact, and
do not and will not omit any material fact necessary to make the statements
therein not misleading.
6.8 ELECTION TO HIGHWAY'S BOARD OF DIRECTORS.
At the Effective Time of the Merger, Highway shall promptly secure the
resignation of present directors in order to cause the nominees of the Company
to be appointed to Highway's board of directors and, subject to fiduciary
obligations under applicable law.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF HIGHWAY
All obligations of Highway under this Agreement shall be subject to the
fulfillment at or prior to Closing of each of the following conditions, it
being understood that Highway may, in its sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such
conditions in whole or in part.
7.1 ACCURACY OF REPRESENTATIONS.
All representations and warranties of the Company contained in this
Agreement, the Collateral Documents and any certificate delivered by any of
the Company at or prior to Closing shall be, if specifically qualified by
materiality, true in all respects and, if not so qualified, shall be true in
all material respects, in each case on and as of the Closing Date with the
same effect as if made on and as of the Closing Date, except for
representations and warranties expressly stated to be made as of the date of
this Agreement or as of another date other than the Closing Date and except
for changes contemplated or permitted by this Agreement. The Company shall
have delivered to Highway a certificate dated as of the Closing Date to the
foregoing effect.
7.2 COVENANTS.
The Company shall, in all material respects, have performed and complied
with each of the covenants, obligations and agreements contained in this
Agreement and the Collateral Documents that are to be performed or complied
with by them at or prior to Closing. The Company shall have delivered to a
certificate dated the Closing Date to the foregoing effect.
7.3 CONSENTS AND APPROVALS.
All consents, approvals, permits, authorizations and orders required to
be obtained from, and all registrations, filings and notices required to be
made with or given to, any Regulatory Authority or Person as provided herein
shall have been obtained.
7.4 DELIVERY OF DOCUMENTS.
The Company shall have delivered, or caused to be delivered, to Highway
the following documents:
(i) Certified copies of the Company's articles of incorporation and by-
laws and certified resolutions of the board of directors and Shareholders of
the Company authorizing the execution of this Agreement and the Collateral
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby.
(ii) Such other documents and instruments as Highway may reasonably
request: (A) to evidence the accuracy of the Company's representations and
warranties under this Agreement, the Collateral Documents and any documents,
instruments or certificates required to be delivered thereunder; (B) to
evidence the performance by the Company of, or the compliance by the Company
with, any covenant, obligation, condition and agreement to be performed or
complied with by the Company under this Agreement and the Collateral
Documents; or (C) to otherwise facilitate the consummation or performance of
any of the transactions contemplated by this Agreement and the Collateral
Documents.
7.5 NO MATERIAL ADVERSE CHANGE.
Since the date hereof, there shall have been no material adverse change
in the Company Assets, the Company Business or the financial condition or
operations of the Company, taken as a whole.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
All obligations of the Company under this Agreement shall be subject to
the fulfillment at or prior to Closing of the following conditions, it being
understood that the Company may, in its sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such
conditions in whole or in part.
8.1 ACCURACY OF REPRESENTATIONS.
All representations and warranties of Highway contained in this Agreement
and the Collateral Documents and any other document, instrument or certificate
delivered by Highway at or prior to the Closing shall be, if specifically
qualified by materiality, true and correct in all respects and, if not so
qualified, shall be true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made on and as of the
Closing Date, except for representations and warranties expressly stated to be
made as of the date of this Agreement or as of another date other than the
Closing Date and except for changes contemplated or permitted by this
Agreement. Highway shall have delivered to the Company a certificate dated as
of the Closing Date to the foregoing effect.
8.2 COVENANTS.
Highway shall, in all material respects, have performed and complied with
each obligation, agreement, covenant and condition contained in this Agreement
and the Collateral Documents and required by this Agreement and the Collateral
Documents to be performed or complied with by Highway at or prior to Closing.
Highway shall have delivered to the Company a certificate dated the Closing
Date to the foregoing effect.
8.3 CONSENTS AND APPROVALS.
All consents approvals, authorizations and orders required to be obtained
from, and all registrations, filings and notices required to be made with or
given to, any Regulatory Authority or Person as provided herein shall have
been obtained.
8.4 DELIVERY OF DOCUMENTS.
Highway, as applicable, shall have executed and delivered, or caused to
be executed and delivered, to the Company the following documents:
(i) Certified copies of the articles of incorporation and by-laws of
Highway and certified resolutions by the board of directors authorizing the
execution of this Agreement and the Collateral Documents and the consummation
of the transactions contemplated hereby.
(ii) Such other documents and instruments as the Company may reasonably
request: (A) to evidence the accuracy of the representations and warranties
Highway under this Agreement and the Collateral Documents and any documents,
instruments or certificates required to be delivered thereunder (B) to
evidence the performance by Highway of, or the compliance by Highway with, any
covenant, obligation, condition and agreement to be performed or complied with
by Highway under this Agreement and the Collateral Documents or (C) to
otherwise facilitate the consummation or performance of any of the
transactions contemplated by this Agreement and the Collateral Documents.
(iii) Letters of resignation from Highway's current officers and
directors to be effective upon the Closing. (iv) Board resolutions from
Highway's current directors appointing only designees of the Company to
Highway's board of directors.
8.5 NO MATERIAL ADVERSE CHANGE.
There shall have been no material adverse change in the business,
financial condition or operations of Highway and its Subsidiaries taken as a
whole.
8.6 NO ASSETS & LIABILITIES.
Highway and its subsidiaries shall have no assets or liabilities.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE COMPANY.
The Company shall indemnify, defend and hold harmless Highway and each of
Highway's Shareholders from and against any and all losses which may be
incurred or suffered by any such party hereto and which may arise out of or
result from any breach of any representation, warranty, covenant or agreement
of the Company contained in this Agreement made as of the Closing.
Notwithstanding the foregoing, no claim under this Section 9.1 may be made
unless notice is given pursuant to Section 9.3 within one year from the
Closing Date.
9.2 INDEMNIFICATION BY HIGHWAY.
Highway shall indemnify, defend and hold harmless the Company and each of
the Company Shareholders from and against any and all losses which may be
incurred or suffered by any such party hereto and which may arise out of or
result from any breach of any representation, warranty, covenant or agreement
of Highway contained in this Agreement made as of the Closing. Notwithstanding
the foregoing, no claim under this Section 9.2 may be made unless notice is
given pursuant to Section 9.3 within one year from the Closing Date.
9.3 NOTICE TO INDEMNIFYING PARTY.
If any party (the "Indemnified Party") receives notice of any claim or
other commencement of any action or proceeding with respect to which any other
party (or parties) (the "Indemnifying Party") is obligated to provide
indemnification pursuant to Sections 9.1 or 9.2, the Indemnified Party shall
promptly give the Indemnifying Party written notice thereof, which notice
shall specify in reasonable detail, if known, the amount or an estimate of the
amount of the liability arising therefrom and the basis of the claim. Such
notice shall be a condition precedent to any liability of the Indemnifying
Party for indemnification hereunder, but the failure of the Indemnified Party
to give prompt notice of a claim shall not adversely affect the Indemnified
Party's right to indemnification hereunder unless the defense of that claim is
materially prejudiced by such failure. The Indemnified Party shall not settle
or compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the
Indemnifying Party (which shall not be unreasonably withheld or delayed)
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as
provided in Section 9.4.
9.4 DEFENSE BY INDEMNIFYING PARTY.
In connection with any claim giving rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding by a Person who is not a
party to this Agreement, the Indemnifying Party at its sole cost and expense
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding (i) if it acknowledges to the Indemnified Party
in writing its obligations to indemnify the Indemnified Party with respect to
all elements of such claim (subject to any limitations on such liability
contained in this Agreement) and (ii) if it provides assurances, reasonably
satisfactory to the Indemnified Party, that it will be financially able to
satisfy such claims in full if the same are decided adversely. If the
Indemnifying Party assumes the defense of any such claim or legal proceeding,
it may use counsel of its choice to prosecute such defense, subject to the
approval of such counsel by the Indemnified Party, which approval shall not be
unreasonably withheld or delayed. The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its
counsel and at its own expense; provided, however, that if the Indemnified
Party, in its sole discretion, determines that there exists a conflict of
interest between the Indemnifying Party (or any constituent party thereof) and
the Indemnified Party, the Indemnified Party (or any constituent party
thereof) shall have the right to engage separate counsel, the reasonable costs
and expenses of which shall be paid by the Indemnified Party. If the
Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall take all steps necessary to pursue
the resolution thereof in a prompt and diligent manner. The Indemnifying Party
shall be entitled to consent to a settlement of, or the stipulation of any
judgment arising from, any such claim or legal proceeding, with the consent of
the Indemnified Party, which consent shall not be unreasonably withheld or
delayed; provided, however, that no such consent shall be required from the
Indemnified Party if (i) the Indemnifying Party pays or causes to be paid all
Losses arising out of such settlement or judgment concurrently with the
effectiveness thereof (as well as all other Losses theretofore incurred by the
Indemnified Party which then remain unpaid or unreimbursed), (ii) in the case
of a settlement, the settlement is conditioned upon a complete release by the
claimant of the Indemnified Party and (iii) such settlement or judgment does
not require the Encumbrance of any asset of the Indemnified Party or impose
any restriction upon its conduct of business.
ARTICLE X
TERMINATION
10.1 TERMINATION.
This Agreement may be terminated, and the transactions contemplated
hereby may be abandoned, at any time prior to the Effective Time.
(a) by mutual written agreement of Highway and the Company hereto duly
authorized by action taken by or on behalf of their respective Boards of
Directors; or
(b) by either the Company or Highway upon notification to the non-
terminating party by the terminating party:
(i) if the terminating party is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement on the part of the non-
terminating party set forth in this Agreement such that the conditions in
Sections 7.1, 7.2, 8.1 or 8.2 will not be satisfied; provided, however, that
if such breach is curable by the non-terminating party and such cure is
reasonably likely to be completed prior to the date specified in Section
10.2(b) (i), then, for so long as the non-terminating party continues to use
commercially reasonable efforts to effect and cure, the terminating party may
not terminate pursuant to this Section 10.1(b) (i);
(ii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making illegal
or otherwise permanently restricting, preventing or otherwise prohibiting the
Merger and such order shall have become final and non-appealable.
10.2 EFFECT OF TERMINATION.
If this Agreement is validly terminated by either the Company or Highway
pursuant to Section 10.1, this Agreement will forthwith become null and void
and there will be no liability or obligation on the part of the parties
hereto, except that nothing contained herein shall relieve any party hereto
from liability for willful breach of its representations, warranties,
covenants or agreements contained in this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 PARTIES OBLIGATED AND BENEFITED.
This Agreement shall be binding upon the Parties and their respective
successors by operation of law and shall inure solely to the benefit of the
Parties and their respective successors by operation of law, and no other
Person shall be entitled to any of the benefits conferred by this Agreement,
except that the Company Shareholders shall be third party beneficiaries of
this Agreement. Without the prior written consent of the other Party, no
Party may assign this Agreement or the Collateral Documents or any of its
rights or interests or delegate any of its duties under this Agreement or the
Collateral Documents.
11.2 PUBLICITY.
The initial press release shall be a joint press release and thereafter
the Company and Highway each shall consult with each other prior to issuing
any press releases or otherwise making public announcements with respect to
the Merger and the other transactions contemplated by this Agreement and prior
to making any filings with any third party and/or any Regulatory Authorities
(including any national securities interdealer quotation service) with respect
thereto, except as may be required by law or by obligations pursuant to any
listing agreement with or rules of any national securities interdealer
quotation service.
11.3 NOTICES.
Any notices and other communications required or permitted hereunder
shall be in writing and shall be effective upon delivery by hand or upon
receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified
in this Section as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) If to Highway, to:
Highway One-OWeb
000 Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxxx
With a Copy to:
Sonnenblick, Xxxxxx & Selvers, PC
0000 Xxxxx 0 Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Company to:
Xxxxxxx Audio Corporation
00 Xxxxx Xxxx, XX Xxx 00
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxxx
With a copy to:
Scolaro, Shulman, Xxxxx, Xxxxxx & Xxxxxxxx, PC
00 Xxxxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx x. Xxxxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section.
11.4 ATTORNEYS' FEES.
In the event of any action or suit based upon or arising out of any
alleged breach by any Party of any representation, warranty, covenant or
agreement contained in this Agreement or the Collateral Documents, the
prevailing Party shall be entitled to recover reasonable attorneys' fees and
other costs of such action or suit from the other Party. Notwithstanding the
foregoing, the prevailing Party shall only be entitled to recover reasonable
attorneys' fees from Xx. Xxxxxxxx in connection with an enforcement of his
indemnity obligations set forth in Section 9.2 hereof.
11.5 HEADINGS.
The Article and Section headings of this Agreement are for convenience
only and shall not constitute a part of this Agreement or in any way affect
the meaning or interpretation thereof.
11.6 CHOICE OF LAW.
This Agreement and the rights of the Parties under it shall be governed
by and construed in all respects in accordance with the laws of the State of
Delaware, without giving effect to any choice of law provision or rule
(whether of the State of Delaware or any other jurisdiction that would cause
the application of the laws of any jurisdiction other than the State of
Delaware).
11.7 RIGHTS CUMULATIVE.
All rights and remedies of each of the Parties under this Agreement shall
be cumulative, and the exercise of one or more rights or remedies shall not
preclude the exercise of any other right or remedy available under this
Agreement or applicable law.
11.8 FURTHER ACTIONS.
The Parties shall execute and deliver to each other, from time to time at
or after Closing, for no additional consideration and at no additional cost to
the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably
necessary to give full effect to this Agreement and to allow each party fully
to enjoy and exercise the rights accorded and acquired by it under this
Agreement.
11.9 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
11.10 ENTIRE AGREEMENT.
This Agreement (including the Exhibits, the Company Schedules, the
Highway Schedules and any other documents, instruments and certificates
referred to herein, which are incorporated in and constitute a part of this
Agreement) contains the entire agreement of the Parties.
11.11 EXPENSES.
Each party will be responsible for payment of its expenses in connection
with the transactions contemplated by this Agreement.
11.12 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
Notwithstanding any right of either Party fully to investigate the
affairs of the other and notwithstanding any knowledge of facts determined or
determinable pursuant to such investigation or right of investigation, each
party shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other contained in this Agreement. Each
representation, warranty, covenant and agreement of the Parties contained
herein shall survive the execution and delivery of this Agreement and the
Closing and shall thereafter terminate and expire on the first anniversary of
the Closing Date unless, prior to such date, the Party has delivered to the
other a written notice of a claim with respect to such representation,
warranty, covenant or agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement
as of the day and year first above written.
HIGHWAY ONE-OWEB, a Utah corporation
By: /s/ Xxxxxxxx Xxxxxx
-------------------
Name: Xxxxxxxx Xxxxxx
Title: President
XXXXXXX AUDIO CORPORATION, a New Jersey corporation
By: /s/ Xxx Xxxxxxxx
----------------
Name: Xxx Xxxxxxxx
Title: Vice President
