EXHIBIT 2.1
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into as of March 8,
2001, by and among United American Companies, Inc., a Colorado corporation
("UAC"); JDK ACQUISITION CORP., a North Carolina corporation and a direct
wholly-owned subsidiary of UAC ("Acquisition Corp."); JDK Enterprises, Inc., a
North Carolina corporation ("JDK"); Xxxx X. Xxxxxx ("X. Xxxxxx"); Xxxxx X. Xxxxx
("Xxxxx"); and Xxxxxxx X. Xxxxxx ("X. Xxxxxx") (X. Xxxxxx, X. Xxxxxx and Xxxxx
collectively referred to as the "Shareholders").
RECITALS:
A. UAC desires to acquire JDK by means of a merger (the "Merger")
of JDK with and into Acquisition Corp., with Acquisition Corp. as the surviving
entity ("Surviving Corporation"), and the separate corporate existence of JDK
shall cease, on the terms and conditions set forth in this Agreement and in the
Plan of Merger attached as Exhibit A.
B. The parties intend the Merger to quality as a tax-free
reorganization within the meaning of Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code").
C. The parties to this Agreement have each been represented by
counsel in connection with the negotiation and execution of this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Merger.
------
1.1 CLOSING. The closing (the "Closing") of the Merger is taking
place simultaneous with the signing of this Agreement at such
time and place as are agreed among the parties, but effective
at the close of business on the date of this Agreement (the
"Closing Date").
1.2 THE MERGER. At or prior to the Closing, the parties must file
Articles of Merger in accordance with the provisions of North
Carolina law. The Merger shall be effective at 11:59 p.m.,
Charlotte time, on the Closing Date (the "Effective Time").
1.3 Conversion of JDK Capital Stock and Issuance of UAC Common
Stock.
--------------------------------------------------------------
(A) ISSUANCE OF UAC COMMON STOCK. Upon the surrender and
cancellation of all of the JDK Common Stock (as
defined in Section 2.2), the JDK Common Stock shall
be converted into the right to receive an aggregate
335,000 shares of voting common stock, with no par
value per share, of UAC ("UAC Common Stock"). Upon
surrender of the JDK Common Stock, 116,017 shares of
the UAC Common Stock shall be issued in the name of
and delivered to Xxxxx, 83,991 shares of the UAC
Common Stock shall be issued in the name of and
delivered to X. Xxxxxx and 67,992 shares of UAC
Common Stock shall be issued in the name of and
delivered to X. Xxxxxx. The remaining 67,000 shares
of UAC Common Stock (the "Holdback Shares") shall be
issued in the name of and delivered to the
Shareholders in the same ratio as the initial 268,000
shares as follows: (i) 33,500 shares upon UAC having
completed an audit of the financial statements of JDK
listed in Section 2.7 and the results of such audit
being acceptable to UAC pursuant to Section 1.6; and
(ii) all remaining Holdback Shares, subject to the
rights of UAC under this Agreement, upon the first
(1st) anniversary of the Closing Date; provided,
however, the Holdback Shares shall be issued and
delivered to the Shareholders (or their respective
estate) in accordance with and at the times specified
in Section 1.3(B).
(B) Accelerated Issuance of Holdback Shares. Upon the
occurrence of any of the following events, UAC shall
issue the Holdback Shares and deliver or, at the
request of any of the Shareholders make available to
such Shareholder, a certificate or certificates (in
such denominations as such Shareholder may reasonably
request) representing the Holdback Shares at the
times set forth below and shall take any and all
action necessary so that such shares, upon issuance,
are duly authorized, validly issued, fully paid and
nonassessable:
(i) If a public announcement is made of a
tender or exchange offer by any person or entity,
including, without limitation, an individual,
company, corporation, partnership, limited liability
company or trust, for 50% or more of the outstanding
shares of UAC entitled to vote in the election of
directors, then the Holdback Shares shall be issued
and delivered to the Shareholders within five (5)
days following the occurrence of such event;
(ii) If the Board of Directors of UAC
approves any merger of UAC with any other corporation
or partnership, the dissolution or liquidation of
UAC, the sale or other transfer of all or
substantially all of the assets of UAC, or the
combination or exchange of shares of UAC, then the
Holdback Shares shall be issued and delivered to the
Shareholders upon the sooner of five (5) days (x)
following the occurrence of such event, or (y)
preceding the date shareholders of record are
determined for purposes of participating in such
event; or
(iii) If any other merger of UAC is proposed
to be consummated, then the Holdback Shares shall be
issued and delivered to the Shareholders within five
2
(5) days preceding the date shareholders of record
are determined for purposes of participating in the
consummation of such merger or consolidation.
(C) IDENTIFICATION OF HOLDBACK SHARES BY SHAREHOLDERS. In
connection with the delivery of any Holdback Shares
to the Shareholders, each Shareholder shall have the
sole right to require that individual certificates of
the Holdback Shares be issued to him in such number
so that the individually certificated Holdback Shares
can be specifically designated and identified by such
Shareholder on his books and records as Holdback
Shares received for any interest income imputed to
such Shareholder for federal and applicable state
income tax purposes. Each Shareholder shall have the
right to determine whether and to what extent, if
any, he should treat for tax purposes any of the
Holdback Shares as payments of imputed interest to
him.
(D) ADJUSTMENT OF HOLDBACK SHARES. In the event any of
the common shares of UAC of the same class as the UAC
Common Stock are reclassified, subdivided or
combined, or if UAC declares a dividend payable in
common stock of UAC, then the number of Holdback
Shares to be issued hereunder shall be adjusted
proportionately.
1.4 Additional Effects of the Merger.
--------------------------------
(A) RIGHTS AND OBLIGATIONS. Upon consummation of the
Merger, all the properties, rights, privileges,
powers and franchises of JDK immediately prior to the
Effective Time and of Acquisition Corp. shall vest in
the Surviving Corporation, and all debts, liabilities
and duties of JDK and Acquisition Corp. shall become
the debts, liabilities and duties of the Surviving
Corporation.
(B) ARTICLES OF INCORPORATION AND BYLAWS. The articles of
incorporation of Acquisition Corp. in effect at the
Effective Time shall be the articles of incorporation
of the Surviving Corporation until amended in
accordance with applicable law. The bylaws of
Acquisition Corp. in effect at the Effective Time
shall be the bylaws of the Surviving Corporation
until amended in accordance with applicable law.
(C) DIRECTORS. The directors of Acquisition Corp. at the
Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in
accordance with the articles of incorporation and
bylaws of the Surviving Corporation until each such
director's successor is duly elected or appointed and
qualified.
(D) OFFICERS. The officers of Acquisition Corp. at the
Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in
accordance with the articles of incorporation and
bylaws of the Surviving Corporation until each such
officer's successor is duly elected or appointed and
qualified.
1.5 OFFSET AGAINST UAC COMMON STOCK (INCLUDING HOLDBACK SHARES).
As security for his indemnification obligations under Section
5, and adjustment for audit of results
3
determined in accordance with Section 1.6, each Shareholder
agrees that during the applicable period(s) specified in
Section 6.1 hereof related to the Shareholders (the
"Applicable Period"), the UAC Common Stock (including the
Holdback Shares) may be subject to an offset for claims made
by UAC, Acquisition Corp., or the Surviving Corporation during
such period under the indemnification provisions of Section 5
and adjustment for audit results under Section 1.6.
1.6 AUDIT OF FINANCIAL STATEMENTS. Following the Closing, UAC
shall conduct an audit of the financial condition of JDK and
its subsidiaries as of January 31, 2000 (the "Audit"). In the
event the Shareholders' equity and the net income of JDK and
its subsidiaries determined in the Audit demonstrate an
adverse change from the Latest Income Statement and Latest
Balance Sheet delivered pursuant to Section 2.7, UAC shall
have the right to offset against the UAC Common Stock issued
or to be issued to the Shareholders (including the Holdback
Shares) that amount equal to the monetary amount of such
difference, pursuant to the provisions of Section 5.2.
2. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each of the
Shareholders, jointly and severally, make the following representations
and warranties to UAC and Acquisition Corp.:
2.1 ORGANIZATION AND QUALIFICATIONS OF JDK: JDK is a corporation
lawfully existing and in good standing under the laws of North
Carolina with full corporate power and authority to own and
lease its properties and to conduct its business in the manner
and in the places where such properties are owned or leased or
such business is conducted by it. All of the issued and
outstanding capital stock of JDK is owned legally and
beneficially by the Shareholders. Except as set forth on
Schedule 2.1, JDK does not have any subsidiaries or own any
equity issued by any other entity. Except as set forth on
Schedule 2.1, JDK is not a member, partner or joint venturer
in any limited liability company, partnership or joint
venture.
2.2 CAPITALIZATION OF JDK. The authorized capital stock of JDK
consists solely of 100,000 shares of common stock, $1.00 par
value, of JDK ("JDK Common Stock"), of which 15,003 shares are
issued and outstanding, fully paid and non-assessable and all
of which issued and outstanding shares are held and owned
solely by the Shareholders. None of the JDK Common Stock has
been issued in violation of any federal or state securities
laws or other applicable laws. There are no outstanding
warrants, options, preemptive rights, or other rights to
purchase or acquire shares of JDK Common Stock or any other
JDK capital stock. No securities or other instruments of JDK
are either directly or indirectly convertible into or
exchangeable for shares of capital stock of JDK and there are
no stock appreciation, phantom or similar rights based on the
book value or any other attribute of any capital stock of JDK.
No restrictions exist on the transfer of shares of JDK Common
Stock.
2.3 AUTHORITY OF JDK AND EACH SHAREHOLDER. This Agreement is the
valid and binding obligation of JDK and of each Shareholder in
accordance with its terms. The execution, delivery and
performance by JDK of this Agreement and the consummation by
JDK of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of
4
JDK and no other corporate proceedings on the part of JDK are
necessary to authorize the execution and delivery of this
Agreement and to consummate the transactions so contemplated.
The execution, delivery and performance of this Agreement by
JDK and the Shareholders and the communication of the
transactions contemplated by this Agreement will not violate
or result in a default under:
(A) any provision of the Articles of Incorporation or
Bylaws of JDK;
(B) any provision of any agreement or obligation to which
JDK or any Shareholder is a party or by which any of
JDK's property is bound; or
(C) any laws, rules or regulations to which JDK, any
Shareholder or any of their respective properties may
be subject.
2.4 TITLE TO PROPERTIES. Except as set forth on Schedule 2.4
hereof, JDK has good and marketable title to all of the assets
owned or used in its business as of the date hereof, free and
clear of any lien, security interest, mortgage, pledge or
other encumbrance of any kind, other than any liens for ad
valorem taxes not yet due and payable (collectively,
"Encumbrances"). Without limiting the generality of the
foregoing, neither JDK, nor LJ Properties of Mebane, LLC, a
North Carolina limited liability company ("LJ Properties"),
uses any assets in its business that are owned by Kicks of
Mebane, Inc., a North Carolina corporation ("Kicks").
2.5 REAL PROPERTY. Except as set forth on Schedule 2.5 hereof, JDK
does not own or lease any real property.
2.6 ENVIRONMENTAL MATTERS. Any real property owned, leased or
operated by JDK (either currently or previously) has not been
used for storing, disposing or treating any hazardous, toxic
or dangerous substance, waste or material regulated under
federal, state or local law ("Hazardous Materials"), nor has
JDK handled any Hazardous Materials, in violation of any
federal, state or local laws and there has been no release or
threatened release of Hazardous Materials by any person or
entity on any real property owned, leased or operated by JDK
(either currently or previously).
2.7 Financial Statements.
--------------------
(A) JDK has delivered to UAC the following financial
statements:
(1) Reviewed balance sheets, statements of
income or loss and retained earnings,
statements of cash flows and notes to
financial statements of JDK for the years
ending January 31, 2000, January 31, 1999
and January 31, 1998 (the "Reviewed
Financial Statements");
(2) Unaudited income statement and statement of
operations of JDK for the year ended January
31, 2001 (the "Latest Income Statement");
and
5
(3) Unaudited balance sheet of JDK as of January
31, 2001 (the "Latest Balance Sheet").
(B) The Reviewed Financial Statements were prepared in
accordance with generally accepted accounting
principles consistently applied, except as otherwise
indicated therein and except for accruals with
respect to vacation.
(C) Except as disclosed on Schedule 2.7 and in Section
2.9, the Latest Balance Sheet presents fairly the
assets and liabilities of JDK as of the date of said
balance sheet as of such date.
2.8 TAXES. JDK is a subchapter-C corporation for federal income
tax purposes. JDK has filed all federal, state and local
income, excise or franchise tax returns, real estate and
personal property tax returns, sales and use tax returns and
other tax returns required to be filed by it, and each such
return is complete and accurate in all material respects. JDK
has paid all taxes owed by it, except taxes which have not yet
accrued or otherwise become due.
2.9 Absence of Undisclosed Liabilities. Except (i) as set forth in
Schedule 2.9, (ii) as reflected or reserved against on the
Latest Balance Sheet, and (iii) for liabilities (none of which
individually or in the aggregate are substantial) incurred in
the ordinary course of business, JDK has no liabilities of any
nature, whether accrued, absolute or contingent. There are no
agreements, judgments, decrees, orders or any facts which
materially affect, or may in the future (so far as can now be
reasonably foreseen) materially affect, the business,
properties, operations or conditions of JDK which have not
been specifically disclosed in this Agreement. Without
limiting the generality of the foregoing, neither JDK nor LJ
Properties is liable or obligated in any way for or under any
indebtedness or other obligation of Kicks, except as set forth
in Schedule 2.20.
2.10 ACCOUNTS RECEIVABLE. All of the accounts receivable of JDK
reflected on the Latest Balance Sheet or thereafter acquired
are valid and enforceable claims, fully collectible and
subject to the setoff or counterclaim in the recorded amounts,
subject only to the allowance for doubtful accounts maintained
in accordance with JDK's past practices and reflected on the
Latest Balance Sheet.
2.11 INVENTORIES. The inventory of JDK consists of items of a
quantity consistent with normal inventory levels of JDK and of
a quality and condition that is usable and saleable in the
ordinary course of business for the purposes for which the
inventory is intended. Such inventory is carried on JDK's
books at the lower of cost or market, with cost determined on
the first-in, first-out method.
2.12 CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Except as set
forth on Schedule 2.12, JDK has conducted its business since
December 31, 2000 only in the usual and ordinary course
consistent with past practice and since such date, JDK has not
(A) sold or transferred any of its assets, except
inventory in the ordinary course of business;
6
(B) changed any method of accounting or accounting
practice;
(C) increased or promised to increase the compensation
payable to any employee or independent contractor;
(D) made any direct or indirect payments, dividends,
distributions, sales or transfers of assets, other
than normal compensation consistent with past
practices, to any officer, director, shareholder or
employee of JDK or any of their affiliates;
(E) changed its outstanding shares of capital stock or
repurchased, redeemed or acquired any outstanding
shares of capital stock or other ownership interest
in securities of JDK; or
(F) suffered any damage or casualty to its assets.
2.13 INTELLECTUAL PROPERTY. Except as set forth on Schedule 2.13,
JDK does not own any patents, copyrights, trademarks or
tradenames, nor has it infringed upon any intellectual
property rights owned, held or used by any person or entity.
Except as set forth on Schedule 2.13, JDK has the right to
use, free and clear of any claims or rights of any person or
entity, all trademarks, service marks, tradenames, trade
secrets and customer lists which JDK is using.
2.14 CONTRACTS
(A) Except for contracts, commitments, plans, agreements
and licenses described on Schedule 2.14
("Commitments"), JDK is not a party to or subject to
any agreement:
(1) creating any obligation of JDK to pay more
than $500.00;
(2) providing for the purchase of all or
substantially all of JDK's requirements of a
particular product or service from a
supplier, or for periodic minimum purchases
of particular product or service from a
supplier;
(3) not terminable on 30 days' notice without
penalty to or additional consideration from
JDK, other than sales and purchase
commitments entered into in the ordinary
course of business for less than $500.00
each;
(4) with any sales agent or distributor which
will not be terminated upon consummation of
the Merger (without any resulting liability
to Seller);
(5) containing covenants limiting JDK's freedom
to compete in any line of business or with
any person or entity, in any location;
(6) for the licensure of any property (either as
licensor or licensee); or
7
(7) with any present or former officer,
director, employee, agent or shareholder of
JDK or with any person or entity controlled
by or affiliated with any of them.
(B) True, correct and complete copies of the Commitments
have been provided to UAC prior to the execution of
this Agreement. All Commitments are in full force and
effect and have not been amended, extended or
otherwise modified. Other than as disclosed on
Schedule 2.14, neither JDK nor, to the best knowledge
of the Shareholders, any other person or entity is in
default under any Commitments.
2.15 LITIGATION. Except as set forth on Schedule 2.15, there is no
legal, administrative, arbitration or other proceeding or
governmental investigation pending or, to the best knowledge
of the Shareholders, threatened by or against JDK or any
Shareholder relating to the business of JDK or the JDK Common
Stock.
2.16 COMPLIANCE WITH LAWS. JDK and each Shareholder (with respect
to the business of JDK), are in material compliance with all
applicable statutes, regulations, ordinances or other laws.
Except as set forth on Schedule 2.21, there has never been any
citation, fine or penalty imposed or asserted against JDK, or
any Shareholder relating to the business of JDK or the JDK
Common Stock, under any foreign, federal, state or local law
or regulation which has not been paid.
2.17 INSURANCE. Schedule 2.17 lists each insurance policy
maintained by JDK with respect to its properties, assets and
business and a brief description of their respective
coverages, including coverage dates, deductibles, premiums and
policy limits.
2.18 PERMITS. JDK holds all licenses, permits and franchises which
are required to permit it to conduct its business, and all
such licenses, permits and franchises are listed on Schedule
2.18.
2.19 CONSENTS AND APPROVALS. Except as set forth on Schedule 2.19,
no consent, authorization, order, or approval of or filing
with any governmental authority, person or entity, including,
without limitation, consents from parties to the Commitments,
is required for the execution and delivery of this Agreement
or the consummation by JDK and each Shareholder of the
transactions contemplated by this Agreement. The parties
acknowledge that a consent may be required of First Union
National Bank and hereby waive such consent as a condition of
closing. JDK agrees to use its best efforts to refinance any
indebtedness of JDK to the extent necessary to obtain the
release of any personal guaranties of the Shareholders.
Additionally, JDK agrees that it will not, without the consent
of the Shareholders, release any liens or substitute any
collateral serving as security for any indebtedness personally
guarantied by the Shareholders; provided, however, that no
such consent will be necessary for (i) the release of a lien
on any collateral whereby the dollar amount equal to the value
of such collateral is used to pay down the respective
indebtedness or (ii) any substitution of collateral with
replacement collateral of an equal or greater value.
8
2.20 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth on
Schedule 2.20, No shareholder, officer, employee or director
of JDK owns directly or indirectly any material interest (more
than 5%) in, or serves as an officer or director of, any
customer, competitor or supplier of JDK, or any organization
which has a material contract or arrangement with JDK.
2.21 WARRANTY OR OTHER CLAIMS. Except as set forth on Schedule
2.21, there are no existing or threatened claims against JDK
for goods or services sold, transferred or marketed which are
defective or fail to meet any product warranties or contract
or industry standards, nor are there any facts upon which a
claim could be based against JDK for goods or services which
are defective or fail to meet any product warranties or
contract or industry standards.
2.22 FINDER'S FEE. Neither JDK nor any Shareholder has incurred
liability or will become liable for any broker's commission or
finder's fee relating to or in connection with the transaction
contemplated by this Agreement.
2.23 EMPLOYEE BENEFITS PLANS. As of the date hereof, the only
employee benefit plan (as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974
("ERISA")) maintained by JDK is a 401(K) plan as described on
Schedule 2.23. There are no unfunded obligations of JDK under
any retirement, pension, profit-sharing and deferred
compensation plans and programs previously maintained by JDK.
JDK has filed all returns required under the Code with respect
to its employee benefit plans, including returns required by
the Department of Labor.
2.24 EMPLOYEE MATTERS. None of the employees of JDK are represented
by any union or subject to any collective bargaining agreement
and, to the best knowledge of each Shareholder, none of such
employees are engaged in any organizational activities.
2.25 BANK ACCOUNTS. All of the bank accounts of JDK, and the
individuals with signature authority, are listed on Schedule
2.25.
2.26 NO DEFAULT. Except as set forth on Schedule 2.21 and Schedule
2.26, neither JDK nor any Shareholder is in default or
violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation)
of any term, condition or provision of (i) JDK's articles of
incorporation or bylaws (or similar governing documents), (ii)
any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which JDK, or
any Shareholder with respect to the business of JDK, is now a
party or by which any of them or any of their respective
properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation
applicable to JDK, or to any Shareholder with respect to the
business of JDK or any of their respective properties or
assets.
2.27 ADDITIONAL REPRESENTATIONS OF THE SHAREHOLDERS. Each
Shareholder represents and warrants to UAC with respect to the
shares of UAC Common Stock to be received in the Merger as
follows:
9
(A) Each Shareholder understands and acknowledges that
the issuance of the shares of UAC Common Stock to be
issued to it in the Merger will not be registered
under the Securities Act of 1933, as amended (the
"Securities Act"), and that the shares of UAC Common
Stock will be issued to it in a transaction that is
exempt from the registration requirements of the
Securities Act. Each Shareholder understands and
acknowledges that such UAC Common Stock cannot be
offered or resold except pursuant to registration
under the Securities Act or an available exemption
from registration and agrees that it shall not resell
such UAC Common Stock except in compliance with
applicable federal and state securities laws;
(B) Each Shareholder is acquiring beneficial ownership in
the UAC Common Stock for investment for his own
account and not with a view to, or for resale in
connection with, any distribution thereof. Each
Shareholder understands that the shares of UAC Common
Stock to be acquired have not been registered under
the Securities Act by reason of a specific exemption
from the registration provisions of the Securities
Act which depends upon, among other things, the bona
fide nature of the investment intent as expressed
herein;
(C) Each Shareholder acknowledges that he is aware that
there is no trading market for the shares of UAC
Common Stock and neither UAC nor any of its officers,
directors or other representatives have made any
representations as to value of the shares of UAC
Common Stock;
(D) Each Shareholder, either independently or together
with a duly appointed representative (within the
meaning of Rule 501 of Regulation D under the
Securities Act), has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of its investment in
UAC Common Stock pursuant to the Merger Agreement and
protecting his own interests in connection with such
transaction. Each Shareholder has the financial
ability to bear the economic risk of his investment
in UAC Common Stock pursuant to the Merger Agreement,
is aware that he may be required to bear the economic
risk of his investment in UAC Common Stock for an
indefinite period of time, has no need for liquidity
with respect to his investment therein at this time,
and has adequate means of providing for his current
needs and personal contingencies;
(E) Each Shareholder has consulted with independent legal
counsel or other advisors with respect to finance,
securities and investments generally to assist him in
evaluating the merits and risks of a prospective
investment in UAC and its subsidiaries and the UAC
Common Stock, and to make an informed decision
regarding the proposed investment in UAC and its
subsidiaries and the UAC Common Stock;
(F) Each Shareholder has received and carefully reviewed
a copy of the Information Statement dated March 2,
2001 (including all annexes thereto, the "Information
Statement");
10
(G) Each Shareholder understands that an investment in
the UAC Common Stock involves substantial risks. Each
Shareholder and his attorney, accountant, financial
advisor and/or other representative
("Representatives") have been given the opportunity
to make a thorough investigation of UAC and its
current and proposed business and have been furnished
with requested materials relating to the same. Each
Shareholder and his Representatives have been
afforded the opportunity to obtain any additional
information deemed necessary to verify the accuracy
of any representations made or information conveyed
to the Shareholders;
(H) Any and all documents, records and books of UAC and
its subsidiaries, have been made available for
inspection to each Shareholder and his
Representatives. Each Shareholder and his
Representatives have had ongoing access to any
financial and other information concerning UAC, its
current and proposed business and the UAC Common
Stock, as such Shareholder and his Representatives
have deemed necessary in connection with each
Shareholder's decision to invest in UAC Common Stock
pursuant to the Merger Agreement including an
opportunity to ask questions of and request
information from representatives of UAC. Prior to the
date hereof, each Shareholder and his Representatives
have made detailed inquiry and full investigation
concerning UAC, including its business, management,
material contracts and relationships, financial
condition, results of operations and prospects, and
knowledgeable representatives of UAC have answered to
the full satisfaction of each Shareholder and his
Representatives all inquiries made by any of the
foregoing persons;
(I) Each Shareholder warrants and agrees that each
certificate representing shares of UAC Common Stock
issued in the Merger shall be endorsed with
substantially the following legend: "THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
2.28 PROFESSIONAL ADVICE. With respect to the tax and other
economic considerations involved in acquiring the UAC Common
Stock, no Shareholder is relying on UAC or Acquisition Corp.,
and each Shareholder has carefully considered and has, to the
extent such Shareholder believes such discussion necessary,
discussed with such Shareholder's professional legal, tax,
accounting and financial advisors the implications of
acquiring the UAC Common Stock for the such Shareholder's
particular tax and financial situation.
3. REPRESENTATIONS AND WARRANTIES OF UAC AND ACQUISITION CORP. UAC and
Acquisition Corp., jointly and severally, make the following
representations and warranties to each Shareholder:
11
3.1 ORGANIZATION AND QUALIFICATIONS OF ACQUISITION CORP.
Acquisition Corp. is a corporation lawfully existing and in
good standing under the laws of the state of North Carolina
with full corporate power and authority to own or lease its
properties and to conduct its businesses in the manner and in
the places where such properties are owned or leased or such
businesses are conducted by it.
3.2 AUTHORITY OF UAC AND ACQUISITION CORP. This Agreement is a
valid and binding obligation of UAC and Acquisition Corp., in
accordance with its terms. The execution, delivery and
performance by UAC and Acquisition Corp. of this Agreement and
the consummation by such parties of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of UAC and Acquisition Corp., and
no other corporate proceedings on the part of any of them are
necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions so contemplated.
The execution, delivery and performance of this Agreement by
UAC and Acquisition Corp. and the consummation of the
transactions contemplated by this Agreement will not violate
or result in a default under:
(A) any provision of the Articles of Incorporation or
Bylaws of UAC or Acquisition Corp.;
(B) any provision of any agreement or obligation to which
UAC and/or Acquisition Corp. is bound; or
(C) any laws, rules or regulations to which UAC,
Acquisition Corp. or any of their respective
properties may be subject.
3.3 UAC COMMON STOCK. The shares of UAC Common Stock to be issued
and delivered by UAC pursuant to this Agreement will, on
delivery of the certificates therefor to the Shareholders in
accordance with the terms hereof, be validly issued, fully
paid, and nonassessable.
4. Closing Documents.
-----------------
4.1 UAC'S DELIVERIES. At the Closing, UAC shall execute and/or
deliver to JDK the following:
(A) a certificate of the Secretary of Acquisition Corp.
certifying as to:
(1) a copy of the resolutions of Acquisition
Corp.'s Board of Directors which authorize
the execution, delivery and performance of
this Agreement as having been duly adopted
and as being in full force and effect on the
Closing Date; and
(2) a copy of the articles of incorporation and
bylaws of Acquisition Corp., as in effect on
the Closing Date;
12
(B) a certificate of the Secretary of UAC certifying as
to a copy of the resolutions of UAC's Board of
Directors which authorize the execution, delivery and
performance of this Agreement as having been duly
adopted and as being in full force and effect on the
Closing Date;
(C) the Plan of Merger in the form of Exhibit A; and
(D) an opinion of Xxxxxx & Xxxxxxx, P.C. as to the
matters set forth on Exhibit 4.1(D).
4.2 JDK's Deliveries. At the Closing, JDK and the Shareholders
shall deliver to UAC physical possession of all the following:
(A) a certificate of the Secretary of JDK certifying as
to:
(1) a copy of the resolutions of JDK's board of
directors and the Shareholders authorizing
the execution, delivery and performance of
this Agreement as having been duly adopted
and as being in full force and effect on the
Closing date; and
(2) a copy of the articles of incorporation and
bylaws of JDK as in effect on the Closing
Date;
(B) the Plan of Merger;
(C) the opinion of Wishart, Norris, Xxxxxxxxx & Xxxxxxx,
P.A. as to the matters set forth on Exhibit 4.2(C);
(D) a certificate signed by each Shareholder
substantially in the form of Exhibit 4.2(D);
(E) employment and noncompetition agreements signed by
each Shareholder substantially in the form of Exhibit
4.2(E); and
(F) all corporate records of JDK, including, without
limitation, the corporate book and stock register.
13
5. Indemnification by the Shareholders.
-----------------------------------
5.1 SHAREHOLDER INDEMNIFICATION OBLIGATIONS. Each Shareholder
agrees to defend, indemnify and hold UAC, Acquisition Corp.,
the Surviving Corporation and any of their affiliates (the
"Indemnitees") harmless from and against any damages, claims,
liabilities, losses and expenses (including without limitation
reasonable attorneys' fees and expenses) (collectively,
"Damages") of any kind or nature whatsoever which may be
sustained or suffered by Indemnitees as a result of a breach
of any representation, warranty or covenant made by JDK or any
Shareholder in this Agreement.
5.2 SATISFACTION FROM UAC COMMON STOCK (INCLUDING HOLDBACK
SHARES). Any claims for indemnification made by the
Indemnitees under this Section 5 or for adjustments under
Section 1.6 which are made shall be satisfied exclusively from
the UAC Common Stock (including Holdback Shares). In the event
of any Damages incurred during such period attributable to any
such claims, UAC may, pursuant to the terms of this Section,
first deduct from any Holdback Shares and then from the other
UAC Common Stock, that number of shares of UAC Common Stock
equal to the amount of such Damages, with such valuation per
share equal to $12.00 per share. In the event any pending
litigation, claim or assessment has been filed or levied on or
prior to the first anniversary of the Closing Date which
litigation, claim or assessment is reasonably likely to result
in any Damages, and for which UAC and/or the Surviving Corp.
has properly given notice of the same during such period
pursuant to Section 5.4, then that number of Shares of UAC
Common Stock (with a value equal to the estimated amount of
the Damages) shall continue to be held back until the final
resolution of such litigation claims or assessments.
Notwithstanding anything contained herein to the contrary,
each Shareholder shall have the right to dispute any claim for
indemnification hereunder pursuant to the dispute resolution
provisions of Section 6.3.
5.3 DETERMINATION OF DAMAGES AND RELATED MATTERS. In calculating
any Damages payable to UAC or its affiliate pursuant to
Sections 1.6, 5.1 or 5.6, the Shareholders shall receive
credit for (a) any reduction to tax liability of Indemnitees
as a result of the facts giving rise to the claim for
indemnification, and (b) any insurance recoveries actually
received by Indemnitees with respect thereto.
5.4 NOTICE OF INDEMNIFICATION. In the event any legal proceeding
shall be threatened or instituted or any claim or demand shall
be asserted by an Indemnitee in respect of which payment may
be sought from any Shareholder under the provisions of this
Section 5, the Indemnitees shall promptly cause written notice
of the assertion of any such claim of which it has knowledge
which is covered by this indemnity to be forwarded to each
Shareholder which notice must be received by each Shareholder
before the end of the applicable survival period. Any notice
of a claim by reason of any of the representations, warranties
or covenants contained in this agreement shall state
specifically the representation, warranty or covenant with
respect to which the claim is made, the facts giving rise to
an alleged basis for the claim, and the amount of the
liability asserted against each Shareholder by reason of the
claim.
14
5.5 INDEMNIFICATION PROCEDURE FOR THIRD-PARTY CLAIMS. In the event
that an Indemnitee receives written notice of the commencement
of any actions or proceeding, the assertion of any claim by a
third party or the imposition of any penalty or assessment for
which indemnity may be sought pursuant to this Section 5 (a
"Third Party Claim"), and such Indemnitee intends to seek
indemnity pursuant to this Section 5, the Indemnitee shall
promptly provide each Shareholder with notice of such action,
proceeding, claim, penalty or assessment, and each Shareholder
shall, upon receipt of such notice, be entitled to participate
in or, at such Shareholder's option, assume the defense,
appeal or settlement of such action, proceeding, claim,
penalty or assessment with respect to which such indemnity has
been invoked with counsel of its own choosing, and the
Indemnitee will cooperate fully with such Shareholder in
connection therewith. In the event that no Shareholder assumes
the defense, appeal or settlement of such action, proceeding,
claim, penalty or assessment within twenty (20) days after
receipt of notice thereof from the Indemnitee, the Indemnitee
shall have the right to undertake the appeal or settlement of
such action, proceeding, claim, penalty or assessment. No
Shareholder shall settle or compromise any such action,
proceeding, claim, penalty or assessment without the
Indemnitee's prior written consent, unless the terms of such
settlement or compromise release each Shareholder from any and
all liability with respect to such claim.
5.6 CLAIMS OF REDEEMED SHAREHOLDERS. In addition to the other
indemnification obligations under this Section 5, each
Shareholder agrees to defend, indemnify and hold Indemnitees
harmless from and against any Damages relating to claims by
any former shareholders of JDK for any matter, specifically
including, without limitation, any claims that such former
shareholders (if any) sold their shares to JDK, or had such
shares redeemed, at prices less than the fair market value at
the time of such sales or redemptions or that material
information was withheld from such individuals in connection
with such sales or redemptions.
5.7 NO CONTRIBUTION. In the event that any Indemnitee is entitled
to any claim for indemnification hereunder against any
Shareholder, the Shareholders agree that they do not have the
right to seek contribution with respect to any such claim
from, or have any similar right with respect to any
Indemnitee, whether by contract, agreement, bylaw, common law,
or otherwise; provided, however, that the Shareholders may
seek contribution with respect to claims arising from the
Shareholders' personal guaranties of the indebtedness to First
Union National Bank, GE Capital First Factors Corporation or
Centura Bank.
6. Miscellaneous.
-------------
6.1 SURVIVAL. All representations, warranties, agreements,
covenants and obligations herein shall survive the execution
and delivery of this Agreement and the Closing and the
consummation of the transactions contemplated hereby and shall
not be affected by any examination made for or on behalf of
the UAC, Acquisition Corp. or JDK. Notwithstanding anything
contained herein to the contrary, the representations and
warranties of the parties shall survive the Closing for a
period of two (2) years after the Closing Date, except (i) the
representations and warranties of each Shareholder under
Sections 2.6, 2.23 and 2.24, which shall survive for the
period of the applicable statute
15
of limitations, (ii) the representations and warranties of
each Shareholder under Section 2.8, which shall survive for a
period of six (6) years and (iii) the representations and
warranties of each Shareholder as to the title of JDK and its
subsidiaries to their respective assets, which shall survive
indefinitely.
6.2 FEES AND EXPENSES. Each party will bear all of its own
expenses in connection with the negotiation and the
consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing, all such expenses
incurred by JDK and the Shareholders shall be paid by the
Shareholders in the ratio of 43.29% by Xxxxx, 31.34% by X.
Xxxxxx and 25.37% by X. Xxxxxx.
6.3 Governing Law; Dispute Resolution.
---------------------------------
(a) This Agreement, and all ancillary documents related
to this Agreement, is governed by the internal laws
of the State of North Carolina, without regard to the
conflict of laws provisions of any jurisdiction.
(b) Arbitration.
-----------
(i) DISPUTES; SELECTION OF ARBITRATORS. All
disputes arising out of or in connection
with this Agreement, upon demand by a party
hereto in writing to all other parties,
shall be resolved by binding arbitration in
accordance with the rules of the American
Arbitration Association, as modified herein.
The arbitrator shall be an independent third
party agreed upon by the parties to the
arbitration.
(ii) PROCEDURE. Unless otherwise agreed to in
writing by the parties to the arbitration,
all arbitration hearings shall be conducted
in Charlotte, North Carolina. Unless
extended by the mutual consent of the
parties, the hearing on the dispute shall be
held within forty-five (45) days after
selection of the arbitrator or panel of
arbitrators as set forth above. Thirty (30)
days prior to the hearing, each party shall
furnish to the other party a list of
anticipated witnesses and a list of
anticipated exhibits, together with a copy
of each exhibit. The arbitrator(s) shall
render a decision resolving the dispute
within sixty (60) days of the conclusion of
the arbitration hearing and such decision
shall be binding on the parties to the
arbitration.
(iii) AVAILABILITY OF SPECIFIC PERFORMANCE. The
parties hereto acknowledge that the actual
damages which would be sustained upon the
breach of this Agreement by any of the
parties cannot be expressed in monetary
terms. Therefore, any party aggrieved by the
breach or threatened breach of any of the
terms of this Agreement may apply to any
court of competent jurisdiction for
preliminary, temporary and permanent
injunctive relief to compel specific
performance of the terms and conditions of
this Agreement; provided, however, the
merits of any breach which is the basis of
such injunctive relief shall be determined
by the arbitrator
pursuant to the arbitration procedure as set
forth above. Each party to this Agreement
against whom such action is brought hereby
waives and releases all rights to assert
that the aggrieved party has an adequate
remedy at law and further agrees not to
assert in any court the claim or defense
that such remedy at law exists.
16
6.4 NOTICES. All notices required or permitted to be given under
this Agreement must be in writing and are deemed given when
delivered in person (or three business days after being
deposited in the United States mail, postage prepaid,
registered or certified mail, addressed as set forth below, or
on the next business day after being deposited with a
nationally-recognized overnight courier service, addressed as
set forth below, or upon dispatch if sent by facsimile with
telephonic confirmation of receipt from the intended recipient
to the facsimile number set forth below):
To UAC, United American Companies, Inc.
Acquisition Corp., 0000 Xxxxxxxx Xxxx, Xxxxx 0000
or the Surviving Corporation Xxxxxxxxx, XX 00000
Attention: President
Fax No.: (000) 000-0000
With a copy to: Xxxxxxxxxx Xxxxxxxx LLP
3500 One First Union Center
000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
To the Shareholders: Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxxx
0000 Xxxxxx Xxxx Xxxx
Xxxxxx, XX 00000
Fax No. (000) 000-0000
With a copy to: Xxxx Xxxxxxx
Wishart, Norris, Xxxxxxxxx
& Xxxxxxx, P.A.
0000 Xxxxx Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Fax No. (000) 000-0000
6.5 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits, constitute the entire agreement between the parties
with respect to subject matter of this Agreement.
6.6 ASSIGNABILITY. This Agreement is enforceable by, and will
inure to the benefit of, the parties to this Agreement and
their successors and assigns, provided no party may assign its
rights or obligations under this Agreement without the prior
written consent of the other parties.
6.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and
all of which shall constitute one agreement.
6.8 PUBLICITY AND DISCLOSURE. No press release or public
disclosure, either written or oral, of the transactions
contemplated by this Agreement, may be made without the prior
knowledge and consent of the parties hereto, except as
otherwise required by law.
6.9 NO THIRD PARTY RIGHTS. Nothing expressed or implied in this
Agreement is intended, nor shall be construed, to confer upon
or give any person, firm or corporation, other than UAC,
Acquisition Corp., JDK and their respective shareholders, any
rights or remedies under or by reason of this Agreement.
6.10 HEADINGS. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of
this Agreement.
6.11 NON-EXCLUSIVITY. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive
and shall be in addition to any and all rights, remedies,
powers and privileges granted by law, rule, regulation or
instrument.
6.12 AMENDMENTS; WAIVERS. Any provision of this Agreement may be
amended or waived prior to the Effective Time, only if such
amendment or waiver is in writing and signed, in the case of
an amendment, by the parties hereto, or in the case of a
waiver, by the parties against whom the waiver is to be
effective.
17
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
UNITED AMERICAN COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
and President
JDK ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
JDK ENTERPRISES, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
Title: President
SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx, Individually
/s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx, Individually
/s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx, Individually
18
EXHIBITS AND SCHEDULES
Exhibit A Plan of Merger
Exhibit 4.1(D) Opinion of Special Counsel to UAC
Exhibit 4.2(C) Opinion of JDK's and Shareholders' Counsel
Exhibit 4.2(D) Certificate of Shareholders
Exhibit 4.2(E) Employment and Noncompetition Agreements
Schedule 2.1 Organization and Qualifications of JDK
Schedule 2.4 Encumbrances
Schedule 2.5 Real Estate
Schedule 2.7 Financial Statements
Schedule 2.9 Additional Liabilities
Schedule 2.12 Conduct of Business in the Ordinary Course
Schedule 2.13 Intellectual Property
Schedule 2.14 Commitments
Schedule 2.15 Litigation
Schedule 2.17 Insurance
Schedule 2.18 Permits
Schedule 2.19 Consents and Approvals
Schedule 2.20 Transactions with Interested Persons
Schedule 2.21 Warranty and Other Claims
Schedule 2.23 Employee Benefit Plans
Schedule 2.25 Bank Accounts
Schedule 2.26 No Default
