EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NELX, INC.,
J&C ACQUISITION CORP.,
AND XXXXXX & COMPANY
MAY 18, 2001
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as
of the 18th day of May, 2001, by and among NELX, INC., a Kansas corporation
("NELX"), J&C ACQUISITION CORP., a West Virginia corporation wholly owned by
NELX ("Acquisition"), and XXXXXX & COMPANY, a West Virginia corporation ("J&C").
R E C I T A L S
A. The Board of Directors of each of NELX, J&C and Acquisition believe
that it is in the best interests of each company and its respective stockholders
to consummate the reorganization provided for herein, pursuant to which NELX
will directly acquire all of the capital stock of J&C (the "J&C Common Stock")
through a merger of Acquisition with and into J&C, with J&C being the surviving
corporation (as hereinafter defined in Section 1.1, the "Merger").
B. Pursuant to a vote of the holders of all capital stock of J&C and
Acquisition made in accordance WITH SECTION 117 of the West Virginia Corporation
Act ("WVCA"), the stockholders of J&C and Acquisition have approved the Merger.
C. For federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a)(1)(A) and 368
(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
A G R E E M E N T
NOW, THEREFORE, in consideration of the covenants, representations and
warranties set forth herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, and in
accordance with the WVCA, at the Effective Time (as defined in Section 1.3
hereof), (a) Acquisition shall be merged with and into J&C, (b) the separate
corporate existence of Acquisition shall cease, and (c) J&C shall continue as
the surviving corporation (the "Surviving Corporation") in the Merger under the
laws of the State of West Virginia under the name Xxxxxx & Company (the
"Merger").
1.2 CLOSING AND CLOSING DATE. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will take place at the
offices of Xxxxxx & Company, Suite 970, 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx
Xxxxxxxx 00000 on May 29, 2001 at 1:00 p.m. local time, or as soon thereafter as
reasonably practicable on (a) the next business day after the last to be
fulfilled or waived of the conditions set forth in Article VIII shall be
fulfilled or waived in accordance herewith, or (b) at such other time, date or
place as J&C and NELX may agree in writing. The date on which the Closing occurs
is referred to herein as the "Closing Date".
1.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date, the parties hereto shall
cause articles of merger, or other appropriate documentation, satisfying the
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requirements of the WVCA (the "Articles of Merger") to be filed with the office
of the Secretary of State of the State of West Virginia in accordance with the
provisions of the WVCA. When used herein, the term "Effective Time" shall mean
the date and time when the Articles of Merger have been accepted for filing by
the Secretary of State of the State of West Virginia or such date and time as
otherwise specified in the Articles of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective Time,
have the effects provided in Section 37 of the WVCA. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of J&C shall
be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 BYLAWS. The bylaws of J&C as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation, until thereafter changed
or amended as provided therein or by applicable law.
2.3 BOARD OF DIRECTORS AND OFFICERS. The board of directors and officers of J&C
immediately prior to the Effective Time shall be the board of directors and
officers, respectively, of the Surviving Corporation, effective as of the
Effective Time, and until the earlier of their respective resignations or the
time that their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time, by virtue of the Merger and
without any action on the part of Acquisition, J&C, or NELX:
(a) Each share of J&C Common Stock, issued and outstanding immediately
prior to the Effective Time will be converted, without any action on the part of
the holders thereof (the "Shareholders"), into its proportionate share of
25,000,000 shares of the common stock, par value $.0001 per share, of NELX
("NELX Common Stock"); provided that no fractional shares of NELX Common Stock
shall be delivered (and the number of shares of NELX Common Stock to be
delivered to any Shareholder shall be rounded down to the nearest whole number)
and the Shareholders shall not be entitled to cash in lieu of fractional shares;
provided further that no more than an aggregate of 25,000,000 shares of NELX
Common Stock shall be issued or issuable at the Effective Time pursuant to the
Merger. Immediately following the Effective Time, the Shareholders shall deliver
to NELX the certificates representing the J&C Common Stock, and NELX shall cause
NELX's transfer agent to deliver to the Shareholders certificates representing
the NELX Common Stock in accordance with Exhibit A hereto. The NELX Common Stock
issued pursuant to this Section 3.1(a) shall be duly authorized, fully paid and
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non-assessable. All shares of NELX Common Stock issued in accordance with
Section 3.1 shall be deemed to be in full satisfaction of all rights pertaining
to shares of J&C Common Stock held by the Shareholders. The Shareholders shall
have no right to transfer or assign the right to receive the NELX Common Stock
prior to the issuance thereof.
(b) Each share of Acquisition Common Stock issued and outstanding
immediately prior to the Effective Time will be converted, without any action on
the part of the holder thereof, into one (1) duly and validly issued, fully paid
and non-assessable share of the common stock, par value $.01 per share, of the
Surviving Corporation.
3.2 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing J&C Common Stock shall cease to have any
rights as stockholders of J&C, except as provided herein or by applicable law.
3.3 TAX CONSEQUENCES. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Section 1.368-2(g) and 1.368-3(a) of the
Income Tax Regulations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF J&C
J&C represents and warrants to NELX as follows:
4.1 ORGANIZATION, ETC. J&C is a corporation duly organized and validly existing
and in good standing under the laws of the State of West Virginia, and is
qualified or licensed to do business and is in good standing as a foreign
corporation in each other jurisdiction in which the conduct of its business or
the ownership of property requires such qualification or licensing, except where
failure to be so qualified or licensed would not have a material adverse effect
on the financial condition or operations of J&C taken as a whole (for J&C, a
"Material Adverse Effect").
4.2 AUTHORITY. J&C has the corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder, and such action has
been duly authorized by all necessary action of J&C's Board of Directors and
will have been duly authorized by the stockholders prior to the Effective Time.
4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by J&C
and constitutes a legal, valid and binding obligation of J&C enforceable in
accordance with its terms, subject to: (i) judicial principles respecting
election of remedies or limiting the availability of specific performance,
injunctive relief, or other equitable remedies; (ii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors' rights; and (iii) public policy
concerns (including, without limitation, the ability of a court to refuse to
enforce unconscionable covenants, indemnification provisions or similar
provisions).
4.4 NO VIOLATION. The execution and the delivery by J&C of this Agreement does
not and will not (i) conflict with or result in a breach of the terms,
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conditions or provisions of, (ii) constitute a default under, (iii) result in a
violation of, or (iv) require any notice, filing, authorization, consent or
approval not heretofore obtained pursuant to, any binding written or oral
agreement or instrument including, without limitation, any charter, bylaw, trust
instrument, indenture or evidence of indebtedness, lease, contract or other
obligation or commitment (each, a "Contractual Obligation") binding upon J&C or
any of its properties or assets, or any law, rule, regulation, restriction,
order, writ, judgment, award, determination, injunction or decree of any court
or government, or any decision or ruling of any arbitrator (each, a "Requirement
of Law") binding upon or applicable to J&C or any of its properties or assets.
It is acknowledged that the Merger will result in a deemed assignment of the
investment advisory contracts of J&C for purposes of Section 205(a)(2) of the
Investment Advisers Act of 1940; and, thus, the continuation of such contracts
will require the consent of the respective clients.
4.5 LITIGATION. There are no pending or overtly threatened actions, claims,
investigations, suits or proceedings by or before any governmental authority,
arbitrator, court or administrative agency which would have a Material Adverse
Effect on J&C.
4.6 CAPITALIZATION. Exhibit A hereto sets forth the record holders of all
outstanding shares of the J&C Common Stock (the "Issued Shares") and the number
of Issued Shares owned by such Shareholder. J&C has authorized 1000 shares of
Common Stock, par value $10.00 per share, and has authorized no other class of
stock. No shares of the J&C Common Stock are held in the treasury of J&C. The
Issued Shares are duly authorized, validly issued, outstanding, fully paid and
nonassessable.
4.7 FINANCIAL STATEMENTS. ATTACHED AS SCHEDULE 4.7 hereto are the unaudited
consolidated financial statements of Xxxxxx & Company and Subsidiary for the
years ended December 31, 2000 and 1999 (the "J&C Financial Statements"). The J&C
Financial Statements are internal statements prepared by management. Each of the
J&C Financial Statements (a) is complete and correct and presents fairly in all
material respects the consolidated financial condition of J&C as of the dates
thereof, (b) discloses all material liabilities of J&C, and (c) has been
prepared on a modified income tax basis and is therefore a departure from
statements prepared in accordance with generally accepted accounting principles.
Since December 31, 2000, there has been no change which would have a Material
Adverse Effect on J&C, liabilities incurred have been for the purpose of
financing the ordinary business and operations of the corporation, and J&C has
not mortgaged, pledged, granted a security interest in or otherwise encumbered
any of its assets or properties.
4.8 INCOME TAX RETURNS. J&C has filed all federal and state income and other tax
returns which are required to be filed, and have paid, or made provision for the
payment of, all taxes which have become due pursuant to said returns or pursuant
to any assessment received by J&C, except such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been provided.
J&C has no knowledge of any pending assessments or adjustments of taxes payable
of J&C with respect to any year.
4.9 PERMITS, FRANCHISES. J&C is an investment adviser registered under the
Investment Advisers Act of 1940. J&C possesses, and will hereafter possess, all
registrations, permits, consents, approvals, franchises and licenses required
and rights to all trademarks, trade names, patents, and fictitious names, if
any, necessary to enable them to conduct the business in which it is now engaged
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in compliance with applicable law, except where failure to do so would not have
a Material Adverse Effect on J&C.
4.10 ERISA. J&C maintains, and has not in the past maintained, any employee
pension benefit plan (a "Plan") that is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended or recodified from
time to time ("ERISA").
4.11 OTHER OBLIGATIONS. J&C is not in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment,
contract, instrument or obligation.
4.12 ENVIRONMENTAL MATTERS. J&C has been in compliance in all material respects
with all applicable federal or state environmental, hazardous waste, health and
safety statutes, and any rules or regulations adopted pursuant thereto, which
govern or affect any of J&C's operations and/or properties (collectively,
"Environmental Laws"). None of the operations of J&C is the subject of any
federal or state investigation evaluating whether any remedial action involving
a material expenditure is needed to respond to a release of any toxic or
hazardous waste or substance into the environment. To the knowledge of J&C, J&C
has no material contingent liability in connection with any release of any toxic
or hazardous waste or substance into the environment.
4.13 REAL PROPERTY; LEASES. J&C DOES NOT OWN ANY REAL PROPERTY. SCHEDULE 4.13
sets forth a complete and accurate list of each lease, sublease or other
arrangement pursuant to which J&C leases or subleases real property
(collectively, the "Leased Premises"). J&C has received no notice of any event
of default or any event, occurrence, condition or act, including without
limitation, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereunder, which constitutes or would constitute
(with notice or lapse of time or both) a default in any respect under any of the
leases or subleases on Schedule 4.13.
4.14 NO CONSENT REQUIRED. Except for the approval of the Merger by the
Shareholders, J&C's execution, delivery and performance of this Agreement does
not require the consent or approval of any other person or entity which has not
been obtained, including, without limitation, any regulatory authority or
governmental body of the United States of America or any state thereof or any
political subdivision of the United States of America or any state thereof.
4.15 NO BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by J&C directly with NELX
without the intervention of any person on behalf of J&C in such manner as to
give rise to any valid claim against NELX or J&C for a finder's fee, brokerage
commission or similar payment.
4.16 FULL DISCLOSURE. No representation, warranty, schedule or certificate of
J&C made or delivered pursuant to this Agreement contains or will contain any
untrue statement of fact, or omits or will omit to state a material fact the
absence of which makes such representation, warranty or other statement
misleading.
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ARTICLE V
ADDITIONAL REPRESENTATION AND WARRANTY RELATING TO THE SHAREHOLDERS
J&C hereby represents and warrants to NELX that each Shareholder owns
of record the shares of J&C Common Stock indicated opposite such Shareholder's
name on Exhibit A hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NELX AND ACQUISITION
NELX and Acquisition each represent and warrant to J&C as follows:
6.1 ORGANIZATION, ETC. NELX is a corporation, duly organized and validly
existing and in good standing under the laws of the State of Kansas, and is
qualified or licensed to do business and is in good standing as a foreign
corporation in each other jurisdictions in which the conduct of its business or
the ownership of property requires such qualification or licensing, except where
failure to be so qualified or licensed would not have a material adverse effect
on the financial condition or operations of NELX and its Subsidiaries (as
defined below), taken as a whole (for NELX and its Subsidiaries, a "Material
Adverse Effect"). Each company (each, a "SUBSIDIARY") LISTED ON SCHEDULE 6.1
hereof is duly organized and validly existing and in good standing under the
laws of the jurisdiction of its organization, and is qualified or licensed to do
business and is in good standing as a foreign corporation in each other
jurisdiction in which the conduct of its business or the ownership of property
requires such qualification or licensing, except where failure to be so
qualified or licensed would not have a Material Adverse Effect on NELX. Except
for the Subsidiaries, NELX does not own, of record or beneficially, the
securities of any other entity. A true and correct copy of the Certificate of
Incorporation and Bylaws of NELX, as currently in effect, has previously been
delivered to J&C.
6.2 AUTHORITY. NELX has the corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder, and such action has
been duly authorized by all necessary action of NELX's Board of Directors. The
issuance and sale of the NELX Common Stock to the Shareholders has been duly
authorized and if, as and when delivered to the Shareholders, such shares will
be duly and validly issued and outstanding, fully paid and nonassessable and
will be free of any Encumbrance (as defined below), other than those imposed
pursuant to securities laws of general application. As used in this Agreement,
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right of way, encroachment, private
building or use restriction, conditional sales agreement, encumbrance or other
right of third parties, whether voluntarily incurred or arising by operation of
law, and includes, without limitation, any agreement to give any of the
foregoing in the future, and any contingent sale or other title.
6.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by NELX
and constitutes a legal, valid and binding agreement and obligation of NELX and
Acquisition enforceable against each in accordance with its terms subject to:
(i) judicial principles respecting election of remedies or limiting the
availability of specific performance, injunctive relief, or other equitable
remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights; and (iii) public policy concerns (including, without
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limitation, the ability of a court to refuse to enforce unconscionable
covenants, indemnification provisions or similar provisions).
6.4 NO VIOLATION. The execution and the delivery by NELX and Acquisition of this
Agreement does not and will not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in a violation of, or (iv) require any notice, filing, authorization,
consent or approval not heretofore obtained pursuant to, any Contractual
Obligation binding upon NELX or any Subsidiary or any of their properties or
assets, or any Requirement of Law binding upon or applicable to NELX or any
Subsidiary or any of their properties or assets, except for such conflicts,
defaults or violations, filings, authorizations, consents or approvals which
would not have a Material Adverse Effect on NELX.
6.5 LITIGATION. There are no pending or overtly threatened actions, claims,
orders, decrees, investigations, suits or proceedings by or before any
governmental authority, arbitrator, court or administrative agency which would
have a Material Adverse Effect on NELX.
6.6 CAPITALIZATION. The authorized capital stock of NELX consists of 500,000,000
shares of NELX Common Stock, 45,802,042 shares of which have been validly issued
as of the date hereof, and such issued shares are fully paid and nonassessable.
NELX owns 100% of the common stock of each of the Subsidiaries. There do not
exist any other authorized or outstanding securities, options, warrants, calls,
commitments, rights to subscribe or other instruments, agreements or rights of
any character, or any pre-emptive rights, convertible into or exchangeable for,
or requiring or relating to the issuance, transfer or sale of, any shares of
capital stock or other securities of NELX or any Subsidiary.
6.7 ANNUAL REPORT; FINANCIAL STATEMENTS. NELX's Annual Report on Form 10-KSB for
the year ended May 31, 2000 (a "Report") was filed with the Securities and
Exchange Commission (the "SEC") on November 4, 2000, and its most recent report
on Form 10-QSB was filed with the SEC for the period ended February 28, 2001 on
April 26, 2001. Each Report complied in all material respects with the rules of
the SEC applicable to such Report on the date filed with the SEC, and neither
Report contained, on the date of filing with the SEC, any untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
materially misleading. The Reports have not been amended. All of the
consolidated financial statements included in the Reports (the "NELX Financial
Statements"): (i) have been prepared from and on the basis of, and are in
accordance with, the books and records of NELX and with generally accepted
accounting principles applied on a basis consistent with prior accounting
periods; (ii) fairly and accurately present in all material respects the
consolidated financial condition of NELX as of the date of each such NELX
Financial Statement and the results of its operations for the periods therein
specified; and (iii) are accompanied by the audit opinion of NELX's independent
public accountants. Except as set forth in Schedule 6.7 or in the NELX Financial
Statements, as of the date hereof, NELX has no liabilities other than (i)
liabilities which are reflected or reserved against in the NELX Financial
Statements and which remain outstanding and undischarged as of the date hereof,
(ii) liabilities arising in the ordinary course of business of NELX since the
filing of the most recent Report not exceeding $25,000 in the aggregate, (iii)
liabilities incurred as a result of the transactions contemplated by this
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Agreement or (iv) liabilities which were not required by generally accepted
accounting principles to be reflected or reserved on the NELX Financial
Statements. Since the date of filing of the most recent Report, there has not
been any event or change which has or will have a Material Adverse Effect on
NELX and NELX has no knowledge of any event or circumstance that would
reasonably be expected to result in such a Material Adverse Effect.
6.8 INCOME TAX RETURNS. NELX and the Subsidiaries have filed all federal and
state income and other tax returns which are required to be filed, and have
paid, or made provision for the payment of, all taxes which have become due
pursuant to said returns or pursuant to any assessment received by NELX or any
Subsidiary, except such taxes, if any, as are being contested in good faith and
as to which adequate reserves have been provided. NELX has no knowledge of any
pending assessments or adjustments of any taxes payable of NELX or its
Subsidiaries with respect to any year.
6.9 PERMITS, COMPLIANCE WITH LAW. NELX and each Subsidiary possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable them to conduct the business in which it is
now engaged in compliance with applicable law, except where failure to do so
would not have a Material Adverse Effect on NELX. NELX and each Subsidiary are
in compliance with all Requirements of Law in the conduct of its business and
corporate affairs, except where failure to comply, singly or in the aggregate,
would not have a Material Adverse Effect on NELX.
6.10 ERISA. Neither NELX nor any Subsidiary maintains a Plan. NELX and each
Subsidiary are in compliance in all material respects with all applicable
provisions of ERISA; neither NELX nor any Subsidiary has violated any provision
of any Plan heretofore maintained or contributed to by it.
6.11 CONTRACTS. SCHEDULE 6.11 sets forth a description of each agreement,
contract lease, license evidence of indebtedness, mortgage, indenture, security
agreement, or other instrument, whether written or oral (collectively,
"Contracts"), which provides for payments to or by NELX or any Subsidiary in
excess of $5,000, or is otherwise material to the operations of NELX or any
Subsidiary. Neither NELX nor any Subsidiary is in default on any Contract,
except for such defaults which would not have a Material Adverse Effect on NELX.
6.12 ENVIRONMENTAL MATTERS. NELX and its subsidiaries (including the
Subsidiaries) have at all times been in compliance in all material respects with
all applicable Environmental Laws. None of the operations of NELX or any
Subsidiary is the subject of any federal or state investigation evaluating
whether any remedial action involving a material expenditure is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment. To NELX's knowledge, neither NELX nor any Subsidiary has received
notice of any actual or threatened claim, investigation, proceeding, order or
decree in connection with any release of any toxic or hazardous waste or
substance into the environment.
6.13 REAL PROPERTY. SCHEDULE 6.13 sets forth all of the real property which is
owned and/or leased by each of NELX and the Subsidiaries (collectively, the
"Real Property"). The Real Property constitutes all of the real property now
used in and necessary for the conduct of the business of NELX and the
Subsidiaries as presently conducted. NELX has delivered to J&C true and complete
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copies of all leases relating to such properties (the "Leases"). The Leases are
in full force and effect and are valid, binding, and enforceable in accordance
with their terms, and no event of default has occurred which (whether with or
without notice, lapse of time or both or the happening or occurrence of any
other event) would constitute a default on the part of any party. Except as set
forth in Schedule 6.13, all real property, buildings and structures owned or
used by NELX and the Subsidiaries are in good condition and suitable for the
purpose or purposes for which it is being used, reasonable wear and tear
excepted, and is in such condition and repair as to permit the continued
operation of said businesses. None of the Real Property, buildings or structures
is in need of material maintenance or repairs except for ordinary, routine
maintenance and repairs.
6.14 EMPLOYEES. Neither NELX nor any Subsidiary has any employees nor any
agreement with any person regarding employment.
6.15 INSURANCE. NELX and the Subsidiaries currently maintain, in full force and
effect, all insurance policies that are reasonably required to be maintained for
the conduct of its business or the ownership of its properties (both real and
personal) (collectively, the "Insurance Policies"). True and complete copies of
all Insurance Policies have been made available to J&C. NELX (a) is not in
default regarding the provisions of any Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion. The coverage provided by
the Insurance Policies, with respect to any insured act or event occurring on or
prior the Effective Time, will not in any way be affected by or terminate or
lapse by reason of the transactions contemplated hereby. Schedule 6.15 sets
forth a listing of all policies maintained by NELX and a listing, by policy, of
all outstanding claims and the amount thereof made by NELX under each such
policy.
6.16 BANK ACCOUNTS. SCHEDULE 6.16 sets forth the names and locations of all
banks, trust companies, savings and loan associations, stock brokerages and
other financial institutions at which NELX and Acquisition maintain accounts of
any nature, or safe deposit boxes, and the name of all persons authorized to
draw thereon or make withdrawals therefrom.
6.17 TITLE TO PROPERTIES. The assets owned or leased by NELX and its
Subsidiaries are all of the assets necessary to conduct the business of NELX and
its Subsidiaries as currently being conducted. NELX and its Subsidiaries have
good and marketable title to substantially all of the assets they own, real and
personal, movable and immovable, tangible and intangible, free and clear of all
Encumbrances, except for: (a) liens for taxes not yet due and payable, or (b)
minor imperfections of title and encumbrances, if any, which (i) are not
substantial in amount, (ii) do not detract from the value of the property
subject thereto, impair the operations of the business of NELX, or the use or
license of certain of the assets of NELX, and (iii) have arisen in the ordinary
course of business consistent with past practice.
6.18 NO BROKERS. The transactions contemplated hereby have been carried out by
NELX directly with J&C and the Shareholders without the intervention of any
person on behalf of NELX in such manner as to give rise to any valid claim
against NELX or J&C for a finder's fee, brokerage commission or similar payment.
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6.19 SECURITIES LAW MATTERS. To the best of its knowledge NELX has filed all
reports, registration statements, proxy statements and other materials, together
with any amendments required to be made with respect thereto, that were required
to be filed with (i) the SEC under the Securities Act or the Exchange Act of
1934, as amended (all such reports and statements are collectively referred to
herein as the "Securities Filings"), and (ii) any applicable state securities
authorities. To the knowledge of NELX, no such Securities Filing, as of the date
it was filed, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Subject
to the accuracy of the representations of each of the Shareholders in a
Shareholder Representation Letter in the form attached as Exhibit C hereto, the
offer and sale of the Shares to the Shareholders will be exempt from the
Securities Act.
6.20 SALE OF CERTAIN PROPERTIES. On or about May 7, 2001, NELX sold certain oil
and gas properties. A closing statement indicating the net amount payable to
NELX is attached as Exhibit D hereto. Except for amounts otherwise applied with
the prior consent of J&C, such proceeds of sale are held, and will be held at
the Effective Time, on deposit in one or more of the accounts identified on
Schedule 6.16.
6.21 FULL DISCLOSURE. No representation, warranty, schedule or certificate of
NELX made or delivered pursuant to this Agreement contains or will contain any
untrue statement of fact, or omits or will omit to state a material fact the
absence of which makes such representation, warranty or other statement
misleading.
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 ACCESS PENDING CLOSING; EXCLUSIVITY.
-----------------------------------
(a) ACCESS TO NELX. NELX shall (i) give to J&C and its counsel,
accountants and other representatives reasonable access, during normal business
hours, throughout the period prior to the Effective Time to all of the books,
contracts, commitments and other records of NELX and shall furnish J&C during
such period with all information concerning NELX that J&C may reasonably
request; and (ii) afford to J&C and its representatives, agents, employees and
independent contractors reasonable access, during normal business hours, to the
properties of NELX, in order to conduct inspections at their expense to
determine that NELX is operating in compliance with all applicable federal,
state, local and foreign statutes, rules and regulations, and all material
building, fire and zoning laws or regulations and that the assets of NELX are
substantially in the condition and of the capacities represented and warranted
in this Agreement; provided, however, that in every instance described in (i)
and (ii), J&C shall make arrangements with NELX reasonably in advance and shall
use their reasonable best efforts to avoid interruption and to minimize
interference with the normal business and operations of NELX. Any such
investigation or inspection by J&C shall not be deemed a waiver of, or otherwise
limit, the representations, warranties or covenants of NELX contained herein.
(b) EXCLUSIVITY TO J&C. Until either the Agreement is terminated or
consummated, NELX agrees not to solicit any other inquiries, proposals or offers
to purchase or otherwise acquire, in a merger transaction or another type of
10
transaction, the business of NELX or the shares of capital stock of NELX. NELX
further agrees to advise J&C promptly of any such inquiry or offer.
(c) ACCESS TO J&C. J&C shall (i) give to NELX and to NELX's counsel,
accountants and other representatives reasonable access, during normal business
hours, throughout the period prior to the Effective Time, to all of the books,
contracts, commitments and other records of J&C and shall furnish NELX during
such period with all information concerning J&C that NELX may reasonably
request; and (ii) afford to NELX and to NELX's representatives, agents,
employees and independent contractors reasonable access, during normal business
hours, to the properties of J&C in order to conduct inspections at NELX's
expense to determine that J&C is operating in compliance with all applicable
federal, state, local and foreign statutes, rules and regulations, and all
material building, fire and zoning laws or regulations and that the assets of
J&C are substantially in the condition and of the capacities represented and
warranted in this Agreement; provided, however, that in every instance described
in (i) and (ii), NELX shall make arrangements with J&C reasonably in advance and
shall use its reasonable best efforts to avoid interruption and to minimize
interference with the normal business and operations of J&C. Any such
investigation or inspection by NELX shall not be deemed a waiver of, or
otherwise limit, the representations, warranties or covenants of J&C contained
herein.
(d) EXCLUSIVITY TO NELX. Until either this Agreement is terminated or
consummated, J&C agrees not to make, directly or indirectly, any other
inquiries, proposals or offers to purchase or otherwise acquire, in a merger
transaction or another type of transaction, the business or the shares of
capital stock of any other company. J&C furthers agree to advise NELX promptly
of any such inquiry or offer.
7.2 OPERATION OF THE BUSINESS. Between the date of this Agreement and the
Effective Time, each of NELX and J&C will conduct its business only in the
ordinary course of business, and will:
(a) not amend its charter or bylaws;
(b) not increase the compensation or benefits (including, without
limitation, salary, bonus and commission schedules) of any personnel, except for
non-key management personnel in the ordinary course of business;
(c) use its reasonable best efforts to preserve intact its current
business organization, keep available the services of its personnel, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with it
consistent with its sound business judgment and past practices;
(d) not issue or sell any debt or equity securities (including upon the
exercise of currently outstanding options, warrants and other rights), declare,
set aside or pay any dividend or distribution in respect of its securities, or
directly or indirectly redeem or repurchase any outstanding securities, provided
that any issuance of stock by J&C shall be prohibited only to the extent that it
would increase the NELX Common Stock to be issued pursuant hereto;
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(e) not sell, assign, transfer, convey, lease or otherwise dispose of
or subject to any Encumbrance any of its assets, except for sales of inventory
and used equipment, in each case in the ordinary course of business consistent
with past practice
(f) not acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or otherwise
acquire any material assets or business of any person;
(g) not make any loans or advances to any person, except in the
ordinary course of business nor discharge any debt prior to the scheduled
maturity thereof;
(h) not make any payment or enter into any agreement or other
transaction with any officer or director of such party, other than employment
compensation and benefits on the terms currently in effect;
(i) not fail to comply in any material respect with all Requirements of
Law applicable to its business;
(j) not make any operational changes or developments of a material
nature; and
(k) not enter into, amend or terminate any Contract which is or would
be required to be disclosed in Schedule 6.11 hereto.
7.3 REASONABLE BEST EFFORTS. Each of the parties hereto shall use its reasonable
best efforts to take promptly, or cause to be taken, all actions, necessary,
proper or advisable to consummate the transactions contemplated hereby
(including obtaining all necessary waivers, consents and approvals) on or before
May 29, 2001 or as soon as practicable thereafter. Without limiting the
generality of the foregoing, NELX shall use its reasonable best efforts to
fulfill the conditions set forth in Section 8.2 and J&C shall use its reasonable
best efforts to fulfill the conditions set forth in Section 8.1.
7.4 NOTIFICATION OF CERTAIN MATTERS. NELX, Acquisition, and J&C shall each give
prompt notice to the other parties of the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
conditions set forth in Article VIII not to be satisfied; provided, however,
that the delivery of any notice pursuant to this Section 7.4 shall not limit or
otherwise affect any remedies available to the party receiving such notice and
no disclosure pursuant to this Section 7.4 shall be deemed to amend or
supplement any written disclosure previously made by one party thereafter, or
prevent or cure any misrepresentations, breach of warranty or breach of
covenant, unless the recipient party shall agree in writing to accept the
disclosures set forth in any such notice.
7.5 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement, the
Merger and the transactions contemplated hereby.
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7.6 EXPENSES. Each party shall bear its own costs and expenses in connections
with the negotiation and consummation of this Agreement.
7.7 PUBLIC DISCLOSURES. NELX and J&C shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to this Agreement or the Merger or the transactions contemplated hereby or
thereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law.
7.8 TAX TREATMENT. J&C and NELX shall each report the Merger as a tax free
reorganization and shall not take, and shall use commercially reasonable efforts
to prevent any of their respective subsidiaries or affiliates from taking, any
actions that could prevent the Merger from qualifying, as a tax free
reorganization under the provisions of Section 368(a) of the Code.
7.9 INDEBTEDNESS OF J&C. J&C shall take such action as may be necessary to cause
the balance of the outstanding notes payable of J&C immediately following the
Effective Time and following application of no more than $800,000 of cash
reserves of NELX to the reduction of notes payable of J&C (including, without
limitation, notes payable to any Shareholder) not to exceed $500,000. Such
action may include settlement of outstanding notes at the Effective Time for
NELX Common Stock otherwise to be issued in the Merger, but in any such case the
NELX Common Stock so used shall be a direct reduction in the number of shares of
NELX Common Stock otherwise to be issued to the Shareholders in the Merger.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 CONDITIONS TO OBLIGATIONS OF NELX AND ACQUISITION. The obligations each of
NELX and Acquisition to consummate and effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by NELX:
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
nor shall there by any action taken, or any statute, rule, regulation,
injunction order or decree enacted, entered, enforced, promulgated, issued or
deemed applicable to the Merger which makes the consummation of the Merger
illegal.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of J&C in this Agreement shall be true and correct in all respects on and as of
the Effective Time as though such representations and warranties were made on
and as of such time, except for those representations and warranties which
address matters only as of a particular date (which shall be true and correct
only as of such date), and for such inaccuracies as individually or in the
aggregate would not have a Material Adverse Effect on J&C.
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(c) COVENANTS. J&C shall have performed and complied in all material
respects with all covenants and obligations of this Agreement required to be
performed and complied with by J&C as of the Effective Time.
(d) CERTIFICATE OF J&C. NELX shall have been provided with a
certificate executed on behalf of J&C by its Chief Executive Officer to the
effect that, as of the Effective Time, the conditions set forth in Sections
8.1(b) and 8.1(c) have been met with respect to J&C.
(e) APPROVAL OF J&C SHAREHOLDERS. The Merger shall have been approved
by an affirmative vote of the Shareholders.
8.2 CONDITIONS TO THE OBLIGATIONS OF J&C. The obligations of J&C to consummate
and effect the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
J&C:
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
nor shall there by any action taken, or any statute, rule, regulation,
injunction order or decree enacted, entered, enforced, promulgated, issued or
deemed applicable to the Merger which makes the consummation of the Merger
illegal.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of NELX and Acquisition in this Agreement shall be true and correct in all
respects and as of the Effective Time as though such representations and
warranties were made on and as of the Effective Time, except for those
representations and warranties which address matters only as of a particular
date (which shall be true and correct only as of such date), and for such
inaccuracies as individually or in the aggregate would not have a Material
Adverse Effect on NELX or Acquisition.
(c) COVENANTS. NELX and Acquisition shall have performed and complied
in all material respects with all covenants and obligations of this Agreement
required to be performed and complied with by them as of the Effective Time.
(d) NELX BOARD OF DIRECTORS. NELX shall have caused such resignations
and appointments as are necessary to establish those officers and directors
identified in Exhibit B hereto as the officers and directors of NELX and the
Subsidiaries.
(e) CERTIFICATE OF NELX. J&C shall have been provided with a
certificate executed on behalf of each of NELX and Acquisition by its President
or Chief Executive Officer, as of the Effective Time, certifying that the
conditions set forth in Sections 8.2(b), 8.2(c) and 8.2(d) have been met.
(f) APPROVAL OF J&C SHAREHOLDERS. The Merger shall have been approved
by an affirmative vote of the Shareholders.
14
(g) FS INVESTMENTS, INC. MERGER. NELX shall have entered into an
Agreement and Plan of Merger with FS Investments, Inc., and the transactions
contemplated thereby (the "FSI Merger") shall close simultaneously with the
Merger.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or at the
Closing, be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by NELX if a material breach of any provision of this Agreement has
been committed by J&C, and such breach has not been waived and such breach (if
curable) is not cured within 10 days after notice thereof, or if any of the
conditions in Section 8.1 has not been satisfied on May 29, 2001 (or other date
specified in this Agreement with respect to any such condition) or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of NELX to comply with its obligations under this Agreement) and
NELX has not waived such condition on or before the Effective Time.
(b) by J&C if a material breach of any provision of this Agreement has
been committed by NELX, and such breach has not been waived and such breach (if
curable) is not cured within 10 days after notice thereof, or if any of the
conditions in Section 8.2 has not been satisfied on May 29, 2001 (or other date
specified in this Agreement with respect to any such condition) or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of J&C to comply with its obligations under this Agreement) and J&C
has not waived such condition on or before the Effective Time.
(c) by mutual consent of J&C and NELX.
(d) by any party if the Closing has not occurred (other than through
the failure of any party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement) on or before the later of June 30,
2001, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION Prior to the Effective Time, termination shall be the
parties' exclusive remedy for a breach of any representation, warranty or
covenant.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by commercial messenger or
courier service, or mailed by registered or certified (return receipt requested)
or overnight mail or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
that notices sent by mail will not be deemed given until received:
15
(a) if to J&C: Xxxxxx & Company
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax:(000) 000-0000
with a copy to: Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxx
Fax: (000) 000-0000
(b) if to NELX or Acquisition:
NELX, Inc.
x/x Xxxxxxx Xxxxx
Xxxxx 0, Xxx 00X
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
10.2 INTERPRETATION. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
10.3 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart. This Agreement
may be executed by facsimile, and a facsimile signature shall have the same
force and affect as an original signature on this Agreement.
10.4 ENTIRE AGREEMENT. This Agreement and the documents, Schedules and
instruments referred to herein and to be delivered pursuant hereto, together
with the FSI Merger agreement and related schedules and instruments, constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior contemporaneous agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no other representations or
warranties, whether written or oral, between the parties in connection with the
subject matter hereof, except as expressly set forth herein.
10.5 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing herein, express or
implied, is intended to or shall confer upon any person not a party hereto any
right, benefit or remedy of any nature whatsoever under or by reason hereof,
except as otherwise provided herein.
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10.6 SEVERABILITY. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
10.7 OTHER REMEDIES. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of West Virginia, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.9 RIGHTS OF CONSTRUCTION. The parties hereto waive the application of any
law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party drafting such
agreement or document.
10.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
could occur in the event any provision of this Agreement, including Article III
hereof, was not performed in accordance with the terms hereof. Without limiting
the generality of the foregoing, NELX hereby acknowledges that (i) the
obligation of NELX to issue shares of NELX Common Stock to the Shareholders is
fundamental and required for the protection of the Shareholders and to preserve
for the Shareholder the benefits of the Merger, (ii) the NELX Common Shares are
of a unique character, and (iii) a breach of such obligation will result in
irreparable harm and damages to the Shareholders which cannot be adequately
compensated by a monetary award. Accordingly, NELX hereby expressly agrees that,
should the Merger be consummated, in addition to all other remedies available to
law or in equity, the Shareholders shall be entitled to the immediate remedy of
specific performance, a temporary and/or permanent restraining order,
preliminary injunction or such other form of injunctive or equitable relief as
may used by the court of competent jurisdiction to restrain or enjoin any of the
parties hereto from breaching any representations, warranties, covenants or
restrictions set forth in Article III of this Agreement, or to specifically
enforce the terms and provisions of Article III hereof. NELX further agrees that
neither the Shareholders nor any other Person shall be required to obtain,
furnish or post any bond or similar instrument in connection with or as a
condition to obtaining any remedy referred to in Section 10.11, and NELX
irrevocably waives any right it may have to require the obtaining, furnishing or
posting of any such bond or similar instrument. If any legal action or other
legal proceeding relating to this Agreement or the enforcement of any provision
of this Agreement is brought by a party hereto, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled). The
foregoing rights shall be in addition to any other right or remedy any person
hereto may have at law or in equity.
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10.11 ARBITRATION.
(a) RULES OF ARBITRATION. All disputes arising in connection with this
Agreement, other than matters pertaining to equitable relief, shall be finally
settled by arbitration by the American Arbitration Association ("AAA") in
Charleston, West Virginia, in accordance with the rules of the AAA ("Rules of
Arbitration"). Judgment on the award rendered by the arbitration panel (the
"Arbitration Panel") may be entered in any court of competent jurisdiction.
(b) INITIATION OF ARBITRATION. Any party which desires to initiate
arbitration proceedings may do so by delivering written notice to the other
party (the "Arbitration Notice") specifying (x) the nature of the dispute or
controversy to be arbitrated; (y) the name and address of the arbitrator
appointed by the party initiating such arbitration; and (z) such other matters
as may be required by the Rules of Arbitration. The party who receives an
Arbitration Notice shall appoint an arbitrator and notify the initiating party
of such arbitrator's name and address within 30 days after delivery of the
Arbitration Notice; otherwise, a second arbitrator shall be appointed at the
request of the party who delivered the Arbitration Notice. The two arbitrators
so appointed shall appoint a third arbitrator who shall be chairman of the
Arbitration Panel and the "neutral arbitrator" for purposes of the Rules of
Arbitration.
(c) DECISIONS FINAL. All decisions of the Arbitration Panel shall be
final, conclusive and binding on all parties and shall not be subject to
judicial review.
10.12 KNOWLEDGE DEFINED. As used herein, "knowledge" shall mean knowledge of a
particular fact or other matter, provided that (a) NELX shall be deemed to have
"knowledge" of all facts actually known to Xxxxxxx Xxxxx, as well as all facts
in NELX's corporate records and files which reasonably would have been
discovered by or known to a person making a prudent review of such files to
determine the accuracy of any representation or warranty made by NELX in this
Agreement or compliance by NELX with any of the covenants in this Agreement, and
(b) J&C shall be deemed to have "knowledge" of all facts known to Xxxx X.
Xxxxxx, as well as all facts in the corporate records and files of J&C which
would have been discovered by or known to a person making a prudent review of
such files to determine the accuracy of any representation or warranty made by
J&C in this Agreement or compliance by J&C with any of the covenants in this
Agreement.
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IN WITNESS WHEREOF, NELX, J&C and Acquisition have caused this
Agreement to be signed and delivered by their respective duly authorized, all as
of the date first written above.
NELX, INC.
BY: /S/ XXXXXXX XXXXX
------------------
Xxxxxxx Xxxxx, President
J&C ACQUISITION CORP.
BY: /S/ XXXXXXX XXXXX
------------------
Xxxxxxx Xxxxx, President
XXXXXX & COMPANY
BY: /S/ XXXX X. XXXXXX
-------------------
Xxxx X. Xxxxxx, President
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