EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BETWEEN
NATIONWIDE ELECTRIC, INC.
AND
POTTER ELECTRIC COMPANY, INC.
and
XXXXX XXXXXXXX, XX.
TABLE OF CONTENTS
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Page
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RECITALS...........................................................................................1
ARTICLE I DEFINITIONS..............................................................................1
ARTICLE II SALE AND PURCHASE OF ASSETS.............................................................3
2.1 Sale and Purchase..................................................................3
2.2 Purchase Price.....................................................................5
2.4 Delivery Date......................................................................6
2.5 Closing............................................................................6
2.6 The Registration Statement.........................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
AND THE COMPANY...............................................................................6
3.1 Validity...........................................................................6
3.2 The Company........................................................................7
3.3 The Assets.........................................................................7
3.4 Financial Statements...............................................................7
3.5 Absence of Certain Events..........................................................8
3.6 Title to and Condition of Assets...................................................8
3.7 Real Property......................................................................8
3.8 Lease..............................................................................8
3.9 Receivables........................................................................8
3.10 Contracts, Etc.....................................................................9
3.11 Material Customers and Suppliers...................................................9
3.12 Litigation and Workers' Compensation Liability....................................10
3.13 Insurance and Performance Bonds...................................................10
3.14 Intellectual Property.............................................................10
3.15 Compliance with Laws..............................................................11
3.16 Licenses, Permits and Authorizations..............................................11
3.17 Taxes.............................................................................11
3.18 Books and Records.................................................................11
3.19 Labor and Employment..............................................................11
3.20 Environmental.....................................................................12
3.21 ERISA.............................................................................13
3.22 Guaranteed Obligations............................................................15
3.23 Disclosure........................................................................15
3.24 Acknowledgment....................................................................15
3.25 Interest in Customers and Suppliers and Related Party Transactions...............16
3.26 Registration Statement............................................................16
3.27 Brokers and Finders...............................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEI...............................................16
4.1 Corporate......................................................................17
4.2 Authorization..................................................................17
4.3 Capital Stock of NEI...........................................................17
4.4 Transactions in Capital Stock..................................................17
4.5 Financial Statements...........................................................17
4.6 Liabilities And Obligations....................................................17
4.7 Conformity With Law; Litigation................................................17
4.8 No Violations..................................................................18
4.9 NEI Stock......................................................................18
4.10 No Side Agreements.............................................................18
4.11 Disclosure.....................................................................19
4.12 Other Agreements...............................................................19
4.13 Registration Statement.........................................................19
ARTICLE V ACTIONS BY SHAREHOLDER AND THE COMPANY
PENDING CLOSING...........................................................................19
5.1 Access.........................................................................19
5.2 Carry on in Ordinary Course....................................................20
5.3 General Increases Limited......................................................20
5.4 Preservation of Organization...................................................20
5.5 No Default.....................................................................20
5.6 Dividends......................................................................20
5.7 Voting Trusts or Other Arrangements............................................20
5.8 Interim Financial and Borrowing Statements.....................................21
5.9 Bids and Contracts.............................................................21
5.10 Cash Withdrawals...............................................................21
5.11 Environmental Audits...........................................................21
5.12 No Transfer....................................................................21
5.13 No Shop........................................................................21
5.14 (Intentionally Omitted)........................................................21
5.15 Notification of Certain Matters................................................21
5.16 Cooperation in Preparation of Registration Statement...........................22
5.17 Authorized Capital.............................................................22
ARTICLE VI CONDITIONS PRECEDENT TO SHAREHOLDER'S OBLIGATIONS...................................22
6.1 Representations and Warranties True............................................22
6.2 Compliance with Agreement......................................................22
6.3 No Litigation..................................................................23
6.4 Employment Agreements..........................................................23
6.5 IPO Closing....................................................................23
ARTICLE VII CONDITIONS PRECEDENT TO NEI'S OBLIGATIONS..........................................23
7.1 Representations and Warranties True............................................23
7.2 Compliance with Agreement......................................................23
7.3 Execution and Deliverables.....................................................23
7.4 Corporate Documents............................................................23
7.5 Due Diligence..................................................................23
7.6 Employment Agreements..........................................................24
7.7 No Material Adverse Change.....................................................24
7.8 Opinion of Counsel for Shareholder.............................................24
7.9 Approval.......................................................................24
7.10 No Litigation..................................................................24
7.11 Shareholder's Release..........................................................24
7.12 Termination of Related Party Agreements........................................25
7.13 Other Founding Companies.......................................................25
7.14 FIRPTA Certificate.............................................................25
7.15 IPO Closing....................................................................25
7.16 Minimum Net Book Value.........................................................25
ARTICLE VIII COVENANTS.........................................................................25
8.1 Release From Guarantees; Repayment of Certain Obligations......................25
8.2 Preparation And Filing of Tax Returns..........................................25
8.3 Further Assurances.............................................................26
ARTICLE IX INDEMNIFICATION.....................................................................26
9.1 Indemnification by Shareholder.................................................26
9.2 Indemnification by NEI.........................................................27
9.3 Procedure......................................................................27
9.4 Exclusive Remedy...............................................................28
9.5 Limitations on Indemnification.................................................28
ARTICLE X TERMINATION..........................................................................29
10.1 Termination....................................................................29
10.2 Liabilities in Event of Termination............................................29
ARTICLE XI NONCOMPETITION AND NONDISCLOSURE....................................................30
11.1 Noncompete Covenant............................................................30
11.2 Confidential Information.......................................................30
11.3 Enforcement....................................................................30
ARTICLE XII TRANSFER RESTRICTIONS..............................................................31
ARTICLE XIII FEDERAL SECURITIES ACT REPRESENTATIONS............................................31
13.1 Compliance with Law............................................................31
13.2 Economic Risk; Sophistication..............................32
ARTICLE XIV REGISTRATION RIGHTS............................................32
14.1 Piggyback Registration Rights..............................32
14.2 Registration Procedures....................................33
14.3 Indemnification............................................35
14.4 Underwriting Agreement.....................................36
14.5 Transfer of Rights.........................................36
14.6 Rule 144 Reporting.........................................36
ARTICLE XV MISCELLANEOUS...................................................36
15.1 Assignment.................................................36
15.2 Governing Law..............................................37
15.3 Notices....................................................37
15.4 Entire Agreement...........................................37
15.5 Successors.................................................37
15.6 Counterparts...............................................37
15.7 Headings...................................................38
15.8 Expenses...................................................38
15.9 Survival...................................................38
15.10 Costs......................................................38
15.11 Publicity..................................................38
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of June 15, 1998, by NATIONWIDE
ELECTRIC, INC., a Delaware corporation ("NEI"), POTTER ELECTRIC COMPANY, INC., a
Nevada corporation (the "Company"), and XXXXX XXXXXXXX, XX. ("Shareholder").
RECITALS
A. The Company is engaged in the electrical contracting business.
Shareholder is the sole shareholder of the Company.
B. NEI and its subsidiaries are entering into separate merger or
acquisition agreements (the "Other Agreements") with other companies engaged in
the electrical contracting business (the "Other Founding Companies") and NEI
intends to conduct an initial public offering of its common stock. This
Agreement, the Other Agreements and the initial public offering constitute the
"NEI Plan of Organization."
C. NEI desires to acquire the Company's assets and business as a
going concern, and the Company desires to sell such assets and business to NEI,
for the purchase price and in accordance with the terms and conditions contained
herein.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
promises contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
In addition to other terms defined in this Agreement, the following
terms shall have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Assets" shall mean the tangible and intangible assets and business as
a going concern of the Company to be acquired by NEI in accordance with this
Agreement.
"Assumed Liabilities" shall mean and be limited to the current
liabilities of the Company to be assumed by NEI and described in Section 2.3.
"Balance Sheet" shall mean the audited balance sheet of the Company
and notes thereto dated as of the Balance Sheet Date.
"Balance Sheet Date" shall mean March 31, 1998.
"Closing Date" shall mean the date as of which the exchange of the
Assets for NEI Stock and cash is consummated in accordance with Article II.
"Company" shall mean the Company and its subsidiaries, if any.
"Company Stock" shall mean all of the issued and outstanding capital
stock of the Company owned by Shareholder.
"Delivery Date" shall mean the date specified by NEI on which the
Deliverables (as defined in Section 2.4) shall be delivered in trust pending the
Closing Date, as contemplated in Article II.
"Founding Companies" shall mean, collectively, the Company and the
Other Founding Companies.
"GAAP" means generally accepted accounting principles, consistently
applied from period to period.
"Xxxx-Xxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976.
"IPO" shall mean NEI's initial public offering of NEI Stock pursuant
to the Registration Statement.
"Material Adverse Change" means a material adverse change in the
business, operations, financial condition or prospects of the Company or the
value of the Assets.
"Material Adverse Effect" means a material adverse effect on the
business, operations, financial condition or prospects of the Company or the
value of the Assets.
"NEI" shall mean Nationwide Electric, Inc. and its subsidiaries.
"NEI Charter Documents"shall mean the Certificate of Incorporation and
Bylaws of NEI, as amended or restated from time to time.
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"NEI Plan of Organization" shall mean the IPO and the acquisition or
merger of the Founding Companies by or into NEI or its subsidiaries.
"NEI Stock" shall mean the voting common stock, par value $.01 per
share, of NEI.
"Other Founding Companies" shall mean the Founding Companies other
than the Company.
"Person" shall mean any individual, corporation, trust, limited
liability company, partnership or other entity.
"Pricing" means the date on which the public offering price per share
of the NEI Stock to be offered in the IPO is determined by NEI and the
Underwriters.
"Prospectus" shall mean the prospectus contained in the Registration
Statement, as amended or supplemented from time to time.
"Registration Statement" means the registration statement on Form S-1
to be filed with the SEC covering the shares of NEI Stock to be issued in the
IPO, as amended or supplemented from time to time.
"Return" means any return, report or statement (including information
returns) required to be filed in connection with any Tax.
"SEC" means the United States Securities and Exchange Commission.
"Shareholder" shall mean Xxxxx Xxxxxxxx, Xx.
"State of Incorporation" means the State of Nevada.
"Tax" or "Taxes" means any and all federal, state, local and foreign
income, gross receipts, sales, use, ad valorem, value added, franchise,
withholding, employment, excise, property and other taxes or assessments, plus
any interest or penalties payable with respect to the same.
"Underwriters" means the underwriters of the IPO.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Sale and Purchase. In accordance with and subject to the terms and
conditions of this Agreement and in reliance upon the mutual representations and
warranties contained herein, on the Closing Date, the Company agrees to sell and
deliver to NEI, and NEI agrees to purchase from
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the Company, all of the tangible and intangible assets of the Company (the
"Assets"), including but not limited to the following:
2.1.1 The Company's business as a going concern (the "Business") and
all goodwill of the Company in connection therewith.
2.1.2 All cash and cash equivalents of the Company on hand or in
accounts of the Company as of the Closing Date.
2.1.3 All vehicles and trailers, tools, machinery and equipment owned
by the Company and used or useful in connection with the Business (the
"Equipment"). A list of Equipment is attached as SCHEDULE 2.1.3.
2.1.4 All inventories of materials and supplies on hand as of the
Closing Date.
2.1.5 All accounts receivable (including receivables from related
parties), costs and estimated earnings in excess of xxxxxxxx on uncompleted
contracts, prepaid expenses and other current assets of the Company in
existence as of the Closing Date and arising from the conduct of the
Business.
2.1.6 All contracts, agreements and arrangements, written or oral,
express or implied, to which the Company is a party as of the Closing Date
in connection with the Business, including but not limited to employment
agreements, collective bargaining agreements, contracts for the provision
of electrical services, joint venture agreements, equipment and vehicle
leases, licenses, commitments and other agreements listed in SCHEDULE
3.10.1 and SCHEDULE 3.10.2 (the "Contracts").
2.1.7 All work in-process of the Company as of the Closing Date.
2.1.8 The Company's rights as lessee under that related-party lease
agreement (the "Lease") for the Company's headquarters facility in Las
Vegas, Nevada (the "Facility").
2.1.9 All bids and proposals of the Company for the provision of
electrical contracting services which have been submitted as of the Closing
Date and as to which contracts have not been awarded as of the Closing
Date.
2.1.10 All furniture, fixtures, files, computers, office equipment
and leasehold improvements owned by the Company as of the Closing Date.
2.1.11 All customer lists, supplier lists, marketing materials,
literature, maintenance records and other business records of the Company
in connection with the Business.
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2.1.12 To the extent assignable, all licenses, permits and
authorizations issued to the Company by federal, state and local
governmental authorities in connection with the Business (the "Permits").
A list of the Permits and a description of their assignability by the
Company is attached as SCHEDULE 2.1.12.
2.1.13 All trademarks, trade names, service marks, logos, copyrights,
trade secrets, know-how, confidential or proprietary information and other
intellectual property of the Company used or useful in connection with the
Business, all federal and state registrations and applications for
registration thereof, all rights therein and thereunder in and for all
countries, and all goodwill of the Business arising thereunder (the
"Intellectual Property"). A list and description of the Intellectual
Property is attached as SCHEDULE 2.1.11.
2.1.14 All other tangible and intangible assets or property of the
Company used or useful in connection with the Business.
2.2 Purchase Price. The aggregate Purchase Price for the Assets shall
consist of cash and NEI Stock determined in accordance with SCHEDULE 2.2
attached hereto (and including the Earnout described in SCHEDULE 2.2), plus
assumption of the Assumed Liabilities described in Section 2.3. The cash
portion of the Purchase Price shall be payable by certified check or wire
transfer on the Closing Date. Notwithstanding the foregoing, NEI may reserve up
to 5% of the cash portion of the Purchase Price as a basket (the "Basket") to
compensate NEI for any accounts receivable (net of bad debt reserves) and/or
retainages of the Company as stated on the Balance Sheet but not collected
within one year after the Closing Date and any loss, damage or expense incurred
by NEI as a result of a breach of any of the representations and warranties in
Article III. The Basket funds shall be deposited in an interest-bearing
account. Any amount remaining in the Basket at the expiration of one year
following the Closing Date and not withheld by NEI as compensation as set forth
above, together with all interest earned on the investment of the Basket funds,
shall be remitted to the Company or to Shareholder at his request. Any accounts
receivable stated on the Balance Sheet but not collected within one year after
the Closing Date shall be assigned to the Company or Shareholder following
expiration of such one year period.
2.3 Liabilities. Subject to the terms and conditions of this Agreement,
NEI will assume and agree to discharge only the Assumed Liabilities, which shall
consist of and be limited to: (a) the "Current Liabilities" listed on the
Balance Sheet (consisting of notes payable, accounts payable, accrued expenses
and other current liabilities, due to related parties, and xxxxxxxx in excess of
costs and estimated earnings on uncompleted contracts, but excluding deferred
income tax liabilities and commitments and contingencies); and (b) any "Current
Liabilities" of the nature described in Section 2.3(a) and incurred by the
Company in the ordinary course of business between the date of this Agreement
and the Closing Date. All other debts, obligations, liabilities and
contingencies of the Company, whether for Taxes, in connection with contract
claims or disputes, for negligence or otherwise and whether existing, payable or
accruing prior to or after the Closing Date, shall remain obligations of the
Company and shall not be assumed by NEI. With the exception of the Assumed
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Liabilities, the Assets shall be transferred to NEI free and clear of any and
all liens, claims, mortgages, security interests, restrictions and encumbrances.
2.4 Delivery Date. On the date specified by NEI by written notice to
Shareholder (the "Delivery Date"), which may be prior or subsequent to the
Pricing, Shareholder shall deliver in trust to NEI's counsel: (a) all bills of
sale with warranty of title, assignments of Contracts and consents thereto,
assignments of Permits (to the extent assignable) and consents thereto,
assignments of Intellectual Property and other instruments deemed necessary or
desirable by NEI to vest title to the Assets in NEI; (b) resolutions duly
adopted by the Shareholder and the Board of Directors of the Company approving
this transaction; and (c) such other documents, certificates, instruments,
opinions, schedules, financial statements and assurances as NEI shall request
(collectively, the "Deliverables"). The Deliverables shall be held in trust by
NEI's counsel pending the Closing Date.
2.5 Closing. On the date specified by NEI by written notice to
Shareholder (the "Closing Date"), which shall be not later than 15 days after
the closing of the IPO, the Deliverables shall be delivered to NEI and the
exchange of the Assets for the Purchase Price in cash and NEI Stock shall be
consummated.
2.6 The Registration Statement. NEI shall use its best efforts to file
the Registration Statement with the SEC and to cause the Registration Statement
to become effective by September 30, 1998. If the Registration Statement has
not been declared effective by the SEC by December 31, 1998 or this transaction
has not Closed by January 22, 1999 for any reason other than failure of any of
the conditions in Article VII, then Shareholder and the Company may terminate
this Agreement by giving written notice to NEI not later than 15 days after such
date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER AND THE COMPANY
Shareholder and the Company jointly and severally make the following
representations and warranties and acknowledge that NEI has relied thereon in
entering into this Agreement. Each such representation and warranty is true and
correct on the date hereof and shall be true and correct on the Delivery Date
and the Closing Date, shall not be effected by any investigation conducted by
NEI, and shall survive for a period of eighteen months following the Closing
Date.
3.1 Validity.
3.1.1 This Agreement is, and any documents and instruments to be
executed and delivered by Shareholder or the Company pursuant hereto shall
be, legal, valid and binding obligations of Shareholder and/or the Company,
enforceable in accordance with their terms.
3.1.2 Neither the execution and delivery by Shareholder and the
Company of this Agreement nor the consummation of the transaction
contemplated hereby requires the consent
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or approval of, or the giving of notice by Shareholder or the Company to,
or the registration by Shareholder or the Company with, or the taking of
any other action by Shareholder or the Company in respect of, any federal,
state or local governmental authority or any third party.
3.1.3 The execution and delivery of this Agreement and the other
instruments contemplated hereby and the consummation of the transaction
contemplated hereby and thereby will not: (a) conflict with or violate any
provision of, or constitute a breach or default under, the Articles of
Incorporation or Bylaws of the Company, any law, regulation, order,
judgment or decree to which Shareholder or the Company is subject, or any
agreement, instrument or restriction of any kind to which Shareholder or
the Company is a party or by which either of them is bound; or (b) result
in the creation or imposition of any lien, claim, charge or encumbrance of
any nature whatsoever upon the Assets.
3.2 The Company. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has all requisite corporate power and authority to own its property and operate
its business as currently conducted. The Company is duly qualified and in good
standing in all states where the conduct of its business so requires. Except as
disclosed in SCHEDULE 3.2, the Company has no subsidiaries and does not directly
or indirectly control or own any interest in any corporation, partnership,
limited liability company, joint venture, proprietorship or other business
entity.
3.3 The Assets. All right, title and interest in the Assets is owned
solely by the Company and the Assets are and shall on the Closing Date be
transferred to NEI free and clear of all liens, claims, mortgages, security
interests, restrictions and encumbrances of any nature, other than liens in
connection with the Assumed Liabilities and acceptable to NEI. Neither the
Company nor Shareholder has entered into any agreement, commitment or
arrangement to transfer any of the Assets or any interest therein or in the
Company to any Person other than NEI (with the exception of the sale of
materials in the ordinary course of business) or to merge the Company with or
into any Person other than NEI.
3.4 Financial Statements. Attached as SCHEDULE 3.4 is the audited Balance
Sheet of the Company as of March 31, 1998 and the audited income statement for
the fiscal year then ended, together with all notes thereto and the report
thereon of the Company's independent auditors (the "Financial Statements"). The
Financial Statements present fairly the financial condition of the Company as of
the date of the Balance Sheet (the "Balance Sheet Date") and the results of its
operations for the fiscal year then ended and have been prepared in conformity
with GAAP. The Company has no material liabilities, obligations or financial
exposure of any nature, absolute or contingent, accrued or otherwise (including
but not limited to contract claims or penalties or settlements thereof,
liquidated damages, fines, assessments, union dues, unfunded pension
contributions, trade payables, indebtedness for borrowed money, Taxes, accrued
compensation or withholdings, negligence or contractor's liability to the extent
not covered by insurance, doubtful accounts receivable or doubtful retainages,
but excluding obligations incurred in the ordinary course of business between
the Balance Sheet Date and the Closing Date), which are not disclosed or
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adequately provided for in the Balance Sheet. Any business backlogs in
existence on the date hereof and disclosed to NEI are bona fide and were created
in the ordinary course of business. The percentages of completion of contracts
in progress as of the Balance Sheet Date and disclosed in the Balance Sheet are
accurate in all material respects in accordance with GAAP.
3.5 Absence of Certain Events. Since the Balance Sheet Date, except as
disclosed in SCHEDULE 3.5: (a) the business of the Company has been conducted
in the ordinary course; and (b) there has not been any Material Adverse Change,
nor any occurrence, circumstance or combination thereof which might be expected
to have a Material Adverse Effect before or after the Closing Date.
3.6 Title to and Condition of Assets.
3.6.1 The Company has good and marketable title to the Assets, free
and clear of any and all liens, claims, mortgages, security interests,
restrictions and encumbrances (except as disclosed in SCHEDULE 3.6.1). All
of the Assets are in the Company's possession and control.
3.6.2 The Equipment is and has been maintained in good operating
condition, ordinary wear and tear excepted. The Equipment includes all of
the equipment, vehicles (other than leased equipment and vehicles), tools
and machinery required for the conduct of the Company's operations as
currently conducted.
3.6.3 The Company has not entered into any agreement or commitment to
sell any of the Assets other than the sale of materials and supplies in the
ordinary course of business, nor (except as disclosed in SCHEDULE 3.6.1)
has the Company made any commitment or taken or failed to take any action
which would cause any lien to attach to any of the Assets.
3.7 Real Property. Except as disclosed in SCHEDULE 3.7, the Company owns
no real property.
3.8 Lease. The Company is a party to the Lease described in the notes to
the Financial Statements. With the exception of the Lease, the Company is not a
party to any real estate leases. The Lease is in full force and effect and
neither the Company nor the lessors have committed any default thereunder. The
Company is not subject to any increase in rentals or other costs in connection
with the Facility which is not provided for in the Lease.
3.9 Receivables. The accounts receivable of the Company as recorded on
the Balance Sheet have been created in the ordinary course of business,
represent valid and enforceable obligations owed to the Company (subject to any
bad debt reserve but not subject to any penalties, claims or retainages not
disclosed in the Balance Sheet) and have been recorded in accordance with GAAP
consistently applied.
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3.10 Contracts, Etc.
3.10.1 Attached as SCHEDULE 3.10.1 is a complete list of all written
or oral collective bargaining agreements, employment agreements and
agreements that impose severance or termination pay liabilities on the
Company (collectively, "Employment Agreements").
3.10.2 Attached as SCHEDULE 3.10.2 is a complete list of all written
or oral contracts and subcontracts for the performance of electrical
services, joint venture agreements, equipment and vehicle leases, licenses,
commitments and other agreements (other than Employment Agreements) to
which the Company is a party (the "Contracts"). Each Contract is in full
force and effect and constitutes the legal, valid and binding obligations
of all parties thereto. The Company is not in default and has not received
or given any notice of default, and to the best knowledge of Shareholder no
other party thereto is in default, under any Contract.
3.10.3 Attached as SCHEDULE 3.10.3 is a list of all bids submitted by
the Company and requests for proposal received by the Company as of the
date hereof.
3.10.4 Attached as SCHEDULE 3.10.4 is a list of all financial
institutions where the Company maintains accounts and the names of the
signatories on those accounts. Shareholder shall cooperate with NEI in
making any changes in signatories desired by NEI following the Closing
Date.
3.10.5 Attached as SCHEDULE 3.10.5 is a complete list of all
mechanics' liens filed by or against the Company which have not been
discharged as of the date hereof.
3.10.6 Attached as SCHEDULE 3.10.6 is a list of all existing disputes
under any of the Contracts. Except as disclosed in SCHEDULE 3.10.6, the
relationships of the Company with its customers, contractors and suppliers
are good commercial working relationships.
3.11 Material Customers and Suppliers.
3.11.1 Attached as SCHEDULE 3.11.1 is a list of the ten largest
customers of the Company (the "Material Customers") during the latest
fiscal year of the Company and the estimated volume of business conducted
by the Company with the Material Customers during such year.
3.11.2 Attached as SCHEDULE 3.11.2 is a list of the ten largest
suppliers to the Company's business (the "Material Suppliers") during the
twelve month period prior to the date hereof and the estimated volume of
business conducted by the Company with the Material Suppliers during such
period.
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3.11.3 The Company's relationships with the Material Customers and
Material Suppliers are good commercial working relationships, and
Shareholder has no reason to believe that any Material Customer or Material
Supplier intends to terminate its relationship with the Company before or
after the Closing Date.
3.12 Litigation and Workers' Compensation Liability.
3.12.1 Except as disclosed in SCHEDULE 3.12.1: (a) there are no
outstanding orders, judgments, injunctions, fines, penalties, citations,
awards or decrees of any court, arbitrator or governmental or regulatory
body involving the Company; and (b) there are no claims, suits, arbitration
proceedings, complaints or actions by any third party or legal,
administrative, arbitration or other proceedings or investigations by any
governmental agency, pending or threatened against the Company or
Shareholder. Copies of all letters provided to the Company's accountants
by counsel for the Company with respect to litigation or claims involving
the Company in the last five fiscal years have previously been delivered to
NEI.
3.12.2 Attached as SCHEDULE 3.12.2 is an accurate statement of all
workers' compensation claims and liabilities and the amount thereof
accrued, pending or threatened against the Company as of the date hereof.
3.13 Insurance and Performance Bonds.
3.13.1 Attached as SCHEDULE 3.13.1 is a complete list of all
insurance policies maintained by the Company, including the name of the
insurer, the amount and nature of the coverage, the amount of the premium
and the term of the policy. All such policies are in full force and effect
and the premiums therefor are currently paid.
3.13.2 Attached as SCHEDULE 3.13.2 is a complete list of all
performance bonds given by the Company, including the name of the issuer
and beneficiary and the amount of each bond. Except as disclosed in
SCHEDULE 3.13.2, no party has collected under or made any claim against any
performance bond of the Company or assessed any liquidated damage against
the Company during the last five years.
3.14 Intellectual Property.
3.14.1 Attached as SCHEDULE 3.14 is a list of all patents, patent
applications, trademarks, trademark registrations, trade names, service
marks, copyrights and other intellectual property owned or licensed by the
Company. Except as disclosed in SCHEDULE 3.14, the Company owns all right,
title and interest in all such intellectual property.
3.14.2 The Company has the right to use all data and information
(including confi dential information, trade secrets and know-how) used in
the conduct of the Business.
10
3.14.3 To the best knowledge of Shareholder, the Company has not
infringed any patent, copyright, trademark, trade name, trade secret or
other proprietary or intellectual property right of any third party and has
not received notice of any such infringement.
3.14.4 All software license agreements to which the Company is a
party are in full force and effect, and the Company has the right to use
all computer software used in the Business.
3.15 Compliance with Laws. The Company is in compliance with all federal,
state and local laws, regulations and ordinances applicable to the conduct of
the Business. The Company has not solicited or accepted any improper payments
from contractors, developers or others, made or solicited any improper payments
to government officials or agencies, or improperly collaborated with other
contractors in connection with the bidding process.
3.16 Licenses, Permits and Authorizations. Attached as SCHEDULE 3.16 is a
complete list of all licenses, permits, franchises and other governmental or
trade authorizations and approvals (collectively, "Permits") necessary for the
Company to conduct the Business. All required Permits have been obtained by
the Company and are in full force and effect.
3.17 Taxes. With the exception of any Taxes subject to good faith dispute
and disclosed in SCHEDULE 3.17 attached hereto, all Taxes owed by the Company
have been fully paid or provided for and all Returns in connection therewith
have been timely filed.
3.18 Books and Records. The books and records of the Company: (a) are
accurate and complete in all respects; (b) have been maintained in accordance
with good business and industry practices on a basis consistent with prior
years; (c) state in reasonable detail and accurately and fairly reflect the
transactions and business of the Company; and (d) accurately and fairly reflect
the basis for the Financial Statements. The Company's minute book is complete
and reflects all corporate actions taken by the board of directors and
Shareholder of the Company.
3.19 Labor and Employment.
3.19.1 A complete list of all employees of the Company as of the most
recently available date has been delivered to NEI. Except as disclosed in
SCHEDULE 3.19: (a) the Company has not had during the last five years, nor
to the best knowledge of Shareholder is there currently threatened, any
walkout, strike, picketing, work stoppage, work slowdown, union grievance
or other similar occurrence relating to union activity or labor practices;
(b) the Company has not committed any unfair labor practices; (c) there is
no pending or, to the best knowledge of Shareholder, threatened charge or
complaint against the Company by the National Labor Relations Board or
comparable state or local agency; (d) the Company has fully complied with
all applicable laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, conditions of employment,
employee safety and health, collective bargaining and the payment and
withholding of taxes; (e) the Company
11
has withheld all amounts required by law or agreement to be withheld from
the wages or salaries of its employees, and is not liable for any
arrearages of wages or employment taxes or penalties for failure to comply
with any of the foregoing; (f) there are no material controversies pending
or threatened between the Company and any of its employees or former
employees; and (g) the Company has not experienced a "plant closing" or
"mass layoff" within the meaning of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. (S)(S)2101 et seq. ("WARN") within the last
five years.
3.19.2 The Company is an open-shop contractor. No union has sought
to organize the Company's workers or to hold union elections during the
last three years.
3.20 Environmental. Except as otherwise provided in SCHEDULE 3.20:
3.20.1 There has not been any "release" (as defined in 42 U.S.C. (S)
9601(22)) or threat of "release" in or about the Facility of any: (a)
"hazardous substances" (as defined in 42 U.S.C. (S) 9601(14)); (b)
"chemicals" subject to regulation under Title III of the Superfund
Amendments and Reauthorization Act (XXXX) of 1986; (c) natural gas liquids,
liquefied natural gas or synthetic gas; (d) petroleum, petroleum-based
products, crude oil or any fraction; or (e) other hazardous or toxic
substances or wastes or materials, pollutants, contaminants or other
substances included under or regulated by any Environmental Laws (as
defined in Section 3.20.8) (collectively, "Hazardous Substances").
3.20.2 No part of the Facility is or has been used at any time prior
to the Closing Date as the site of any handling, treatment, storage,
refining or disposal of any Hazardous Substances and there are no Hazardous
Substances on or in the Facility, whether contained in barrels, tanks,
equipment (moveable or fixed) or other containers.
3.20.3 No part of the Facility is or has been at any time during the
Company's operation of the same, a "facility" as defined in 42 U.S.C. (S)
9601(9)(B).
3.20.4 There are not now, nor has there been at any time during the
Company's operation thereof, any underground storage tanks located in or
about the Facility.
3.20.5 No asbestos or asbestos-containing materials have been
installed, used, incorporated into or disposed of in or about the Facility.
3.20.6 No polychlorinated biphenyls are located in or about the
Facility.
3.20.7 Accurate and complete copies of any and all environmental
investigations, studies, audits, tests, reviews and analyses in the
possession of Shareholder or the Company and relating to the Facility have
been delivered to NEI.
12
3.20.8 There are no conditions in or about the Facility which violate
any federal, state or local law, ordinance, rule, regulation or agreement
pertaining to: (a) environmental protection, regulation, contamination or
clean-up; (b) underground storage tanks; (c) asbestos or asbestos-
containing materials; or (d) the handling, treatment, storage, use or
disposal of Hazardous Substances, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Solid
Waste Disposal Act, Department of Transportation regulations regarding the
transportation of Hazardous Substances or other applicable materials, state
lien or superlien or environmental protection, regulation, contamination or
clean-up statutes, or any statute or rule of law providing common law
remedies relating to Hazardous Substances (collectively, "Environmental
Laws"). The Facility and the Company's use of the same and all business
and electrical contracting practices of the Company comply with all
Environmental Laws.
3.20.9 No litigation, claims or demands have been brought or
threatened against the Company by any governmental authority or private
claimant in connection with any Hazardous Substances or alleging any
violation of Environmental Laws or any injuries suffered or incurred by
reason of any matter referred to in this Section 3.20.
3.20.10 There are no liens under Environmental Laws on the Facility,
and no governmental actions have been taken or are in process which could
subject the Facility to such liens.
3.20.11 All disposal practices relating to Hazardous Substances have
been accomplished in accordance with all applicable laws, rules,
regulations and ordinances.
3.21 ERISA.
3.21.1 Attached as SCHEDULE 3.21.1 is a list of all "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and all other employee benefit
arrangements, policies or payroll practices, including retirement, savings,
disability, medical, dental, health and life insurance plans, death benefit
plans, group insurance, profit sharing, deferred compensation, bonus, stock
option, stock bonus or other stock incentive plans, vacation pay, severance
or termination pay policies, "cafeteria" or "flexible benefit" plans under
Section 125 of the Internal Revenue Code of 1986, as amended (the "Code"),
or other employee benefit plans, arrangements, contracts, agreements,
policies or commitments, whether formal or informal, written or oral, that
provide benefits for employees or former employees of the Company or for
which the Company could have any actual or contingent liability
(collectively, "Benefit Plans"). The Company has made available to NEI a
copy of each Benefit Plan and any related funding agreements, all of which
are legally valid and binding and in full force and effect, and there are
no defaults thereunder. The Company has also made available to NEI copies
of the summary plan description for each Benefit Plan, the most recent
annual report and actuarial
13
report for each Benefit Plan, if any, and the Internal Revenue Service
determination letter, if any, for each Benefit Plan and each amendment
thereto.
3.21.2 The Benefit Plans have been operated and administered by the
Company in compliance with all applicable laws, including ERISA and the
Code, and all reports required by any government agency with respect to
each Benefit Plan have been timely filed. With respect to the Benefit
Plans, no event has occurred which would subject the Company to liability
(except for benefits, claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable statute,
order or governmental rule or regulation. With respect to the Benefit
Plans, there has been no prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code, and there has been no
action, suit, grievance, arbitration or other claim with respect to the
administration or investment of assets of the Benefit Plans (other than
routine claims for benefits made in the ordinary course) pending, or to the
best knowledge of Shareholder, threatened against the Company. All
contributions required to be made to each Benefit Plan under its terms,
ERISA or other applicable law have been timely made. The Company has no
material unfunded liabilities or obligations under any of the Benefit
Plans.
3.21.3 Except as disclosed in SCHEDULE 3.21.3, neither the Company
nor any member of its "controlled group" under Section 414 of the Code
contributes to a "multiemployer plan," as defined in Section 414(f) of the
Code or Section 3(37) of ERISA. With respect to each multiemployer plan in
which the Company or any member of its controlled group participates or has
participated, neither the Company nor any member of the controlled group:
(a) has withdrawn, partially withdrawn, or received notice of any claim or
demand for withdrawal liability or partial withdrawal liability; (b) has
received notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that any such plan is or may become
insolvent; (c) has failed to make any required contributions; or (d) has
incurred any withdrawal liability by reason of a sale of assets pursuant to
Section 4204 of ERISA.
3.21.4 With respect to each Benefit Plan which is subject to Title IV
of ERISA: (a) no such Benefit Plan has terminated, or has filed a notice of
intent to terminate in the last six years; (b) there is no outstanding
liability under Section 4062 of ERISA; (c) neither the Company nor any
member of its controlled group that is a substantial employer has made a
withdrawal (or has been deemed to do so under Section 4062(e) of ERISA)
that could result in liability under Section 4063 of ERISA or otherwise;
(d) the Pension Benefit Guaranty Corporation has not instituted proceedings
to terminate such Benefit Plan; and (e) no reportable event, as described
in Section 4043 of ERISA, has occurred.
3.21.5 Except as disclosed in SCHEDULE 3.21.3 no Benefit Plan is a
"multiple employer plan" within the meaning of Section 4063 or 4064 of
ERISA.
14
3.21.6 No current or former employee of the Company is or may become
entitled to post-employment benefits of any kind other than coverage
mandated by Section 4980B of the Code.
3.21.7 Each Benefit Plan of the Company or member of its controlled
group has been operated at all times in substantial compliance with the
provisions of COBRA and any applicable similar state law.
3.22 Guaranteed Obligations. SCHEDULE 3.22 contains a complete description
of all liabilities and obligations of the Company which have been guaranteed by
Shareholder as of the Closing Date (the "Guaranteed Obligations").
3.23 Disclosure.
3.23.1 No representation or warranty of Shareholder or the Company in
this Agreement or any other document delivered pursuant hereto or any
statement, document, certificate or exhibit furnished or to be furnished by
Shareholder or the Company pursuant to this Agreement or in connection with
the transactions contemplated hereby (including but not limited to the
Financial Statements and the Director and Officer Questionnaire and any
other questionnaires or representation certificates furnished by the
Company or Shareholder) contains or will contain any untrue statement of
material fact or omits or will omit a material fact necessary to make the
statements contained herein or therein not misleading. To the best
knowledge of Shareholder, there is no fact which Shareholder has not
disclosed in writing to NEI which has or may have a Material Adverse
Effect; provided, the foregoing does not apply to statements contained in
or omitted from any such documents made or omitted in reliance upon
information furnished in writing by NEI.
3.23.2 If, during the period of time in which a prospectus is
required to be delivered in connection with the IPO, the Company or
Shareholder becomes aware of any fact or circumstance which would affect in
any material respect the accuracy of a representation or warranty of the
Company or Shareholder in this Agreement or a representation or disclosure
with respect to the Company or Shareholder in the Registration Statement or
Prospectus, the Company and Shareholder shall immediately give notice of
such fact or circumstance to NEI. However, such notification shall not
relieve either the Company or Shareholder from their respective obligations
under this Agreement, and the truth and accuracy of all representations and
warranties of the Company and Shareholder as of the date of this Agreement
and as of the Delivery Date and the Closing Date shall be a precondition to
the consummation of this transaction.
3.24 Acknowledgment. Shareholder acknowledges and agrees: (a) that there
exists no firm commitment, binding agreement or promise of any kind, express or
implied, that a Registration Statement will become effective or that the IPO
will occur; (b) that neither NEI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the Company,
15
Shareholder or any other Person for any failure of the Registration Statement to
become effective or any failure of the IPO to occur at a particular price or
within a particular range of prices or to occur at all; (c) that NEI has not
committed to pay any dividends on the NEI Stock and that, in all likelihood, no
dividends will be paid on the NEI Stock in the foreseeable future; (d) that if
the Registration Statement becomes effective there is no guaranty the NEI Stock
will appreciate or not depreciate in value, that an active market will exist for
the NEI Stock, or that Shareholder will be able in the future to sell his NEI
Stock at a price equal to or greater than the public offering price per share in
the IPO; and (e) that the decision of Shareholder to enter into this Agreement
has been made independent of, and without reliance upon, any statements,
opinions, communications or due diligence investigations made or performed by
any prospective Underwriter.
3.25 Interest in Customers and Suppliers and Related Party Transactions.
Except in connection with the Lease or as described in SCHEDULE 3.25, neither
Shareholder nor any officer, director or Affiliate of the Company or of
Shareholder: (a) possesses, directly or indirectly, any financial interest in
or is a director, officer, employee or Affiliate of any corporation, firm,
association or business organization that is a customer, supplier or competitor
of the Company or is engaged in any other business relationship with the
Company; or (b) is or will be a party to any agreement or arrangement that
involves receipt by such person of compensation or property from the Company
other than through a customary employment relationship.
3.26 Registration Statement. To the best of Shareholder's knowledge, none
of the information (including financial information) supplied or to be supplied
by the Company or Shareholder specifically for inclusion in the Registration
Statement contains or will contain any untrue statement of material fact
concerning the Company or Shareholder or omits or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein concerning the Company or Shareholder, in light of the
circumstances under which they are made, not misleading. The Company and
Shareholder shall have the right to review and approve in advance any statements
made about the Company and Shareholder in the Registration Statement.
3.27 Brokers and Finders. Neither Shareholder nor the Company has
retained any broker or finder in connection with this transaction, and neither
NEI nor any subsidiary shall become liable for the fees of any brokers or
finders retained by the Company or Shareholder as a result of this transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEI
NEI makes the following representations and warranties and
acknowledges that Shareholder and the Company have relied thereon in entering
into this Agreement. Each such representation and warranty is true and correct
on the date hereof and shall be true and correct on
16
the Delivery Date and the Closing Date, shall not be affected by any
investigation conducted by Shareholder, and shall survive for a period of
eighteen months following the Closing Date.
4.1 Corporate. NEI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. NEI has the requisite
power and authority to enter into this Agreement and acquire the Assets.
4.2 Authorization. This Agreement has been duly authorized, executed and
delivered by NEI and constitutes the legal, valid and binding obligation of NEI
enforceable in accordance with its terms.
4.3 Capital Stock of NEI. The authorized capital stock of NEI shall
conform to the description thereof in the Registration Statement and shall be
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind other than as
described in the Registration Statement. All of the issued and outstanding
shares of capital stock of NEI have been duly authorized and validly issued, are
fully paid and nonassessable and were offered, issued, sold and delivered by NEI
in compliance with all applicable federal and state securities laws.
4.4 Transactions in Capital Stock. Except for the Other Agreements and
except as described in the Registration Statement or in connection with any
future acquisitions or mergers which may be conducted by NEI or its
subsidiaries: (a) there are no options, warrants, calls, conversion rights or
commitments of any kind which obligate NEI to issue any of its authorized but
unissued capital stock; and (b) NEI has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its securities or any interest
therein or to pay any dividend or make any distribution in respect thereof.
4.5 Financial Statements. The Financial Statements of NEI and its
subsidiaries to be included in the Registration Statement (the "NEI Financial
Statements") will have been prepared in accordance with GAAP and will present
fairly the financial position of NEI and its subsidiaries as of the dates
thereof and the results of operations of NEI and its subsidiaries for the
periods then ended.
4.6 Liabilities And Obligations. Except as set forth in the Registration
Statement, NEI has no material liabilities or obligations of any kind, other
than liabilities incurred in the ordinary course of business or as contemplated
by this Agreement or the Other Agreements or in connection with other
acquisitions or mergers contemplated by NEI and the fees and expenses incurred
or to be incurred in connection with the transactions contemplated hereby and
thereby.
4.7 Conformity With Law; Litigation. Except as disclosed in the
Registration Statement, NEI is not in violation of any law or regulation or any
order of any court or federal, state, municipal or other governmental agency
having jurisdiction over it and there are no claims, actions, suits or
proceedings pending or, to the best knowledge of NEI, threatened against or
affecting NEI at law or in equity or before or by any federal, state, municipal
or other governmental agency and no
17
notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received. NEI has conducted its business in material
compliance with the requirements of applicable law and regulation.
Notwithstanding the foregoing, NEI makes no representation or warranty to
Shareholder or the Company regarding any Other Founding Company.
4.8 No Violations.
4.8.1 NEI is not in violation of the NEI Charter Documents or, to the
best knowledge of NEI, any lease, instrument, agreement, license or permit
to which NEI is a party or by which NEI or any of its assets are bound.
4.8.2 The execution and delivery of this Agreement by NEI do not
conflict with or result in a breach of any provision of, or constitute a
default under any of the terms or conditions of: (a) the NEI Charter
Documents; (b) any law, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable
to NEI or any of its assets; or (c) any other contract to which NEI is a
party.
4.8.3 Except for: (a) the filings with the SEC pursuant to the 1933
Act in connection with the IPO, the purchase and sale of the Assets and the
acquisition or merger of the Other Founding Companies; (b) the declaration
of effectiveness of the Registration Statement by the SEC and filings with
various state blue sky authorities; and (c) any filings required under the
Xxxx-Xxxxx Act in connection with the acquisition or merger of the Other
Founding Companies, the NEI Plan of Organization does not require notice
to, registration or filing with or the consent or approval of any
governmental agency or other third party.
4.9 NEI Stock. At the time of its issuance and delivery, the NEI Stock
will constitute duly authorized and validly issued shares of NEI common stock,
fully paid and nonassessable, and with the exception of restrictions upon resale
set forth in Articles XII and XIII hereof, will be identical in all material
respects (not including the form of certificate upon which it is printed or the
presence or absence of a CUSIP number on any such certificate) to any NEI common
stock issued and outstanding as of the date hereof. The NEI Stock shall at the
time of such issuance and delivery be free and clear of any liens, claims or
encumbrances, except as provided in Articles XII and XIII. The NEI Stock shall
be issued to the Company or Shareholder in accordance with Shareholder's
instructions, with Shareholder to bear all Taxes arising from issuance or
transfer of the NEI Stock to Shareholder.
4.10 No Side Agreements. NEI has not entered into and will not enter into
any agreement with any of the Other Founding Companies or their shareholders,
other than the Other Agreements and the agreements described in the Registration
Statement, including the employment agreements, leases and Indemnification
Agreements referred to therein or entered into in connection with the
transactions contemplated thereby.
18
4.11 Disclosure. The Registration Statement and Prospectus will not as of
their respective dates contain an untrue statement of material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, that the
foregoing does not apply to any statements contained in or omitted from the
Registration Statement or Prospectus in reliance upon information furnished by
the Company or Shareholder or by the Other Founding Companies or their
shareholders for inclusion in the Registration Statement.
4.12 Other Agreements. The Other Agreements will have been duly
authorized, executed and delivered by NEI and will constitute the legal, valid
and binding obligations of NEI and its subsidiaries enforceable against NEI and
such subsidiaries in accordance with their respective terms.
4.13 Registration Statement. The Registration Statement will comply as to
form in all material respects with the applicable requirements of the 1933 Act
and the regulations thereunder, provided that the foregoing does not apply to
any information that the Company or Shareholder or the Other Founding Companies
or their shareholders furnish to NEI specifically for inclusion in the
Registration Statement.
ARTICLE V
ACTIONS BY SHAREHOLDER AND THE COMPANY PENDING CLOSING
From the date hereof through the Closing Date:
5.1 Access. Shareholder and the Company shall permit NEI and its
representatives and the Underwriters and their representatives to perform such
inspections, investigations and due diligence with respect to the Company, its
assets, business and financial condition, as NEI or the Underwriters deem
advisable. Shareholder and the Company shall provide NEI and its
representatives and the Underwriters and their representatives full access to
and an opportunity to inspect all properties, facilities, books, records,
accounts, contracts and documents of the Company, and shall make themselves,
their counsel and the officers and employees of the Company available to NEI and
the Underwriters and otherwise cooperate with NEI's and the Underwriters' due
diligence investigations. Shareholder and the Company shall furnish NEI and its
representatives and the Underwriters and their representatives all information
with respect to the business and affairs of the Company as NEI or the
Underwriters reasonably request. Shareholder and the Company shall permit NEI
and the Underwriters to have access to other third parties, including
contractors, suppliers and bankers with which the Company does business, as
reasonably required for verification of any information obtained by NEI or the
Underwriters during their due diligence investigation. Shareholder and the
Company shall permit NEI to conduct appraisals of the Company's equipment and/or
real estate at NEI's expense. NEI will coordinate such due diligence
investigations with Shareholder to avoid disruption or undue interference with
the operations of the Company. Shareholder shall deliver to NEI copies of all
environmental audits, risk assessments and other
19
investigations performed with respect to the Company or its assets at any time
prior to the Closing Date. Notwithstanding the foregoing, the representations
and warranties in Article III shall not be affected by any due diligence
investigation conducted by NEI, the Underwriters or their respective
representatives.
5.2 Carry on in Ordinary Course. The Company shall carry on its business
in the ordinary course and substantially in the manner as heretofore conducted.
The Company shall not institute any methods of purchase, sale, bidding,
management, accounting or operation which are inconsistent with past practice or
with accepted standards in the industry without the prior written consent of
NEI. The Company shall not sell or transfer or enter into any contract or
commitment to sell or transfer any of the Assets (other than inventory or as
necessary to perform contracts in the ordinary course) or engage in any
transaction or incur any indebtedness or obligations outside the ordinary course
of business without the prior written consent of NEI. The Company shall keep
all performance bonds and insurance policies in full force and effect.
5.3 General Increases Limited. Without the prior written consent of NEI
or as required under existing employment agreements or to meet commitments
previously made and disclosed to NEI, the Company shall not: (a) increase or
decrease the compensation or benefits of its officers or employees; or (b) pay
or commit to pay any bonuses or commissions to officers.
5.4 Preservation of Organization. Shareholder shall use his best efforts
to preserve the Company's business organization intact, to keep available to NEI
the present employees of the Business and to preserve for NEI the present
relationships of the Company with customers (including Material Customers),
contractors and suppliers (including Material Suppliers) and others doing
business with it. The Company shall not amend its Articles of Incorporation or
Bylaws or make any changes in its authorized or issued capital stock. The
Company shall not issue to Shareholder or any other Person any shares of common
stock or other securities or grant to Shareholder or other Person any right,
option or warrant to purchase any common stock or other securities of the
Company or securities convertible into the same.
5.5 No Default. The Company shall perform all obligations under and shall
not default under any Employment Agreement, Contract, commitment, obligation or
indebtedness.
5.6 Dividends. The Company shall not declare or pay any dividend or make
any distribution, directly or indirectly, in respect of the Company Stock, nor
redeem any of the Company Stock, without the written consent of NEI.
5.7 Voting Trusts or Other Arrangements. Shareholder shall not enter into
any voting trust, voting agreement or other arrangement with respect to the
Company Stock or the election of directors of the Company.
20
5.8 Interim Financial and Borrowing Statements. Shareholder shall deliver
to NEI such interim balance sheets and operating statements and statements of
Company borrowings at such intervals as NEI reasonably requests.
5.9 Bids and Contracts. The Company shall provide NEI with a copy of all
bids submitted by and contracts awarded to or entered into by the Company
between the date of this Agreement and the Closing Date.
5.10 Cash Withdrawals. No cash shall be withdrawn from the accounts of
the Company or withheld from its revenues, except as required for: (a) the
conduct of the Business in the ordinary course; and (b) the payment of
obligations incurred in the ordinary course.
5.11 Environmental Audits. Shareholder and the Company shall, and shall
cause the Company's landlords to, permit NEI to conduct Phase I environmental
assessments of the Facility at NEI's expense. If NEI reasonably determines that
a Phase II environmental assessment or any environmental remediation is
necessary or advisable with respect to the Facility, such assessment and/or
remediation shall be completed as soon as practicable at Shareholder's expense.
5.12 No Transfer. Shareholder shall not transfer to any Person any of the
Company Stock, nor grant to any Person or entity any right, title or interest in
or right or option to acquire any Company Stock.
5.13 No Shop. Neither Shareholder, nor the Company, nor any agent,
officer, director, trustee or representative of Shareholder or the Company
shall, during the period commencing on the date of this Agreement and ending on
the earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly solicit or initiate the
submission of proposals or offers from any Person for, participate in any
discussions pertaining to, furnish any information to any Person other than NEI
or its authorized agents in connection with, or enter into any transaction,
agreement, understanding, arrangement or commitment in connection with: (a) any
sale or acquisition of all or a material amount of the Company Stock or all or a
material amount of the Assets; or (b) any merger, consolidation, joint venture
(except joint ventures entered into in the ordinary course of business in
connection with the provision of electrical contracting services and disclosed
in writing to NEI) or business combination of the Company with any other entity.
5.14 (Intentionally Omitted).
5.15 Notification of Certain Matters. Shareholder and the Company shall
give prompt notice to NEI upon becoming aware of any Material Adverse Change,
any event or condition likely to have a Material Adverse Effect, or any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or Shareholder contained herein to be
untrue or inaccurate in any material respect on or prior to the Closing Date.
NEI shall give prompt notice to Shareholder of any event the occurrence or non-
occurrence of which would be likely
21
to cause any representation or warranty of NEI contained herein to be untrue or
inaccurate in any material respect on or prior to the Closing Date.
5.16 Cooperation in Preparation of Registration Statement. The Company
and Shareholder shall furnish or cause to be furnished to NEI and the
Underwriters all information concerning the Company and Shareholder required for
inclusion in, and will cooperate with NEI and the Underwriters in the
preparation of, the Registration Statement and Prospectus (including, to the
extent required, audited and unaudited historical and pro forma financial
statements prepared in accordance with GAAP, in form suitable for inclusion in
the Registration Statement). Shareholder shall execute and deliver such
documents, including questionnaires, representation certificates and lock-up
agreements, deemed advisable by NEI or the Underwriters in connection with the
IPO. The disclosure of information with respect to the Company and Shareholder
in the Registration Statement and in the conduct of the IPO shall not constitute
a violation of any confidentiality agreement, including Section 11.2 of this
Agreement, among the parties hereto. All information and disclosures provided
by Shareholder or the Company in accordance with this Section 5.16 shall be
subject to the provisions of Sections 3.2.3, 3.2.4 and 3.2.6 hereof. The
Company and Shareholder agree promptly to advise NEI if at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the 1933 Act, they discover that any information contained in the
Prospectus concerning the Company or Shareholder becomes inaccurate or
incomplete in any material respect, and to provide the information needed to
correct any such inaccuracy.
5.17 Authorized Capital. Prior to the Closing Date, NEI shall maintain
its authorized capital stock as set forth in the Registration Statement, except
for stock splits, changes made in response to comments made by the SEC or
requirements of any exchange or automated trading system for which application
is made to list the NEI Stock.
ARTICLE VI
CONDITIONS PRECEDENT TO SHAREHOLDER'S OBLIGATIONS
Each and every obligation of Shareholder to be performed on the
Closing Date shall be subject to the satisfaction prior to or on the Closing
Date of the following conditions, unless waived in writing by Shareholder:
6.1 Representations and Warranties True. NEI's representations and
warranties in this Agreement shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
given on the Closing Date, and Shareholder shall receive a certificate from an
officer of NEI to that effect.
6.2 Compliance with Agreement. NEI shall have complied with all its
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Closing Date, and Shareholder shall receive a certificate
from an officer of NEI to that effect.
22
6.3 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain the
purchase and sale of the Assets or the IPO.
6.4 Employment Agreements. Xxxxx Xxxxxxxx, Xx., Xxxxxx Xxxxxxxx and Xxxxx
Xxxxxxxx, Xx. shall have entered into employment and noncompetition agreements
mutually acceptable to each such Person and NEI.
6.5 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
ARTICLE VII
CONDITIONS PRECEDENT TO NEI'S OBLIGATIONS
Each and every obligation of NEI to be performed on the Closing Date
shall be subject to the satisfaction prior to or on the Closing Date of the
following conditions, unless waived in writing by NEI:
7.1 Representations and Warranties True. The representations and
warranties of Shareholder and the Company in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been given on the Closing Date, and NEI shall
receive a certificate from Shareholder to that effect.
7.2 Compliance with Agreement. Shareholder and the Company shall have
complied with all of their obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date, and NEI
shall receive a certificate from Shareholder to that effect.
7.3 Execution and Deliverables. Shareholder and the Company shall have
executed counterparts of this Agreement and all Deliverables shall have been
delivered to NEI.
7.4 Corporate Documents. Shareholder shall have delivered to NEI: (a)
certified copies of the Articles of Incorporation and Bylaws of the Company; and
(b) certificates from the proper state officials evidencing the good standing of
the Company in the State of Incorporation and all other states in which the
Company is qualified to do business.
7.5 Due Diligence. NEI shall be satisfied with the results of its due
diligence investigation, including but not limited to the following matters:
7.5.1 NEI shall have completed and shall be satisfied with the
results of the inspections, investigations and due diligence referred to in
Section 5.1, including but not
23
limited to: (a) verification of the quality, quantity and valuation of the
Company's assets and liabilities; (b) verification of Shareholder's factual
representations regarding the Company's business operations; (c)
verification of the Company's historical and expected operating
performance, as reflected in the Financial Statements and other information
provided to NEI; and (d) approval of the Financial Statements.
7.5.2 NEI shall have reviewed and approved all labor contracts
relating to the Company and shall be satisfied with the Company's labor
relations.
7.5.3 NEI shall be satisfied that the Company has clear and
marketable title to the Assets, free and clear of all liens, claims,
mortgages, restrictions and encumbrances other than in connection with the
Assumed Liabilities.
7.5.4 NEI shall be satisfied that the transaction contemplated by
this Agreement will not cause a breach or termination of any Contract
materially beneficial to the Business.
7.5.5 NEI shall have completed and shall be satisfied with the
results of the Phase I environmental assessments and any Phase II
environmental assessments contemplated in Section 5.11.
7.6 Employment Agreements. NEI shall have entered into employment
agreements acceptable to NEI with Xxxxx Xxxxxxxx, Xx., Xxxxxx Xxxxxxxx and Xxxxx
Xxxxxxxx, Xx. and shall have made such other arrangements with respect to the
Company's key employees as NEI deems advisable.
7.7 No Material Adverse Change. There shall not have been any Material
Adverse Change from the Balance Sheet Date to the Closing Date, nor any event or
condition which NEI believes is likely to have a Material Adverse Effect.
7.8 Opinion of Counsel for Shareholder. NEI shall have received from
Shareholder's counsel a written opinion, dated as of the Closing Date,
addressed to NEI and satisfactory to counsel for NEI in form and substance.
7.9 Approval. The transaction contemplated hereby shall have been
approved by Shareholder and the Board of Directors of the Company.
7.10 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain or
prohibit the purchase and sale of the Assets or the IPO.
7.11 Shareholder's Release. Shareholder shall have delivered to NEI an
instrument dated the Closing Date releasing the Company and NEI from: (a) any
and all claims of Shareholder against the Company and NEI; and (b) obligations
of the Company and NEI to Shareholder, except for: (i)
24
continuing obligations to Shareholder relating to his employment; and (ii)
obligations arising under this Agreement or the transactions contemplated
hereby.
7.12 Termination of Related Party Agreements. Except for the Lease and as
described in SCHEDULE 7.12, all existing agreements between the Company and
Shareholder or his Affiliates shall have been terminated on or before the
Closing Date.
7.13 Other Founding Companies. NEI shall have entered into the Other
Agreements with the Other Founding Companies and closing shall have occurred
thereunder, with closing of this Agreement and the Other Agreements deemed to
have occurred simultaneously.
7.14 FIRPTA Certificate. If requested by NEI in connection with the
Lease, Shareholder shall have delivered to NEI a certificate to the effect that
he is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury
regulations.
7.15 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
7.16 Minimum Net Book Value. The net book value of the Company as of the
Closing Date, in accordance with an unaudited balance sheet of the Company
prepared in accordance with GAAP and acceptable to NEI, shall be not less than
$400,000.
ARTICLE VIII
COVENANTS
8.1 Release From Guarantees; Repayment of Certain Obligations. NEI shall
use reasonable efforts to have Shareholder released from any and all guarantees
of the Assumed Liabilities. In the event NEI cannot obtain such releases from
the lenders of any such guaranteed indebtedness within 120 days following the
Closing Date, NEI shall promptly pay off or otherwise refinance or retire such
indebtedness such that Shareholder's personal liability shall be released. NEI
will indemnify Shareholder against any loss or damage suffered during such 120
day period as a result of such personal guarantees.
8.2 Preparation And Filing of Tax Returns.
8.2.1 The Company, if possible, or otherwise Shareholder shall file
or cause to be filed all federal, state and local income Tax Returns for
the Company for all taxable periods prior to and after the Closing Date,
and shall permit NEI to review prior to filing the Company's Tax Returns
for the fiscal year in which the Closing Date occurs. Shareholder shall
pay or cause to be paid all Tax liabilities based on taxable income of the
Company.
25
8.2.2 If applicable, each of the Company, NEI and Shareholder shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and will treat this
transaction as a tax-free contribution under Section 351(a) of the Code
subject to gain, if any, recognized on the receipt or constructive receipt
of cash or other property under Section 351(b) of the Code. Shareholder
shall pay or cause to be paid all Taxes (including federal, state, and
local income Tax and transfer Tax) arising from any taxable gain on the
sale of the Assets effected hereby.
8.2.3 The Company and/or Shareholder shall file IRS Form 8594 and/or
any other appropriate Tax forms under Section 1060 of the Internal Revenue
Code reflecting the purchase price allocation elected by NEI.
8.3 Further Assurances.
8.3.1 Shareholder will use his best efforts to: (a) obtain any
consents by third parties or governmental authorities required or deemed
desirable by NEI in connection with the consummation of the transaction
contemplated hereby and NEI's acquisition of the Assets; (b) fulfill or
cause to be fulfilled each of the conditions precedent to NEI's
obligations recited in Article VII hereof on or prior to the Closing Date;
and (c) perform each of the acts and observe each of the covenants required
to be performed or observed by Shareholder and the Company at or prior to
the Closing Date.
8.3.2 Shareholder and the Company shall execute and deliver or cause
to be executed and delivered such further instruments and take such other
action as NEI deems necessary or desirable to remedy any breach of
representation or warranty made by Shareholder or the Company herein or to
more effectively carry out the transfer of the Assets and the consummation
of the transaction contemplated by this Agreement.
8.3.3 NEI shall execute and deliver or cause to be executed and
delivered such further instruments and take such other action as
Shareholder deems necessary or desirable to remedy any breach of
representation or warranty made by NEI herein or to more effectively carry
out the transfer of the NEI Stock and the consummation of the transaction
contemplated by this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Shareholder. Shareholder agrees to indemnify and
hold NEI, its officers, directors and representatives harmless from any and all
loss, cost, claim, damage, fine, penalty, expense (including reasonable
attorneys' fees), liability and cause of action arising from: (a) any breach of
the representations and warranties of Shareholder or the Company contained
herein or
26
in any Schedules, certificates, questionnaires or other instruments delivered in
connection herewith; (b) any breach of this Agreement by Shareholder or the
Company; (c) any liability under the 1933 Act, the 1934 Act or other federal or
state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of material fact relating
to the Company or Shareholder which was based upon information provided to NEI
or its counsel or the Underwriters by the Company or Shareholder and contained
in the Registration Statement or Prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company or Shareholder required to be stated therein or necessary to make the
statements therein not misleading; provided, that such indemnity shall not inure
to the benefit of NEI to the extent such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and Shareholder provided written corrected information to
NEI for inclusion in the final Prospectus and such information was not so
included; (d) any default by the Company under any performance bond occurring
prior to the Closing Date; (e) any liability or obligation of the Company other
than the Assumed Liabilities, or the Company's breach of any agreements entered
into in connection with the Assumed Liabilities; (f) any violation by the
Company of any federal, state or local law, regulation or ordinance (including
but not limited to Environmental Laws or laws governing the employment of labor
or employee safety and health) occurring prior to the Closing Date; (g) any
breach of any Employment Agreement or Contract or the terms of any Permit
occurring prior to the Closing Date; (h) any litigation or claim arising from
the conduct of the Business prior to the Closing Date and not disclosed in
SCHEDULE 3.12.1; (i) any uninsured workers' compensation claims or liabilities
arising prior to the Closing Date and not disclosed in SCHEDULE 3.12.2; and (j)
all Taxes owed by the Company for periods prior to or after the Closing Date and
all Taxes owed by Shareholder or the Company in connection with this
transaction.
9.2 Indemnification by NEI. NEI agrees to indemnify and hold Shareholder
harmless from any loss, cost, claim, damage, fine, penalty, expense (including
reasonable attorneys' fees), liability and cause of action arising from: (a)
any breach by NEI of its representations and warranties contained herein or in
any Schedules or certificates furnished by NEI; (b) any breach by NEI of this
Agreement; or (c) any liability under the 1933 Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of material fact
relating to NEI or any of the Other Founding Companies contained in any
preliminary prospectus, the Registration Statement or Prospectus or arising out
of or based upon any omission or alleged omission to state therein a material
fact relating to NEI or any of the Other Founding Companies required to be
stated therein or necessary to make the statements therein not misleading,
except to the extent such statement or omission relates to the Company or
Shareholder.
9.3 Procedure. If any party entitled to indemnification hereunder
(whether individually or collectively, the "Indemnified Party") receives notice
of any claim or the commencement of any action or proceeding with respect to
which any other party (whether individually or collectively, the "Indemnifying
Party") is obligated to indemnify pursuant to Section 9.1 or 9.2, the
Indemnified Party shall promptly give the Indemnifying Party written notice
thereof. Such notice shall describe the
27
claim in reasonable detail and shall indicate the amount (estimated if
necessary) of the loss that has been or may be sustained by the Indemnified
Party in connection therewith. The Indemnifying Party may elect to compromise
or defend, at the Indemnifying Party's own expense and by the Indemnifying
Party's own counsel, any such matter involving the asserted liability of the
Indemnified Party. If the Indemnifying Party elects to compromise or defend
such asserted liability, the Indemnifying Party shall within 30 days (or sooner,
if the nature of the asserted liability so requires) notify the Indemnified
Party of its intent to do so, and the Indemnified Party shall cooperate, at the
expense of the Indemnifying Party, in the compromise of, or defense against, any
such asserted liability. If: (a) the Indemnifying Party does not elect to
compromise or defend against the asserted liability; (b) the Indemnified Party
reasonably determines that the Indemnifying Party's counsel has a conflict of
interest with the Indemnified Party or that the Indemnifying Party or its
counsel is not diligently defending the claim; or (c) the Indemnifying Party
fails to notify the Indemnified Party of its election to compromise or defend
such asserted liability as provided herein, then the Indemnified Party may, if
acting in accordance with its good faith business judgment, pay, compromise or
defend such asserted liability at the Indemnifying Party's expense, and such
settlement shall be binding on the Indemnifying Party for purposes of this
Article IX. Notwithstanding the foregoing, neither the Indemnifying Party nor
the Indemnified Party may settle or compromise any claim over the reasonable
good faith objection of the other. In any event, the Indemnified Party and the
Indemnifying Party may each participate, at its own expense, in the defense
against the claim. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense.
9.4 Exclusive Remedy. The indemnification provided for in this Article IX
shall (except as provided in Articles XI and XIV or as prohibited by ERISA) be
the exclusive remedy in any action seeking damages or any other form of monetary
relief brought by any party to this Agreement against another party. Any
indemnity payment under this Article IX shall be treated as an adjustment to the
exchange consideration for tax purposes unless a final determination (which
shall include the execution of a Form 870-AD or successor form) with respect to
the Indemnified Party or its Affiliates causes any such payment not to be
treated as an adjustment to the exchange consideration for federal income Tax
purposes.
9.5 Limitations on Indemnification. Notwithstanding the foregoing
provisions of this Article IX:
9.5.1 NEI shall not assert any claim for indemnification against
Shareholder unless the aggregate of all claims which NEI may have against
Shareholder exceeds $10,000. The Company and Shareholder shall not assert
any claim for indemnification against NEI unless the aggregate of all
claims which the Company and Shareholder may have against NEI exceeds
$10,000.
28
9.5.2 Shareholder shall not be liable under this Article IX for any
amount which exceeds the value, established in accordance with this
Agreement, of the cash and NEI Stock received by Shareholder hereunder.
9.5.3 Except as provided in Section 9.1(j), Shareholder shall not be
liable under this Article IX for any claim arising more than 18 months
after the Closing Date. The provisions of Section 9.1(j) shall survive for
the applicable limitations period.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date, but only:
10.1.1 By the mutual written consent of NEI and Shareholder
10.1.2 By NEI, if the Registration Statement shall not have been
declared effective by the SEC by the close of business, Kansas City time,
on December 31, 1998.
10.1.3 By Shareholder if the Registration Statement shall not have
been declared effective by the SEC by the close of business, Kansas City
time, on December 31, 1998 or this transaction shall not have Closed by
January 22, 1998, for any reason other than failure of Shareholder to
satisfy any of the conditions in Article VII which are within his control.
10.1.4 By Shareholder and the Company if the applicable conditions
set forth in Article VI hereof have not been satisfied or waived as of the
Closing Date
10.1.5 By NEI if the applicable conditions set forth in Article VII
hereof have not been satisfied or waived as of the Closing Date
10.1.6 By NEI if NEI in its sole discretion elects to terminate the
underwriting agreement with respect to the IPO or if NEI in its sole
discretion elects not to proceed with the IPO or the NEI Plan of
Organization.
10.2 Liabilities in Event of Termination. NEI shall have no liability to
Shareholder or the Company for any legal, accounting or other fees or expenses
incurred by either of them in the event of any termination of this Agreement.
29
ARTICLE XI
NONCOMPETITION AND NONDISCLOSURE
11.1 Noncompete Covenant. Shareholder agrees that for a term commencing on
the Closing Date and ending five years thereafter, he shall not, directly or
indirectly: (a) own or have any interest in, or be an officer, director,
partner, joint venturer, employee, agent, representative or consultant of, or in
any way assist, any corporation, partnership, limited liability company or other
entity engaged in the commercial or industrial electrical contracting business
anywhere in the United States of America (provided, the foregoing shall not
prohibit the ownership of less than 5% of any publicly-traded entity); (b)
divert or attempt to divert any customers or contractors of NEI or its
subsidiaries; or (c) entice or induce any employee or officer of NEI or its
subsidiaries to leave such service for the purpose of engaging in a competing
commercial or industrial electrical contracting business. Shareholder
acknowledges the foregoing covenants are reasonable in scope or duration and are
a material inducement for NEI to participate in this Agreement. Notwithstanding
the foregoing, if a court of competent jurisdiction determines that the scope or
duration of any such covenants are unreasonable and unenforceable in any
respect, such covenants shall automatically be modified to the extent such court
deems reasonable and enforceable under the circumstances and, as so modified,
such covenants shall remain in full force and effect.
11.2 Confidential Information.
11.2.1 Shareholder agrees that he shall not disclose to any Person
(other than NEI and its representatives and the Underwriters and their
representatives) nor use for any purpose (other than in connection with the
IPO or the conduct of the Business prior to the Closing Date) any
confidential information, trade secrets, customer lists, price lists, bids,
technical know-how or other confidential or proprietary information of or
with respect to the Company, whether or not marked or specifically
identified as confidential.
11.2.2 If this transaction does not close or if this Agreement is
terminated for any reason, NEI shall not disclose to any Person nor use for
any purpose (other than in connection with any action brought under this
Agreement or pursuant to any subpoena or order of a court or administrative
agency) any confidential information, trade secrets, customer lists, price
lists, bids, technical know-how or other confidential or proprietary
information of or with respect to the Company, whether or not marked or
specifically identified as confidential.
11.3 Enforcement.
11.3.1 Shareholder acknowledges that any breach of the covenants in
Section 11.1 or 11.2.1 would cause irreparable injury to NEI which would
not be fully compensable in damages. Accordingly, NEI may enforce any
breach of such covenants by obtaining injunctive or specific relief from a
court of competent jurisdiction, without the necessity of posting bond or
proving lack of an adequate remedy at law.
30
11.3.2 NEI acknowledges that any breach of the covenants in Section
11.2.2 would cause irreparable injury to the Company which would not be
fully compensable in damages. Accordingly, the Company may enforce any
breach of such covenants by obtaining injunctive or specific relief from a
court of competent jurisdiction, without the necessity of posting bond or
proving lack of an adequate remedy at law.
11.3.3 The remedies specified in this Section 11.3 shall be
cumulative and not exclusive of other remedies available at law or in
equity.
ARTICLE XII
TRANSFER RESTRICTIONS
Unless otherwise agreed by NEI, except for transfers to immediate
family members of Shareholder who agree to be bound by the restrictions in this
Article XII (or trusts for the benefit of Shareholder or such family members),
for a period of one year from the Closing Date, except pursuant to Article XIV
hereof, Shareholder shall not sell, assign, exchange, transfer or otherwise
dispose of any shares of NEI Stock received by him pursuant to this Agreement.
The certificates evidencing the NEI Stock will bear a legend substantially in
the form set forth below and containing such other information as NEI may deem
necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN CONSENT OF
THE ISSUER, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION OR OTHER DISPOSITION PRIOR TO
THE FIRST ANNIVERSARY OF THE DATE HEREOF. UPON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
ARTICLE XIII
FEDERAL SECURITIES ACT REPRESENTATIONS
13.1 Compliance with Law. Shareholder acknowledges that the shares of NEI
Stock to be delivered to Shareholder pursuant to this Agreement have not been
and will not be registered under the 1933 Act (except as provided in Article
XIV) and may not be resold without compliance with the 1933 Act and regulations
thereunder. The NEI Stock is being acquired by Shareholder solely for his own
account, for investment purposes only, and with no present intention of
31
distributing, selling or otherwise disposing of such stock in connection with a
distribution. Shareholder represents and agrees that none of the shares of NEI
Stock issued to him will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except in full compliance with all
applicable provisions of the 1933 Act and the rules and regulations of the SEC.
The NEI Stock shall bear the following legend in addition to the legend required
under Article XII:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THE FEDERAL AND APPLICABLE STATE SECURITIES LAWS OR
THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH LAWS.
13.2 Economic Risk; Sophistication. Shareholder represents that he is able
to bear the economic risk of an investment in the NEI Stock and can afford to
sustain a total loss of such investment. Shareholder has substantial knowledge
and experience in making investment decisions of this type (or is relying on
qualified purchaser representatives with such knowledge and experience) and is
capable, either individually or together with such purchaser representatives, of
evaluating the merits and risks of this investment. Shareholder has had an
adequate opportunity to ask questions and receive answers from the officers of
NEI concerning the transaction contemplated hereby. Shareholder represents that
he is an "accredited investor" as defined in Rule 501(a) under the 1933 Act, or
if not an accredited investor, he has sufficient income and net worth to
withstand the risks of the investment contemplated hereby and, individually or
together with his purchaser representatives, is sufficiently sophisticated to
evaluate the merits and risks of such investment. Shareholder acknowledges that
the risks of this transaction include tax risks and Shareholder has consulted
with his tax advisors with respect to and fully accepts such risks.
ARTICLE XIV
REGISTRATION RIGHTS
14.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever NEI proposes to register any NEI Stock for its own or others'
account under the 1933 Act for a public offering, other than: (a) any shelf or
other registration of shares to be used as consideration for acquisitions of
additional businesses by NEI; or (b) registrations relating to employee benefit
plans, NEI shall give Shareholder written notice of its intent to do so. Upon
the written request of Shareholder given within 10 days after receipt of such
notice, NEI shall cause to be included in such registration all of the NEI Stock
issued to Shareholder pursuant to this Agreement which Shareholder requests,
other than shares of NEI Stock which may then be sold under Rule 144(k) (or any
similar or successor provision) under the 1933 Act, and other than shares of NEI
Stock that have been theretofore sold by Shareholder in accordance with the 1933
Act, provided that NEI shall have the right to reduce pro rata the number of
shares of each Selling Shareholder included in such registration to the extent
that inclusion of such shares could, in the written opinion of tax counsel to
NEI or its
32
independent auditors, jeopardize the tax status of the transactions contemplated
hereby and by the Registration Statement. In addition, if NEI is advised in
writing in good faith by any managing underwriter of an underwritten offering of
securities pursuant to a registration statement under this Section 14.1 that the
number of shares to be sold by Persons other than NEI is greater than the number
of such shares which may be offered without adversely affecting the success of
the offering, NEI may reduce pro rata (among Shareholder and all other selling
security holders in the offering) the number of shares offered for the accounts
of such Persons to a number deemed satisfactory by the managing underwriter. If
Shareholder disapproves of the terms of the underwriting, Shareholder may elect
to withdraw therefrom by written notice to NEI and the managing underwriter, and
Shareholder's shares of NEI Stock so withdrawn shall be withdrawn from
registration.
14.2 Registration Procedures. Whenever NEI is required to register shares
of NEI Stock pursuant to Section 14.1, NEI will, as expeditiously as possible:
14.2.1 Prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, NEI will
furnish a representative of Shareholder with copies of such documents
proposed to be filed) as promptly as practicable.
14.2.2 Notify Shareholder of any stop order issued or threatened by
the SEC and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
14.2.3 Prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period of not less than 120 days, cause the prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 474 under the 1933 Act; and comply with the provisions of
the 1933 Act applicable to it with respect to the disposition of all
securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in the registration statement or prospectus, as
amended or supplemented.
14.2.4 Furnish to Shareholder such number of copies of such
registration statement, each supplement thereto and the prospectus included
therein (including each preliminary prospectus and any term sheet
associated therewith), and such other documents as he may reasonably
request in order to facilitate the disposition of the shares.
14.2.5 If requested by the managing underwriter or underwriters, if
any, or Shareholder, promptly incorporate in a prospectus supplement or
post-effective amendment or term sheet such information as the managing
underwriter or underwriters or Shareholder, as the case may be, reasonably
requests to be included therein, including, without limitation,
33
information with respect to the number of shares of NEI Stock being sold by
Shareholder to any underwriter or underwriters, the purchase price being
paid therefor and the terms of the offering, and promptly make all required
filings of the same by prospectus supplement or post-effective amendment.
14.2.6 Make available for inspection by Shareholder, any underwriter
participating in any disposition pursuant to such registration statement,
counsel retained by Shareholder, counsel for the underwriters and any
accountant or other agent retained by Shareholder or any underwriter
(collectively, the "Inspectors"), all financial and other records and
pertinent corporate documents of NEI (the "Records") as shall be reasonably
necessary to enable them to exercise their due diligence responsibility,
and cause NEI's officers, directors and employees to supply all information
reasonably requested by any such Inspectors in connection with such
registration statement; provided, that records which NEI determines, in
good faith, to be confidential and which NEI notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless: (a) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement; or (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or administrative agency after delivery of
sufficient notice to NEI to enable NEI to contest such subpoena or order.
14.2.7 Take all other steps reasonably necessary to effect the
registration of the shares of NEI Stock contemplated hereby.
14.2.8 Use best efforts to register the securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as shall be reasonably requested by Shareholder, and to keep
such registration or qualification effective during the period such
registration statement is required to be kept effective, provided that NEI
shall not be required to become subject to taxation, to qualify generally
to do business or to file a general consent to service of process in any
such states or jurisdictions.
14.2.9 Cause all such shares of NEI Stock to be listed or included
not later than the date of the first sale of such shares under the
registration statement on any securities exchange or trading system on
which similar securities issued by NEI are then listed or included.
14.2.10 Notify Shareholder at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the period
that NEI is required to keep the registration statement effective of the
happening of any event as a result of which the prospectus included in such
registration statement (as then in effect), together with any associated
term sheet, contains an untrue statement of material fact or omits to state
any fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made) not
misleading, and, at the request of Shareholder, NEI will promptly prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of the covered shares, such prospectus will not
34
contain an untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made) not
misleading.
All expenses incurred in connection with a registration under this Article
XIV and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printing and
accounting fees and expenses, but excluding underwriting commissions and
discounts attributable to the shares being registered hereunder), shall be borne
by NEI.
14.3 Indemnification.
14.3.1 In connection with any registration under Section 14.1, NEI
shall indemnify, to the extent permitted by law, Shareholder against any
and all loss, cost, claim, damage, expense (including reasonable attorneys'
fees), liability and cause of action arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or associated
term sheet or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or
contained in or omitted from any information furnished in writing to NEI by
Shareholder expressly for use therein, or by a Shareholder's failure to
deliver a copy of the registration statement or prospectus or any amendment
or supplement thereto after NEI has furnished Shareholder with a sufficient
number of copies of the same.
14.3.2 In connection with any registration under Section 14.1,
Shareholder shall furnish to NEI in writing such information concerning
Shareholder and his proposed offering of shares as is reasonably requested
by NEI for use in any such registration statement or prospectus and will
indemnify, to the extent permitted by law, NEI, its directors, officers and
representatives and each Person who controls NEI (within the meaning of the
0000 Xxx) against any and all loss, cost, claim, damage, expense (including
reasonable attorneys' fees), liability and cause of action resulting from
any untrue or alleged untrue statement of material fact or any omission or
alleged omission to state therein a material fact required to be stated in
the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not
misleading, but only to the extent such untrue or alleged untrue statement
or omission or alleged omission is contained in or omitted from information
furnished in writing to NEI by Shareholder expressly for use in the
registration statement. Notwithstanding the foregoing, the liability of
Shareholder under this Section 14.3.2 shall be limited to an amount equal
to the net proceeds actually received by Shareholder from the sale of the
relevant shares covered by the registration statement.
14.3.3 The indemnification provided hereunder shall be governed by the
procedures recited in Section 9.3.
35
14.4 Underwriting Agreement. In connection with each registration pursuant
to Section 14.1 covering an underwritten registered offering, NEI and
Shareholder agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement for companies of NEI's size and
investment stature, including indemnification; provided, Shareholder shall be
exempt from any indemnification of the managing underwriters other than with
respect to information provided by Shareholder to NEI or the managing
underwriters specifically for inclusion in the registration statement.
14.5 Transfer of Rights. The right to cause NEI to register shares of NEI
Stock under this Agreement may be assigned by Shareholder, but only to a member
of Shareholder's immediate family or a trust or partnership for the benefit of
Shareholder or such family members.
14.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of NEI Stock
to the public without registration, NEI agrees to use its reasonable efforts to:
14.6.1 Make current public information regarding NEI available as
contemplated in Rule 144 under the 1933 Act for a period of five years
beginning 90 days following the effective date of the Registration
Statement.
14.6.2 File with the SEC on a timely basis all reports and other
documents required of NEI under the 1934 Act at any time after it has
become subject to such reporting requirements.
14.6.3 So long as Shareholder owns any restricted NEI Stock, furnish
to Shareholder upon written request a written statement by NEI as to its
compliance with the current public information requirements of Rule 144 (at
any time from and after 90 days following the effective date of the
Registration Statement), and of the 1934 Act (any time after it has become
subject to such reporting requirements), a copy of the most recent annual
or quarterly report of NEI, and such other reports and documents so filed
as Shareholder may reasonably request in availing himself of any rule or
regulation of the SEC allowing Shareholder to sell any such shares without
registration.
ARTICLE XV
MISCELLANEOUS
15.1 Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party. Any attempted assignment
without such written consent shall be null and void and without legal effect.
Notwithstanding the foregoing, NEI may assign to any wholly-owned subsidiary of
NEI its right to acquire the Assets.
36
15.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the state of Missouri, without reference
to conflicts of laws rules.
15.3 Notices. All notices or other communications required or permitted
hereunder shall be in writing and may be hand delivered or sent by certified
mail, commercial overnight delivery service or facsimile transmission:
If to Shareholder: Xxxxx Xxxxxxxx, Xx.
Potter Electric Company, Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
FAX: (000) 000-0000
with a copy to: Xxxxxx & Xxxx, Chartered
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
FAX: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
If to NEI: Nationwide Electric, Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
FAX: (000) 000-0000
Attn: President
with a copy to: Xxxxxxx, Mag & Fizzell, P.C.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
FAX: (000) 000-0000
Attn: Xxxx Xxxxx
or to such other address or facsimile number as any party may provide the others
in writing.
15.4 Entire Agreement. Together with the Schedules and Exhibits hereto,
this constitutes the entire agreement of the parties with respect to the subject
matter hereof and may not be modified, altered or amended except by written
instrument executed by all parties hereto.
15.5 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
15.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which, taken together, shall
constitute a single instrument.
37
15.7 Headings. Headings in this Agreement are for convenience of
reference only and shall have no effect in the interpretation of this Agreement.
15.8 Expenses. Each party shall pay its own expenses in connection with
the transaction contemplated hereby, whether or not such transaction is
consummated. Without limitation, the fees and expenses of Shareholder's legal,
accounting and financial advisors shall be paid by Shareholder.
15.9 Survival. Those provisions of this Agreement which by their nature
are intended to survive the Closing Date shall so survive for the period recited
therein, or if no time period is recited therein, shall survive indefinitely.
15.10 Costs. If any action or proceeding is brought for the enforcement
or interpretation of this Agreement or because of an alleged dispute, breach,
default or misrepresentation in connection with this Agreement, the successful
or prevailing party shall be entitled to recover reasonable attorneys' fees and
all other costs and expenses incurred in such action or proceeding, in addition
to any other relief to which it may be entitled.
15.11 Publicity. No public disclosure, announcement or publicity with
respect to the transaction contemplated hereby, the IPO or the NEI Plan of
Organization may be made except by and with the prior approval of NEI. NEI
shall coordinate with Shareholder in making announcements of this transaction to
the Company's customers, suppliers and employees.
38
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
NATIONWIDE ELECTRIC, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
"NEI"
POTTER ELECTRIC COMPANY, INC.
By: /s/ Xxxxx Xxxxxxxx, Xx.
-------------------------------------
Xxxxx Xxxxxxxx, Xx., President
The "Company"
SHAREHOLDER:
/s/ Xxxxx Xxxxxxxx, Xx.
-----------------------------------------
Xxxxx Xxxxxxxx, Xx.
NATIONWIDE ELECTRIC, INC. -- POTTER ELECTRIC COMPANY, INC
ASSET PURCHASE AGREEMENT SIGNATURE PAGE
