EXCHANGE AGREEMENT
among
KRANZCO REALTY TRUST,
NEW AMERICA NETWORK, INC.,
XXXXXX X. XXXX,
XXXXXXX X. XXXX
and
XXXXXXX X. XXXX, AS TRUSTEE OF THE
GRANTOR RETAINED ANNUITY TRUST OF
XXXXXX X. XXXX U/A DTD. MAY 12, 1998
Dated as of ____________, 1998
TABLE OF CONTENTS
Article Page
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1. Exchange Offer; Tendering of Shares; Closing.......................... 2
1.2. Tendering of Shares........................................... 2
1.3. Closing ..................................................... 2
2. Representations and Warranties of NAI and the Sellers................. 2
2.1. Organization and Good Standing................................ 2
2.2. Capitalization of NAI; Ownership of Seller Shares............. 3
2.3. Organization and Good Standing of Subsidiaries................ 3
2.4. Options ..................................................... 4
2.5. Authority of NAI and the Sellers.............................. 4
2.6. Consents and Approvals; No Violations......................... 4
2.7. Assets and Liabilities........................................ 5
2.8. Insurance..................................................... 5
2.9. Owned and Leased Real Property................................ 5
2.10. Contracts; Debt Instruments................................... 5
2.11. Absence of Certain Changes or Events.......................... 5
2.12. Financial Statements, Undisclosed Liabilities................. 6
2.13. Books and Records............................................. 6
2.14. Taxes......................................................... 6
2.15. Related Party Transactions.................................... 7
2.16. Litigation.................................................... 7
2.17. Compliance with Applicable Law................................ 7
2.18. No Brokers, Finders or Investment Bankers..................... 8
2.19. Absence of Changes in Benefit Plans; ERISA Compliance......... 8
2.20. Employees & Employee Policies................................. 8
2.21. Broker Members, Brokerage and Other Services.................. 8
2.22. Environmental Representations................................. 9
2.23. Intellectual Property Representations......................... 9
2.24. Access to Records............................................. 9
2.25. Responses from Buyer.......................................... 9
2.26. No Representation Regarding Investment........................ 9
2.27. Private Company; Prior Offerings.............................. 10
2.28. Informed Investment Decisions................................. 10
2.29. Receipt of Buyer Registration Statements...................... 10
3. Representations and Warranties of the Buyer........................... 10
3.1. Organization and Good Standing................................ 10
3.2. Capitalization of the Buyer................................... 10
3.3. Authority of the Buyer........................................ 11
3.4. Consents and Approvals; No Violations......................... 11
3.5. Buyer Common Shares........................................... 11
3.6. No Brokers, Finders or Investment Bankers..................... 11
3.7. SEC Filings................................................... 12
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Article Page
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4. Covenants............................................................. 12
4.1. Other Transaction Proposals................................... 12
4.2. Conduct of Businesses......................................... 13
4.3. Filings; Other Action......................................... 14
4.4. Inspection of Records; Opportunity to Ask Questions........... 15
4.5. Publicity..................................................... 15
4.6. Listing Application........................................... 15
4.7. Further Action................................................ 15
4.8. Sale of Securities of NAI and the Buyer....................... 15
4.9. Expenses...................................................... 16
5. Conditions............................................................ 16
5.1. Conditions to Each Party's Obligation to Consummate the
Exchange Offer................................................ 16
5.2. Conditions to Obligations of the Buyer to Consummate the
Exchange Offer................................................ 17
5.3. Conditions to Obligation of NAI and the Sellers to Consummate
the Exchange Offer............................................ 18
6. Termination........................................................... 19
6.1. Termination by Mutual Consent................................. 19
6.2. Termination by the Sellers, NAI or the Buyer.................. 19
6.3. Termination by the Sellers or NAI............................. 19
6.4. Termination by the Buyer...................................... 20
6.5. Effect of Termination and Abandonment......................... 20
6.6. Extension; Waiver............................................. 20
7. Indemnification....................................................... 21
7.1. By the Sellers................................................ 21
7.2. By the Buyer.................................................. 22
7.3. By NAI........................................................ 23
7.4. Limitation on Indemnification................................. 24
7.5. Escrow........................................................ 24
8. General Provisions.................................................... 25
8.1. Survival...................................................... 25
8.2. Notices....................................................... 25
8.3. Assignment; Binding Effect; Benefit........................... 26
8.4. Entire Agreement.............................................. 26
8.5. Amendment..................................................... 26
8.6. Governing Law................................................. 26
8.7. Counterparts.................................................. 27
8.8. Headings...................................................... 27
8.9. Interpretation................................................ 27
8.10. Waivers....................................................... 27
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Article Page
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8.11. Incorporation................................................. 27
8.12. Severability.................................................. 27
8.13. Enforcement of Agreement...................................... 27
8.14. Non-Recourse.................................................. 27
Exhibit A Unanimous Written Consent of Shareholders of NAI
Exhibit B-1 Xxxxxx Xxxx Employment Agreement
Exhibit B-2 Xxxxxxx Xxxx Employment Agreement
Exhibit C Escrow Agreement
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EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement"), dated as of ____________,
1998, among Kranzco Realty Trust, a Maryland real estate investment trust (the
"Buyer"), New America Network, Inc., a Delaware corporation, which conducts
business under the name New America International ("NAI"), Xxxxxx X. Xxxx ("X.
Xxxx"), Xxxxxxx X. Xxxx, ("X. Xxxx" and together with X. Xxxx, the "Finns")
and Xxxxxxx X. Xxxx, as Trustee of the Grantor Retained Annuity Trust of
Xxxxxx X. Xxxx u/a dtd. May12, 1998, the "Trust", and together with the Finns,
the "Sellers").
RECITALS
WHEREAS, the Buyer desires to exchange $8,000,000 of ten-year
convertible subordinated notes of the Buyer (the "Buyer Notes") for 80% of the
issued and outstanding shares of common stock, par value $.01 per share, of
NAI ("NAI Common Stock") pursuant to an exchange offer (the "Exchange Offer")
to be conducted in accordance with a prospectus included as part of a
Registration Statement on Form S-4 (the "Exchange Offer Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act");
WHEREAS, subject to the terms and conditions of this Agreement, the
Buyer will conduct the Exchange Offer in accordance with the Exchange Offer
Registration Statement;
WHEREAS, the Sellers own an aggregate of 10,082,997 shares of NAI
Common Stock, representing 77.7% of the issued and outstanding shares of NAI
Common Stock;
WHEREAS, in connection with the Exchange Offer, on March 20, 1998,
the Buyer, NAI and the Finns entered into a letter of intent (the "Letter of
Intent"), pursuant to which, subject to the terms and conditions of this
Agreement, the Sellers agreed, among other things, (i) to tender 80% of their
shares of NAI Common Stock to the Buyer in the Exchange Offer, (ii) in the
event that less than 80% of all of the issued and outstanding shares of NAI
Common Stock are tendered to the Buyer in connection with the Exchange Offer,
to tender such additional number of their shares of NAI Common Stock such that
at least 80% of all of the issued and outstanding shares of NAI Common Stock
are tendered to the Buyer in connection with the Exchange Offer (provided that
in no event shall the Sellers be required to tender more than 90% of the
shares of NAI Common Stock owned by the Sellers) and (iii) make certain
representations and warranties to the Buyer in respect of NAI and the
information contained in the Exchange Offer Registration Statement and the
Distribution Registration Statement (as defined below) relating to NAI;
WHEREAS, the parties hereto desire to enter into this Agreement in
order to formalize the matters agreed to in the Letter of Intent and certain
other matters; and
WHEREAS, immediately following the consummation of the Exchange
Offer, (i) NAI intends to reincorporate as a Maryland corporation, through the
merger of NAI with and into a wholly-owned subsidiary of NAI, (ii) the Buyer
intends to distribute 70.2% of the issued and outstanding shares of NAI Common
Stock to its shareholders (the "Distribution") and (iii) immediately following
the Distribution, NAI intends to distribute to its shareholders (including the
shareholders of the Buyer who receive NAI Common Stock as part of the
Distribution) rights ("Rights") to purchase one share of NAI Common Stock at a
price of $2.00 per share, each as more fully described in the prospectus
included as part of a Registration Statement on Form S-1 (the "Distribution
Registration Statement") under the Securities Act;
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. Exchange Offer; Tendering of Shares; Closing
1.1. Exchange Offer. Subject to the terms and conditions of this
Agreement, the Buyer agrees to conduct the Exchange Offer in accordance with
the Exchange Offer Registration Statement.
1.2. Tendering of Shares. The Sellers hereby agree that each of them
will tender 80% of his shares of NAI Common Stock in the Exchange Offer;
provided, however, that in the event that less than 80% of the issued and
outstanding shares of NAI Common Stock are tendered to the Buyer in connection
with the Exchange Offer, the Sellers shall tender such additional number of
their own shares of NAI Common Stock such that at least 80% of the issued and
outstanding shares of NAI Common Stock are tendered to the Buyer in connection
with the Exchange Offer; provided further, however, that in no event shall the
Sellers be required to tender more than 90% of the shares of NAI Common Stock
owned by the Sellers.
1.3. Closing. Subject to the terms and conditions of this Agreement
and the Exchange Offer Registration Statement, the closing of the Exchange
Offer (the "Closing") shall take place at the offices of Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxx & Xxxxxx LLP, 1290 Avenue of the Americas, New York, New York,
as promptly as practicable following the Expiration Date (as defined in the
Exchange Offer Registration Statement) and in accordance with the Exchange
Offer Registration Statement. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".
ARTICLE 2
2. Representations and Warranties of NAI and the Sellers. NAI and
the Sellers, jointly and severally, represent and warrant to the Buyer as
follows:
2.1. Organization and Good Standing. NAI is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own,
operate, lease and encumber its properties and assets and to carry on its
business as it is now being conducted. NAI is licensed and qualified to do
business as a foreign corporation and is in good standing in all the states,
countries and jurisdictions listed on Schedule 2.1 hereto, which is a true,
complete and correct list of all of the states, countries and jurisdictions in
which NAI is required to be licensed and qualified to do business as a foreign
corporation or in which it owns or leases property other than any state,
country or jurisdiction where the failure to be so licensed or qualified would
not have a material adverse effect on the condition (financial or otherwise),
business, prospects, properties, net worth or results of operations of NAI and
its subsidiaries taken as a whole. NAI and the Sellers have delivered
to Buyer true, complete and correct copies of the Certificate of Incorporation
of NAI and its Bylaws, in each case, as amended and/or restated.
2.2. Capitalization of NAI; Ownership of Seller Shares. The
authorized stock of NAI consists of 20,000,000 shares of NAI Common Stock and
1,000,000 shares of preferred stock ("NAI Preferred Stock") of which 201,000
shares have been designated as Series A Redeemable Convertible Preferred Stock
("NAI Series A Preferred Stock"). As of the date hereof, there are 12,974,414
shares of NAI Common Stock issued and outstanding and there are no shares of
NAI Series A Preferred Stock are issued and outstanding.
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All of the issued and outstanding shares of NAI Common Stock are owned
beneficially and of record by the shareholders of NAI, and to the best of the
Sellers' knowledge after due inquiry, are free of any liens, claims, actions,
rights of first refusal or other encumbrances. All such shares have been duly
authorized and are validly issued, fully paid and nonassessable and are free of
preemptive rights with no personal liability attaching to the ownership thereof.
There are no notations on the share certificates or in the stock records as to
any liens, claims, actions or rights of first refusal or other encumbrances. NAI
also has 534,675 shares of treasury stock (the "NAI Treasury Stock"). Set forth
as Schedule 2.2 is a true, complete and correct listing of each shareholder of
NAI, the number of shares owned by each such shareholder and the dates of
issuance of all such shares.
X. Xxxx is the record and beneficial owner of 7,385,890 shares of NAI
Common Stock (excluding shares of NAI Common Stock owned by the Trust), X.
Xxxx is the record and beneficial owner of 697,107 shares of NAI Common Stock
(excluding shares of NAI Common Stock owned by the Trust) and the Trust is the
record and beneficial owner of 2,000,000 shares of NAI Common Stock
(collectively, the "Seller Shares"). The Seller Shares are, and as of the
closing of the Exchange Offer will be, free and clear of any liens, claims,
actions, rights of first refusal and other circumstances.
2.3. Organization and Good Standing of Subsidiaries. (a) Each
Subsidiary (as defined below) of NAI (an "NAI Subsidiary") is a corporation
duly organized, validly existing and in good standing under the laws of its
state of jurisdiction and has all requisite corporate power and authority to
own, operate, lease and encumber its properties and assets and to carry on its
business as it is now being conducted. Each NAI Subsidiary is licensed and
qualified to do business and is in good standing in all the states, countries
and jurisdictions listed on Schedule 2.3(a) hereto, which is a true, complete
and correct list of all of the states, countries and jurisdictions in which
each NAI Subsidiary is required to be licensed and qualified to do business or
in which it owns or leases property other than any state, country or
jurisdiction where the failure to be so licensed or qualified would not have a
material adverse effect on the condition (financial or otherwise), business,
prospects, properties, net worth or results of operations of such NAI
Subsidiary, taken as a whole. NAI and the Sellers have delivered to the Buyer
true, complete and correct copies of the Articles of Incorporation and Bylaws,
in each case, as amended and/or restated for each NAI Subsidiary.
(b) Each NAI Subsidiary is wholly-owned by NAI and the ownership
interest of NAI in each NAI Subsidiary, is free of any liens, claims or other
encumbrances. All shares of each NAI Subsidiary have been duly authorized and
are validly issued, fully paid and nonassessable and are free of preemptive
rights with no personal liability attaching to the ownership thereof. Set forth
on Schedule 2.3(b) is a true, complete and correct listing of each NAI
Subsidiary. "Subsidiary" of any Person means any corporation, partnership,
limited liability company, joint venture or other legal entity of which such
Person (either directly or through or together with another Subsidiary of such
Person) owns any of the capital stock or other equity interests of such
corporation, partnership, limited liability company, joint
venture or other legal entity. As used herein, "Person" means an individual,
corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
2.4. Options. Except as set forth as Schedule 2.4, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which NAI or any NAI
Subsidiary is a party or by which such entity is bound, obligating NAI or any
NAI Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of stock, voting securities or other ownership
interest of NAI or any NAI Subsidiary or obligating NAI or any NAI Subsidiary
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking (other than to
NAI or an NAI Subsidiary).
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2.5. Authority of NAI and the Sellers. NAI and the Sellers have all
requisite power (corporate, in the case of NAI, and trust, in the case of the
Trust) and authority to execute and deliver this Agreement, the other
documents set forth as Schedule 2.5 and any other documents contemplated by
this Agreement or such documents or the transactions contemplated thereby (the
"Transaction Documents"), to consummate the transactions contemplated by the
Transaction Documents and to take all other actions required to be taken by
them pursuant to the provisions hereof and thereof. The execution, delivery
and performance by NAI and the Sellers and the consummation by NAI and the
Sellers of the transactions contemplated by the Transaction Documents, have
been approved by all requisite corporate action of NAI and trust action on the
part of the Trust, and no other corporate or trust proceedings on the part of
NAI or the Trust, as the case may be, are necessary to authorize the
execution, delivery and performance of the Transaction Documents. The
Transaction Documents have been duly and validly executed and delivered by NAI
and the Sellers, as the case may be, and constitute valid and binding
agreements of NAI and the Sellers, as the case may be, enforceable against NAI
and the Sellers in accordance with their respective terms.
2.6. Consents and Approvals; No Violations. Except as set forth in
Schedule 2.6 hereto, no filing or registration with, and no consent,
authorization, declaration or approval of, any governmental body, court,
arbitration board, tribunal or authority ("Governmental Entity"), or any third
party, is necessary for the execution, delivery and performance by NAI or the
Sellers of the Transaction Documents or the consummation of the transactions
contemplated thereby. The execution, delivery and performance by NAI and the
Sellers of the Transaction Documents and the transactions contemplated
thereby, will not (i) constitute any violation or breach of any provision of
the charter or By-laws of NAI or any NAI Subsidiary or the trust agreement of
the Trust, or (ii) constitute any violation or breach of any provision of, or
constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any liens, pledges,
mortgages, deeds of trust, security interests, claims against title, charges,
options or other encumbrances ("Encumbrances") upon any of the assets of NAI,
any NAI Subsidiary or the Sellers under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions under (A) the Certificate of Incorporation or the By-laws of NAI or
the comparable charter or organizational documents or partnership or similar
agreement (as the case may be) of any NAI Subsidiary, each as amended or
supplemented to the date of this Agreement, or (B) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, license, franchise, permit, concession, contract, or
other instrument, or other obligation to which NAI, any NAI Subsidiary or the
Sellers is a party, or by which NAI, any NAI Subsidiary, the Sellers or any of
their properties is bound or affected, or (iii) conflict with or constitute
any violation of any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to NAI, any NAI Subsidiary or the Sellers.
2.7. Assets and Liabilities. NAI and each NAI Subsidiary has good and
valid title to all assets used in their respective businesses, free and clear
of any Encumbrances. The assets reflected on the balance sheet being delivered
pursuant to Section 2.12 hereto constitute all of the assets used in, and are
sufficient for, the operation of NAI's business as it is presently conducted.
2.8. Insurance. NAI and the Sellers acknowledge that NAI and each NAI
Subsidiary has adequate insurance coverage for their respective assets.
Schedule 2.8 is a true, complete and correct listing of all property and
casualty policies in effect for NAI and its Subsidiaries and copies of all
such property and casualty policies have been delivered to the Buyer. All such
policies are in full force and effect and no notice of cancellation,
threatened cancellation, default or non-compliance has been received with
respect thereto.
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2.9. Owned and Leased Real Property. Neither NAI nor any NAI
Subsidiary owns any real property. Set forth on Schedule 2.9 is a true, complete
and accurate list of all leases of real property under which NAI or any NAI
Subsidiary is either the lessor or lessee. To the best knowledge of the Sellers,
each such lease is the legal, valid and binding obligation of the lessor and
lessee thereof, enforceable in accordance with its terms. True, complete and
correct copies of all leases have been delivered to the Buyer.
2.10. Contracts; Debt Instruments. Neither NAI, any NAI Subsidiary
nor the Sellers has received a written notice that NAI or any NAI Subsidiary
is in violation of or in default under (nor to the best knowledge of NAI and
the Sellers does there exist any condition which upon the passage of time or
the giving of notice or both would cause such a violation of or default under)
any loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement, arrangement
or understanding, to which it is a party or by which it or any of its
properties or assets is bound, except as set forth in Schedule 2.10(a) hereto,
nor to the best knowledge of NAI and the Sellers does such a violation or
default exist, except to the extent that such violation or default,
individually or in the aggregate, would not have a material adverse effect on
the business, assets, properties, financial condition or results of operations
of NAI and the NAI subsidiaries taken as a whole (an "NAI Material Adverse
Effect"). Set forth on Schedule 2.10(b) is a true, complete and correct list
of all contracts and agreements to which NAI or any NAI Subsidiary is a party
which are not set forth on another Schedule hereto. NAI and the Sellers have
delivered to the Buyer true, correct and complete copies of the contracts and
agreements listed on Schedule 2.10(c).
Set forth as Schedule 2.10(d) is a true, complete and correct list of
each loan or credit agreement, note, bond, mortgage, indenture and any other
agreement and instrument pursuant to which any indebtedness of NAI or any NAI
Subsidiary is outstanding or may be incurred. Neither NAI nor any NAI
Subsidiary is in default under any such loan or credit agreement, note, bond,
mortgage, indenture or any other agreement.
2.11. Absence of Certain Changes or Events. Since the date of the
most recent audited financial statements ("NAI Financial Statement Date") NAI
and the NAI Subsidiaries have conducted their business only in the ordinary
course (including the acquisition of properties and issuance of securities)
and there has not been (a) any material adverse change in the business,
financial condition, or results of operations or prospects of NAI and the NAI
Subsidiaries taken as a whole (an "NAI Material Adverse Change"), nor has
there been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in an NAI Material Adverse Change, (b) any
split, combination or reclassification of any of NAI's shares of Common Stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, or giving the right to acquire by
exchange or exercise, shares of its Common Stock or any issuance of an ownership
interest in, any NAI Subsidiary, (c) any damage, destruction or loss, whether or
not covered by insurance, that has or would have an NAI Material Adverse Effect,
(d) any change in accounting methods, principles or practices by NAI or any NAI
Subsidiary materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles ("GAAP") or (e) any amendment of any employment, consulting,
severance, retention or any other agreement between NAI or any NAI Subsidiary
and any officer of NAI or any NAI Subsidiary, true, complete and correct copies
of which agreements and amendments thereof are listed on Schedule 2.11 hereto,
or (f) any redemption of the shares of NAI's capital stock other than the
redemption of the outstanding NAI Series A Preferred Stock for $202,000. There
is no employment or severance contract, or other agreement requiring payments,
or cancellation of indebtedness to which NAI or an NAI Subsidiary is a party or
other obligation required to be made or satisfied by NAI or any NAI Subsidiary
upon a change of control or otherwise as a result of the execution of the
Transaction Documents or the consummation of any of the transactions
contemplated by the Transactions Documents.
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2.12. Financial Statements, Undisclosed Liabilities. The consolidated
financial statements of NAI for the last three fiscal years ended June 30,
1997 and six months ended December 31, 1997 have been prepared in accordance
with GAAP, applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly presented, in accordance
with the applicable requirements of GAAP. Neither NAI nor any of the NAI
Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth
on a consolidated balance sheet of NAI or in the notes thereto) other than as
set forth in such financial statements. The Sellers and NAI have delivered to
the Buyer copies of all financial statements of NAI and its Subsidiaries for
the three fiscal years ended June 30, 1995, 1996, 1997 and the six months
ended December 31, 1997.
2.13. Books and Records. The books of account and all other financial
records of NAI and each NAI Subsidiary are true, complete and correct in all
material respects, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements delivered by NAI. The minute books and other records of
NAI and each NAI Subsidiary have been made available to the Buyer, contain
accurate records of all meetings and accurately reflect in all material
respects all other actions of the shareholders, the directors and any
committees.
2.14. Taxes. Except as set forth in Schedule 2.14, NAI and each NAI
Subsidiary has timely filed all federal, state, local and foreign tax returns
required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Entity having authority to do so) through the
date hereof and such returns are complete, accurate and comply with all
applicable laws and NAI and each NAI Subsidiary has timely paid all Taxes (as
defined below) required to be paid by them. True, correct and complete copies of
all federal, state, local and foreign tax returns filed by NAI and each NAI
Subsidiary and all communications relating thereto have been delivered to the
Buyer. There are no claims or assessments for the collection of any taxes from
NAI or any NAI Subsidiary, which have been asserted, are pending, or, to the
knowledge of the Sellers and NAI, threatened. There are no audits relating to
Taxes of NAI or any NAI Subsidiary pending, or, to the knowledge of the Sellers
and NAI, threatened. The most recent audited financial statements reflect an
adequate reserve for all material Taxes payable by NAI and each NAI Subsidiary
for all taxable periods and portions thereof through the date of such financial
statements. Neither NAI nor any NAI Subsidiary has incurred any liability for
Taxes other than in the ordinary course of business. No event has occurred, and
no condition or circumstance exists, which presents a risk that any Tax
described in the preceding sentence will be imposed upon NAI or any NAI
Subsidiary. To the best knowledge of NAI and the Sellers, no deficiencies for
any Taxes have been proposed, asserted or assessed against NAI or any NAI
Subsidiary, and no requests for waivers of the time to assess any such Taxes are
pending. As used in this Agreement, "Taxes" shall include all federal, state,
local and foreign income, property, withholding, sales, franchise, employment,
excise and other taxes, tariffs or governmental charges of any nature
whatsoever, together with penalties, interest or additions to Tax with respect
thereto. No outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or tax returns has been
given by or on behalf of NAI. No federal, state, local or foreign audits or
other administrative proceedings or court proceedings ("Audits") exist or have
been initiated with regard to any Taxes or tax returns of NAI and NAI has not
received any written notice that such an Audit is pending or threatened with
respect to any Taxes due from or with respect to NAI or any tax return filed by
or with respect to NAI. NAI has not filed a consent pursuant to Section 341(f)
of the Internal Revenue Code of 1986 (the "Code") (or any predecessor provision)
or agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset, as such term is defined in Section 341(f)(4) of the Code,
owned by NAI. NAI has no liability for Taxes of any person pursuant to Treasury
Regulation ss.1.1502-6 (or any similar provision of state, local or foreign law)
and NAI is not a party to any tax sharing agreement. NAI is not a party to any
contract, agreement or other arrangement which could result in the payment of
amounts that could be nondeductible by reason of Section 280G of the Code.
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2.15. Related Party Transactions. Set forth on Schedule 2.15 hereto
is a true, complete and correct list of all arrangements, agreements and
contracts entered into by NAI or any NAI Subsidiary with (a) any consultant,
(b) any person who is an officer, director, employee, Affiliate or shareholder
of NAI or any NAI Subsidiary, any relative of any of the foregoing or any
entity of which any of the foregoing is an Affiliate or shareholder, officer,
director or employee. "Affiliate" shall have the same meaning as such term is
defined in Rule 405 promulgated under the Securities Act.
2.16. Litigation. There are no actions, suits or proceedings pending,
or to the best knowledge of the Sellers and NAI, threatened in writing against
or affecting NAI or any NAI Subsidiary, at law or in equity, that individually
or in the aggregate, could reasonably be expected to (i) have an NAI Material
Adverse Effect, or (ii) prevent the consummation of any of the transactions
contemplated by the Transaction Documents, nor are there any orders,
injunctions, judgements or decrees of any court, arbitrator or other
Governmental Entity, to which NAI and any NAI Subsidiary is or has been a
party or by which NAI and any NAI Subsidiary's properties are, or have been,
bound or which, insofar as reasonably can be foreseen in the future would
have, any such effect.
2.17. Compliance with Applicable Law. (a) Except as set forth on
Schedule 2.17(a), neither NAI nor any NAI Subsidiary is in violation of any
order of any Governmental Entity, or any law, ordinance, governmental rule or
regulation ("Laws") to which NAI or any NAI Subsidiary is subject, except for
such violations that, individually or in the aggregate would not have an NAI
Material Adverse Effect.
(b) Neither NAI nor any NAI Subsidiary has either prepared or
distributed a franchise disclosure document. Except as set forth on Schedule
2.17(b), NAI has not offered a franchise as that term is defined by the
federal and state franchise laws. Except as set forth on Schedule 2.17 (b),
NAI is exempt from and has not violated any federal or state franchise laws.
2.18. No Brokers, Finders or Investment Bankers. Neither NAI, nor any
of its officers or directors, or the Sellers, has employed any broker or
finder or investment banker or incurred any liability which remains
unsatisfied for any brokerage or finder's fee or commission or similar
payments in connection with this Agreement and the transactions contemplated
hereby.
2.19. Absence of Changes in Benefit Plans; ERISA Compliance. Except
as set forth on Schedule 2.19, there has not been any adoption of any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other
employee benefit plan, arrangement or understanding (whether or not legally
binding) providing benefits to any current or former employee, officer or
director of NAI, any NAI Subsidiary, or any person Affiliated with NAI under
Section 414(b), (c), (m) or (o) of the Code (collectively, "NAI Benefit
Plans").
All NAI Benefit Plans, including any such plan that is an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), are in compliance in all material
respects with all applicable requirements of law, including but not limited to
ERISA and the Code and neither NAI nor any NAI Subsidiary has any material
liabilities or obligations with respect to any such NAI Benefit Plan, whether
accrued, contingent or otherwise. The execution of, and performance of the
transactions contemplated by the Transaction Documents will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any NAI Benefit Plan, policy, arrangement or agreement or any
trust or loan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in
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benefit or obligation to fund benefits with respect to any employee or director.
There are no severance agreements or severance policies applicable to employees
of NAI or any NAI Subsidiary.
2.20. Employees & Employee Policies. Set forth as Schedule 2.20(a) is
a true, complete and correct list of each employee and such employee's
position and salary as of the date hereof. A copy of each employee handbook of
NAI currently in effect has previously been made available to the Buyer. Such
handbook fairly and accurately summarizes all material employee policies,
vacation policies and payroll practices of NAI and each NAI Subsidiary.
2.21. Broker Members, Brokerage and Other Services. Set forth as
Schedule 2.21(a) is a true, complete and correct list of each real estate
broker that is a member of the NAI network (the "Broker Member") and each
agreement between NAI and a Broker Member (the "Broker Member Agreement"). The
Sellers and NAI have delivered to the Buyer true, correct and complete copies
of the Broker Member Agreements. To the best of the Sellers' and NAI's
knowledge after due inquiry, each Broker Member is licensed as a real estate
broker in each jurisdiction where such Broker Member is required to be
licensed. Each Broker Member Agreement is in full force and effect and no
party to any Broker Member Agreement has given notice of termination or its
intent to terminate any Broker Member Agreement. Except as listed on Schedule
2.21(b) hereto, (i) each Broker Member is current in the payment of license
transactional fees due NAI and, as of the date hereof, there are no
commissions due any Broker Member by NAI or any NAI Subsidiary. Set forth on
Schedule 2.21(c) is a true, complete and correct listing of each assignment in
progress. Set forth on Schedule 2.21(d) is a true, complete and correct
listing of all corporate and institutional clients and true, complete and
correct copies of all contracts with corporate and institutional clients still
in effect has been provided to the Buyer. Set forth on Schedule 2.21(e) is a
true, complete listing of all ancillary services contracts, and true, complete
and correct copies of all ancillary services contracts have been delivered to
the Buyer.
2.22. Environmental Representations. None of NAI or any NAI
Subsidiaries or, to the best of NAI's and the Sellers' knowledge after due
inquiry, any other person has caused or permitted (a) the unlawful presence of
any hazardous substances, hazardous materials, toxic substances or waste
materials (collectively, "Hazardous Materials") on any of the properties of NAI
or any NAI Subsidiary (the "NAI Properties"), or (b) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the NAI Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have an NAI Material Adverse
Effect; and in connection with the construction on or operation and use of the
NAI Properties, NAI and the NAI Subsidiaries have not failed to comply in any
material respect with all applicable local, state and federal environmental
laws, regulations, ordinances and administrative and judicial orders relating to
the generation, recycling, reuse, sale, storage, handling, transport and
disposal of any Hazardous Materials, except to the extent such failure to
comply, individually or in the aggregate, would not have an NAI Material Adverse
Effect.
2.23. Intellectual Property Representations. NAI and each NAI
Subsidiary has valid, legal rights to use, all trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights,
whether or not registered (collectively, the "Intellectual Property Rights"),
which are necessary to, or used in, their respective businesses. Neither NAI
nor any NAI Subsidiary is a defendant in any claim, suit, action or proceeding
relating to their respective businesses which involves a claim of infringement
of any trademarks or service marks. Neither the Sellers nor NAI has any
knowledge of any existing infringement by another person of any of the
Intellectual Property Rights belonging to NAI or any NAI Subsidiary. Neither
the Sellers nor NAI has received notice of the infringement by NAI or any NAI
Subsidiary of any
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infringement of any Intellectual Property Rights of a third party. Set forth on
Schedule 2.23 is a true, complete and correct list of all Intellectual Property
Rights of NAI or any NAI Subsidiary.
2.24. Access to Records. NAI and the Sellers have been afforded full
and complete access to all information and other materials relating to the
Buyer and its affiliates and the properties, business, financial condition and
operations of the Buyer and any other matters, relating to the Buyer or the
Transaction Documents and the transactions contemplated thereby which NAI or
the Sellers have requested, or deemed necessary in evaluating the merits and
risks of acquiring the Buyer Notes and the Buyer Common Shares (as defined
herein), and have been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of any information provided. NAI
and the Sellers acknowledge that they have received copies of the documents
filed by the Buyer with the Securities and Exchange Commission (the "SEC") as
set forth on Schedule 2.24 (the "SEC Documents").
2.25. Responses from Buyer. The Sellers have had the opportunity to
ask and have answered any questions concerning the financial condition,
business or operations or any other matter with respect to the Buyer and its
affiliates or with respect to the merits and risks of an acquisition of the
Buyer Notes or the Buyer Common Shares, and NAI and the Sellers have received
complete and satisfactory answers to all such questions.
2.26. No Representation Regarding Investment. No representation to
NAI or the Sellers has been made with respect to any tax or economic benefits
to be derived from an investment in the Buyer Notes or the Buyer Common Shares
or as to any other matter. NAI and the Sellers are relying solely upon their
own knowledge and upon the advice of their personal advisors with respect to
the tax, economic and other aspects of an investment in the Buyer Notes or the
Buyer Common Shares issuable upon conversion of the Notes.
2.27. Private Company; Prior Offerings. NAI is not now, nor has it
ever been, subject to section 12 or 15 of the Securities Exchange Act of 1934,
as amended. Each offer and issuance of securities by NAI has been pursuant to
a valid exemption from registration under the Securities Act, and applicable
state securities laws and have been conducted in compliance with all federal
and state securities laws. The NAI Common Stock has never been traded on an
"established securities market" within the meaning of Section 453(k)(2) of the
Code.
2.28. Informed Investment Decisions. The Sellers have carefully
reviewed and understand the SEC Documents and other information provided by
the Buyer and they have such knowledge and experience in financial, business
and real estate matters that they are capable of evaluating the merits and
risks of an acquisition of the Buyer Notes and the Buyer Common Shares and of
making an informed investment decision. NAI and the Sellers have retained
their own counsel, accountant and/or other advisors as to the legal, tax and
related matters concerning the acquisition of the Buyer Notes and the Buyer
Common Shares.
2.29. Receipt of Buyer Registration Statements. Sellers have received
and reviewed copies of the Exchange Offer Registration Statement and the
Distribution Registration Statement (collectively, the "Registration
Statements"). Such Registration Statements do not contain an untrue statement
of a material fact relating to NAI or any NAI Subsidiary or their respective
officers, directors or stockholders or omit to state any material fact
relating to NAI or any NAI Subsidiary or their respective officers, directors
or stockholders required to be stated herein, or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
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ARTICLE 3
3. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers as follows:
3.1. Organization and Good Standing. (i) The Buyer is a real estate
investment trust duly formed and existing by virtue of the laws of the State
of Maryland and is in good standing with the State Department of Assessment
and Taxation of Maryland ("SDAT") and (ii) the Buyer has all requisite trust
power to own and operate, lease and encumber its properties and assets and to
carry on its business as it is now being conducted.
3.2. Capitalization of the Buyer. The authorized shares of beneficial
interest of the Buyer consist of 100,000,000 shares of beneficial interest. As
of December 31, 1997, the Buyer had issued and outstanding 222,750 Series C
cumulative redeemable preferred shares of beneficial interest; 11,155 Series A-1
increasing rate cumulative convertible preferred shares of beneficial interest;
1,183,331 Series B cumulative convertible preferred shares of beneficial
interest; 1,800,000 Series D cumulative convertible preferred shares of
beneficial interest; and 10,415,427 common shares of beneficial interest. All of
the issued and outstanding shares of beneficial interest of the Buyer have been
duly authorized and are validly issued, fully paid and nonassessable. Except as
set forth on Schedule 3.2 hereto, as of the date hereof, there are no
outstanding options or warrants to purchase shares of beneficial interest of the
Seller.
3.3. Authority of the Buyer. The Buyer has all requisite trust power
and authority to execute and deliver this Agreement and the other Transactions
Documents and to consummate the transactions contemplated by this Agreement
and the other Transaction Documents and to take all other actions required to
be taken by it pursuant to the provisions hereof and thereof. The execution,
delivery and performance by the Buyer of this Agreement and the other
Transaction Documents and the consummation by the Buyer of the transactions
contemplated by this Agreement and the other Transaction Documents have been
duly and validly authorized and approved by all requisite trust action of the
Buyer and no other trust proceedings on the part of the Buyer are necessary to
authorize the execution, delivery and performance of this Agreement and the
other Transaction Documents or to consummate the transactions contemplated
thereby. This Agreement and the other Transaction Documents have been duly and
validly executed and delivered by the Buyer and constitute valid and binding
agreements of the Buyer enforceable against the Buyer in accordance with their
terms.
3.4. Consents and Approvals; No Violations. Except for applicable
requirements of state Blue Sky laws, if any, and as set forth in Schedule 3.4
hereto, no filing or registration with, and no consent, authorization,
declaration or approval of, any Governmental Entity, or any third party, is
necessary for the execution, delivery and performance by the Buyer of this
Agreement or the other Transaction Documents or the consummation of the
transactions contemplated by this Agreement and the other Transaction
Documents. Neither the execution, delivery and performance by the Buyer of
this Agreement or the other Transaction Documents nor the consummation by the
Buyer of the transactions contemplated by this Agreement or the other
Transaction Documents will (i) conflict with or constitute any violation or
breach of any provision of the Declaration of Trust of the Buyer, (ii)
conflict with or constitute any violation or breach of any provision of, or
constitute a default (or an event which, with the giving of notice or the
passage of time or both) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any Encumbrances upon any of the properties of the
Buyer under, or result in being declared void, voidable or without further
binding effect, any of the terms, conditions or provisions of any agreement,
or any license, franchise, permit, concession, lease, contract, or other
instrument, or other obligation to which the Buyer is a party, or by which the
Buyer or any of its
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properties is bound or affected or (iii) conflict with or constitute any
violation of any judgment, order, decree, statute, law, ordinance rule or
regulation applicable to the Buyer.
3.5. Buyer Common Shares. The Buyer has reserved for issuance a
sufficient number of Common Shares of the Buyer (the "Buyer Common Shares") to
satisfy its obligations to issue common shares of the Buyer upon the
conversion of the Buyer Notes. The Buyer Common Shares to be issued upon
conversion of the Buyer Notes will be validly issued, fully paid and
non-assessable shares at the time so issued. There are no preemptive rights
with respect to the Buyer Common Shares.
3.6. No Brokers, Finders or Investment Bankers. Neither the Buyer,
nor any of its officers or directors has employed any broker or finder or
investment banker or incurred any liability which remains unsatisfied for any
brokerage or finder's fee or commission or similar payments in connection with
this Agreement and the transactions contemplated hereby.
3.7. SEC Filings. As of the date hereof, the Buyer has filed timely
all reports and any definitive proxy or information statements required to be
filed by the Seller with the Securities and Exchange Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.
3.8. Access to Records. The Buyer has been afforded full and complete
access to all information and other materials relating to NAI and the
business, financial condition and operations of NAI and any other matters,
relating to NAI or the Transaction Documents and the transactions contemplated
thereby which the Buyer has requested, or deemed necessary in evaluating the
merits and risks of acquiring the NAI Common Stock, and has been afforded the
opportunity to obtain any additional information necessary to verify the
accuracy of any information provided.
3.9. Responses from NAI. The Buyer has had the opportunity to ask and
have answered any questions concerning the financial condition, business or
operations or any other matter with respect to NAI or with respect to the
merits and risks of an acquisition of the NAI Common Stock, and the Buyer has
received complete and satisfactory answers to all such questions.
3.10. No Representation Regarding Investment. Except as set forth in
this Agreement, no representation to the Buyer has been made with respect to
any tax or economic benefits to be derived from an investment in the NAI
Common Stock or as to any other matter. The Buyer is relying solely upon its
own knowledge and upon the advice of its personal advisors with respect to the
tax, economic and other aspects of an investment in the NAI Common Stock.
ARTICLE 4
4. Covenants.
4.1. Other Transaction Proposals. Unless and until this Agreement
shall have been terminated in accordance with its terms, neither NAI nor the
Sellers shall, nor shall NAI permit any of its subsidiaries or Affiliates, or
any of its or their respective officers, directors or employees, or any
investment banker, financial advisor, attorney, accountant for, or other
representative of, retained by them to, (a) solicit, initiate, encourage
(including by way of furnishing information) or facilitate, any inquiry or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any acquisition or purchase of 10% or more of the assets of, or any 5% or
greater equity interest in, NAI or any of its subsidiaries or any tender offer
(including a self tender offer) or exchange offer, merger, consolidation,
business combination, sale of
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10% or more of the assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving NAI or any of its subsidiaries or
any other transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay any of the
transactions contemplated by the Transaction Documents, the Exchange Offer
Registration Statement or the Distribution Registration Statement (the "Proposed
Transactions") or materially dilute the benefits to the Buyer of such
transactions (any "Other Transaction Proposal") or agree to or endorse any Other
Transaction Proposal, (b) propose, or enter into or participate in any
discussions or negotiations regarding any of the foregoing, furnish to any other
person any information with respect to its business, properties or assets or any
of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing set forth in subsection (a) above or
this subsection (b), or (c) sell, transfer or encumber any real property
investments or partnership or joint venture interests of NAI or enter into any
agreement to do so. The preceding sentence shall not prohibit (i) furnishing
information pursuant to an appropriate confidentiality letter concerning NAI and
its businesses, properties or assets to a third party who has made any bona fide
Other Transaction Proposal after the date hereof which is not as a result of a
breach of this Section 4.1, (ii) engaging in discussions or negotiations with
such a third party who has made any bona fide Other Transaction Proposal after
the date hereof which is not as a result of a breach of this Section 4.1, or
(iii) taking and disclosing to its stockholders a position with respect to any
bona fide Other Transaction Proposal which is not as a result of a breach of
Section 4.1, but in each case referred to in the foregoing clauses (i) through
(iii) only after the Board of Directors of NAI concludes in good faith following
consultation with, and receipt of an opinion of, outside counsel that such
action is necessary for the Board of NAI to comply with its fiduciary
obligations under applicable law. If NAI receives notice from a third party of
any Other Transaction Proposal after the date hereof, then NAI shall immediately
inform the Buyer of the receipt thereof, and provide a general summary of such
proposal, and shall keep the Buyer informed of the status of any such proposal
and any response to such proposal. Nothing in this Section 4.1 shall (x) permit
NAI or the Sellers to terminate this Agreement (except as specifically provided
in Article 6 hereof), (y) permit NAI or the Sellers to enter into any agreement
with respect to any Other Transaction Proposal during the term of this Agreement
(it being agreed that during the term of this Agreement, neither NAI, the NAI
Subsidiaries nor the Sellers shall enter into any agreement with any person that
provides for, or in any way facilitates, any Other Transaction Proposal), or (z)
affect any other obligation of any party under this Agreement.
4.2. Conduct of Businesses.
(i) Prior to the Closing, unless the other party has consented in
writing thereto, the Buyer, NAI and the Sellers (with respect to NAI):
(a) Shall use their reasonable best efforts, and shall cause
each of their respective Subsidiaries to use their reasonable best
efforts, to preserve intact their business organizations and goodwill
and keep available the services of their respective officers and
employees;
(b) Shall promptly notify the other of any material emergency
or other material change in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects or the normal
course of their businesses or in the operation of their properties, any
material complaints, investigations or hearings (or communications
indicating that the same may be contemplated) of or before any
Governmental Entity, or the breach in any material respect of any
representation or warranty contained herein; and
(c) Shall promptly deliver to the other true and correct copies
of any report, statement or schedule filed with the SEC subsequent to
the date of this Agreement.
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(ii) Prior to the Closing Date, unless the Buyer has consented in
writing thereto, NAI and each of the NAI Subsidiaries shall, and the Sellers
shall cause NAI and each of the NAI Subsidiaries to:
(a) Conduct their operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore
conducted;
(b) Not amend their Certificate of Incorporation or Bylaws or
other organizational documents, in each case as amended, supplemented
and/or restated to the date hereof;
(c) Not (i) issue any shares of their capital stock, effect any
stock split, reverse stock split, stock dividend, recapitalization or
other similar transaction, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the date
hereof to acquire any shares of their capital stock, (iii) increase any
compensation or enter into or amend any employment agreement with any
of its present or future officers or directors, or (iv) adopt any new
employee benefit plan (including any stock option, stock benefit or
stock purchase plan) or amend any existing employee benefit plan in any
material respect, except for changes which are less favorable to
participants in such plans;
(d) Not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock, or (ii) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any of the
NAI Subsidiaries, or make any commitment for any such action except for
the redemption of the NAI Preferred Stock in accordance with its terms;
and
(e) Not sell, lease or otherwise dispose of (i) any of its
capital stock of or other interests in the NAI Subsidiaries or (ii)
except in the ordinary course of business, any of its other assets
which are material, individually or in the aggregate;
(f) Not make any loans, advances or capital contributions to, or
investments in, any other Person in excess of $1,000;
(g) Not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent audited consolidated
financial statements (or the notes thereto) of NAI delivered to the
Buyer in accordance with Section 2.12 hereof or incurred in the
ordinary course of business consistent with past practice;
(h) Not enter into any commitment, contract or agreement which
may result in total payments or liability by or to it in excess of
$10,000, other than broker membership agreements or affiliate member
agreements entered into in the ordinary course of business; and
(i) Not enter into any commitment, contract or agreement with
any officer, director, consultant or affiliate of NAI or any of the NAI
Subsidiaries.
(iii) Prior to the Closing Date, unless the Sellers have consented in
writing thereto, the Buyer shall not effect any stock split, reverse stock
split, recapitalization or other similar transactions.
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4.3. Filings; Other Action. Subject to the terms and conditions
herein provided, each of the parties hereto shall: (a) use all reasonable best
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Closing Date with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Closing Date from, Governmental Entities in connection with the execution and
delivery of this Agreement and the consummation of the Proposed Transactions and
(ii) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; (b) use all reasonable best efforts to
obtain in writing any consents required from third parties in form reasonably
satisfactory to NAI, the Sellers and the Buyer necessary to effectuate the
Proposed Transactions, and (c) use all reasonable best efforts to take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the Proposed
Transactions. If, at any time after the Closing Date, any further action is
necessary or desirable to carry out the purpose of this Agreement, the proper
officers and directors of NAI, the Buyer and the Sellers shall take all such
necessary action.
4.4. Inspection of Records; Opportunity to Ask Questions. From the
date hereof to the Closing, NAI shall allow all designated officers,
attorneys, accountants and other representatives of the Buyer access at all
reasonable times to the records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs, of NAI and the NAI Subsidiaries. NAI and the Sellers will continue to
cause the managerial employees, counsel, regular independent certified public
accountants and consultants of NAI and each of the NAI Subsidiaries to be
available upon reasonable notice to answer questions of the Buyer and its duly
authorized representatives. Any investigation carried out by the Buyer or its
authorized representatives shall not affect or mitigate NAI's or the Sellers'
covenants, representations and warranties in this Agreement, which shall
continue in full force and effect.
4.5. Publicity. The Buyer and NAI shall, subject to their legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies) consult with each other before issuing any press release or
making any other public statement, or making any disclosure to any third
party, with respect to the Proposed Transactions, and shall not issue any such
press release, make any such public statement, or make any such disclosure,
without the prior written consent of the other party which consent shall not
be unreasonably withheld. It is further agreed that in determining whether or
not a press release or other public statement or disclosure should be issued
or made and its contents, the overriding concerns shall be that the Buyer is a
public company and its obligations as a result thereof and all issues shall be
resolved with that in mind.
4.6. Listing Application. The Buyer shall promptly prepare and submit
to the NYSE a supplemental listing application covering the Buyer Common
Shares, and shall use its reasonable efforts to obtain, prior to the Closing
Date, approval for the listing of such Buyer Common Shares, subject to
official notice of issuance.
4.7. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Closing Date by the other party of each of the
conditions of performance set forth herein or the waiver thereof, perform such
further acts and execute such documents as may reasonably be required to
effect the Proposed Transactions.
4.8. Sale of Securities of NAI and the Buyer. The Sellers shall not
sell or transfer, directly or indirectly, any shares of NAI Common Stock, any
Buyer Notes, any Buyer Common Shares or any Rights held by the Sellers,
directly or indirectly, for a period of three years from the Closing Date,
except that (i) the Finns may transfer shares of NAI Common Stock, Buyer Notes
(other than Buyer Notes held in Escrow
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pursuant to Section 7.5 hereof), and Buyer Common Shares to members of their
immediate family (subject to such transferees agreeing to be bound by this
Agreement) and (ii) the Trust may transfer shares of NAI Common Stock, Buyer
Notes (other than Buyer Notes held in escrow pursuant to Section 7.5 herein),
and Buyer Common Shares to the Finns). The Buyer Common Shares, the Buyer Notes
and the NAI Common Stock shall bear restrictive legends to the effect of the
foregoing.
4.9. Expenses. If the Proposed Transactions are consummated, all
costs and expenses incurred by all parties in connection with the Proposed
Transactions shall be paid by NAI, including, without limitation, the filing
fee in connection with the filing of the Exchange Offer Registration Statement
with the SEC, accounting fees, attorneys' fees and the expenses incurred in
connection with printing and mailing the Exchange Offer Registration
Statement.
4.10. Reincorporation Merger. On the date hereof, the Sellers have
entered into a nonunanimous written consent (the "Written Consent") of the
shareholders of NAI, in the form attached hereto as Exhibit A, authorizing,
among other things, the merger of NAI with and into New America International,
Inc., a Maryland corporation and a wholly-owned subsidiary of NAI. The Finns
agree that they will not take any action to modify, revoke, rescind or in any
other way affect the Written Consent and the transactions authorized therein
without the written consent of the Buyer.
4.11. Board of Directors of NAI. The Buyer and the Sellers agree that
immediately following the consummation of the Exchange Offer, the Board of
Directors of NAI shall be reconstituted to consist of Xxxxxx X. Xxxx, Xxxxxxx
X. Xxxx, Xxxxxx Xxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx
Xxxxxxxxx, Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx.
4.12. Restriction on Convertibility of the Buyer Notes.
Notwithstanding the fact that the Buyer Notes, by their terms, become
convertible into Buyer Common Shares two years after the Closing Date, the
Sellers agree that they will not convert the Buyer Notes issued to them into
Buyer Common Shares until a date at least three years after the Closing Date;
provided, however, that in the event that (i) the Buyer, in accordance with the
terms of the Buyer Notes, sends out a notice of redemption relating to the Buyer
Notes prior to a date three years after the Closing or (ii) there is a Change in
Control or an Event of Default (each as defined in the Exchange Offer
Registration Statement), then the Sellers may convert the Buyer Notes issued to
them, in accordance with the terms of the Buyer Notes, prior to a date three
years after the Closing but in no event prior to the date one year after the
date of issuance of the Buyer Notes.
ARTICLE 5
5. Conditions.
5.1. Conditions to Each Party's Obligation to Consummate the Exchange
Offer. The respective obligation of each party to consummate the Exchange
Offer shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which prohibits the
consummation of the Proposed Transactions. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
best efforts to have any such injunction lifted.
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(b) The Exchange Offer Registration Statement and the
Distribution Registration Statement shall have become effective and all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the Proposed Transactions shall have been obtained and no stop order
with respect to any of the foregoing shall be in effect.
(c) 10,379,531 shares of NAI Common Stock, representing 80%
of the total number of issued and outstanding shares of NAI Common Stock have
been validly tendered and not withdrawn prior to the Expiration Date pursuant
to the Exchange Offer Registration Statement.
(d) The Buyer shall have obtained the approval for the
listing of the Buyer Common Shares on the NYSE, subject to official notice of
issuance.
(e) All consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity or third parties
required in connection with the Proposed Transactions shall have been obtained
or made.
(f) Each party shall have delivered all such documents or
certificates and disclosed such information as the other party may reasonably
request.
5.2. Conditions to Obligations of the Buyer to Consummate the
Exchange Offer. The obligation of the Buyer to consummate the Exchange Offer
shall be subject to the fulfillment at or prior to the Closing of the
following conditions, unless waived by the Buyer:
(a) NAI and the Sellers shall have performed their agreements
contained in this Agreement required to be performed on or prior to the
Closing and the representations and warranties of NAI and the Sellers
contained in this Agreement (without giving effect to any materiality
qualifications or exceptions contained therein) shall be true and
correct in all material respects as of the Closing Date as if made on
the Closing Date, and the Buyer shall have received a certificate of
the President or a Vice President of NAI and of each of the Sellers,
dated the Closing Date, certifying to such effect;
(b) NAI and the Finns shall have entered into employment
agreements (the "Employment Agreements"), substantially in the form of
Exhibits B-1 and B-2 hereto.
(c) The Sellers and an escrow agent shall have entered into an
Escrow Agreement (the "Escrow Agreement"), substantially in the form of
Exhibit C hereto, and the principal amount of $800,000 of the Buyer
Notes issued to X. Xxxx and the principal amount of $200,000 of the
Buyer Notes issued to X. Xxxx shall be deposited with the escrow agent
pursuant to the Escrow Agreement.
(d) The Buyer shall have received evidence in writing that
Xxxxxxx Xxxxxx, Xxxxxx XxXxxxxxx, and Xxxx Xxxxxxxx have resigned from
the Board of Directors of NAI, effective as of the Closing Date.
(e) The Buyer shall have received the opinion of Greenbaum,
Rowe, Xxxxx, Xxxxx, Xxxxx & Xxxxxx LLP, dated the Closing Date, to the
effect set forth in Sections 2.1 (except with respect to foreign
qualification for which no opinion need be given), 2.2, 2.3 (except
with respect to foreign qualification for which no opinion need be
given), 2.5, 2.6, 2.17 (except with respect to laws governing brokerage
commissions and franchise laws as to which no opinion need be given),
2.27 and 2.29, subject to customary assumptions, limitations and
qualifications.
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(f) Any waiver or consent of the holders of the NAI Preferred
Stock required in connection with the Proposed Transactions shall have
been obtained.
(g) From the date of this Agreement through the Closing, there
shall not have occurred any change in the financial condition,
business, operations or prospects of NAI and the NAI Subsidiaries,
taken as a whole, that would have or would be reasonably likely to have
an NAI Material Adverse Effect.
(h) Xxxxx Xxxx shall have entered into a letter agreement
pursuant to which she has agreed not to convert the Buyer Notes issued
to her until a date at least three years following the Closing Date;
provided, however, that in the event that (i) the Buyer, in accordance
with the terms of the Buyer Notes, sends out a notice of redemption
relating to the Buyer Notes prior to a date three years after the
Closing or (ii) there is a Change of Control or an Event of Default
(each as defined in the Exchange Offer Registration Statement), then
Xxxxx Xxxx may convert the Buyer Notes issued to her, in accordance
with the terms of the Buyer Notes, prior to a date three years after
the Closing but in no event prior to the date one year after the date
of issuance of the Buyer Notes..
5.3. Conditions to Obligation of NAI and the Sellers to Consummate
the Exchange Offer. The obligations of NAI and the Sellers to consummate the
Exchange Offer shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions, unless waived by the Sellers:
(a) The Buyer shall have performed its agreements contained
in this Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of the Buyer contained in
this Agreement (without giving effect to any materiality
qualifications or exceptions contained therein) shall be true and
correct in all material respects as of the Closing Date as if made on
the Closing Date, and NAI and the Sellers shall have received a
certificate of the President or a Vice President of the Buyer, dated
the Closing Date, certifying to such effect.
(b) NAI shall have received the opinion of Xxxxxxxx
Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP or Xxxxxxx Xxxxxxx & Ingersoll
LLP, dated the Closing Date, substantially to the effect set forth in
Sections 3.1, 3.2, 3.3 and 3.4, subject to customary assumptions,
limitations and qualifications.
(c) NAI and the Finns shall have entered into the Employment
Agreements.
(d) From the date of this Agreement through the Closing,
there shall have not occurred any material adverse change in the
financial condition, business, operations or prospects of the Buyer
and its subsidiaries taken as a whole; provided, however, that any
change in the stock price of the Buyer will not constitute a material
adverse change under this Section 5.3(d).
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ARTICLE 6
6. Termination.
6.1. Termination by Mutual Consent. This Agreement and the Exchange
Offer may be terminated at any time prior to the Closing Date, by the mutual
written consent of the Buyer and NAI.
6.2. Termination by the Sellers, NAI or the Buyer. This Agreement may
be terminated and the Exchange Offer may be terminated by action of the
Sellers, the Board of Directors of NAI or the Board of Trustees of the Buyer
if (a) the Exchange Offer shall not have been consummated by December 31,
1998, or (b) a United States federal or state court of competent jurisdiction
or other Governmental Entity shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable,
provided, that the party seeking to terminate this Agreement pursuant to this
clause (b) shall have used all reasonable efforts to remove such order,
decree, ruling or injunction; and provided, in the case of a termination
pursuant to clause (a) above, that the terminating party shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the
failure referred to in said clause.
6.3. Termination by the Sellers or NAI. This Agreement may be
terminated and the Exchange Offer may be terminated at any time prior to the
Closing Date, by action of the Sellers or the Board of Directors of NAI, if
(a) in the exercise of its good faith judgment following consultation with,
and receipt of an opinion of, outside counsel that such action is necessary
for the Board of Directors of NAI to comply with its fiduciary duties to its
shareholders imposed by law, the Board of Directors of NAI determines that
such termination is required by reason of any Other Transaction Proposal being
made, or (b) there has been a breach by the Buyer of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to materially impair the Buyer's ability to consummate the transactions
contemplated by the Transaction Documents, which breach is not curable by
December 31, 1998, (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the Buyer,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by NAI or the Sellers to the Buyer, (d)
the consideration being offered in the Exchange Offer for each share of NAI
Common Stock is reduced below $.7707 of the Buyer Notes, without the consent
of the Sellers, or (e) after the date hereof: (i) any domestic or
international event or act or occurrence has materially disrupted, or in the
opinion of the Sellers will in the immediate future materially disrupt, the
securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter market; (iii) a banking
moratorium shall have been declared either by Federal or New York State
authorities; (iv) there shall have occurred any outbreak or material
escalation of hostilities or other calamity or crises the effect of which on
the financial markets of the United States or on the United States is such as
to make it, in the judgment of the Sellers, impracticable to consummate the
Proposed Transactions; or (v) any restriction materially adversely affecting
the Proposed Transactions which was not in effect on the date hereof shall
have become effective. Notwithstanding the foregoing, any termination pursuant
to this Section 6.3(a) shall only be effective if, simultaneously with such
termination, all sums that NAI and the Sellers are required to pay to the
Buyer pursuant to Section 6.5 have been paid.
6.4. Termination by the Buyer. This Agreement may be terminated and
the Exchange Offer may be terminated at any time prior to the Closing Date, by
action of the Board of Trustees of the Buyer, if (a) after the date hereof:
(i) any domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Buyer will in the immediate future
materially disrupt, the securities markets; (ii) a
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general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market; (iii) a banking moratorium shall have been
declared either by Federal or New York State authorities; (iv) there shall
have occurred any outbreak or material escalation of hostilities or other
calamity or crises the effect of which on the financial markets of the United
States or on the United States is such as to make it, in the judgment of the
Buyer, impracticable to consummate the Proposed Transactions; or (v) any
restriction materially adversely affecting the Proposed Transactions which was
not in effect on the date hereof shall have become effective; (b) there has
been a breach by NAI or the Sellers of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have an NAI Material Adverse Effect or, materially impair NAI's or the
Seller's ability to consummate the transaction contemplated by the Transaction
Documents, which breach is not curable by December 31, 1998, or (c) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of NAI or the Sellers which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the Buyer to NAI and the Sellers.
6.5. Effect of Termination and Abandonment.
(a) If an election is made to terminate this Agreement pursuant to
Section 6.3(a), 6.4(b) or 6.4(c), (i) NAI and the Sellers shall immediately
reimburse the Buyer for the Buyer's costs and expenses, including, without
limitation, legal and accounting fees, printing and filing fees, incurred in
connection with its due diligence and negotiation and efforts to enter into
this Agreement, prepare, file and process the Registration Statements and
consummate transactions contemplated hereby and thereby and (ii) if NAI and
the Sellers consummate any Other Transaction Proposal relating to in excess of
10% of NAI's assets or outstanding capital stock within 180 days of December
31, 1998 or at any time thereafter pursuant to a definitive agreement entered
into within such 180-day period, NAI and the Sellers shall immediately pay in
cash to the Buyer a termination fee of $1,000,000.
(b) If an election is made to terminate this Agreement pursuant to
Section 6.3(b) 6.3(c) or 6.3(d), the Buyer shall immediately reimburse NAI and
the Sellers for up to $100,000 of their costs and expenses, including, without
limitation, legal and accounting fees, incurred in connection with its due
diligence, negotiation and efforts to enter into this Agreement, prepare, file
and process the Registration Statements and consummate the transactions
contemplated hereby and thereby.
(c) In the event of termination of this Agreement and the
termination of the Exchange Offer pursuant to this Article 6, all obligations of
the parties hereto shall terminate, except the obligations of the parties
pursuant to this Section 6.5 and except for the provisions of Sections 8.3, 8.4,
8.5, 8.6, 8.7, 8.9, 8.10, 8.12, 8.13, and 8.14.
6.6. Extension; Waiver. At any time prior to the Closing Date, any
party hereto, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 7
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7. Indemnification.
7.1. By the Sellers. The Sellers and, in the event the transactions
contemplated by this Agreement are not consummated, NAI, jointly and
severally, agree to indemnify and hold harmless the Buyer and its respective
Affiliates, and their respective shareholders, partners, trustees, directors,
officers, employees, agents, successors and assigns (each an "indemnified
person") from and against, and to reimburse any such indemnified person when
incurred with respect to, any loss, damage, liability claim, cost and expense,
including reasonable attorneys' fees ("Losses") incurred by such indemnified
person by reason of or arising out of or in connection with (i) the breach of
any representation or warranty made by or on behalf of NAI or any Seller
contained in this Agreement, any other Transaction Document or any exhibit
hereto or thereto or in any schedule or certificate furnished or to be
furnished to the Buyer pursuant to or in connection with this Agreement, any
other Transaction Document or any of the transactions hereby contemplated;
(ii) the failure of NAI or any Seller to perform any agreement required by
this Agreement or any other Transaction Document to be performed by such
Person; and (iii) the allegation by any third party of the existence of any
state of facts which if it existed would constitute a breach of any
representation or warranty made by or on behalf of NAI or any Seller contained
in this Agreement, any other Transaction Document or any exhibit hereto or
thereto or in any schedule or certificate furnished or to be furnished to the
Buyer pursuant to or in connection with this Agreement any other Transaction
Document or any of the transactions hereby contemplated.
Each indemnified person agrees to give prompt notice to the Sellers
of any claim by any third party for which such indemnified party may request
indemnification under this Section 7.1 (except any failure or delay to give
such notice shall not relieve any Seller of its obligations hereunder unless
and only to the extent, if at all, any such Person has been irrevocably
prejudiced directly by reason of such failure or delay).
If (a) any such third party claim shall be a claim solely for
monetary damages, (b) the entire amount of such claim shall not be subject to
the limitations on indemnification set forth in Section 7.4 hereof, and (c)
the Sellers shall agree in writing within ten business days after receipt of
notice of such claim that they are required, pursuant to this Section 7.1, to
indemnify for the full amount of such claim, then the Sellers shall be
entitled to control the contest, defense, settlement or compromise of any such
claim (including the engagement of counsel in connection therewith), at their
own cost and expense, including the cost and expense of attorneys' fees in
connection with such contest, defense, settlement or compromise and each
indemnified person shall have the right to participate in the contest,
defense, settlement or compromise of any such claim at its cost and expense,
including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that, the Sellers shall not settle or
compromise any such claim without the prior written consent of the indemnified
persons, unless the sole relief provided is monetary damages that are paid in
full by the Sellers and such settlement includes an unconditional release of
the indemnified persons of all liabilities in respect of such claims.
If such claim shall not be solely a claim for monetary damages and/or
such claim shall be subject, in whole or in part, to the limitations on
indemnification set forth in Section 7.4, but the Sellers shall agree in
writing within ten business days after receipt of notice of such claim that
they are required, pursuant to this Section 7.1 (but subject to the
limitations set forth in Section 7.4), to indemnify each indemnified person
for the full amount of such claim, then the contest, defense, settlement and
compromise of such claim shall be controlled jointly by the Sellers, on the
one hand, and the indemnified persons, on the other hand (and any counsel
engaged in connection therewith shall be acceptable to both such groups), at
the cost and expense of the Sellers, including the cost and expense of
attorneys' fees in connection with such contest, defense, settlement or
compromise, and such claim shall not be settled or compromised unless the
indemnified persons, on the one hand, and the Sellers, on the other hand,
jointly approve such settlement or compromise.
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If such claim shall not be a claim for monetary damages or the Sellers
do not agree in writing within ten business days after receipt of notice of such
claim that the Sellers are required, pursuant to this Section 7.1, to indemnify
the indemnified persons for the full amount of such claim, then the indemnified
persons shall control the contest, defense, settlement or compromise of any such
claim (including the engagement of counsel in connection therewith), at the
Sellers' cost and expense, including the cost and expense of attorneys' fees in
connection with such contest, defense, settlement or compromise, and the Sellers
shall have the right to participate in the contest, defense, settlement or
compromise of any such claim at their own cost and expense, including the cost
and expense of attorneys' fees in connection with such participation; provided,
however, that the indemnified persons shall diligently defend any such claim and
shall not settle or compromise any such claim without the prior written consent
of the Sellers, which consent shall not be unreasonably withheld.
7.2. By the Buyer. The Buyer agrees to indemnify and hold harmless
the Sellers and their respective Affiliates, and their respective
shareholders, partners, directors, officers, employees, agents, successors and
assigns (each an "indemnified person") from and against, and to reimburse any
such indemnified person when incurred with respect to, any and all Losses
incurred by such indemnified person by reason of or arising out of or in
connection with (i) the breach of any representation or warranty made by or on
behalf of the Buyer contained in this Agreement, any other Transaction
Document or any exhibit hereto or thereto or in any schedule or certificate
furnished or to be furnished to the Sellers pursuant to or in connection with
this Agreement, any other Transaction Document or any of the transactions
hereby contemplated, (ii) the failure of the Buyer to perform any agreement
required by this Agreement or any other Transaction Document to be performed
by it, and (iii) the allegation by any third party of the existence of any or
state of facts which if it existed would constitute a breach of any
representation or warranty made by or on behalf of the Buyer contained in this
Agreement, any other Transaction Document or any exhibit hereto or in any
schedule or certificate furnished or to be furnished to the Sellers pursuant
to or in connection with this Agreement, any other Transaction Document or any
of the transactions hereby contemplated.
Each indemnified person agrees to give prompt notice to the Buyer of
any claim by any third party for which such indemnified party may request
indemnification under this Section 7.2 (except any failure or delay to give
such notice shall not relieve the Buyer of its obligations hereunder unless
and only to the extent, if at all, that the Buyer has been irrevocably
prejudiced directly by reason of such failure or delay).
If (a) any such third party claim shall be solely for monetary
damages and (b) the Buyer shall agree in writing within ten business days
after receipt of notice of such claim that it is required, pursuant to this
Section 7.2, to indemnify for the full amount of such claim, then the Buyer
shall be entitled to control the contest, defense, settlement or compromise of
any such claim (including the engagement of counsel in connection therewith),
at its own cost and expense, including the cost and expense of attorneys' fees
in connection with such contest, defense, settlement or compromise and each
indemnified person shall have the right to participate in the contest,
defense, settlement or compromise of any such claim at its own cost and
expense, including the cost and expense of attorneys' fees in connection with
such participation; provided, however, that, the Buyer shall not settle or
compromise any such claim without the prior written consent of the indemnified
persons, unless the sole relief provided is monetary damages that are paid in
full by the Buyer and such settlement includes an unconditional release of the
indemnified persons of all liabilities in respect of such claims.
If such claim shall not be solely a claim for monetary damages, but
the Buyer shall agree in writing within ten business days after receipt of
notice of such claim that it is required, pursuant to this Section 7.2, to
indemnify each indemnified person for the full amount of such claim, then the
contest, defense, settlement and compromise of such claim shall be controlled
jointly by the Buyer, on the one hand, and the indemnified
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person, on the other hand (and any counsel engaged in connection therewith
shall be acceptable to both such groups), at the cost and expense of the
Buyer, including the cost and expense of attorneys' fees in connection with
such contest, defense, settlement or compromise, and such claim shall not be
settled or compromised unless the indemnified persons, on the one hand, and
the Buyer, on the other hand, jointly approve such settlement or compromise.
If such claim shall not be a claim for monetary damages or the Buyer
does not agree in writing within ten business days after receipt of notice of
such claim that it is required, pursuant to this Section 7.2 to indemnify the
indemnified persons for the full amount of such claim, then the indemnified
persons shall control the contest, defense, settlement or compromise of any
such claim (including the engagement of counsel in connection therewith), at
the Buyer's cost and expense, including the cost and expense of attorneys'
fees in connection with such contest, defense, settlement or compromise, and
the Buyer shall have the right to participate in the contest, defense,
settlement or compromise of any such claim at their own cost and expense,
including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that the indemnified persons shall
diligently defend any such claim and shall not settle or compromise any such
claim without the prior written consent of the Buyer, which consent shall not
be unreasonably withheld.
7.3. By NAI. NAI agrees to indemnify and hold harmless the Buyer and
its respective Affiliates, and their respective shareholders, partners,
trustees, directors, officers, employees, agents, successors and assigns (each
an "indemnified person") from and against, and to reimburse any such
indemnified person when incurred with respect to, any Losses incurred by such
indemnified person by reason of or arising out of or in connection with the
failure of NAI to comply with (i) any Laws relating to real estate brokers or
(ii) any federal or state franchise Laws.
Each indemnified person agrees to give prompt notice to NAI of any
claim by any third party for which such indemnified party may request
indemnification under this Section 7.3 (except any failure or delay to give
such notice shall not relieve NAI of its obligations hereunder unless and only
to the extent, if at all, any such Person has been irrevocably prejudiced
directly by reason of such failure or delay).
If (a) any such third party claim shall be a claim solely for
monetary damages and (b) NAI shall agree in writing within ten business days
after receipt of notice of such claim that they are required, pursuant to this
Section 7.3, to indemnify for the full amount of such claim, then NAI shall be
entitled to control the contest, defense, settlement or compromise of any such
claim (including the engagement of counsel in connection therewith), at their
own cost and expense, including the cost and expense of attorneys' fees in
connection with such contest, defense, settlement or compromise and each
indemnified person shall have the right to participate in the contest,
defense, settlement or compromise of any such claim at its cost and expense,
including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that, NAI shall not settle or compromise any
such claim without the prior written consent of the indemnified persons,
unless the sole relief provided is monetary damages that are paid in full by
NAI and such settlement includes an unconditional release of the indemnified
persons of all liabilities in respect of such claims.
If such claim shall not be a claim solely for monetary damages or NAI
does not agree in writing within ten business days after receipt of notice of
such claim that NAI is required, pursuant to this Section 7.3, to indemnify
the indemnified persons for the full amount of such claim, then the
indemnified persons shall control the contest, defense, settlement or
compromise of any such claim (including the engagement of counsel in
connection therewith), at NAI's cost and expense, including the cost and
expense of attorneys' fees in connection with such contest, defense,
settlement or compromise, and NAI shall have the right to participate in the
contest, defense, settlement or compromise of any such claim at its own cost
and expense,
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including the cost and expense of attorneys' fees in connection with such
participation; provided, however, that the indemnified persons shall
diligently defend any such claim and shall not settle or compromise any such
claim without the prior written consent of NAI, which consent shall not be
unreasonably withheld.
7.4. Limitation on Indemnification(s). Except as set forth in the
proviso to this sentence, neither the Sellers, on the one hand, nor the Buyer,
on the other hand, shall be required to pay any amounts pursuant to clause (i)
or (iii) of Section 7.1, or pursuant to clause (i) or (iii) of Section 7.2
hereof (as the case may be) unless and until the aggregate of all Losses
(other than those hereinafter referred to in the proviso to this sentence)
incurred by all persons indemnified by such indemnifying parties under such
clauses exceeds $80,000, in which event such indemnifying parties shall be
liable, dollar-for-dollar, for the full amount of such Losses; provided that,
notwithstanding the foregoing, the Sellers shall in all events be obligated to
indemnify on a dollar-for-dollar basis from and against all Losses arising out
of or in connection with the breach or alleged breach of the representations
and warranties made in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.16, 2.18,
2.19, 2.27 and 2.29 and the Buyer shall be obligated to indemnify on a
dollar-for-dollar basis from and against all Losses arising out of or in
connection with the breach or alleged breach of the representations and
warranties made in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7. In no event
shall the Sellers be liable to the Buyer for any Losses for which a claim is
made against the Sellers under Section 7.1(i) or 7.1(iii) (other than those
arising out of or in connection with the breach or alleged breach of the
representations and warranties made in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6,
2.14, 2.16, 2.18, 2.19, 2.27 and 2.29) in excess of $1,000,000.
7.5. Escrow. In order to secure the obligations of the Seller to
indemnify the Buyer pursuant to this Article 7, on the Closing Date, X. Xxxx
and X. Xxxx are depositing with the escrow agent under the Escrow Agreement
$800,000 principal amount of Buyer Notes and $200,000 principal amount of
Buyer Notes, respectively. In any instance in which the Buyer has a claim for
indemnity under this Article 7, the Buyer agrees that it will make a demand
and a reasonable effort under the circumstances (which shall not require the
Buyer to institute any suit or other action) to collect such claim against the
funds, to the extent of such funds, then held under the Escrow Agreement,
prior to making any claim against the Sellers with respect to such claim
unless the claim exceeds the amount of such funds.
ARTICLE 8
8. General Provisions.
8.1. Survival. All statements, certifications, indemnifications,
representations and warranties made hereby by the parties to this Agreement,
and their respective covenants, agreements and obligations to be performed
pursuant to the terms hereof, shall survive the Closing, notwithstanding any
examination by or on behalf of any party hereto, notwithstanding any notice of
a breach or of a failure to perform not waived in writing and notwithstanding
the consummation of the transactions hereby contemplated with knowledge of
such breach or failure, and (except with respect to those made in Sections
2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.16, 2.18, 2.19, 2.27, 2.29, 3.1, 3.2, 3.3,
3.4, 3.5, 3.6 and 3.7 which shall survive without limitation, and those
contained in Section 2.14, which shall survive until the expiration of the
statute of limitations on the tax matters discussed therein) the
representations and warranties made hereby by the parties shall terminate on
the second anniversary of the Closing Date, except to the extent a party gives
written notice to the other parties of any breach thereof on or before such
date, and then only with respect to the matters described in such notice;
provided, however, that nothing herein contained shall modify or be construed
to modify in any respect whatsoever any covenant, agreement or obligation to
be performed by any party pursuant to the provisions of this Agreement.
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8.2. Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery
or certified or registered mail (return receipt requested and first-class
postage prepaid) and addressed as follows:
If to the Buyer:
Xx. Xxxxxx Xxxxxxxxx, President
Kranzco Realty Trust
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Xxxxxx, Esq.
Xxxxxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
If to the Sellers or, prior to the Closing Date, NAI:
Xx. Xxxxxx Xxxx, Chief Executive Officer
New America Network, Inc.
000 X.X. Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
With a copy to:
Xxx X. Xxxxxx, Esq..
Greenbaum, Rowe, Xxxxx,
Xxxxx, Xxxxx & Xxxxxx LLP
Metro Corporate Campus One
00 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so delivered.
8.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this
Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or
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their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
8.4. Entire Agreement. This Agreement, the Exhibits and the Schedules
and any documents delivered by the parties in connection herewith constitute
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings among the parties
with respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5. Amendment. This Agreement may be amended by the parties hereto.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
rules of conflict of laws. Each of NAI and the Sellers hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America located in the
State of New York (the "New York Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such courts),
waives any objection to the laying of venue of any such litigation in the New
York Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum.
8.7. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
8.8. Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
8.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
8.11. Incorporation. All Schedules and Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
8.12. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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8.13. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any New York
Court, this being in addition to any other remedy to which they are entitled
at law or in equity.
8.14. Non-Recourse. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of the Buyer by the undersigned in his capacity as a
trustee or officer of the Buyer, which has been formed as a Maryland real
estate investment trust pursuant to an Amended and Restated Declaration of
Trust of Kranzco, dated as of June 17, 1992, as amended and restated, and not
individually, and neither the trustees, officers nor shareholders of the Buyer
shall be personally bound or have any personal liability hereunder. NAI and
the Sellers shall look solely to the assets of the Buyer for satisfaction of
any liability of the Buyer with respect to this Agreement. NAI and the Sellers
will not seek recourse or commence any action against any of the shareholders
of the Buyer or any of their personal assets, and will not commence any action
for money judgments against any of the trustees or officers of the Buyer or
seek recourse against any of their personal assets, for the performance or
payment of any obligation of the Buyer hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
KRANZCO REALTY TRUST
By: ____________________________________
Name:
Title:
NEW AMERICA NETWORK, INC.
By: ____________________________________
Name:
Title:
____________________________________
Xxxxxx X. Xxxx
____________________________________
Xxxxxxx X. Xxxx
____________________________________
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Xxxxxxx X. Xxxx, as trustee of the Grantor
Retained Annuity Trust of Xxxxxx X. Xxxx
u/a dtd. May 12, 1998
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