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Exhibit 10.8
STOCK EXCHANGE AGREEMENT
AMONG
NORTH AMERICAN TEL-COM GROUP, INC.,
AND
XXXXX XXXXXXX
March 31, 1998
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TABLE OF CONTENTS
PAGE
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AGREEMENT.............................................................................................. 1
1. Definitions................................................................................... 1
2. Exchange Transaction.......................................................................... 6
(a) Basic Transaction.................................................................... 6
(b) Consideration........................................................................ 6
(c) The Closing.......................................................................... 6
(d) Deliveries at Closing................................................................ 7
3. Representations and Warranties Concerning the Transaction..................................... 7
(a) Representations and Warranties of the Transferor..................................... 7
(b) Representations and Warranties of the North American................................. 8
4. Representations and Warranties Concerning Target.............................................. 11
(a) Organization, Qualification, and Corporate Power..................................... 11
(b) Authorization of Transaction......................................................... 11
(c) Capitalization....................................................................... 11
(d) Noncontravention..................................................................... 12
(e) Brokers' Fees........................................................................ 12
(f) Title to Assets...................................................................... 12
(g) Subsidiaries......................................................................... 12
(h) Financial Statements................................................................. 12
(i) Events Subsequent to Most Recent 12-Month Period End................................. 13
(j) Undisclosed Liabilities.............................................................. 15
(k) Legal Compliance..................................................................... 15
(l) Tax Matters.......................................................................... 15
(m) Real Property........................................................................ 17
(n) Intellectual Property................................................................ 18
(o) Tangible Assets...................................................................... 20
(p) Inventory............................................................................ 20
(q) Contracts............................................................................ 20
(r) Notes and Accounts Receivable........................................................ 20
(s) Powers of Attorney................................................................... 21
(t) Insurance............................................................................ 21
(u) Litigation........................................................................... 21
(v) Commitments and Warranties........................................................... 22
(w) Liability for Services Performed..................................................... 22
(x) Employees............................................................................ 22
(y) Employee Benefits.................................................................... 22
(z) Guaranties........................................................................... 24
(aa) Environmental, Health, and Safety Matters............................................ 24
(ab) Certain Business Relationships with Target........................................... 26
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(ac) Customers and Suppliers.............................................................. 26
(ad) Disclosure........................................................................... 26
5. Pre-Closing Covenants......................................................................... 26
(a) General.............................................................................. 26
(b) Notices and Consents................................................................. 26
(c) Operation of Business................................................................ 27
(d) Preservation of Business............................................................. 27
(e) Full Access.......................................................................... 27
(f) Notice of Developments............................................................... 27
(g) Exclusivity.......................................................................... 28
(h) No Termination of Transferor's Obligation by Subsequent Incapacity................... 28
6. Post-Closing Covenants........................................................................ 28
(a) General.............................................................................. 28
(b) Litigation Support................................................................... 28
(c) Transition........................................................................... 28
(d) Confidentiality...................................................................... 29
(e) Stock Options........................................................................ 29
(f) Independent Accountants.............................................................. 29
(g) Employees of Target.................................................................. 29
(h) Tax Matters.......................................................................... 29
7. Conditions to Obligation to Close............................................................. 30
(a) Conditions to Obligation of North American........................................... 30
(b) Conditions to Obligation of the Transferor........................................... 32
(c) Post-Closing Obligations of Transferor............................................... 33
8. Remedies for Breaches of This Agreement....................................................... 33
(a) Survival of Representations and Warranties........................................... 33
(b) Indemnification Provisions for Benefit of the North American......................... 34
(c) Indemnification Provisions for Benefit of the Transferor............................. 36
(d) Matters Involving Third Parties...................................................... 36
(e) Determination of Adverse Consequences................................................ 38
(f) Basket............................................................................... 38
(g) Other Indemnification Provisions..................................................... 38
9. Post-Closing Adjustment of Consideration...................................................... 39
10. Tax Matters................................................................................... 40
(a) Tax Periods Ending on or Before the Closing Date..................................... 40
(b) Tax Periods Beginning Before and Ending After the Closing Date....................... 40
(c) Cooperation on Tax Matters........................................................... 41
(d) Tax Sharing Agreements............................................................... 42
(e) S Corporation Status................................................................. 42
(f) Certain Taxes........................................................................ 42
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11. Termination................................................................................... 42
(a) Termination of Agreement............................................................. 42
(b) Effect of Termination................................................................ 43
12. Miscellaneous................................................................................. 43
(a) Press Releases and Public Announcements.............................................. 43
(b) No Third-Party Beneficiaries......................................................... 43
(c) Entire Agreement..................................................................... 43
(d) Succession and Assignment............................................................ 43
(e) Counterparts......................................................................... 44
(f) Headings............................................................................. 44
(g) Notices.............................................................................. 44
(h) Governing Law........................................................................ 45
(i) Amendments and Waivers............................................................... 45
(j) Severability......................................................................... 46
(k) Expenses............................................................................. 46
(l) Construction......................................................................... 46
(m) Incorporation of Exhibits, Annexes, and Schedules.................................... 46
(n) Specific Performance................................................................. 46
(o) Submission to Jurisdiction........................................................... 46
(p) WAIVER OF JURY TRIAL................................................................. 47
Exhibit A--Intentionally Omitted
Exhibit B--Financial Statements
Exhibit C--List of Key Employees
Exhibit D--Opinion of Transferor's Counsel
Exhibit E--Real Property Lease
Exhibit F--Secretary and Incumbency Certificate (Target)
Exhibit G--Employment Agreements
Exhibit H--Intentionally Omitted
Exhibit I--Opinion of North American's Counsel
Exhibit J--Secretary and Incumbency Certificate (North American)
Annex I--Exceptions to the Transferor's Representations and Warranties
Concerning the Transaction
Annex II--Exceptions to the North American's Representations and Warranties
Concerning the Transaction
Disclosure Schedule--Exceptions to Representations and Warranties
Concerning Target
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STOCK EXCHANGE AGREEMENT
Agreement entered into as of March 31, 1998, by and among North
American Tel-Com Group, Inc., a Florida corporation ("North American"), and
Xxxxx Xxxxxxx (the "Transferor"), the sole shareholder of Mich-Com Cable
Services Incorporated, a Michigan corporation ("Target"). North American and
the Transferor are referred to collectively herein as the "Parties."
The Transferor in the aggregate owns all of the outstanding capital
stock of Target.
This Agreement contemplates the transfer by Transferor of all of the
issued and outstanding capital stock of Target to North American. The
Transferor will receive cash and capital stock in North American in exchange
for his capital stock in Target.
Simultaneously herewith, North American is entering into stock
exchange agreements for the acquisition of all of the issued and outstanding
capital stock of each of Kenya Corporation, CableMasters Corp., and Excel Cable
Construction, Inc. (together with this Agreement, the "Exchange Agreements")
and a Securities Purchase Agreement with HIG Cable, Inc. All of the parties to
the Exchange Agreements intend for the transfers contemplated pursuant to the
Exchange Agreements to be treated as a single transaction qualifying under
Section 351 of the Code (as that term is hereafter defined).
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation
D promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses, and any other cost of enforcing a party's rights under this
Agreement.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local or foreign law.
"APPLICABLE RATE" means the corporate base rate of interest
publicly announced from time to time by PNC Bank, N.A.
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"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"CLOSING" has the meaning set forth in Section 2(c) below.
"CLOSING DATE" has the meaning set forth in Section 2(c)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning
the businesses and affairs of Target that is not already generally available to
the public.
"CONSIDERATION" has the meaning set forth in Section 2(b)
below.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth
in Code Section 1563.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4
below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e)
bonus, incentive, stock purchase, stock ownership, stock option, stock
appreciation right, severance, salary continuation, termination, change of
control or other material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Section 3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
Hazardous Materials (which, for purposes of this Agreement, shall xxxxx any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation), each as
amended and as now or hereafter in effect.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means (i) any corporation included with
Target in a controlled group of corporations within the meaning of Section
414(b) of the Code; (ii) any trade or business (whether or not incorporated)
which is under common control with Target within the meaning of Section 414(c)
of the Code; (iii) any member of an affiliated service group of which Target is
a member within the meaning of Section 414(m) of the Code; or (iv) any other
person or entity treated as an affiliate of Target under Section 414(o) of the
Code.
"EXCHANGE AGREEMENTS" has the meaning set forth in the
preface above.
"EXCHANGES" means the transactions contemplated under the
Exchange Agreements.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENT" has the meaning set forth in Section
4(h) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"HIG" refers to HIG Cable, Inc., a Cayman Islands
corporation.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section
8(d) below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals),
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(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"KNOWLEDGE" means that which is known by a person and that of
which a person has constructive knowledge based upon information readily
available to that person in the performance of such person's duties. In the
case of North American or Target, "Knowledge" means the "Knowledge" of its
respective directors and executive officers.
"LIABILITY" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MATERIAL ADVERSE EFFECT" means, individually or together
with other adverse effects, any material adverse effect on the assets,
liabilities, results of operations, business condition (financial or otherwise)
or prospects of Target or on Target's ability to consummate the transactions
contemplated hereby or the ability of the North American to operate the
business of Target immediately after the Closing in substantially the same
manner as such business is conducted prior to Closing.
"MOST RECENT BALANCE SHEET" means the balance sheet contained
within the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in Section 4(h) below.
"MOST RECENT FISCAL PERIOD END" has the meaning set forth in
Section 4(h) below.
"MOST RECENT 12-MONTH PERIOD END" has the meaning set forth
in Section 4(h) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA
Section 3(37).
"NATIONAL SECURITIES EXCHANGE" shall have the meaning
ascribed to that term in the rules and regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
"NORTH AMERICAN" has the meaning set forth in the preface
above.
"NORTH AMERICAN CLASS A COMMON SHARES" means any share of the
Class A Common Stock, par value $.01 per share, of North American.
"NORTH AMERICAN CLASS B COMMON SHARES" means any share of the
Class B Common Stock, par value $.01 per share, of North American.
"NORTH AMERICAN COMMON STOCK" means any share of the common
stock, par value $.01 par share, of North American.
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"NORTH AMERICAN SERIES A PREFERRED SHARES" means any share of
the Series A Convertible Preferred Stock, par value $.01 per share, of North
American.
"NORTH AMERICAN PREFERRED STOCK" means any share of the
preferred stock, par value $.01 per share, of North American.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section
4043.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement of even date herewith, by and between North American and HIG,
including exhibits thereto.
"SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens that could not reasonably be expected to have
a Material Adverse Effect, (b) liens for Taxes not yet due and payable or for
Taxes that the taxpayer is contesting in good faith through appropriate
proceedings disclosed on Section 4(l) of the Disclosure Schedule, (c) purchase
money liens and liens securing rental payments under capital lease arrangements
disclosed in the Most Recent Financial Statements, and (d) other liens arising
in the Ordinary Course of Business and not incurred in connection with the
borrowing of money, so long as such liens could not reasonably be expected to
have a Material Adverse Effect.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of
North American of even date herewith.
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"SUBSIDIARY" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of the Common Stock, par value
$1.00 per share, of Target.
"TARGET SHAREHOLDER" means any Person who or which holds any
Target Shares.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not,
and any obligations under any agreements or arrangements with respect to any of
the foregoing.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8(d)
below.
"TRANSFEROR" has the meaning set forth in the preface above.
2. EXCHANGE TRANSACTION.
(a) BASIC TRANSACTION. On and subject to the terms and
conditions of this Agreement, North American agrees to acquire from the
Transferor, and the Transferor agrees to transfer to North American, all of his
Target Shares for the consideration specified below in this Section 2.
(b) CONSIDERATION. North American agrees to deliver to the
Transferor at Closing (i) cash in the amount of $3,773,000 payable by wire
transfer or other immediately available funds and (ii) 817,400 North American
Class B Common Shares (collectively, the "Consideration"). The Consideration
shall be subject to adjustment pursuant to the provisions of Section 9 hereof.
(c) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Holland &
Knight LLP in Miami,
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Florida, commencing at 9:00 a.m. local time on March 31, 1998 or such other
date, time and place as the Parties may mutually determine (the "CLOSING
DATE").
(d) DELIVERIES AT CLOSING. At the Closing, (i) the Transferor
will deliver to the North American the various certificates, instruments, and
documents referred to in Section 7(a) below, (ii) North American will deliver to
the Transferor the various certificates, instruments, and documents referred to
in Section 7(b) below, and (iii) the Transferor will deliver to North American
stock certificates representing all of his Target Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) North American will
deliver to the Transferor the Consideration specified in Section 2(b) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR.
Transferor represents and warrants to North American that the statements
contained in this Section 3(a) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(a)), except as set forth in Annex I
attached hereto.
(i) AUTHORIZATION OF TRANSACTION. The Transferor has
full power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Transferor, enforceable in
accordance with its terms and conditions except to the extent
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting
the enforcement of creditors' rights or by the principles governing
the availability of equitable remedies. The Transferor need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency or any
other Person in order to consummate the transactions contemplated by
this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Transferor is subject or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Transferor is a
party or by which he is bound or to which any of his assets is
subject.
(iii) BROKERS' FEES. Transferor has, or prior to
Closing will have, paid any fees or commissions due from Transferor to
any broker, finder, or agent with respect to the transactions
contemplated by this Agreement. Transferor agrees that he will pay
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any additional amounts that may become due from him or Target to any
such broker, finder or agent in the future, including as a result of
any indemnification obligations.
(iv) INVESTMENT. The Transferor (A) understands
that, except as contemplated under the Stockholders Agreement, the
North American Class B Common Shares that he will receive as part of
the Purchase Price have not been, and will not be, registered under
the Securities Act, or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (B) is acquiring such
North American Class B Common Shares solely for his own account for
investment purposes, and not with a view to the distribution thereof,
(C) is a sophisticated investor with knowledge and experience in
business and financial matters, (D) has received certain information
concerning North American and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and
the risks inherent in holding the North American Class B Common
Shares, (E) is able to bear the economic risk and lack of liquidity
inherent in holding the North American Class B Common Shares, and (F)
is an Accredited Investor for the reasons set forth on Annex I.
(v) TARGET SHARES. The Transferor holds of record
and owns beneficially all of the issued and outstanding Target Shares,
as further described in Section 4(c) hereof, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, security interests
liens or other encumbrances, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The Transferor
is not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Transferor to sell,
transfer, or otherwise dispose of any capital stock of Target (other
than this Agreement). The Transferor is not a party to any voting
trust, proxy, shareholders agreement, or other agreement or
understanding with respect to the voting of any capital stock of
Target.
(vi) DISCLOSURE. Neither this Agreement nor any of
the exhibits, attachments, written statements, documents, certificates
or other items prepared for or supplied to North American by the
Transferor with respect to the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make each statement contained
herein or therein not misleading. There is no fact which the
Transferor has not disclosed to the North American herein and of which
the Transferor is aware which could be anticipated to have a Material
Adverse Effect.
(b) REPRESENTATIONS AND WARRANTIES OF THE NORTH AMERICAN.
North American represents and warrants to Transferor that the statements
contained in this Section 3(b) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(b)), except as set forth in Annex II
attached hereto.
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(i) ORGANIZATION OF THE NORTH AMERICAN. North
American is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida. Correct and
complete copies of the charter and bylaws of North American (as
amended to date) are included as part of Annex II. The names and
titles of each officer and director of North American is set forth in
Annex II.
(ii) CAPITALIZATION OF NORTH AMERICAN. The entire
authorized capital stock of North American consists of (i) 98,000,000
shares of North American Common Stock, including (i) 10,000,000 North
American Class A Common Shares, 20,000,000 North American Class B
Common Shares, and 68,000,000 Shares of undesignated North American
Common Stock and (ii) 2,000,000 shares of North American Preferred
Stock, including 100,000 designated as North American Series A
Preferred Shares. The issued and outstanding capital stock of North
American, immediately prior to (i) the closing of the transactions
contemplated pursuant to the Exchange Agreements and (ii) the proposed
sale of 100,000 North American Series A Preferred Shares to HIG,
consists of 1,946,330 North American Class A Common Shares, no North
American Class B Common Shares and no North American Preferred Stock.
The issued and outstanding capital stock of North American,
immediately following the (i) closing of the transactions contemplated
pursuant to the Exchange Agreements and (ii) the proposed sale of
100,000 North American Series A Preferred Shares to HIG, shall consist
of 1,946,330 North American Class A Shares, 5,011,800 North American
Class B Shares and 100,000 North American Series A Preferred Shares,
held of record as set forth in Annex II hereto. All of the issued and
outstanding North American Class A Common Shares have been, and upon
issuance pursuant to the Exchange Agreements and the Securities
Purchase Agreement, respectively, the 5,011,800 Class B Common Shares
and the 100,000 North American Series A Preferred Shares will be, duly
authorized, validly issued, fully paid, and nonassessable. Except as
disclosed in Annex II, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
North American to issue, sell, or otherwise cause to become
outstanding any of its capital stock. Except as disclosed in Annex II,
there are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to North
American. Except as disclosed in Annex II, there are no voting trusts,
proxies or other agreements or understandings with respect to the
voting of the capital stock of North American.
Included as part of Annex II is an unaudited pro
forma balance sheet for North American, dated as of the date of this
Agreement, which gives effect on a pro forma basis to (i) the
consummation of the transactions contemplated by the Exchange
Agreements, (ii) the sale of 100,000 North American Series A Preferred
Shares to HIG and (iii) the proposed $10,000,000 Revolving Credit
Facility and $19,000,000 Term Loan from PNC Bank, N.A.
Also included as part of Annex II is a table listing
the percentage of North American capital stock attributable to each
class of shareholders of North American
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immediately following the closing of (i) the transactions contemplated
by the Exchange Agreements and (ii) the transactions contemplated by
the Securities Purchase Agreement.
(iii) OPERATION. North American has not conducted
any activities or incurred any liabilities other than in connection
with the Exchanges and in connection with securing financing for the
Exchanges.
(iv) AUTHORIZATION OF TRANSACTION. North American
has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of North American, enforceable in
accordance with its terms and conditions except to the extent
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting
the enforcement of creditors' rights or by the principles governing
the availability of equitable remedies. North American need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency or any
other Person in order to consummate the transactions contemplated by
this Agreement.
(v) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which either North American is subject or any provision of their
respective charter or bylaws or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which North American is a party or
by which North American is bound or to which any of its assets is
subject.
(vi) BROKERS' FEES. North American has, or prior to
the Closing will have, paid or made arrangements to pay any fees or
commissions due from North American to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement. North
American agrees that they will pay any additional amounts that may
become due from North American to any such broker, finder or agent in
the future, including as a result of any indemnification obligations.
(vii) DISCLOSURE. Neither this Agreement nor any of
the exhibits, attachments, written statements, documents, certificates
or other items prepared for or supplied to the Transferor by the North
American with respect to the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state any material
fact necessary in order to make each statement contained herein or
therein not misleading. There is no fact which North American has not
disclosed to the Transferor herein and of which North American or any
of the its officers or directors is aware and
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which could be anticipated to have a material adverse effect on the
operations of North American after the Closing.
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET. The Transferor
represents and warrants to the North American that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4), except as set forth in the Disclosure Schedule
delivered by the Transferor to the North American on the date hereof and
initialed by the Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule
shall be effective to modify only those representations and warranties to which
the Disclosure Schedule makes explicit reference. The Disclosure Schedule will
be arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Target
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. Target is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Target has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and in which it presently proposes to
engage and to own and use the properties owned and used by it. Section 4(a) of
the Disclosure Schedule lists the directors and officers of Target. Correct and
complete copies of the charter and bylaws of Target (as amended to date) are
included as part of Section 4(a) of the Disclosure Schedule. The minute books
(containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of Target are correct and complete and an
true and correct copy thereof has been provided to North American. Target is
not in default under or in violation of any provision of its charter or bylaws.
(b) AUTHORIZATION OF TRANSACTION. [INTENTIONALLY LEFT BLANK]
(c) CAPITALIZATION. The entire authorized capital stock of
Target consists of 50,000 Target Shares, of which 5,000 Target Shares are
issued and outstanding and no Target Shares are held in treasury. All of the
issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record and owned
beneficially solely by the Transferor. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, preemptive rights or other contracts or commitments that could
require Target to issue, sell, or otherwise cause to become outstanding any of
its capital stock or securities convertible or exchangeable for, or any
options, warranties, or rights to purchase, any of such capital stock. There
are no outstanding obligations of Target to repurchase, redeem or otherwise
acquire any capital stock or any securities convertible into or exchangeable
for such capital stock or any options, warrants or rights to purchase such
capital stock or securities. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to Target. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting,
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transfer, dividend or other rights (such as registration rights under the
Securities Act) of the capital stock of Target.
(d) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which Target is subject or any
provision of the charter or bylaws of Target or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Target is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). Target need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any Person,
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(e) BROKERS' FEES. Target has, or prior to Closing will have,
paid any fees or commissions due from Target to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement. Transferor
agrees that he will pay any additional amounts that may become due from Target
to any such broker, finder or agent in the future, including as a result of any
indemnification obligations.
(f) TITLE TO ASSETS. Target has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests (other than the
Security Interests disclosed on the face of the Most Recent Balance Sheet),
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet, none of which disposals are
expected to have a Material Adverse Effect. The consummation of the
transactions contemplated by this Agreement will not affect Target's good and
marketable title to, or valid leasehold interest in, the properties and assets
described in the preceding sentence.
(g) SUBSIDIARIES. Target does not currently have, and has
never had, any Subsidiaries and does not own any securities of any other
Person.
(h) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT B are
the following financial statements (collectively the "FINANCIAL STATEMENTS"):
(i) audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow including the audit report thereon as of
and for the 12-month period ended December 31, 1997 (the "MOST RECENT 12-MONTH
PERIOD END") for Target; (ii) unaudited consolidated balance sheets, statements
of income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended June 30, 1993, June 30, 1994, June 30, 1995, June 30, 1996
and June 30, 1997 and (iii) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow, (the
"MOST RECENT FINANCIAL STATEMENTS") as of and for the period from January
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1, 1998, through February 28, 1998 (the "MOST RECENT FISCAL PERIOD END") for
Target. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of Target as of
such dates and the results of operations of Target for such periods, are
correct and complete, and are consistent with the books and records of Target
(which books and records are correct and complete); provided, however, that the
Most Recent Financial Statements are subject to normal year-end adjustments
(which will not be material individually or in the aggregate) and lack
footnotes.
(i) EVENTS SUBSEQUENT TO MOST RECENT 12-MONTH PERIOD END.
Since the Most Recent 12-Month Period End and except as disclosed in the
Disclosure Schedule, there has not occurred any Material Adverse Effect.
Without limiting the generality of the foregoing, since that date:
(i) Target has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) Target has not entered into any agreements,
contracts, leases, or licenses either involving more than $10,000 in
the aggregate, having a term greater than 12 months or outside the
Ordinary Course of Business;
(iii) no party (including any of Target) has
accelerated, terminated, modified, or cancelled any agreements,
contracts, leases, or licenses involving more than $10,000 in the
aggregate to which Target is a party or by which it is bound;
(iv) Target has not imposed or allowed to be imposed
any Security Interest upon any of its assets, tangible or intangible;
(v) Target has not made any capital expenditures
involving more than $10,000 in the aggregate or outside the Ordinary
Course of Business;
(vi) Target has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any
other Person;
(vii) Target has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation
involving more than $10,000 in the aggregate;
(viii) Target has not delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
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(ix) Target has not cancelled, compromised, waived,
or released any right or claim either involving more than $10,000 in
the aggregate or outside the Ordinary Course of Business;
(x) Target has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in
the charter or bylaws of any of Target;
(xii) Target has not issued, sold, or otherwise
disposed of any of its capital stock or securities convertible into or
exchangeable for such stock, or granted any options, warrants, or
other rights to purchase or obtain any of such capital stock or
securities;
(xiii) Target has not declared, set aside, or paid
any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock or other securities;
(xiv) Target has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property involving more than $10,000 in the aggregate;
(xv) Target has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees or their "Associates" (as defined in Rule 12b-2 under the
Exchange Act);
(xvi) Target has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) Target has not granted any increase in any
compensation of any of its directors, officers, or other employees;
(xviii) Target has not adopted, amended, modified,
or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xix) Target has not made any other change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xx) Target has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
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(xxi) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving Target; and
(xxii) Target has not increased, or experienced any
change in assumptions underlying or method of calculating, any bad
debt, contingency, tax or other reserves or changed its accounting
practices, methods or assumptions (including changes in estimates or
valuation methods); or written down the value of any assets; and
(xxiii) Target has not committed to any of the
foregoing.
(j) UNDISCLOSED LIABILITIES. Except as disclosed in Section
4(j) of the Disclosure Schedule, Target does not have any Liability, except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (ii) Liabilities which have arisen after the
Most Recent 12-Month Period End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law and none of which could reasonably be expected to have a
Material Adverse Effect).
(k) LEGAL COMPLIANCE. Target and its predecessors and
Affiliates has complied, in all material respects, with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
(l) TAX MATTERS.
(i) Target has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by Target (whether or not shown on any
Tax Return) have been paid or are fully and adequately accrued and
adequately disclosed on the Most Recent Balance Sheet. Target is not
currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Target does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of Target that arose in connection with
any failure (or alleged failure) to pay any Tax.
(ii) Target has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder,
or other third party.
(iii) Neither Transferor nor Target has Knowledge
that any authority expects to assess any additional Taxes for any
period for which Tax Returns have been
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filed. There is no action, suit or proceeding, investigation, dispute
or claim now pending or threatened concerning any Tax Liability of
Target or proposed adjustment to the taxable income of Target either
(A) claimed or raised by any authority in writing or (B) as to which
any of the Transferor and Target has Knowledge based upon personal
contact with any agent of such authority. Section 4(l) of the
Disclosure Schedule lists all Tax Returns filed with respect to Target
for the last three completed tax years, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Transferor has delivered to the North
American correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by Target since January 1, 1994.
(iv) Target has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) Target has not filed a consent under Code
Section 341(f) concerning collapsible corporations. Target has not
made any payments, is not obligated to make any payments, or is not a
party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible under Code Section
280G or that would give rise to any obligation to indemnify any Person
for any excise tax payable pursuant to Code Section 4999. The Target
has not been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Target has disclosed on
its federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax within
the meaning of Code Section 6662. Neither Target nor any predecessor
or affiliate thereof is a party to any Tax allocation, sharing,
indemnification or similar agreement. Target (A) has not been a member
of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Target) and (B)
does not have any Liability for the Taxes of any Person (other than
any of Target and its Subsidiaries) under Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise. No indebtedness of
Target consists of "corporate acquisition indebtedness" within the
meaning of Code Section 279.
(vi) Section 4(l) of the Disclosure Schedule sets
forth as of the most recent practicable date the basis for Federal
income tax purposes of Target in its assets.
(vii) The unpaid Taxes of Target (A) did not, as of
the Most Recent Fiscal Period End, exceed the reserve for Tax
Liability set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not, and will not as of
the Closing Date, exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and
practice of Target in filing its Tax Returns.
(viii) INTENTIONALLY LEFT BLANK.
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(m) REAL PROPERTY. Target does not own any real property.
Section 4(m) of the Disclosure Schedule lists and describes briefly all real
property leased or subleased to Target. The Transferor has delivered to North
American correct and complete copies of the leases and subleases listed in
Section 4(m) of the Disclosure Schedule (as amended to date). With respect to
each lease and sublease listed in Section 4(m) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(B) the lease or sublease will continue to
be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no party to the lease or sublease is in
breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease or sublease has
repudiated any provision thereof;
(E) there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or
sublease;
(F) Target has not received a notice from
the lessor indicating that the lease will not be renewed at
the end of its current term for any additional terms provided
for in the lease;
(G) the term of the lease will continue for
a minimum of six months past the Closing Date;
(H) with respect to each sublease, the
representations and warranties set forth in subsections (A)
through (G) above are true and correct with respect to the
underlying lease;
(I) Target has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(J) all facilities leased or subleased
thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and
regulations;
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(K) all facilities leased or subleased
thereunder are supplied with utilities and other services
necessary for the operation of said facilities; and
(L) the Transferor is not aware of any
pending or threatened foreclosure or other enforcement
proceedings relating to the real property underlying the
leases or subleases set forth in Section 4(m) of the
Disclosure Schedule that could result in Target's loss of
possession of such real property.
(n) INTELLECTUAL PROPERTY.
(i) Target owns or has the right to use pursuant to
license, sublicense, agreement, or permission in writing all
Intellectual Property necessary for the operation of the businesses of
Target as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by Target
immediately prior to the Closing hereunder will be owned or available
for use by Target on identical terms and conditions immediately
subsequent to the Closing hereunder. Target has taken all necessary
action to maintain and protect each item of Intellectual Property that
it owns or uses.
(ii) Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Transferor and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of Target has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
Target must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of Transferor and Target,
no third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights
of Target.
(iii) Section 4(n)(iii) of the Disclosure Schedule
identifies each patent or registration which has been issued to Target
with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which
Target has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which Target
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Transferor has delivered
to North American correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to North American correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section
4(n)(iii) of the Disclosure Schedule also identifies each trade name
or unregistered trademark used by Target in connection with any of its
businesses. With respect to each item of Intellectual Property
required to be identified in Section 4(n)(iii) of the Disclosure
Schedule:
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(A) Target possesses all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) Target has never agreed to indemnify
any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) Section 4(n)(iv) of the Disclosure Schedule
identifies each item of Intellectual Property that any third party
owns and that Target uses pursuant to license, sublicense, agreement,
or permission. The Transferor has delivered to the North American
correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
item of Intellectual Property required to be identified in Section
4(n)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby;
(C) no party to the license, sublicense,
agreement, or permission is in breach or default, and no
event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense,
agreement, or permission has repudiated any provision
thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
(F) the underlying item of Intellectual
Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
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(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(H) Target has never granted any sublicense
or similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of Transferor and Target,
Target will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its businesses
as presently conducted and as presently proposed to be conducted.
(vi) None of the Transferor and Target has any
Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third
parties have developed which reasonably could be expected to supersede
or make obsolete any product or process of any of Target.
(o) TANGIBLE ASSETS. Target owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its business as presently conducted and as presently proposed to be conducted.
Each such tangible asset has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used and
presently is proposed to be used. Section 4(o) of the Disclosure Schedule lists
all tangible assets owned by Target.
(p) INVENTORY. Target does not have any inventory.
(q) CONTRACTS. Section 4(q) of the Disclosure Schedule lists
all the contracts and other agreements to which Target is a party. The
Transferor has delivered to the North American a correct and complete copy of
each written agreement listed in Section 4(q) of the Disclosure Schedule (as
amended to date). With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
Section 4(q) of the Disclosure Schedule lists each currently outstanding bid or
proposal for business submitted by Target in excess of $1,000,000.
(r) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of Target are reflected properly on the Most Recent Balance Sheet in
accordance with GAAP, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and, will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve
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for bad debts set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Target.
(s) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of Target.
(t) INSURANCE. Section 4(t) of the Disclosure Schedule
includes a true, correct and complete list of all policies of insurance
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which Target is a
party, a named insured, or otherwise the beneficiary of coverage. Genuine and
complete copies of each of the insurance policies listed in Section 4(t) of the
Disclosure Schedule have been provided to North American.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither Target nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; (D) neither Target, any ERISA Affiliate nor
the North American shall be subject to a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability and (E) to
Transferor's or Target's Knowledge, no party to the policy has repudiated any
provision thereof. Target has been fully covered at all times during the past 5
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Section
4(t) of the Disclosure Schedule describes any self-insurance arrangements
affecting Target.
(u) LITIGATION. Section 4(u) of the Disclosure Schedule sets
forth each instance in which Target (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party, or
to the Knowledge of Transferor or Target, is threatened to be made a party to
any claim, action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. Except as set
forth in ss.4(u) of the Disclosure Schedule, there is no other pending, or to
the knowledge of Transferor or Target, threatened claim, arbitration
proceeding, action, suit, investigation or other proceeding against or
involving Target or any property or rights of Target or any officer or director
or Target. None of the actions, suits, proceedings, hearings, and
investigations set forth in ss.4(u) of the Disclosure Schedule could result in
any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of Target. Neither the Transferor
nor the directors and officers (and employees with responsibility for
litigation matters) of Target has any reason to believe that any such action,
suit, proceeding, hearing, or investigation may be brought or threatened
against Target.
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(v) COMMITMENTS AND WARRANTIES. All services provided by the
Company have been performed in conformity with all applicable contractual
commitments (written or oral) and all express and implied warranties (written
or oral), and Target has no Liability and, to the Knowledge of the Transferor
and Target, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) in connection with any such services.
ss.4(v) of the Disclosure Schedule includes copies of the standard forms of
agreement entered into between Target and its customers. Target has not entered
into any written or oral agreements with any of its customers that include
guaranties, warranties, or indemnity provisions other than those included in
the agreements included as part of Section 4(v) of the Disclosure Schedule.
Neither Target nor the Transferor has received notice (written or
oral) from any of its customers stating that the customer intends to reduce the
volume of business that it currently conducts with Target or to cease doing
business with Target.
(w) LIABILITY FOR SERVICES PERFORMED. Target has no Liability
(and, to Transferor's knowledge, there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability) arising out of any
injury to individuals or property as a result of or in connection with any
services provided by Target.
(x) EMPLOYEES. To the Knowledge of the Transferor or Target,
no executive, key employee, or group of employees has any plans to terminate
employment with Target. Target is not currently, nor at any prior time has
been, a party to or bound by any collective bargaining agreement, nor has
Target experienced any strikes, grievances, claims of unfair labor practices,
or other collective bargaining disputes. Target has not committed any unfair
labor practice. Neither the Transferor nor Target has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Target.
(y) EMPLOYEE BENEFITS.
(i) Section 4(y) of the Disclosure Schedule lists
each Employee Benefit Plan that Target or any ERISA Affiliate
maintains, contributes to, or is required to contribute to or under
which Target or any ERISA Affiliate has any liability.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) complies in
form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and disclosures
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I
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of ERISA and of Code Section 4980B have been met with respect
to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance
with the past custom and practice of Target and in accordance
with GAAP. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which
is an Employee Pension Benefit Plan now meets and at all
times since inception have met the requirements of a
"qualified plan" under Code Section 401(a) and has received,
within the last two years, a favorable determination letter
from the Internal Revenue Service.
(E) As of the Closing Date, the market
value of assets under each such Employee Benefit Plan which
is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) will equal or exceed the present value of
all vested and nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions
applicable to an Employee Pension Benefit Plan terminating on
such date.
(F) The Transferor has delivered to the
North American correct and complete copies of the plan
documents and summary plan descriptions including all
amendments thereto, the most recent determination letter
received from the Internal Revenue Service, the three most
recent Form 5500 Annual Reports (including all schedules
thereto), the three most recent annual premium payment forms
filed with the PBGC, and all related trust agreements,
insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that
Target or any ERISA Affiliate maintains, contributes to, or is
required to contribute to or under which Target or any ERISA Affiliate
has any liability:
(A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate
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any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee Benefit Plan.
No Fiduciary has any Liability for breach of fiduciary duty
or any other failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to any such Employee Benefit
Plan (other than routine claims for benefits) is pending or
threatened. Neither the Transferor nor Target has any
Knowledge of any Basis for any such action, suit, proceeding,
hearing, or investigation.
(C) Neither Target nor any ERISA Affiliate
has not incurred, and none of the Transferor and the
directors and officers (and employees with responsibility for
employee benefits matters) of Target has any reason to expect
that Target or any ERISA Affiliate will incur, any Liability
to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan.
(iii) Neither Target nor any ERISA Affiliate
contributes to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(iv) Neither Target nor any ERISA Affiliate
maintains or contributes to, or has ever been required to contribute
to any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Section 4980B).
(z) GUARANTIES. Target is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
(aa) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) Target and its predecessors and Affiliates have
complied and are in compliance with all Environmental, Health, and
Safety Requirements.
(ii) Without limiting the generality of the
foregoing, Target and its Affiliates have obtained and complied with,
and are in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental, Health,
and Safety Requirements for the occupation of its facilities and the
operation of its business; a list of all such permits, licenses and
other authorizations is set forth on the attached "ENVIRONMENTAL AND
SAFETY PERMITS SCHEDULE."
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(iii) Neither Target nor its predecessors or
Affiliates has received any written or oral notice, report or other
information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities
arising under Environmental, Health, and Safety Requirements.
(iv) None of the following exists at any property or
facility owned or operated by Target: (1) underground storage tanks,
(2) asbestos-containing material in any form or condition, (3)
materials or equipment containing polychlorinated biphenyls, or (4)
landfills, surface impoundments, or disposal areas.
(v) None of Target or its predecessors or Affiliates
has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or
operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or
would give rise to liabilities, including any liability for response
costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as
amended ("SWDA") or any other Environmental, Health, and Safety
Requirements.
(vi) Neither this Agreement nor the consummation of
the transaction that is the subject of this Agreement will result in
any obligations for site investigation or cleanup, or notification to
or consent of government agencies or third parties, pursuant to any of
the so-called "transaction-triggered" or "responsible property
transfer" Environmental, Health, and Safety Requirements.
(vii) Neither Target nor its predecessors or
Affiliates has, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other Person relating to
Environmental, Health, and Safety Requirements.
(viii) No facts, events or conditions relating to
the past or present facilities, properties or operations of Target or
any of its predecessors or Affiliates will prevent, hinder or limit
continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety Requirements
(whether on-site or off-site), or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental, Health, and Safety Requirements, including
without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
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(ab) CERTAIN BUSINESS RELATIONSHIPS WITH TARGET. Neither the
Transferor, its Affiliates, any director or employee of Target, or any
relatives of Transferor, or any person living in the same residence as such
persons, has been involved in any business arrangement or relationship with
Target within the past 12 months, and neither the Transferor nor its Affiliates
nor any of such other persons own leases, licenses, or otherwise has any
interest in any asset, tangible or intangible, which is used in the business of
Target or any contract, lease or commitment to which Target is a party. Target
is not indebted to any officer, director or employee of Target for any
liability or obligation. No officer, director or employee of Target is indebted
to Target for any liability or obligation.
(ac) CUSTOMERS AND SUPPLIERS. No purchase order or commitment
of Target is in excess of normal requirements, nor are prices provided therein
in excess of current market prices for the products or services to be provided
thereunder. No material supplier of Target has advised Target in writing within
the past year that it will stop, or decrease the rate of, supplying materials,
products or services to Target and no material customer of Target has advised
Target in writing within the past year that it will stop, or decrease the rate
of buying materials, products or services from Target. Section 4(ac) of the
Disclosure Schedule sets forth a list of (a) each customer that accounted for
more that 5% of the consolidated revenues of Target during the last full fiscal
year or the interim period through the date of the Most Recent Financial
Statements and the amount of revenues accounted for by such customer during
each such period and (b) each supplier that is the sole supplier of any
significant product or component to Target. The consummation of the
transactions contemplate hereby will not have a material adverse effect on
Target's relationship with any customer or supplier listed in Section 4(ac) of
the Disclosure Schedule.
(ad) DISCLOSURE. Neither this Agreement nor any of the
exhibits, attachments, written statements, documents, certificates or other
items prepared for or supplied to the North American by or on behalf of Target
or the Transferor with respect to the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make each statement contained herein or therein not
misleading. There is no fact which Target or the Transferor have not disclosed
to the North American herein and of which the Transferor, Target, or any of
Target's officers or directors is aware and which could be anticipated to have
a Material Adverse Effect.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his or its best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 7 below).
(b) NOTICES AND CONSENTS. The Transferor will cause Target to
give any notices to third parties, and will cause Target to use its best
efforts to obtain any third party
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consents, that the North American reasonably may request in connection with the
matters referred to in Section 4(d) above. Each of the Parties will (and the
Transferor will cause Target to) give any notices to, make any filings with,
and use its best efforts to obtain any authorizations, consents, and approvals
of governments and governmental agencies in connection with the matters
referred to in Section 3(a)(ii), Section 3(b)(vi), and Section 4(d) above.
Without limiting the generality of the foregoing, each of the Parties will file
(and the Transferor will cause Target to file) any Notification and Report
Forms and related material that he or it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act, will use his or its best
efforts to obtain (and the Transferor will cause Target to use its best efforts
to obtain) an early termination of the applicable waiting period, and will make
(and the Transferor will cause Target to make) any further filings pursuant
thereto that may be necessary, proper, or advisable in connection therewith.
(c) OPERATION OF BUSINESS. The Transferor will not cause or
permit Target to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Transferor will not cause or permit Target to
(i) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock or (ii) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Section 4(i) above.
(d) PRESERVATION OF BUSINESS. The Transferor will cause
Target to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
(e) FULL ACCESS. The Transferor will permit, and will cause
Target to permit, representatives of North American to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of Target, to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
Target. At the request of North American, Transferor will permit, and will
cause Target to permit, the lenders and the investors who are expected to
provide the capital necessary to consummate the transactions contemplated
hereby, and their respective counsel, to have the same access as permitted to
the North American in accordance with the immediately preceding sentence.
(f) NOTICE OF DEVELOPMENTS. The Transferor will give prompt
written notice to the North American of any breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any breach of any of his or its own
representations and warranties in Section 3 above. No disclosure by any Party
pursuant to this Section 5(f), however, shall be deemed to amend or supplement
Annex I, Annex II, or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
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(g) EXCLUSIVITY. The Transferor will not (and the Transferor
will not cause or permit Target to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of Target (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Transferor will notify the North
American immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(h) NO TERMINATION OF TRANSFEROR'S OBLIGATION BY SUBSEQUENT
INCAPACITY. Transferor specifically agrees that his obligations hereunder,
including, without limitation, the obligations pursuant to Section 8 hereof,
shall not be eliminated by his or her death or incapacity.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing.
(a) GENERAL. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Transferor acknowledges and agrees that
from and after the Closing North American will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to Target.
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Target, each of the other Parties will cooperate
with him or it and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
ss.8 below).
(c) TRANSITION. The Transferor will not take any action that
is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of Target from
maintaining the same business relationships with Target after the Closing as it
maintained with Target prior to the Closing. The Transferor will refer all
customer inquiries relating to the businesses of Target to the North American
from and after the Closing.
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(d) CONFIDENTIALITY. [INTENTIONALLY LEFT BLANK]
(e) STOCK OPTIONS. Within 90 days after the Closing, North
American will adopt a stock incentive plan (the "Stock Incentive Plan")
pursuant to which stock options and other forms of stock-based compensation may
be awarded to the officers, directors and employees of North American and its
subsidiaries. North American agrees that upon adoption of the Stock Incentive
Plan, it shall grant options to purchase an aggregate of up to 50,000 shares of
North American common stock, at an exercise price of $5.00 per share (the
"Options"), to the key employees of Target named in EXHIBIT C to this
Agreement. The terms and conditions of the Options and the number of Options to
be awarded to each key employee shall be determined by the Board of Directors
of North American at the time of grant. In addition to the foregoing,
Transferor shall be entitled to transfer up to 82,500 shares of his North
American Common Stock to employees of Target as provided in the Shareholders
Agreement.
(f) INDEPENDENT ACCOUNTANTS. After the Closing, Transferor
shall (i) use reasonable efforts to cause Target's past and present independent
auditors and accounting personnel to make available to North American and its
representatives all financial information, including the right to examine all
working papers pertaining to audits or reviews previously or hereafter made by
such auditors, and (ii) provide such cooperation as North American and its
representatives may request in connection with any audit or review of Target
that North American may direct its representatives to make. Without limiting
the generality of the foregoing, Transferor agrees that he will cooperate with,
and cause Target's past and present independent auditors, accounting personnel
and other necessary persons to cooperate with the North American in the
preparation of any documents filed by the North American with the U.S.
Securities and Exchange Commission in connection with an offering of
securities, to the extent information about Target is required therein.
(g) EMPLOYEES OF TARGET. North American agrees that, for a
period of one year after the Closing Date, the group health benefits, vacation,
and paid holidays provided to employees of Target will be comparable to such
items provided by Target to such employees prior to the Closing Date. Although
North American has no present intention of dismissing any current employees of
Target, nothing in this Section is intended to impose any obligation on North
American to retain any such employees. In the event Targets 401(k) plan is
terminated, North American agrees that each of the participants under said plan
shall be fully vested provided said plan permits such option.
(h) TAX MATTERS. The Transferor covenants and agrees not to
take any action, or fail to take any action, with respect to Taxes, that would
have an adverse effect on North American on or after the Closing Date,
including, without limitation, amending or otherwise supplementing any Tax
Return or report of Target with respect to any period prior to the Closing Date
without the consent of the North American. If any taxing authority conducts any
audit or investigation relating to Target prior to the Closing Date, North
American may, in its sole
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election, have the right to supervise such audit or investigation and provide
any response required in connection therewith.
(i) North American agrees not to take any action at or after
the Closing Date that would affect the ability of the transfers contemplated
under the Exchange Agreements to be treated as a single transaction qualifying
under Section 351 of the Code.
(j) North American shall pay or cause to be paid in
accordance with their terms all liabilities relating to equipment leases and
employee bonuses of Target, including but not limited to accrued but unpaid
bonuses as reflected on the Most Recent Financial Statement.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF NORTH AMERICAN. The
obligation of North American to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all
material respects at and as of the Closing Date and there shall not
have occurred any Material Adverse Effect;
(ii) the Transferor and Target shall have performed
and complied with all of his covenants hereunder in all material
respects through the Closing;
(iii) Target shall have procured all of the third
party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction, or
before any arbitrator, wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of Target to
own its assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(v) the Transferor shall have delivered to the North
American a certificate, which pursuant to its terms authorizes PNC
Bank, N.A. and HIG to rely thereon to the same extent as if the
certificate was addressed directly to them, to the effect that each of
the conditions specified above in Section 7(a)(i)-(iv) is satisfied in
all respects;
(vi) all applicable waiting periods (and any
extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired
or otherwise been terminated and the Parties
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shall have received all other authorizations, consents, and approvals
of governments and governmental agencies referred to in Section
3(a)(ii), Section 3(b)(vi), and Section 4(d) above;
(vii) North American shall have received from
counsel to the Transferor an opinion in form and substance as set
forth in EXHIBIT D attached hereto, addressed to the North American
and which pursuant to its terms authorizes PNC Bank, N.A. and HIG to
rely thereon to the same extent as if it were addressed directly to
them, and dated as of the Closing Date;
(viii) North American shall have obtained on terms
and conditions reasonably satisfactory to it the proceeds of all of
the financing it needs in order to consummate the transactions
contemplated by all of the Exchange Agreements.
(ix) all actions to be taken by the Transferor in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the North
American.
(x) at least five business days prior to the
Closing, North American shall have received the Most Recent Balance
Sheet. The Most Recent Balance Sheet will reflect (A) Shareholders'
Equity of at least $1,260,000, (B) notes payable not exceeding
$650,000 and (C) cash at least equal to $157,000. North American shall
not have objected to, challenged or otherwise repudiated any of the
amounts included in the Most Recent Balance Sheet.
(xi) North American shall have received an
appraisal, from an appraiser selected by the North American, that
states that the fair market value of Target's tangible assets listed
in Section 4(o) of the Disclosure Schedule is at least equal to the
book value of such assets reflected in the Closing Balance Sheet.
(xii) Target and Transferor shall have entered into
the real property lease agreement attached hereto as EXHIBIT E;
(xiii) Target shall have delivered a Secretary and
Incumbency Certificate in the form attached hereto as EXHIBIT F;
(xiv) Target shall have delivered evidence of its
qualification to do business in each jurisdiction where it is so
qualified and a certificate of good standing issued by the Secretary
of State of each such jurisdiction demonstrating that Target is in
good standing in that jurisdiction;
(xv) Target shall have delivered (A) payoff letters
relating to all existing indebtedness of Target to creditors for
borrowed money and (B) UCC-3 financing
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statements executed by such creditors releasing any security interests
of such creditors in Target's assets;
(xvi) Transferor shall have entered into an
Employment Agreement with Target in the form attached hereto as
EXHIBIT G;
(xvii) on or prior to the Closing Date, North
American shall have closed the transactions contemplated by each of
the other Exchange Agreements;
(xviii) all actions to be taken by the Transferor in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the North American.
North American may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE TRANSFEROR. The
obligation of the Transferor to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the North American shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction, or before any arbitrator, wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) the North American shall have delivered to the
Transferor a certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired
or otherwise been terminated and the Parties shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(a)(ii), Section
3(b)(v), and Section 4(d) above;
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(vi) Transferor shall have entered into an
Employment Agreement with Target, in the form attached hereto as
EXHIBIT G (Transferor covenants and agrees to execute the Employment
Agreement as of the Closing Date);
(vii) Transferor shall have received from counsel to
the North American an opinion in form and substance as set forth in
EXHIBIT I attached hereto, addressed to the Transferor, and dated as
of the Closing Date;
(viii) Buyer shall have delivered a Secretary and
Incumbency Certificate in the form attached hereto as EXHIBIT J;
(ix) This Agreement and the transactions
contemplated hereby shall have been approved by the Board of Directors
and Shareholders of North American;
(x) on or prior to the Closing Date, the
transactions contemplated pursuant to each of the other Exchange
Agreements, and the Securities Purchase Agreement shall have been
closed; and
(xi) all actions to be taken by the North American
in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Transferor.
The Transferor may waive any condition specified in this Section 7(b) if he
executes a writing so stating at or prior to the Closing.
(c) POST-CLOSING OBLIGATIONS OF TRANSFEROR.
(i) Transferor shall use best efforts to obtain
Employment Agreements between Target and each of Xxx Xxxxx and Xxxxxxx
Xxxxxxxx in the form attached hereto as EXHIBIT G within 30 days of
the Closing Date.
(ii) Target shall use its best efforts to deliver
landlord consent and estoppel certificates, in form and substance
satisfactory to the North American, relating to each of the real
property leases listed in Section 4(m) of the Disclosure Schedule;
(iii) Target shall use its best efforts to deliver
the resignations of all directors of Target that Buyer shall have
requested.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements of the Parties contained
in this Agreement or in any certificate, document, instrument or agreement
delivered pursuant to this Agreement shall
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survive the Closing hereunder (notwithstanding any due diligence investigations
that may have been undertaken by the damaged Party) and continue in full force
and effect through all statutes of limitations. Notwithstanding the foregoing,
no claim for indemnification in respect of a breach of a representation or
warranty shall be made after the date three years from and after the Closing
Date, except that a claim for indemnification in respect of a breach of the
representations set forth in Section 3(a), 3(b), 4(a)-(f), 4(l), 4(y) and 4(aa)
may be made at anytime following the Closing Date and are not subject to the
foregoing three year limitation.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE NORTH
AMERICAN.
(i) In the event the Transferor breaches (or in the
event any third party alleges facts that, if true, would mean the
Transferor has breached) any of his representations, warranties (or
any of such representations or warranties is untrue or inaccurate),
covenants and agreements contained herein or in any certificate,
document, instrument or agreement delivered pursuant to this
Agreement, and, provided that the Indemnified Buyers (as hereafter
defined) make a written claim for indemnification against the
Transferor pursuant to Section 12(g) below within the applicable claim
period provided in 8(a) above, then the Transferor agrees to indemnify
North American and each of its officers, directors, employees,
representatives and shareholders (the "Indemnified Buyers") from and
against the entirety of any Adverse Consequences the Indemnified
Buyers may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Indemnified
Buyers may suffer after the end of any applicable claim period)
resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(ii) The Transferor agrees to indemnify the
Indemnified Buyers from and against the entirety of any Adverse
Consequences the Indemnified Buyers may suffer resulting from, arising
out of, relating to, in the nature of, or caused by any Liability of
Target (x) for any Taxes of Target with respect to any Tax year or
portion thereof ending on or before the Closing Date or for any Tax
year beginning before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with Section 9(b)) to the
portion of such period beginning before and ending on the Closing
Date), to the extent such Taxes are not reflected in the reserve for
Tax Liability shown on the face of the Most Recent Balance Sheet or,
if applicable, the Closing Date Balance Sheet, and (y) for the unpaid
Taxes of any Person (other than Target) under Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(iii) Transferor agrees to indemnify the Indemnified
Buyers from and against the entirety of any Adverse Consequences they
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the activities of any entity which at any time has
been owned, in whole or in part, by Target.
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(iv) Transferor agrees to indemnify the Indemnified
Buyers from and against the entirety of any Adverse Consequences they
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any Retained Liabilities (as hereafter defined). As
used herein, the term Retained Liabilities means all liabilities,
claims, commitments, demands or obligations of Target (or any
subsidiary of Target) existing or arising out of any facts or set of
operative facts existing on or prior to the Closing Date, except for
any such liabilities, claims, commitments, demands or obligations of
Target (or any subsidiary of Target) set forth (A) on the face of the
Closing Date Balance Sheet or (B) in Section 4(j) of the Disclosure
Schedule.
(v) Transferor agrees to indemnify the Indemnified
Buyers from and against the entirety of any Adverse Consequences they
may suffer resulting from, or arising out of, relating to, or in the
nature of or caused by any claim by a stockholder or former
stockholder of Target or any other Person seeking to assert: (i)
ownership or rights to ownership of any shares of capital stock of
Target or any Subsidiary, (ii) any rights of a stockholder (other than
the right to receive the Purchase Price) including any option,
preemptive rights or rights to receive notice or to vote, (iii) any
rights under Target's charter, bylaws or other constituent documents,
or (iv) any claim that his shares of capital stock were to be
repurchased by Target.
(vi) Transferor agrees to indemnify the Indemnified
Buyers from and against the entirety of any Adverse Consequences they
may suffer resulting from, or arising out of, relating to, or in the
nature of or caused by any claim by a dissenting shareholder that the
Consideration is less than the fair value of his shares.
(vii) Without limiting any other indemnification
provided in this Section 8, Transferor agrees to indemnify the
Indemnified Buyers from and against the entirety of any Adverse
Consequences they may suffer as a result of a taxing authority taking
the position that any former or current subcontractor of Target should
have been, at any time prior to the Closing Date, treated as an
employee of Target.
(viii) Without limiting any other indemnification
provided in this Section 8, Transferor agrees to indemnify the
Indemnified Buyers from and against the entirety of any Adverse
Consequences they may suffer as a result of Target's failure to be
duly authorized to conduct business and in good standing under the
laws of any jurisdiction where such qualification is or has been
required as of or prior to the Closing Date. The indemnification
obligation of Transferor under this Section 8(b)(viii) shall not be
limited or otherwise affected in any manner by any disclosures made by
the Transferor in the Disclosure Schedule.
(ix) Without limiting any other indemnification
provided in this Section 8, Transferor agrees to indemnify the
Indemnified Buyers from and against the entirety of any Adverse
Consequences they may suffer resulting from, arising out of, related
to, or in the nature of or caused by the Department of Labor
investigation (the "Investigation")
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and the Internal Revenue Service audit (the "Audit") referenced in
Section 4(k) of the Disclosure Schedule. The Transferror agrees and
acknowledges that the indemnification provided in this Section
8(b)(viii) with respect to the Investigation and the Audit shall not
be limited or affected in any manner by the disclosure of the
Investigation and the Audit in Section 4(k) of the Disclosure
Schedule. The provisions of Section 8(f) shall not apply to the
indemnification obligations under this Section 8(b)(ix).
(x) Notwithstanding anything set forth herein to the
contrary, as to the first $160,000 (reduced for any stock used to
satisfy the purchase price adjustment in Section 9) of indemnification
required by Transferor, he shall be permitted to satisfy that
obligation with North American common stock which shall be valued at
$5.00 per share (appropriately adjusted for any capital adjustment)
provided said indemnification is required within six months from the
date hereof.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE TRANSFEROR.
(i) In the event North American breaches (or in the
event any third party alleges facts that, if true, would mean the
North American had breached) any of their representations, warranties
(or any of such representations or warranties is untrue or
inaccurate), covenants and agreements contained herein or in any
certificate, document, instrument or agreement delivered pursuant to
this Agreement, and, provided that the Transferor makes a written
claim for indemnification against the North American pursuant to
Section 12(g) below within the applicable claim period provided in
8(a) above, then North American agrees to indemnify the Transferor and
each of his representatives (the "Indemnified Transferors") from and
against the entirety of any Adverse Consequences the Indemnified
Transferors may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Indemnified
Transferors may suffer after the end of any applicable claim period)
resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(ii) North American agrees to indemnify the
Transferor from and against the entirety of any Adverse Consequences
the Transferor may suffer as a result of Target's failure to pay the
amounts due, for periods after the Closing Date, under any of the
contracts, leases and other agreements set forth in Section 4(q) of
the Disclosure Schedule as to which Transferor is a personal
guarantor; provided, however, that Transferor shall not be entitled to
indemnification pursuant to this Section 8(c)(ii) to the extent that
North American is otherwise entitled to indemnification from the
Transferor in connection with the matters described in this Section
8(c)(ii).
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any party
entitled to indemnification hereunder (the "INDEMNIFIED PARTY") with
respect to any matter (a "THIRD PARTY CLAIM") which may give rise to a
claim for indemnification against any other Party (the
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"INDEMNIFYING PARTY") under this Section 8, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is materially prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party
so long as (A) the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party has given notice
of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, (E) the named
parties to the Third Party Claim do not include both the Indemnified
Party and the Indemnifying Party, and (F) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim, (B) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).
(iv) In the event any of the conditions in
Section 8(d)(ii) above is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (B) the Indemnifying
Parties will reimburse the Indemnified Party promptly and periodically
for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying
Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting
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from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 8.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall
take into account the time cost of money (using the Applicable Rate as the
discount rate) in determining Adverse Consequences for purposes of this Section
8. All indemnification payments under this Section 8 shall be deemed
adjustments to the Consideration.
(f) BASKET. The Transferor shall not be obligated to
indemnify North American pursuant to this Section 8 for any Adverse
Consequences in respect of a breach of (or inaccuracy in) a representation or
warranty until the aggregate amount of all Adverse Consequences in respect of
breaches (or inaccuracies) in representation or warranties exceeds $10,000 (the
"Trigger Amount"). Once the aggregate Adverse Consequences in respect of
breaches (or inaccuracies) in representation or warranties exceed the Trigger
Amount, North American shall be entitled to indemnification for the full amount
of all Adverse Consequences in respect of breaches (or inaccuracies) in
representation or warranties above the Trigger Amount.
The foregoing limitation on the indemnification obligations of
Transferor shall not apply to any breach of any covenants or agreements of
Transferor in this Agreement. In addition, notwithstanding the foregoing
provisions of this paragraph, such limitations shall not apply to breaches of
(or inaccuracies in) any of the representations or warranties in the following
provisions of this Agreement: Sections 3(a), 4(a), 4(b), 4(c), 4(d) and 4(e).
Further, the foregoing limitations of liability shall not apply to any breach
of any representation or warranty if such representation or warranty was made
with actual knowledge or reckless disregard of its falsity or inaccuracy or
incompleteness.
In calculating the amount of Adverse Consequences incurred arising out
of or related to any breach of a representation or warranty, references to
"material" or "Material Adverse Effect" or "knowledge" or "Knowledge" or other
materiality or similar qualifications, including as expressed in accounting
concepts such as GAAP, shall be disregarded. No right of indemnification
hereunder shall be limited by reason of any investigation or audit conducted
before or after the Closing by any party hereto or the knowledge of such party
of any breach of any representation, warranty, covenant or agreement by the
other party at any time.
(g) OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy (including without limitation any
such remedy arising under Environmental, Health, and Safety Requirements) any
Party may have with respect to Target, or the transactions contemplated by this
Agreement. The Transferor hereby agrees that he or it will not make any claim
for indemnification against Target by reason of the fact that he or it was a
director, officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses,
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43
or otherwise and whether such claim is pursuant to any statute, charter
document, bylaw, agreement, or otherwise) with respect to any matter for which
a Buyer Indemnified Party may be entitled to indemnification from the
Transferor as provided in this Section 8.
9. POST-CLOSING ADJUSTMENT OF CONSIDERATION.
(a) Within 60 days after the Closing Date, North American
will prepare and deliver to the Transferor a draft balance sheet (the "DRAFT
CLOSING DATE BALANCE SHEET") for Target as of the close of business on the
Closing Date (determined as though the Parties had not consummated the
transactions contemplated by this Agreement). North American will prepare the
Draft Closing Date Balance Sheet in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements.
(b) If the Transferor has any objections to the Draft Closing
Date Balance Sheet, he will deliver a detailed statement describing his
objections to North American within 30 days after receiving the Draft Closing
Date Balance Sheet. North American and the Transferor will use reasonable
efforts to resolve any such objections themselves. If the Parties do not obtain
a final resolution within 30 days after North American has received the
statement of objections, however, North American and Transferor will select an
accounting firm mutually acceptable to them to resolve any remaining
objections. If North American and the Transferor are unable to agree on the
choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot (after excluding their respective regular outside
accounting firms). The determination of any accounting firm so selected will be
set forth in writing and will be conclusive and binding upon the Parties. North
American will revise the Draft Closing Date Balance Sheet as appropriate to
reflect the resolution of any objections thereto pursuant to this Section 9(b).
ThE "CLOSING DATE BALANCE SHEEt" shall mean the Draft Closing Date Balance
Sheet together with any revisions thereto pursuant to this Section 9(b).
(c) In the event the Parties submit any unresolved objections
to an accounting firm for resolution as provided in Section 9(b) above, any
expenses relating to the engagement of the accounting firm shall be allocated
between the Transferor and North American by the accounting firm in proportion
to the amount in dispute which is decided in favor of the challenging party.
(d) North American will make the work papers and back-up
materials used in preparing the Draft Closing Date Balance Sheet available to
the Transferor and its accountants and other representatives at reasonable
times and upon reasonable notice during (A) the preparation by North American
of the Draft Closing Date Balance Sheet, (B) review by the Transferor of the
Draft Closing Date Balance Sheet, and (C) the resolution by the Parties of any
objections thereto.
(e) The Consideration, will be adjusted as follows:
(i) If the Shareholder's Equity set forth in the
Closing Date Balance Sheet is less than $1,260,000, the Transferor
will pay to the North American an amount equal
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to such deficiency (plus interest thereon at the Applicable Rate from
the Closing Date) within three business days after the date on which
the Closing Date Balance Sheet finally is determined pursuant to
Section 9(b).
(ii) If the notes payable of Target set forth in the
Closing Balance Sheet are greater than $650,000 the Transferor will
pay to the North American an amount equal to such excess (plus
interest thereon at the Applicable Rate from the Closing Date) within
three business days after the date on which the Closing Date Balance
Sheet finally is determined pursuant to Section 9(b) above.
(iii) If the cash of Target set forth in the Closing
Date Balance Sheet is less than $344,000 the Transferor will pay to
the North American an amount equal to such deficiency (plus interest
thereon at the Applicable Rate from the Closing Date) within three
business days after the date on which the Closing Date Balance Sheet
finally is determined pursuant to Section 9(b) above.
(f) The aggregate of all amounts required to be paid by
Transferor to North American pursuant to Section 9(a)(iii) shall be paid (i)
first, at the option of the Transferor, up to $160,000 in value (at $5.00 per
share) of North American Class B Common Shares, (ii) then, 100% in cash up to
$100,000, and (iii) thereafter 49% in cash and 51% in North American Class B
Common Shares (valued at $5.00 per share). The cash portion of any such payment
shall be made by wire transfer or delivery of other immediately available
funds.
10. TAX MATTERS. The following provisions shall govern the allocation
of responsibility as between North American and Transferor for certain tax
matters following the Closing Date:
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
Transferor shall prepare or cause to be prepared and timely file or cause to be
timely filed all Tax Returns for Target for all periods ending on or prior to
the Closing Date which are filed after the Closing Date (the "Pre-Closing
Period"). Such Tax Returns shall be prepared by treating items on such Tax
Return in a manner consistent with the past practices with respect to such
items, unless otherwise required by law. Transferor shall permit North American
to review and comment on each such Tax Return described in the preceding
sentence prior to filing. North American shall pay the amounts due for Taxes of
Target with respect to the Pre-Closing Periods, up to the amount reflected in
the reserve for Tax Liability shown on the face of the Most Recent Balance
Sheet. Transferor agrees that he will pay, when due, all amounts due for Taxes
of Target with respect to Pre-Closing Periods, that exceed the reserve for Tax
Liability.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. North American shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of Target for Tax periods which begin before the
Closing Date and end after the Closing Date. North American shall permit
Transferor to review and comment on each such Tax return described in the
preceding sentence prior to filing. Transferor shall pay to North American
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within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date to the extent such
Taxes are not reflected in the reserve for Tax Liability shown on the face of
the Most Recent Balance Sheet. For purposes of this Section , in the case of
any Taxes that are imposed on a periodic basis and are payable for a Taxable
period that includes (but does not end on) the Closing Date, the portion of
such Tax which relates to the portion of such Taxable period ending on the
Closing Date shall (x) in the case of any real and personal property Taxes, be
deemed to be the amount of such Tax for the entire Taxable period multiplied by
a fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days
in the entire Taxable period, and (y) in the case of any other Tax be deemed
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date. Any credits relating to a Taxable period that begins
before and ends after the Closing Date shall be taken into account as though
the relevant Taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of Target.
(c) COOPERATION ON TAX MATTERS.
(i) North American, Target and Transferor shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and
(upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Target and Transferor
agree (A) to retain all books and records with respect to Tax matters
pertinent to Target relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by North American or Transferor, any
extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, Target or Transferor, as
the case may be, shall allow the other party to take possession of
such books and records.
(ii) North American and Transferor further agree,
upon request, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other Person as
may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) North American and Transferor further agree,
upon request, to provide the other party with all information that
either party may be required to report
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pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(iv) If Target is an S Corporation, Transferor
agrees that promptly after the Closing Date, he will prepare and file
any required S Corporation federal and state tax returns for Target
for the period from January 1, 1997 through the Closing Date and will
pay all applicable Taxes for that period, as more particularly
described in Section 10(e) below.
(d) TAX SHARING AGREEMENTS. All tax sharing agreements or
similar agreements with respect to or involving Target shall be terminated as
of the Closing Date and, after the Closing Date, Target shall not be bound
thereby or have any liability thereunder.
(e) S CORPORATION STATUS. If Target is an S Corporation,
Transferor acknowledges that as a result of the consummation of the
transactions contemplated by this Agreement, Target's S Corporation status will
terminate as of the Closing Date. Notwithstanding anything in this Section 10
to the contrary, Transferor agrees that he will file any required S Corporation
federal, state or local tax returns for Target for the period from January 1,
1997 through the Closing Date and will pay all applicable Taxes for such
period. Transferor will elect under Section 1362(e)(3) of the Code not to have
the pro rata allocation method of Section 1362(e)(2) of the Code apply to
Target's final taxable year as an S Corporation.
(f) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by
Transferor when due, and Transferor will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, North American will, and will cause
its affiliates to, join in the execution of any such Tax Returns and other
documentation.
11. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(i) North American and the Transferor may terminate
this Agreement by mutual written consent at any time prior to the
Closing;
(ii) North American may terminate this Agreement by
giving written notice to the Transferor at any time prior to the
Closing (A) in the event the Transferor has breached any
representation, warranty, or covenant contained in this Agreement in
any material respect, North American has notified the Transferor of
the breach, and the breach has continued without cure for a period of
30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before April 15, 1998, by reason of the
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failure of any condition precedent under Section 7(a) hereof (unless
the failure results primarily from the North American itself breaching
any representation, warranty, or covenant contained in this
Agreement); and
(iii) the Transferor may terminate this Agreement by
giving written notice to North American at any time prior to the
Closing (A) in the event North American has breached any
representation, warranty, or covenant contained in this Agreement in
any material respect, the Transferor has notified the North American
of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before April 15, 1998, by reason of the failure of
any condition precedent under Section 7(b) hereof (unless the failure
results primarily from the Transferor himself breaching any
representation, warranty, or covenant contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 11(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
12. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the North American and the Transferor; PROVIDED, HOWEVER, that any
Party may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
best efforts to advise the other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns and the Indemnified Parties
referred to in Section 8 hereof.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the North American
and the Transferor; PROVIDED, HOWEVER, that the North American may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates, (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the
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North American nonetheless shall remain responsible for the performance of all
of its obligations hereunder) and (iii) without the approval of the Transferor
assign its rights and interests hereunder to its lenders (and any agent for the
lenders), and the Parties consent to any exercise by such lenders (and such
agents) of their rights and remedies with respect to such collateral.
(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
IF TO THE TRANSFEROR: COPY TO:
--------------------- --------
Xxxxx Xxxxxxx Xxxxxxx, Chaves, Rubin,
c/o Mich-Com Cable Services, Inc. Xxxxxx & Xxxxxx, P.A.
0000 Xxxxx Xxxxxx Xxxxxxx 0000 Xxxxxxxxx Xxxx.
Xxxxxx, Xxxxxxx 00000 Xxxx Xxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
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IF TO THE NORTH AMERICAN: COPY TO:
------------------------- --------
North American Tel-Com Group, Inc. Holland & Knight LLP
0000 Xxxx Xxxxx Xxxxx Xxxx, Xxx. 000 0 Xxxx Xxxxxxx Xxxx., 00xx Xxxxx
Xxxx Xxxx Xxxxx, XX 00000 Ft. Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx Attn: Xxxx X. Xxxxxx, Esq.
Holland & Knight LLP
000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
H.I.G. Capital Management, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx
White & Case, LLP
First Union Financial Tower
Suite 4900
000 X. Xxxxxxxx Xxxx.
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Florida or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Florida.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the North American and the Transferor. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
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(j) SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) EXPENSES. Each of the Parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Transferor
agrees Target has not borne or will bear any of the Transferor's costs and
expenses (including any of their legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in
the negotiation of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The
Exhibits, Annexes, Schedules and Certificates identified in this Agreement are
incorporated herein by reference and made a part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which they
may be entitled, at law or in equity.
(o) SUBMISSION TO JURISDICTION. Each of the Parties submits
to the jurisdiction of any state or federal court sitting in Palm Beach County,
Florida, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and
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waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 12(o)
above. Nothing in this Section 12(g), however, shall affect the right of any
Party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
In any action or proceeding arising out of or relating to this
Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees and costs from the other party to the action or proceeding.
(p) WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND TO
THE FULLEST EXTENT PERMITTED BY LAW WAIVE ANY RIGHTS THAT THEY MAY HAVE TO
CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
NORTH AMERICAN TEL-COM, INC.
By:
------------------------------
Xxxxxxx X. Xxxxxxxx
TRANSFEROR
----------------------------------
Xxxxx Xxxxxxx
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