EXHIBIT 10.15
MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
----------------------
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") is made and
entered into as of April 1, 2003, by and among: NATIONAL AUTO CREDIT, INC.
("NAC" or the "PARENT"), a Delaware corporation; OMI BUSINESS ACQUISITION CORP.
("MERGER SUB"), a Delaware corporation and a wholly owned subsidiary of Parent;
ORA/METRO INCorporated ("ORA" or the "ACQUIRED CORPORATION"), a New York
corporation; and XXXX XXXXXXXX ("XXXXXXXX" or the "STOCKHOLDER"). As used
herein, NAC, Merger Sub, the Acquired Corporation and the Stockholder are
referred to collectively as the "PARTIES" and each as a "PARTY."
RECITALS
A. The Stockholder owns 100% of the outstanding shares of the capital stock of
the Acquired Corporation.
B. NAC wishes to acquire all of such shares of the Acquired Corporation from
the Stockholder.
C. NAC, Merger Sub, the Acquired Corporation and the Stockholder intend to
effect a merger (the "MERGER") of the Acquired Corporation into Merger Sub
in accordance with this Agreement and the Delaware General Corporation Law
(the "DELAWARE CORPORATE LAW") and the New York Business Corporation Law
(the "NY BCL"). Upon the consummation of the Merger, the Acquired
Corporation will cease to exist.
D. It is intended that the Merger qualifies as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "CODE").
E. NAC has caused the formation of Merger Sub for the purpose of accomplishing
a tax-free triangular merger with the Acquired Corporation.
F. This Agreement has been approved by the respective boards of directors of
NAC, Merger Sub and the Acquired Corporation, has been approved by NAC, as
the sole stockholder of Merger Sub and has been approved the Stockholder,
as the holder of all of the outstanding capital stock of the Acquired
Corporation.
G. In connection with the execution and delivery of this Agreement, some or
all of the parties hereto are or will be executing and delivering an
Employment Agreement for Xxxxxxxx and other collateral documents.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound hereby, do mutually agree as follows:
ARTICLE 1
THE MERGER
In connection with the Merger, the respective boards of directors of NAC,
Merger Sub and the Acquired Corporation have, by resolutions duly adopted,
approved the following provisions of this Article 1 as the plan of merger
required by the applicable provisions of the Delaware Corporate Law and the NY
BCL:
1.1 The Merger. At the Effective Time (as defined in Section 1.3 below), in
accordance with this Agreement and Delaware Corporate Law and the NY BCL, the
Acquired Corporation shall be merged with and into Merger Sub, the separate
corporate existence of the Acquired Corporation (except as such existence may be
continued by operation of law) shall cease, and Merger Sub shall continue as the
surviving corporation under the name OMI Communications, Inc., which name Merger
Sub shall adopt in connection with the consummation of the Merger. Merger Sub,
in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "SURVIVING CORPORATION."
1.2 Effect of the Merger. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises of a public, as well as of a
private, nature of each of Merger Sub and the Acquired Corporation; all
property, real, personal and mixed, and all accounts payable arising in the
ordinary course of business and accrued expenses due on whatever account, and
all debts, liabilities and duties due to the Acquired Corporation shall be taken
and deemed to be transferred to and vested in the Surviving Corporation without
further act or deed; and the Surviving Corporation shall be responsible and
liable for all liabilities and obligations of the Acquired Corporation, in each
case in accordance with Delaware Corporate Law and the NY BCL.
1.3 Consummation of the Merger. The Merger shall be effective at such time
as a certificate of merger relating to the Merger (the "DELAWARE CERTIFICATE OF
MERGER") is duly filed with the Secretary of State of the State of Delaware and
a certificate of merger relating to the Merger (the "NY CERTIFICATE OF MERGER"
and, collectively with the Delaware Certificate of Merger, the "CERTIFICATES OF
MERGER") is duly filed with the Secretary of State of the State of New York, as
contemplated by Section 1.10 hereof. The date and time when the Merger shall
become effective is referred to herein as the "EFFECTIVE TIME" (provided,
however, that, if the Certificates of Merger, as so filed, provide that the
Merger shall take effect, or be effective, at another time, then "EFFECTIVE
TIME," as used herein, means the time so stated in the Certificates of Merger).
1.4 Certificate of Incorporation and Bylaws; and Directors and Officers.
The Certificate of Incorporation and Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation immediately after the
Effective Time and shall thereafter continue to be its Certificate of
Incorporation and Bylaws until amended as provided therein and under Delaware
Corporate Law. The directors of Merger Sub holding office immediately prior to
the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time. The officers of Merger Sub holding office
immediately prior to the Effective Time shall be the officers (holding the same
offices as they held with Merger Sub) of the Surviving Corporation immediately
after the Effective Time.
1.5 Determination and Payment of Base Purchase Price.
(a) Base Purchase Price. The base purchase price ("BASE PURCHASE PRICE,"
and collectively with the Bonus Purchase Price (as defined below) the "PURCHASE
PRICE") shall be two hundred thousand (200,000) shares of common stock, $.05 par
value per share, of NAC (hereinafter, the common stock of NAC shall be referred
to as "NAC COMMON STOCK"), which shall be issued as provided below and shall be
subject to
2
adjustment as provided in Article 7 below. The shares of NAC common stock
contemplated to be issued as provided in the preceding sentence are hereinafter
sometimes referred to collectively as the "NAC MERGER SHARES."
(b) Payment of the Base Purchase Price. At the Closing, the Base Purchase
Price shall be paid by the issuance to the Stockholder of the NAC Merger SHARES.
1.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Acquired
Corporation or any holder of the securities of the Acquired Corporation, each
share of the Class A common stock, par value $.001 per share, of the Acquired
Corporation (the "ORA COMMON STOCK") issued and outstanding immediately prior to
the Effective Time shall automatically be canceled and extinguished and
converted into and become the right of the holder of such share of ORA Common
Stock to receive twenty (20) shares of NAC Common Stock.
1.7 Reorganization. The Parties hereby adopt this Agreement as a "plan of
reorganization" and shall consummate the Merger in accordance with Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code. None of the parties shall take a
reporting position inconsistent with the treatment of the Merger as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
1.8 Closing. The closing of the transactions contemplated hereby (the
"CLOSING") shall occur at 10:00 A.M. (local time) on the third business day
after each of the conditions to closing contained in Article 6 hereof have been
fulfilled or waived in writing, at the offices of Xxxx Xxxxx LLP, 599 Lexington
Avenue, 29th Floor, New York, New York, or at such other place, on such other
date and/or at such other time as the Parties may mutually agree upon in
writing. Simultaneously with the consummations of the Closing, the Parties shall
file, or cause to be filed, with the Secretary of State of the State of Delaware
and the Secretary of State of the State of New York, the Certificates of Merger.
1.9 Taking of Necessary Actions; Further Actions. NAC and Merger Sub, on
the one hand, and the Acquired Corporation and the Stockholder, on the other
hand, shall use all reasonable efforts to take all such actions (including,
without limitation, actions to cause the satisfaction of the conditions of the
other to effect the Merger) as may be necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
possession of all the rights, privileges, immunities and franchises of the
Acquired Corporation, and to subject fully the Surviving Corporation to all
debts and obligations of the Acquired Corporation. The officers and directors of
the Surviving Corporation are fully authorized and directed in the name of the
Acquired Corporation and the Surviving Corporation to take, and shall take, all
such actions. Without limiting the scope or generality of the foregoing, the
Acquired Corporation and the Stockholder shall take all reasonable, commercial
efforts to obtain all Required Waivers, Required Consents and Required Approvals
(as those terms are hereinafter defined)
1.10 Bonus Purchase Price. If the sum of (A) the Adjusted EBITDA (as
defined below) of the Acquired Corporation for the period from February 1, 2003
through the Effective Time and (B) the Adjusted EBITDA of the Surviving
Corporation for the period from the Effective Time through January 31, 2006 is
equal to or greater than Nine Hundred Thousand Dollars ($900,000), then the
Stockholder shall be entitled to receive, in addition to the Base Purchase
Price, an additional One Hundred and Fifty Thousand Dollars ($150,000) (the
"BONUS PURCHASE PRICE"). The Bonus Purchase Price shall be paid by the Surviving
Corporation, together with interest thereon at five percent (5%) per annum, in
twenty-four (24) equal quarterly installments of principal and interest
commencing with the fiscal quarter of the Surviving Corporation next following
the fiscal quarter during which the Adjusted EBITDA of the Surviving Corporation
referred to in clause (B) above has been determined. As used herein, "ADJUSTED
EBITDA" for any entity for any period means the earnings of such entity for such
period, before any deduction for interest, taxes, depreciation and amortization,
and before deducting corporate overhead or other expenses allocated to such
entity by NAC but after deducting (A) the aggregate amount of all capital
expenditures (including, without limitation, pursuant to any capital or
capitalized lease) made or required to be made by such entity (or any of its
subsidiaries) during such period and (B) any debt service paid or required to be
paid during such period by such entity (or any of its subsidiaries), including,
without limitation, any debt
3
service paid or required to be paid with respect to the SBA Loan (as hereinafter
defined), the Citibank Loan (as hereinafter defined) and the Stockholder's Note
(as hereinafter defined), in each case as determined in accordance with
generally accepted accounting principles.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF NAC AND MERGER SUB
NAC and Merger Sub (collectively, the "NAC PARTIES" and each an "NAC
PARTY"), jointly and severally, hereby represent and warrant to the Acquired
Corporation and the Stockholder as follows:
2.1 Organization and Qualification. Each NAC Party is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted, and is duly
qualified in every jurisdiction where the failure to do so would have a
Materially Adverse Effect (as hereinafter defined) on such NAC Party. The copies
of the Certificate of Incorporation and Bylaws of NAC and the Certificate of
Incorporation and Bylaws of Merger Sub previously furnished to the Stockholder
reflect all amendments thereto and are correct and complete. As used herein,
"MATERIALLY ADVERSE EFFECT" on any Person (as hereinafter defined) means any
materially adverse effect on the assets, liabilities, financial condition,
operating results, customer, employee, supplier or franchise relations, business
(as currently conducted and as proposed to be conducted), business condition or
prospects or financing arrangements of such Person, "MATERIALLY ADVERSE CHANGE"
with respect to any Person means any materially adverse change in the assets,
liabilities, financial condition, operating results, customer, employee,
supplier or franchise relations, business (as currently conducted and as
proposed to be conducted), business condition or prospects or financing
arrangements of such Person, and "PERSON" means any individual, corporation,
partnership, limited liability company, joint venture, business trust,
association or other business entity of any type or nature.
2.2 Authority Relative to This Agreement. Each NAC Party has the requisite
corporate power and authority to enter into this Agreement and each of the
Collateral Documents (as hereinafter defined) to which it is contemplated
hereunder to become a party and to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by each NAC Party and
the consummation by each NAC Party of the transactions contemplated hereby to be
performed by it have been duly authorized by the Board of Directors such NAC
Party, and no other corporate proceedings on the part of either NAC Party are
necessary to authorize this Agreement and such transactions. The execution and
delivery of each Collateral Document to which either NAC Party is contemplated
hereunder to become a party and the consummation by such NAC Party of the
transactions contemplated thereby to be performed by it have been duly
authorized by the Board of Directors of such NAC Party, and no other corporate
proceedings on the part of such NAC Party are necessary to authorize such
Collateral Document and such transactions. This Agreement has been duly executed
and delivered by each NAC Party and constitutes a valid and binding obligation
of each NAC Party, enforceable against such NAC Party in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity. The execution,
delivery and performance of this Agreement by either NAC Party is not, and will
not be, in breach or violation of, or be in conflict with or constitute, with or
without the passage of time or the giving of notice (or both), a default under,
(a) its Certificate of Incorporation or Bylaws, (b) any agreement, arrangement
or understanding to which such NAC Party is a party or by which it is otherwise
bound, (c) any Permit (as hereinafter defined) applicable to such NAC Party or
(d) any law, regulation, order, judgment or decree applicable to it and does not
and will not result in the creation of any Lien (as hereinafter defined) on any
assets of such NAC Party or of any of its current subsidiaries or result in, or
constitute grounds for, the termination, suspension, revocation, forfeiture,
lapse, impairment or non-renewal of any Permit the absence or
4
loss of which would have or could be reasonably anticipated to have a Materially
Adverse Effect on NAC. The execution, delivery and performance of any Collateral
Document by either NAC Party that is contemplated hereunder to become a party
thereto will not be in breach or violation of, or be in conflict with or
constitute, with or without the passage of time or the giving of notice (or
both), a default under, (a) the Certificate of Incorporation or Bylaws of such
NAC Party, (b) any agreement, arrangement or understanding to which such NAC
Party is a party or by which such NAC Party is otherwise bound, (c) any Permit
applicable to such NAC Party or (d) any law, regulation, order, judgment or
decree applicable to such NAC Party and will not result in the creation of any
Lien on any assets of such NAC Party or of any of its current subsidiaries or
result in, or constitute grounds for, the termination, suspension, revocation,
forfeiture, lapse, impairment or non-renewal of any Permit the absence or loss
of which would have, or could be reasonably anticipated to have, a Materially
Adverse Effect on NAC. Except for such filings to be made pursuant to Delaware
Corporate Law in order to effect the Merger (which NAC agrees to make) or
pursuant to federal or state securities laws, no authorization, consent or
approval of, or filing with, any public body, court or authority is (a)
necessary on the part of either NAC Party for the consummation by such NAC Party
of the transactions contemplated by this Agreement to be performed by it or (b)
necessary on the part of such NAC Party for the consummation by such NAC Party
of the transactions contemplated by any Collateral Document to which such NAC
Party is contemplated hereunder to become a party to be performed by it. As used
herein, "COLLATERAL DOCUMENTS" mean, collectively, the Employment Agreement, the
Non-Competition Agreement (as hereinafter defined), the Stockholder's Note and
the Registration Rights Agreement (as hereinafter defined).
2.3 No Materially Adverse Changes. Except as set forth in Section 2.3 of
the letter, dated as of the date hereof, furnished by NAC to the Stockholder
(the "NAC DISCLOSURE LETTER"), a copy of which letter is attached hereto as
Exhibit D, or in the NAC Business Reports (as defined in Section 2.6 below),
there has not been any Materially Adverse Change with respect to NAC since
January 1, 2002.
2.4 Validity of Stock. The NAC Merger Shares shall, when issued: (i) be
duly authorized, validly issued, fully paid and non-assessable and free of liens
and encumbrances created by any person other than the Stockholder, and (ii) be
free and clear of any transfer restrictions, liens and encumbrances except for
restrictions on transfer under applicable federal and state securities laws,
including Rule 144 promulgated under the Securities Act of 1933, as amended,
(the "SECURITIES ACT") and except as provided for in this Agreement.
2.5 Capitalization. The authorized equity capitalization of NAC consists of
40,000,000 shares of NAC Common Stock and 2,000,000 shares of Preferred Stock.
As of the date hereof, 7,830,614 shares of NAC Common Stock are issued and
outstanding, and except as set forth in Section 2.5 of the NAC Disclosure
Letter, as of the Closing there will be 7,830,614 shares of NAC Common Stock
issued and outstanding (exclusive of any shares of NAC Common Stock contemplated
to be issued to the Stockholder pursuant to this Agreement), all of which shares
are validly issued, fully paid and non-assessable, and no shares of Preferred
Stock are outstanding. Except as disclosed in Section 2.5 of the NAC Disclosure
Letter or in the NAC Business Reports or provided for herein or any of the
Post-Merger Agreements (as hereinafter defined), there are no options, warrants,
conversion privileges or other rights, agreements, arrangements or commitments
obligating NAC to issue or sell any shares of capital stock of NAC or securities
or obligations of any kind convertible into or exchangeable for any shares of
capital stock of NAC or of any other corporation, nor are there any stock
appreciation, phantom stock or similar rights outstanding based upon the book
value or any other attribute of NAC. Except as disclosed in the NAC Business
Reports, no holders of outstanding shares of NAC Common Stock are entitled to
any preemptive or other similar rights.
2.6 Financial Statements and SEC Filings. NAC has made available to the
Stockholder and correct copies of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement (collectively, the
"REPORTS") filed by NAC with the U.S. Securities and Exchange Commission (the
"SEC")
5
between January 31, 2002 and the date of this Agreement. NAC will also deliver
to the Stockholder on or before the Closing, any other reports that are filed
with the SEC after the date hereof and prior to the Closing, and any other
reports or other information sent generally to NAC's stockholders after the date
hereof, but not required to be filed with the SEC. (The Reports and all other
reports and information referred to in the immediately preceding sentence,
whether or not filed with the SEC, are herein collectively referred to as the
"NAC BUSINESS REPORTS," and the financial statements, including the notes
thereto, contained in the NAC Business Reports are hereinafter collectively
referred to as the "NAC FINANCIAL STATEMENTS"). NAC has duly filed all the
Reports required to be filed by it with the SEC under the Securities Act and the
Securities Exchange Act of 1934, as amended, and no such Report, nor any Report
sent to NAC's stockholders generally, contains any untrue statement of material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements in such Report, in light of the circumstances
under which they were made, not misleading. The NAC Financial Statements were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved and present fairly
the consolidated financial condition, results of operations and cash flows of
NAC and its consolidated subsidiaries as of the dates and for the periods
indicated therein, subject, in the case of unaudited interim statements, to
normal year-end accounting adjustments and the absence of complete footnote
disclosure.
2.7 Absence of Undisclosed Liabilities. Except as and to the extent stated
in Section 2.7 of the NAC Disclosure Letter or in the NAC Financial Statements
or otherwise in the NAC Business Reports, NAC does not have any material
liabilities or obligations (whether accrued, absolute, contingent, unliquidated,
known, unknown or otherwise), other than (i) liabilities incurred in the
ordinary course of business and (ii) obligations under contracts and commitments
incurred in the ordinary course of business, which, in both subsections (i) and
(ii), individually or in the aggregate, are not material to the financial
condition or operating results of NAC (determined on a consolidated basis).
2.8 Litigation. Except as set forth in Section 2.8 of the NAC Disclosure
Letter or in the NAC Business Reports, there are (a) no actions, suits,
proceedings or orders, at law or in equity, pending or threatened against NAC,
(b) to the best information and belief of NAC, no investigations pending or
threatened against NAC before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and (c) no bases known to NAC for any of the foregoing.
2.9 No Commissions. NAC has not incurred any obligation for any finder's or
broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
2.10 No Liabilities of Merger Sub. Except for its obligations under this
Agreement or any Collateral Document, Merger Sub is not subject to any
liabilities, obligations or claims, whether absolute or contingent, liquidated
or unliquidated, known or unknown. Merger Sub was formed solely for the purpose
of consummating the transactions contemplated by this Agreement and, except as
provided for herein or contemplated hereby, has not engaged in any business or
other activities for any other purpose.
2.11 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of NAC or Merger Sub
is required in connection with the consummation of the transactions contemplated
by this Agreement or any of the Collateral Documents, except (a) the filing of
the Delaware Certificate of Merger with the Secretary of State of Delaware and
filing of the NY Certificate of Merger with the Secretary of State of New York
and (b) such filings as may be required under federal and/or state securities
laws, which filings NAC agrees to make to the extent (but only to the extent)
expressly provided for in the Registration
6
Rights Agreement. The foregoing representation and warranty set forth in this
Section 2.11 are subject to and conditioned upon the truth and accuracy of the
representations of the Stockholder as set forth in Article 4 below.
2.12 Disclosure. Neither this Article 2 nor the NAC Disclosure Letter
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading, and there is no fact
known to NAC that has not been disclosed to the Stockholder that materially and
adversely affects, or could reasonably be anticipated to materially and
adversely affect, the business, including the operating results, assets,
customer, supplier or employee relations and business prospects, of NAC
(determined on a consolidated basis); provided, however, that the foregoing
shall not be deemed to extend or apply to any fact or circumstance that relates
to the Acquired Corporation (including, without limitation, the operating
results, assets, customer, supplier or employee relations or business prospects
of the Acquired Corporation).
2.13 Reorganization Matters.
(a) NAC has, and at the Effective Time will have, no plan or intention to:
(i) Liquidate Merger Sub;
(ii) Merge Merger Sub with or into any other corporation;
(iii) Sell or otherwise dispose of the stock of Merger Sub except
for transfers of stock to corporations "controlled" (within
the meaning of Section 368(c) of the Code) by NAC;
(iv) Cause Merger Sub to sell or otherwise dispose of any its
assets or assets acquired in the Merger from the Acquired
Corporation except for (i) sales or other dispositions made
in the ordinary course of business (including, without
limitation, dispositions of obsolete or damaged property),
(ii) transfers described in Section 368(a)(2)(C) of the
Code; (iii) transfers to members of the "qualified group"
(within the meaning of Treasury Regulations Section
1.368-1(d)(4)(ii)) encompassing NAC (the "NAC GROUP")
following the Effective Time, or (iv) transfers to a
partnership if either (x) members of the NAC Group, in the
aggregate, own a significant interest in that partnership
business or (y) one or more members of the NAC Group have
active and substantial management functions as a partner
with respect to that partnership business;
(v) Cause Merger Sub to issue additional shares of stock that
would result in NAC losing "control" (within the meaning of
Section 368(c) of the Code) of Merger Sub following the
Effective Time;
(vi) Cause Merger Sub or the NAC Group following the Effective
Time to discontinue the historic business conducted by
Merger Sub preceding the Effective Time or fail to use in a
business a significant portion of the assets held by Merger
Sub immediately preceding the Effective Time;
(vii) Acquire or cause any person "related" (within the meaning of
Treasury Regulations Section 1.368-1(e)(3)) to NAC to
acquire any of the NAC Common Stock issued in the Merger; or
(viii) Take any action that might otherwise cause the Merger not to
be treated as a "reorganization" within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
7
(b) Prior to the Effective Time, neither NAC nor any person "related" to
NAC will, "in connection with" the Merger, acquire, directly or
indirectly, any shares of capital stock of the Acquired Corporation.
For purposes hereof, the term "related" has the meaning in Treasury
Regulations Section 1.368-1(e)(3), and the term "in connection with"
has the meaning in Treasury Regulations Section 1.368-1(e)(2).
(c) At the Effective Time:
(i) NAC will own all of the outstanding stock of Merger Sub;
(ii) Merger Sub will own all of the assets ever owned by Merger
Sub;
(iii) Neither NAC nor Merger Sub will be, nor will either of NAC
or Merger Sub have been at any time during the five-year
period preceding the Effective Time, the owner for federal
income tax purposes of shares of capital stock of the
Acquired Corporation; and
(iv) NAC Common Stock will be "voting stock" within the meaning
of Code Section 368(a)(2)(E)(ii).
(d) NAC has, and at the Effective Time will have, no plan or intention to
adopt any stock repurchase plan other than a plan that will limit
repurchases of NAC Common Stock to repurchases made on the open market
on an established securities exchange through a broker pursuant to an
arrangement that will preclude NAC from knowing the identity of the
seller and seller from knowing the identity of the purchaser.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE ACQUIRED CORPORATION AND THE STOCKHOLDER
The Acquired Corporation and the Stockholder (collectively, the
"STOCKHOLDER PARTIES" and each a "STOCKHOLDER PARTY"), jointly and severally,
represent and warrant to NAC and Merger Sub as follows:
3.1 Organization and Qualification. The Acquired Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and has the requisite corporate power and authority to
own and operate its properties and to carry on its business as now conducted.
The Acquired Corporation is duly qualified to do business in every jurisdiction
where the failure to do so would have a Materially Adverse Effect on the
Acquired Corporation. The copies of the Acquired Corporation's Certificate of
Incorporation and Bylaws, which have been furnished by the Stockholder to NAC
prior to the date of this Agreement, reflect all amendments made thereto and are
correct and complete.
3.2 Authority Relative to this Agreement. The Acquired Corporation has the
requisite corporate power and authority to enter into this Agreement and each of
the Collateral Documents to which it is contemplated hereunder to become a party
and to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement by the Acquired Corporation and the consummation by
the Acquired Corporation of the transactions contemplated hereby to be performed
by it have been duly authorized by the Board of Directors of the Acquired
Corporation and have been duly approved by the Stockholder, and no other
corporate proceedings on the part of the Acquired Corporation are necessary to
authorize and approve this Agreement and such transactions. The execution and
delivery of each Collateral Document to which the Acquired Corporation is
contemplated hereunder to become a party and the consummation by the Acquired
Corporation of the transactions contemplated thereby to be performed by it have
been duly authorized by the
8
Board of Directors of the Acquired Corporation and have been duly approved by
the Stockholder, and no other corporate proceedings on the part of the Acquired
Corporation are necessary to authorize such Collateral Document and such
transactions. This Agreement has been duly executed and delivered by the
Acquired Corporation and constitutes a valid and binding obligation of the
Acquired Corporation, enforceable against its in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity. Except as expressly set
forth in Section 3.2 of the letter, dated as of the date hereof, furnished by
the Stockholder to NAC and Merger Sub (the "ORA DISCLOSURE LETTER"), a copy of
which letter is attached hereto as Exhibit E, the execution, delivery and
performance of this Agreement by the Acquired Corporation and the Stockholder is
not, and will not be, in breach or violation of, or be in conflict with or
constitute, with or without the passage of time or the giving of notice (or
both), a default under, (a) the Certificate of Incorporation or Bylaws of the
Acquired Corporation, (b) any agreement, arrangement or understanding to which
the Acquired Corporation and/or the Stockholder is a party or by which the
Acquired Corporation and/or the Stockholder is otherwise bound, (c) (subject to
the Required Permits (as hereinafter defined) having been obtained) any Permit
applicable to the Acquired Corporation and/or the Stockholder or (d) any law,
regulation, order, judgment or decree, applicable to the Acquired Corporation
and/or the Stockholder and does not and will not result in, create or trigger
the termination or acceleration of, or any right of termination or acceleration
under, any such agreement, arrangement or understanding or result in the
creation of any Lien on any of assets of the Acquired Corporation or of any of
its subsidiaries or result in, or constitute grounds for, the termination,
suspension, revocation, forfeiture, lapse, impairment or non-renewal of any
Permit the absence or loss of which would have or could be reasonably
anticipated to have a Materially Adverse Effect on NAC. The execution, delivery
and performance by the Acquired Corporation of any Collateral Document to which
it is contemplated hereunder to become a the will not be in breach or violation
of, or be in conflict with or constitute, with or without the passage of time or
the giving of notice (or both), a default under, (a) the Certificate of
Incorporation or Bylaws of such Acquired Corporation, (b) any agreement,
arrangement or understanding to which the Acquired Corporation and/or the
Stockholder is a party or by which the Acquired Corporation and/or the
Stockholder is otherwise bound, (c) any Permit applicable to the Acquired
Corporation and/or the Stockholder or (d) any law, regulation, order, judgment
or decree applicable to the Acquired Corporation and/or the Stockholder and will
not result in, create or trigger the termination or acceleration of, or any
right of termination or acceleration under, any such agreement, arrangement or
understanding or result in the creation of any Lien on any of assets of the
Acquired Corporation or of any of its subsidiaries or result in, or constitute
grounds for, the termination, suspension, revocation, forfeiture, lapse,
impairment or non-renewal of any Permit the absence or loss of which would have
or could be reasonably anticipated to have a Materially Adverse Effect on NAC.
Except for such filings to be made pursuant to Delaware Corporate Law and the NY
BCL in order to effect the Merger, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of the
Acquired Corporation or the Stockholder for the consummation by the Acquired
Corporation and the Stockholder of the transactions contemplated by this
Agreement or any Collateral Document to be performed by it or him.
3.3 Capitalization and Voting Rights.
(a) The authorized equity capitalization of ORA consists of one million
(1,000,000) shares of the ORA Common Stock and one million (1,000,000)
shares of Class B common stock, par value $.001 per share. There are 10,000
shares of ORA Common Stock issued and outstanding, all of which shares are
owned beneficially and of record by the Stockholder. No shares of ORA's
Class B common stock are issued or outstanding. All of the outstanding
shares of ORA Common Stock are duly and validly authorized and issued,
fully paid and non-assessable, and were issued in accordance with the
registration or qualification provisions of the Securities Act and any
relevant state securities laws, or pursuant to valid exemptions therefrom.
9
(b) Except as expressly set forth in Section 3.3 of the ORA Disclosure
Letter, there are no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments obligating the Acquired
Corporation to issue or sell any shares of its capital stock or securities
or obligations of any kind exercisable for, convertible into or
exchangeable for any shares of its capital stock or of any other
corporation, nor are there any stock appreciation, phantom stock or similar
rights outstanding based upon the book value or any other attribute of the
Acquired Corporations (or any group of Persons including the Acquired
Corporations). No holders of outstanding shares of ORA Common Stock are
entitled to any preemptive or other similar rights.
(c) The Acquired Corporations is not a party or otherwise subject to any
agreement or understanding, and there is no agreement or understanding
between any Persons, that affects or relates to the voting or giving of
written consents with respect to any capital stock of the Acquired
Corporation or by any director of the Acquired Corporation.
3.4 Financial Statements of the Acquired Corporation.
(a) Unaudited Interim Financial Statements. The Acquired Corporation has
provided NAC with an unaudited balance sheet of the Acquired Corporation
(the "INTERIM BALANCE SHEET"), dated as of February 28, 2003, a statement
of profit and loss and of cash flows of the Acquired Corporation (the
"INTERIM CASH STATEMENTS" and, collectively with the Interim Balance Sheet,
the "INTERIM FINANCIAL STATEMENTS"), for the period from January 1, 2003
through February 28, 2003. The Interim Balance Sheet presents fairly in all
material respects the financial condition of the Acquired Corporation as of
the date thereof, subject to normal year-end accounting adjustments and the
absence of footnote disclosure. Except as set forth in the Interim Balance
Sheet, the Acquired Corporation has no liabilities or obligations (whether
accrued, absolute, contingent, unliquidated, known, unknown or otherwise),
other than (i) liabilities incurred in the ordinary course of business and
(ii) obligations under contracts and commitments incurred in the ordinary
course of business, which, in both clauses (i) and (ii), individually or in
the aggregate, are not material to the financial condition or operating
results of the Acquired Corporation. The Interim Cash Statements present
fairly in all material respects the information purported to be presented
therein. Without limiting the scope or generality of the foregoing, the
Acquired Corporation is not a party to or otherwise bound by any loan
agreement or other contract pursuant to which the Acquired Corporation is
obligated to make payment with respect to any borrowed money, except such
loan agreement(s) or other contract(s) as is/are listed in Part A of
Section 3.4(a) of the ORA Disclosure Letter, and the Acquired Corporation
is not a party to or otherwise bound by any lease or other agreement that,
pursuant to GAAP, is deemed to be, or should be treated as, a capital
lease, except such lease(s) or other agreement(s) as is/are listed in Part
B of Section 3.4(a) of the ORA Disclosure Letter.
(b) Audited Financials. The Acquired Corporation has provided NAC with
audited balance sheets and statements of profit and loss and of cash flows
for the Acquired Corporation for each of the prior three (3) years
(collectively, the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial
Statements presents fairly in all material respects the financial condition
of the Acquired Corporation as of the respective dates thereof and the
results of operations and cash flows of the Acquired Corporation for the
periods covered thereby.
(c) Financials Audited in Due Course. The financial statements of the
Acquired Corporation can be audited in accordance with GAAP and SEC
Regulation S-X and SEC Regulation S-B (if applicable) within thirty-five
(35) days following the Closing.
10
(d) GAAP Accounting. The Interim Financial Statements and the Audited
Financial Statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved and present fairly the
financial position, results of operations, and cash flows of the Acquired
Corporation as of the dates and for the periods indicated therein.
(e) Book Value, Working Capital and Cash. The Acquired Corporation has a
net book value, exclusive of amounts due to the Stockholder, of at least
zero dollars ($0), net working capital, exclusive of current amounts due
under capital leases, of at least fifty thousand dollars ($50,000) and at
least five thousand dollars ($5,000) of cash.
3.5 No Materially Adverse Changes. Except as expressly set forth in Section
3.5 of the ORA Disclosure Letter, since January 1, 2002, there has not been any
Materially Adverse Change with respect to the Acquired Corporation. Without
limiting the generality or scope of the foregoing, since January 1, 2002, there
has not been:
(a) any change in the assets, liabilities, financial condition or operating
results of the Acquired Corporation from that reflected in the Interim
Balance Sheet, except for changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial
condition, operating results or business (as such business is presently
conducted) of the Acquired Corporation;
(c) any waiver by the Acquired Corporation of a material right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Acquired Corporation, except (i) in the
ordinary course of business and (ii) that is not material to the assets,
liabilities, properties, financial condition, operating results or business
(as such business is presently conducted)of the Acquired Corporation;
(e) any material change or amendment to a material contract or arrangement
by which the Acquired Corporation or any of its assets or properties is
bound or subject;
(f) any material change in any compensation arrangement or agreement with
any employee of the Acquired Corporation;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the Acquired
Corporation;
(h) any resignation or termination of employment of any key officer of the
Acquired Corporation; and there is no impending resignation or termination
of employment of any such officer;
(i) any receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Acquired Corporation;
(j) any Lien created by the Acquired Corporation , or otherwise created or
attaching, on or with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Acquired Corporation (including,
without limitation, to or for the benefit of any of its employees, officers
or directors or any members of their immediate
11
families), other than travel advances and other advances made to employees
of the Acquired Corporation in the ordinary course of its business;
(l) any declaration, setting aside or payment or other distribution in
respect of any of capital stock of the Acquired Corporation, or any direct
or indirect redemption, purchase or other acquisition of any of such stock
by the Acquired Corporation;
(m) loss of any customer or client by the Acquired Corporation or receipt
by the Acquired Corporation of any notice that such client or customer
intends to cease doing business with the Acquired Corporation, exclusive of
any client or customer the loss of which could not reasonably anticipated
to have a Materially Adverse Effect on the Acquired Corporation;
(n) any other event or condition of any character that might be reasonably
expected to have a Materially Adverse Effect on the Acquired Corporation;
or
(o) any agreement or commitment by the Acquired Corporation to do any of
the things described in this Section 3.5.
3.6 Litigation. There are (a) no actions, suits, proceedings or orders, at
law or in equity, pending or threatened against the Acquired Corporation, (b) to
the best information and belief of the Stockholder Parties, no investigations
pending or threatened against the Acquired Corporation before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, and (c) no basis known to the
Acquired Corporation or Stockholder for any of the foregoing.
3.7 Subsidiaries. The Acquired Corporation does not own or control,
directly or indirectly, any interest in any other Person. The Acquired
Corporation is not a participant in any joint venture, partnership or similar
arrangement.
3.8 Patents and Trademarks. The Acquired Corporation has sufficient
ownership or rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes and other intellectual property (all of the foregoing, collectively,
the "INTELLECTUAL PROPERTY") necessary for its business as now conducted or as
proposed to be conduced without, any conflict with or infringement of the rights
of any other Person. Section 3.8 of the ORA Disclosure Letter lists all material
Intellectual Property (including, without limitation, patents, trademarks and
servicemarks and pending applications therefor) necessary for the business of
the Acquired Corporation as now conducted or as proposed to be conduced, all of
which Intellectual Property is (except as expressly set forth in Section 3.8 of
the ORA Disclosure Letter) owned by the Acquired Corporation free and clear of
any lien, pledge, security interest, competing claim or other encumbrance of any
nature whatsoever (each of the foregoing, a "LIEN"). There are no outstanding
options, licenses or agreements of any kind relating to the Intellectual
Property, nor is the Acquired Corporation bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other Person. Neither the Acquired
Corporation nor the Stockholder is aware of any violation by the Acquired
Corporation of, nor has the Acquired Corporation or the Stockholder received any
communications alleging that the Acquired Corporation has violated or, by
conducting its business as presently conducted or as proposed to be conducted,
would violate, any Intellectual Property (or rights therein) of any other
Person. Neither the Acquired Corporation nor the Stockholder is aware that any
of the employees of the Acquired Corporation is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Acquired Corporation or
that would conflict with the business of the
12
Acquired Corporation as now conducted or as proposed to be conducted. Neither
the execution nor delivery of this Agreement, nor the carrying on of the
business of the Acquired Corporation by its employees, nor the conduct of the
business of the Acquired Corporation as now conducted or as proposed to be
conducted, will, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. It is not and
will not be necessary for the Acquired Corporation to utilize any inventions or
other Intellectual Property of any of its employees (or people it currently
intends to hire) made prior to or outside the scope of their employment by the
Acquired Corporation. The Acquired Corporation has taken all commercially
reasonable actions necessary to protect all of the Intellectual Property owned
by it.
3.9 Compliance with Other Instruments. The Acquired Corporation is not in
violation or default of any provision of its Certificate of Incorporation or
Bylaws, or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or any provision of any federal or state
statute, rule or regulation applicable to the Acquired Corporation.
3.10 Agreements; Action. Except as expressly set forth in Section 3.10 of
the ORA Disclosure Letter,
(a) There are no agreements, understandings or proposed transactions
between the Acquired Corporation and any of its officers, directors and
affiliates or any affiliate of such officers, directors and affiliates;
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the
Acquired Corporation is a party or by which it is otherwise bound that may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Acquired Corporation in excess of $2,500, or in excess of $10,000 in the
aggregate; or (ii) the license of any Intellectual Property to or from the
Acquired Corporation, or (iii) provisions restricting or affecting the
development, manufacture or distribution of the products or services of the
Acquired Corporation, or (iv) indemnification by the Acquired Corporation
with respect to infringements of any proprietary rights or other
Intellectual Property;
(c) The Acquired Corporation has not (i) declared or paid any dividend or
authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $20,000 or in
excess of $50,000 in the aggregate, (iii) made any loan or advance to any
Person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business;
(d) The Acquired Corporation is not a party to or otherwise bound by any
contract, agreement (written or oral), instrument or other commitment, or
subject to any restriction under its Certificate or Incorporation or
Bylaws, that would have, and could reasonably be anticipated to have, a
Materially Adverse Effect on the Acquired Corporation; and
(e) The Stockholder has provided NAC with true, complete and correct copies
of the SBA Loan Documents (as hereinafter defined), the Citibank Loan
Documents (as hereinafter defined), each Capital Lease (as hereinafter
defined) and the Stockholder's Note, including all amendments, supplements
and other modifications thereto or thereof, and except as set forth in the
Stockholder's Note, all payments and other obligations due or owing from
the Acquired Corporation to the Stockholder have been discharged and
satisfied in full.
13
For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same Person (including Persons who or that the
Acquired Corporation or the Stockholder has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
3.11 Related Party Transactions. Except as expressly set forth in Section
3.11 of the ORA Disclosure Letter, no employee, officer or director of the
Acquired Corporation or member of his or her immediate family is indebted to the
Acquired Corporation, nor is the Acquired Corporation indebted (or committed to
make loans or extend any guarantee credit) to any of them. Except as expressly
set forth in Section 3.11 of the ORA Disclosure Letter, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Acquired Corporation is affiliated or with which the Acquired Corporation
has a business relationship, or any firm or corporation that competes with the
Acquired Corporation, except that employees, officers or directors of the
Acquired Corporation and members of their immediate families may own, in the
aggregate, up to five percent (5%) of the stock in a publicly traded company
that may compete with the Acquired Corporation. Except as expressly set forth in
Section 3.11 of the ORA Disclosure Letter, no member of the immediate family of
any officer or director of the Acquired Corporation is directly or indirectly
interested in any material contract with the Acquired Corporation.
3.12 Permits. The Acquired Corporation has all franchises, permits,
licenses, consents, approvals and any similar authority (all of the foregoing,
collectively, "PERMITS"), whether issued or granted by any governmental
authority or other Person, necessary for the conduct of its business as now
conducted and as proposed to be conducted, the lack of which would have, or
could reasonably be anticipated to have, a Materially Adverse Effect on the
Acquired Corporation. The Acquired Corporation is not in default in any material
respect under any of such Permit. The consummation of the Merger and the other
transactions contemplated hereby and by the Collateral Documents will not result
in the termination, suspension, revocation, forfeiture, lapse, impairment or
non-renewal of any such Permit or constitute justifiable grounds for the
termination, suspension, revocation, forfeiture, lapse, impairment or
non-renewal of any of such Permit, other than the Permits set forth in Section
3.12 of the ORA Disclosure Letter (all such Permits, collectively, the "REQUIRED
PERMITS" and the waivers of any automatic termination, suspension, revocation,
forfeiture, lapse, impairment or non-renewal of any such Permits or of any and
all rights to terminate, suspend, revoke, forfeit, lapse, impairment or not
renew any such Permits as a consequence or result of the execution, delivery
and/or performance of this Agreement and/or any of the Collateral Agreements
and/or the consummation of the Merger and the other transactions contemplated
hereby and thereby are hereinafter referred to collectively as the "REQUIRED
WAIVERS").
3.13 Employee Benefit Plans. Except as expressly set forth in Section 3.13
of the ORA Disclosure Letter, the Acquired Corporation does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
3.14 Tax Returns, Payments and Elections. The Acquired Corporation has
filed all tax returns and reports (including information returns and reports) as
required to be filed by it by law. These returns and reports are true and
correct in all material respects. The Acquired Corporation has paid, or will pay
prior to becoming delinquent, all taxes shown to be due and payable on such
returns and reports, and any assessments imposed, except those contested by the
Acquired Corporation in good faith and expressly set forth in Section 3.14 of
the ORA Disclosure Letter. Except as expressly set forth in Section 3.14 of the
ORA Disclosure Letter, the Acquired Corporation has not elected pursuant to the
Code to be treated as an S Corporation or a collapsible corporation pursuant to
Section 1362(a) or Section 341(f) of the Code, nor has the Acquired Corporation
made any other elections pursuant to the Code (other than elections that relate
solely to methods of accounting, depreciation or amortization) that would have,
or could reasonably be anticipated to have, a Materially Adverse
14
Effect on the Acquired Corporation or upon the Surviving Corporation following
consummation of the Merger. There is no tax deficiency proposed or assessed
against the Acquired Corporation, and the Acquired Corporation has not executed
any waiver of any statute of limitations on the assessment or collection of any
tax or governmental charge, nor have any of the federal income tax returns of
the Acquired Corporation or any of its state income or franchise tax or sales or
use tax returns ever been audited by governmental authorities. Since the date of
the Interim Balance Sheet, the Acquired Corporation has not incurred any taxes,
assessments or governmental charges other than in the ordinary course of
business, and the Acquired Corporation has made adequate provisions on its books
of account for all taxes, assessments and governmental charges with respect to
the business, properties and operations of the Acquired Corporation for the
period since such date. The Acquired Corporation has withheld or collected from
each payment made to each of its employees the amount of all taxes and
assessments (including, but not limited to, federal income taxes, Federal
Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom and have paid the same to the
proper tax receiving officers or authorized depositories and have (as
appropriate) withheld, collected and/or paid to the appropriate authority all
other taxes and assessments (including, without limitation, sales, real estate,
property and commercial lease taxes) required to be withheld, collected and/or
paid by them.
3.15 Minute Books. The minute book of the Acquired Corporation provided to
NAC contains a complete summary of all meetings and other actions of directors
and stockholders of the Acquired Corporation [or such consolidated corporation,
as the case may be,] since the time of its incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
3.16 Labor Agreements and Actions; Employee Compensation. The Acquired
Corporation is not bound by or subject to (and none of the assets or properties
of the Acquired Corporation is bound by or subject to) any contract, commitment
or arrangement with any labor union, and no labor union has requested or has
sought to represent any of the employees, representatives or agents of the
Acquired Corporation. There is no strike or other labor dispute involving the
Acquired Corporation pending, or to the best information and belief the
Stockholder Parties, threatened, that would have, or could reasonably be
anticipated to have, a Materially Adverse Effect on the Acquired Corporation,
nor to the best information and belief of the Stockholder Parties is there any
labor organization activity involving the employees of the Acquired Corporation.
To the best information and belief of the Stockholder Parties there is not any
officer or key employee, or any group of key employees, who intends to terminate
his or their employment with the Acquired Corporation, nor does the Acquired
Corporation have a present intention to terminate the employment of any of the
foregoing. Except as otherwise provided in the employment agreement referred to
in Section 5.2 below, the employment of each officer and employee of the
Acquired Corporation is terminable at the will of the Acquired Corporation,
without payment (other than accrued compensation through the date of
termination) or other liability on the part of the Acquired Corporation. To the
best information and belief of the Stockholder Parties, the Acquired Corporation
has complied in all material respects with all applicable state and federal
equal employment opportunity and other laws related to employment. The Acquired
Corporation is not a party to or otherwise bound by any currently effective
employment contract, deferred compensation agreement, bonus incentive plan,
profit sharing plan, retirement agreement or other employee compensation
agreement or arrangement.
3.17 Governmental and Third Party Consents. Except as expressly set forth
in Section 3.17 of the ORA Disclosure Letter, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority or any other
third party on the part of the Acquired Corporation or the Stockholder is
required in connection with the consummation of the transactions contemplated by
this Agreement or any of the Collateral Documents, except the filing of the
Delaware Certificate of Merger with the Secretary of State of Delaware and the
filing of the NY Certificate of Merger with the Secretary of State of New York
and such consents, approvals, orders, authorizations, registrations,
qualifications, designations, declarations or filings as are expressly set for
in Section 3.17 of the
15
ORA Disclosure Letter (all such consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations and filings,
collectively, the "REQUIRED APPROVALS"). Except for the consents and approvals
expressly set forth in Section 3.17 of the Campus Disclosure Letter (all such
consents and approvals, collectively, the "REQUIRED CONSENTS"), all consents and
approvals of third parties necessary or appropriate for the Surviving
Corporation to assume, upon the consummation of the Merger, the rights and
benefits of the Acquired Corporation under any contract, agreement or other
instrument (inclusive of insurance policies) to which the Acquired Corporation
is a party, by which the Acquired Corporation is otherwise bound or under which
any benefit has been granted to the Acquired Corporation or under any Permit
granted to or held by the Acquired Corporation have been obtained and are in
full force and effect, exclusive of any contract, agreement or other instrument
the termination or expiration of which would not have, and could not reasonably
be anticipated to have, a Materially Adverse Effect upon the Acquired
Corporation.
3.18 Title to Property and Assets. Except as expressly set forth in Section
3.18 of the ORA Disclosure Letter, the Acquired Corporation owns its property
and assets free and clear of all Liens, except such Liens as arise in the
ordinary course of business and do not materially impair the Acquired
Corporation's ownership or use of such property or assets. With respect to the
property and assets it leases, the Acquired Corporation is in compliance with
such leases and holds a valid leasehold interest free of any Liens, and the
Acquired Corporation is not in violation or default of, and to the best
knowledge of the Stockholder, no other party to any such lease is in violation
or default of, any such lease.
3.19 Insurance. Except as expressly set forth in Section 3.19 of the ORA
Disclosure Letter, the Acquired Corporation has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. Except as expressly set forth in Section
3.19 of the ORA Disclosure Letter, the Acquired Corporation has in full force
and effect product liability and errors and omissions insurance in accounts
customary for companies similarly situated.
3.20 Disclosure. Neither this Article 3 nor the ORA Disclosure Letter
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact that
has not been disclosed to NAC that materially affects adversely or could
reasonably be anticipated to materially affect adversely the business, including
the operating results, assets, customer, supplier or employee relations and
business prospects, of the Acquired Corporation.
ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to NAC and Merger Sub as follows:
4.1 Authority. The Stockholder has the power and authority to enter into
this Agreement and each of the Collateral Documents to which he or it is
contemplated hereunder to become a party and to carry out his obligations
hereunder and thereunder. This Agreement has been duly executed by the
Stockholder and constitutes a valid and binding obligation of the Stockholder,
enforceable against him in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity. Each Collateral Document to which the
Stockholder is contemplated hereunder to become a party will, when executed and
delivered by the Stockholder, constitute a valid and binding obligation of the
Stockholder, enforceable against him in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws relating to the enforcement of creditors' rights
16
generally and by general principles of equity. The execution, delivery
and performance of this Agreement by the Stockholder is not, and will not be, in
breach or violation of (a) any agreement, arrangement or understanding to which
the Stockholder is a party or by which he is otherwise bound, (b) any license,
franchise or permit applicable to the Stockholder or (c) any law, regulation,
order, judgment or decree applicable to the Stockholder. The execution, delivery
and performance of any Collateral Document by the Stockholder contemplated
hereunder to become a party thereto will not be in breach or violation of (a)
any agreement, arrangement or understanding to which the Stockholder is a party
or by which he is otherwise bound, (b) any license, franchise or permit
applicable to the Stockholder or (c) any law, regulation, order, judgment or
decree applicable to the Stockholder. No authorization, consent or approval of,
or filing with, any public body, court or authority is necessary on the part of
the Stockholder for the consummation by him of the transactions contemplated by
this Agreement to be performed by him.
4.2 Stock Ownership. The Stockholder is the legal and beneficial owner of
all of the issued and outstanding shares of the capital stock of the Acquired
Corporation, free and clear of all Liens, other than restrictions under federal
and state securities laws. Any and all proxies and similar rights that may have
been given by the Stockholder prior to this Agreement regarding any shares of
capital stock of the Acquired Corporation have been revoked and are not longer
outstanding or of any force or effect
4.3 Purchase Entirely for Own Account. The NAC Merger Shares to be received
by the Stockholder will be acquired for investment only and for the
Stockholder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and the Stockholder has no present
intention of selling, granting any participation in or otherwise distributing or
disposing of the same. By executing this Agreement, the Stockholder further
represents that he does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any other Person, with respect to any of the NAC Merger Shares.
4.4 Disclosure of Information. The Stockholder believes that he has
received all the information he or it considers necessary or appropriate for
deciding whether to receive the NAC Merger Shares contemplated hereunder to be
issued to him. The Stockholder has had an opportunity to ask questions and
receive answers from NAC and its management regarding the business, properties,
prospects and financial condition of NAC.
4.5 Investment Experience. The Stockholder acknowledges that he is able to
fend for himself, can bear the economic risk of his investment and has such
knowledge and experience in financial or business matters that he is capable of
evaluating the merits and risks of the investment of owning the NAC Merger
Shares contemplated hereunder to be issued to him. The Stockholder is an
accredited investor, as that term is defined in Rule 501 promulgated under the
Securities Act.
4.6 Restricted Securities. The Stockholder understands that the NAC Merger
Shares he is acquiring are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from NAC in a
transaction not involving a public offering and that, under such laws and
applicable regulations, such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,
the Stockholder represents that he is familiar with SEC Rule 144, as presently
in effect, and understands the resale limitations imposed thereby and by the
Securities Act.
4.7 Holding Period. The Stockholder agrees that, for a period of one year
from the Effective Time, he will not transfer or otherwise dispose of the NAC
Merger Shares (or any of them) being issued to him pursuant to the terms of this
Agreement.
17
4.8 Ownership of Shares. There are no obligations of the Stockholder to
sell or to acquire any of the shares of capital stock of the Acquired
Corporation except pursuant to this Agreement. With respect to all of the
Stockholder's shares of capital stock of the Acquired Corporation, the
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters herein, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to agree to all
of the matters set forth in this Agreement, in each case with no limitations,
qualifications or restrictions on such rights, subject, however, to applicable
securities laws and the terms of this Agreement.
4.9 Guaranteed Obligations. Except as expressly set forth in reasonable
detail in Part A of Section 4.9 of the ORA Disclosure Letter, the Stockholder
has not agreed to act as a guarantor or surety with respect to any obligation or
liability of the Acquired Corporation (all such obligations and liabilities, as
so expressly set forth in reasonable detail in Part A of Section 4.9 of the ORA
Disclosure Letter, are hereinafter referred to collectively as the "GUARANTEED
OBLIGATIONS"). The Stockholder has provided NAC with true, complete and accurate
copies of each (a) guaranty and surety agreement or other document (including
all amendments, supplements and other modifications thereof or thereto) pursuant
to which Stockholder has agreed to act as a guarantor or surety with respect to
any obligation or liability of the Acquired Corporation (each such guaranty and
surety agreement or other document that is listed in Part B of Section 4.9 of
the ORA Disclosure Letter, a "STOCKHOLDER GUARANTY") and (b) loan agreement,
lease or other document (including all amendments, supplements and other
modifications thereof or thereto) that set forth any obligation or liability
with respect to which the Stockholder has agreed to act as a guarantor or surety
(each such loan agreement, lease or other document that is listed in Part C of
Section 4.9 of the ORA Disclosure Letter, a "GUARANTEED CONTRACT").
4.10 Legends. It is understood that the Securities Act restricts the
transferability of securities, such as the NAC Merger Shares, issued in reliance
upon the exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereunder, and that the certificates evidencing any of
the NAC Merger Shares will bear the following legend (in addition to such other
legends as may be required by law or contract):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
OTHER THAN PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT OR AN EXEMPTION
FROM REGISTRATION THEREUNDER. THE HOLDER OF THIS CERTIFICATE AGREES THAT
IT/HE/SHE WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
(UNLESS SUCH SECURITY IS TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT) A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Registration Rights Agreement. At the Closing, NAC and the Stockholder
shall enter into and deliver to the other a Registration Rights Agreement in the
form attached hereto as Exhibit A (the "REGISTRATION RIGHTS AGREEMENT").
18
5.2 Employment and Non-Competition Agreements. At the Closing, NAC and the
Stockholder shall enter into and deliver to the other an Employment Agreement in
the form attached hereto as Exhibit B-1 and a Non-Competition And
Non-Solicitation Agreement (the "NON-COMPETE AGREEMENT") in the form attached
hereto as Exhibit B-2.
5.3 Expenses. Each party to this Agreement (NAC, on the one hand, for
itself and Merger Sub and the Stockholder, on the other hand, for himself and
the Acquiring Corporation) shall bear its or his own expenses in connection with
this Agreement and the transactions contemplated hereby. The Acquired
Corporation shall bear the expenses for the audit of the Acquired Corporation,
which expenses (up to a maximum of $25,000) shall, upon consummation of the
Merger, be borne by the Surviving Corporation, with any amount in excess of such
$25,000 to be reimbursed to the Surviving Corporation by the Stockholder.
5.4 Taxes. At the Closing, the Stockholder shall be responsible for all
sales, transfer and other similar taxes (inclusive of income taxes, other than
income taxes of NAC or Merger Sub) that result from or are occasioned by the
Merger. Without limiting the generality or scope of the foregoing, the
Stockholder shall bear (and to the extend paid by the Surviving Corporation,
reimburse the Surviving Corporation for) any and all taxes that may become due
and payable by the Acquired Corporation (or the Surviving Corporation as the
successor to the Acquired Corporations) as a consequence of the consummation of
the Merger; provided, however, that the foregoing shall not be deemed to
obligate the Stockholder to bear (or to reimburse the Surviving Corporation for)
any income or other taxes of the Surviving Corporation that accrue and become
payable following consummation of the Merger.
5.5 Notification of Certain Matters. Each Party shall give prompt notice to
the others of (a) the occurrence or failure to occur of any event, which
occurrence or failure has caused, would cause or would be likely to cause any
representation or warranty on its or his part contained in this Agreement to be
untrue or inaccurate at, or at any time prior to, the Closing, and (b) any
material failure of such Party, or any officer, director, stockholder, employee
or agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it or him hereunder.
5.6 Access to Information; Confidentiality.
(a) NAC shall have the opportunity to make a complete due diligence review
of the books, records, business and affairs of the Acquired Corporation,
and the Stockholder shall have the opportunity to make a complete due
diligence review of the books, records, business and affairs of NAC.
(b) To facilitate the due diligence review, (i) NAC shall provide to the
Stockholder and his agents complete access to all of its records and
documents, shall provide the Stockholder with bank and professional
references and shall use reasonable efforts to make available for
consultation its customers and suppliers and (ii) the Stockholder shall
provide to NAC and its agents complete access to all of the records and
documents of the Acquired Corporation, shall provide NAC with bank and
professional references and shall use reasonable efforts to make available
for consultation the customers and suppliers of the Acquired Corporation.
(c) Each Party agrees that all non-public information provided to any other
Party will be treated as confidential, and if this Agreement is terminated,
will return to the Party providing same all confidential documents (and all
copies thereof) in its or his possession, or will certify to such Party
that all such documents not returned have been destroyed; provided however,
that, in the event the Merger is consummated, this provision shall not
apply to NAC or Merger Sub and there shall be no restriction on the ability
of NAC or Merger Sub to disclose information with regard to the Acquired
Corporation.
19
Non-public information shall not include any information that a Party can
demonstrate: (i) was already in such Party's possession prior to
negotiations related to this transaction; (ii) is or becomes publicly and
openly known and in the public domain through no fault of such Party; or
(iii) is received by such Party in a non-confidential manner from a third
party having the right to disclose such information. The provisions of this
Section 5.6(c) shall survive any termination of this Agreement.
5.7 Certified NAC and Merger Sub Resolutions. At or prior to the Closing,
NAC shall furnish to the Stockholder (i) a copy of the text of the resolutions
by which the corporate action on the part of NAC and Merger Sub necessary to
approve this Agreement (including, without limitation, the plan of merger
contained herein), the Merger and the issuance of the NAC Merger Shares and the
Collateral Documents contemplated hereunder to be executed and delivered by NAC
and/or Merger Sub were taken and (ii) certificates executed on behalf of NAC and
Merger Sub certifying, in each case, that such copy is a true, correct and
complete copy of such resolutions and that such resolutions were duly adopted
and have not been amended or rescinded.
5.8 Certified Resolutions of the Acquired Corporations. At or prior to the
Closing, the Acquired Corporation shall furnish to NAC (i) a copy of the text of
the resolutions by which the Board of Directors of the Acquired Corporation and
the Stockholder approved this Agreement (including, without limitation, the plan
of merger contained herein), the Merger and the Collateral Documents
contemplated hereunder to be executed and delivered by the Acquired Corporation
and (ii) a certificate executed on behalf of the Acquired Corporation by its
corporate secretary certifying to NAC that such copy is a true, correct and
complete copy of such resolutions and that such resolutions were duly adopted
and have not been amended or rescinded.
5.9 Release of Guaranty. NAC shall use reasonable commercial efforts to
cooperate and assist the Stockholder in his efforts to obtain a release from his
obligation to assume or perform any Guaranteed Obligations under the Stockholder
Guaranty with respect to each Guaranteed Obligation under and with respect to a
Guaranteed Contract. Such efforts shall include the agreement by NAC to provide
its guarantee in lieu of, and in replacement for, the guaranty of the
Stockholder, but NAC shall not be obligated to make any payment in order to
accomplish any such release.
5.10 Effectiveness of Collateral Documents. Notwithstanding the execution
and delivery of the Collateral Documents at the Closing, none of the Collateral
Documents shall be effective until the Effective Time.
ARTICLE 6
CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each Party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) there shall not be pending by or before any court or other governmental
body an order or injunction restraining or prohibiting the transactions
contemplated hereby or by any of the Collateral Documents or any action or
proceeding (other than one brought by or on behalf of any Party) pursuant
to which the party bringing or commencing such action or proceeding is
seeking such any order or injunction; and
(b) no Party shall have terminated this Agreement as permitted herein.
20
6.2 Additional Conditions to Obligations of the Acquired Corporation and
the Stockholder. The obligations of the Acquired Corporation and the Stockholder
to effect the Merger is also subject to the fulfillment at or prior to the
Closing of the following conditions:
(a) NAC shall have furnished to the Stockholder a certificate in which NAC
and Merger Sub shall certify that the representations and warranties of NAC
and Merger Sub set forth in Article 2 above that are by their terms
qualified by materiality shall be true and correct at and as of the Closing
with the same force and effect as if made again at and as of the Closing
and the representations and warranties of NAC and Merger Sub set forth in
Article 2 above that are not so qualified shall be true and correct in all
material aspects on and as of the Closing with the same force and effect as
if made again at and as the Closing, each of the NAC and Merger Sub shall
in all material respects have performed each obligation and agreement and
complied with each covenant to be performed and complied with it hereunder
at or prior to the Closing and NAC shall have furnished to the Acquired
Corporation and the Stockholder a certificate in which NAC shall have
certified that the foregoing conditions have been met;
(b) NAC shall have delivered to the attorney for the Stockholder to be held
in escrow, to be released immediately after the Effective Time, the
certificate(s) for the NAC Merger Shares;
(c) Between the date hereof and the Closing, (i) there shall have been no
Materially Adverse Change with respect to NAC, (ii) there shall have been
no adverse federal, state or local legislative or regulatory change
affecting in any material respect the services, products or business of NAC
and (iii) none of the properties and assets of NAC shall have been damaged
by fire, flood, casualty, act of God or the public enemy or other cause
(regardless of insurance coverage for such damage), which damages would
have, or could reasonably be anticipated to have, a Materially Adverse
Effect on NAC, and NAC shall have delivered to the Stockholder a
certificate, dated as of the Closing, to the effect of the matters set
forth in the foregoing clauses (i) - (iii); and
(d) NAC shall have complied with its obligations under Section 5.7 above,
and all corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Stockholder's counsel,
and the Stockholder and his counsel shall have received all such
counterpart original and certified or other copies of such documents as
they may reasonably request.
6.3 Additional Conditions to Obligations of NAC and Merger Sub. The
obligations of NAC and Merger Sub to effect the Merger are also subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The Acquired Corporation and the Stockholder shall have furnished to
NAC a certificate in which the Acquired Corporation and the Stockholder
shall certify that the representations and warranties of the Acquired
Corporation and the Stockholder set forth in Articles 3 and 4 hereof that
are by their terms qualified by materiality shall be true and correct at
and as of the Closing with the same force and effect as if made again at
and as of the Closing and the representations and warranties of the
Acquired Corporation and the Stockholder set forth in Articles 3 and 4
hereof that are not so qualified shall be true and correct in all material
respects at and as of the Closing with the same force and effect as if made
again at and as the Closing, the Acquired Corporation and the Stockholder
shall in all material respects have performed each obligation and agreement
and complied with each covenant to be performed and complied with by it or
him hereunder at or prior to the Closing, each and all of the Required
Waivers, the Required Consents and the Required Approvals shall have been
obtained and shall be in full force and effect and the Acquired Corporation
and the Stockholder shall have furnished to NAC a certificate
21
in which the Acquired Corporation and the Stockholder shall have certified
that the foregoing conditions have been met;
(b) The Stockholder shall have delivered the original certificate(s) for
all of his shares of ORA Common Stock, duly endorsed to the Surviving
Corporation for cancellation;
(c) Between the date hereof and the Closing, (i) there shall have been no
Materially Adverse Change with respect to the Acquired Corporation, (ii)
there shall have been no adverse federal, state or local legislative or
regulatory change affecting in any material respect the services, products
or business of the Acquired Corporation and (iii) none of the properties
and assets of the Acquired Corporation shall have been damaged by fire,
flood, casualty, act of God or the public enemy or other cause (regardless
of insurance coverage for such damage) which damages would have, or could
reasonably be anticipated to have, a Materially Adverse Effect on the
Acquired Corporation, and the Acquired Corporation and the Stockholder
shall have delivered to NAC a certificate, dated as of the Closing, to the
effect of the matters set forth in the foregoing clauses (i) - (iii); and
(d) The Acquired Corporation shall have complied with its obligations under
Section 5.8 above, and all corporate and other proceedings in connection
with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
NAC's counsel, and NAC and its counsel shall have received all such
counterpart original and certified or other copies of such documents as
they may reasonably request.
ARTICLE 7
POST CLOSING OBLIGATIONS
7.1 Adjustments to Payment of Purchase Price. The determination of the Base
Purchase Price as set forth above was based upon the premise and assumption that
the Net Indebtedness Position (as hereinafter defined) of the Acquired
Corporation at the time of the Closing would be at least thirty-two thousand
dollars ($32,000) (the "BASE AMOUNT"). In the event the Net Indebtedness
Position of the Acquired Corporation at the time of the Closing is not equal to
at least the Base Amount, then the Base Purchase Price shall be adjusted, at the
election of NAC, by either (i) reducing of the outstanding principal amount of
the Stockholder's Note by the amount of the Shortfall (as hereinafter defined)
or (ii) multiplying the 200,000 shares of NAC Common Stock presumed to be the
correct amount of the Base Purchase Price by a fraction, the numerator of which
is the amount of the Shortfall and the denominator of which is the Base Amount,
with the number of shares of NAC Common Stock resulting from such calculation to
be returned to NAC as provided below. As used herein, the "NET INDEBTEDNESS
POSITION" of the Acquired Corporation at any time means the amount, if any, by
which the amount of nine hundred and fifty thousand dollars ($950,000.00)
exceeds the aggregate Outstanding Indebtedness (as hereinafter defined) of the
Acquired Corporation as of such time, "SHORTFALL" means the amount, if any, by
which the Base Amount exceeds the actual Net Indebtedness Position of the
Acquired Corporation at the time of the Closing, and the "OUTSTANDING
INDEBTEDNESS" of the Acquired Corporation as of any time means, as of such time,
(I) the aggregate outstanding amount (inclusive of principal, accrued but unpaid
interest and all fees and charges then due) owed by the Acquired Corporation for
borrowed money, which shall include, without limitation, (A) all amounts owed by
the Acquired Corporation to SBA Bank pursuant to or as contemplated by that
certain Loan Agreement, dated as of April 25, 2002, by and between the Acquired
Corporation and SBA Bank (such Loan Agreement, collectively with all related
loan documentation, including any surety, guaranty, security agreement, pledge
agreement or other agreement related thereto, the "SBA LOAN DOCUMENTS" and the
loan covered thereby, the "SBA LOAN"), (B) all amounts owed by the
22
Acquired Corporation to Citibank NA pursuant to or as contemplated by that
certain Loan Agreement and Line of Credit Agreement, dated as of July 1, 2001,
by and between the Acquired Corporation and Citibank NA (such Loan Agreement and
Line of Credit Agreement, collectively with all related loan documentation,
including any surety, guaranty, security agreement, pledge agreement or other
agreement related thereto, the "CITIBANK LOAN DOCUMENTS" and the loan covered
thereby, the "CITIBANK LOAN"), (C) all amounts owed by the Acquired Corporation
under or pursuant to any capital or capitalized lease (including, without
limitation, those leases listed in Part B of Section 3.4(a) of the ORA
Disclosure Letter (any such capital or capitalized lease, collectively with all
related lease documentation, a "CAPITAL LEASE") and (D) all repayment
obligations, exclusive of $115,000 of accrued compensation due to the
Stockholder, owed by the Acquired Corporation to the Stockholder, which
obligations shall be evidenced by a certain promissory note (the "STOCKHOLDER'S
NOTE"), dated the date of the Closing and issued by the Acquired Corporation to
the order of the Stockholder in the stated principal amount of one hundred and
fifty-three thousand dollars ($153,000) and otherwise in the form and substance
of Exhibit C attached hereto, plus (II) the aggregate amount at such time or
thereafter payable by the Acquired Corporation pursuant to any Capital Lease. If
the foregoing results in an adjustment in the number of shares of NAC Common
Stock that should have been issued to the Stockholder for the Base Purchase
Price, then such adjustment shall be made by the Stockholder, as promptly as
practical following NAC's request therefor, returning to NAC for cancellation an
appropriate number of the shares of NAC Common Stock it received at the Closing
in payment of the Base Purchase Price.
7.2 Recharacterization of NAC Merger Shares. In the event the Stockholder
is required, as contemplated by Section 7.1 above, to return any of the shares
of NAC Common Stock initially issued to him at the Closing as contemplated under
Section 1.5(b) above, the term "NAC Merger Shares," as used in this Agreement,
shall be deemed to refer to the balance of such shares of NAC Common Stock.
7.2 Timing of Adjustments. Any adjustments required by this Article 7 shall
be made within four (4) calendar months following the Effective Time or, if the
amount of the Outstanding Indebtedness is determined by arbitration as
contemplated by Section 10.12 below, within thirty (30) days after the amount of
the Outstanding Indebtedness has been so determined.
7.3 Delivery of Audited Financial. The Stockholder shall deliver, or cause
to be delivered to NAC, within thirty-five (35) days following the Closing,
audited balance sheets (as of the date of the Closing and as of the end of each
of the last three fiscal years of the Acquired Corporation) and statements of
profit and loss and cash flows (for each of the last three fiscal years of the
Acquired Corporation and for the period from the end of the last completed
fiscal year of the Acquired Corporation through the date of the Closing), in
each case prepared in accordance with GAAP and SEC Regulation S-X and SEC
Regulation S-B (if applicable).
7.4 Indemnification for Payments Made Pursuant to Stockholder Guaranty. If,
following the Closing, the Stockholder is not released from his obligations
under any Stockholder Guaranty and Stockholder is required to make any payment
thereunder, NAC shall promptly (and, in any event, within thirty (30) days
following payment by the Stockholder and receipt of demand therefor from
Stockholder, which demand is accompanied with appropriate proof of payment by
Stockholder) reimburse the Stockholder for such payment; provided, however,
that, if any claim shall be made against the Stockholder under or with respect
to any Stockholder Guaranty, the Stockholder shall give prompt written notice
thereof to NAC and NAC shall be entitled, with counsel selected by it, to defend
against and settle such claim in the name of and on behalf of the Stockholder.
23
ARTICLE 8
INDEMNITIES
8.1 Survival of Representations and Warranties. All representations,
warranties, covenants and other agreements made by NAC, Merger Sub, the Acquired
Corporation and the Stockholder in this Agreement shall survive the Closing.
8.2 Acquired Corporations and Stockholder to Indemnify.
(a) General. Subject to the limitations in this Article 8, the Stockholder
and (subject to Section 8.8 below) the Acquired Corporation, jointly and
severally, agree to indemnify and hold harmless NAC and Merger Sub and
their respective directors, officers, employees and agents from and against
all proceedings, judgments, decrees, demands, claims, actions, losses,
damages, liabilities, costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, (collectively referred to as
"LOSSES") asserted against or incurred by NAC, Merger Sub or their
respective directors, officers, employees or agents resulting from (i) a
breach of any covenant, agreement, representation or warranty of the
Acquired Corporation or the Stockholder contained in this Agreement, the
exhibits hereto (exclusive of the Collateral Documents) or any certificate,
document or instrument (other than the Collateral Documents, but including
the ORA Disclosure Letter) delivered by or on behalf of the Acquired
Corporation or the Stockholder pursuant hereto or as contemplated hereby or
(ii) the assertion by any third party of a claim (a "THIRD PARTY CLAIM")
that, if true, would constitute such a breach.
(b) Tax Matters. The Acquired Corporation and the Stockholder, jointly and
severally, also agree to indemnify, hold harmless and defend NAC and Merger
Sub from and against any and all assessments, claims and liability
(including, without limitation, any interest or other penalty) relating to
(i) any failure to file federal, state or local tax returns or amended
returns for the Acquired Corporation for any period, including short
periods, for which a return was due, including any extensions, prior to or
ending on the Effective Time; (ii) for any non-payment by the Acquired
Corporation of federal, state or local taxes due for any period, including
short periods, for which a return was due prior to or ending on the
Effective Time; (iii) for any errors or omissions related to any federal,
state or local tax returns, and the elections thereunder, filed by the
Acquired Corporation for any period, including short periods, for which a
return was due prior to or ending on the Effective Time; or (iv) any taxes
that may become due as a result of any breach of any representation or
warranty of the Acquired Corporation and/or the Stockholder set forth in
this Agreement.
8.3 NAC and Merger Sub to Indemnify. Subject to the limitations in this
Article 8, NAC and Merger Sub, jointly and severally, hereby agree to indemnify
and hold harmless the Stockholder and his agents from and against all Losses
asserted against or incurred by the Stockholder and his agents resulting from
(i) a breach of any covenant, agreement, representation or warranty of NAC or
Merger Sub contained in this Agreement, the exhibits hereto (exclusive of the
Collateral Documents, but including the NAC Disclosure Letter) or any
certificate, document or instrument (other than the Collateral Documents)
delivered by or on behalf of NAC or Merger Sub pursuant hereto or as
contemplated hereby or (ii) the assertion of any Third Party Claim that, if
true, would constitute such a breach.
8.4 Notice of Claim. Any Party that or who has a claim that would give rise
to liability pursuant to this Article 8 shall give prompt notice to all other
Parties of such claim, together with a reasonable description thereof. With
respect to any Third Party Claim that is covered by the indemnifications
contained hereunder, the Party obligated to indemnify shall be afforded the
opportunity, at its expense, to defend or settle such Claim if, within ten (10)
business days of notice thereof, it acknowledges in writing its or his
indemnification obligation
24
hereunder, utilizes counsel reasonably satisfactory to the indemnified
party, commences such defense promptly and pursues such defense with
diligence; provided, however, that such indemnifying party shall secure the
consent of the indemnified party to any settlement, which consent shall not
be unreasonably withheld or delayed. If any indemnified party defends
against any Third Party Claim hereunder, such party shall use reasonable
efforts in such defense and to mitigate Losses arising thereunder. In the
event any indemnified party is indemnified hereunder with respect to any
Third Party Claim the defense of which has been undertaken by a Party that
is obligated hereunder to indemnify such indemnified party with respect to
such Claim, such indemnified party shall promptly and fully cooperate with
the indemnifying party in such defense.
8.5 Certain Limitations.
(a) Cap. The limit on the indemnification liability of the Stockholder and
the Acquired Corporation under Section 8.2(a) and the limit on the
indemnification liability of NAC and Merger Sub under Section 8.3 (each of
such limits shall be referred to as a "CAP") shall be an amount equal to
the Purchase Price plus (with respect to the indemnification liability of
the Stockholder) the amount of the Stockholder Note, the amount of any
payments paid or payable to the Stockholder pursuant to the Employment
Agreement and the amount paid by NAC pursuant to Section 7.4 above.
(b) Basket. Neither the Stockholder, considered as a party on one hand, nor
NAC and Merger Sub, considered as a party on the other hand, shall be
required to indemnify the other such party for any Losses relating to any
matter subject to indemnification under this Article 8 unless and until
such Losses exceed fifty thousand dollars ($50,000) (the "BASKET AMOUNT"),
but in the event the Losses exceed the Basket Amount, the Party responsible
therefor shall be liable and responsible for the full amount of such Losses
without reduction for the Basket Amount.
(c) Inapplicability of Cap and Basket. The Basket and Cap shall not apply
to any breach of this Agreement constituting fraud or any intentional
misstatement, any liability under or with respect to Section 8.2(b) above
or any liability under or with respect to any breach of any of the
Collateral Documents.
8.6 Satisfaction of Obligations. If any indemnifying party becomes
obligated to indemnify another party with respect to any claim for
indemnification hereunder and the amount of liability with respect thereto shall
have been finally determined, subject to the limitations set forth in Section
8.5 above, the indemnifying party shall pay such amount to the indemnified
party.
8.7 Exclusive Remedy at Law. This Article 8 provides the sole and exclusive
remedy at law of each of the Parties in any cause of action based thereon
(subject to the exception in Section 8.5(c) hereof) against the Parties for any
inaccuracy, misrepresentation or default in, or breach of, any of the
representations, warranties or covenants given or made by the Parties in this
Agreement, any exhibit hereto (excluding, however, the Collateral Documents, but
including the NAC Disclosure Letter and ORA Disclosure Letter, as applicable) or
in any certificate, document or instrument (other than the Collateral Documents)
delivered by or on behalf of any Party pursuant hereto. Nothing contained
herein, however, shall be construed as limiting any rights or remedies in
equity, including without limitation, the right of specific performance.
8.8 Right to Proceed Against the Stockholder. In the event the Merger is
consummated, NAC and Merger Sub shall be permitted, and authorized, to proceed
(at their option) only against the Stockholder with respect to the
indemnification set forth above in this Article 8, and in the event of any
recovery from the Stockholder on account of or with respect to such indemnity,
the Stockholder shall not be entitled to seek or obtain from the Acquired
Corporation (or the Surviving Corporation as the successor to the Acquired
25
Corporations) any payment or contribution with respect to such recovery. THE
STOCKHOLDER hereby expressly waives the right to seek or obtain from THE
Acquired Corporation (or the Surviving Corporation as the successor to the
Acquired Corporations) any payment or contribution with respect to any such
recovery.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual consent of the Stockholder and a duly authorized officer of
NAC;
(b) by NAC or Merger Sub if the Acquired Corporation or the Stockholder
breaches any of its or his material representations, warranties or
covenants contained herein and such breach is not curable or, if is
curable, is not cured within fifteen (15) business days after receipt of
written notice thereof, or by the Acquired Corporation or the Stockholder
if NAC or Merger Sub breaches any of its material representations,
warranties or covenants contained herein and such breach is not curable or,
if curable, is not cured within fifteen (15) business days after receipt of
written notice thereof;
(c) by either NAC Party if the conditions to close the transactions
contemplated by this Agreement shall become incapable of satisfaction other
than on account of any action or inaction by either NAC Party, or by either
Stockholder Party if the conditions to close the transactions contemplated
by this Agreement shall become incapable of satisfaction other than on
account of any action or inaction by either Stockholder Party; or
(d) by any of NAC, Merger Sub, the Acquired Corporations and the
Stockholder if all of the conditions to consummation of the Merger shall
not have occurred, or been satisfied or waived, by April 30, 2003;
provided, however, that neither NAC Party shall have the right to terminate
this Agreement unilaterally if the event giving rise to such right shall be
primarily attributable to either NAC Party or to any Person affiliated with
either NAC Party and neither Stockholder Party shall have the right to
terminate this Agreement unilaterally if the event giving rise to such
right shall be primarily attributable to either Stockholder Party or to any
Person affiliated with either Stockholder Party.
9.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 9.1 hereof, this Agreement shall become void, and there
shall be no liability or further obligation hereunder on the part of any Party
or its respective stockholders (including the Stockholder), officers or
directors, except as set forth in Article 8 hereof, except for liability arising
from a willful breach of this Agreement and except for liability with respect to
any provision hereof that by its terms expressly survives the termination of
this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 Public Statements. Except as required by applicable law, no Party
shall make any public announcement or statement with respect to the Merger, this
Agreement or any related transaction without the approval of the other Parties,
which approval will not be unreasonably withheld or delayed. Each Party agrees
26
to consult with the other Parties prior to issuing any such public announcement
or statement with respect to the Merger, this Agreement or any related
transaction.
10.2 Notices. All notices and other communications required or provided for
hereunder or under any of the Collateral Documents shall be in writing and shall
be sufficiently given if made by hand delivery, by telecopier, by recognized
overnight courier service or by registered or certified mail (postage prepaid
and return receipt requested) to the intended Party at the following applicable
address (or at such other address for such Party as shall be specified by like
notice given by such Party to the other Parties):
If to NAC or Merger Sub (or, after National Auto Credit, Inc.
consummation of the Merger, to 000 Xxxxxxx Xxxxxx, 00xx Xxxxx
the Acquired Corporation): Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx XxXxxxxx
FAX: (000) 000-0000
With a copy to: Xxxx Xxxxx LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
FAX: (000) 000-0000
If to the Stockholder or (prior to Xxxx Xxxxxxxx
consummation of the Merger) the 00 Xxxx Xxxx Xxxxxx
Acquired Corporation: Xxxxxx Xxxxxx, Xxx Xxxx 00000
FAX: (000) 000-0000
With a copy to: Xxxxxx X. Xxxx, Esq.
Peri & Xxxxxxx, L.L.C.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
FAX: (000) 000-0000
All such notices and other communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three (3) Business Days
after being deposited in the mail, postage prepaid, if delivered by mail; the
next Business Day, if sent by recognized overnight courier service; and when
receipt acknowledged, if telecopied; provided, however, notice to a Party's
attorney shall not constitute notice to such Party. For the purposes of this
Agreement, "BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or required to be closed in the
State of New York.
10.3 Interpretation. The headings contained in this Agreement or in any
Collateral Document are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement or such Collateral Document.
References to Sections and Articles (or any other subdivision) in this Agreement
or in any Collateral Document refer, unless otherwise stated, to sections and
articles (or any other subdivision) of this Agreement or such Collateral
Document, as the case may be. When used in this Agreement or any Collateral
Document, words such as "herein," "hereinafter," "hereof," "hereto," "hereby"
and "hereunder," and words of like import, unless the context requires
otherwise, refer to this Agreement (including the exhibits and attachments
hereto) or such Collateral Document (as the case may be) as a whole, and not to
any particularly Section, Article or other subdivision hereof or thereof. As
used in this Agreement or any Collateral Document,
27
the masculine, feminine and neuter genders shall be deemed to include the others
if the context requires. This Agreement and the Collateral Documents are the
product of mutual negotiations by the parties hereto and thereto and their
counsels; and no party to this Agreement or any of the Collateral Documents
shall be deemed the draftsperson of this Agreement or any Collateral Document or
any provision hereof or thereof or to have provided same. Accordingly, in the
event of any inconsistency or ambiguity of any provision of this Agreement or
any Collateral Document, such inconsistency or ambiguity shall not be
interpreted against any particular party to such agreement.
10.4 Severability. The provisions of this Agreement and each of the
Collateral Documents shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof or thereof shall not affect the
validity or enforceability of this Agreement or any Collateral Document or any
of the other terms or provisions hereof or thereof. Furthermore, in lieu of any
such invalid or unenforceable term or provision, the Parties intend that there
shall be added, as a part of this Agreement or the applicable Collateral
Document (as may be applicable), a provision as similar in terms to such invalid
or unenforceable provision as may be possible and be valid and enforceable.
10.5 Integration. This Agreement (together with all other documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all other prior agreements, representations, warranties and undertakings, both
written and oral, among the Parties, with respect to the subject matter hereof
and thereof.
10.6 No Third Party Beneficiaries. This Agreement (together with all the
documents and instruments referred to herein) is not intended to confer upon any
other person or entity (other than the additional indemnified parties
contemplated by Article 8 hereof) any rights or remedies hereunder.
10.7 Assignment. This Agreement shall not be assigned by operation of law
or otherwise, except that NAC and Merger Sub may assign all or any portion of
their rights under this Agreement to any wholly owned subsidiary of NAC, but no
such assignment shall relieve NAC and Merger Sub of their obligations hereunder,
and except that this Agreement may be assigned by operation of law to any
corporation with or into which NAC may be merged.
10.8 Further Assurances. Upon the request of any Party, the other Parties
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out, and to effectuate
fully, the intent and purposes of this Agreement and the Collateral Documents.
10.9 Binding Effect; Assignment. This Agreement and shall be binding upon
and be enforceable against the Parties and their respective heirs,
administrators, legal representatives, successors and assigns and shall inure to
the benefit of and be enforceable by the Parties and their respective heirs,
administrators, legal representatives, successors and permitted assigns.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
10.11 Amendment. This Agreement may not be amended except by an instrument
in writing approved by the Parties and signed on behalf of each of the Parties.
10.12 Non-Waiver. Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor any waiver or relinquishment of any rights or
power at any other time or times.
28
10.13 Waiver of Jury Trial; Consent to Jurisdiction. EACH OF THE PARTIES
EXPRESSLY WAIVES ITS OR HIS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY SUIT,
LITIGATION OR OTHER JUDICIAL PROCEEDING REGARDING THIS AGREEMENT OR ANY
COLLATERAL DOCUMENT OR ANY DISPUTE HEREUNDER OR THEREUNDER OR RELATING HERETO OR
THERETO. This Agreement and each of the Collateral Documents shall be governed
by, interpreted under and construed in accordance with the internal laws of the
State of New York applicable to contracts executed and to be performed wholly
within that State without giving effect to the choice or conflict of laws
principles or provisions thereof, except to the extent any provision hereof or
thereof must be governed by, interpreted under or construed in accordance with
the laws of the State of Delaware. Each of the Parties agrees that any dispute
under or with respect to this Agreement or any of the Collateral Documents shall
(subject to Section 10.14 below) be determined before the state or federal
courts situated in the City, County and State of New York, which courts shall
have exclusive jurisdiction over and with respect to any such dispute, and each
of the Parties hereby irrevocably submits to the jurisdiction of such courts.
Each Party hereby agrees not to raise any defense or objection, under the theory
of forum non conveniens or otherwise, with respect to the jurisdiction of any
such court. In addition to such other method as may available under applicable
law, each Party agrees that any summons, complaint or other papers or process in
connection with any such dispute (including any dispute contemplated by Section
10.14 below) may be served on it or him in the same manner in which a Notice may
be given to it or him pursuant to Section 10.2 above.
10.14 Dispute Resolution and Arbitration. Subject to clause (c) below, if
any dispute arises between or among any of the Parties regarding or relating to
this Agreement or (unless otherwise expressly provided for therein) any
Collateral Document (including, without limitation, any aspect of Xxxxxxxx'x
obligations under the Employment Agreement), then, IN LIEU OF LITIGATION, the
Parties consent and agree to resolve such dispute through mandatory arbitration
under the Commercial Rules of the American Arbitration Association (the "AAA"),
before a single, independent arbitrator (which arbitrator shall, subject to
clause (b) below, be a retired judge of any Federal Court or a retired judge who
has served as a judge in civil proceedings in New York at the Supreme Court
level or on a more senior court in the State of New York). Any such arbitrator
shall be selected by mutual agreement of the parties to such arbitration, but in
the event such parties cannot agree upon the selection of such arbitrator, the
AAA located in New York City shall appoint such arbitrator in accordance with
the commercial arbitration rules of the AAA. Any arbitration proceeding
contemplated hereunder shall be conducted in New York City, New York. The
Parties consent to the entry of judgment upon award rendered by the arbitrator
in any court of competent jurisdiction. Without limiting the generality or scope
of the foregoing, all disputes (except as otherwise herein or in the applicable
Collateral Document expressly provided) under or with respect to this Agreement
or any Collateral Document shall be subject to arbitration as herein provided,
which disputes may include, without limitation, any claim or dispute with
respect to (i) the enforceability of this Agreement or any Collateral Document
(or any provision hereof or thereof), (ii) whether this Agreement or any
Collateral Document was induced by fraud or coercion and (iii) whether any Party
is entitled to rescission or any other remedy.
(a) Notwithstanding the foregoing, if the dispute relates to a
determination of the amount of the Outstanding Indebtedness hereunder or
any other financial amount under any of the Collateral Documents, such
dispute shall be resolved in accordance with clause (a) above but the
single arbitrator shall be an individual with substantial experience in
auditing public companies.
(b) Notwithstanding the foregoing, if any suit or other judicial proceeding
is commenced asserting a Third Party Claim against any Party and if such
Third Party Claim would or could give rise to a claim for indemnification
by such Party under Article 8 above, then, at the election of such Party,
the Party obligated hereunder to indemnify with respect to such Claim may
be joined in such suit or other judicial
29
proceeding so that all matters related thereto (including the obligation,
if any, of any Party to indemnify another Party with respect to such Claim)
may be resolved in such suit or other legal proceeding.
(c) Notwithstanding the foregoing, however, should adequate grounds exist
for seeking immediate injunctive or other equitable relief hereunder or
under any Collateral Document, any Party may seek and obtain such relief
through a judicial proceeding or action in accordance with Section 10.13
above, provided that, upon obtaining such relief, any further proceeding in
such judicial proceeding or action (exclusive of any appeal) shall be
stayed pending the resolution of the arbitration proceedings called for
herein.
(d) With respect to any arbitration contemplated by this Section 10.14,
each Party shall, subject to Article 8 above, bear its or his own costs;
however, any fees assessed by the AAA shall be allocated by the arbitrator
in his or her sole discretion.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
SIGNATURE PAGE TO FOLLOW]
30
IN WITNESS WHEREOF, Xxxxxxxx has executed this Agreement on the date first
written above and each of NAC, Merger Sub and the Acquired Corporation has
caused this Agreement to be executed on the date first written above by its
respective officer or other representative thereunder duly authorized.
NATIONAL AUTO CREDIT, INC.,
a Delaware corporation
By:
----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Executive V. P. and CFO
OMI BUSINESS ACQUISITION CORP..,
a Delaware corporation
By:
----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Vice President
ORA/METRO INCORPORATED,
a New York corporation
By:
----------------------------------------
Name: Xxxx Xxxxxxxx
Title: President
--------------------------------------------
XXXX XXXXXXXX
31
