Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
NATIONWIDE ELECTRIC, INC.
AND
XXXXXXXXX ELECTRIC COMPANY, INC.
and its
SHAREHOLDERS
TABLE OF CONTENTS
-----------------
Page
----
RECITALS...................................................................... 1
ARTICLE I DEFINITIONS......................................................... 1
ARTICLE II MERGER OF THE COMPANY INTO NEI..................................... 4
2.1 Merger....................................................... 4
2.2 Articles of Incorporation.................................... 4
2.3 Bylaws....................................................... 4
2.4 Directors and Officers....................................... 4
2.5 Further Action............................................... 4
2.6 Merger Consideration......................................... 4
2.7 Treatment of Shares of Constituent Corporations.............. 5
2.8 Dissenting Shares............................................ 5
2.9 Delivery Date................................................ 5
2.10 Merger Date.................................................. 6
2.11 The Registration Statement................................... 6
2.12 Dividends; Options........................................... 6
2.13 Redemption................................................... 6
2.14 Related Party Receivables; Xxxxxxxxx Property, Inc........... 7
2.15 Shareholder Distributions.................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
AND THE COMPANY.......................................................... 7
3.1 Validity..................................................... 7
3.2 The Company.................................................. 8
3.3 The Company Stock............................................ 8
3.4 Financial Statements......................................... 9
3.5 Absence of Certain Events.................................... 9
3.6 Title to and Condition of Personal Property.................. 9
3.7 Real Property................................................10
3.8 Leases.......................................................10
3.9 Receivables..................................................10
3.10 Contracts, Etc...............................................11
3.11 Material Customers and Suppliers.............................11
3.12 Litigation and Workers' Compensation Liability...............12
3.13 Insurance and Performance Bonds..............................12
3.14 Intellectual Property........................................12
3.15 Compliance with Laws.........................................13
3.16 Licenses, Permits and Authorizations.........................13
3.17 Taxes........................................................13
3.18 Books and Records....................................................13
3.19 Labor and Employment.................................................14
3.20 Environmental........................................................14
3.21 ERISA................................................................16
3.22 Guaranteed Obligations...............................................17
3.23 Disclosure...........................................................17
3.24 Acknowledgment.......................................................18
3.25 Interest in Customers and Suppliers and Related Party Transactions...18
3.26 Registration Statement...............................................19
3.27 Brokers and Finders..................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEI......................................19
4.1 Corporate............................................................19
4.2 Authorization........................................................19
4.3 Capital Stock of NEI.................................................19
4.4 Transactions in Capital Stock........................................20
4.5 Financial Statements.................................................20
4.6 Liabilities And Obligations..........................................20
4.7 Conformity With Law; Litigation......................................20
4.8 No Violations........................................................20
4.9 NEI Stock............................................................21
4.10 No Side Agreements...................................................21
4.11 Disclosure...........................................................21
4.12 Other Agreements.....................................................21
4.13 Registration Statement...............................................22
ARTICLE V ACTIONS BY SHAREHOLDERS AND THE COMPANY PENDING THE MERGER DATE.............22
5.1 Access...............................................................22
5.2 Carry on in Ordinary Course..........................................22
5.3 General Increases Limited............................................23
5.4 Preservation of Organization.........................................23
5.5 No Default...........................................................23
5.6 Dividends............................................................23
5.7 Voting Trusts or Other Arrangements..................................23
5.8 Interim Financial and Borrowing Statements...........................23
5.9 Bids and Contracts...................................................23
5.10 Cash Withdrawals.....................................................24
5.11 Environmental Audits.................................................24
5.12 No Transfer..........................................................24
5.13 No Shop..............................................................24
5.14 Agreements...........................................................24
5.15 Notification of Certain Matters......................................24
5.16 Cooperation in Preparation of Registration Statement.................25
5.17 Authorized Capital.................................. 25
5.18 Compliance With The Xxxx-Xxxxx Act.................. 25
ARTICLE VI CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS.......... 26
6.1 Representations and Warranties True................. 26
6.2 Compliance with Agreement........................... 26
6.3 No Litigation....................................... 26
6.4 Employment Agreements............................... 26
6.5 IPO Closing......................................... 26
6.6 Real Estate Leases.................................. 26
6.7 Consents............................................ 26
6.8 Opinion of Counsel.................................. 27
6.9 Xxxx-Xxxxx Act...................................... 27
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF NEI................. 27
7.1 Representations and Warranties True................. 27
7.2 Compliance with Agreement........................... 27
7.3 Execution and Deliverables.......................... 27
7.4 Corporate Documents................................. 27
7.5 Due Diligence....................................... 27
7.6 Employment Agreements............................... 28
7.7 No Material Adverse Change.......................... 28
7.8 Opinion of Counsel for Shareholders................. 28
7.9 Resignations........................................ 28
7.10 Board and Shareholder Approval...................... 28
7.11 No Litigation....................................... 28
7.12 Shareholders' Release............................... 29
7.13 Termination of Related Party Agreements............. 29
7.14 Other Founding Companies............................ 29
7.15 FIRPTA Certificate.................................. 29
7.16 IPO Closing......................................... 29
7.17 Leases.............................................. 29
7.18 Consents............................................ 29
7.19 Xxxx-Xxxxx Act...................................... 29
ARTICLE VIII COVENANTS.................................................. 29
8.1 Release From Guarantees; Repayment of Certain
Obligations......................................... 29
8.2 Preparation And Filing of Tax Returns............... 30
8.3 Further Assurances.................................. 30
ARTICLE IX INDEMNIFICATION............................................ 30
9.1 Indemnification by The Shareholders................. 30
9.2 Indemnification by NEI.............................. 31
9.3 Procedure........................................... 31
9.4 Exclusive Remedy.................................... 32
9.5 Limitations on Indemnification...................... 32
ARTICLE X TERMINATION................................................ 33
10.1 Termination......................................... 33
10.2 Liabilities in Event of Termination................. 33
ARTICLE XI NONCOMPETITION AND NONDISCLOSURE........................... 34
11.1 Noncompete Covenant................................. 34
11.2 Confidential Information............................ 34
11.3 Enforcement......................................... 35
ARTICLE XII TRANSFER RESTRICTIONS...................................... 35
ARTICLE XIII FEDERAL SECURITIES ACT REPRESENTATIONS..................... 36
13.1 Compliance with Law................................. 36
13.2 Economic Risk; Sophistication....................... 36
ARTICLE XIV REGISTRATION RIGHTS........................................ 36
14.1 Piggyback Registration Rights....................... 36
14.2 Registration Procedures............................. 37
14.3 Indemnification..................................... 39
14.4 Underwriting Agreement.............................. 40
14.5 Transfer of Rights.................................. 40
14.6 Rule 144 Reporting.................................. 40
ARTICLE XV MISCELLANEOUS.............................................. 41
15.1 Assignment.......................................... 41
15.2 Governing Law....................................... 41
15.3 Notices............................................. 41
15.4 Entire Agreement.................................... 42
15.5 Successors.......................................... 42
15.6 Counterparts........................................ 42
15.7 Headings............................................ 42
15.8 Expenses............................................ 42
15.9 Survival............................................ 42
15.10 Costs............................................... 42
15.11 Publicity........................................... 43
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is entered into as of June 12, 1998, by NATIONWIDE
ELECTRIC, INC., a Delaware corporation ("NEI"), HENDERSON ELECTRIC COMPANY,
INC., a Kentucky corporation (the "Company"), and the shareholders of the
Company identified in SCHEDULE A attached hereto and executing counterparts of
this Agreement (the "Shareholders").
RECITALS
A. The Company is engaged in the electrical contracting business.
B. Shareholders own all of the issued and outstanding capital stock
of the Company (the "Company Stock").
C. NEI and its subsidiaries are entering into separate merger or
acquisition agreements (the "Other Agreements") with other companies engaged in
the electrical contracting business (the "Other Founding Companies") and NEI
intends to conduct an initial public offering of its common stock. This
Agreement, the Other Agreements and the initial public offering constitute the
"NEI Plan of Organization."
D. The parties desire that the Company be merged into NEI, with
Shareholders to receive cash and NEI Stock in exchange for their Company Stock
in the merger.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
promises contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
In addition to other terms defined in this Agreement, the following
terms shall have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Articles of Merger" shall mean the Articles of Merger to be filed
with the Secretaries of State of the State of Delaware and the State of
Incorporation, pursuant to which the Company shall be merged into NEI.
"Company" shall mean the Company and its subsidiaries, if any.
"Company Stock" shall mean all of the issued and outstanding capital
stock of the Company owned by the Shareholders on the Delivery Date and the
Merger Date.
"Constituent Corporations" shall mean the Company and NEI.
"Delivery Date" shall mean the date specified by NEI on which the
Company Stock shall be delivered in trust pending the Merger Date, as
contemplated in Article II.
"DGCL" shall mean the Delaware General Corporation Law, as amended
from time to time.
"Dissenting Shares" shall mean any shares of Company Stock with
respect to which any Shareholder has exercised his or her appraisal rights under
the DGCL.
"Founding Companies" shall mean, collectively, the Company and the
Other Founding Companies.
"GAAP" means generally accepted accounting principles, consistently
applied from period to period.
"Xxxx-Xxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 and accompanying Rules.
"IPO" shall mean NEI's initial public offering of NEI Stock pursuant
to the Registration Statement.
"Material Adverse Change" means a material adverse change in the
business, operations, financial condition or prospects of the Company or the
value of the Company Stock.
"Material Adverse Effect" means a material adverse effect on the
business, operations, financial condition or prospects of the Company or the
value of the Company Stock.
"Merger" shall mean the transaction contemplated hereby, pursuant to
which: (a) the Company will be merged into NEI; and (b) the Shareholders will
receive the Merger Consideration in exchange for their Company Stock.
2
"Merger Consideration" shall mean the cash and NEI Stock to be
received by each Shareholder in connection with the Merger.
"Merger Date" shall mean the effective date of the Merger as described
in Article II.
"NEI" shall mean Nationwide Electric, Inc.
"NEI Charter Documents" shall mean the Certificate of Incorporation
and Bylaws of NEI, as amended or restated from time to time.
"NEI Plan of Organization" shall mean the IPO and the acquisition or
merger of the Founding Companies by or into NEI or its subsidiaries.
"NEI Stock" shall mean the voting common stock, par value $.01 per
share, of NEI.
"Other Founding Companies" shall mean the Founding Companies other
than the Company.
"Person" shall mean any individual, corporation, trust, limited
liability company, partnership or other entity.
"Pricing" means the date on which the public offering price per share
of the NEI Stock to be offered in the IPO is determined by NEI and the
Underwriters.
"Prospectus" shall mean the prospectus contained in the Registration
Statement, as amended or supplemented from time to time.
"Registration Statement" means the registration statement on Form S-1
to be filed with the SEC covering the shares of NEI Stock to be issued in the
IPO, as amended or supplemented from time to time.
"Requisite Shareholder Approval" shall mean the affirmative vote of
the holders of the requisite number of shares of Company Stock necessary to
approve the Merger pursuant to the DGCL and the laws of the State of
Incorporation.
"Return" means any return, report or statement (including information
returns) required to be filed in connection with any Tax.
"SEC" means the United States Securities and Exchange Commission.
"Shareholders" means the shareholders of the Company executing this
Agreement.
3
"State of Incorporation" means the State of Kentucky.
"Surviving Corporation" shall mean NEI from and after the Merger Date.
"Tax" or "Taxes" means any and all federal, state, local and foreign
income, gross receipts, sales, use, ad valorem, value added, franchise,
withholding, employment, excise, property and other taxes or assessments, plus
any interest or penalties payable with respect to the same.
"Underwriters" means the underwriters of the IPO.
ARTICLE II
MERGER OF THE COMPANY INTO NEI
2.1 Merger. In accordance with and subject to the terms and conditions of
this Agreement and in reliance on the mutual representations and warranties
contained herein, effective on the Merger Date, the Company shall be merged into
NEI. As a result of the Merger, the separate corporate existence of the Company
shall cease, and NEI shall be the Surviving Corporation in the Merger. The
Merger shall have the effects set forth in the DGCL.
2.2 Articles of Incorporation. The Articles of Incorporation of NEI in
effect immediately prior to the Merger Date shall continue in effect as the
Articles of Incorporation of the Surviving Corporation until further amended or
restated.
2.3 Bylaws. The Bylaws of NEI as in effect immediately prior to the
Merger Date shall continue in effect as the Bylaws of the Surviving Corporation
until further amended and restated.
2.4 Directors and Officers. The officers and directors of NEI immediately
prior to the Merger Date shall be the officers and directors of the Surviving
Corporation, retaining their respective positions and terms of office.
2.5 Further Action. If at any time NEI shall determine that any further
instruments or assurances are necessary or desirable to confirm in NEI the title
to any property or rights of the Company acquired or to be acquired by NEI as a
result of the Merger, Shareholders and the officers and directors of the Company
immediately prior to the Merger Date are authorized and directed to execute and
deliver such instruments and assurances and do all things necessary or
advisable, in the name of the Company, to perfect or confirm title to such
property or rights in NEI and to otherwise carry out the provisions of this
Agreement and the Merger.
2.6 Merger Consideration. The aggregate Merger Consideration to be
received by the Shareholders in exchange for the Company Stock shall consist of
cash and shares of NEI Stock determined in accordance with SCHEDULE 2.6 attached
hereto. The cash portion of the Merger
4
Consideration shall be payable by certified check or wire transfer on the Merger
Date. Notwithstanding the foregoing, NEI may reserve up to 5% of the cash
portion of the aggregate Merger Consideration as a basket (the "Basket") to
compensate NEI for any accounts receivable (net of bad debt reserves) and/or
retainages of the Company as stated on the Balance Sheet (as defined in Section
3.4) but not collected within one year after the Merger Date and any loss,
damage or expense incurred by NEI as a result of a breach of any of the
representations and warranties in Article III. The Basket funds shall be
deposited by NEI in an interest-bearing account. Any amount remaining in the
Basket at the expiration of one year following the Merger Date and not retained
by NEI as compensation as set forth above, together with all interest earned on
the deposit of the Basket funds, shall be remitted pro rata to the Shareholders.
Each Shareholder not exercising his or her appraisal rights in accordance with
Section 2.8 shall be entitled to a pro rata portion of the aggregate Merger
Consideration in accordance with the percentage which the number of shares of
Company Stock owned by such Shareholder bears to the total number of shares of
Company Stock (other than Dissenting Shares) held by all the Shareholders.
Notwithstanding the provisions of the DGCL and the foregoing provisions of this
Article II, prior to the Merger Date, the Company may effect the asset
distribution and partial redemption of Company Stock contemplated in Section
2.13.
2.7 Treatment of Shares of Constituent Corporations.
2.7.1 Each share of Company Stock issued and outstanding immediately
prior to the Merger Date shall, by virtue of the Merger and without any
action on the part of the Shareholders, be automatically canceled and shall
cease to represent any interest in the Company, and, except for those
Dissenting Shares for which appraisal rights are perfected in accordance
with Section 2.8, each share of Company Stock shall entitle the holder
thereof solely to his or her pro rata share of the aggregate Merger
Consideration as provided in Section 2.6.
2.7.2 Each share of NEI Stock issued and outstanding immediately
prior to the Merger Date shall remain outstanding after the Merger Date as
one share of the issued and outstanding common stock of the Surviving
Corporation.
2.8 Dissenting Shares. Notwithstanding the foregoing provisions of this
Article II, any holder of Dissenting Shares who has perfected his or her
appraisal rights in accordance with the DGCL shall have no right to any Merger
Consideration, but shall have only such rights as provided by the DGCL.
Provided, any holder of Dissenting Shares whose appraisal rights are forfeited
in accordance with the DGCL shall have the right solely to the pro rata portion
of the aggregate Merger Consideration to which he or she is entitled hereunder.
2.9 Delivery Date. On the date specified by NEI by written notice to the
Shareholders (the "Delivery Date"), which may be prior or subsequent to the
Pricing, the Shareholders shall deliver in trust to NEI's counsel: (a) all
certificates for the Company Stock, duly endorsed in blank or accompanied by
duly executed stock powers; (b) resolutions duly adopted by the Shareholders
signifying the Requisite Shareholder Approval; and (c) such other documents,
instruments, opinions,
5
schedules, financial statements and assurances as NEI shall request consistent
with the terms of this Agreement (collectively, the "Deliverables"). The
Deliverables shall be held in trust by NEI's counsel pending the Merger Date.
Prior to the Delivery Date, NEI shall advise Shareholders of the procedures
required for proper surrender of the certificates evidencing the Company Stock
and shall supply such transmittal letters and other documentation required for
such purpose.
2.10 Merger Date. On the date specified by NEI by written notice to the
Shareholders (the "Merger Date"), which shall be not later than 15 days after
the closing date of the IPO, the Company Stock and Deliverables shall be
delivered to NEI and NEI shall thereafter file Articles of Merger with the
Secretaries of State of the State of Delaware and the State of Incorporation.
Each Shareholder whose Deliverables were delivered to NEI's counsel on or prior
to the Delivery Date will receive that portion of the aggregate Merger
Consideration to which he or she is entitled. After the Merger Date, until
properly surrendered to NEI's counsel, each outstanding certificate for Company
Stock not delivered to NEI's counsel as of the Delivery Date and not
representing Dissenting Shares shall be deemed for all purposes to represent
only the right to receive that portion of the aggregate Merger Consideration
represented thereby. Unless and until surrendered as provided herein, no such
certificate shall entitle the holder thereof to any portion of the Merger
Consideration. Except as otherwise provided in Section 2.6, no Shareholder shall
be entitled to interest on any portion of the Merger Consideration. The record
holder of any certificate for Company Stock (other than Dissenting Shares) which
shall have been lost or destroyed shall nevertheless receive the portion of the
aggregate Merger Consideration to which he or she is entitled, provided such
holder delivers to NEI, at such holder's sole expense, a lost certificate
affidavit in form and substance acceptable to NEI, together with such surety as
NEI deems necessary to indemnify NEI for any loss or expense resulting from
presentation of such lost or destroyed certificate.
2.11 The Registration Statement. NEI shall use commercially reasonable
efforts to file the Registration Statement with the SEC and to cause the
Registration Statement to become effective by September 30, 1998. If the
Registration Statement has not become effective by December 31, 1998, then
Shareholders and the Company may terminate this Agreement by giving written
notice to NEI not later than January 15, 1999.
2.12 Dividends; Options. Any and all dividends with respect to the Company
Stock (whether or not permitted under the terms of this Agreement) declared at
any time prior to the Merger Date and remaining unpaid on the Merger Date, and
any and all outstanding options or other rights to acquire capital stock of the
Company in existence at any time prior to the Merger Date, shall be canceled
effective as of the Merger Date.
2.13 Redemption. Immediately prior to the Delivery Date, the Company shall
redeem 244 shares of the Company Stock from the Shareholders by distributing to
them: (a) the life insurance policies owned by the Company on the lives of its
officers and Shareholders with an aggregate cash surrender value of
approximately $134,347; and (b) all of the real property and improvements
thereon owned by the Company, subject to any mortgages secured thereby (with a
net book value as of March 31, 1998 of $788,214) and subject to the leases
referred to in Sections 6.6 and 7.17. The
6
Company shall bear any corporate Taxes due in connection with such redemption up
to a maximum amount of $180,000. Any corporate Taxes due in connection with such
redemption in excess of $180,000 shall be reimbursed by the Shareholders within
30 days after receipt of NEI's written notice that it has paid such Taxes.
Shareholders shall not cause the Company to prepay the mortgages referred to in
Section 2.13(b) in excess of their regular amortization schedule prior to the
Merger Date. For purposes of computing such Taxes, NEI shall use the
Shareholders' valuation of the real property so long as such valuation is
reasonable.
2.14 Related Party Receivables; Xxxxxxxxx Property, Inc. On the Merger
Date: (a) all indebtedness and accounts payable owed to the Company by its
Affiliates (including but not limited to amounts owed by Xxx Xxxxxxxxx, Xxxxx
Xxxxxxxxx and Xxxxxxxxx Property, Inc.) will be paid in full; and (b) the
Company's investment in Xxxxxxxxx Property, Inc. in the amount of $340,782 will
be purchased from the Company in cash by the Shareholders. The payment of such
amounts and the purchase of such investment will be made in cash on the Merger
Date concurrently with payment of the Merger Consideration to the Shareholders.
2.15 Shareholder Distributions. The Company shall not pay any dividends or
distributions to any of the Shareholders from the date of this Agreement through
the Merger Date, except as otherwise provided in Section 2.13. Notwithstanding
the foregoing, if the Merger Date occurs after August 15, 1998, then an amount
equal to 100% of the after-tax income of the Company for the period from August
15, 1998 through the Merger Date shall be added to the cash portion of the
Merger Consideration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND THE COMPANY
Shareholders and the Company jointly and severally make the following
representations and warranties and acknowledge that NEI has relied thereon in
entering into this Agreement. Such representations and warranties shall not be
affected by any investigation conducted by NEI, and shall survive for a period
of eighteen months following the Merger Date.
3.1 Validity.
3.1.1 This Agreement is, and any documents and instruments to be
executed and delivered by Shareholders or the Company pursuant hereto shall
be, legal, valid and binding obligations of Shareholders and/or the
Company, enforceable in accordance with their terms.
3.1.2 Except as provided in SCHEDULE 3.1, neither the execution and
delivery by Shareholders and the Company of this Agreement nor the
consummation of the Merger requires the consent or approval of, or the
giving of notice by Shareholders or the Company to, or the registration by
Shareholders or the Company with, or the taking of any other action
7
by Shareholders or the Company in respect of, any federal, state or local
governmental authority or any third party, with the exception of the
required filing of the Articles of Merger with the Secretaries of State of
the State of Delaware and the State of Incorporation.
3.1.3 Except as provided in SCHEDULE 3.1, the execution and delivery
of this Agreement and the other instruments contemplated hereby and the
consummation of the Merger will not: (a) conflict with or violate any
provision of, or constitute a breach or default under, the Articles of
Incorporation or Bylaws of the Company, any law, regulation, order,
judgment or decree to which any Shareholder or the Company is subject, or
any agreement, instrument or restriction of any kind to which any
Shareholder or the Company is a party or by which any of them are bound; or
(b) result in the creation or imposition of any lien, claim, charge or
encumbrance of any nature whatsoever upon the Company Stock or any assets
of the Company.
3.2 The Company. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has all requisite corporate power and authority to own its property and operate
its business as currently conducted. The Company is duly qualified and in good
standing in all states where the conduct of its business so requires. Except as
disclosed in SCHEDULE 3.2, the Company has no subsidiaries and does not directly
or indirectly control or own any interest in any corporation, partnership,
limited liability company, joint venture, proprietorship or other business
entity. The Company has all requisite power and authority to effectuate the
Merger.
3.3 The Company Stock.
3.3.1 A description of the authorized capital stock of the Company is
attached as SCHEDULE 3.3. SCHEDULE A contains a complete list of all
Shareholders of the Company and the number of shares of Company Stock owned
by each Shareholder. The Company Stock is duly authorized, validly issued,
fully paid and nonassessable. There are no shares of common stock or other
securities of the Company issued and outstanding other than the Company
Stock. There are no outstanding options, warrants or other rights to
acquire any common stock or other securities of the Company or securities
convertible into the same. No Person has been issued any stock grants,
"phantom stock," stock appreciation rights or similar compensation
expressed in or computed on the basis of the Company's securities or the
value thereof. No Person has any preemptive right to purchase any
securities of the Company. There have been no stock splits, reverse stock
splits or other recapitalizations of the Company during the last five
years. The Company has not redeemed or retired any of its common stock or
other securities during the last four years.
3.3.2 All legal and beneficial right, title and interest in the
Company Stock is owned solely by the Shareholders and the Company Stock is
and shall on the Merger Date be free and clear of all liens, claims,
pledges, security interests, encumbrances and restrictions. No securities
of the Company other than the Company Stock are held by any Shareholder or
any
8
other Person, and no Person other than Shareholders has any equity interest
in the Company. Except as provided herein, no Shareholder has entered into
any agreement, commitment or arrangement to transfer any Company Stock or
any interest therein to any Person other than NEI, nor to merge the Company
with or into any Person other than NEI. No Shareholder is a party to any
proxy, voting trust, voting agreement or similar understanding with respect
to the Company Stock or the election of directors of the Company.
3.4 Financial Statements. Attached or to be attached as SCHEDULE 3.4 are
the audited financial statements of the Company (including the notes thereto and
the report thereon of the Company's independent public accountants) for the
Company's fiscal years ended March 31, 1996, 1997 and 1998, together with the
unaudited consolidated balance sheet as of June 30, 1998 (the "Balance Sheet")
and unaudited income statement of the Company for the stub period then ended
(collectively, the "Financial Statements"). The Financial Statements present
fairly (and the unaudited Balance Sheet and income statement will present
fairly) the consolidated financial condition of the Company as of their
respective dates and the consolidated results of its operations for the
respective periods then ended and have been (or will be) prepared in conformity
with GAAP (provided, that the unaudited financial statements will be presented
without footnotes and will be subject to normal year-end adjustments). On the
Merger Date, the Company will have no material liabilities, obligations or
financial exposure of any nature, absolute or contingent, accrued or otherwise
[including but not limited to contract claims or penalties or settlements
thereof, liquidated damages, fines, assessments, union dues, unfunded pension
contributions, trade payables, indebtedness for borrowed money, Taxes, accrued
compensation or withholdings, negligence or contractor's liability to the extent
not covered by insurance, doubtful accounts receivable or doubtful retainages,
but excluding obligations incurred in the ordinary course of business between
the date of the Balance Sheet (the "Balance Sheet Date") and the Merger Date],
which are not disclosed or adequately provided for in the Balance Sheet. Any
business backlogs in existence on the date hereof and disclosed to NEI are bona
fide and were created in the ordinary course of business. The percentages of
completion of contracts in progress as of the Balance Sheet Date and disclosed
in the Balance Sheet will be accurate in all material respects in accordance
with GAAP. The Balance Sheet will reflect all appropriate accruals for
obligations of the Company accrued through the Balance Sheet Date (subject to
normal year-end adjustments).
3.5 Absence of Certain Events. Since the Balance Sheet Date, except as
disclosed in SCHEDULE 3.5: (a) the business of the Company has been conducted in
the ordinary course; and (b) there has not been any Material Adverse Change, nor
any occurrence, circumstance or combination thereof which might be expected to
have a Material Adverse Effect before or after the Merger Date.
3.6 Title to and Condition of Personal Property.
3.6.1 Attached as SCHEDULE 3.6.1 is a complete list of all tangible
personal property owned by the Company (the "Personal Property").
9
3.6.2 The Company has good and marketable title to the Personal
Property, free and clear of any and all liens, claims, security interests,
restrictions and encumbrances (except as disclosed in SCHEDULE 3.6.2). All
of the Personal Property is in the Company's possession and control.
3.6.3 The Personal Property is and has been maintained in good
operating condition, ordinary wear and tear excepted. The Personal Property
includes all of the equipment, vehicles (other than leased equipment and
vehicles), tools and inventory required for the conduct of the Company's
operations as currently conducted.
3.6.4 The Company has not entered into any agreement or commitment to
sell any of the Personal Property or any other assets of the Company other
than the sale of materials and supplies in the ordinary course of business,
nor (except as disclosed in SCHEDULE 3.6.2) has the Company made any
commitment or taken or failed to take any action which would cause any lien
to attach to any of the Personal Property.
3.7 Real Property
3.7.1 Attached as SCHEDULE 3.7.1 is complete list of all real
property owned by the Company (the "Real Property").
3.7.2 The Company has good and marketable title to the Real Property,
free and clear of any and all liens, claims, security interests,
restrictions and encumbrances (except as disclosed in SCHEDULE 3.7.2.).
3.7.3 Except as provided in Sections 2.13 and 3.8, the Company has
not entered into any agreement or commitment to sell or lease any of the
Real Property nor, except as disclosed in SCHEDULE 3.7.2, has the Company
made any commitment or taken or failed to take any action which would cause
any lien to attach to any of the Real Property.
3.8 Leases. SCHEDULE 3.8 contains a list and description of all real
property leases ("Leases") to which the Company is a party, either as lessor or
lessee (the facilities subject to such Leases being referred to as the "Leased
Facilities"). Each of the Leases is in full force and effect and neither the
Company nor any other party thereto has committed any default thereunder. The
Company is not subject to any increase in rentals or other costs in connection
with any Leased Facility of which the Company is lessee which is not provided
for in the applicable Lease.
3.9 Receivables. The accounts receivable of the Company as recorded on
the Balance Sheet have been created in the ordinary course of business,
represent valid and enforceable obligations owed to the Company (subject to the
Company's bad debt reserve but not subject to any penalties, claims or
retainages not disclosed in the Balance Sheet) and have been recorded in
accordance with GAAP consistently applied.
10
3.10 Contracts, Etc.
3.10.1 Attached as SCHEDULE 3.10.1 is a complete list of all written
or oral collective bargaining agreements, employment agreements and
agreements that impose severance or termination pay liabilities on the
Company (collectively, "Employment Agreements").
3.10.2 Attached as SCHEDULE 3.10.2 is a complete list of all written
or oral contracts and subcontracts for the performance of electrical
services, joint venture agreements, equipment and vehicle leases, licenses,
commitments and other agreements (other than Employment Agreements) to
which the Company is a party (the "Contracts"). Each Contract is in full
force and effect and constitutes the legal, valid and binding obligations
of all parties thereto. The Company is not in default and has not received
or given any notice of default, and to the best knowledge of Shareholders
no other party thereto is in default, under any Contract.
3.10.3 Attached as SCHEDULE 3.10.3 is a list of all bids submitted by
the Company and requests for proposal received by the Company as of the
date hereof.
3.10.4 Attached as SCHEDULE 3.10.4 is a list of all financial
institutions where the Company maintains accounts and the names of the
signatories on those accounts. Shareholders shall cooperate with NEI in
making any changes in signatories desired by NEI following the Merger Date.
3.10.5 Attached as SCHEDULE 3.10.5 is a complete list of all
mechanics' liens filed by or against the Company which have not been
discharged as of the date hereof.
3.10.6 Attached as SCHEDULE 3.10.6 is a list of all existing disputes
under any of the Contracts. Except as disclosed in SCHEDULE 3.10.6, the
relationships of the Company with its customers, contractors and suppliers
are good commercial working relationships.
3.11 Material Customers and Suppliers.
3.11.1 Attached as SCHEDULE 3.11.1 is a list of the ten largest
customers of the Company (the "Material Customers") during the twelve month
period prior to the date hereof and the estimated volume of business
conducted by the Company with the Material Customers during such period.
3.11.2 Attached as SCHEDULE 3.11.2 is a list of the ten largest
suppliers to the Company's business (the "Material Suppliers") during the
twelve month period prior to the date hereof and the estimated volume of
business conducted by the Company with the Material Suppliers during such
period.
11
3.11.3 The Company's relationships with the Material Customers and
Material Suppliers are good commercial working relationships, and
Shareholders have no reason to believe that any Material Customer or
Material Supplier intends to terminate its relationship with the Company
before or after the Merger Date.
3.12 Litigation and Workers' Compensation Liability.
3.12.1 Except as disclosed in SCHEDULE 3.12.1: (a) there are no
outstanding orders, judgments, injunctions, fines, penalties, citations,
awards or decrees of any court, arbitrator or governmental or regulatory
body involving the Company; and (b) there are no claims, suits, arbitration
proceedings, complaints or actions by any third party or legal,
administrative, arbitration or other proceedings or investigations by any
governmental agency, pending or threatened against the Company or any
Shareholder. Copies of all letters provided to the Company's accountants by
counsel for the Company with respect to litigation or claims involving the
Company in the last five fiscal years have previously been delivered to
NEI.
3.12.2 Attached as SCHEDULE 3.12.2 is an accurate statement of all
workers' compensation claims and liabilities and the amount thereof
accrued, pending or threatened against the Company as of the date hereof.
3.13 Insurance and Performance Bonds.
3.13.1 Attached as SCHEDULE 3.13.1 is a complete list of all insurance
policies maintained by the Company, including the name of the insurer, the
amount and nature of the coverage, the amount of the premium and the term
of the policy. All such policies are in full force and effect and the
premiums therefor are currently paid.
3.13.2 Attached as SCHEDULE 3.13.2 is a complete list of all
performance bonds given by the Company, including the name of the issuer
and beneficiary and the amount of each bond. Except as disclosed in
SCHEDULE 3.13.2, no party has collected under or made any claim against any
performance bond of the Company or assessed any liquidated damage against
the Company during the last five years.
3.14 Intellectual Property.
3.14.1 Attached as SCHEDULE 3.14 is a list of all patents, patent
applications, trademarks, trademark registrations, trade names, service
marks, copyrights and other intellectual property owned or licensed by the
Company. Except as disclosed in SCHEDULE 3.14, the Company owns all right,
title and interest in all such intellectual property.
12
3.14.2 The Company has the right to use all data and information
(including confidential information, trade secrets and know-how) used in
the conduct of its business.
3.14.3 To the best knowledge of Shareholders, the Company has not
infringed any patent, copyright, trademark, trade name, trade secret or
other proprietary or intellectual property right of any third party and has
not received notice of any such infringement.
3.14.4 All software license agreements to which the Company is a party
are in full force and effect, and the Company has the right to use all
computer software used in its business.
3.15 Compliance with Laws. The Company is in material compliance with all
federal, state and local laws, regulations and ordinances applicable to the
conduct of its business. The Company has not solicited or accepted any improper
payments from contractors, developers or others, made or solicited any improper
payments to government officials or agencies, or improperly collaborated with
other contractors in connection with the bidding process.
3.16 Licenses, Permits and Authorizations. Attached as SCHEDULE 3.16 is a
complete list of all licenses, permits, franchises and other governmental or
trade authorizations and approvals (collectively, "Permits") necessary for the
Company to conduct its business. All required Permits have been obtained by the
Company and are in full force and effect.
3.17 Taxes. With the exception of any Taxes subject to good faith dispute
and disclosed on SCHEDULE 3.17 attached hereto: (a) all Taxes owed by the
Company have been fully paid or provided for and all Returns in connection
therewith have been timely filed; and (b) the Company has adequately accrued for
all such Taxes payable subsequent to the last period for which they were paid,
and the Company will have no liability for Taxes for the period ending on the
Balance Sheet Date in excess of amounts accrued on the Balance Sheet. Any
federal or state Tax audit of the Company or any Shareholder occurring after the
Merger Date but based on tax years prior to the Merger Date, and any Taxes
assessed as a result of any such audit, shall be the responsibility of and shall
be paid by Shareholders; provided, however, that NEI files the Company's income
Tax Return for the taxable year in which the Merger Date occurs consistent with
the manner in which the Company has previously filed its income Tax Returns
(unless otherwise required by applicable tax law and regulation) and NEI pays
the Tax shown as due thereon; and provided further, that NEI shall have
discretion to take Tax positions with respect to the Company which differ from
those taken in prior periods, so long as such positions do not directly increase
any Tax obligation of Shareholders related to Taxes payable by the Company from
that which would have been in effect had the Returns been filed consistent with
the positions taken in prior periods, so long as such past positions are not
deemed improper by the relevant taxing authorities.
3.18 Books and Records. The books and records of the Company: (a) are
accurate and complete in all material respects; (b) have been maintained in
accordance with good business and industry practices on a basis consistent with
prior years; (c) state in reasonable detail and accurately
13
and fairly reflect the transactions and business of the Company; and (d)
accurately and fairly reflect the basis for the Financial Statements. The
Company's minute book is complete and reflects all corporate actions taken by
the board of directors and shareholders of the Company.
3.19 Labor and Employment.
3.19.1 A complete list of all employees of the Company as of the most
recently available date has been delivered to NEI. Except as disclosed in
SCHEDULE 3.19: (a) the Company has not had during the last five years, nor
to the best knowledge of Shareholders is there currently threatened, any
walkout, strike, picketing, work stoppage, work slowdown, union grievance
or other similar occurrence relating to union activity or labor practices;
(b) the Company has not committed any unfair labor practices; (c) there is
no pending or, to the best knowledge of Shareholders, threatened charge or
complaint against the Company by the National Labor Relations Board or
comparable state or local agency; (d) the Company has complied in all
material respects with all applicable laws, rules and regulations relating
to the employment of labor, including those relating to wages, hours,
conditions of employment, employee safety and health, collective bargaining
and the payment and withholding of taxes; (e) the Company has withheld all
amounts required by law or agreement to be withheld from the wages or
salaries of its employees, and is not liable for any arrearages of wages or
employment taxes or penalties for failure to comply with any of the
foregoing; (f) there are no material controversies pending or threatened
between the Company and any of its employees or former employees; and (g)
the Company has not experienced a "plant closing" or "mass layoff" within
the meaning of the Worker Adjustment and Retraining Notification Act, 29
U.S.C. (S)(S)2101 et seq. ("WARN") within the last five years.
3.19.2 The International Brotherhood of Electrical Workers has been
recognized by the Company as the bargaining unit for certain of its
employees and such union currently represents approximately 275 of the
Company's employees. All union dues and benefits and contributions to union
pension plans payable by the Company under collective bargaining agreements
have been fully paid, and the Company has complied in all material respects
with its obligations under such collective bargaining agreements.
3.20 Environmental. Except as otherwise provided in SCHEDULE 3.20:
3.20.1 To the best of Shareholders' knowledge, there has not been any
"release" (as defined in 42 U.S.C. (S) 9601(22)) or threat of "release" in
or about the Real Property or Leased Facilities (collectively, the
"Facilities") of any: (a) "hazardous substances" (as defined in 42 U.S.C.
(S) 9601(14)); (b) "chemicals" subject to regulation under Title III of the
Superfund Amendments and Reauthorization Act (XXXX) of 1986; (c) natural
gas liquids, liquefied natural gas or synthetic gas; (d) petroleum,
petroleum-based products, crude oil or any fraction; or (e) other hazardous
or toxic substances or wastes or materials, pollutants,
14
contaminants or other substances included under or regulated by any
Environmental Laws (as defined in Section 3.20.8) (collectively, "Hazardous
Substances").
3.20.2 To the best of Shareholders' knowledge, no part of the
Facilities is or has been used at any time prior to the Merger Date as the
site of any handling, treatment, storage, refining or disposal of any
Hazardous Substances and there are no Hazardous Substances on or in the
Facilities, whether contained in barrels, tanks, equipment (moveable or
fixed) or other containers, except in compliance with applicable law and
regulations.
3.20.3 No part of the Facilities is or has been at any time during the
Company's operation of the same, a "facility" as defined in 42 U.S.C. (S)
9601(9)(B).
3.20.4 There are not now, nor has there been at any time during the
Company's operation thereof, any underground storage tanks located in or
about the Facilities.
3.20.5 No asbestos or asbestos-containing materials have been
installed, used, incorporated into or disposed of in or about the
Facilities.
3.20.6 No polychlorinated biphenyls are located in or about the
Facilities.
3.20.7 Accurate and complete copies of any and all environmental
investigations, studies, audits, tests, reviews and analyses in the
possession of any Shareholder or the Company and relating to the Facilities
have been delivered to NEI.
3.20.8 To the best of Shareholders' knowledge, there are no conditions
in or about the Facilities which violate any federal, state or local law,
ordinance, rule, regulation or agreement pertaining to: (a) environmental
protection, regulation, contamination or clean-up; (b) underground storage
tanks; (c) asbestos or asbestos-containing materials; or (d) the handling,
treatment, storage, use or disposal of Hazardous Substances, including
without limitation the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act
("RCRA"), the Solid Waste Disposal Act, Department of Transportation
regulations regarding the transportation of Hazardous Substances or other
applicable materials, state lien or superlien or environmental protection,
regulation, contamination or clean-up statutes, or any statute or rule of
law providing common law remedies relating to Hazardous Substances
(collectively, "Environmental Laws"). The Facilities and the Company's use
of the same and all business and electrical contracting practices of the
Company comply in all material respects with all Environmental Laws.
3.20.9 No litigation, claims or demands have been brought or, to the
best of Shareholders' knowledge, threatened against the Company by any
governmental authority or private claimant in connection with any Hazardous
Substances or alleging any violation of
15
Environmental Laws or any injuries suffered or incurred by reason of any
matter referred to in this Section 3.20.
3.20.10 There are no liens under Environmental Laws on any of the
Personal Property or Facilities, and no governmental actions have been
taken or are in process which could subject any of the Personal Property or
Facilities to such liens.
3.20.11 To the best of Shareholders' knowledge, all disposal practices
relating to Hazardous Substances have been accomplished in accordance with
all applicable laws, rules, regulations and ordinances.
3.21 ERISA.
3.21.1 Attached as SCHEDULE 3.21.1 is a list of all "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and all other employee benefit
arrangements, policies or payroll practices, including retirement, savings,
disability, medical, dental, health and life insurance plans, death benefit
plans, group insurance, profit sharing, deferred compensation, bonus, stock
option, stock bonus or other stock incentive plans, vacation pay, severance
or termination pay policies, "cafeteria" or "flexible benefit" plans under
Section 125 of the Internal Revenue Code of 1986, as amended (the "Code"),
or other employee benefit plans, arrangements, contracts, agreements,
policies or commitments, whether formal or informal, written or oral, that
provide benefits for employees or former employees of the Company or for
which the Company could have any actual or contingent liability
(collectively, "Benefit Plans"). The Company has made available to NEI a
copy of each Benefit Plan and any related funding agreements, all of which
are legally valid and binding and in full force and effect, and there are
no defaults thereunder. The Company has also made available to NEI copies
of the summary plan description for each Benefit Plan, if any, the most
recent annual report and actuarial report for each Benefit Plan, if any,
and the Internal Revenue Service determination letter, if any, for each
Benefit Plan and each amendment thereto.
3.21.2 The Benefit Plans have been operated and administered by the
Company in material compliance with all applicable laws, including ERISA
and the Code, and all reports required by any government agency with
respect to each Benefit Plan have been timely filed. With respect to the
Benefit Plans, no event has occurred which would subject the Company to
liability (except for benefits, claims and funding obligations payable in
the ordinary course) under ERISA, the Code or any other applicable statute,
order or governmental rule or regulation. With respect to the Benefit
Plans, to the best of Shareholders' knowledge, there has been no prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Code which was not exempt, and there has been no action, suit,
grievance, arbitration or other claim with respect to the administration or
investment of assets of the Benefit Plans (other than routine claims for
benefits made in the ordinary course) pending, or to the best knowledge of
Shareholders, threatened against the Company. All
16
contributions required to be made to each Benefit Plan under its terms,
ERISA or other applicable law have been timely made. The Company has no
material unfunded liabilities or obligations under any of the Benefit
Plans.
3.21.3 Except as disclosed in SCHEDULE 3.21.3, neither the Company nor
any member of its "controlled group" under Section 414 of the Code
contributes to a "multiemployer plan," as defined in Section 414(f) of the
Code or Section 3(37) of ERISA. With respect to each multiemployer plan in
which the Company or any member of its controlled group participates or has
participated, neither the Company nor any member of the controlled group:
(a) has withdrawn, partially withdrawn, or received notice of any claim or
demand for withdrawal liability or partial withdrawal liability; (b) has
received notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that any such plan is or may become
insolvent; (c) has failed to make any required contributions; or (d) has
incurred any withdrawal liability by reason of a sale of assets pursuant to
Section 4204 of ERISA.
3.21.4 With respect to each Benefit Plan which is subject to Title IV
of ERISA: (a) no such Benefit Plan has terminated, or has filed a notice of
intent to terminate in the last six years; (b) there is no outstanding
liability under Section 4062 of ERISA; (c) neither the Company nor any
member of its controlled group that is a substantial employer has made a
withdrawal (or has been deemed to do so under Section 4062(e) of ERISA)
that could result in liability under Section 4063 of ERISA or otherwise;
(d) the Pension Benefit Guaranty Corporation has not instituted proceedings
to terminate such Benefit Plan; and (e) no reportable event, as described
in Section 4043 of ERISA, has occurred.
3.21.5 Except as disclosed in SCHEDULE 3.21.3 no Benefit Plan is a
"multiple employer plan" within the meaning of Section 4063 or 4064 of
ERISA.
3.21.6 No current or former employee of the Company is or may become
entitled to post-employment benefits of any kind other than coverage
mandated by Section 4980B of the Code.
3.21.7 Each Benefit Plan of the Company or member of its controlled
group has been operated at all times in substantial compliance with the
provisions of COBRA and any applicable similar state law.
3.22 Guaranteed Obligations. SCHEDULE 3.22 contains a complete description
of all liabilities and obligations of the Company which have been guaranteed by
any of the Shareholders as of the Merger Date (the "Guaranteed Obligations").
3.23 Disclosure.
17
3.23.1 No representation or warranty of Shareholders or the Company in
this Agreement or any other document delivered pursuant hereto or any
statement, document, certificate or exhibit furnished or to be furnished by
Shareholders or the Company pursuant to this Agreement or in connection
with the transactions contemplated hereby (including but not limited to the
Financial Statements and any questionnaires or representation certificates
furnished by the Company and the Shareholders) contains or will contain any
untrue statement of material fact or omits or will omit a material fact
necessary to make the statements contained herein or therein not
misleading. To the best knowledge of Shareholders, there is no fact which
Shareholders have not disclosed in writing to NEI which has or may have a
Material Adverse Effect; provided, the foregoing does not apply to
statements contained in or omitted from any such documents made or omitted
in reliance upon information furnished in writing by NEI.
3.23.2 If, during the period of time in which a prospectus is required
to be delivered in connection with the IPO, the Company or any Shareholder
becomes aware of any fact or circumstance which would affect in any
material respect the accuracy of a representation or warranty of the
Company or the Shareholders in this Agreement or a representation or
disclosure with respect to the Company or the Shareholders in the
Registration Statement or Prospectus, the Company and the Shareholders
shall immediately give notice of such fact or circumstance to NEI. However,
such notification shall not relieve either the Company or the Shareholders
from their respective obligations under this Agreement, and the truth and
accuracy of all representations and warranties of the Company and the
Shareholders as of the date of this Agreement and as of the Delivery Date
and the Merger Date shall be a precondition to the consummation of the
Merger.
3.24 Acknowledgment. The Shareholders acknowledge and agree: (a) that there
exists no firm commitment, binding agreement or promise of any kind, express or
implied, that a Registration Statement will become effective or that the IPO
will occur; (b) that neither NEI nor its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the Company, the
Shareholders or any other Person for any failure of the Registration Statement
to become effective or any failure of the IPO to occur at a particular price or
within a particular range of prices or to occur at all; (c) that NEI has not
committed to pay any dividends on the NEI Stock and that, in all likelihood, no
dividends will be paid on the NEI Stock in the foreseeable future; (d) that if
the Registration Statement becomes effective, there is no guaranty the NEI Stock
will appreciate or not depreciate in value, that an active market will exist for
the NEI Stock, or that the Shareholders will be able in the future to sell their
NEI Stock at a price equal to or greater than the public offering price per
share in the IPO; and (e) that the decision of the Shareholders to enter into
this Agreement and to exchange the Company Stock for NEI Stock and cash has been
made independent of, and without reliance upon, any statements, opinions,
communications or due diligence investigations made or performed by any
prospective Underwriter.
3.25 Interest in Customers and Suppliers and Related Party Transactions.
Except as described in SCHEDULE 3.25, no Shareholder nor any officer, director
or Affiliate of the
18
Company or of any Shareholder: (a) possesses, directly or indirectly, any
financial interest in or is a director, officer, employee or Affiliate of any
corporation, firm, association or business organization that is a customer,
supplier or competitor of the Company or is engaged in any other business
relationship with the Company; or (b) is or will be a party to any agreement or
arrangement that involves receipt by such person of compensation or property
from the Company other than through a customary employment relationship.
3.26 Registration Statement. To the best of Shareholders' knowledge, none
of the information (including financial information) supplied or to be supplied
by the Company or the Shareholders specifically for inclusion in the
Registration Statement contains or will contain any untrue statement of material
fact concerning the Company or the Shareholders or omits or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein concerning the Company or the Shareholders, in light of
the circumstances under which they are made, not misleading. The Company and the
Shareholders shall have the right to review and approve in advance any
statements made about the Company and the Shareholders in the Registration
Statement.
3.27 Brokers and Finders. Neither Shareholders nor the Company have
retained any broker or finder in connection with this transaction, and NEI shall
not become liable for any broker's or finder's fees as a result of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEI
NEI makes the following representations and warranties and
acknowledges that Shareholders and the Company have relied thereon in entering
into this Agreement. Each such representation and warranty is true and correct
on the date hereof and shall be true and correct on the Delivery Date and the
Merger Date, shall not be affected by any investigation conducted by
Shareholders, and shall survive for a period of eighteen months following the
Merger Date.
4.1 Corporate. NEI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. NEI has the requisite
power and authority to enter into this Agreement, to effectuate the Merger and
provide the Merger Consideration to Shareholders.
4.2 Authorization. This Agreement has been duly authorized, executed and
delivered by NEI and constitutes the legal, valid and binding obligation of NEI
enforceable in accordance with its terms.
4.3 Capital Stock of NEI. Prior to the Merger Date, the Certificate of
Incorporation of NEI will be amended to provide for not less than 41,000,000
shares of authorized capital stock, consisting of not less than 30,000,000
shares of Common Stock, par value $.01 per share, 1,000,000
19
shares of Class A Nonvoting Common Stock, par value $.01 per share, and
10,000,000 shares of "blank check" Preferred Stock, par value $.01 per share. On
the Merger Date, the authorized capital stock of NEI shall be free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind, with the exception of restrictions
against transfer of the nature described in Article XIII of this Agreement. All
of the issued and outstanding shares of capital stock of NEI have been duly
authorized and validly issued, are fully paid and nonassessable and were
offered, issued, sold and delivered by NEI in compliance with all applicable
federal and state securities laws.
4.4 Transactions in Capital Stock. Except as otherwise contemplated with
respect to: (a) the Other Agreements and any future acquisitions or mergers
which may be conducted by NEI or its subsidiaries or Affiliates; (b) the
overallotment option to be granted to the Underwriters in connection with the
IPO; (c) the conversion of shares of Class A Nonvoting Common Stock to Common
Stock to be effected prior to the effective date of the IPO; and (d) the
issuance of shares of Common Stock of NEI in connection with NEI's acquisition
of Xxxxxxx Electric Co., there are no options, warrants, calls, conversion
rights or commitments of any kind which obligate NEI to issue any of its
authorized but unissued capital stock. Except as contemplated in connection with
NEI's acquisition of Xxxxxxx Electric, Co., NEI has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its securities or any
interest therein nor any obligation to pay any dividend or make any distribution
in respect of any of its capital stock.
4.5 Financial Statements. The Financial Statements of NEI and its
subsidiaries to be included in the Registration Statement (the "NEI Financial
Statements") will have been prepared in accordance with GAAP and will present
fairly the financial position of NEI and its subsidiaries as of the dates
thereof and the results of operations of NEI and its subsidiaries for the
periods then ended.
4.6 Liabilities And Obligations. NEI has no material liabilities or
obligations of any kind, other than: (a) liabilities incurred in the ordinary
course of business; (b) the liabilities to be assumed under this Agreement and
the Other Agreements or in connection with other acquisitions or mergers
contemplated by NEI; (c) a revolving credit facility to be obtained by NEI; and
(d) the fees and expenses incurred or to be incurred in connection with the
transactions contemplated in this Agreement and the transactions described in
this Section 4.6.
4.7 Conformity With Law; Litigation. NEI is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental agency having jurisdiction over it and there are no claims,
actions, suits or proceedings pending or, to the best knowledge of NEI,
threatened against or affecting NEI at law or in equity or before or by any
federal, state, municipal or other governmental agency and no notice of any such
claim, action, suit or proceeding, whether pending or threatened, has been
received, other than any such matters to which the Company or any of the Other
Founding Companies may be subject. NEI has conducted its business in material
compliance with the requirements of applicable law and regulation.
20
Notwithstanding the foregoing, NEI makes no representation or warranty to the
Shareholders or the Company regarding any Other Founding Company.
4.8 No Violations.
4.8.1 NEI is not in violation of the NEI Charter Documents or any
lease, instrument, agreement, license or permit to which NEI is a party or
by which NEI or any of its assets are bound.
4.8.2 The execution and delivery of this Agreement by NEI do not
conflict with or result in a breach of any provision of, or constitute a
default under any of the terms or conditions of: (a) the NEI Charter
Documents; (b) any law, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable
to NEI or its assets; or (c) any other contract to which NEI is a party.
4.8.3 Except for: (a) the filings with the SEC pursuant to the 1933
Act in connection with the IPO and the acquisition or merger of the Other
Founding Companies; (b) the declaration of effectiveness of the
Registration Statement by the SEC and filings with various state blue sky
authorities; (c) the filings required to consummate the Merger; and (d) any
filings required under the Xxxx-Xxxxx Act in connection with the Merger or
the acquisition or merger of the Other Founding Companies, the NEI Plan of
Organization does not require notice to, registration or filing with or the
consent or approval of any governmental agency or other third party.
4.9 NEI Stock. At the time of issuance and delivery to the Shareholders,
the NEI Stock will constitute duly authorized and validly issued shares of NEI
Stock, fully paid and nonassessable, and with the exception of restrictions upon
resale set forth in Articles XII and XIII hereof, will be identical in all
respects (not including the form of certificate upon which it is printed or the
presence or absence of a CUSIP number on any such certificate) to any NEI Stock
issued and outstanding as of the date hereof. The NEI Stock shall at the time of
such issuance and delivery be free and clear of any liens, claims or
encumbrances, except as provided in Articles XII and XIII.
4.10 No Side Agreements. NEI has not entered into and will not enter into
any agreement with any of the Other Founding Companies or their shareholders,
other than the Other Agreements and the agreements described in the Registration
Statement, including the employment agreements, leases and Indemnification
Agreements referred to therein or entered into in connection with the
transactions contemplated thereby.
4.11 Disclosure. The Registration Statement and Prospectus will not as of
their respective dates contain an untrue statement of material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, that the
foregoing does not apply to any statements contained in or omitted from the
Registration Statement or Prospectus in reliance upon information furnished by
the Company or the
21
Shareholders or by the Other Founding Companies or their shareholders for
inclusion in the Registration Statement.
4.12 Other Agreements. The Other Agreements will have been duly authorized,
executed and delivered by NEI and will constitute the legal, valid and binding
obligations of NEI and its subsidiaries, enforceable against NEI and such
subsidiaries in accordance with their respective terms.
4.13 Registration Statement. The Registration Statement will comply as to
form in all material respects with the applicable requirements of the 1933 Act
and the regulations thereunder, provided that the foregoing does not apply to
any information that the Company or the Shareholders or the Other Founding
Companies or their shareholders have furnished to NEI specifically for inclusion
in the Registration Statement.
ARTICLE V
ACTIONS BY SHAREHOLDERS AND THE COMPANY PENDING THE MERGER DATE
From the date hereof through the Merger Date:
5.1 Access. Shareholders and the Company shall permit NEI and its
representatives and the Underwriters and their representatives to perform such
inspections, investigations and due diligence with respect to the Company, its
assets, business and financial condition, as NEI or the Underwriters deem
advisable. Shareholders and the Company shall provide NEI and its
representatives and the Underwriters and their representatives full access to
and an opportunity to inspect all properties, facilities, books, records,
accounts, contracts and documents of the Company, and shall make themselves,
their counsel and the officers of the Company available to NEI and the
Underwriters and otherwise cooperate with NEI's and the Underwriters' due
diligence investigations. Shareholders and the Company shall furnish NEI and its
representatives and the Underwriters and their representatives all information
with respect to the business and affairs of the Company as NEI or the
Underwriters reasonably request. Shareholders and the Company shall permit NEI
and the Underwriters to have access to other third parties, including
contractors, suppliers and bankers with which the Company does business, as
reasonably required for verification of any information obtained by NEI or the
Underwriters during their due diligence investigation, provided such
investigation is conducted only in the presence of representatives of the
Company and at times reasonably acceptable to the Company. Shareholders and the
Company shall permit NEI to conduct appraisals of the Company's equipment and/or
real estate at NEI's expense. NEI will coordinate such due diligence
investigations with Shareholders to avoid disruption or undue interference with
the operations of the Company. Shareholders shall deliver to NEI copies of all
environmental audits, risk assessments and other investigations performed with
respect to the Company or its assets at any time prior to the Merger Date.
Notwithstanding the foregoing, the representations and warranties in Article III
shall not be affected by any due diligence investigation conducted by NEI, the
22
Underwriters or their respective representatives. NEI will promptly advise the
Company and Shareholders if it learns of any facts which conflict with any of
the representations and warranties made by the Company and Shareholders herein.
5.2 Carry on in Ordinary Course. The Company shall carry on its business in
the ordinary course and substantially in the manner as heretofore conducted. The
Company shall not institute any methods of purchase, sale, bidding, management,
accounting or operation which are inconsistent with past practice or with
accepted standards in the industry without the prior written consent of NEI.
Except as provided in Section 2.13, the Company shall not enter into any
contract or commitment to purchase or sell any equipment, machinery, real
property, capital assets or other assets (other than inventory or as necessary
to perform contracts in the ordinary course) or engage in any transaction or
incur any indebtedness or obligations outside the ordinary course of business
without the prior written consent of NEI. The Company shall keep all performance
bonds and insurance policies in full force and effect.
5.3 General Increases Limited. Without the prior written consent of NEI or
as required under existing collective bargaining or employment agreements or to
meet commitments previously made and disclosed to NEI, and except as described
in SCHEDULE 5.3 attached hereto, the Company shall not: (a) increase or decrease
the compensation or benefits of its officers or employees; or (b) pay or commit
to pay any bonuses or commissions.
5.4 Preservation of Organization. Shareholders shall use their best efforts
to preserve the Company's business organization intact, to keep available to NEI
the present employees of the Company and to preserve for NEI the present
relationships of the Company with customers (including Material Customers),
contractors and suppliers (including Material Suppliers) and others doing
business with it. Except as provided in Section 2.13, the Company shall not
amend its Articles of Incorporation or Bylaws or make any changes in its
authorized or issued capital stock. The Company shall not issue to any
Shareholder or any other Person any shares of common stock or other securities
or grant to any Shareholder or other Person any right, option or warrant to
purchase any common stock or other securities of the Company or securities
convertible into the same.
5.5 No Default. The Company shall perform all obligations under and shall
not default under any Employment Agreement, Contract, commitment, obligation or
indebtedness.
5.6 Dividends. Except as provided in Section 2.13, the Company shall not
declare or pay any dividend or make any distribution, directly or indirectly, in
respect of the Company Stock, nor redeem any of the Company Stock, unless
consented to by NEI in writing.
5.7 Voting Trusts or Other Arrangements. Shareholders shall not enter into
any voting trust, voting agreement or other arrangement with respect to the
Company Stock or the election of directors of the Company.
23
5.8 Interim Financial and Borrowing Statements. Shareholders shall deliver
to NEI such interim balance sheets and operating statements and statements of
Company borrowings at such intervals as NEI reasonably requests.
5.9 Bids and Contracts. The Company shall provide NEI with a copy of all
bids submitted by and contracts awarded to or entered into by the Company
between the date of this Agreement and the Merger Date.
5.10 Cash Withdrawals. No cash shall be withdrawn from the accounts of the
Company or withheld from its revenues, except as required for: (a) the conduct
of the Company's business in the ordinary course; and (b) the payment of
obligations incurred in the ordinary course.
5.11 Environmental Audits. Shareholders and the Company shall, and shall
cause the Company's landlords to, permit NEI to conduct Phase I environmental
assessments of the Facilities at NEI's expense. If NEI reasonably determines
that a Phase II environmental assessment or any environmental remediation is
necessary or advisable with respect to any Facility, such assessment and/or
remediation shall be completed as soon as practicable at Shareholders' expense.
Notwithstanding the foregoing, in no event shall Shareholders' obligation to
remediate exceed an aggregate cost of $100,000. If the amount of any such
required remediation exceeds $100,000 in the aggregate, then the Company and
Shareholders shall have the right to terminate this Agreement by giving written
notice to NEI (in which event neither party shall have any further liability to
the other), unless NEI in its sole discretion elects to assume such excess
remediation costs.
5.12 No Transfer. Except as provided in Section 2.13, no Shareholder shall
transfer to any Person other than NEI any of the Company Stock, nor grant to any
Person or entity other than NEI any right, title or interest in or right or
option to acquire any Company Stock.
5.13 No Shop. None of the Shareholders, nor the Company, nor any agent,
officer, director, trustee or representative of any of the Shareholders or the
Company shall, during the period commencing on the date of this Agreement and
ending on the earlier to occur of the Merger Date or the termination of this
Agreement in accordance with its terms, directly or indirectly solicit or
initiate the submission of proposals or offers from any Person for, participate
in any discussions pertaining to, furnish any information to any Person other
than NEI or its authorized agents in connection with, or enter into any
transaction, agreement, understanding, arrangement or commitment in connection
with: (a) any sale or acquisition of all or a material amount of the Company
Stock or all or a material amount of the assets of, or any equity interest in,
the Company; or (b) any merger, consolidation, joint venture (except joint
ventures entered into in the ordinary course of business in connection with the
provision of electrical contracting services and disclosed in writing to NEI) or
business combination of the Company with any other entity.
5.14 Agreements. Shareholders and the Company shall terminate, on or prior
to the Merger Date: (a) any shareholder agreements, voting agreements, voting
trusts, options, warrants and Employment Agreements to which the Company is a
party or entered into with respect to the
24
Company; and (b) any listing agreement between the Company and any Shareholder,
provided that nothing herein shall prohibit the Company from paying (either
prior to or on the Merger Date) notes or other obligations from the Company to
the Shareholders in accordance with their terms, which terms have been disclosed
to and accepted by NEI.
5.15 Notification of Certain Matters. Shareholders and the Company shall
give prompt notice to NEI upon becoming aware of any Material Adverse Change,
any event or condition likely to have a Material Adverse Effect, or any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Shareholders contained herein
to be untrue or inaccurate in any material respect on or prior to the Merger
Date. NEI shall give prompt notice to Shareholders of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty of NEI contained herein to be untrue or inaccurate in any material
respect on or prior to the Merger Date.
5.16 Cooperation in Preparation of Registration Statement. The Company and
the Shareholders shall furnish or cause to be furnished to NEI and the
Underwriters all information concerning the Company and the Shareholders
required for inclusion in, and will cooperate with NEI and the Underwriters in
the preparation of, the Registration Statement and Prospectus (including audited
and unaudited historical and pro forma financial statements prepared in
accordance with GAAP, in form suitable for inclusion in the Registration
Statement). Shareholders shall execute and deliver such documents, including
questionnaires, representation certificates and lock-up agreement not
inconsistent with the provisions of this Agreement, deemed advisable by NEI or
the Underwriters in connection with the IPO. The disclosure of information with
respect to the Company and the Shareholders in the Registration Statement and in
the conduct of the IPO shall not constitute a violation of any confidentiality
agreement, including Section 11.2 of this Agreement, among the parties hereto.
All information and disclosures provided by Shareholders or the Company in
accordance with this Section 5.16 shall be subject to the provisions of Sections
3.23, 3.24 and 3.26 hereof. The Company and the Shareholders agree promptly to
advise NEI if at any time during the period in which a prospectus relating to
the IPO is required to be delivered under the 1933 Act, they discover that any
information contained in the Prospectus concerning the Company or the
Shareholders becomes inaccurate or incomplete in any material respect, and to
provide the information needed to correct any such inaccuracy.
5.17 Authorized Capital. Prior to the Merger Date, NEI shall maintain its
authorized capital stock as set forth in the Registration Statement, except for
stock splits, changes made in response to comments made by the SEC or
requirements of any exchange or automated trading system for which application
is made to list the NEI Stock.
5.18 Compliance With The Xxxx-Xxxxx Act. If NEI determines that any filings
under the Xxxx-Xxxxx Act are required in connection with this Agreement or any
Other Agreements, then: (a) each party agrees to cooperate and use its best
efforts to comply with the Xxxx-Xxxxx Act; (b) such compliance by the
Shareholders and the Company shall be deemed a condition precedent to NEI's
obligations under this Agreement; and (c) the parties agree to cooperate and use
their best efforts to
25
cause all filings required under the Xxxx-Xxxxx Act to be made. If filings under
the Xxxx-Xxxxx Act are required, the cost thereof (including filing fees) shall
be paid by NEI. The obligation of each party to consummate the transactions
contemplated by this Agreement is subject to the expiration or termination of
the waiting period under the Xxxx-Xxxxx Act, if applicable.
ARTICLE VI
CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the
Merger Date shall be subject to the satisfaction prior to or on the Merger Date
of the following conditions, unless waived in writing by Shareholders:
6.1 Representations and Warranties True. The representations and
warranties of NEI in this Agreement shall be true and correct on and as of the
Merger Date with the same effect as though such representations and warranties
had been given on the Merger Date, and Shareholders shall receive a certificate
from an officer of NEI to that effect.
6.2 Compliance with Agreement. NEI shall have complied with its
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Merger Date, and Shareholders shall receive a certificate
from an officer of NEI to that effect.
6.3 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain the
Merger or the IPO.
6.4 Employment Agreements. Xxx Xxxxxxxxx and Xxxxx Xxxxxxxxx shall each
have entered into a mutually acceptable Employment Agreement with NEI or its
Affiliate providing for $150,000 in base salary plus a cash bonus (payable
quarterly and reconciled annually) in an amount equal to 6% of the annual pre-
Tax income of the Xxxxxxxxx Division of NEI (which for purposes of such
Employment Agreements will include the pre-Tax income of the former Eagle
Electric Company, Inc.), or, at the election of the employee, $170,000 in base
salary plus a bonus equal to 5% of such net income. In addition, NEI or its
Affiliate shall have entered into Employment Agreements with Xxxxx Xxxxxxxxx and
Xxxxx Xxxxxx.
6.5 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
6.6 Real Estate Leases. NEI or its Affiliate shall have entered into
leases (the "Leases") with the Shareholders for the real property located at
0000 Xxxxxx Xxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx, 0000 Xxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxx, and 00000 Xxxxx Xxxxx, Xxxx Xxx, Xxxx. The Leases shall be triple net
leases providing for a monthly aggregate rental of $15,000, shall be for a term
of seven years and shall otherwise be on such terms and conditions as agreed to
by the parties.
26
6.7 Consents. The Company shall have obtained all consents from third
parties required to consummate the Merger.
6.8 Opinion of Counsel. Shareholders shall have received from NEI's
counsel a written "authority opinion," dated as of the Closing Date,
satisfactory in form and substance to Shareholders and their counsel.
6.9 Xxxx-Xxxxx Act. If a filing is required under the Xxxx-Xxxxx Act to
effectuate the Merger, such filing shall have been made and the expiration or
termination of the waiting period under the Xxxx-Xxxxx Act shall have occurred.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF NEI
Each and every obligation of NEI to be performed on the Merger Date
shall be subject to the satisfaction prior to or on the Merger Date of the
following conditions, unless waived in writing by NEI:
7.1 Representations and Warranties True. The representations and
warranties of Shareholders and the Company in this Agreement shall be true and
correct on and as of the Merger Date with the same effect as though such
representations and warranties had been given on the Merger Date, and NEI shall
receive certificates from the Shareholders to that effect.
7.2 Compliance with Agreement. Shareholders and the Company shall have
complied with all of their obligations under this Agreement which are to be
performed or complied with by them prior to or on the Merger Date, and NEI shall
receive certificates from the Shareholders to that effect.
7.3 Execution and Deliverables. Each of the Shareholders and the Company
shall have executed a counterpart of this Agreement and all Deliverables shall
have been delivered to NEI.
7.4 Corporate Documents. Shareholders shall have delivered to NEI: (a)
certified copies of the Articles of Incorporation and Bylaws of the Company; and
(b) certificates from the proper state officials evidencing the good standing of
the Company in the State of Incorporation and all other states in which the
Company is qualified to do business.
7.5 Due Diligence. NEI shall be satisfied with the results of its due
diligence investigation, including but not limited to the following matters:
27
7.5.1 NEI shall have completed and shall be satisfied with the
results of the inspections, investigations and due diligence referred to in
Section 5.1, including but not limited to: (a) verification of the quality,
quantity and valuation of the Company's assets and liabilities; (b)
verification of Shareholders' factual representations regarding the
Company's business operations; (c) verification of the Company's historical
and expected operating performance, as reflected in the Financial
Statements and other information provided to NEI; and (d) approval of the
Financial Statements.
7.5.2 NEI shall have reviewed and approved all labor contracts
relating to the Company and shall be satisfied with the Company's labor
relations.
7.5.3 NEI shall be satisfied that the Company has clear and
marketable title to its assets.
7.5.4 NEI shall be satisfied that the transaction contemplated by
this Agreement will not cause a breach or termination of any Contract
materially beneficial to the Company's business or operations.
7.5.5 NEI shall have completed and shall be satisfied with the
results of the Phase I environmental assessments and any Phase II
environmental assessments contemplated in Section 5.11.
7.6 Employment Agreements. NEI or its Affiliate shall have entered into
Employment Agreements acceptable to NEI with Xxx Xxxxxxxxx and Xxxxx Xxxxxxxxx
in accordance with the terms recited in Section 6.4 and Employment Agreements
acceptable to NEI with Xxxxx Xxxxxxxxx and Xxxxx Xxxxxx, and shall have made
such other arrangements with respect to the Company's key employees as NEI deems
advisable.
7.7 No Material Adverse Change. There shall not have been any Material
Adverse Change from the Balance Sheet Date to the Merger Date, nor any event or
condition which NEI believes is likely to have a Material Adverse Effect.
7.8 Opinion of Counsel for Shareholders. NEI shall have received from
Shareholders' counsel a written opinion, dated as of the Merger Date, addressed
to NEI and satisfactory to counsel for NEI in form and substance.
7.9 Resignations. All directors of the Company shall have delivered their
written resignations to NEI.
7.10 Board and Shareholder Approval. The Merger shall have been approved
by the Board of Directors of the Company and the Requisite Shareholder Approval
shall have been obtained.
28
7.11 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain or
prohibit the Merger or the IPO.
7.12 Shareholders' Release. The Shareholders shall have delivered to NEI
an instrument dated the Merger Date releasing the Company and NEI from: (a) any
and all claims of the Shareholders against the Company and NEI; and (b)
obligations of the Company and NEI to the Shareholders, except for: (i)
continuing obligations to any Shareholders relating to their employment; and
(ii) obligations arising under this Agreement or the transactions contemplated
hereby.
7.13 Termination of Related Party Agreements. Except as set forth in
SCHEDULE 7.13, all existing agreements between the Company and the Shareholders
or their Affiliates shall have been terminated on or before the Merger Date.
7.14 Other Founding Companies. NEI shall have entered into the Other
Agreements with the Other Founding Companies and closing shall have occurred
thereunder, with closing of this Agreement and the Other Agreements deemed to
have occurred simultaneously.
7.15 FIRPTA Certificate. If requested by NEI in connection with any real
property lease to which any of the Shareholders and the Company, NEI or
Subsidiary will be parties, each Shareholder shall have delivered to NEI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
7.16 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
7.17 Leases. The Shareholders and NEI shall have entered into the Leases
in accordance with the terms recited in Section 6.6.
7.18 Consents. The Company shall have obtained all consents from third
parties required to consummate the Merger.
7.19 Xxxx-Xxxxx Act. If a filing is required under the Xxxx-Xxxxx Act to
effectuate the Merger, such filing shall have been made and the expiration or
termination of the waiting period under the Xxxx-Xxxxx Act shall have occurred.
29
ARTICLE VIII
COVENANTS
8.1 Release From Guarantees; Repayment of Certain Obligations. NEI shall
use reasonable efforts to have the Shareholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on SCHEDULE 8.1. In the event NEI cannot obtain such releases from the lenders
of any such guaranteed indebtedness within 120 days following the Merger Date,
NEI shall promptly pay off or otherwise refinance or retire such indebtedness
such that the Shareholders' personal liability shall be released. NEI will
indemnify the Shareholders against any loss or damage suffered during such 120
day period as a result of such personal guarantees.
8.2 Preparation And Filing of Tax Returns. The Company, if possible, or
otherwise the Shareholders shall file or cause to be filed all federal, state
and local income Tax Returns for the Company for all taxable periods ending
prior to the Merger Date, and shall permit NEI to review such Tax Returns prior
to filing. The Company shall pay all Taxes due and payable on or prior to the
Merger Date and shall adequately accrue for all Taxes due after the Merger Date
but based on periods occurring prior to the Merger Date.
8.3 Further Assurances.
8.3.1 Shareholders will use their best efforts to: (a) obtain any
consents by third parties or governmental authorities required or deemed
desirable by NEI in connection with the consummation of the Merger; (b)
fulfill or cause to be fulfilled each of the conditions precedent to NEI's
obligations recited in Article VII hereof on or prior to the Merger Date;
and (c) perform each of the acts and observe each of the covenants required
to be performed or observed by Shareholders and the Company at or prior to
the Merger Date.
8.3.2 Shareholders and the Company shall execute and deliver or cause
to be executed and delivered such further instruments and take such other
action as NEI deems necessary or desirable to more effectively carry out
the Merger.
8.3.3 NEI shall execute and deliver or cause to be executed and
delivered such further instruments and take such other action as
Shareholders deem necessary or desirable to more effectively carry out the
Merger.
ARTICLE IX
INDEMNIFICATION
30
9.1 Indemnification by The Shareholders. Shareholders jointly and
severally agree to indemnify and hold NEI and its officers, directors and
representatives harmless from any and all loss, cost, claim, damage, fine,
penalty, expense (including reasonable attorneys' fees), liability and cause of
action (to the extent not covered by insurance paid to or collected by NEI)
arising from: (a) any breach of the representations and warranties of
Shareholders or the Company contained herein or in any Schedules, certificates,
questionnaires or other instruments delivered in connection herewith; (b) any
breach of this Agreement by Shareholders or the Company; (c) any liability under
the 1933 Act, the 1934 Act or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of material fact relating to the Company or the
Shareholders which was based upon information provided to NEI or its counsel or
the Underwriters by the Company or the Shareholders and contained in the
Registration Statement or Prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company or the Shareholders required to be stated therein or necessary to make
the statements therein not misleading; provided, that such indemnity shall not
inure to the benefit of NEI to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the Shareholders provided written corrected
information to NEI for inclusion in the final Prospectus and such information
was not so included, and provided further, that no Shareholder shall be liable
for any indemnification pursuant to this Section 9.1(c) to the extent solely
attributable to a breach of any representation, warranty or agreement made by
any other Shareholder; (d) any default by the Company under any performance bond
occurring prior to the Merger Date; (e) any liability or obligation of the
Company which is not disclosed in the Balance Sheet or is not incurred in the
ordinary course of business from the Balance Sheet Date to the Merger Date; (f)
any violation by the Company of any federal, state or local law, regulation or
ordinance (including but not limited to Environmental Laws or laws governing the
employment of labor or employee safety and health) occurring prior to the Merger
Date; (g) any breach of any Employment Agreement or Contract or the terms of any
Permit occurring prior to the Merger Date; (h) any litigation or claim arising
from the conduct of the Company's business prior to the Merger Date and not
disclosed in SCHEDULE 3.12.1; (i) any uninsured workers' compensation claims or
liabilities arising prior to the Merger Date and not disclosed in SCHEDULE
3.12.2; or (j) subject to Section 3.17, any federal, state or local audit of the
Tax Returns of the Company for the tax year in which the Merger Date occurs or
any prior tax year and any additional Taxes which the Company or NEI is required
to pay in connection with any such audit or any resulting adjustment in the Tax
liability of the Company or NEI. Any liability of Shareholders under Section
9.1(j) shall be reduced by the net present value (computed at an annual
capitalization rate of 10%) of any corresponding Tax deduction which may
properly be taken by NEI as a result of any such adjustment.
9.2 Indemnification by NEI. NEI agrees to indemnify and hold the
Shareholders harmless from any loss, cost, claim, damage, fine, penalty, expense
(including reasonable attorneys' fees), liability and cause of action arising
from: (a) any breach by NEI of its representations and warranties contained
herein or in any Schedules or certificates furnished by NEI; (b) any breach by
NEI of this Agreement; or (c) any liability under the 1933 Act, the 1934 Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement
31
or alleged untrue statement of material fact relating to NEI or any of the Other
Founding Companies contained in any preliminary prospectus, the Registration
Statement or Prospectus or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to NEI or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, except to the extent such statement or
omission relates to the Company or the Shareholders.
9.3 Procedure. If any party entitled to indemnification hereunder (whether
individually or collectively, the "Indemnified Party") receives notice of any
claim or the commencement of any action or proceeding with respect to which any
other party (whether individually or collectively, the "Indemnifying Party") is
obligated to indemnify pursuant to Section 9.1 or 9.2, the Indemnified Party
shall promptly give the Indemnifying Party written notice thereof. Such notice
shall describe the claim in reasonable detail and shall indicate the amount
(estimated if necessary) of the loss that has been or may be sustained by the
Indemnified Party in connection therewith. The Indemnifying Party may elect to
compromise or defend, at the Indemnifying Party's own expense and by the
Indemnifying Party's own counsel, any such matter involving the asserted
liability of the Indemnified Party. If the Indemnifying Party elects to
compromise or defend such asserted liability, the Indemnifying Party shall
within 30 days (or sooner, if the nature of the asserted liability so requires)
notify the Indemnified Party of its intent to do so, and the Indemnified Party
shall cooperate, at the expense of the Indemnifying Party, in the compromise of,
or defense against, any such asserted liability. If: (a) the Indemnifying Party
does not elect to compromise or defend against the asserted liability; (b) the
Indemnified Party reasonably determines that the Indemnifying Party's counsel
has a conflict of interest with the Indemnified Party or that the Indemnifying
Party or its counsel is not diligently defending the claim; or (c) the
Indemnifying Party fails to notify the Indemnified Party of its election to
compromise or defend such asserted liability as provided herein, then the
Indemnified Party may, if acting in accordance with its good faith business
judgment, pay, compromise or defend such asserted liability at the Indemnifying
Party's expense, and such settlement shall be binding on the Indemnifying Party
for purposes of this Article IX. Notwithstanding the foregoing, neither the
Indemnifying Party nor the Indemnified Party may settle or compromise any claim
over the reasonable good faith objection of the other; provided, however, that
if the Indemnifying Party can demonstrate that it is able to settle a matter for
a specific sum and the Indemnified Party objects to such settlement, then the
Indemnifying Party's liability in connection with such matter shall not exceed
the amount of the proposed settlement plus the defense and negotiation costs
incurred by the Indemnified Party in connection therewith. In any event, the
Indemnified Party and the Indemnifying Party may each participate, at its own
expense, in the defense against the claim. If the Indemnifying Party chooses to
defend any claim, the Indemnified Party shall make available to the Indemnifying
Party any books, records or other documents within its control that are
necessary or appropriate for such defense.
9.4 Exclusive Remedy. The indemnification provided for in this Article IX
shall (except as provided in Articles XI and XIV or as prohibited by ERISA) be
the exclusive remedy in any action seeking damages or any other form of monetary
relief brought by any party to this Agreement against another party. Any
indemnity payment under this Article IX shall be treated as an adjustment to the
32
exchange consideration for tax purposes unless a final determination (which
shall include the execution of a Form 870-AD or successor form) with respect to
the Indemnified Party or its Affiliates causes any such payment not to be
treated as an adjustment to the exchange consideration for federal income Tax
purposes.
9.5 Limitations on Indemnification. Notwithstanding the foregoing
provisions of this Article IX:
9.5.1 NEI shall not assert any claim for indemnification against any
of the Shareholders unless the aggregate of all claims which NEI may have
against the Shareholders exceeds $50,000. The Company and the Shareholders
shall not assert any claim for indemnification against NEI unless the
aggregate of all claims which the Company and the Shareholders may have
against NEI exceeds $50,000.
9.5.2 No Shareholder shall be liable under this Article IX for any
amount which exceeds the value, established in accordance with this
Agreement, of the cash and NEI Stock received by such Shareholder
hereunder.
9.5.3 Except as provided in Section 9.1(j), no Shareholder shall be
liable under this Article IX for any claim arising more than 18 months
after the Merger Date. Shareholders' obligations under Section 9.1(j) shall
survive for the applicable Tax statute of limitations period.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the
Merger Date, but only:
10.1.1 By the mutual written consent of NEI and the Shareholders
10.1.2 By the Shareholders and the Company on the one hand, or by NEI
on the other hand, if the Registration Statement shall not have been
declared effective by the SEC by December 31, 1998.
10.1.3 By the Shareholders and the Company if the applicable
conditions set forth in Article VI hereof have not been satisfied or waived
as of the Merger Date
10.1.4 By NEI if the applicable conditions set forth in Article VII
hereof have not been satisfied or waived as of the Merger Date
33
10.1.5 By NEI if NEI, in its sole discretion, elects to terminate the
underwriting agreement with respect to the IPO or if NEI, in its sole
discretion, elects not to proceed with the IPO or the NEI Plan of
Organization.
10.2 Liabilities in Event of Termination. Neither NEI nor the Company and
the Shareholders shall have any liability to the other for any legal, accounting
or other fees or expenses incurred by any them in the event of any termination
of this Agreement.
ARTICLE XI
NONCOMPETITION AND NONDISCLOSURE
11.1 Noncompete Covenant. Each Shareholder agrees that for a term
commencing on the Merger Date and ending upon expiration of the period set forth
opposite such Shareholder's name in SCHEDULE 11.1 hereto, he or she shall not,
directly or indirectly: (a) own or have any interest in, or be an officer,
director, partner, joint venturer, employee, agent, representative or consultant
of, or in any way assist, any corporation, partnership, limited liability
company or other entity engaged in the commercial or industrial electrical
contracting business anywhere in the United States of America (provided, the
foregoing shall not prohibit the ownership of less than 5% of any publicly-
traded entity); (b) divert or attempt to divert any customers or contractors of
NEI or its subsidiaries; or (c) entice or induce any employee or officer of NEI
or its subsidiaries to leave such service for the purpose of engaging in a
competing commercial or industrial electrical contracting business. Shareholders
acknowledge the foregoing covenants are reasonable in scope and duration and are
a material inducement for NEI to participate in this Agreement. Notwithstanding
the foregoing, if a court of competent jurisdiction determines that the scope or
duration of any such covenants are unreasonable and unenforceable in any
respect, such covenants shall automatically be modified to the extent such court
deems reasonable and enforceable under the circumstances and, as so modified,
such covenants shall remain in full force and effect.
11.2 Confidential Information.
11.2.1 Shareholders jointly and severally agree that they shall not
disclose to any Person (other than NEI and its representatives and the
Underwriters and their representatives) nor use for any purpose (other than
in connection with the IPO or the conduct of the Company's business prior
to the Merger Date) any confidential information, trade secrets, customer
lists, price lists, bids, technical know-how or other confidential or
proprietary information of or with respect to the Company, whether or not
marked or specifically identified as confidential.
11.2.2 If the Merger is not consummated or if this Agreement is
terminated for any reason, NEI shall not disclose to any Person nor use for
any purpose (other than in connection with any action brought under this
Agreement or pursuant to any subpoena or
34
order of a court or administrative agency) any confidential information,
trade secrets, customer lists, price lists, bids, technical know-how or
other confidential or proprietary information of or with respect to the
Company, whether or not marked or specifically identified as confidential.
If the Merger is not consummated, or if this Agreement is terminated for
any reason, NEI shall promptly return to the Company all information which
it has received from the Company or its Shareholders and will seek to cause
others to whom such information was provided by NEI, or at NEI's request,
to return all such information.
11.3 Enforcement.
11.3.1 Shareholders acknowledge that any breach of the covenants in
Section 11.1 or 11.2.1 would cause irreparable injury to NEI which would
not be fully compensable in damages. Accordingly, NEI may enforce any
breach of such covenants by obtaining injunctive or specific relief from a
court of competent jurisdiction, without the necessity of posting bond or
proving lack of an adequate remedy at law.
11.3.2 NEI acknowledges that any breach of the covenants in Section
11.2.2 would cause irreparable injury to the Company which would not be
fully compensable in damages. Accordingly, the Company may enforce any
breach of such covenants by obtaining injunctive or specific relief from a
court of competent jurisdiction, without the necessity of posting bond or
proving lack of an adequate remedy at law.
11.3.3 The remedies specified in this Section 11.3 shall be
cumulative and not exclusive of other remedies available at law or in
equity.
ARTICLE XII
TRANSFER RESTRICTIONS
Unless otherwise agreed by NEI, except for transfers to immediate
family members of Shareholders who agree to be bound by the restrictions in this
Article XII (or trusts for the benefit of the Shareholders or such family
members), for a period of one year from the Merger Date, except pursuant to
Article XIV hereof, none of the Shareholders shall sell, assign, exchange,
transfer or otherwise dispose of any shares of NEI Stock received by them
pursuant to the Merger. The certificates evidencing the NEI Stock will bear a
legend substantially in the form set forth below and containing such other
information as NEI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN CONSENT OF
THE ISSUER, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION OR OTHER DISPOSITION PRIOR TO
THE FIRST ANNIVERSARY OF THE
35
DATE HEREOF. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH
THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
ARTICLE XIII
FEDERAL SECURITIES ACT REPRESENTATIONS
13.1 Compliance with Law. Shareholders acknowledge that the shares of NEI
Stock to be delivered to the Shareholders pursuant to this Agreement have not
been and will not be registered under the 1933 Act (except as provided in
Article XIV) and may not be resold without compliance with the 1933 Act and
regulations thereunder. The NEI Stock is being acquired by the Shareholders
solely for their own respective accounts, for investment purposes only, and with
no present intention of distributing, selling or otherwise disposing of such
stock in connection with a distribution. The Shareholders represent and agree
that none of the shares of NEI Stock issued to them will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except in
full compliance with all applicable provisions of the 1933 Act and the rules and
regulations of the SEC. The NEI Stock shall bear the following legend in
addition to the legend required under Article XII:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THE FEDERAL AND APPLICABLE STATE SECURITIES LAWS OR
THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH LAWS.
13.2 Economic Risk; Sophistication. The Shareholders represent that they
are able to bear the economic risk of an investment in the NEI Stock and can
afford to sustain a total loss of such investment. Each Shareholder has
substantial knowledge and experience in making investment decisions of this type
(or is relying on qualified purchaser representatives with such knowledge and
experience) and is capable, either individually or together with such purchaser
representatives, of evaluating the merits and risks of this investment. The
Shareholders have had an adequate opportunity to ask questions and receive
answers from the officers of NEI concerning the transaction contemplated hereby.
Each Shareholder represents that he or she is an "accredited investor" as
defined in Rule 501(a) under the 1933 Act, or if not an accredited investor,
such Shareholder has sufficient income and net worth to withstand the risks of
the investment contemplated hereby and, individually or together with his or her
purchaser representatives, is sufficiently sophisticated to evaluate the merits
and risks of such investment. The Shareholders acknowledge that the risks of
this transaction include tax risks and the Shareholders have consulted with
their tax advisors with respect to and fully accept such risks.
36
ARTICLE XIV
REGISTRATION RIGHTS
14.1 Piggyback Registration Rights. At any time following the Merger Date,
whenever NEI proposes to register any NEI Stock for its own or others' account
under the 1933 Act for a public offering, other than: (a) any shelf or other
registration of shares to be used as consideration for acquisitions of
additional businesses by NEI; or (b) registrations relating to employee benefit
plans, NEI shall give each Shareholder written notice of its intent to do so.
Upon the written request of any Shareholder given within 10 days after receipt
of such notice, NEI shall cause to be included in such registration all of the
NEI Stock issued to such Shareholder pursuant to this Agreement which any such
Shareholder requests, other than shares of NEI Stock which may then be sold
under Rule 144(k) (or any similar or successor provision) under the 1933 Act,
and other than shares of NEI Stock that have been theretofore sold by the
Shareholder in accordance with the 1933 Act, provided that NEI shall have the
right to reduce pro rata the number of shares of each Selling Shareholder
included in such registration to the extent that inclusion of such shares could,
in the written opinion of tax counsel to NEI or its independent auditors,
jeopardize the tax status of the transactions contemplated hereby and by the
Registration Statement. In addition, if NEI is advised in writing in good faith
by any managing underwriter of an underwritten offering of securities pursuant
to a registration statement under this Section 14.1 that the number of shares to
be sold by persons other than NEI is greater than the number of such shares
which may be offered without adversely affecting the success of the offering,
NEI may reduce pro rata (among the Shareholders and all other selling security
holders in the offering) the number of shares offered for the accounts of such
persons to a number deemed satisfactory by the managing underwriter. If any
Shareholder disapproves of the terms of the underwriting, that Shareholder may
elect to withdraw therefrom by written notice to NEI and the managing
underwriter. That Shareholder's shares of NEI Stock so withdrawn shall also be
withdrawn from registration; provided, that, if by the withdrawal of such shares
a greater number of shares of NEI Stock held by other Shareholders may be
included in such registration, then NEI shall offer to all other Shareholders
the right to include additional shares in the same proportion used in effecting
the above limitations.
14.2 Registration Procedures. Whenever NEI is required to register shares
of NEI Stock pursuant to Section 14.1, NEI will, as expeditiously as possible:
14.2.1 Prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, NEI will
furnish a representative of the Shareholders with copies of such documents
proposed to be filed) as promptly as practicable.
14.2.2 Notify the Shareholders of any stop order issued or threatened
by the SEC and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
37
14.2.3 Prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period of not less than 120 days, cause the prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 474 under the 1933 Act; and comply with the provisions of
the 1933 Act applicable to it with respect to the disposition of all
securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in the registration statement or prospectus, as
amended or supplemented.
14.2.4 Furnish to each Shareholder who so requests such number of
copies of such registration statement, each supplement thereto and the
prospectus included therein (including each preliminary prospectus and any
term sheet associated therewith), and such other documents as such
Shareholder may reasonably request in order to facilitate the disposition
of the shares.
14.2.5 If requested by the managing underwriter or underwriters, if
any, or any participating Shareholder, promptly incorporate in a prospectus
supplement or post-effective amendment or term sheet such information as
the managing underwriter or underwriters or any participating Shareholder,
as the case may be, reasonably requests to be included therein, including,
without limitation, information with respect to the number of shares of NEI
Stock being sold by participating Shareholders to any underwriter or
underwriters, the purchase price being paid therefor and the terms of the
offering, and promptly make all required filings of the same by prospectus
supplement or post-effective amendment.
14.2.6 Make available for inspection by participating Shareholders,
any underwriter participating in any disposition pursuant to such
registration statement, counsel retained by the participating Shareholders,
counsel for the underwriters and any accountant or other agent retained by
participating Shareholders or any underwriter (collectively, the
"Inspectors"), all financial and other records and pertinent corporate
documents of NEI (the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause NEI's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which NEI determines, in good faith, to
be confidential and which NEI notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless: (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
registration statement; or (b) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or administrative agency after delivery of sufficient notice
to NEI to enable NEI to contest such subpoena or order.
14.2.7 Take all other steps reasonably necessary to effect the
registration of the shares of NEI Stock contemplated hereby.
38
14.2.8 Use best efforts to register the securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Shareholders, and to
keep such registration or qualification effective during the period such
registration statement is required to be kept effective, provided that NEI
shall not be required to become subject to taxation, to qualify generally
to do business or to file a general consent to service of process in any
such states or jurisdictions.
14.2.9 Cause all such shares of NEI Stock to be listed or included
not later than the date of the first sale of such shares under the
registration statement on any securities exchange or trading system on
which similar securities issued by NEI are then listed or included.
14.2.10 Notify each Shareholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within the
period that NEI is required to keep the registration statement effective of
the happening of any event as a result of which the prospectus included in
such registration statement (as then in effect), together with any
associated term sheet, contains an untrue statement of material fact or
omits to state any fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made) not misleading, and, at the request of such Shareholder, NEI will
promptly prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the covered shares, such
prospectus will not contain an untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made) not misleading.
All expenses incurred in connection with a registration under this Article
XIV and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printing and
accounting fees and expenses, but excluding underwriting commissions and
discounts attributable to the shares being registered hereunder), shall be borne
by NEI.
14.3 Indemnification.
14.3.1 In connection with any registration under Section 14.1, NEI
shall indemnify, to the extent permitted by law, each selling Shareholder
(each, an "Indemnified Party") against any and all loss, cost, claim,
damage, expense (including reasonable attorneys' fees), liability and cause
of action arising out of or resulting from any untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in or
omitted from any information furnished in writing to NEI by such
Indemnified Party expressly for use therein,
39
or by any Indemnified Party's failure to deliver a copy of the registration
statement or prospectus or any amendment or supplement thereto after NEI
has furnished such Indemnified Party with a sufficient number of copies of
the same.
14.3.2 In connection with any registration under Section 14.1, each
selling Shareholder shall furnish to NEI in writing such information
concerning such Shareholder and his or her proposed offering of shares as
is reasonably requested by NEI for use in any such registration statement
or prospectus and will indemnify, to the extent permitted by law, NEI, its
directors, officers and representatives and each Person who controls NEI
(within the meaning of the 0000 Xxx) against any and all loss, cost, claim,
damage, expense (including reasonable attorneys' fees), liability and cause
of action resulting from any untrue or alleged untrue statement of material
fact or any omission or alleged omission to state therein a material fact
required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent such untrue or alleged
untrue statement or omission or alleged omission is contained in or omitted
from information so furnished in writing to NEI by such Shareholder
expressly for use in the registration statement. Notwithstanding the
foregoing, the liability of a Shareholder under this Section 14.3.2 shall
be limited to an amount equal to the net proceeds actually received by such
Shareholder from the sale of the relevant shares covered by the
registration statement.
14.3.3 The indemnification provided hereunder shall be governed by
the procedures recited in Section 9.3.
14.4 Underwriting Agreement. In connection with each registration pursuant
to Section 14.1 covering an underwritten registered offering, NEI and each
participating Shareholder agrees to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement for companies of
NEI's size and investment stature, including indemnification; provided, the
Shareholders shall be exempt from any indemnification of the managing
underwriters other than with respect to information provided by the respective
Shareholders to NEI or the managing underwriters specifically for inclusion in
the registration statement.
14.5 Transfer of Rights. The right to cause NEI to register shares of NEI
Stock under this Agreement may be assigned by any Shareholder, but only to a
member of such Shareholder's immediate family or a trust or partnership for the
benefit of the Shareholder or such family members.
14.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of NEI Stock
to the public without registration, NEI agrees to use its reasonable efforts to:
40
14.6.1 Make current public information regarding NEI available as
contemplated in Rule 144 under the 1933 Act for a period of five years
beginning 90 days following the effective date of the Registration
Statement.
14.6.2 File with the SEC on a timely basis all reports and other
documents required of NEI under the 1934 Act at any time after it has
become subject to such reporting requirements.
14.6.3 So long as a Shareholder owns any restricted NEI Stock,
furnish to each Shareholder upon written request a written statement by NEI
as to its compliance with the current public information requirements of
Rule 144 (at any time from and after 90 days following the effective date
of the Registration Statement), and of the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of NEI, and such other reports and documents so
filed as the Shareholder may reasonably request in availing itself of any
rule or regulation of the SEC allowing such Shareholder to sell any such
shares without registration.
ARTICLE XV
MISCELLANEOUS
15.1 Assignment. This Agreement shall not be assigned by any party without
the prior written consent of the other parties. Any attempted assignment without
such written consent shall be null and void and without legal effect.
15.2 Governing Law. With the exception of those provisions of the DGCL
applicable to the Merger, this Agreement shall be governed by and construed in
accordance with the substantive laws of the state of Missouri, without reference
to conflicts of laws rules.
15.3 Notices. All notices or other communications required or permitted
hereunder shall be in writing and may be hand delivered or sent by certified
mail, commercial overnight delivery service or facsimile transmission:
If to Shareholders: Mr. Xxxxxx Xxxxxxxxx
Mr. Xxxxx Xxxxxxxxx
Xxxxxxxxx Electric Company, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
FAX: (000) 000-0000
with a copy to: Xxxxxxxxxx Xxxx & XxXxxxxx PLLC
0000 Xxxxxxxx Xxxx Xxxxx
00
Xxxxxxxxxx, Xxxxxxxx 00000
FAX: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx
If to NEI: Nationwide Electric, Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
FAX: (000) 000-0000
Attn: President
with a copy to: Xxxxxxx, Mag & Fizzell, P.C.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
FAX: (000) 000-0000
Attn: Xxxx Xxxxx
or to such other address or facsimile number as any party may provide the others
in writing. Notice shall be effective when received by the party to whom
addressed.
15.4 Entire Agreement. Together with the Schedules and Exhibits hereto and
the Articles of Merger, this constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified, altered or
amended except by written instrument executed by all parties hereto.
15.5 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
15.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which, taken together, shall
constitute a single instrument.
15.7 Headings. Headings in this Agreement are for convenience of reference
only and shall have no effect in the interpretation of this Agreement.
15.8 Expenses. Each party shall pay its own expenses in connection with the
Merger, whether or not the Merger is consummated. Without limitation, the fees
and expenses of Shareholders' legal, accounting and financial advisors and any
brokers and any transfer taxes payable on the exchange of the Company Stock
shall be paid by Shareholders.
15.9 Survival. Those provisions of this Agreement which by their nature are
intended to survive the Merger Date shall so survive for the period recited
therein, or if no time period is recited therein, shall survive indefinitely.
42
15.10 Costs. If any action or proceeding is brought for the enforcement or
interpretation of this Agreement or because of an alleged dispute, breach,
default or misrepresentation in connection with this Agreement, the successful
or prevailing party shall be entitled to recover reasonable attorneys' fees and
all other costs and expenses incurred in such action or proceeding, in addition
to any other relief to which it may be entitled.
15.11 Publicity. No public disclosure, announcement or publicity with
respect to the Merger, the IPO or the NEI Plan of Organization may be made
except by and with the prior approval of NEI. NEI shall coordinate with
Shareholders in making announcements of the Merger to the Company's customers,
suppliers and employees.
43
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
NATIONWIDE ELECTRIC, INC.
By:
________________________________________
"NEI"
XXXXXXXXX ELECTRIC COMPANY, INC.
By:
_________________________________________
The "Company"
SHAREHOLDERS:
--------------------------------------------
Xxxxxx Xxxxxxxxx
--------------------------------------------
Xxxxx Xxxxxxxxx
NATIONWIDE ELECTRIC, INC.--XXXXXXXXX ELECTRIC COMPANY, INC.
MERGER AGREEMENT SIGNATURE PAGE
SCHEDULE A
SHAREHOLDERS
Number of Shares
Name of Company Stock*
---- ----------------
Xxxxxx Xxxxxxxxx 1139
Xxxxx Xxxxxxxxx 1139
* Subject to the redemption referred to in Section 2.13
SCHEDULE 2.6
MERGER CONSIDERATION
TOTAL AGGREGATE MERGER CONSIDERATION $11,500,000
Cash /1/ /2/ $ 5,250,000
NEI Stock /3/ $ 6,250,000
--------------
/1/ In the event the consolidated book value of the Company as of March 31,
1998 (computed in accordance with GAAP, after reflecting the entries related to
consummation of the redemption transaction referred to in Section 2.13 (without
taking into account the Tax consequences thereof) and after deducting the
Company's investment in Eagle Electric Company, Inc. in the amount of $518,445)
is less than or greater than $6,577,305, the cash portion of the Merger
Consideration shall be decreased by the amount of such deficiency or increased
by the amount of such excess, as the case may be.
/2/ Subject to increase in accordance with the provisions of Section 2.15.
/3/ The actual number of shares of NEI Stock shall be based upon the initial
offering price determined at the Pricing, rounded up to the nearest whole share.
