SHARE PURCHASE AND EXCHANGE AGREEMENT MANCHESTER INC. NICE CARS OPERATIONS ACQUISITIONCO, INC. NICE CARS, INC. SHAREHOLDERS OF NICE CARS, INC.
NICE
CARS OPERATIONS ACQUISITIONCO, INC.
NICE
CARS, INC.
SHAREHOLDERS
OF NICE
CARS, INC.
THIS
SHARE PURCHASE AND EXCHANGE AGREEMENT (this "Agreement"), dated October 4,
2006,
is entered into by and between Manchester Inc., a Nevada corporation having
its
principal office at 000 Xxxxxxxx Xxxxx, 0xx
Xxxxx,
Xxxxxx, Xxxxx 00000 (the “Parent”), Nice
Cars
Operations AcquisitionCo, Inc.,
a
Delaware corporation and wholly owned subsidiary of the Parent (the “Company”),
Nice
Cars,
Inc.
(“NCI”) a Georgia Corporation having its principal office at 000 Xxxxxxxxxxx
Xxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 and the undersigned shareholders of
NCI
(each a “Shareholder,” and collectively, the “Shareholders”).
WITNESSETH
:
WHEREAS,
the Parent is the sole owner of all of the issued and outstanding shares of
the
capital stock of the Company;
WHEREAS,
the Company desires to acquire all of the issued and outstanding shares of
NCI
(the “NCI Shares”) from the Shareholders, and the Shareholders wish to sell the
NCI Shares;
WHEREAS,
an Affiliate of the Company (“NCCAC
Acquisition Co.”)
intends
to acquire all of the issued and outstanding shares of Nice
Cars
Capital Acceptance Corporation,
a
Georgia Corporation (“NCCAC”), simultaneously with the acquisition of the NCI
Shares;
WHEREAS,
the parties hereto intend,
by approving resolutions authorizing this Agreement, to adopt this Agreement
and
the Plan and Agreement of Merger of Foreign Corporation into Delaware
Corporation (the “Merger Agreement”), to be executed and filed as of even date
of the Closing (the “Closing Date”) as contemplated hereto, as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code
of 1986, as amended (the "Code"), and the regulations promulgated
thereunder;
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
_________________
Information
marked with the notation [ * ] has been omitted from the exhibits filed with
the
U.S. Securities and Exchange Commission (the “Commission”) pursuant to a request
for confidential treatment submitted to the Commission on the date of this
filing. A complete copy of these exhibits has been provided to the
Commission.
1. Share
Purchase and Exchange. Subject to the terms and conditions stated herein, at
the
Closing (as defined below), (a) the Shareholders shall assign, transfer, convey,
and deliver to the Company, and the Company shall accept and acquire,
the NCI Shares and any and all rights in such shares to which such Shareholder
is entitled, and by so doing, each Shareholder will be deemed to have assigned
all of his or her right, title and interest in and to all such NCI Shares to
the
Company; and (b) in exchange for the NCI Shares, the Company shall transfer
to
the Shareholders, and the Shareholders shall accept from the Company, (i)
618,750 shares of the Parent’s common stock (the “Exchange Shares”) on the date
of the Closing; and (ii) a payment of two million four hundred and seventy-five
thousand dollars ($2,475,000) by wire transfer to be made on the Closing Date
to
an account designated by the Shareholders. If one or more stock certificates
representing the NCI Shares have been issued, such conveyance of the NCI Shares
shall be evidenced by such stock certificate(s), duly endorsed to the Company
or
accompanied by stock powers duly executed to the order of the Company, or other
instruments of transfer in form and substance reasonably satisfactory to the
Company. As additional inducement to the Shareholders, the Parent and the
Company shall at Closing issue to the Shareholders the S Tax Reimbursement
Note
(as defined below) provided for in the NCCAC Agreement (as defined below) in
the
form attached to the NCCAC Agreement as Exhibit
B
as
described in Section 8(a) herein, and the Shareholder Note (the “Shareholder
Note”) provided for in the NCCAC Agreement in the form attached thereto as
Exhibit
C
with
respect to repayment of Shareholder loans to NCCAC and NCI outstanding as of
the
Closing Date.
2. Closing
and Deliveries.
2.1 The
Closing. The closing (the "Closing") of the transactions contemplated hereunder
shall take place simultaneously with the execution of this Agreement at such
place as the parties hereto may agree, provided, however, time is of the essence
and the Closing shall not be later than ten (10) days from the date of this
Agreement.
2.2 Employment
Agreements. Simultaneously with the Closing, the Company will enter into
employment agreements with those individuals listed on Exhibit
D
hereto,
substantially in the form of the employment agreements attached
hereto.
2.3 Payments
to the Xxxxx. At the Closing, the Company shall take such actions as are
necessary and proper to ensure that any and all amounts due and owed by NCI
pursuant to those notes executed with Xxxxxxx Xxxx and his spouse and three
children (the “Xxxxx”) and which are listed on Exhibit
E
hereto
shall be paid at Closing by the delivery of a promissory note by NCI to the
Xxxxx.
2.4 Release
of the Xxxxx. The Company shall promptly after Closing take such actions as
are
necessary and proper to ensure that the Xxxxx shall be released from those
personal guaranties or other obligations ("Personal Obligations") relating
to
NCI that such individuals may have and which are listed on Exhibit
F
provided, however, that no duplicate payments shall be made in respect of any
Personal Obligations agreed to be paid under the acquisition of NCCAC as of
even
date herewith. In the event the Company is unable to obtain the release of
the
Xxxxx from any Personal Obligations, the Company shall fund an escrow account
or
obtain a letter of credit in an amount equal to the sum of all unreleased
Personal Obligations, and the funds in the escrow account or such letter of
credit will be used to satisfy the unreleased Personal Obligations as they
become due. The terms and provisions of the escrow account or such letter of
credit shall be mutually agreed upon by the Company and Shareholders. Parent
and
Company hereby covenant and agree that any lease for premises occupied by NCI
which is either in the name of Xxx Xxxx or which is personally guaranteed by
Xxx
Xxxx shall not be amended, modified, renewed or extended in any manner unless
and until Xxx Xxxx is removed from any and all personal obligations under said
lease.
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2.5 Merger
of
NCI into the Company. At the Closing, the officers of NCI and the Company shall
execute, deliver and file with the Secretary of State of the State of Delaware
the Merger
Agreement,
attached hereto as Annex A, and shall take any and all further actions
reasonably necessary to cause the merger of NCI into the Company such that
NCI
shall thereafter cease to exist and all business previously conducted by NCI
shall thereafter be conducted by the Company. Parent and Company acknowledge
that an important consideration to the Shareholders for this transaction is
that
the receipt of the Parent's stock by the Shareholders shall be deemed to be
a
tax free reorganization under Section 368(a)(2)(D) of the Code and Parent and
Company agree not to take any actions which would cause this transaction not
to
be a reorganization under Section 368(a)(2)(D) of the Code. In addition, Parent
and Company agree not to make any tax elections under Section 338 of the Code
which would have any adverse or detrimental impact on the
Shareholders.
2.6 NCCAC
Agreement. Simultaneous with the Closing, the Parent, Nice Cars Acceptance
AcquisitionCo, Inc., NCCAC and the Shareholders will have executed that certain
Stock Purchase and Exchange Agreement of even date herewith ("NCCAC Agreement"),
and the Closing shall have taken place pursuant to the NCCAC
Agreement.
2.7 Opinion
of Company’s Counsel. Simultaneously with Closing, the Company and the Parent
shall deliver an opinion letter from counsel to the Company and Parent,
substantially in the form attached hereto as Exhibit
G.
2.8 Opinion
of NCI. Simultaneously with Closing, NCI shall deliver an opinion letter from
counsel to NCI, substantially in the form attached hereto as Exhibit
H.
3.
Representations
and Warranties; Indemnification.
3.1
Representations
and Warranties of the Shareholders. As an inducement to the Company to enter
into this Agreement and to consummate the transactions contemplated herein,
the
Shareholders represent and warrant to the Company as follows, all of which
are
true and complete as of the date of this Agreement and as of the Closing, except
to the extent set forth on a disclosure schedule attached hereto referencing
the
Section and paragraph number of the provision herein corresponding to such
exception:
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(a) Authority.
Each of the Shareholders has the right, power, authority and capacity to execute
and deliver this Agreement, to consummate the transactions contemplated hereby
and to perform his obligations under this Agreement. This Agreement constitutes
the legal, valid and binding obligations of the Shareholders, enforceable
against each Shareholder in accordance with the terms hereof.
(b) Ownership.
The Shareholders are the sole record and beneficial owners of all of the issued
and outstanding NCI Shares, have good and marketable title to the NCI Shares,
free and clear of all Encumbrances (as hereinafter defined), and have full
legal
right and power to sell, transfer and deliver the NCI Shares to the Company
in
accordance with this Agreement. "Encumbrances" shall mean any liens, pledges,
hypothecations, charges, adverse claims, options, preferential arrangements
or
restrictions of any kind, including, without limitation, any restriction of
the
use, voting, transfer, receipt of income or other exercise of any attributes
of
ownership, other than as provided under applicable securities laws. Upon the
execution and delivery of this Agreement, the Company will receive good and
marketable title to the NCI Shares, free and clear of all Encumbrances. There
are no stockholders' agreements, voting trust, proxies, options, warrants,
convertible instruments, rights of first refusal or any other agreements or
understandings with respect to the NCI Shares. Except
as
contemplated by this Agreement, there are no preemptive or similar rights to
purchase or otherwise acquire shares of the capital stock of NCI pursuant to
any
provision of law, the Certificate of Incorporation or By-Laws (in each case,
as
amended and in effect on the date hereof), or any agreement to which any
Shareholder or NCI is a party.
(c) No
Conflict. Except as set forth on Exhibit
I,
none of
the execution, delivery, or performance of this Agreement, or the consummation
of the transactions contemplated hereby, conflicts or will conflict with, or
(with or without notice or lapse of time, or both) will result in a termination,
breach or violation of (i) any instrument, contract or agreement to which any
of
the Shareholders are a party or by which he or she is bound, or to which the
NCI
Shares are subject; or (ii) any federal, state, local or foreign law, ordinance,
judgment, decree, order, statute, or regulation, or that of any other
governmental body or authority, applicable to the Shareholders or the NCI
Shares.
(d) No
Consent. Except as set forth on Exhibit
J,
no
consent, approval, authorization or order of, or any filing or declaration
with
any governmental authority or any other person, is required for the consummation
by the Shareholders of any of the transactions contemplated by the Shareholders
under this Agreement.
(e) Own
Account. Each Shareholder is acquiring the Exchange Shares for his or her own
account as principal, and not as a nominee or agent; for investment purposes
only, and not with a view to, or for, resale, distribution or fractionalization
thereof in whole or in part; and no other person has a direct or indirect
beneficial interest in such Exchange Shares or any portion thereof. No
Shareholder has any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations in the Exchange Shares to
such
person or to any third person.
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(f) No
Advertisement. The Shareholders are not acquiring the Exchange Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or presented at any seminar or meeting, or pursuant
to
any solicitation of a subscription by a person not previously known to the
Shareholders in connection with investment securities generally.
(g) No
Obligation to Register. Except as otherwise provided in this Agreement, the
Shareholders understand that neither the Company nor the Parent is under any
obligation to register the Exchange Shares under the Securities Act of 1933,
as
amended (the "Securities Act"), or to assist the Shareholders in complying
with
the Securities Act or the securities laws of any state of the United States
or
of any foreign jurisdiction. The Shareholders understand
that the Exchange Shares must be held indefinitely unless such Exchange Shares
are registered under the Securities
Act
or an
exemption from registration is available. Each Shareholder acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities
Act
(“Rule
144”),
and
that each Shareholder has been advised that Rule 144 permits resales only under
certain circumstances. The Shareholders understand that to the extent that
Rule
144 is not available, such Shareholder will be unable to sell any Exchange
Shares without either registration under the Securities
Act
or
the existence of another exemption from such registration
requirement.
(h) Experience.
Each of the Shareholders is (1) experienced in making investments of the kind
described in this Agreement and the related documents, (2) able, by reason
of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way
by
the Company, the Parent or any of their affiliates or selling agents), to
protect its own interests in connection with the transactions described in
this
Agreement, and the related documents, and (3) able to afford the entire loss
of
its investment in the Exchange Shares.
(i) Exemption
from Registration. Each of the Shareholders acknowledges his understanding
that
the offering and sale of Exchange Shares is intended to be exempt from
registration under the Securities Act. In furtherance thereof, in addition
to
the other representations and warranties of the Shareholders made herein, the
Shareholders further represent and warrant to and agree with each of the Company
and the Parent and their affiliates as follows:
(1)
Each
Shareholder realizes that the basis for the exemption may not be present if,
notwithstanding such representations, such Shareholder is acquiring the Exchange
Shares for a fixed or determinable period in the future, or for a market rise,
or for sale if the market does not rise. No Shareholder has any such
intention.
5
(2) Each
Shareholder has adequate means for providing for his current needs and personal
contingencies and has no need for liquidity with respect to the acquisition
of
the Exchange Shares.
(3) Each
Shareholder has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of the prospective
investment in the Exchange Shares.
(4) Each
Shareholder has been provided an opportunity for a reasonable period of time
prior to the date hereof to obtain additional information concerning the
offering of the Exchange Shares, the Company, the Parent, and all other
information to the extent the Company or the Parent possesses such information
or can acquire it without unreasonable effort or expense.
(5) Each
Shareholder has carefully reviewed all of the Parent's filings under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(j) Accredited
Investor. Each Shareholder is an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the Securities Act by
reason of Rule 501(a)(3).
(k)
Risk.
Each Shareholder understands that an investment in the Exchange Shares is a
speculative investment which involves a high degree of risk and the potential
loss of his entire investment.
(l)
Net
Worth. Each Shareholder’s overall commitment to investments which are not
readily marketable is not disproportionate to such Shareholder’s net worth, and
the acquisition of the Exchange Shares will not cause such overall commitment
to
become excessive.
(m) SEC
Documents. Each Shareholder has received all documents, records, books and
other
information pertaining to Shareholder’s investment in the Company that has been
requested by such Shareholder. Each Shareholder has reviewed or received copies
of all reports and other documents filed by the Parent with the Securities
and
Exchange Commission (the "SEC Documents").
(n)
Reliance.
Other than as set forth herein, the Shareholders are not relying upon any other
information, representation or warranty by the Company or the Parent, or any
officer, director, stockholder, agent or representative of the Company or the
Parent in determining to invest in the Exchange Shares. Each Shareholder has
consulted, to the extent deemed appropriate by such Shareholder, with such
Shareholder’s own advisers as to the financial, tax, legal and related matters
concerning an investment in the Exchange Shares and on that basis believes
that
his or its investment in the Exchange Shares is suitable and appropriate for
such Shareholder.
6
(o)
No
Governmental Review. Each Shareholder is aware that no federal or state agency
has (1) made any finding or determination as to the fairness of this investment,
(2) made any recommendation or endorsement of the Exchange Shares, the Company,
or the Parent or (3) guaranteed or insured any investment in the Exchange Shares
or any investment made by the Company or the Parent.
(p)
Price.
Each Shareholder understands that the price of the Exchange Shares offered
hereby bear no relation to the assets, book value or net worth of the Parent
and
were determined arbitrarily by the Parent. Each Shareholder further understands
that there is a substantial risk of further dilution on his or its investment
in
the Parent.
(q)
Full
Disclosure. No representation or warranty made by any Shareholder to the Company
and/or the Parent in this Agreement omits to state a material fact necessary
to
make the statements herein, in light of the circumstances in which they were
made, not misleading. There is no fact known to any Shareholder that has
specific application to the NCI Shares and that materially adversely affects
or,
as far as can be reasonably foreseen, materially threatens the NCI Shares that
has not been set forth in this Agreement.
(r) Compliance
Undertakings. Each Shareholder hereby
acknowledges that he/she is acquainted with the requirements of Section 16
and
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations issued thereunder. Each
Shareholder understands
that, as a result of its acquisition of Shares, and in order to comply with
Section 16 and Section 13(d) and the rules and regulations issued thereunder,
each Shareholder
may
be
required to file a report on Form 3 and a Schedule 13D and each such Shareholder
hereby undertakes and agrees to make such filing in a timely manner if so
required.
3.2
Representations
and Warranties of the Parent. As an inducement to the Shareholders to enter
into
this Agreement and to consummate the transactions contemplated herein, the
Parent represents and warrants to the Shareholders as follows, all of which
are
true and complete as of the date of this Agreement and as of the Closing, except
to the extent set forth on a disclosure schedule attached hereto referencing
the
Section and paragraph number of the provision herein corresponding to such
exception:
(a)
Organization
of the Parent. The Parent is a corporation duly organized and validly existing
and in good standing under the laws of the State of Nevada, and has all
requisite power and authority to own, lease and operate its properties and
to
carry on its business as now being conducted. The Parent is duly qualified
as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes
such
qualification necessary, other than those in which the failure so to qualify
would not have a material adverse effect on the business, operations,
properties, prospects or condition (financial or otherwise) of the Parent.
Parent has, prior to the execution of this Agreement, delivered to the
Shareholders true and complete copies of its (i) Certificate of Incorporation
with all amendments thereto; and (ii) By-laws, in each case as in effect on
the
date of Closing. Parent is not in default under or in violation of any provision
of its Certificate of Incorporation or By-laws.
7
(b)
Authority.
(1) The Parent has the requisite corporate power and authority to enter into
and
perform its obligations under this Agreement and to issue the Exchange Shares,
the S Tax Reimbursement Note and the Shareholder Note; (2) the execution and
delivery of this Agreement by the Parent and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the Parent
or its Board of Directors or stockholders is required; and (3) this Agreement,
the S Tax Reimbursement Note and the Shareholder Note have been duly executed
and delivered by the Parent and constitutes a valid and binding obligation
of
the Parent enforceable against the Parent in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
(c)
SEC
Documents. To the best of Parent's knowledge, the Parent has not provided to
the
Shareholders any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by
the
Parent, but which has not been so disclosed. As of their respective dates,
the
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal,
state
and local laws, rules and regulations applicable to such SEC Documents, and
none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Parent included
in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the Securities and Exchange Commission (the "SEC") or other applicable rules
and regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied
on
a consistent basis during the periods involved (except (1) as may be otherwise
indicated in such financial statements or the notes thereto or (2) in the case
of unaudited interim statements, to the extent they may not include footnotes
or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Parent as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in
the
case of unaudited statements, to normal year-end audit
adjustments).
(d)
Exemption
from Registration; Valid Issuances. When issued and transferred as herein
provided, the Exchange Shares shall be duly authorized, validly issued, fully
paid, and nonassessable. Neither the sales of the Exchange Shares pursuant
to,
nor the Parent's performance of its obligations under, this Agreement shall
(1)
result in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Exchange Shares or any of the assets of the Parent, or
(2)
entitle the other holders of the common stock of the Parent to preemptive or
other rights to subscribe to or acquire the Exchange Shares or other securities
of the Parent.
8
(e)
No
General Solicitation or Advertising in Regard to this Transaction. Neither
the
Parent nor any of its affiliates nor any person acting on its or their behalf
(1) has conducted or will conduct any general solicitation (as that term is
used
in Rule 502(c) of Regulation D) or general advertising with respect to any
of
the Exchange Shares, or (2) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Exchange Shares under the Securities
Act.
(f)
No
Conflicts. The execution, delivery and performance of this Agreement by the
Parent and the consummation by the Parent of the transactions contemplated
hereby, including without limitation the issuance of the Exchange Shares, do
not
and will not (1) result in a violation of the Certificate of Incorporation
or
By-Laws of the Parent, or (2) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Parent is a party, or (3) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to
the
Parent or by which any property or asset of the Parent is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a material adverse effect on the business, operations, properties,
prospects or condition (financial or otherwise) of the Parent) nor is the Parent
otherwise in violation of, conflict with or in default under any of the
foregoing. The business of the Parent is not being conducted in violation of
any
law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have
a
material adverse effect on the business, operations, properties, prospects
or
condition (financial or otherwise) of the Parent. The Parent is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Exchange Shares in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings that may be required to be made by the Parent subsequent to the Closing,
any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Over The Counter Bulletin Board); provided that, for
purposes of the representation made in this sentence, the Parent is assuming
and
relying upon the accuracy of the relevant representations and agreements of
the
Shareholders herein.
9
(g)
No
Undisclosed Liabilities. The Parent has no liabilities or obligations that
are
material, individually or in the aggregate, and that are not disclosed in the
SEC Documents or otherwise publicly announced, other than those incurred in
the
ordinary course of the Parent's businesses and which, individually or in the
aggregate, do not or would not have a material adverse effect on the
Parent.
(h)
No
Undisclosed Events or Circumstances. No event or circumstance has occurred
or
exists with respect to the Parent or its businesses, properties, prospects,
operations or financial condition, that, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Parent but which has not been so publicly announced or disclosed in
the
SEC Documents.
(i) Litigation
and Other Proceedings. Except as may be set forth in the SEC Documents, there
are no lawsuits or proceedings pending or to the best knowledge of the Parent
threatened, against the Parent, nor has the Parent received any written or
oral
notice of any such action, suit, proceeding or investigation, which would have
a
material adverse effect on the business, operations, properties, prospects
or
condition (financial or otherwise) of the Parent. Except as set forth in the
SEC
Documents, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Parent, requested of any court,
arbitrator or governmental agency which would have a material adverse effect
on
the business, operations, properties, prospects or condition (financial or
otherwise) of the Parent.
(j) Capitalization.
Immediately prior to the Closing, the authorized capital stock of the Parent
shall consist of: (i) a total of ten million (10,000,000) shares of preferred
stock, par value $.001 per share, none of which are issued and outstanding;
and
(b) a total of one hundred million (100,000,000) shares of common stock, par
value $.001 per share, of which 32,787,500 are issued and outstanding as of
the
Closing after giving effect to the issuance of shares hereof. Immediately
prior to the Closing, the Parent has issued and outstanding (i) options to
purchase 550,000 shares of the Parent’s common stock with an exercise purchase
price no less than $4.00 per share; and (ii) warrants that Parent has committed
to issue to purchase up to 4,000,000 shares of the Parent’s common stock in
favor of Palm Beach Multi-Strategy Fund L.P. (the "Lender") at an exercise
purchase price of the lesser of $3.00 per share and a price per share equal
to
75% of the publicly-traded market price for such shares. The
Parent expects to adopt an equity incentive plan with a number of shares of
Parent common stock authorized to be issued thereunder to be determined by
the
Board of Directors as customary and reasonable by reference to
similarly-situated public companies. Except as contemplated by this Agreement,
there are no other outstanding warrants, options, conversion privileges,
preemptive rights, or other rights or agreements to purchase or otherwise
acquire or issue any equity securities of the Parent as of the date of this
Agreement.
(k) Full
Disclosure. No representation or warranty made to any Shareholder by the Parent
in this Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were made, not
misleading. There is no fact known to the Parent that has specific application
to the Exchange
Shares
and that
materially adversely affects or, as far as can be reasonably foreseen,
materially threatens the Exchange
Shares
that has
not been set forth in this Agreement or otherwise disclosed in the Parent’s
publicly available reports and disclosures filed with the U.S. Securities and
Exchange Commission.
10
3.3
Representations
and Warranties of the Company. As an inducement to the Shareholders to enter
into this Agreement and to consummate the transactions contemplated herein,
the
Company represents and warrants to the Shareholders as follows, all of which
are
true and complete as of the date of this Agreement and as of the Closing, except
to the extent set forth on a disclosure schedule attached hereto referencing
the
Section and paragraph number of the provision herein corresponding to such
exception:
(a)
Organization
of the Company. The Company is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite power and authority to own, lease and operate its properties and
to
carry on its business as now being conducted. The Company is duly qualified
as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes
such
qualification necessary, other than those in which the failure so to qualify
would not have a material adverse effect on the business, operations,
properties, prospects or condition (financial or otherwise) of the Company.
Company has, prior to the execution of this Agreement, delivered to the
Shareholders true and complete copies of its (i) Certificate of Incorporation
with all amendments thereto; and (ii) By-laws, in each case as in effect on
the
date of Closing. Company is not in default under or in violation of any
provision of its Certificate of Incorporation or By-laws.
(b)
Authority.
(1) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement and to issue the Exchange
Shares, the S Tax Reimbursement Note and the Shareholder Note; (2) the execution
and delivery of this Agreement by the Company and the consummation by it of
the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (3) this
Agreement, the S Tax Reimbursement Note and the Shareholder Note have been
duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c)
No
General Solicitation or Advertising in Regard to this Transaction. Neither
the
Company nor any of its affiliates nor any person acting on its or their behalf
(1) has conducted or will conduct any general solicitation (as that term is
used
in Rule 502(c) of Regulation D) or general advertising with respect to any
of
the Exchange Shares, or (2) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Exchange Shares under the Securities
Act.
11
(d)
No
Conflicts. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby, including without limitation the issuance of the Exchange Shares, do
not
and will not (1) result in a violation of the Certificate of Incorporation
or
By-Laws of the Company, or (2) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (3) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to
the
Company or by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a material adverse effect on the business, operations, properties,
prospects or condition (financial or otherwise) of the Company) nor is the
Company otherwise in violation of, conflict with or in default under any of
the
foregoing. The business of the Company is not being conducted in violation
of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have
a
material adverse effect on the business, operations, properties, prospects
or
condition (financial or otherwise) of the Company. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Exchange Shares in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings that may be required to be made by the Company subsequent to the
Closing, any registration statement that may be filed pursuant hereto, and
any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Over The Counter Bulletin Board); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements
of
the Shareholders herein.
(e)
No
Undisclosed Liabilities. The Company has no liabilities or obligations that
are
material, individually or in the aggregate, other than those incurred in the
ordinary course of the Company's businesses and which, individually or in the
aggregate, do not or would not have a material adverse effect on the
Company.
(f)
No
Undisclosed Events or Circumstances. No event or circumstance has occurred
or
exists with respect to the Company or its businesses, properties, prospects,
operations or financial condition, that, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced.
12
(g) Litigation
and Other Proceedings. There are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would have a material adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of
the
Company. No judgment, order, writ, injunction or decree or award has been issued
by or, so far as is known by the Company, requested of any court, arbitrator
or
governmental agency which would have a material adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of
the
Company.
(h) Full
Disclosure. No representation or warranty made to any Shareholder by the Company
in this Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were made, not
misleading. There is no fact known to the Company that has specific application
to the Exchange
Shares
and that
materially adversely affects or, as far as can be reasonably foreseen,
materially threatens the Exchange
Shares
that has
not been set forth in this Agreement or otherwise disclosed in the Parent’s
publicly available reports and disclosures filed with the U.S. Securities and
Exchange Commission.
3.4 Representations
and Warranties regarding NCI. As
an
inducement to the Company and the Parent to enter into this Agreement and to
consummate the transactions contemplated herein, each of the Shareholders,
jointly and severally, represent and warrant to the Company and the Parent
as
follows regarding matters pertaining to NCI, all of which are true and complete
as of the date of this Agreement and as of the Closing, except to the extent
set
forth on a disclosure schedule attached hereto referencing the section and
paragraph number of the provision herein corresponding to such
exception:
(a)
Organization
of NCI. NCI is a corporation duly organized and validly existing and in good
standing under the laws of the state of Georgia, and has all requisite power
and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. NCI is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature
of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have
a
material adverse effect on the business, operations, properties, prospects
or
condition (financial or otherwise) of NCI. NCI has, prior to the execution
of
this Agreement, delivered to the Company and the Parent true and complete copies
of its (i) Certificate of Incorporation with all amendments thereto; and (ii)
By-Laws, in each case as in effect on date of the Closing. NCI is not in default
under or in violation of any provision of its Certificate of Incorporation
or
By-Laws.
(b)
Authority.
(1) NCI has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement; (2) the execution and delivery
of
this Agreement by NCI and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of NCI or its Board
of
Directors or stockholders is required; and (3) this Agreement has been duly
executed and delivered by NCI and constitutes a valid and binding obligation
of
NCI enforceable against NCI in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general
application.
13
(c)
Documents.
NCI has not provided to the Company or the Parent any information that contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d)
Issuances.
The shares of NCI delivered hereto have been properly issued by NCI pursuant
to
applicable federal and state laws or exemption therefrom. When delivered as
herein provided, the NCI Shares shall be duly authorized, validly issued, fully
paid, and nonassessable. Neither the transfer of the NCI Shares pursuant to,
nor
the Company's or Parent’s performance of NCI obligations under, this Agreement
shall (1) result in the creation or imposition of any liens, charges, claims
or
other encumbrances upon the NCI Shares or any of the assets of NCI, or (2)
entitle the other holders of the NCI Shares to any rights to subscribe to or
acquire any other NCI Shares or other securities of the Company or the Parent.
The NCI Shares constitute all of the issued and all outstanding equity interests
in NCI and there are no direct or indirect rights of any nature or kind issued
or outstanding, contingent or otherwise, to acquire any NCI Shares, including,
without limitation, no options, warrants or instruments convertible into NCI
Shares.
(e)
No
General Solicitation or Advertising in Regard to this Transaction. NCI, nor
any
of its affiliates nor any person acting on its or their behalf (1) has conducted
or will conduct any general solicitation (as that term is used in Rule 502(c)
of
Regulation D) or general advertising with respect to any of the NCI Shares,
or
(2) made any offers or sales of any security or solicited any offers to buy
any
security under any circumstances that would require registration of the NCI
Shares under the Securities Act.
(f)
No
Conflicts. Except as set forth on Exhibit I and Schedule 3.4(t), the execution,
delivery and performance of this Agreement by NCI and the consummation by NCI
of
the transactions contemplated hereby, do not and will not (1) result in a
violation of the Certificate of Incorporation or By-Laws of NCI, or (2) conflict
with, or constitute a material default (or an event that with notice or lapse
of
time or both would become a material default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any one
or
more agreements that individually or in the aggregate are material, indenture,
instrument or any "lock-up" or similar provision of any underwriting or similar
agreement to which NCI is a party, or (3) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to
NCI
or by which any property or asset of NCI is bound or affected (except, in the
case of (2) and (3), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in
the
aggregate, have a material adverse effect on the business, operations,
properties, prospects or condition (financial or otherwise) of NCI or its
ability to consummate the transaction contemplated hereby) nor is NCI otherwise
in violation of, conflict with or in default under any of the foregoing. The
business of NCI is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations that
either singly or in the aggregate do not and will not have a material adverse
effect on the business, operations, properties, prospects or condition
(financial or otherwise) of NCI.
14
(g)
No
Undisclosed Liabilities. NCI has no liabilities or obligations that are
material, individually or in the aggregate, and that are not disclosed in (i)
the financial statements described in Section 3.4(j) of this Agreement; (ii)
the
releases attached as Exhibit
F
hereto;
or (iii) as disclosed on Schedule 3.4(g) of this Agreement, other than those
incurred in the ordinary course of NCI’s business and which, individually or in
the aggregate, are not material to NCI. The minute books and other records
of
NCI contain a true and complete record, in all material respects, of all action
taken at all meetings and by all written consents in lieu of meetings of
directors, members, shareholders, the management committee or boards of
directors, subcommittees and committees of the boards of directors of
NCI.
(h)
No
Undisclosed Events or Circumstances. Except as set forth on Schedule 3.4(h),
no
event or circumstance has occurred or exists with respect to NCI or its
business, properties, prospects, operations or financial condition, that, under
applicable law, rule or regulation, would require public disclosure under the
Securities Act and/or Exchange Act if NCI were subject to the reporting
requirements of Sections 13 or 15 of the Exchange Act that has not been
disclosed in writing to the Company or the Parent.
(i) Litigation
and Other Proceedings. Except as listed on Schedule 3.4(i), there are no
lawsuits or proceedings pending or, to the best knowledge of the Shareholders
or
NCI threatened, against NCI, nor has NCI received any written or oral notice
of
any such action, suit, proceeding or investigation, which would have a material
adverse effect on the business, operations, properties, prospects or condition
(financial or otherwise) of NCI. No judgment, order, writ, injunction or decree
or award has been issued by or, so far as is known by the Shareholders or NCI,
requested of any court, arbitrator or governmental agency which would have
a
material adverse effect on the business, operations, properties, prospects
or
condition (financial or otherwise) of NCI or its ability to consummate the
transaction contemplated hereby.
(j) Validity
of Financial Statements. The audited financial statements of NCI prepared by
Xxxxxxx Xxxx & Co, PLLC as of December 31, 2005, December 31, 2004 and
December 31, 2003 are true and correct
and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except
as
may be otherwise indicated in such financial statements or the notes thereto)
and fairly present in all material respects the financial position of NCI as
of
the dates thereof and the results of operations and cash flows for the periods
then ended. The
unaudited balance sheets and profit and loss statements for the six-month period
ended June 30, 2006 and the months ended July 31, 2006 and August 31, 2006,
which the Shareholders have delivered to the Company and the Parent fairly
present in all material respects the financial position of NCI as of the dates
thereof.
15
(k) No
Competing Interests.
Except
with respect to the ownership interest in the Parent following the Closing
and
except as disclosed on Schedule 3.4(k), each of the Shareholders
hereby
represents and warrants to the Parent and the Company that neither such
Shareholder, nor any affiliate, has any ownership or other interest in any
business or activity that competes or can reasonably be expected to compete,
directly or indirectly, with any business of the Company following the Closing.
Except as disclosed on Schedule 3.4(k), each of the Shareholders
hereby
represents and warrants to Purchaser that neither he, she or it nor any
affiliate, has or shares, any ownership or similar interest in any asset or
property (including any intellectual property) that is being (or has been in
the
past 12-month period) used in connection with the operation of the business
of
NCI.
(l) Environmental,
Health and Safety Matters. Except as set forth on Schedule 3.4(l):
(i) NCI
is in
compliance in all material respects with all Environmental Laws applicable
to
its business.
(ii) Neither
Shareholders nor NCI has received any notice regarding any actual or alleged
material violation of Environmental Laws including any investigatory, remedial
or corrective obligations, arising under Environmental Laws.
“Environmental
Laws” means all Laws and rules of common law pertaining to the environment,
health and safety, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.) (“CERCLA”),
the Emergency Planning and Community Right to Know Act and the Superfund
Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act (42
U.S.C. § 6901 et seq.), the Resource Conservation and Recovery Act of 1976, the
Hazardous and Solid Waste Amendments Act of 1984, the Clean Air Act (42 U.S.C.
§
7401 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Federal Water
Pollution Control Act, the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Safe Drinking Water Act, the Occupational Safety and Health Act
of
1970 (42 U.S.C. § 11001 et seq.), the Oil Pollution Act of 1990, the Hazardous
Materials Transportation Act (49 U.S.C. § 1801 et seq.), and any similar or
analogous statutes, regulations and decisional law of any governmental
authority, as each of the foregoing may have been amended or
supplemented.
(m) Subsidiaries.
NCI does not own or control, directly or indirectly, any corporation,
partnership, association or business entity.
(n) Absence
of Certain Changes and Events. Except
as
set forth on Schedule 3.4(n), since
the
end of the period covered by the audited financial statements for the year
ended
December 31, 2005, the business of NCI has been conducted only in the ordinary
course consistent with prior practice and NCI has not: (a) transferred, leased
or otherwise disposed of any of its assets or properties other than in the
ordinary course of business; (b) waived, released or terminated any material
rights, Claims, contracts or leases, as applicable; (c) suffered any material
damage, destruction or loss, whether or not such damage, destruction or loss
shall have been insured against; (d) suffered any material adverse change in
the
financial condition, properties or business; or (e) made or entered into any
contract or commitment to make any capital expenditure in excess of $100,000.
Except
as
set forth on Schedule 3.4(n), since
August 31, 2006, there have not been any dividends or other distributions from
NCI to any shareholder of NCI.
16
(o) Assets
and Rights. There are no facts or conditions affecting the assets and properties
of NCI which could, individually or in the aggregate, interfere in any material
respect with the use, occupancy, or operation thereof as currently used,
occupied or operated, or their adequacy for such use. Except as set forth on
Schedule 3.4(o), NCI has good and marketable title to all assets and property
owned by NCI, including, without limitation, all accounts
receivable.
(p) Taxes.
(i)
NCI
has timely filed with the appropriate taxing authorities all tax returns
required to have been filed by NCI on or before the Closing Date; each such
tax
return is true, correct and complete in all material respects; and all taxes
of
NCI that are required to have been paid on or before the Closing Date (whether
or not shown on any tax return) have been timely paid in full.
(ii)
Except as set forth on Schedule 3.4(p), there is no action, suit, proceeding,
investigation, audit, claim or assessment pending or, to the knowledge of the
Shareholders, threatened with respect to NCI with respect to a liability for
taxes or with respect to any tax return. No deficiency for any tax has been
assessed with respect to NCI which has not been paid in full.
(q) Transactions
with Certain Persons. Except
as
set forth on Schedule 3.4(q), no
officer, member, manager or employee of NCI, nor any member of any such person’s
family owns any assets used in or relating to the business of NCI (other than
incidental personal office items) or is presently a party to any material
transaction with NCI, including, but not limited to, any contract, agreement
or
other arrangement (a) providing for the furnishing of services by, (b) providing
for the rental of real or personal property from, or (c) otherwise requiring
payments to (other than for services as employees, officers or managers of
NCI)
such person.
(r)
Employees.
Except
as
set forth on Schedule 3.4(r), there are no pension,
retirement, profit-sharing, thrift-savings, deferred compensation, share bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, vacation plan,
or other employee benefit plans or any other commitments, arrangements, promises
or understandings with any employee as to salary or bonus, if applicable. NCI
has complied in all material respects with all legal requirements relating
to
employment practices, terms and conditions of employment, equal employment
opportunity, nondiscrimination, immigration, anti-harassment/retaliation and
whistleblower retaliation protection, wages, hours, collective bargaining,
the
payment of social security and similar taxes and occupational safety and health
requirements with respect to matters occurring on or before the Closing
Date.
17
(s) Material
Contracts. Each
contract which would or could reasonably be expected to result in a payment
by
NCI to any third party in excess of $100,000 is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance
with
its terms, of NCI and any other party thereto, and to the knowledge of
Shareholders neither NCI nor, any other party to such contract is, nor has
received notice that it is, in violation or breach of or default under any
such
contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such contract).
(t) Permits.
(i) NCI owns or validly holds all permits required to own and lease assets
and
properties of NCI and to conduct the business as currently being conducted;
(ii)
each such permit is valid, binding and in full force and effect; and (iii)
except as set forth on Schedule 3.4(t) NCI is not and has not received any
notice that it is, in default (or with the giving of notice or lapse of time
or
both, would be in default) under any such permit and after giving effect to
the
transactions contemplated hereby the Company shall be fully able to continue
and
conduct business in the ordinary course as previously conducted by NCI, subject
to registration requirements under applicable state laws which may be attended
to in due course following the Closing.
(u) Insurance.
All liability, property, workers compensation, directors and officers liability
and other insurance policies (including any self insurance programs, if any)
currently in effect that insure the business of NCI or employees of NCI or
affect or relate to the ownership, use or operation of any of the assets and
properties of NCI (collectively, the “Insurance Policies”). Each of the
Insurance Policies is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and none of the Shareholders,
NCI or the person to whom such policy has been issued has received any notice
of
cancellation or termination in respect of any such policy or is in default
thereunder, and none of the Shareholders, NCI, or any person to whom such policy
has been issued know of any reason or state of facts that could lead to the
cancellation of the Insurance Policies. None of the Shareholders, NCI, or any
person to whom such policy has been issued has failed to give any significant
notice or present any significant claim under any of the Insurance Policies
in
due and timely fashion.
(v) Employees.
The Shareholders have provided the Company and the Parent with a complete and
accurate list of all employees and sales persons currently employed or engaged
by NCI, together with the position held by each such person, the amount of
the
annual compensation (separating base salary and other forms of compensation)
of
each such person. NCI has paid in full to such employees all wages, commissions,
bonuses and other compensation for all services performed by them to date (other
than amounts accrued since the end of the last pay period and bonuses accrued
for the month of September) and NCI is not subject to any claim for non-payment
or non-performance of any of the foregoing.
18
(w) Accounts
Receivable. The accounts receivable carried in NCI’s books and records: (i) are
valid; (ii) have arisen solely out of bona fide performance of services and
other business transactions in the ordinary course of business consistent with
past practice, in each case, with persons other than affiliates; (iii) are
not
subject to any prior lien and are not subject to valid defenses, set-offs or
counterclaims, and there are no refunds, discounts or other adjustments payable
in respect of such accounts receivable; and (iv) are collectable in accordance
with their terms, subject to the historical bad debt expense incurred by
NCI.
(x) Bank
Accounts; Signatories. Schedule 3.4(x) sets forth (i) a complete and accurate
list of all signatories of any and all bank accounts of, for or in the name
of,
NCI and a list of all authorized signatories for each, and (ii) a list of all
credit cards in the name of NCI that are used by the Shareholders or any of
their affiliates or relatives.
3.5 Indemnification.
(a) The
Shareholders shall jointly and severally indemnify and hold harmless the Company
and the Parent and the officers, directors, agents, affiliates, representatives
and the respective successors and assigns of the Company and the Parent from
and
against any and all damages, losses, liabilities, taxes and costs and expenses
(including, without limitation, attorneys' fees and costs) resulting directly
or
indirectly from (i) any inaccuracy, misrepresentation, breach of warranty or
non-fulfillment of any of the representations and warranties of the Shareholders
in this Agreement, or any actions, omissions or statements of fact inconsistent
with in any material respect any such representation or warranty, (ii) any
failure by the Shareholders to perform or comply with any agreement, covenant
or
obligation in this Agreement.
(b) The
Company and Parent shall jointly and severally indemnify and hold harmless
NCI
and the Shareholders’ and their respective agents, affiliates, representatives
and respective successors and assigns from and against any and all damages,
losses, liabilities, taxes and costs and expenses (including, without
limitation, attorneys' fees and costs) resulting directly or indirectly from
(i)
any inaccuracy, misrepresentation, breach of warranty or non-fulfillment of
any
of the representations and warranties of the Company or Parent in this
Agreement, or any actions, omissions or statements of fact inconsistent with
in
any material respect any such representation or warranty, (ii) any failure
by
the Company or Parent to perform or comply with any agreement, covenant or
obligation in this Agreement.
(c) Rules
Regarding Indemnification.
The
obligations and liabilities of each party which may be subject to
indemnification liability hereunder (the “indemnifying party”) to the other
party (the “indemnified party”) shall be subject to the following terms and
conditions:
19
(i) Claims
by
Non-Parties. The indemnified party shall give written notice within a reasonably
prompt period of time to the indemnifying party of any written claim by a third
party which is likely to give rise to a claim by the indemnified party against
the indemnifying party based on the indemnity agreements contained in this
Section, stating the nature of said claim and the amount thereof, to the extent
known. The indemnified party shall give notice to the indemnifying party that
pursuant to the indemnity, the indemnified party is asserting against the
indemnifying party a claim with respect to a potential loss from the third
party
claim, and such notice shall constitute the assertion of a claim for indemnity
by the indemnified party. If, within thirty (30) days after receiving such
notice, the indemnifying party advises the indemnified party that it will
provide indemnification and assume the defense at its expense, then so long
as
such defense is being conducted, the indemnified party shall not settle or
admit
liability with respect to the claim and shall afford to the indemnifying party
and defending counsel reasonable assistance in defending against the claim.
If
the indemnifying party assumes the defense, counsel shall be selected by such
party and if the indemnified party then retains its own counsel, it shall do
so
at its own expense. If the indemnified party does not receive a written
objection to the notice from the indemnifying party within thirty (30) days
after the indemnifying party’s receipt of such notice, the claim for indemnity
shall be conclusively presumed to have been assented to and approved, and in
such case the indemnified party may control the defense of the matter or case
and, at its sole discretion, settle or admit liability. If within the aforesaid
thirty (30) day period the indemnified party shall have received written
objection to a claim (which written objection shall briefly describe the basis
of the objection to the claim or the amount thereof, all in good faith), then
for a period of ten (10) days after receipt of such objection the parties shall
attempt to settle the dispute as between the indemnified and indemnifying
parties.
(ii) Claims
by
a Party. The determination of a claim asserted by a party hereunder (other
than
as set forth in section (a) above) pursuant to this Section shall be made as
follows: The indemnified party shall give written notice within a reasonably
prompt period of time to the indemnifying party of any claim by the indemnified
party which has not been made pursuant to subsection (a) above, stating the
nature and basis of such claim and the amount thereof, to the extent known.
The
claim shall be deemed to have resulted in a determination in favor of the
indemnified party and to have resulted in a liability of the indemnifying party
in an amount equal to the amount of such claim estimated pursuant to this
paragraph if within forty-five (45) days after the indemnifying party’s receipt
of the claim the indemnified party shall not have received written objection
to
the claim. In such event, the claim shall be conclusively presumed to have
been
assented to and approved. If within the aforesaid forty-five (45) day period
the
indemnified party shall have received written objection to a claim (which
written objection shall briefly describe the basis of the objection to the
claim
or the amount thereof, all in good faith), then for a period of sixty (60)
days
after receipt of such objection the parties shall attempt to settle the disputed
claim as between the indemnified and indemnifying parties.
(iii) If
the
Closing occurs, no party shall have any liability (for indemnification or
otherwise) with respect to any representation or warranty or any covenant or
obligation to be performed or complied with prior to the Closing Date
(other than representations with respect to taxes and any cases involving fraud)
unless on or
before
May 31, 2009, the indemnified party notifies the indemnifying party of a claim
specifying the factual basis of the claim as set forth in subparagraph (i)
and
(ii) of this Paragraph (c).
20
4. Stock
Legend.
Each
certificate representing the Exchange Shares shall be stamped or otherwise
imprinted with legends substantially in the following form (in addition to
any
legend required by applicable state securities or "blue sky" laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
(1)(A) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE ACT (IF AVAILABLE) OR ANOTHER THEN AVAILABLE EXEMPTION UNDER THE ACT AND
STATE SECURITIES LAWS, OR (B) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE LAWS, AND WHEREIN MANCHESTER
INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER THE ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED, OR (C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN
DECLARED EFFECTIVE UNDER THE ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); AND (2) PRIOR TO ANY SUCH TRANSFER, IT WILL FURNISH
TO
MANCHESTER INC. AND THE TRANSFER AGENT FOR THE COMMON STOCK SUCH CERTIFICATIONS,
LEGAL OPINIONS, OR OTHER INFORMATION AS MANCHESTER INC. OR SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT OR STATE SECURITIES LAWS; AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE SECURITIES EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. FURTHERMORE, HEDGING TRANSACTIONS
INVOLVING THE SECURITIES EVIDENCED HEREBY MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
The
Parent agrees to reissue certificates representing any of the Exchange Shares
without the legend set forth above if at such time, prior to making any transfer
of any such Exchange Shares, such holder thereof shall give written notice
to
the Parent describing the manner and terms of such transfer and removal as
the
Parent may reasonably request. Such proposed transfer and removal will not
be
effected until: (a) either (i) the Parent has received an opinion of counsel
reasonably satisfactory to the Parent, to the effect that the registration
of
the Exchange Shares under the Securities
Act
is
not required in connection with such proposed transfer; (ii) a registration
statement under the Securities
Act
covering such proposed disposition has been filed by the Parent with the
Commission and has become effective under the Securities
Act;
(iii) the Parent has received other evidence reasonably satisfactory to the
Parent that such registration and qualification under the Securities
Act
and
state securities laws are not required; or (iv) the holder provides the Parent
with reasonable assurances that such security can be sold pursuant to Rule
144
under the Securities
Act;
and
(b) either (i) the Parent has received an opinion of counsel reasonably
satisfactory to the Parent, to the effect that registration or qualification
under the securities or "blue sky" laws of any state is not required in
connection with such proposed disposition; or (ii) compliance with applicable
state securities or "blue sky" laws has been effected or a valid exemption
exists with respect thereto. The Parent will respond to any such notice from
a
holder within five (5) business days. In the case of any proposed transfer
under
this section, the Parent will use reasonable efforts to comply with any such
applicable state securities or "blue sky" laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified; (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject; or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Parent. The restrictions on transfer
contained in this section shall be in addition to, and not by way of limitation
of, any other restrictions on transfer contained in any other section of this
Agreement. Whenever
a
certificate representing the Exchange Shares is required to be issued to a
purchaser without a legend, in lieu of delivering physical certificates
representing the Exchange Shares, provided the Parent's transfer agent is
participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer program, the Parent shall use its
commercially reasonable efforts to cause its transfer agent to electronically
transmit the Exchange Shares to a purchaser by crediting the account of such
purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system (to the extent not inconsistent with any provisions
of this Agreement).
21
5. Registration.
(a) The
Parent and the Shareholders agree that if at any time after the date hereof
the
Parent shall propose to file a registration statement with respect to any of
its
common stock on a form suitable for a secondary offering, it will give notice
in
writing to such effect to the Shareholders at least thirty (30) days prior
to
such filing, and, at the written request of the Shareholders, made within ten
(10) days after the receipt of such notice, will include therein at the Parent's
cost and expense (including the reasonable fees and expenses of one counsel
to
all such holder(s), but excluding underwriting discounts, commissions and filing
fees attributable to the common stock included therein) such of the Exchange
Shares as the Shareholders shall request; provided, however, that if the
offering being registered by the Parent is underwritten and if the
representative of the underwriters certifies in writing that the inclusion
therein of the Exchange Shares would materially and adversely affect the sale
of
the securities to be sold by the Parent thereunder, then the Parent shall be
required to include in the offering only that number of securities, including
the Exchange Shares, which the underwriters determine in their sole discretion
will not jeopardize the success of the offering (the securities so included
to
be apportioned pro rate among all selling holders of shares according to the
total amount of securities entitled to be included therein owned by each selling
holder of shares, but in no event shall the total amount of Exchange Shares
included in the offering be less than the number of securities included in
the
offering by any other single selling holder of shares unless all of the Exchange
Shares are included in the offering).
22
(b) After
the
date hereof, the Parent shall not grant to any holder of securities of the
Parent any registration rights which have a priority greater than those granted
to Shareholders without the prior written consent of Shareholders.
(c) The
Parents obligations under Section
5(a)
above
with respect to the Exchange Shares are expressly conditioned upon the
Shareholders furnishing to the Parent in writing such information concerning
the
Shareholders as the Parent shall reasonably request for inclusion in the
registration statement. If any registration statement including any of the
Exchange Shares is filed, the Parent shall indemnify the Shareholders from
any
loss, claim, damage or liability arising out of, based upon or in any way
relating to any untrue statement of a material fact contained in such
registration statement or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except for any such statement or omission based on information furnished in
writing by the Shareholders expressly for use in connection with such
registration statement; and the Shareholders shall indemnify the Parent (and
each of its officers and directors who has signed such registration statement,
each director, each person, if any, who controls the Parent within the meaning
of the Securities Act, each underwriter for the Parent and each person, if
any,
who controls such underwriter within the meaning of the Securities Act) and
each
other such Shareholders against any loss, claim, damage or liability arising
from any such statement or omission which was made in reliance upon information
furnished in writing to the Parent by the Shareholders expressly for use in
connection with such registration statement.
6. Rights
of
Co-Sale.
(a) No
officer or director of the Parent (each, a "Key Shareholder") shall enter into
any private transaction that would result in the sale by it of any securities
of
the Parent now or hereafter owned by it, unless prior to such sale such Key
Shareholder shall give written notice (the "Co-Sale Notice") to the Shareholders
addressed and delivered as set forth in Section
8(a)
hereof,
of its intention to effect such sale in order that the Shareholders may exercise
its rights under this Section
6
as
hereinafter described. Such notice shall set forth (i) the number of securities
to be sold by such Key Shareholder, (ii) the principal terms of the sale,
including the price at which the securities are intended to be sold, and (iii)
an offer by such Key Shareholder to use its best efforts to cause to be included
with the securities to be sold by its in the sale, on a securities-by-securities
basis and on the same terms and conditions, the Exchange Shares issuable or
issued to the Shareholders pursuant to this Agreement. For purposes of clarity,
the foregoing provisions of this Section
6
shall
not apply to any public market sales of securities, including, without
limitation, any transactions executed within the scope of Rule 144.
Notwithstanding the foregoing, this Section
6
shall
not apply to any transfers by any Key Shareholder for estate planning purposes
to: (i) a trust for the benefit of such Key Shareholder or the Key Shareholder's
spouse or issue; or (ii) to a family partnership, limited liability company
or
similar entity of which the members are the foregoing persons.
23
(b) If
Shareholders have not accepted such offer in writing within a period of ten
(10)
days from the date of receipt of the Co-Sale Notice, the such Key Shareholder
shall thereafter be free for a period of ninety (90) days to sell the number
of
securities specified in the Co-Sale Notice, at a price no greater than the
price
set forth in the Co-Sale Notice and on otherwise no more favorable terms to
such
Key Shareholder than as set forth in the Co-Sale Notice, without any further
obligation to Shareholders in connection with such sale. In the event that
such
Key Shareholder fails to consummate such sale within such ninety (90) day
period, the Shareholders specified in the Co-Sale Notice shall continue to
be
subject to this Section
6.
(c) If
Shareholders accept such offering in writing within a ten (10) day period,
then
such acceptance shall be irrevocable unless Key Shareholder shall be unable
to
cause to be included in his sale the number of Exchange Shares held by
Shareholders and set forth in the written acceptance. In the event, such Key
Shareholder and Shareholders shall participate in the sale equally, with such
Key Shareholder and Shareholders each selling half the number of such securities
to be sold in the sale.
7. Preemptive
Rights.
(a) Subject
to the terms and conditions contained in this Section
7,
the
Parent hereby grants to Shareholders a right of first offer with respect to
future sales of shares ("New Issues") by the Parent. Shareholders shall be
entitled to purchase such number of shares in each New Issue that is determined
by multiplying the total number of shares in each New Issue by a fraction,
the
numeration of which is the number of Exchange Shares and the denominator of
which is the total number of shares then held by all holders of shares as a
group on a fully diluted basis.
(b) Each
time
the Parent proposes to offer shares or securities convertible into shares for
sale, the Parent shall first make an offering of such securities to the
Shareholders by delivering to Shareholders a notice ("Offering Notice") stating
(i) its bona fide intention to offer such securities, (ii) the number of
securities proposed to be offered, and (iii) the price and terms upon which
it
proposes to offer such securities.
(c) Within
fourteen (14) calendar days following the delivery of the Offering Notice,
Shareholders may elect to purchase or obtain, at the price and upon the terms
specified in the Offering Notice, that number of shares of the New Issue
determined as provided in Section
7(a),
by
written notice of acceptance ("Acceptance Notice") to the
Parent.
24
(d) The
right
of the first offer in this Section
7
shall
not be applicable (a) to the issuance or sale of securities, or options
therefor, pursuant to a bonus or option plan, or otherwise pursuant to the
employment terms of an officer or employee, approved by the Parent's Board
of
Directors, or (b) to the issuance of securities in connection with a bona fide
business acquisition of or by the Parent, whether by merger, consolidation,
sale
of assets, exchange of stock or otherwise.
8. Taxes.
(a) The
parties acknowledge that NCI has elected to be treated as "S" Corporation under
the provisions of Section
1361
of the
Code with the result that the taxable income of NCI ("S Income") is taxed to
the
Shareholders for both federal and state income tax purposes. The Shareholders
have computed that the sum of $1,577,785.00 is the aggregate estimated amount
necessary to reimburse the Shareholders for all state and federal income taxes
("S Taxes") payable by the Shareholders with respect to NCI and NCCAC for the
year ending December 31, 2005 and for the partial year ending as of the date
of
Closing by reason of the Shareholders reporting the S Income on their personal
federal and state income tax returns ("Tax Amount"). At the Closing, the Parent
and NCCAC
Acquisition Co.
shall
deliver to the Shareholders the S Tax Taxes Reimbursement Note attached as
Exhibit B to the NCCAC Agreement (the “S Tax Reimbursement Note”) in an amount
equal to the Tax Amount. After
the
Shareholders have prepared their federal and state income tax returns for the
years ending December 31, 2005 and for December 31, 2006, and the S Taxes
attributable to the S Income are computed in accordance with the procedure
set
forth in subparagraph (b) of this Section 8, if the amount paid pursuant to
the
S Tax Reimbursement Note was not sufficient to fully reimburse the Shareholders
for the total amount of the S Taxes, the Company shall make an additional
distribution to the Shareholders in the amount of the deficiency: and if the
amount paid pursuant to the S Tax Reimbursement Note was in excess of the actual
S Taxes, the Shareholders shall reimburse the Company such excess amount.
(b) For
purposes of computing the amount of the S
Taxes
payable by the Shareholders, the Shareholders shall prepare their tax returns
for the years ending December 31, 2005 and December 31, 2006 first with the
inclusion of the S Income and next with the exclusion of the S Income and the
difference of tax liabilities as shown on the respective returns shall be deemed
to be the S Taxes.
(c) In
the
event that the federal or state income tax returns for NCI for the years ending
December 31, 2005 or December 31, 2006 are audited by the Internal Revenue
Service or by any state revenue department and in the event adjustments are
made
on such tax returns by reason of such audits with the result that the
Shareholders owe additional S Taxes, the Company covenants and agrees to
promptly pay to the Shareholders an amount equal to the increase in the S Taxes.
In the event the adjustments made on such tax returns by reason of such audits
result in the S Taxes being reduced, the Shareholders covenant and agree to
promptly refund to the Company funds in amount equal to the reduction in the
S
Taxes.
25
(d) The
Company and NCI agree to make available to the Shareholders, upon request from
the Shareholders, all books and records of the Company and NCI that the
Shareholders may need in order to complete their December 31, 2005 and December
31, 2006 federal and state income tax returns and or to respond to any inquiries
from any governmental authority relating to the tax returns or the operations
of
NCI prior to the Closing.
(e) Notwithstanding
anything to the contrary herein, any and all such tax reimbursement obligations
to the Shareholders on the part of the Company and NCI shall be reduced
dollar-for-dollar to the same and full extent of any and all cash distributions
and/or cash withdrawals made by any and all of the Shareholders with respect
to
the year ending December 31, 2005 and through the partial year ended for
2006 through the Closing Date other than distributions made to the Shareholders
as employees (both salary and bonus) or distributions made to the Shareholders
as repayment of Shareholder loans to NCI.
9. Broker.
The parties acknowledge that H&H Associates ("Broker") is entitled to a
brokerage commission/finder's fee as a result of the transactions contemplated
by this Agreement, and upon the Closing, the Company and Parent hereby agree
to
pay to Broker the sum of One Hundred Twenty-five Thousand Dollars ($125,000.00)
in cash and Parent agrees to distribute to Broker that number of shares of
the
Parent's common stock which shall be equal to $125,000 as determined by
reference to the Exchange Shares Stock Price; provided that the Broker confirms
in writing that the Broker is an accredited investor, as that term is defined
in
Rules and Regulations of the Securities Act by reason of Rule 501(a)(3) and
Broker completes such investment questionnaires and other written documentation
as is reasonably requested by the Parent.
10.
Miscellaneous.
(a)
Notices.
All notices or other communications required or permitted hereunder shall be
in
writing. Any notice, request, demand, claim or other communication hereunder
shall be deemed duly given (i) if by personal delivery, when so delivered;
(ii)
if mailed, three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid and addressed to
the
intended recipient as set forth below; or (iii) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent to the address of the intended
recipient as first set forth above. Any party may change the address to which
notices and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
Notice
Address of Parent:
|
Manchester,
Inc.
|
000
Xxxxxxxx Xxxxx, 0xx
Xxxxx
|
|
Xxxxxx,
Xxxxx 00000
|
|
Attn:
Xxxxxxx X. Xxxxxx
|
|
Corporate Secretary
|
26
Notice
Address of Company:
|
Nice
Cars Operations AcquisitionCo, Inc.
|
000
Xxxxxxxx Xxxxx, 0xx
Xxxxx
|
|
Xxxxxx,
Xxxxx 00000
|
|
Attn:
Xxxxxxx X. Xxxxxx
|
|
Corporate Secretary
|
|
Notice
Address of NCI:
|
Nice
Cars,
Inc.
|
000
Xxxxxxxxxxx Xxxxxxx
|
|
Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
|
|
Attn:
Xxx Xxxx
|
|
Notice
Address of Shareholders:
|
Xxx
Xxxx and Xxxxxxxx Xxxx
|
0000
Xxxxxx Xxxxx
|
|
Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
|
(b)
Choice
of
Law. This Agreement shall be governed, construed and enforced in accordance
with
the laws of the State of New York and the federal laws of United States
applicable therein, without giving effect to principles of conflicts of
law.
(c)
Jurisdiction.
The parties hereby irrevocably consent to the in personam jurisdiction of the
state or federal courts located in the State of New York, in connection with
any
action or proceeding arising out of or relating to this Agreement or the
transactions and the relationships established thereunder. The parties hereby
agree that such courts shall be the venue and exclusive and proper forum in
which to adjudicate such matters and that they will not contest or challenge
the
jurisdiction or venue of these courts.
(d)
Entire
Agreement. This Agreement sets forth the entire agreement and understanding
of
the parties in respect of the transactions contemplated hereby and supersedes
all prior and contemporaneous agreements, arrangements and understandings of
the
parties relating to the subject matter hereof. No representation, promise,
inducement, waiver of rights, agreement or statement of intention has been
made
by any of the parties which is not expressly embodied in this Agreement, such
other agreements, notes or instruments related to this transaction executed
simultaneously herewith, or the written statements, certificates, schedules
or
other documents delivered pursuant to this Agreement or in connection with
the
transactions contemplated hereby.
(e)
Assignment.
Each party's rights and obligations under this Agreement shall not be assigned
or delegated, by operation of law or otherwise, without the other party's prior
consent, and any such assignment or attempted assignment shall be void, of
no
force or effect, and shall constitute a material default by such
party.
27
(f)
Amendments.
This Agreement may be amended, modified, superseded or cancelled, and any of
the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed by each party, in the case of
a
waiver, by the party waiving compliance.
(g)
Waivers.
The failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or the breach of any term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach
or a
waiver of any other term, covenant, representation or warranty of this
Agreement.
(h) Further
Assurances. The parties shall from time to time do and perform such
additional acts and execute and deliver such additional documents and
instruments as may be required or reasonably requested by any party to
establish, maintain or protect its rights and remedies or to effect the purposes
of this Agreement. The Shareholders will assist the Company and the
Parent, in each case at no cost to Shareholders, to obtain all necessary permits
that require registration of the business of NCI as conducted immediately prior
to the Closing in respect of continuation of such ordinary course of business
following the Closing. Without limiting the foregoing, the parties shall
promptly after Closing take commercially reasonable actions to cause the
assignment to the Company of the leases set forth on Exhibit K attached hereto,
which are in the name of one or more Shareholders to the Company, and such
actions shall include, without limitation, obtaining the consent of landlords
to
the extent necessary under such leases.
(i) Counterparts;
Interpretation. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument. All references to “material” or
“materiality” herein shall refer to matters, understandings, agreements,
actions, courses of dealing, courses of operations, or events, which
individually or in the aggregate exceed $200,000. All references to
“knowledge” means those facts or circumstances actually known after due inquiry.
No ambiguity in any provision hereof shall be construed against parties by
reason of the fact it was drafted by such party or its counsel. References
to
“including” means including without limiting the generality of any description
preceding such term. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person other than
the parties any rights or remedies under or by reason of this Agreement.
(j) Acceptance
by Fax.
This
Agreement shall be accepted, effective and binding, for all purposes, when
the
parties shall have signed and transmitted to each other, by telecopier or
otherwise, copies of the signature pages hereto.
(k) Binding
Effect; Benefits.
This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any person other than the parties hereto, and their respective
heirs, legal representatives, successors and permitted assigns, any rights,
remedies, obligations or liabilities under, in connection with or by reason
of
this Agreement.
28
(l) Reporting.
The Shareholders
and NCI
acknowledge that the Parent is a public Company subject to U.S. Federal
securities laws. The Shareholders
and NCI
acknowledge that they will not engage in any trading in the Parent’s securities
until after public announcement of the acquisition in form and date to be
mutually agreed upon by the Shareholders
and the
Parent. The Shareholders furthermore agree to use commercially reasonable
efforts to promptly comply and assist the Parent with any and all requests
for
information as necessary to comply with the Parent’s filing requirements with
the U.S. Securities and Exchange Commission and the Parent’s public reporting
obligations.
[Signature
Page Follows]
29
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date first set forth above.
|
|
|
By: | /s/ Xxxxxxx Xxxxxx | |
Name: Xxxxxxx
Xxxxxx
Title: Corporate
Secretary
|
NICE
CARS OPERATIONS ACQUISITIONCO, INC.
|
||
|
|
|
By: | /s/ Xxxxxxx Xxxxxx | |
Name: Xxxxxxx
Xxxxxx
Title: Corporate
Secretary
|
NICE
CARS, INC.
|
||
|
|
|
By: | /s/ Xxx Xxxx | |
Name: Xxx
Xxxx
Title: President
|
SHAREHOLDERS
OF NICE
CARS, INC.
|
||
|
|
|
/s/ Xxx Xxxx | ||
Xxx
Xxxx
|
/s/ Xxxxxxxx Xxxx | ||
Xxxxxxxx
Xxxx
|
-30-
INDEX
TO
EXHIBITS AND SCHEDULES
EXHIBIT
A [INTENTIONALLY
OMITTED]
EXHIBIT
B [INTENTIONALLY
OMITTED]
EXHIBIT
C [INTENTIONALLY
OMITTED]
EXHIBIT
D LIST
OF
INDIVIDUALS ENTERING INTO EMPLOYMENT AGREEMENTS WITH THE NICE CARS
ENTITIES
EXHIBIT
E LIST
OF
AMOUNTS TO BE PAID TO SHAREHOLDERS AT CLOSING
EXHIBIT
F LIST
OF
RELEASES / CONSENTS / TERMINATIONS NEEDED AT CLOSING
EXHIBIT
G WUERSCH
& XXXXXX, LLP
-
OPINION LETTER
EXHIBIT
H XXXXXXXXX,
XXXXXX & XXXXXXX, P.C. - OPINION LETTER
EXHIBIT
I CONFLICTS
EXHIBIT
J REQUIRED
CONSENT
EXHIBIT
K
POST-CLOSING
LEASE ASSIGNMENTS
SCHEDULE
3.4(G) LIABILITIES
AND OBLIGATIONS
SCHEDULE
3.4(H) NO
UNDISCLOSED EVENTS OR CIRCUMSTANCES
SCHEDULE
3.4(I) LITIGATION
AND OTHER PROCEEDINGS
SCHEDULE
3.4(K) COMPETING
INTERESTS
SCHEDULE
3.4(L) ENVIRONMENTAL
MATTERS
SCHEDULE
3.4(N) ABSENCE
OF CERTAIN CHANGES AND EVENTS
SCHEDULE
3.4(O) ASSETS
AND RIGHTS
SCHEDULE
3.4(P) TAXES
SCHEDULE
3.4(Q) TRANSACTION
WITH CERTAIN PERSONS
SCHEDULE
3.4(R) EMPLOYEE
PLANS
SCHEDULE
3.4(T) PERMITS
SCHEDULE
3.4(X) BANK
ACCOUNTS AND CREDIT CARDS
ANNEX
A
PLAN
AND
AGREEMENT OF MERGER OF FOREIGN CORPORATION INTO DELAWARE
CORPORATION
EXHIBIT
A
[INTENTIONALLY
OMITTED]
EXHIBIT
B
[INTENTIONALLY
OMITTED]
EXHIBIT
C
[INTENTIONALLY
OMITTED]
EXHIBIT
D
LIST
OF
INDIVIDUALS ENTERING INTO
EMPLOYMENT
AGREEMENTS
WITH
THE
NICE CARS ENTITIES
1. |
Xxxxxxx
X. Xxxx - President
|
2. |
Xxxxxxxx
X. Xxxx - Secretary
|
3. |
Xxxxxxx
X. Xxxx, XX - Corporate
Credit and Collections Manager
|
4. |
Xxxxxx
Xxxx - General
Manager
|
5. |
Xxxxxx
Xxxx - Human
Resources Manager
|
EXHIBIT
E
LIST
OF
AMOUNTS TO BE
PAID
TO
SHAREHOLDERS AT CLOSING
1. |
Xxxxxxx
X. Xxxx and Xxxxxxxx X. Xxxx -
$627,542.77
|
EXHIBIT
F
LIST
OF
RELEASES / CONSENTS / TERMINATIONS
NEEDED
AT
CLOSING
1. |
Gateway
Bank and Trust Company - Account No. [ *
]
|
(a)
|
Loan
in the name of Nice Cars, Inc. and personally guaranteed by
Xxxxxxx X. Xxxx, Xx.
|
(b) |
Line
of Credit in the amount of $[ * ]
|
(c)
|
Current
Balance - [ * ] paid at Closing.
|
2. |
New
South Federal Savings Bank - Account No. [ *
]
|
(a)
|
Loan
in the name of Nice Cars, Inc. and personally guaranteed by
Xxxxxxx X. Xxxx, Xx.
|
(b) |
Floor
Plan Arrangement in the amount of [ *
]
|
(c) |
Current
Balance - $0
|
3. |
Xxxxxx
Financial Services, Inc.
|
(a) |
Commitment
to participate in installment
contracts
|
(b) |
Dated
01/13/05
|
(c)
|
Approximate
balance (09/25/05) - [ * ]- does not include interest rebate or
any
prepayment penalties - per diem - [ *
]
|
(d)
|
Financial
Covenant (Section 12.6.18) "the control and ownership of the Seller
(NCCAC) and Dealer (Nice Cars) shall remain
unchanged"
|
(e)
|
Additional
Covenant (Section 15.2) "neither Dealer nor Seller may consolidate
with or
merge into any corporation or other entity or transfer its property
substantially as an entirety to any person unless the successor
party
unless" the surviving entity agrees to be bound by the Xxxxxx financial
documents.
|
(f)
|
Prepayment
penalty (Section 19.1) - [ * ] percent [ * ]% of Commitment Amount
- not
the amount outstanding. Original Commitment Amount per document
was [ * ]
and per memo from Xxx Xxxx to Xxxxxx Xxxxx dated 12/13/05, Commitment
Amount had been increased to [ * ].
|
4. |
Xxxxx
Xxxxxx - Lease
|
(a) |
Lease
in the name of Xxx Xxxx d/b/a Nice
Cars
|
(b) |
Location
- Rome
|
(c) |
Date
of Lease 10/03/02 as amended by Lease Amendment dated
08/25/04
|
(d) |
Term
of Lease expires 10/31/10
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without consent of
Lessor
|
5. |
Xxxxx
Xxxxxx - Lease
|
(a) |
Lease
in the name of Xxx Xxxx d/b/a Nice
Cars
|
(b) |
Location
- New Fort Oglethorpe lot
|
(c) |
Date
of Lease 03/16/04
|
(d) |
Term
of Lease expires 06/30/11 with two (2) five (5) year
options
|
(e) |
Rent
$[ * ] per month for the first 4 years, $[ * ] per month the last
3
years
|
(f) |
No
assignment or subletting without prior written consent of
Lessor
|
6. |
XX
Xxxxxx Estate - Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
- Xxxxxx
|
(c) |
Date
of Lease 07/23/03
|
(d) |
Term
of Lease expires 07/31/08
|
(e) |
Rent
$[ * ] per month - Annual CPI adjustment
|
(f) |
No
assignment or subletting without prior consent of
Lessor
|
(g) |
Signed
individually by Xxx Xxxx
|
7. |
XX
Xxxxxxx - Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
- Xxxxxx
|
(c) |
Date
of Lease 07/30/02 as amended by Amendment to Lease dated
08/14/04
|
(d)
|
Term
of Lease expires 07/31/07 with one (1) five (5) year option (rent
increases to $[ * ] per month)
|
(e) |
Rent
$[ * ] per month + payment of increase in
taxes
|
(f) |
No
assignment of subletting without consent of
Lessor
|
(g) |
Personal
guaranty of Xxx Xxxx
|
8. |
Village
Developers - Lease
|
(a) |
Lease
in the name of Xxx Xxxx for Nice Cars,
Inc.
|
(b) |
Location
- Corporate Headquarters
|
(c) |
Date
of Lease 01/02/05
|
(d)
|
Term
of Lease expires 01/31/08 with one (1) three (3) year option (rent
increase to $[ * ] per month)
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without consent of
Lessor
|
9. |
Xxxxx
Group, LLC - Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
- Xxxxxxx
|
(c) |
Date
of Lease 06/01/03
|
(d) |
Term
of Lease expires 05/31/05 with five (5) one (1) year
option
|
(e) |
Rent
$[ * ] per month
|
(f)
|
Sublease
to Xxxxxxx Xxxxxxx effective 08/01/05 at $[ * ] per year annual
rent -
sublease specifically does not release Nice Cars, Inc. from its
lease
obligation
|
(g)
|
No
record of personal guaranty
|
10. |
TNHJ
Properties - Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
0000 - 0000 Xxxxxxxx Xxxx
|
(c) |
Date
of Lease 12/18/03
|
(d)
|
Term
of Lease expires 12/31/09 with three (3) five (5) year options
(rent
increasing during each renewal
option)
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without consent of
Lessor
|
(g) |
Personal
Guaranty of Xxx Xxxx
|
11. |
Xxxxxx
- Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
- Storage lot / Lakeview Drive
|
(c) |
Date
of Lease 03/01/04
|
(d)
|
Term
of Lease expires 02/28/05 with five (5) one (1) year
options
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without consent of
Lessor
|
(g) |
No
record of personal guaranty
|
12. |
Xxxxx
- Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
0000 Xxxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxx
|
(c) |
Date
of Lease 05/22/01
|
(d)
|
Term
of Lease expires 06/01/06
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without prior written consent of
Lessor
|
(g) |
No
record of personal guaranty
|
13. |
Xxxxx
- Lease
|
(a) |
Lease
in the name of Nice Cars, Inc.
|
(b) |
Location
- Fort Oglethorpe
|
(c) |
Date
of Lease 06/01/01
|
(d)
|
Term
of Lease expires 05/31/06
|
(e) |
Rent
$[ * ] per month
|
(f) |
Illegible
|
(g) |
No
record of personal
guaranty
|
14. |
Xxxxxxxx
Sublease - Land:
|
(a) |
Lease
in the name of Nice Cars, Inc. and Nice Cars Capital Acceptance
Corporation
|
(b) |
Location
- Marietta, Georgia
|
(c) |
Date
of lease - July 11, 2006
|
(d) |
Term
of lease expires July 31, 2010 - One 36 month
option
|
(e) |
Rent
- $[ * ] per month
|
(f) |
Subject
to terms of original lease, original lease not attached to
sublease
|
(g) |
No
record of personal guaranty
|
15. |
Xxxxxxxx
Sublease - Building:
|
(a) |
Lease
in the name of Nice Cars, Inc. and Nice Cars Capital Acceptance
Corporation
|
(b) |
Location
- Marietta, Georgia
|
(c) |
Date
of lease - July 7, 2006
|
(d) |
Term
of lease - month to month until sublessee gives sublessor 30 days
notice
of termination
|
(e) |
Rent
- $[ * ] per month
|
(f) |
Subject
to terms of original lease, original lease not attached to
sublease
|
(g) |
No
record of personal guaranty
|
16. |
ADT
Automotive - Baltimore / Washington Auto
Exchange
|
(a) |
Personal
Guaranty of Xxx Xxxx dated 10/12/98
|
(b) |
Guarantee
of financial obligations and odometer disclosure
statements
|
(c) |
Current
obligation per Xxx Xxxx - $0
|
17. |
Bel
Air Auto Auction
|
(a) |
Personal
Guaranty of Xxx Xxxx dated 05/27/98
|
(b) |
Guarantee
of financial obligations and Guarantee's title to each
vehicle
|
(c) |
Current
obligation per Xxx Xxxx - $0
|
18. |
ABC
- REDTOP Auto Auction
|
(a) |
Personal
Guaranty of Xxx Xxxx dated 12/16/05
|
(b)
|
Guarantee
of financial obligations and completeness and accuracy of each
odometer
disclosure statement
|
(c) |
Current
obligation per Xxx Xxxx - $0
|
19. |
PADE
- Pennsylvania Auto Dealers Exchange,
Inc.
|
(a) |
Authorization
to Buy and Sell at PADE
|
(b) |
Authorization
and Disclaimer
|
(c)
|
"Dealership
agrees to provide to subscribing auto auction and/or auction access
on a
timely basis any significant changes relative to their business
including
to but not limited to information regarding licensees, banks and
dealer
representatives"
|
(d)
|
Current
obligation per Xxx Xxxx - $0
|
20. |
Xxxxx
Fargo Financial - Account No. [ * ]
|
(a) |
Equipment
Lease for surveillance equipment
|
(b) |
Lease
dated 12/03/03
|
(c) |
Payments
- 60 monthly payments of [ * ] per
month
|
(d) |
Assignment
provision - Nice Cars has "no right to sell, transfer, assign or
sublease
the equipment or this Lease"
|
EXHIBIT
G
WUERSCH
& XXXXXX, LLP
-
OPINION LETTER
EXHIBIT
H
XXXXXXXXX,
XXXXXX & XXXXXXX, P.C. - OPINION LETTER
EXHIBIT
I
CONFLICTS
1. |
All
items listed on Exhibit F to this Share Purchase and Exchange
Agreement.
|
2. |
All
items listed on Schedule 3.4(t) to this Share Purchase and Exchange
Agreement.
|
EXHIBIT
J
REQUIRED
CONSENT
1. |
All
items listed on Exhibit F to this Share Purchase and exchange
Agreement.
|
2. |
All
items listed on Schedule 3.4(t) to this Share Purchase and Exchange
Agreement.
|
EXHIBIT
K
POST-CLOSING
LEASE ASSIGNMENTS
1. |
Xxxxx
Xxxxxx - Lease
|
(a) |
Location
- Rome
|
(b) |
Date
of Lease 10/03/02 as amended by Lease Amendment dated
08/25/04
|
(c) |
Term
of Lease expires 10/31/10
|
2. |
Xxxxx
Xxxxxx - Lease
|
(a) |
Location
- New Fort Oglethorpe lot
|
(b) |
Date
of Lease 03/16/04
|
(c) |
Term
of Lease expires 06/30/11 with two (2) five (5) year
options
|
3. |
XX
Xxxxxxx - Lease
|
(a) |
Location
- Xxxxxx
|
(b) |
Date
of Lease 07/30/02 as amended by Amendment to Lease dated
08/14/04
|
(c)
|
Term
of Lease expires 07/31/07 with one (1) five (5) year option
|
4. |
Village
Developers - Lease
|
(a) |
Location
- Corporate Headquarters
|
(b) |
Date
of Lease 01/02/05
|
(c)
|
Term
of Lease expires 01/31/08 with one (1) three (3) year option
|
5. |
TNHJ
Properties - Lease
|
(a) |
Location
0000 - 0000 Xxxxxxxx Xxxx
|
(b) |
Date
of Lease 12/18/03
|
(c)
|
Term
of Lease expires 12/31/08 with three (3) five (5) year options
|
6. |
X.
X. Xxxxxx Estate - Lease
|
(a) |
Location
- Xxxxxx
|
(b) |
Date
of Lease - 07/23/03
|
(c) |
Term
of Lease expires 08/01/08 with one (1) five (5) year
renewal
|
7. |
Xxxxx
Group, LLC - Lease
|
(a) |
Location
- Xxxxxxx
|
(b) |
Date
of Lease 06/01/03
|
(c) |
Term
of Lease expires 05/31/05 with five (5) one (1) year
option
|
8. |
Xxxxxx
- Lease
|
(a) |
Location
- Storage lot / Lakeview Drive
|
(b) |
Date
of Lease 03/01/04
|
(c)
|
Lease
expires 02/28/05 with five (5) one (1) year
options
|
9. |
Xxxxx
- Lease
|
(a) |
Location
0000 Xxxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxx
|
(b) |
Date
of Lease 05/22/01
|
(c)
|
Term
of Lease expires 06/01/06
|
10. |
Xxxxx
- Lease
|
(a) |
Location
- Fort Oglethorpe
|
(b) |
Date
of Lease 06/01/01
|
(c)
|
Term
of Lease expires 05/31/06
|
11. |
Xxxxxxxx
Sublease - Land:
|
(a) |
Location
- Marietta, Georgia
|
(b) |
Date
of lease - July 11, 2006
|
(c) |
Term
of lease expires July 31, 2010 - One 36 month
option
|
12. |
Xxxxxxxx
Sublease - Building:
|
(a) |
Location
- Marietta, Georgia
|
(b) |
Date
of lease - July 7, 2006
|
(c) |
Term
of lease - month to month until sublessee gives sublessor 30 days
notice
of termination
|
Schedule
3.4(g)
LIABILITIES
AND OBLIGATIONS
1.
|
All
items listed on Exhibit F to the Share Purchase and Exchange
Agreement.
|
2.
|
Nice
Cars, Inc. and Nice Cars Capital Acceptance Corporation are subject
to a
pending audit by the Internal Revenue Service ("IRS") for the years
2002,
2003 and 2004. During the process of the audit, the IRS raised
an issue of
the amount of discount Nice Cars, Inc. takes at the time it sells
the
customers' financing packages to Nice Cars Capital Acceptance Corporation.
At one time, the IRS indicated that it was going to be the IRS's
position
that the discount should be deferred and not taken by Nice Cars,
Inc.
until such time as Nice Cars Capital Acceptance Corporation had
incurred
an actual loss on each customer's financial package. If the IRS
were to
prevail in its position that the discount be deferred, this would
have a
negative impact on Nice Cars, Inc. and Nice Cars Capital Acceptance
Corporation because this would cause Nice Cars, Inc. to record
a higher
net income in the year the customer's financial package is sold
to Nice
Cars Capital Acceptance Corporation. However, the IRS revenue agent
has
now orally advised the certified public accountant for Nice Cars,
Inc. and
Nice Cars Capital Acceptance Corporation that the IRS will not
raise the
issue of the deferral of the discount in the current audit for
years 2002,
2003 and 2004, and instead the IRS is agreeing to allow a [ * ]
percent [
* ]% discount. Until receipt of the revenue agent's report for
the audit
period 2002, 2003 and 2004, there can be no assurance that the
IRS will
not be raised the issue of the deferral of the discount. Also,
there can
be no assurance that the deferral of the discount will not be raised
in
audits of future years by the IRS.
|
3.
|
Estimated
Tennessee franchise and excise taxes for the period from
January 1, 2006 through the date of
closing
|
(a)
|
Nice
Cars, Inc. [ * ]
|
(b)
|
Nice
Cars, Capital Acceptance Corporation [ *
]
|
4.
|
Estimated
Georgia income taxes for the period from January 1, 2006 through
the date of closing
|
(a)
|
Nice
Cars, Inc. [ * ]
|
(b)
|
Nice
Cars, Capital Acceptance Corporation [ *
]
|
5.
|
Estimated
tax distribution due Ray and Xxxxxxxx Xxxx for the year ending
December 31, 2005 for the S-Corporation income taxable to Ray
and Xxxxxxxx Xxxx.
|
(a)
|
Nice
Cars, Inc. [ * ]
|
(b)
|
Nice
Cars, Capital Acceptance Corporation [ *
]
|
6.
|
Estimated
tax reimbursement due Ray and Xxxxxxxx Xxxx for the period from
January 1, 2006 through the date of closing for the
S-Corporation income taxable to Ray and Xxxxxxxx Xxxx.
|
(a)
|
Nice
Cars, Inc. [ * ]
|
(b)
|
Nice
Cars, Capital Acceptance Corporation [ *
]
|
7.
|
Any
amounts or accruals due under any of the Employee Plans described
on
Schedule 3.4(r)
|
Schedule
3.4(h)
No
Undisclosed Events or Circumstances
1. Nice
Cars, Inc. and Nice Cars Capital Acceptance Corporation are subject to a
pending
audit by the Internal Revenue Service ("IRS") for the years 2002, 2003 and
2004.
During the process of the audit, the IRS raised an issue of the amount of
discount Nice Cars, Inc. takes at the time it sells the customers' financing
packages to Nice Cars Capital Acceptance Corporation. At one time, the IRS
indicated that it was going to be the IRS's position that the discount should
be
deferred and not taken by Nice Cars, Inc. until such time as Nice Cars Capital
Acceptance Corporation had incurred an actual loss on each customer's financial
package. If the IRS were to prevail in its position that the discount be
deferred, this would have a negative impact on Nice Cars, Inc. and Nice Cars
Capital Acceptance Corporation because this would cause Nice Cars, Inc. to
record a higher net income in the year the customer's financial package is
sold
to Nice Cars Capital Acceptance Corporation. However, the IRS revenue agent
has
now orally advised the certified public accountant for Nice Cars, Inc. and
Nice
Cars Capital Acceptance Corporation that the IRS will not raise the issue
of the
deferral of the discount in the current audit for years 2002, 2003 and 2004,
and
instead the IRS is agreeing to allow a [ * ] percent [ * ]% discount. Until
receipt of the revenue agent's report for the audit period 2002, 2003 and
2004,
there can be no assurance that the IRS will not be raised the issue of the
deferral of the discount. Also, there can be no assurance that the deferral
of
the discount will not be raised in audits of future years by the
IRS.
Schedule
3.4(i)
Litigation
and Other Proceedings
1. Ms.
Xxxx
Xxxxxx made a request for arbitration in a letter dated December 28, 2005.
In
that letter, she asserted damages in excess of $250,000. Xx. Xxxxxx'x claim
relates to allegations that Nice Cars failed to comply with warranties in
connection with the sale of a used car, which car has been repossessed by
Nice
Cars. Management of Nice Cars believe that Xx. Xxxxxx'x claim is without
merit
and, even to the extent if she were successful, the damages sought are in
excess
of what she could reasonably be expected to recover. Xx. Xxxxxx has verbally
agreed to settle her claim if Nice Cars agrees not to xxx her or provide
a
negative report to any credit reporting agency. Counsel for Nice Cars sent
Xx.
Xxxxxx a mutual release and settlement agreement for her to sign to resolve
this
matter, but Nice Cars never received a signed copy from Xx. Xxxxxx.
2. As
of
August 31, 2006, Nice Cars is a creditor in 496 bankruptcies. As a part of
Nice
Cars' ordinary business practices, it is usually paid through a bankruptcy
plan
determined by the Bankruptcy Trustee at a reduced interest rate or the
underlying car will be returned back to it.
3. Mr.
Xxxxxxxx Xxxxx informed Nice Cars via letter of a potential claim involving
an
accident where he allegedly fell on the Nice Cars premises. To date, no further
action has been taken by Xx. Xxxxx in this matter and Nice Cars management
believes the matter is complete.
4. In
the
ordinary course of business, authorities for the State of Tennessee may take
possession of a vehicle from a Nice Cars' customer in connection with the
arrest
of such customer. When this occurs, Nice Cars will send notice to the Tennessee
Department of Safety-Legal Division reflecting its legal interest in such
cars.
In the ordinary course of business, the cars will either be returned to Nice
Cars or Nice Cars will be paid as a creditor in the event of the disposal
of
such cars by the State. Currently, there are approximately five (5) cars
that
are in the possession of the Tennessee Department of Safety.
5. Xx.
Xxxxx
Xxxxxxxx has filed a claim against Nice Cars for a breach of contract. The
claim
is pending in Catoosa County Magistrate Court. Nice Cars would estimate that
any
potential liability would not exceed $2,500.
6. Mr.
Xxxxxx Xxxxxx has filed a claim against Nice Cars for breach of contract
based
on Nice Cars' repossession of vehicle. Magistrate Court ruled in favor of
Xxxxxx, but he case was appealed to Superior Court of Catoosa County. The
claim
is for approximately $1,000.
7. Xx.
Xxxxxx Xxxxxx has filed a claim against Nice Cars for breach of contract.
Xx.
Xxxxxx was awarded a default judgment in Xxxxxxxx County General Sessions
Court.
This case has been appealed to Circuit Court. This case involves a claim
of
about $10,000.
8. Nice
Cars
is involved in a lien dispute involving a car purchased by April Bowling.
This
case was originally in Catoosa County Magistrate Court. It involves competing
lien claims. The Magistrate Court ruled in favor of the mechanic in the amount
of $1,960.00, and the case has been appealed to Catoosa Superior Court.
9. Ms.
Nina
Xxxxxx Xxxxxxx brought suit against Nice Cars in Xxxxxxxx County Sessions
Court.
However, a civil warrant was never served on Nice Cars. There have been no
material developments in the case since that time. As of the current date,
Nice
Cars still has not been served with process in connection with this
matter.
10. On
May
25, 2006, Providence Washington sued Nice Cars alleging breach of contract
by
Nice Cars for failure to pay an adjusted premium. The parties have agreed
to
settle this suit for $16,000 and expect the suit to be dismissed once the
release is executed and the settlement paid.
Schedule
3.4(k)
Competing
Interests
The
Shareholders have an ownership or similar interest in the following assets
used
in connection with the operation of the Business of NCCAC:
1. |
Xxxxx
Xxxxxx - Lease
|
(a) |
Lease
in the name of Xxx Xxxx d/b/a Nice
Cars
|
(b) |
Location
- Rome
|
(c) |
Date
of Lease 10/03/02 as amended by Lease Amendment dated
08/25/04
|
(d) |
Term
of Lease expires 10/31/10
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without consent of
Lessor
|
2. |
Xxxxx
Xxxxxx - Lease
|
(a) |
Lease
in the name of Xxx Xxxx d/b/a Nice
Cars
|
(b) |
Location
- New Fort Oglethorpe lot
|
(c) |
Date
of Lease 03/16/04
|
(d) |
Term
of Lease expires 06/30/11 with two (2) five (5) year
options
|
(e)
|
Rent
$[ * ] per month for the first 4 years, $[ * ] per month the last
3
years
|
(f) |
No
assignment or subletting without prior written consent of
Lessor
|
3. |
Village
Developers - Lease
|
(a) |
Lease
in the name of Xxx Xxxx for Nice Cars,
Inc.
|
(b) |
Location
- Corporate Headquarters
|
(c) |
Date
of Lease 01/02/05
|
(d)
|
Term
of Lease expires 01/31/08 with one (1) three (3) year option (rent
increase to $[ * ] per month)
|
(e) |
Rent
$[ * ] per month
|
(f) |
No
assignment or subletting without consent of
Lessor
|
4. |
ADT
Automotive - Baltimore / Washington Auto
Exchange
|
(a) |
Personal
Guaranty of Xxx Xxxx dated 10/12/98
|
(b) |
Guarantee
of financial obligations and odometer disclosure
statements
|
(c) |
Current
obligation per Xxx Xxxx - $0
|
5. |
Bel
Air Auto Auction
|
(a) |
Personal
Guaranty of Xxx Xxxx dated 05/27/98
|
(b) |
Guarantee
of financial obligations and Guarantee's title to each
vehicle
|
(c) |
Current
obligation per Xxx Xxxx - $0
|
6. |
ABC
- REDTOP Auto Auction
|
(a) |
Personal
Guaranty of Xxx Xxxx dated 12/16/05
|
(b)
|
Guarantee
of financial obligations and completeness and accuracy of each
odometer
disclosure statement
|
(c) |
Current
obligation per Xxx Xxxx - $0
|
Schedule
3.4(n)
Absence
of Certain Changes and Events
1. Capital
Expenditures
(a) Opening
of Marietta lot - leasehold improvements - approximate cost [ * ]
(b) Passtime
devises - approximate cost - [ * ]
2. Nice
Cars, Inc. and Nice Cars Capital Acceptance Corporation are subject to a
pending
audit by the Internal Revenue Service ("IRS") for the years 2002, 2003 and
2004.
During the process of the audit, the IRS raised an issue of the amount of
discount Nice Cars, Inc. takes at the time it sells the customers' financing
packages to Nice Cars Capital Acceptance Corporation. At one time, the IRS
indicated that it was going to be the IRS's position that the discount should
be
deferred and not taken by Nice Cars, Inc. until such time as Nice Cars Capital
Acceptance Corporation had incurred an actual loss on each customer's financial
package. If the IRS were to prevail in its position that the discount be
deferred, this would have a negative impact on Nice Cars, Inc. and Nice Cars
Capital Acceptance Corporation because this would cause Nice Cars, Inc. to
record a higher net income in the year the customer's financial package is
sold
to Nice Cars Capital Acceptance Corporation. However, the IRS revenue agent
has
now orally advised the certified public accountant for Nice Cars, Inc. and
Nice
Cars Capital Acceptance Corporation that the IRS will not raise the issue
of the
deferral of the discount in the current audit for years 2002, 2003 and 2004,
and
instead the IRS is agreeing to allow a [ * ] percent [ * ]% discount. Until
receipt of the revenue agent's report for the audit period 2002, 2003 and
2004,
there can be no assurance that the IRS will not be raised the issue of the
deferral of the discount. Also, there can be no assurance that the deferral
of
the discount will not be raised in audits of future years by the
IRS.
3. Distributions
made to Shareholders since August 31, 2006.
(a) Xxx
Xxxx
- partial repayment of shareholder debt in the amount of [ * ].
(b) Salary
and monthly bonuses paid to Xxx Xxxx during September, 2006 in the ordinary
course of business approximate amount [ * ].
(c) Salary
and monthly bonuses paid to Xxxxxxxx Xxxx during September, 2006 in the ordinary
course of business approximate amount [ * ].
Schedule
3.4(o)
Assets
and Rights
1. Xxxxx
Fargo Financial - Account No. [ * ]
(a) Equipment
Lease for surveillance equipment
(b) Lease
dated 12/03/03
(c) Payments
- 60 monthly payments of [ * ] per month
(d) Assignment
provision - Nice Cars has "no right to sell, transfer, assign or sublease
the
equipment or this Lease"
Schedule
3.4(p)
Taxes
1. Nice
Cars, Inc. and Nice Cars Capital Acceptance Corporation are subject to a
pending
audit by the Internal Revenue Service ("IRS") for the years 2002, 2003 and
2004.
During the process of the audit, the IRS raised an issue of the amount of
discount Nice Cars, Inc. takes at the time it sells the customers' financing
packages to Nice Cars Capital Acceptance Corporation. At one time, the IRS
indicated that it was going to be the IRS's position that the discount should
be
deferred and not taken by Nice Cars, Inc. until such time as Nice Cars Capital
Acceptance Corporation had incurred an actual loss on each customer's financial
package. If the IRS were to prevail in its position that the discount be
deferred, this would have a negative impact on Nice Cars, Inc. and Nice Cars
Capital Acceptance Corporation because this would cause Nice Cars, Inc. to
record a higher net income in the year the customer's financial package is
sold
to Nice Cars Capital Acceptance Corporation. However, the IRS revenue agent
has
now orally advised the certified public accountant for Nice Cars, Inc. and
Nice
Cars Capital Acceptance Corporation that the IRS will not raise the issue
of the
deferral of the discount in the current audit for years 2002, 2003 and 2004,
and
instead the IRS is agreeing to allow a [*] percent [ * ]% discount. Until
receipt of the revenue agent's report for the audit period 2002, 2003 and
2004,
there can be no assurance that the IRS will not be raised the issue of the
deferral of the discount. Also, there can be no assurance that the deferral
of
the discount will not be raised in audits of future years by the
IRS.
Schedule
3.4(q)
Transaction
With Certain Persons
1. Certain
of the leases listed on Exhibit K (items 4 through 20) are in the name of
Xxx
Xxxx but the leased premises are used for the benefit of the NCCAC. Xxx Xxxx
will execute any and all documents necessary to convey all of his rights,
title
and interest under the lease to the Company.
2. Certain
of the auto auction agreements have been personally guaranteed by Xxx Xxxx
(see
Exhibit F items 16 through 19).
Schedule
3.4(r)
Employee
Plans
1. Holidays:
NCCAC
observes 6 paid holidays per year, which are: New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Hourly
employees must be employed 90 days prior to the holiday to receive holiday
pay.
All employees must work the scheduled day before and after the holiday to
be
eligible to receive holiday pay. Part time employees are not eligible to
receive
holiday pay.
2. Vacations:
Employees
will receive [ * ] week after one year, [ * ] weeks after [ * ] years, [
* ]
weeks after [ * ] years, [ * ] weeks after [ * ] years. Supervisor approval
must
be obtained for scheduling of vacation period. Vacations must be taken, they
cannot be carried over to the following year. Any employee who resigns or
is
discharged will not receive pay for the unused vacation earned. Employees
may
receive pay in lieu of vacation time with supervisor approval. Pay will be
based
on [ * ] employment for commissioned sales personnel.
3. Sick
Pay:
The
company provides sick pay of [ * ] day after one year, [ * ] days after two
years and [ * ] days after three years. Sick pay does not accumulate if not
used
and may not be paid in lieu of sick time.
4. Group
Health & Life Insurance: [ * ]
5. Nice
Cars, Inc. 401(k) Plan: [ * ]
6. Bonus
Plans:
(a) Xxxxxxx
X. Xxxx receives a monthly bonus equal to 1.65% of Nice Cars' Net Pre-tax
Income
for the applicable month.
(b) Xxxxxxxx
X. Xxxx receives a monthly bonus equal to 1.65% of Nice Cars' Net Pre-tax
Income
for the applicable month.
(c) Xxxxxxx
X. Xxxx, XX receives a monthly bonus equal to 1.30% of Nice Cars' Net Pre-tax
Income for the applicable month. Xxxxxxx X. Xxxx, XX receives an additional
monthly bonus based upon Nice Cars Charge-Off Percentage (as follows). The
amount of the monthly bonus shall be based upon the Nice Cars
Charge-Off
Percentage for such month as follows: 3.00% or less equals an $8,000 bonus;
3.01% to 3.25% equals a $7,000 bonus; 3.26% to 3.50% equals a $6,000 bonus;
3.51% to 3.75% equals a $5,000 bonus; and 3.76% to 4.00% equals a $4,000
bonus;
4.01% to 4.25% equals a $3,000 bonus; 4.26% to 4.50% equals a $2,000 bonus;
4.51% to 4.75% equals a $1,500 bonus; 4.76% to 5.00% equals a $1,000 bonus;
and
5.1% or more equals no bonus.
(d) Xxxxxx
Xxxx receives
a monthly bonus equal to 1.30% of Nice Cars' Net Pre-tax Income for the
applicable month. Xxxxxx
Xxxx receives a monthly bonus equal to $40 per Net Unit Sold.
(e) Xxxxxx
Xxxx receives a monthly bonus equal to 1.30% of Nice Cars' Net Pre-tax Income
for the applicable month.
(f) All
salaried employees participate in a [ * ] percent [ * ]% bonus plan in which
[ *
] of the pretax profit earned by the Company each month is distributed to
all
salaried personnel at discretion of management.
(g) Other
bonus plans for non-executive employees based on unit sales, collection activity
and other incentives.
Schedule
3.4(t)
Permits
1. All
Leases listed on Exhibit K (items 4 through 15) can not be assigned or assumed
by the Company without Landlord's prior written consent.
2. The
Company will need to apply for new auto auction licenses with the
following:
(a) [
*
]
(b) [
*
]
(c) [
*
]
(d)
[
*
]
3. The
Company will need to file new applications with the states of Tennessee and
Georgia for a Used Motor Vehicle Dealer License for each Nice Cars
location.
4. The
Company will need to file for local business licenses in each jurisdiction
where
it does business.
5. The
Company will need to file sales tax registration application with Tennessee
and
Georgia Department of Revenue.
6. None
of
the permits or licenses of NCCAC are assignable to the Company.
Schedule
3.4(x)
Bank
Accounts and Credit Cards
A. Bank
Accounts
1. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
2. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
3. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
4. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
5. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
6. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
7. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
8. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
9. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
10. Regions
Bank
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
(c) Authorized
Signers : [
*
]
B. Credit
Cards
1. American
Express Executive Business Card
(a) Account
Name : [
*
]
(b) Account
Number : [
*
]
2. Platinum
Plus for Business
(a) Account
Name : [
*
].
(b) Account
Number : [
*
]
ANNEX
A
PLAN
AND
AGREEMENT OF MERGER
OF
FOREIGN CORPORATION INTO
DELAWARE
CORPORATION
(attached)
PLAN
AND AGREEMENT OF MERGER
OF
FOREIGN CORPORATION INTO DELAWARE CORPORATION
AGREEMENT
OF MERGER made this 4th day of October, 2006, between Nice Cars, Inc., a
Georgia
Corporation (the “Georgia Corporation”), and Nice Cars Operations AcquisitionCo,
Inc., a Delaware Corporation (the “Delaware Corporation”).
WHEREAS,
the Georgia Corporation has an authorized capital stock consisting of 100,000
shares of common stock, par value $.01 per share, of which 1,000 shares have
been duly issued and are now outstanding (the “Georgia Corporation Shares”);
WHEREAS,
the Delaware Corporation has an authorized capital stock consisting of 100
shares of common stock, par value $.01 per share (the "Common Stock") of
which one
hundred (100) shares have been validly
issued, fully paid, are nonassessable and
are
now outstanding;
WHEREAS,
the Delaware Corporation is a wholly owned subsidiary of Manchester, Inc.,
a
Nevada corporation (the “Parent Corporation”);
WHEREAS,
the Parent Corporation has previously issued 618,750 shares of its common
stock,
par value $0.001 per share (“Parent Corporation Shares”) to the Delaware
Corporation;
WHEREAS,
the Georgia Corporation and the Delaware Corporation intend, by approving
resolutions authorizing this Agreement of Merger, to adopt this Agreement
of
Merger as a plan of reorganization within the meaning of Section 368(a) of
the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder; and
WHEREAS,
the stockholders and directors of the Board of each of the Georgia Corporation
and the Delaware Corporation deem it advisable and generally to the advantage
and welfare of the two corporate parties that the Georgia Corporation merge
into
the Delaware Corporation as permitted under the provisions of Georgia Business
Corporation Law and of the General Corporation Law of the State of Delaware.
NOW,
THEREFORE, in consideration of the premises and of the mutual agreements
herein
contained and of the mutual benefits hereby provided, it is agreed by and
between the parties hereto as follows:
1.
MERGER. The Georgia Corporation be, and it hereby is, merged into the Delaware
Corporation.
2.
EFFECTIVE DATE. This Agreement of Merger shall become effective immediately
upon
compliance with the laws of the States of Georgia and Delaware, the time
of such
effectiveness being hereinafter called the Effective Date.
3.
SURVIVING CORPORATION. The Delaware Corporation shall survive the merger
herein
contemplated and shall continue to be governed by the laws of the State of
Delaware, but the separate corporate existence of the Georgia Corporation
shall
cease as of the Effective Date.
4.
AUTHORIZED CAPITAL. The authorized capital stock of the Delaware Corporation
following the Effective Date shall be one hundred (100) shares of Common
Stock,
par value $.01 per share, unless and until the same shall be changed in
accordance with the laws of the State of Delaware.
5.
CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the Delaware
Corporation in effect immediately prior to the Effective Date shall continue
in
full force and effect as the Certificate of Incorporation of the Delaware
Corporation as the surviving corporation at the Effective Date and following
the
Effective Date until the same shall be amended or repealed in accordance
with
the provisions thereof, which power to amend or repeal is hereby expressly
reserved, and all rights or powers of whatsoever nature conferred in such
Certificate of Incorporation or herein upon any shareholder or director or
officer of the Delaware Corporation or upon any other persons whomsoever
are
subject to the reserve power. Such Certificate of Incorporation shall constitute
the Certificate of Incorporation of the Delaware Corporation separate and
apart
from this Agreement of Merger and may be separately certified as the Certificate
of Incorporation of the Delaware Corporation.
6.
BYLAWS. The Bylaws of the Delaware Corporation as they exist on the effective
date shall be the Bylaws of the Delaware Corporation following the Effective
Date unless and until the same shall be amended or repealed in accordance
with
the provisions thereof.
7.
BOARD
OF DIRECTORS. The members of the Board of Directors of the Delaware Corporation
immediately after the effective date of the merger shall be those persons
who
were the members of the Board of Directors of the Delaware Corporation
immediately prior to the effective date of the merger, and such persons shall
serve in such offices, respectively, for the terms provided by law or in
the
Certificate of Incorporation and/or the Bylaws, or until their respective
successors are elected and qualified.
8.
FURTHER ASSURANCE OF TITLE. If at any time the Delaware Corporation shall
consider or be advised that any acknowledgments or assurances in law or other
similar actions are necessary or desirable in order to acknowledge or confirm
in
and to the Delaware Corporation any right, title, or interest of the Georgia
Corporation held immediately prior to the Effective Date. The Georgia
Corporation and its proper officers and directors serving the Georgia
Corporation immediately prior to the Effective Date shall and will execute
and
deliver all such acknowledgments or assurances in law and do all things
necessary or proper to acknowledge or confirm such right, title, or interest
in
the Delaware Corporation as shall be necessary to carry out the purposes
of this
Agreement of Merger, and the Delaware Corporation and the proper officers
and
directors thereof are fully authorized to take any and all such action in
the
name of the Georgia Corporation or otherwise.
9.
RETIREMENT OF ORGANIZATION STOCK. Forthwith upon the Effective Date, the
authorized shares of common stock of the Georgia Corporation presently issued
and outstanding shall be exchanged for 618,750 shares of common stock the
Parent
Corporation, which shall be delivered from the assets of the Delaware
Corporation.
10.
CONVERSION OF OUTSTANDING STOCK. As of the Effective Date, each of the issued
and outstanding shares of Common Stock of the Delaware Corporation and all
rights in respect thereof shall continue in effect as fully paid and
nonassessable shares of Common Stock of the Delaware Corporation, and each
certificate nominally representing Georgia Corporation Shares shall become
null
and
void.
The holders of such certificates shall surrender the same to the Delaware
Corporation in exchange for the Parent Corporation Shares delivered from
the
assets of the Delaware Corporation.
11.
RIGHTS AND LIABILITIES OF DELAWARE CORPORATION. At and after the Effective
Date
of the merger, the Delaware Corporation shall succeed to and possess, without
further act or deed, all of the estate, rights, privileges, powers, and
franchises, both public and private, and all of the property, real, personal,
and mixed, of each of the parties hereto; all debts due to the Georgia
Corporation or whatever account shall be vested in the Delaware Corporation;
all
claims, demands, property, rights, privileges, powers and franchises and
every
other interest of either of the parties hereto shall be as effectively the
property of the Delaware Corporation as they were of the respective parties
hereto; the title to any real estate vested by deed or otherwise in the Georgia
Corporation shall not revert or be in any way impaired by reason of the merger,
but shall be vested in the Delaware Corporation; all rights of creditors
and all
liens upon any property of either of the parties hereto shall be preserved
unimpaired, limited in lien to the property affected by such lien at the
effective time of the merger; all debts, liabilities, and duties of the
respective parties hereto shall thenceforth attach to the Delaware Corporation
and may be enforced against it to the same extent as if such debts, liabilities,
and duties had been incurred or contracted by it; and the Delaware Corporation
shall indemnify and hold harmless the officers and directors of each of the
parties hereto against all such debts, liabilities and duties and against
all
claims and demands arising out of the merger.
12.
SERVICE OF PROCESS ON DELAWARE CORPORATION. The Delaware Corporation agrees
that
it may be served with process in the State of Georgia in any proceeding for
enforcement of any obligation of the Georgia Corporation as well as for the
enforcement of any obligation of the Delaware Corporation arising from the
merger, including any suit or other proceeding to enforce the right of any
shareholder as determined in appraisal proceedings pursuant to the provisions
of
the Georgia Business Corporation Law.
13.
TERMINATION. This Agreement of Merger may be terminated and abandoned by
joint
action of the Board of Directors of the Delaware Corporation and the Georgia
Corporation at any time prior to the Effective Date, whether before or after
approval by the shareholders of the two corporate parties hereto.
14.
PLAN
OF REORGANIZATION. This Agreement of Merger is intended to constitute a tax-free
Plan of Reorganization under Section 368(a) of the Internal Revenue Code
of
1986, as amended, to be carried out in the manner, on the terms and subject
to
the conditions herein set forth.
15.
EXPENSES AND RIGHTS OF DISSENTING SHAREHOLDERS. The Delaware Corporation
shall
pay all expenses of carrying this Agreement of Merger into effect and of
accomplishing the merger, including amounts, if any, to which dissenting
shareholders of the Georgia Corporation may be entitled by reason of this
merger.
[Signature
Page Follows]
IN
WITNESS WHEREOF each of the corporate parties hereto has caused this Agreement
of Merger to be executed by an authorized officer pursuant to authority duly
granted by the respective stockholders and directors of the Board of each
such
corporation in accordance with Section 252 of Delaware General Corporation
Law.
NICE
CARS, INC.
By:
/s/
Xxxxxxx Xxxx
Name:
Xxxxxxx
Xxxx
Title: President
NICE
CARS
OPERATIONS ACQUISITIONCO, INC.
By:
/s/
Xxxxxxx Xxxxxx
Name:
Xxxxxxx
Xxxxxx
Title:
Corporate
Secretary