AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXXXXXXXX.XXX, INC., a Florida corporation,
NEW LEAF DISTRIBUTING COMPANY, a Georgia corporation,
and
AL-WALI CORPORATION, a Georgia corporation
April 6, 2001
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of April 6,
2001, by and among XXXXXXXXXXXX.XXX, INC., a Florida corporation ("NAC"), NEW
LEAF DISTRIBUTING COMPANY, a Georgia corporation and wholly owned subsidiary of
NAC ("Acquisition Sub"), and AL-WALI, INC., a Georgia corporation doing business
as New Leaf Distributing Company ("New Leaf"). NAC, Acquisition Sub, and New
Leaf are sometimes hereinafter referred to collectively as the "Companies", or
individually as a "Company".
WHEREAS, the respective Boards of Directors of the Companies deem it
advisable and in the best interests of their respective stockholders that New
Leaf be acquired by and become a wholly owned subsidiary of NAC and, in
furtherance thereof, the Boards of Directors of each of the Companies have
approved, as applicable, the merger of New Leaf with and into Acquisition Sub,
upon the terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), New Leaf
shall be merged (the "Merger") with and into Acquisition Sub, with Acquisition
Sub being the surviving corporation in the Merger (the "Surviving Corporation"),
and shall continue to be governed by the laws of the State of Georgia, and the
separate existence of New Leaf shall thereupon cease. The Merger shall have the
effects set forth in the Georgia Business Corporation Code (the "GBCC"). The
name of the Surviving Corporation shall be "New Leaf Distributing Company".
1.2 Effective Time of the Merger. The Merger shall become effective
(the "Effective Time") upon the completion of the filing of a properly executed
Certificate of Merger with the Secretary of State of the State of Georgia, which
filings shall be made on the date of the Closing after satisfaction of the
conditions set forth in Article VIII.
ARTICLE II.
THE SURVIVING CORPORATION AND NAC
2.1 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of New Leaf as in effect at the Effective Time shall
be the Articles of Incorporation of the Surviving Corporation until thereafter
amended in accordance with such Articles of Incorporation and applicable law;
provided, however, that the Articles of Incorporation shall be amended to
reflect the name of the Surviving Corporation as "New Leaf Distributing
Company".
2.2 Bylaws of the Surviving Corporation. The Bylaws of New Leaf as
in effect at the Effective Time shall be the Bylaws of the Surviving Corporation
until thereafter amended in accordance with such Bylaws and applicable law;
provided, however, that such Bylaws shall be amended to reflect the name of the
Surviving Corporation as "New Leaf Distributing Company".
2.3 Directors and Officers of the Surviving Corporation.
(a) Effective upon the Effective Time, the
following individuals shall be the directors of the Surviving Corporation, to
serve until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation and Bylaws of
the Surviving Corporation, or as otherwise provided by applicable law: Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxxx Xxxxxxxx.
(b) Effective upon the Effective Time, the
following individuals shall be the officers of the Surviving Corporation, to
serve until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation and Bylaws of
the Surviving Corporation, or as otherwise provided by applicable law: Xxxxxx
Xxxxxx shall be the President, Xxxxxxx Xxxxxxxx shall be the Treasurer, and
Xxxxxxx Xxxxxxxx shall be the Secretary.
2.4 Directors and Officers of NAC.
(a) Effective upon the Effective Time, the
following individuals shall be the directors of NAC, to serve until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of NAC, or as otherwise
provided by applicable law: Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx
and Xxxxxxx Xxxxxx.
(b) Effective upon the Effective Time, the
following individuals shall be the officers of NAC, to serve until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of NAC, or as otherwise
provided by applicable law: Xxxxxx Xxxxxx shall be the Chief Executive Officer,
Xxxxxxx Xxxxxxxx shall be the Treasurer, and Xxxxxxx Xxxxxxxx shall be the
President and Secretary.
ARTICLE III.
CONVERSION OF SHARES
3.1 Exchange Ratio. At the Effective Time by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Each share of the no par value common stock of
New Leaf ("New Leaf Shares") issued and outstanding immediately prior to the
Effective Time (other than the Excluded Shares as defined in Section 3.7, New
Leaf Shares held in the New Leaf ESOP as described in Section 7.11, and New Leaf
Shares held by NAC or any subsidiary of NAC, if any) shall be converted at the
Effective Time into the right to receive (i) 2,606.1455 shares of restricted
common stock, par value $.02 per share, of NAC ("NAC Shares") (for a total of
9,147,571 NAC Shares); and (ii) a promissory note made by NAC in the form of the
attached Exhibit 3.1(a)(1) ("NAC Promissory Note"), in the principal amount of
$71.2251 and at an interest rate of 8% per year (for a total principal amount of
$250,000 of NAC Promissory Notes) payable within 35 months of the Effective
Time, and secured, subject to the consent of New Leaf's primary lender, by a
mortgage on the property described as 000 Xxxxxxxx Xxxx, Xxxxxx Xxxxxxx,
Xxxxxxx, currently owned by New Leaf, in the form of the attached Exhibit
3.1(a)(2).
(b) At the Effective Time, all New Leaf Shares
(other than the Excluded Shares as defined in Section 3.7, New Leaf Shares held
in the New Leaf ESOP as described in Section 7.11, and New Leaf Shares held by
NAC or any subsidiary of NAC, if any) shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
certificate previously representing any such New Leaf Shares ("New Leaf
Certificate") shall thereafter represent the NAC Shares and the NAC Promissory
Notes into which such New Leaf Shares have been converted. New Leaf Certificates
shall be exchanged for certificates representing whole (See Section 3.5) NAC
Shares ("NAC Certificate") and for an NAC Promissory Note.
(c) If, prior to the Effective Time, except as
contemplated by Section 3.1(a), the New Leaf Shares or the NAC Shares should
split or combine or a stock dividend or other stock distribution should occur
with respect to either, then the number of NAC Shares that each New Leaf Share
shall be converted into at the Effective Time shall be appropriately adjusted to
reflect such split, combination, dividend, or other distribution.
(d) Each New Leaf Share held in treasury, and each
New Leaf Share held in the New Leaf ESOP as described in Section 7.11 (and
subject to Section 7.11), and each New Leaf Share held by NAC or any subsidiary
of NAC immediately prior to the Effective Time shall be canceled and retired and
cease to exist as of the Effective time, and no NAC Shares or NAC Promissory
Notes shall be issued in exchange therefor.
(e) Each share of no par value common stock of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding immediately after the Effective Time, and
shall not be affected by the Merger.
3.2 Exchange of Shares.
(a) As of the Effective Time, each holder of New
Leaf Shares (other than Excluded Shares, New Leaf Shares held in the New Leaf
ESOP described in Section 7.11, and New Leaf Shares held by NAC or any
Subsidiary of NAC) shall, upon surrender of one or more New Leaf Certificates
for cancellation to NAC, be entitled to receive the NAC Promissory Notes and NAC
Certificates in accordance with Section 3.1(a). The NAC Promissory Notes and the
NAC Shares into which the New Leaf Shares shall be converted in the Merger shall
be deemed to have been issued at the Effective Time.
(b) Promptly after the Effective Time, NAC shall
mail to each holder of record of a New Leaf Certificate(s): (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the New Leaf Certificates shall pass, only upon delivery of
the New Leaf Certificates to NAC and shall be in such form and have such other
provisions as NAC and the other Companies may reasonably agree) and (ii)
instructions for use in effecting the surrender of the New Leaf Certificates in
exchange for an NAC Promissory Note and NAC Certificates representing NAC
Shares. Upon surrender of a New Leaf Certificate for cancellation to NAC
together with such letter of transmittal, duly executed, the holder of such New
Leaf Certificate shall be entitled to receive in exchange therefor an NAC
Promissory Note in the principal amount which such holder has the right to
receive pursuant to Section 3.1(a), and an NAC Certificate representing that
number of whole NAC Shares which such holder has the right to receive pursuant
to Section 3.1(a), in each case in respect of the New Leaf Certificates
surrendered pursuant to the provisions of this Article III.
(c) In the event that any New Leaf Certificate
shall have been lost, stolen, or destroyed, upon the making of an affidavit of
that fact by the person claiming such New Leaf Certificate to be lost, stolen,
or destroyed, NAC shall issue or cause to be issued in exchange for such lost,
stolen, or destroyed New Leaf Certificate an NAC Promissory Note in the
principal amount which such holder has the right to receive pursuant to Section
3.1(a), and an NAC Certificate representing that number of whole NAC Shares
which such holder has the right to receive, pursuant to Section 3.1(a), in each
case in respect of the lost, stolen, or destroyed New Leaf Certificates pursuant
to the provisions of this Article III. When authorizing such issuance in
exchange therefor, the Board of Directors of NAC may, in its reasonable
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed New Leaf Certificate to post a bond in
the form customarily required by NAC as indemnity against any claim that may be
made against NAC with respect to the New Leaf Certificate alleged to have been
lost, stolen, or destroyed.
3.3 Stock Options, Warrants, Debentures and other Agreements. As of
the Effective Time, any stock options, warrants, convertible securities, or
other contractual commitments or agreements of any kind to purchase or issue New
Leaf Shares that are outstanding both as of the date hereof and at the Effective
Time (whether or not contingent or otherwise requiring further shareholder
approval) shall be automatically converted into equivalent contractual
commitments or agreements in the Surviving Corporation.
3.4 Dividends; Transfer Taxes. No dividends that are declared on NAC
Shares shall be paid to persons entitled to receive NAC Shares in the Merger
until such persons surrender their New Leaf Certificates. Upon such surrender,
there shall be paid to the person in whose name the NAC Shares shall be issued
any dividends which shall have become payable with respect to such NAC Shares
between the Effective Time and the time of such surrender. In no event shall the
person entitled to receive such dividends be entitled to receive interest on
such dividends. If any NAC Shares are to be issued in a name other than that in
which the New Leaf Certificate surrendered in exchange therefor is registered,
it shall be a condition of such exchange that the person requesting such
exchange shall pay to NAC's transfer agent, Computershare Trust Company, Inc.
("Transfer Agent") any transfer or other taxes required by reason of the
issuance of such NAC Shares in a name other than that of the registered holder
of the New Leaf Certificate surrendered, or shall establish to the satisfaction
of the Transfer Agent that such tax has been paid or is not applicable.
3.5 No Fractional Shares. No NAC Certificates representing
fractional NAC Shares shall be issued upon the surrender for exchange of New
Leaf Certificates pursuant to this Article III, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a shareholder of
NAC. In lieu of any such fractional shares, each holder of New Leaf Shares who
would otherwise have been entitled to a fraction of an NAC Share upon surrender
of a New Leaf Certificate for exchange pursuant to this Article III shall be
entitled to receive the next highest whole number of NAC Shares.
3.6 Closing of Transfer Books. At the Effective Time, the stock
transfer books of New Leaf shall be closed and there shall be no further
registrations or transfers on the records of New Leaf of the New Leaf Shares
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, New Leaf Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for an NAC Promissory Note
and NAC Certificates representing NAC Shares in accordance with the terms
hereof.
3.7 Dissenting Shares. If holders of New Leaf Shares are entitled to
dissent from the Merger pursuant to the GBCC, and demand appraisal of any such
New Leaf Shares in accordance with the provisions of the GBCC ("Dissenting
Holders"), any New Leaf Shares held by such a Dissenting Holder as to which
appraisal has been so demanded ("Excluded Shares") shall not be converted as
described in Section 3.1, but shall from and after the Effective Time represent
only the right to receive such consideration as may be determined to be due to
such Dissenting Holder pursuant to the GBCC; provided, however, that New Leaf
Shares held by a Dissenting Holder who shall, after the Effective Time, withdraw
his, her or its demand for appraisal or lose his right of appraisal with respect
to such New Leaf Shares, in either case pursuant to the GBCC, shall not be
deemed Excluded Shares but shall be deemed to be converted, as of the Effective
Time, into the right to receive an NAC Promissory Note and NAC Shares in
accordance with Section 3.1(a).
3.8 Piggyback Registration Right.
(a) If, at any time on or after the Effective Time
NAC proposes to file a registration statement under the Securities Act of 1933
with respect to an offering by NAC of its common stock (other than a
registration statement on Form S-4 or S-8 or any successor form or a
registration statement filed solely in connection with an exchange offer, a
business combination transaction or an offering of securities solely to the
existing stockholders or employees of NAC), then NAC, on each such occasion,
shall give written notice (each, an "NAC Piggy-Back Notice") of such proposed
filing to all of the New Leaf stockholders that receive the NAC Shares pursuant
to the terms of this Agreement at least fifteen days before the anticipated
filing date of such registration statement, and through such NAC Piggy-Back
Notice shall offer to such New Leaf stockholders the opportunity to register
such aggregate number of their shares of NAC common stock as each such New Leaf
stockholder may request. Each such New Leaf Stockholder shall have the right,
exercisable for the five days immediately following the giving of the NAC
Piggy-Back Notice, to request, by written notice (each, a "Holder Notice") to
NAC, the inclusion of all or any portion of the NAC common stock of such New
Leaf stockholder in such registration statement. Notwithstanding anything to the
contrary contained in this Section 3.8(a), the registration rights afforded by
this Section 3.8(a) shall be deemed waived to the extent any underwriter or any
investor or group of investors that have put capital into NAC equal to or
exceeding $1,000,000, determines that the inclusion of shares of NAC common
stock held by New Leaf stockholders in such registration shall materially and
adversely affect the success of such offering.
(b) Expenses. NAC will pay all registration expenses
in connection with any registration of NAC common stock effected pursuant to
this Section 3.8.
(c) Withdrawal or Suspension of Registration
Statement. Notwithstanding anything contained to the contrary in this Section
3.8, NAC shall have the absolute right, whether before or after the giving of an
NAC Piggy-Back Notice or Holder Notice, to determine not to file a registration
statement in which the New Leaf stockholders shall have the right to include
their shares of NAC common stock pursuant to this Section 3.8, to withdraw such
registration statement or to delay or suspend pursuing the effectiveness of such
registration statement. In the event of such a determination after the giving of
an NAC Piggy-Back Notice, NAC shall give notice of such determination to all New
Leaf stockholders and, thereupon, (A) in the case of a determination not to
register or to withdraw such registration statement, NAC shall be relieved of
its obligation under this Section 3.8 to register any of the NAC common stock in
connection with such registration and (B) in the case of a determination to
delay the registration, NAC shall be permitted to delay or suspend the
registration of NAC common stock pursuant to this Section 3.8 for the same
period as the delay in the registration of such other securities.
3.9 Repurchase Rights. NAC shall have the right to repurchase up to
3,147,571 of the NAC Shares issued in exchange for New Leaf Shares, 35 months
after the Effective Time, for a purchase price of $.20 per share, by providing
the holders of said NAC Shares with 30 days prior written notice. Said
repurchase rights shall be evidenced by a legend on each certificate
representing an NAC Share subject to the repurchase rights.
3.10 Irrevocable Proxy. Each holder of the 3,147,571 NAC shares
subject to NAC's repurchase rights as described in Section 3.9 irrevocably
appoints Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx, jointly, as his/her successor in
interest with full power of substitution, the true and lawful attorney and proxy
of said holder in his/her name, place and xxxxx to attend all meetings of the
stockholders of NAC, and to vote or to give their consent in respect to said NAC
shares, in connection with any and all matters relating to NAC and its business
operations. Said holders hereby affirm that this proxy is irrevocable and
coupled with an interest and shall terminate 35 months after the Effective Time,
and said holders hereby ratify and confirm all that the proxies may lawfully do
or cause to be done by virtue hereof. The existence of said irrevocable proxy
shall be evidenced by a legend on each certificate representing an NAC Share for
which an irrevocable proxy has been granted.
3.11 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at New Leaf's offices at 000 Xxxxxxxx
Xxxx, Xxxxxx Xxxxxxx, Xxxxxxx, at 10:00 a.m., local time, June1, 2001, or such
other date or time as is agreed to by the Companies.
3.12 Supplementary Action. If at any time after the Effective Time,
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either NAC or New Leaf, or
otherwise to carry out the provisions of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered on
behalf of each, in the name of and on behalf of them as appropriate, to execute
and deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF NEW LEAF
As used in this Agreement, (i) the term "Material Adverse Effect"
means, with respect to NAC, Acquisition Sub, or New Leaf, as the case may be, a
material adverse effect on the business, assets, results of operations, or
financial condition of such party and its subsidiaries taken as a whole, or that
could reasonably be expected to materially impair the ability of such party to
perform its obligations hereunder, and (ii) the term "Subsidiary" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party or any other subsidiary of
such party is a general partner (excluding partnerships the general partnership
interests of which held by such party or any subsidiary of such party do not
have a majority of the voting interests in such partnership) or of which at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporations or other
organizations is directly or indirectly owned or controlled by such party and/or
by any one or more of its subsidiaries.
New Leaf shall represent and warrant at the Closing, with respect to
itself and its subsidiaries, except as disclosed to NAC in the New Leaf Schedule
of Exceptions (the "New Leaf Schedule") to be delivered to NAC at the Closing,
as follows:
4.1 Organization. Each of New Leaf and its subsidiaries is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and has the corporate power to carry
on its business as it is now being conducted or presently proposed to be
conducted. Each of New Leaf and its subsidiaries is duly qualified as a foreign
corporation to do business, and is in good standing (to the extent the concept
of good standing exists), in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified shall not
have a Material Adverse Effect.
4.2 Capitalization. As of the Closing, the authorized capital stock
of New Leaf and each of its subsidiaries is as set forth in Section 4.2 of the
New Leaf Schedule. As of the Closing, the capital stock of New Leaf which is
issued and outstanding is as set forth in Section 4.2 of the New Leaf Schedule.
All of the issued and outstanding shares of capital stock of New Leaf are
validly issued, fully paid, and non-assessable and free of preemptive rights or
similar rights created by statute, the Articles of Incorporation or Bylaws of
New Leaf or any agreement by which New Leaf or any of its subsidiaries is a
party or by which it is bound, except as disclosed in the New Leaf Schedule.
Except (a) as set forth above or, (b) as disclosed in Section 4.2 of the New
Leaf Schedule, there are not as of the date of Closing any shares of capital
stock of New Leaf issued or outstanding or any options, warrants, subscriptions,
calls, rights, convertible securities, or other agreements or commitments
obligating New Leaf to issue, transfer, or sell any shares of its capital stock.
As of the date of Closing, no bonds, debentures, notes, or other indebtedness
having the right to vote (or convertible into or exercisable for securities
having the right to vote) on any matters on which stockholders of New Leaf may
vote ("Voting Debt") were issued and outstanding except as disclosed in the New
Leaf Schedule.
4.3 Authority Relative to this Agreement. New Leaf has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement by New Leaf and the consummation by
New Leaf of the transactions contemplated hereby have been duly authorized by
New Leaf, and no other corporate proceedings on the part of New Leaf are
necessary to approve this Agreement or the transactions contemplated hereby.
4.4 Consents and Approvals; No Violations. Except for filing and
recordation of a Certificate of Merger under the GBCC, no filing with, and no
permit, authorization, consent, or approval of, any public body or authority is
necessary for the consummation of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by New Leaf, nor
the consummation by it of the transactions contemplated hereby, nor compliance
by New Leaf with any of the provisions hereof, shall (a) result in any breach of
the Articles of Incorporation or Bylaws of New Leaf, (b) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation, or
acceleration) under, any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, contract, agreement, or other instrument or
obligation to which New Leaf or any of its subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or (c) violate any
order, writ, injunction, decree, statute, rule, or regulation applicable to New
Leaf, any of its subsidiaries or any of their properties or assets, except in
the case of clauses (b) and (c) for violations, breaches, or defaults that would
not have a Material Adverse Effect.
4.5 Financial Statements. The New Leaf Balance Sheet, Income
Statement, and Statement of Cash Flows dated December 31, 2000 (the "New Leaf
Financial Statements") fairly present in all material respects the consolidated
financial position and the results of operations and cash flows of New Leaf and
its subsidiaries as of the respective dates and periods thereof.
4.6 Absence of Certain Changes or Events. Since December 31, 2000,
neither New Leaf nor any of its subsidiaries has: (a) taken any of the actions
set forth in Sections 6.1(b), 6.1(c), or 6.1(e) hereof; (b) incurred any
liability material to New Leaf and its subsidiaries on a consolidated basis,
except in the ordinary course of its business, consistent with past practices,
except as provided in Section 7.15; (c) suffered a change, or any event
involving a prospective change, in the business, assets, financial condition, or
results of operations of New Leaf or any of its subsidiaries which has had, or
is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect, (other than as a result of changes or proposed changes in
federal or state regulations of general applicability or interpretations
thereof, changes in generally accepted accounting principles, and changes that
could, under the circumstances, reasonably have been anticipated in light of
disclosures made in writing by New Leaf to NAC pursuant hereto and except as
provided in Section 7.15); or (d) subsequent to the date hereof, except as
permitted by Sections 6.1 and 7.15 hereof, conducted its business and operations
other than in the ordinary course of business and consistent with past
practices.
4.7 Litigation. As of the date of Closing, and except to the extent
that individually and in the aggregate they would not reasonably be expected to
have a Material Adverse Effect: (a) there is no action, suit, judicial, or
administrative proceeding, arbitration or investigation pending or, to the best
knowledge of New Leaf, threatened against or involving New Leaf or any of its
subsidiaries, or any of their properties or rights, before any court,
arbitrator, or administrative or governmental body; (b) there is no judgment,
decree, injunction, rule, or order of any court, governmental department,
commission, agency, instrumentality, or arbitrator outstanding against New Leaf
or any of its subsidiaries; and (c) New Leaf and its subsidiaries are not in
violation of any term of any judgments, decrees, injunctions, or orders
outstanding against them. New Leaf has furnished to NAC in writing, a
description of all litigation, actions, suits, proceedings, arbitrations,
investigations known to it, judgments, decrees, injunctions or orders pending;
or to its best knowledge, threatened against or involving New Leaf or any of its
subsidiaries, or any of their properties or rights as of the date of Closing.
4.8 Contracts.
(a) Each of the material contracts, instruments,
mortgages, notes, security agreements, leases, agreements, or understandings,
whether written or oral, to which New Leaf or any of its subsidiaries is a party
that relates to or affects the assets or operations of New Leaf or any of its
subsidiaries or to which New Leaf or any of its subsidiaries or their respective
assets or operations may be bound or subject is a valid and binding obligation
of New Leaf and in full force and effect (with respect to New Leaf or such
subsidiary), except for where such failure would not, individually or in the
aggregate, have a Material Adverse Effect. Except to the extent that the
consummation of the transactions contemplated by this Agreement may require the
consent of third parties, as disclosed in the New Leaf Schedule, there are no
existing defaults by New Leaf or any of its subsidiaries thereunder or, to the
knowledge of New Leaf, by any other party thereto, which defaults, individually
or in the aggregate, would have a Material Adverse Effect; and no event of
default has occurred, and no event, condition, or occurrence exists, that
(whether with or without notice, lapse of time, or the happening or occurrence
of any other event) would constitute a default by New Leaf or any of its
subsidiaries thereunder which default would have a Material Adverse Effect.
(b) Except for this Agreement, as of the date of
Closing, and except as disclosed on the New Leaf Schedule, neither New Leaf nor
any of its subsidiaries is a party to any oral or written (i) consulting
agreement not terminable on 60 days' or less notice involving the payment of
more than $5,000 per annum, in the case of any such agreement with an
individual; (ii) joint venture agreement; (iii) non-competition or similar
agreements that restricts New Leaf or its subsidiaries from engaging in a line
of business; (iv) agreement with any executive officer or other employee of New
Leaf or any subsidiary the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving New
Leaf of the nature contemplated by this Agreement and which provides for the
payment of in excess of $5,000; (v) agreement with respect to any executive
officer of New Leaf or any subsidiary providing any term of employment beyond
one year or compensation guaranty in excess of $50,000 per annum; or (vi)
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan, or stock purchase plan, any of the benefits of
which shall be increased, or the vesting of the benefits of which shall be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which shall be calculated on
the basis of any of the transactions contemplated by this Agreement.
4.9 Employee Benefit Plans.
(a) Disclosed in Schedule 4.9 of the New Leaf
Schedule is a true and complete list of each written or formal employee benefit
plan (including, without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) policy or agreement that is maintained (all of the foregoing, the
"Benefit Plans"), or is or was contributed to by New Leaf or pursuant to which
New Leaf or any trade or business, whether or not incorporated (an "ERISA
Affiliate"), which together with New Leaf would be deemed a "single employer"
within the meaning of Section 4001 of ERISA, is still potentially liable for
payments, benefits, or claims. A copy of each Benefit Plan as currently in
effect and, if applicable, the most recent Annual Report, Actuarial Report or
Valuation, Summary Plan Description, Trust Agreement, and a Determination Letter
issued by the IRS for each Benefit Plan have heretofore been delivered to NAC to
the extent requested by NAC. No Benefit Plan was or is subject to Title IV of
ERISA or Section 412 of the Code (including any "multi-employer plan", as
defined in Section 3(37) of ERISA).
(b) Except as disclosed on the New Leaf Schedule,
each of the Benefit Plans that are subject to ERISA is, to the best of New
Leaf's knowledge, in substantial compliance with ERISA; each of the Benefit
Plans intended to be "qualified" within the meaning of Section 401 (a) of the
Code is so qualified; and no event has occurred, and to New Leaf's knowledge,
there exists no condition or set of circumstances, in connection with which New
Leaf or any ERISA Affiliate is or could be subject to liability (except
liability for benefit claims and funding obligations payable in the ordinary
course) under ERISA, the Code, or any other applicable law with respect to any
Benefit Plan.
(c) Except as disclosed on the New Leaf Schedule,
all contributions or other amounts payable by New Leaf or its subsidiaries
through December 31, 2000 with respect to each Benefit Plan in respect of
current or prior plan years have been either paid or accrued on the New Leaf
Financial Statements. Any contributions or other amounts payable by New Leaf or
its subsidiaries for periods between December 31, 2000 and the Effective Time
with respect to each Benefit Plan in respect of current or prior plan years have
been or shall be either paid or accrued in the normal course of business on the
books and records of New Leaf at or prior to the Effective Time. There are no
pending, or, to the best knowledge of New Leaf, threatened or anticipated claims
(other than routine claims for benefits) by or on behalf of or against any of
the Benefit Plans or any trusts or other funding vehicles related thereto.
(d) Except as disclosed on the New Leaf Schedule,
no Benefit Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
for periods extending beyond their retirement or other termination of service
(other than (i) coverage mandated by Part 6 of Subtitle B of Title I of ERISA,
Section 4980B of the Code or any comparable state law, (ii) death benefits or
retirement benefits under any "employee pension plan," as that term is defined
in Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as
liabilities on the books of New Leaf or the ERISA Affiliates, or (iv) benefits
the full cost of which is borne by the current or former employee or his or her
beneficiary).
4.10 Taxes. For the purposes of this section, the term "tax" shall
include all taxes, charges, withholdings, fees, levies, penalties, additions,
interest, or other assessments imposed by any United States federal, state, or
local authority or any other taxing authority on New Leaf or any of its Tax
Affiliates (as hereinafter defined) as to their respective income, profit,
franchise, gross receipts, payroll, sales, employment, worker's compensation,
use, property, withholding, excise, occupancy, environmental, and other taxes,
duties, or assessments of any nature, whatsoever. New Leaf has filed or caused
to be filed timely all material federal, state, local, and foreign tax returns
required to be filed by each of its and any member of its consolidated,
combined, unitary, or similar group (each such member a "Tax Affiliate"). Such
returns, reports, and other information are accurate and complete in all
material respects. New Leaf has paid or caused to be paid or has made adequate
provision or set up an adequate accrual or reserve for the payment of, all taxes
shown to be due in respect of the periods for which returns are due, and has
established (or shall establish at least quarterly) an adequate accrual or
reserve for the payment of all taxes payable in respect of the period subsequent
to the last of said periods required to be so accrued or reserved. Neither New
Leaf nor any of its Tax Affiliates has any material liability for taxes in
excess of the amount so paid or accruals or reserves so established. Neither New
Leaf nor any of its Tax Affiliates is delinquent in the payment of any tax in
excess of the amount reserved or provided therefor, and no deficiencies for any
tax, assessment, or governmental charge in excess of the amount reserved or
provided therefor have been threatened, claimed, proposed, or assessed. No
waiver or extension of time to assess any taxes has been given or requested. All
except as disclosed on the New Leaf Schedule.
4.11 Compliance With Applicable Law. New Leaf and each of its
subsidiaries holds all licenses, franchises, permits, variances, exemptions,
orders, approvals, and authorizations necessary for the lawful conduct of its
business under and pursuant to, and the business of each of New Leaf and its
subsidiaries is not being conducted in violation of, any provision of any
federal, state, local, or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license, or
other governmental authorization or approval applicable to New Leaf or any of
its subsidiaries, except to the extent that the failure to hold any such
licenses, franchises, permits, or authorizations, or any such violation, would
not have a Material Adverse Effect.
4.12 Subsidiaries. The New Leaf Schedule lists all the subsidiaries
of New Leaf as of the date of the Closing and indicates for each such corporate
subsidiary as of such date the jurisdiction of incorporation or organization.
All of the outstanding shares of capital stock or other equity interests of each
of the subsidiaries are (i) held by New Leaf or one of such wholly-owned
subsidiaries; (ii) fully paid and non-assessable; and (iii) owned by New Leaf or
one of such wholly owned subsidiaries free and clear of any claim, lien, or
encumbrance.
4.13 Labor and Employment Matters. (a) New Leaf and its subsidiaries
are in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms, and conditions of employment and
wages and hours, and such laws respecting employment discrimination, equal
opportunity, affirmative action, worker's compensation, occupational safety, and
health requirements and unemployment insurance and related matters, and are not
engaged in and have not engaged in any unfair labor practice; (b) to the
knowledge of New Leaf, no investigation or review by or before any governmental
entity concerning any violations of any such applicable laws is pending nor, to
the knowledge of New Leaf is any such investigation threatened or has any such
investigation occurred during the last three years, and no governmental entity
has provided any notice to New Leaf or any of its subsidiaries or otherwise
asserted an intention to conduct any such investigation; (c) there is no labor
strike, dispute, slowdown, or stoppage actually pending or threatened against
New Leaf or any of its subsidiaries; (d) no union representation question or
union organizational activity exists respecting the employees of New Leaf or any
of its subsidiaries; (e) no collective bargaining agreement exists which is
binding on New Leaf or any of its subsidiaries; (f) neither New Leaf nor any of
its subsidiaries is experiencing any material work stoppage or other material
labor difficulty; and (g) in the event of termination of the employment of any
of the current officers, directors, employees, or agents of New Leaf or any of
its subsidiaries, neither New Leaf nor any of its subsidiaries shall, to the
best of New Leaf's knowledge, pursuant to any agreement or by reason of anything
done prior to the Effective Time by New Leaf or any of its subsidiaries be
liable to any of said officers, directors, employees, or agents for so-called
"severance pay" or any other similar payments or benefits, including, without
limitation, post-employment healthcare (other than pursuant to COBRA) or
insurance benefits. All except as disclosed on the New Leaf Schedule.
4.14 Intellectual Property.
(a) Except to the extent that the inaccuracy of
any of the following (or the circumstances giving rise to such inaccuracy) does
not have or could not reasonably be expected to have a Material Adverse Effect
and except as disclosed on the New Leaf Schedule:
(i) New Leaf and each of its subsidiaries
owns, or is licensed or otherwise has the legally enforceable right to use (in
each case, clear of any liens or encumbrances of any kind), all Intellectual
Property (as hereinafter defined) used in or necessary for the conduct of its
business as currently conducted;
(ii) no claims are pending or, to the best
knowledge of New Leaf, threatened that New Leaf or any of its subsidiaries is
infringing on or otherwise violating the rights of any person with regard to any
Intellectual Property used by, owned by, and/or licensed to New Leaf or any of
its subsidiaries and, to the best knowledge of New Leaf, there are no valid
grounds for any such claims;
(iii) to the best knowledge of New Leaf,
no person is infringing on or otherwise violating any right of New Leaf or any
of its subsidiaries with respect to any Intellectual Property owned by and/or
licensed to New Leaf or any of its subsidiaries;
(iv) to the best knowledge of New Leaf,
there are no valid grounds for any claim challenging the ownership or validity
of any Intellectual Property owned by New Leaf or any of its subsidiaries or
challenging New Leaf's or any of its subsidiaries' license or legally
enforceable right to use any Intellectual Property licensed by it; and
(v) to the best knowledge of New Leaf,
all patents, registered trademarks, service marks, and copyrights held by New
Leaf, if any, and each of its subsidiaries are valid and subsisting.
(b) For purposes of this Agreement, "Intellectual
Property" means trademarks (registered or unregistered), service marks, brand
names, certification marks, trade dress, assumed names, trade names, and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable, or not in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works of authorship, whether
copyrighted, copyrightable, or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights and computer programs and software (including source code, object code,
and data); licenses, immunities, covenants not to xxx, and the like relating to
the foregoing; and any claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing.
4.15 Insurance. As of the date of the Closing, New Leaf and each of
its subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are customary in the
businesses in which they are engaged. All material policies of insurance and
fidelity or surety bonds insuring New Leaf or any of its subsidiaries or their
respective businesses, assets, employees, officers, and directors are in full
force and effect. As of the date hereof, there are no material claims by New
Leaf or any of its subsidiaries under any such policy or instrument as to which
any insurance company is denying liability or defending under a reservation of
rights clause. All except as disclosed on the New Leaf Schedule.
4.16 New Leaf Stockholders.
(a) Nature of the New Leaf Stockholders. Each New
Leaf stockholder is either (i) an "accredited investor," as such term is defined
in the Securities Act of 1933, as amended, or (ii) either alone or together with
a purchaser representative (see Section 4.16(b)) has such knowledge and
experience in financial and business matters that he/she/it is capable of
evaluating the merits and risks of an investment in NAC.
(b) Purchaser Representative. Pursuant to the terms
of a power of attorney agreement in the form of the Attached Exhibit 4.16(b)
(the "Power of Attorney Agreement"), each New Leaf stockholders has appointed a
purchaser representative ("Purchaser Representative") with respect to the
offering of NAC Shares pursuant to the terms of this Agreement. New Leaf shall
be solely responsible for the payment of any fees associated with the services
provided by the Purchaser Representative.
4.17 New Leaf acknowledges that each NAC Certificate and NAC
Promissory Note shall contain the a restrictive legend representing that the NAC
Shares and the NAC Promissory Notes have not been registered under the
Securities Act. The NAC Shares and the NAC Promissory Notes may not be sold or
offered for sale or otherwise distributed without an effective registration
statement for the NAC Shares and the NAC Promissory Notes under the Securities
Act or an opinion of counsel satisfactory to NAC that such registration is not
required as the sale offer or distribution thereof. Further, each NAC
Certificate evidencing an NAC Share subject to NAC's right of repurchase, as
described in Section 3.9, shall contain a restrictive legend representing that
said NAC Shares are subject to a right of repurchase of NAC pursuant to Section
3.9 of this Agreement, and each NAC Certificate evidencing an NAC Share subject
to an irrevocable proxy, as described in Section 3.10, shall contain a
restrictive legend representing that said NAC Shares are subject to an
irrevocable proxy pursuant to Section 3.10 of this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF NAC AND ACQUISITION SUB
NAC and Acquisition Sub shall jointly and severally represent and
warrant at the Closing, with respect to themselves and their subsidiaries,
except as disclosed to New Leaf in the NAC/Acquisition Sub Schedule of
Exceptions (the "NAC/Acquisition Sub Schedule") to be delivered to New Leaf at
the Closing, as follows:
5.1 Organization. Each of NAC and its subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or presently proposed to be conducted.
Each of NAC and its subsidiaries is duly qualified as a foreign corporation to
do business, and is in good standing (to the extent the concept of good standing
exists), in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified shall not have a Material
Adverse Effect.
5.2 Capitalization. As of the Closing, the authorized capital stock
of NAC and its subsidiaries is as set forth in Schedule 4.2 of the
NAC/Acquisition Sub Schedule. As of the Closing hereof, the capital stock of NAC
Shares which is issued and outstanding is as set forth in Section 5.2 of the
NAC/Acquisition Sub Schedule. All of the issued and outstanding NAC Shares are
validly issued, fully paid, and non-assessable and free of preemptive rights or
similar rights created by statute, the Articles of Incorporation or Bylaws of
NAC or any agreement by which NAC or any of its subsidiaries is a party or by
which it is bound, except as disclosed on the NAC/Acquisition Sub Schedule.
Except (a) as set forth above or, (b) as disclosed in Schedule 4.2 of the
NAC/Acquisition Sub Schedule, there are not as of the date of Closing any shares
of capital stock of NAC issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities, or other agreements or
commitments obligating NAC to issue, transfer, or sell any shares of its capital
stock. As of the Closing, no Voting Debt of NAC were issued and outstanding.
5.3 Authority Relative to this Agreement. NAC and Acquisition Sub
have the corporate power to enter into this Agreement and to carry out their
obligations hereunder. The execution and delivery of this Agreement by NAC and
Acquisition Sub and the consummation by NAC and Acquisition Sub of the
transactions contemplated hereby have been duly authorized by NAC and
Acquisition Sub, and no other corporate proceedings on the part of NAC or
Acquisition Sub are necessary to approve this Agreement or the transactions
contemplated hereby.
5.4 Consents and Approvals; No Violations. Except for state
securities or blue sky laws, if applicable, and, as applicable, filing and
recordation of the Certificate of Merger under the GBCC, no filing with, and no
permit, authorization, consent, or approval of, any public body or authority is
necessary for the consummation of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by NAC and
Acquisition Sub, nor the consummation by them of the transactions contemplated
hereby, nor compliance by NAC and Acquisition Sub with any of the provisions
hereof, shall (a) result in any breach of the Articles of Incorporation or
Bylaws of NAC or Acquisition Sub, (b) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, or acceleration) under, any
of the terms, conditions, or provisions of any note, bond, mortgage, indenture,
license, contract, agreement, or other instrument or obligation to which NAC or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (c) violate any order, writ, injunction,
decree, statute, rule, or regulation applicable to NAC, any of its subsidiaries
or any of their properties or assets, except in the case of clauses (b) and (c)
for violations, breaches, or defaults that would not have a Material Adverse
Effect.
5.5 Financial Statements. The NAC Balance Sheet, Income Statement,
and Statement of Cash Flows dated December 31, 2000 (the "NAC Financial
Statements") fairly present in all material respects the consolidated financial
position and the results of operations and cash flows of NAC and its
subsidiaries as of the respective dates and periods thereof.
5.6 Absence of Certain Changes or Events. Since December 31, 2000,
neither NAC nor any of its subsidiaries has: (a) incurred any liability material
to NAC and its subsidiaries on a consolidated basis, except in the ordinary
course of its business, consistent with past practices; (b) suffered a change,
or any event involving a prospective change, in the business, assets, financial
condition, or results of operations of NAC or any of its subsidiaries which has
had, or is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect, (other than as a result of changes or proposed changes
in federal or state regulations of general applicability or interpretations
thereof, changes in generally accepted accounting principles, and changes that
could, under the circumstances, reasonably have been anticipated in light of
disclosures made in writing by NAC or Acquisition Sub to New Leaf pursuant
hereto).
5.7 Litigation. As of the date of the Closing, and except to the
extent that individually and in the aggregate they would not reasonably be
expected to have a Material Adverse Effect: (a) there is no action, suit,
judicial, or administrative proceeding, arbitration or investigation pending or,
to the best knowledge of NAC or Acquisition Sub, threatened against or involving
NAC or any of its subsidiaries, or any of their properties or rights, before any
court, arbitrator, or administrative or governmental body; (b) there is no
judgment, decree, injunction, rule, or order of any court, governmental
department, commission, agency, instrumentality, or arbitrator outstanding
against NAC or any of its subsidiaries; and (c) NAC and its subsidiaries are not
in violation of any term of any judgments, decrees, injunctions, or orders
outstanding against them. NAC and Acquisition Sub have furnished to New Leaf in
writing, a description of all litigation, actions, suits, proceedings,
arbitrations, investigations known to it, judgments, decrees, injunctions or
orders pending; or to its best knowledge, threatened against or involving NAC or
any of its subsidiaries, or any of their properties or rights as of the date of
Closing.
5.8 Contracts.
(a) Each of the material contracts, instruments,
mortgages, notes, security agreements, leases, agreements, or understandings,
whether written or oral, to which NAC or any of its subsidiaries is a party that
relates to or affects the assets or operations of NAC or any of its subsidiaries
or to which NAC or any of its subsidiaries or their respective assets or
operations may be bound or subject is a valid and binding obligation of NAC and
in full force and effect (with respect to NAC or such subsidiary), except for
where such failure would not, individually or in the aggregate, have a Material
Adverse Effect. Except to the extent that the consummation of the transactions
contemplated by this Agreement may require the consent of third parties, as
disclosed in the NAC/Acquisition Sub Schedule, there are no existing defaults by
NAC or any of its subsidiaries thereunder or, to the knowledge of NAC, by any
other party thereto, which defaults, individually or in the aggregate, would
have a Material Adverse Effect; and no event of default has occurred, and no
event, condition, or occurrence exists, that (whether with or without notice,
lapse of time, or the happening or occurrence of any other event) would
constitute a default by NAC or any of its subsidiaries thereunder which default
would have a Material Adverse Effect.
(b) Except for this Agreement, as of the date of
Closing, and except as disclosed on the NAC/Acquisition Sub Schedule, neither
NAC nor any of its subsidiaries is a party to any oral or written (i) consulting
agreement not terminable on 60 days' or less notice involving the payment of
more than $5,000 per annum, in the case of any such agreement with an
individual; (ii) joint venture agreement; (iii) non-competition or similar
agreements that restricts NAC or its subsidiaries from engaging in a line of
business; (iv) agreement with any executive officer or other employee of NAC or
any subsidiary the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving NAC of the
nature contemplated by this Agreement and which provides for the payment of in
excess of $5,000; (v) agreement with respect to any executive officer of NAC or
any subsidiary providing any term of employment beyond one year or compensation
guaranty in excess of $50,000 per annum; or (vi) agreement or plan, including
any stock option plan, stock appreciation rights plan, restricted stock plan, or
stock purchase plan, any of the benefits of which shall be increased, or the
vesting of the benefits of which shall be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which shall be calculated on the basis of any of the transactions
contemplated by this Agreement.
5.9 Employee Benefit Plans.
(a) Disclosed in Schedule 4.9 of the NAC/Acquisition
Sub Disclosure Schedule is a true and complete list of each written or formal
employee benefit plan (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA) policy or agreement that is
maintained (all of the foregoing, the "Benefit Plans"), or is or was contributed
to by NAC or pursuant to which NAC or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with NAC would be deemed a
"single employer" within the meaning of Section 4001 of the ERISA, is still
potentially liable for payments, benefits, or claims. A copy of each Benefit
Plan as currently in effect and, if applicable, the most recent Annual Report,
Actuarial Report or Valuation, Summary Plan Description, Trust Agreement, and a
Determination Letter issued by the IRS for each Benefit Plan have heretofore
been delivered to New Leaf to the extent requested by New Leaf. No Benefit Plan
was or is subject to Title IV of ERISA or Section 412 of the Code (including any
"multi-employer plan," as defined in Section 3(37) of ERISA).
(b) Except as disclosed on the NAC/Acquisition Sub
Schedule, each of the Benefit Plans that are subject to ERISA, to the best of
New Leaf's and Acquisition Sub's knowledge, is in substantial compliance with
ERISA; each of the Benefit Plans intended to be "qualified" within the meaning
of Section 401 (a) of the Code is so qualified; and no event has occurred, and
to NAC's knowledge, there exists no condition or set of circumstances, in
connection with which NAC or any ERISA Affiliate is or could be subject to
liability (except liability for benefit claims and funding obligations payable
in the ordinary course) under ERISA, the Code, or any other applicable law with
respect to any Benefit Plan.
(c) Except as disclosed on the NAC/Acquisition Sub
Schedule, all contributions or other amounts payable by NAC or its subsidiaries
through December 31, 2000 with respect to each Benefit Plan in respect of
current or prior plan years have been either paid or accrued on the NAC
Financial Statements. Any contributions or other amounts payable by NAC or its
subsidiaries for periods between December 31, 2000 and the Effective Time with
respect to each Benefit Plan in respect of current or prior plan years have been
or shall be either paid or accrued in the normal course of business on the books
and records of NAC at or prior to the Effective Time. There are no pending, or,
to the best knowledge of NAC, threatened or anticipated claims (other than
routine claims for benefits) by or on behalf of or against any of the Benefit
Plans or any trusts or other funding vehicles related thereto.
(d) Except as disclosed on the NAC/Acquisition Sub
Schedule, no Benefit Plan provides benefits, including without limitation death
or medical benefits (whether or not insured), with respect to current or former
employees for periods extending beyond their retirement or other termination of
service (other than (i) coverage mandated by Part 6 of Subtitle B of Title I of
ERISA, Section 4980B of the Code or any comparable state law, (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of New Leaf or the ERISA Affiliates, or (iv)
benefits the full cost of which is borne by the current or former employee or
his or her beneficiary).
5.10 Taxes. NAC has filed or caused to be filed timely all material
federal, state, local, and foreign tax returns required to be filed by it an
each of its Tax Affiliates. Such returns, reports, and other information are
accurate and complete in all material respects. NAC has paid or caused to be
paid or has made adequate provision or set up an adequate accrual or reserve for
the payment of, all taxes shown to be due in respect of the periods for which
returns are due, and has established (or shall establish at least quarterly) an
adequate accrual or reserve for the payment of all taxes payable in respect of
the period subsequent to the last of said periods required to be so accrued or
reserved. Neither NAC nor any of its Tax Affiliates has any material liability
for taxes in excess of the amount so paid or accruals or reserves so
established. Neither NAC nor any of its Tax Affiliates is delinquent in the
payment of any tax in excess of the amount reserved or provided therefor, and no
deficiencies for any tax, assessment, or governmental charge in excess of the
amount reserved or provided therefor have been threatened, claimed, proposed, or
assessed. No waiver or extension of time to assess any taxes has been given or
requested. All except as disclosed on the NAC/Acquisition Sub Schedule.
5.11 Compliance With Applicable Law. NAC and each of its
subsidiaries holds all licenses, franchises, permits, variances, exemptions,
orders, approvals, and authorizations necessary for the lawful conduct of its
business under and pursuant to, and the business of each of NAC and its
subsidiaries is not being conducted in violation of, any provision of any
federal, state, local, or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license, or
other governmental authorization or approval applicable to NAC or any of its
subsidiaries, except to the extent that the failure to hold any such licenses,
franchises, permits, or authorizations, or any such violation, would not have a
Material Adverse Effect.
5.12 Subsidiaries. The NAC/Acquisition Sub Schedule lists all the
subsidiaries of NAC as of the date of the Closing and indicates for each such
corporate subsidiary as of such date the jurisdiction of incorporation or
organization. All of the outstanding shares of capital stock or other equity
interests of each of the subsidiaries are (i) held by NAC or one of such
wholly-owned subsidiaries; (ii) fully paid and non-assessable; and (iii) owned
by NAC or one of such wholly owned subsidiaries free and clear of any claim,
lien, or encumbrance.
5.13 Labor and Employment Matters. (a) NAC and its subsidiaries are
in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms, and conditions of employment and
wages and hours, and such laws respecting employment discrimination, equal
opportunity, affirmative action, worker's compensation, occupational safety, and
health requirements and unemployment insurance and related matters, and are not
engaged in and have not engaged in any unfair labor practice; (b) to the
knowledge of NAC and Acquisition Sub, no investigation or review by or before
any governmental entity concerning any violations of any such applicable laws is
pending nor, to the knowledge of NAC and Acquisition Sub is any such
investigation threatened or has any such investigation occurred during the last
three years, and no governmental entity has provided any notice to NAC or any of
its subsidiaries or otherwise asserted an intention to conduct any such
investigation; (c) there is no labor strike, dispute, slowdown, or stoppage
actually pending or threatened against NAC or any of its subsidiaries; (d) no
union representation question or union organizational activity exists respecting
the employees of NAC or any of its subsidiaries; (e) no collective bargaining
agreement exists which is binding on NAC or any of its subsidiaries; (f) neither
NAC nor any of its subsidiaries is experiencing any material work stoppage or
other material labor difficulty; and (g) in the event of termination of the
employment of any of the current officers, directors, employees, or agents of
NAC or any of its subsidiaries, neither NAC nor any of its subsidiaries shall,
to the best knowledge of NAC or such subsidiary, pursuant to any agreement or by
reason of anything done prior to the Effective Time by NAC or any of its
subsidiaries be liable to any of said officers, directors, employees, or agents
for so-called "severance pay" or any other similar payments or benefits,
including, without limitation, post-employment healthcare (other than pursuant
to COBRA) or insurance benefits. All except as disclosed on the NAC/Acquisition
Sub Schedule.
5.14 Intellectual Property. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such inaccuracy)
does not have or could not reasonably be expected to have a Material Adverse
Effect and except as disclosed on the NAC/Acquisition Sub Schedule:
(a) NAC and each of its subsidiaries owns, or is
licensed or otherwise has the legally enforceable right to use (in each case,
clear of any liens or encumbrances of any kind), all Intellectual Property used
in or necessary for the conduct of its business as currently conducted;
(b) no claims are pending or, to the best knowledge
of NAC or Acquisition Sub, threatened that NAC or any of its subsidiaries is
infringing on or otherwise violating the rights of any person with regard to any
Intellectual Property used by, owned by, and/or licensed to NAC or any of its
subsidiaries and, to the best knowledge of NAC and Acquisition Sub, there are no
valid grounds for any such claims;
(c) to the best knowledge of NAC and Acquisition
Sub, no person is infringing on or otherwise violating any right of NAC or any
of its subsidiaries with respect to any Intellectual Property owned by and/or
licensed to NAC or any of its subsidiaries;
(d) to the best knowledge of NAC and Acquisition
Sub, there are no valid grounds for any claim challenging the ownership or
validity of any Intellectual Property owned by NAC or any of its subsidiaries or
challenging NAC's or any of its subsidiaries' license or legally enforceable
right to use any Intellectual Property licensed by it; and
(e) to the best knowledge of NAC and Acquisition
Sub, all patents, registered trademarks, service marks, and copyrights held by
NAC and each of its subsidiaries are valid and subsisting.
5.15 Insurance. As of the date of the Closing, NAC and each of its
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are customary in the
businesses in which they are engaged. All material policies of insurance and
fidelity or surety bonds insuring NAC or any of its subsidiaries or their
respective businesses, assets, employees, officers, and directors are in full
force and effect. As of the date hereof, there are no material claims by NAC or
any of its subsidiaries under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause. All except as disclosed in the NAC/Acquisition Sub Schedule.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business Pending the Merger. New Leaf, NAC and
Acquisition Sub each agree that, during the period from the date of this
Agreement and continuing until the Effective Time:
(a) the business of such Companies shall be
conducted only in the ordinary and usual course of business and consistent with
past practices;
(b) None of such Companies shall (i) sell or pledge
or agree to sell or pledge any stock owned by it; (ii) amend its Articles of
Incorporation or Bylaws; or (iii) split, combine, or reclassify the shares of
stock or declare, set aside, or pay any dividend or other distribution payable
in cash, stock, or property in respect of its shares of stock, or directly or
indirectly redeem, purchase, or otherwise acquire any of its shares of stock;
(c) None of such Companies shall (i) authorize for
issuance, issue, sell, pledge, dispose of, encumber, deliver, or agree or commit
to issue, sell, pledge, or deliver any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class or exchangeable
into shares of stock of any class or any Voting Debt, except as provided in
Section 7.15 (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase, or otherwise), except that New
Leaf may issue New Leaf Shares required to be issued upon exercise of existing
stock options, warrants, or similar plans, or under other contractual
commitments previously made, which options, warrants, plans, or commitments have
been disclosed in writing to NAC in the New Leaf Schedule; (ii) acquire, dispose
of, transfer, lease, license, mortgage, pledge, or encumber any fixed or other
substantial assets other than in the ordinary course of business and consistent
with past practices, except as provided in Section 7.15; (iii) incur, assume, or
prepay any material indebtedness, liability, or obligation or any other material
liabilities or issue any debt securities other than in the ordinary course of
business and consistent with past practices; (iv) assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly, contingently, or
otherwise) for the obligations any other person (other than a subsidiary) in a
material amount other than in the ordinary course of business and consistent
with past practices; (v) make any material loans, advances, or capital
contributions to, or investments in, any other person, other than in the
ordinary course of business and consistent with past practices; (vi) fail to
maintain adequate insurance consistent with past practices for their businesses
and properties; or (vii) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing except as provided in Section
7.15;
(d) Each Company shall preserve intact its business
organization, keep available the services of its present officers and key
employees, and preserve the goodwill of those having business relationships with
it; provided, however, that no breach of this covenant shall be deemed to have
occurred if (i) a failure to comply with this Section 6.1(d) occurs as a result
of any matter arising out of the transactions contemplated by this Agreement or
any acquisition proposals made to such Company or the public announcement
thereof; except (i) as in the course of normal annual officer elections; or (ii)
if New Leaf appoints a new corporate secretary.
(e) The Companies shall not knowingly take or allow
to be taken or fail to take any action which act or omission would jeopardize
qualification of the Merger as a "reorganization" within the meaning of Section
368(a) of the Code; and
(f) Each Company shall use all reasonable efforts
to prevent any representation or warranty of such Company herein from becoming
untrue or incorrect in any material respect.
6.2 Compensation Plans. During the period from the date of this
Agreement and continuing until the Effective Time, each Company agrees that, ,
except as set forth in Section 7.11, it shall not, without the prior written
consent of the other Companies (except as required by applicable law or pursuant
to existing contractual arrangements or other plans or commitments as otherwise
disclosed to NAC in writing pursuant hereto) (a) enter into, adopt, or amend any
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance, or other employee benefit plan, agreement,
trust, plan, fund or other arrangement between such Company and one or more of
its officers, directors, or employees, in each case so as to materially increase
the benefits thereunder (collectively, "Compensation Plans"), (b) grant or
become obligated to grant any increase in the compensation or fringe benefits of
directors, officers, or employees (including any such increase pursuant to any
Compensation Plan) or any increase in the compensation payable or to become
payable to any officer, except, with respect to employees other than officers,
for increases in compensation in the ordinary course of business consistent with
past practice, or enter into any contract, commitment, or arrangement to do any
of the foregoing, except for normal increases and non-stock benefit changes in
the ordinary course of business consistent with past practice, (c) institute any
new employee benefit, welfare program, or Compensation Plan, (d) make any change
in any Compensation Plan or other employee welfare or benefit arrangement or
enter into any employment or similar agreement or arrangement with any employee,
or (e) enter into or renew any contract, agreement, commitment, or arrangement
providing for the payment to any director, officer, or employee of New Leaf of
compensation or benefits contingent, or the terms of which are materially
altered in favor of such individual, upon the occurrence of any of the
transactions contemplated by this Agreement.
6.3 Current Information. From the date of this Agreement to the
Effective Time, each Company shall cause one or more of its designated
representatives to confer on a regular and frequent basis with representatives
of the other Companies and to report the general status of its ongoing
operations. Each Company shall promptly notify the other Companies of any
material change in its normal course of business or in its properties.
6.4 Legal Conditions to Merger. Each of NAC, Acquisition Sub and New
Leaf shall, and shall cause their subsidiaries to, use all reasonable efforts
(a) to take, or cause to be taken, all actions necessary to comply promptly with
all legal requirements which may be imposed on such party or its subsidiaries
with respect to the Merger and to consummate the transactions contemplated by
this Agreement, subject to the appropriate vote or consent of shareholders, and
(b) to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any governmental
entity and/or any other public or private third party which is required to be
obtained or made by such party or any of its subsidiaries in connection with the
Merger and the transactions contemplated by this Agreement, including without
limitation NAC using all reasonable efforts to comply with any and all federal
and state securities laws with respect to the issuance of the NAC Shares and NAC
Promissory Notes; provided, however, that a party shall not be obligated to take
any action pursuant to the foregoing if the taking of such action or such
compliance or the obtaining of such consent, authorization, order, approval, or
exemption would, in such party's reasonable opinion, (i) be materially
burdensome to such party and its subsidiaries taken as a whole or impact in such
a materially adverse manner the economic or business benefit of the transactions
contemplated by this Agreement as to render inadvisable the consummation of the
Merger, or (ii) result in the imposition of a condition or restriction on such
party or on the Surviving Corporation of the type referred to in Section 8.1(c).
Each of NAC, Acquisition Sub and New Leaf shall promptly cooperate with and
furnish information to the other in connection with any such burden suffered by,
or requirement imposed upon, any of them or any of their subsidiaries in
connection with the foregoing.
6.5 Advice of Changes; Government Filings. Each party shall confer
on a regular and frequent basis with the other, report on operational matters
and promptly advise the other orally and in writing of any change or event
having, or which, insofar as can reasonably be foreseen, could have, a Material
Adverse Effect on such party or which would cause or constitute a material
breach of any of the representations, warranties, or covenants of such party
contained herein. Each Company shall file all reports required by regulation to
be filed by it with the U.S. Securities and Exchange Commission between the date
of this Agreement and the Effective Time and shall deliver to the other party
copies of all such reports promptly after the same are filed. Except where
prohibited by applicable statutes and regulations, each party shall promptly
provide the other (or its counsel) with copies of all other filings made by such
party with any state or federal government entity in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE VII.
ADDITIONAL AGREEMENTS
7.1 Access and Information.
(a) Each Company shall afford to the other Companies
and their financial advisors, legal counsel, accountants, consultants, and other
representatives access during normal business hours throughout the period from
the date hereof to the closing to all of its books, records, properties,
facilities, personnel commitments, and records (including but not limited to Tax
Returns) and, during such period, shall furnish promptly all information
concerning its business, properties, and personnel as the other Companies may
reasonably request in order for each Company to fully investigate the business
and affairs of the other Companies prior to the Effective Time (the
"Inspection").
(b) All information furnished by a Company to another
Company pursuant hereto shall be treated as the sole property of the Company
furnishing the information until consummation of the Merger contemplated hereby.
Each Company shall hold any such information that is nonpublic in confidence.
7.2 Acquisition Proposals. Each Company shall not, and shall use its
best efforts to cause its directors, officers, employees, financial advisors,
legal counsel, accountants, and other agents and representatives (for purposes
of this Section 7.2 only, being referred to as "affiliates") not to, initiate,
solicit, or encourage, directly or indirectly, or take any other action to
facilitate any inquiries or the making of any proposal with respect to, engage
or participate in negotiations concerning, provide any nonpublic information or
data to, or have any discussions with any party other than the parties hereto
relating to, any acquisition, merger, consolidation, acquisition of beneficial
ownership of or the right to vote securities representing 10% or more of the
total voting power of such entity, dissolution, business combination, purchase
of all or any significant portion of the assets or any division of, or any
equity interest in, such entity, or similar transaction other than the Merger
(such proposals, announcements, or transactions being referred to as
"Acquisition Proposals"). A Company shall promptly notify the other Companies
orally and in writing if any such Acquisition Proposal (including the terms
thereof and identity of the persons making such proposals) is received and
furnish to the other Companies hereto a copy of any written proposal.
7.3 Shareholder Approvals. Each Company, acting through its
respective Board of Directors, shall, in accordance with applicable law and
their Articles of Incorporation and Bylaws, promptly and duly call, give notice
of, and convene, as soon as practicable following the date hereof a meeting of
the shareholders for the purpose of voting to approve and adopt this Agreement,
or obtain such approval of the shareholders in accordance with applicable law
and their Articles of Incorporation and Bylaws, and shall use its best efforts
to obtain such approval of shareholders.
7.4 Public Announcements. So long as this Agreement is in effect,
each Company agrees that it shall obtain the approval of the other party prior
to issuing any press release and shall use its best efforts to consult with the
others before otherwise making any public statement or responding to any press
inquiry with respect to this Agreement or the transactions contemplated hereby,
except as may be required by law or any governmental agency.
7.5 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses.
7.6 NAC Offering. NAC shall use its best efforts to raise up to
$5,000,000 in immediately available funds through the offering and sale of
shares of NAC restricted common stock prior to the Effective Time. Consistent
with the provisions of Section 9.1(c), if NAC has not raised at least $2,000,000
in immediately available funds within 60 days of the execution of this
Agreement, New Leaf shall have the right to either extend the 60 day period or
terminate this Agreement.
7.7 Operating Capital. NAC shall provide New Leaf $800,000 in
operating capital, from the capital raised pursuant to the provisions of Section
7.6, within 60 days of the Effective Time. $500,000 of this amount shall be
expended at the direction of Xxx Xxxxxxxxxxx and Xxxxxxx Xxxxxxxx.
7.8 Assumption of Guarantees. NAC will assume the personal
guarantees of New Leaf's management with respect to the mortgage on New Leaf's
facility at 000 Xxxxxxxx Xxxx, Xxxxxx Springs, Geogia subject to the lender's
and guarantor's approval.
7.9 Use of New Leaf Facilities. All daily operations and
facilities of the Companies will be consolidated into New Leaf's existing
facility in Lithia Springs, Georgia.
7.10 Employment Agreements. Xxxxxxx Xxxxxxxx and Xxx Xxxxxxxxxxx
will be given 2 year, part-time employment agreements with NAC, commencing on
the Effective Date, in the form of the attached Exhibit 7.10. The employment
agreements will provide that NAC will provide Bellezza and Daughdrille with
health insurance coverage under NAC's employee health insurance plan for as long
as NAC exists and maintains such a health insurance plan.
7.11 New Leaf ESOP. At or prior to the Effective Time New Leaf shall
have acquired all of the New Leaf Shares held by the New Leaf ESOP for
$1,100,000 payable over time pursuant to the terms of a promissory note issued
by New Leaf to the New Leaf ESOP. At the Effective Time (a) Acquisition Sub will
assume New Leaf's $1,100,000 obligation to the New Leaf ESOP by operation of law
and pay that obligation in full; and (b) the New Leaf ESOP shall be terminated
and an application for a letter of determination respecting the termination
shall be filed with the Internal Revenue Service. Final distributions from the
New Leaf ESOP will be made, without further liability to NAC or New Leaf,
promptly following receipt of a favorable determination letter from the Internal
Revenue Service.
7.12 Additional Agreements.
(a) Subject to the terms and conditions herein
provided, including without limitation those set forth in the proviso to Section
6.5 hereof, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers,
consents, and approvals, and to effect all necessary registrations and filings.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers
and/or directors of the Companies shall take all such necessary action.
(b) Subject to the terms and conditions herein
provided, including without limitation those set forth in the proviso to Section
6.4 hereof, each Company shall cooperate with the others and use all reasonable
efforts to prepare all necessary documentation to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders, and
authorizations of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by this Agreement.
7.13 No Survival of Representations and Warranties. The
respective representations and warranties of New Leaf, NAC and Acquisition Sub
contained in this Agreement shall not survive beyond the Effective Time.
7.14 Indemnification.
(a) New Leaf hereby agrees to indemnify and hold
NAC, the Surviving Corporation and their officers, directors, affiliates,
representatives, trustees, grantors, beneficiaries and agents, and any
successors thereto (the "NAC Indemnitees"), harmless from any and all damages,
losses, costs or reasonable expenses (including, without limitation, reasonable
fees and expenses of investigation and reasonable attorneys' and consultants'
fees and expenses in connection with any action suit, or proceeding)
(collectively, "Damages") incurred or suffered as a result of or arising out of:
(i) the breach of any representation or warranty made by New Leaf pursuant to
Article IV of this Agreement or any other certificate or document delivered by
New Leaf pursuant to this Agreement, and (ii) the breach of any covenant or
agreement made or to be performed by New Leaf pursuant to this Agreement.
(b) NAC hereby agrees to indemnify and hold New
Leaf and its officers, directors, affiliates, representatives, trustees,
grantors, beneficiaries and agents, and any successors thereto (the "New Leaf
Indemnitees") harmless from Damages incurred or suffered as a result of or
arising out of (i) the breach of any representation or warranty made by NAC
pursuant to Article V of this Agreement or any other certificate or document
delivered by NAC pursuant to this Agreement; or (ii) the breach of any covenant
or agreement made or to be performed by NAC pursuant to this Agreement.
(c) Any party seeking indemnification (the
"Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter (the "Claim")
pursuant to this Section 7.14 shall promptly notify the Indemnifying Party in
writing of the existence of the Claim, setting forth in reasonable detail the
facts and circumstances pertaining thereto and the basis for the Indemnified
Party's right to indemnification.
(d) In the event that any third party notifies any
Indemnified Party with respect to any matter which may give rise to a Claim for
indemnification against the Indemnifying Party under this Agreement, then the
Indemnified Party shall promptly notify the Indemnifying Party of such Claim;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the extent) the
Indemnifying Party is prejudiced by such failure to give notice. The
Indemnifying Party, upon waiver of its right to contest the liability for which
indemnification is being sought and demonstration by the Indemnifying Party of
its financial ability to satisfy any resulting judgment to the reasonable
satisfaction of the Indemnified Party, shall have the right to assume defense of
the Claim if notice is given to the Indemnified Party within twenty (20) days
after receipt of notice of such Claim. If the Indemnifying Party assumes defense
of the Claim as provided in the preceding sentence, then:
(i) The Indemnifying Party will diligently
defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party;
(ii) The Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
(a) to the extent the Indemnified Party concludes reasonably based upon advice
of counsel that a conflict of interest exists between the Indemnified Party and
Indemnifying Party or (b) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party and such Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to the Indemnified Party which are
not available to the Indemnifying Party, or available to the Indemnifying Party,
but the assertion of which would be adverse to the interest of the Indemnified
Party;
(iii) The Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect to the
matter without the written consent of the Indemnifying Party (not to be withheld
or delayed unreasonably; it being understood and agreed that failure to consent
to a judgment or settlement that provides for relief other than monetary damages
or does not provide an unconditional release of the Indemnifying Party from
liability shall not be deemed unreasonable); and
(iv) The Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement, without the written
consent of the Indemnified Party (not to be withheld or delayed unreasonably; it
being understood and agreed that failure to consent to a judgment or settlement
that provides for relief other than monetary damages or does not provide an
unconditional release of the Indemnified Party from liability shall not be
deemed unreasonable).
(e) If no Indemnifying Party notifies the Indemnified
Party within twenty (20) days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, then the
Indemnified Party may defend against, or enter into any settlement with respect
to, the matter in any manner it reasonably may deem appropriate, without
prejudice to any of its rights hereunder.
(f) The Indemnified Party shall be entitled to
reimbursement of reasonable expenses included in Damages with respect to any
Claim (including, without limitation, the cost of defense, preparation and
investigation relating to such Claim) as such expenses are incurred by the
Indemnified Party; provided, however, that the Indemnified Party shall undertake
to repay any amounts arising solely from the fault of such Indemnified Party.
7.15 New Leaf Debt Financing. Notwithstanding anything contained
herein to the contrary, New Leaf may at any time prior to the Effective Time
seek and obtain additional or replacement debt financing, including without
limitation refinancing or replacement of its existing line of credit.
7.16 Noncompetition Agreements. Xxxxxxx Xxxxxxxx and Xxx Xxxxxxxxxxx
will sign two year noncompetition agreements with NAC, commencing on the
Effective Date, in the form of the attached Exhibit 7.16 (the "Noncompetition
Agreements"). The Noncompetition Agreements will provide for a payment in the
amount of $200,000 from NAC to each of Bellezza and Daughdrille in the event the
parties do not violate the terms of the Noncompetition Agreements. The $200,000
payments will be made at the end of the two year term of the Noncompetition
Agreements.
ARTICLE VIII.
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to the Companies' Obligation to Effect the Merger.
The respective obligations of all Companies to effect the transactions
contemplated herein shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any one of which may be waived by a
writing signed by NAC, Acquisition Sub, and New Leaf:
(a) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the shareholders of each of the
Companies to the extent required and in accordance with applicable law and each
Company's Articles of Incorporation and Bylaws.
(b) No preliminary or permanent injunction or other
order by any federal, state, or foreign court of competent jurisdiction which
prohibits the consummation of the Merger shall have been issued and remain in
effect as of the Closing. No statute, rule, regulation, executive order, stay,
decree, or judgment shall have been enacted, entered, issued, promulgated, or
enforced by any court or governmental authority which prohibits or restricts the
consummation of the Merger. Other than the filing of the Certificate of Merger
with the Secretary of State for the State of Georgia, all authorizations,
consents, orders or approvals of, or declarations or filings with, and all
expirations of waiting periods imposed by, any governmental entity (all of the
foregoing, "Consents") which are necessary for the consummation of the Merger,
other than Consents the failure to obtain which would have no material adverse
effect on the consummation of the Merger or on the Surviving Corporation and its
subsidiaries, taken as a whole, shall have been filed, occurred, or been
obtained (all such permits, approvals, filings, and consents and the lapse of
all such waiting periods being referred to as the "Requisite Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in full force
and effect. All state securities or blue sky permits and other authorizations
necessary to issue the NAC Shares and NAC Promissory Notes in exchange for the
New Leaf Shares and to consummate the Merger shall have been received.
(c) There shall not be any action taken, or any
statute, rule, regulation, or order enacted, entered, enforced, or deemed
applicable to the Merger, by any federal or state governmental entity which, in
connection with the grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon any Surviving Corporation, including, without
limitation, requirements relating to the disposition of assets, which in any
such case would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
(d) Each of the Companies shall have performed in
all material respects its obligations under this Agreement required to be
performed by them at or prior to the Effective Time and the representations and
warranties of each of the Companies contained in this Agreement shall be true
and correct in all material respects at and as of the Effective Time as if made
at and as of such time, except as contemplated by this Agreement, and each
Company shall have received a certificate of the Chairman of the Board, the
President, or an Executive Vice President of the other Company as to the
satisfaction of this condition.
(e) Each Company shall have obtained the consent
or approval of each person and entity whose consent or approval shall be
required in connection with the transactions contemplated hereby, under any loan
or credit agreement, note, mortgage, indenture, lease, license, or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a material
adverse effect on the Surviving Corporation and its subsidiaries taken as a
whole or upon the consummation of the transactions contemplated hereby.
8.2 Conditions to Obligations of NAC and Acquisition Sub. The
obligations of NAC and Acquisition Sub to carry out the transactions
contemplated by this Agreement are subject, at the option of NAC and Acquisition
Sub, to the satisfaction, or waiver by NAC and Acquisition Sub, of the following
conditions:
(a) No proceeding which New Leaf shall be a debtor,
defendant, or party seeking an order for its own relief or reorganization shall
have been brought or be pending by or against such person under any United
States or state bankruptcy or insolvency law.
(b) There shall have not been a Material Adverse
Effect on the business, prospects, financial or other condition of New Leaf from
the date of this Agreement to the date of the Closing.
(c) The New Leaf ESOP shall have been terminated,
and New Leaf shall have acquired all of the New Leaf Shares held by the New Leaf
ESOP in exchange for a promissory note in the amount of $1,100,000.
(d) The representations and warranties given by
New Leaf at the Closing pursuant to Article IV and the New Leaf Schedule shall
be acceptable to NAC in its reasonable discretion.
8.3 Conditions to Obligations of New Leaf. The obligations of New
Leaf to carry out the transactions contemplated by this Agreement are subject,
at the option of New Leaf, to the satisfaction, or waiver by New Leaf, of the
following conditions:
(a) No proceeding which NAC or Acquisition Sub shall
be a debtor, defendant, or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against such person
under any United States or state bankruptcy or insolvency law.
(b) NAC shall have raised at least $2,000,000 in
immediately available funds as described in Section 7.6 within 60 days of the
execution of this Agreement (which period may be extended by New Leaf in its
sole discretion).
(c) The representations and warranties give by NAC
and/or Acquisition Sub as of the Closing pursuant to Article V and the
NAC/Acquisition Sub Schedule shall be acceptable to New Leaf in its reasonable
discretion.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby abandoned at any time prior to the Effective Time, whether
before or after approval by the shareholders of the Companies:
(a) By mutual written consent of all of the Companies.
(b) By either NAC or New Leaf if the Merger shall not
have been consummated on or before June 1, 2001.
(c) By New Leaf if NAC has not raised, consistent with
the provisions of Section 7.6, at least $2,000,000 on or before 60 days after
the execution of this Agreement (which period may be extended by New Leaf in its
sole discretion).
(d) By NAC or New Leaf if there shall have been any
material default of a material obligation of the other hereunder and, if such
default is curable, such default shall have not been remedied within 10 days
after receipt by the defaulting Company, as the case may be, of notice in
writing specifying such default and requesting that it be remedied; provided,
that such 10-day period shall be extended for a reasonable time if the
defaulting Company shall be making diligent attempts to cure such default.
(e) Without action on the part of any Company, if any
court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree, or ruling or taken any
other action restraining, enjoining, or otherwise prohibiting the Merger and
such order, decree, ruling, or any other action shall have become final and
non-appealable.
(f) By either NAC or New Leaf, upon written notice to
the other, if the approval of the shareholders of any Company required for the
consummation of the Merger shall not have been obtained.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no further
effect and, except for a termination resulting from a breach by a party of this
Agreement, there shall be no liability or obligation on the part of any Company.
Nothing contained in this Section 9.2 shall relieve any party from liability for
willful breach of this Agreement that results in termination of this Agreement.
Upon request therefor, each party shall redeliver all documents, work papers,
and other material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing same.
ARTICLE X.
GENERAL PROVISIONS
10.1 Amendment. This Agreement may be amended by action by all of
the parties taken at any time before or after requisite approval hereof by the
shareholders of a Company, but, after any such approval, no amendment shall be
made which alters the exchange ratio as set forth in Section 3.1(a) or which in
any way materially adversely affects the rights of such shareholders, without
the further approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
10.2 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Such extensions or waivers shall be in
writing, executed by each of the Companies. Such waiver shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
10.3 Brokers. Each Company represents and warrants to the others
that no broker, finder, or financial advisor is entitled to any brokerage,
finder's, or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any party hereto, except as reflected in the New Leaf Schedule or
the NAC/Acquisition Sub Schedule.
10.4 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by telex or telecopy or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to NAC or 0000 Xxxxx Xxxxxx Xxxxxx
Acquisition Suite 7
Sub, to: Xxxx Xxxxx, Xxxxxxx 00000
Attention: President
with a copy to: Atlas Xxxxxxxx, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
(b) If to New Leaf, to: Al-Wali Corporation
000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxxx, Xxxxxxx
Attention: President
with a copy to: Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx Xxxxxx
10.5 Descriptive Headings. The headings contained in this
Agreement are for reference Purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.6 Entire Agreement; Assignment. This Agreement (including the
Exhibits, Schedules, and other documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof; and (b) shall not be assigned by operation
of law or otherwise.
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia without giving
effect to the provisions thereof relating to conflicts of law.
10.8 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any party other than the parties
hereto any rights, benefit, or remedies of any nature whatsoever or by reason of
this Agreement.
10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
10.10 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not effect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
10.11 Jurisdiction and Venue. Each party hereto hereby agrees that
any proceeding relating to this Agreement and the Merger shall be brought in a
state court of Georgia. Each party hereto hereby consents to personal
jurisdiction in any such action brought in any such Georgia court, consents to
service of process by registered mail made upon such party and such party's
agent and waives any objection to venue in any such Georgia court or to any
claim that such Georgia court is an inconvenient form.
10.12 Investigation. The respective representations and warranties
of each Company contained herein or in the certificates or other documents
delivered prior to the Closing shall not be deemed waived or otherwise affected
by any investigation made by any party hereto.
10.13 Consents. For purposes of any provision of this Agreement
requiring, permitting, or providing for the consent of any or Company, the
written consent of the Chief Executive Officer or President of a Company shall
be sufficient to constitute such consent.
10.14 Special ERISA Limitations. Notwithstanding any provisions
herein to the contrary, any representations, warranties, covenants, obligations
and conditions in this Agreement relating to the New Leaf ESOP are subject to
and limited by any applicable prohibitions, restrictions, requirements or other
provisions of the Internal Revenue Code of 1986, as amended (including, without
limitation, the prohibited transaction rules in section 4975 thereof), the
Employee Retirement Income Security Act of 1974, as amended (including, without
limitation, the prohibited transaction rules in Section 406 and 408 thereof),
any regulations and rulings under the foregoing, and the plan documentation of
the New Leaf ESOP.
[signatures contained on the following page]
IN WITNESS WHEREOF, each Company has caused this Agreement to be
executed on its behalf by its duly authorized officer(s), all as of the date
first above written.
XXXXXXXXXXXX.XXX, INC. AL-WALI, INC.
a Florida corporation a Georgia corporation doing business
Distributing Company as New Leaf
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxx Xxxxxxx Xxxxxxx
Its Chief Executive Officer Its President
NEW LEAF DISTRIBUTING COMPANY
a Georgia corporation
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Its Chief Executive Officer
