EXHIBIT 99.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT ("AGREEMENT") is made
and
entered into as of November 18, 2005 (the "EFFECTIVE DATE"), by and
among:
NATIONAL AUTO CREDIT, INC. ("NAC" or the "PURCHASER"), a Delaware
corporation;
FLEXNER WHEATLEY & ASSOCIATES ("FWA"), a Nevada corporation;
and MEETINGNET
INTERACTIVE, INC. ("MEETINGNET"), a Florida corporation. As used
herein, (a) FWA
and MeetingNet are referred to collectively as the "HOLDERS" and
each as a
"HOLDER"), and NAC and the Holders are referred to collectively as
the "PARTIES"
and each as a "PARTY."
RECITALS
A.
The Holders together own 100% of the membership interests in Option
Technologies Interactive LLC ("OTI" or the "PURCHASED ENTITY"), a
Florida limited liability company (all of membership interests of
the
Purchased Entity are hereinafter referred to collectively as the
"PURCHASED INTERESTS").
B.
NAC wishes to acquire all of the Purchased Interests from the
Holders,
and each Holder desires to sell to NAC all of such Holder's
Purchased
Interests (the purchase of all of the Purchased Interests is
hereinafter referred to as the "PURCHASE").
C.
This Agreement has been approved by the board of directors of NAC
and
by the Board of Directors of each Holder.
D.
In connection with the execution and delivery of this Agreement,
(i)
the Holders will be executing and delivering a certain Lockup,
Standstill And Voting Agreement of even date herewith regarding,
among
other things, the voting of any shares of NAC capital stock issued
in
connection with the transactions contemplated by this Agreement,
(ii)
certain principals in, or executives of, the Purchased Entity will
be
executing a certain Employment Agreement (as hereinafter defined),
certain Consulting Agreements (as hereinafter defined) and a
certain
Non-Compete Agreement (as hereinafter defined), and (iii) NAC will
be
issuing certain promissory notes, as provided below.
NOW, THEREFORE, in consideration of the premises and mutual
covenants
set forth herein, and other good and valuable consideration, the
receipt and
sufficiency of which are hereby acknowledged, the Parties,
intending to be
legally bound hereby, do mutually agree as follows:
ARTICLE 1
PURCHASE OF MEMBERSHIP INTERESTS
1.1 Purchase of Membership Interests. Subject to the terms and
conditions contained herein, NAC agrees to purchase from the
Holders, and the
Holders agree to sell to NAC, all of the Purchased Interests.
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1.2 Determination of Purchase Price. The purchase price ("PURCHASE
PRICE") for all of the Purchased Interests shall be Two Million Two
Hundred
Thirty-Three Thousand One Hundred Twenty-Five Dollars ($2,233,125)
PLUS Four
Hundred Ninety-Six Thousand Two Hundred Fifty (496,250) shares of
NAC Common
Stock, par value $0.05 per share; provided, however, that the
amount of the
Purchase Price shall be subject to adjustment as provided in
Sections 1.4 and
7.1 below.
1.3 Payment of Purchase Price. At the Closing (as hereinafter
defined), NAC shall make (or cause to be made) the following
payments to the
Holders on account of and with respect to the Purchase Price (the
aggregate
amount of such payments to the Holders (with, for such purposes, it
being agreed
and understood that such payments shall be deemed to include the
principal
amounts of the promissory notes referred to in clause (b) below and
the value of
the shares of NAC Common Stock referred to in clause (c) below) is
hereinafter
sometimes referred to as the "PURCHASE PRICE PAYMENTS"):
(a)
cash or wire transfer in the amount of Four Hundred Twenty-Five
Thousand Three Hundred and Thirty-Five Dollars and Eighty-Seven
Cents ($425,335.87) to FWA and the amount of Three Hundred
Nineteen Thousand Thirty-Nine Dollars and Thirteen Cents
($319,039.13) to MeetingNet (such payments, collectively, the
"CASH PAYMENTS");
(b)
two promissory notes of NAC, one issued to FWA in the original
principal amount of Eight Hundred Fifty Thousand Six Hundred
Seventy-One Dollars and Seventy-Five Cents ($850,671.75) (the
"FWA NOTE"), and one issued to the MeetingNet in the original
principal amount of Six Hundred Thirty-Eight Thousand
Seventy-Eight Dollars and Twenty-Five Cents ($638,078.25) (the
"MEETINGNET NOTE," and collectively with the FWA Note, the
"PROMISSORY NOTES"); and
(c)
Four Hundred Ninety-Six Thousand Two Hundred Fifty (496,250)
shares of NAC Common Stock, par value $0.05 per share, of which
Two Hundred Eighty-Three Thousand Five Hundred Fifty-Seven
(283,557) shares (the "FWA SHARES") shall be issued to FWA and
Two Hundred Twelve Thousand Six Hundred Ninety-Three (212,693)
shares (the "MEETINGNET SHARES," and collectively with the FWA
Shares, the "PURCHASE PRICE SHARES") shall be issued to
MeetingNet.
The FWA Note and the MeetingNet Note shall be in the form attached
hereto as
Exhibit G-1 and G-2, respectively. The payments on account of and
with respect
to the Purchase Price shall be adjusted as set forth in Sections
1.4 and 7.1
below.
1.4 Adjustments to the Purchase Price. The Purchase Price shall be
adjusted in accordance with this Section 1.4.
(a)
Increase in Purchase Price Based on Adjusted EBITDA. If the
Adjusted EBITDA (as defined below) for the period (the
"POST-CLOSING PERIOD") commencing on February 1, 2006 and
expiring January 31, 2008 exceeds the Threshold Amount (as
defined below), then the amount of the Purchase Price shall be
increased by an amount (the "POSITIVE PURCHASE PRICE ADJUSTMENT")
equal to $412,500 plus
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imputed interest thereon at five percent (5%) per annum,
compounded quarterly, which increase in the Purchase Price shall
be (i) evidenced by increasing the outstanding principal amount
of the FWA Note by fifty-seven and fourteen one-hundredths
percent (57.14%) (the "FWA PERCENTAGE") of the amount of the
Positive Purchase Price Adjustment and increasing the outstanding
principal amount of the MeetingNet Note by forty-two and
eight-six hundredths percent (42.86%) (the "MEETINGNET
PERCENTAGE") of the amount of the Positive Purchase Price
Adjustment and (ii) paid in accordance with the terms of the
Promissory Notes as so increased. As used herein, "ADJUSTED
EBITDA" for any period means the aggregate net earnings of the
Purchased Entity (to the extent applicable, on a consolidated
basis with its subsidiaries, if any) for such period, before any
deduction for interest, taxes, depreciation and amortization and
before deducting any "parent company" expenses of NAC or other
expenses of NAC allocated by NAC to the Purchased Entity by NAC
other than amounts allocated to the Purchased Entity (in a manner
consistent with NAC's customary practice of allocating the same
to other direct or indirect subsidiaries of NAC) on account of
its proportionate share of insurance premiums, accounting fees,
state franchise taxes, corporate employee benefits (i.e., 401-K
Plan benefits) and other expenses customarily so allocated by NAC
to or among its other subsidiaries (which amounts shall be so
deducted in determining the net earnings of the Purchased
Entity), in each case as determined in accordance with generally
accepted accounting principles ("GAAP"); provided, however, that,
in calculating the Adjusted EBITDA, (i) the Adjusted EBITDA shall
be determined exclusive of the effect, if any, of any purchase
accounting adjustments required by GAAP to conform the
consolidated financial statements or results of the Purchased
Entity with NAC's financial reporting and accounting principals,
(ii) no deduction shall be made with respect to any payments made
by the Purchased Entity to its employees under the OTI Employee
Bonus Plan (as defined below) as required under Section 7.5 below
and (ii) notwithstanding anything contained herein to the
contrary, (a) if any substantial portion of the business time of
any employee or consultant of the Purchased Entity is required to
be devoted to the primary benefit of NAC or any of its other
direct or indirect subsidiaries, an appropriate portion of the
salary of such employee or of the consulting fees of such
consultant shall be allocated to NAC or such direct or indirect
subsidiary (as the case may be) and not deducted in determining
the net earnings of the Purchased Entity and (b) if any
substantial portion of the business time of any employee or
consultant of NAC or any of its other direct or indirect
subsidiaries is required to be devoted to the primary benefit of
the Purchased Entity (or any of its subsidiaries), an appropriate
portion of the salary of such employee or of the consulting fees
of such consultant shall be allocated to the Purchased Entity and
shall be deducted in determining the net earnings of the
Purchased Entity. As used herein, "THRESHOLD AMOUNT" means one
million six hundred fifty thousand dollars ($1,650,000);
provided, however, that to the extent that the Holders can
demonstrate that the net income achieved by the meeting
production business in the United States has, on account of a
pandemic or terrorism, been depressed during the Post-Closing
Period below what it was prior to the Post-Closing Period, then
the "THRESHOLD
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AMOUNT" shall mean one million six hundred fifty thousand dollars
($1,650,000) as reduced by the same portion that the Holders can
demonstrate that the net income achieved by the meeting
production business in the United States has, on account of a
pandemic or terrorism, been depressed during the Post-Closing
Period below what it was prior to the Post-Closing Period.
(b)
Decrease in Purchase Price Based on Adjusted EBITDA. If the
Adjusted EBITDA for the Post-Closing Period is less than
$1,200,00, then the amount of the Purchase Price shall be
decreased by $412,500 plus imputed interest thereon at five
percent (5%) per annum, compounded quarterly; and if the Adjusted
EBITDA for the Post-Closing Period is less than $1,300,000 but
greater than or equal to $1,200,000, then the amount of the
Purchase Price shall be decreased by $206,250 plus imputed
interest thereon at five percent (5%) per annum, compounded
quarterly (the amount of any decrease in the Purchase Price
determined by the foregoing provision of this sentence is
hereinafter referred to as the "NEGATIVE PURCHASE PRICE
ADJUSTMENT"). Any decrease in the Purchase Price provided for in
the foregoing provisions of this Section 1.4(b) shall be
evidenced and effected by decreasing the outstanding principal
amount of the FWA Note by the FWA Percentage of the amount of the
Negative Purchase Price Adjustment and decreasing the outstanding
principal amount of the MeetingNet Note by the MeetingNet
Percentage of the amount of the Negative Purchase Price
Adjustment.
(c)
Decrease in Purchase Price Based on Closing Book Value. If six
hundred thousand dollars ($600,000) exceeds the Closing Book
Value (as defined below) (any such excess is hereinafter referred
to as the "NEGATIVE BOOK VALUE VARIANCE"), then the amount of the
Purchase Price shall be decreased by an amount equal to the
Negative Book Value Variance, which decrease shall be evidenced
and effected by decreasing the outstanding principal amount of
the FWA Note by the FWA Percentage of the amount of the Negative
Book Value Variance and decreasing the outstanding principal
amount of the MeetingNet Note by the MeetingNet Percentage of the
amount of the Negative Book Value Variance. As used herein,
"CLOSING BOOK VALUE" means the book value of the Purchased Entity
(and its consolidated subsidiaries, if any), determined as of the
close of business on the Closing Date (as defined below), as
determined in accordance with GAAP.
1.5 Other Adjustments. If the Closing Book Value exceeds six
hundred
thousand dollars ($600,000) (any such excess is hereinafter
referred to as the
"POSITIVE BOOK VALUE VARIANCE"), then the Purchased Entity shall be
deemed to
have received a loan from FWA in the amount of the FWA Percentage
of the
Positive Book Value Variance and a loan from MeetingNet in the
amount of the
Meeting Net Percentage of the Positive Book Value Variance, which
loans (the
"BOOK VALUE LOANS") shall be repaid to FWA and MeetingNet, without
interest,
within six (6) months following the Closing (with it being agreed
and understood
that such repayment shall be made as soon as practical following
the Closing
from, and based upon receipt by the Purchased Entity of, accounts
receivable
included in the Closing Book Value, but
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after preserving a minimum of $75,000 in cash that is not on
deposit (other than
in a bank account for the Purchased Entity) or otherwise
restricted).
1.6 Closing. The closing of the transactions contemplated hereby
(the
"CLOSING") shall occur at 10:00 A.M. (local time) on the third
Business Day (as
hereinafter defined) after each of the conditions to closing
contained in
Article 6 hereof has been fulfilled or waived in writing, at the
offices of Reed
Smith LLP, 599 Lexington Avenue, 29th Floor, New York, New York, or
at such
other place, on such other date and/or at such other time as the
Parties may
mutually agree upon in writing. The date on which the Closing
occurs is
hereinafter sometimes referred to as the "CLOSING DATE."
1.7 Taking of Necessary Actions; Further Actions. NAC, on the one
hand,
and the Holders, on the other hand, shall use all reasonable
efforts to take all
such actions as may be necessary or desirable to carry out the
purposes of this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF NAC
As an inducement to the Holders to enter into this Agreement, NAC
hereby represents and warrants to the Holders as follows:
2.1 Organization and Qualification. NAC is a corporation duly
organized, validly existing and in good standing under the laws of
the State of
Delaware and has the requisite corporate power and authority, and
all necessary
governmental approvals, to own or lease and operate its properties
and to carry
on its business as it is now being conducted (exclusive, however,
of any
governmental approvals the absence of which would not have, and
could not be
reasonably anticipated to have, a Materially Adverse Effect (as
hereinafter
defined) on NAC). NAC is duly qualified in every jurisdiction where
the failure
to do so would have, or could be reasonably anticipated to have, a
Materially
Adverse Effect on NAC. The copies of the Certificate of
Incorporation and Bylaws
of NAC previously furnished to the Holders reflect all amendments
made thereto
and are correct and complete. Such organizational documents are in
full force
and effect. NAC is not in violation of any of its organizational
documents. As
used herein, "MATERIALLY ADVERSE EFFECT" on any Person (as
hereinafter defined)
means any materially adverse effect on the assets, liabilities,
financial
condition, operating results, customer, employee, supplier or
franchise
relations, business (as currently conducted and as proposed to be
conducted),
business condition or prospects or financing arrangements of such
Person (taken
as a whole on a consolidated basis with its consolidated
subsidiaries, if any)
or on the ability of such Person to perform the transactions
contemplated hereby
to be performed by such Person, "MATERIALLY ADVERSE CHANGE" with
respect to any
Person means any materially adverse change in the assets,
liabilities, financial
condition, operating results, customer, employee, supplier or
franchise
relations, business (as currently conducted and as proposed to be
conducted),
business condition or prospects or financing arrangements of such
Person (taken
as a whole on a consolidated basis with its consolidated
subsidiaries, if any)
or in the ability of such Person to perform the transactions
contemplated hereby
to be performed by such Person, and "PERSON" means any individual,
corporation,
partnership, limited liability company, joint venture, business
trust,
association or other business entity of any type or nature.
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2.2 Authority Relative to This Agreement. NAC has the requisite
corporate power and authority to enter into this Agreement and each
of the
Collateral Documents (as hereinafter defined) to which it is
contemplated
hereunder to become a party and to carry out its obligations
hereunder and
thereunder. The execution and delivery of this Agreement by NAC and
the
consummation by NAC of the transactions contemplated hereby to be
performed by
it have been duly authorized by all necessary corporate action on
the part of
NAC, and no other corporate proceedings on the part of NAC are
necessary to
authorize this Agreement and such transactions. The execution and
delivery of
each Collateral Document to which NAC is contemplated hereunder to
become a
party and the consummation by NAC of the transactions contemplated
thereby to be
performed by it have been duly authorized by all necessary
corporate action on
the part of NAC, and no other corporate proceedings on the part of
NAC are
necessary to authorize the execution, delivery or performance of
such Collateral
Document by NAC and the performance of such transactions by NAC.
This Agreement
has been duly executed and delivered by NAC and constitutes a
legal, valid and
binding obligation of NAC, enforceable against NAC in accordance
with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency,
reorganization or other similar laws relating to the enforcement of
creditors'
rights generally or by general principles of equity, regardless of
whether such
enforceability is considered at law or in equity. Each Collateral
Document to
which NAC is contemplated hereunder to become a party will, when
executed and
delivered by NAC, constitute a legal, valid and binding obligation
of NAC,
enforceable against NAC in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization
or other similar laws relating to the enforcement of creditors'
rights generally
or by general principles of equity, regardless of whether such
enforceability is
considered at law or in equity. The execution, delivery and
performance of this
Agreement by NAC is not, and will not be, in breach or violation
of, or be in
conflict with or constitute, with or without the passage of time or
the giving
of notice (or both), a default under, (a) its Certificate of
Incorporation or
Bylaws, (b) any agreement, arrangement or understanding to which it
is a party
or by which it is otherwise bound, (c) any Permit (as hereinafter
defined)
applicable to it or (d) any law, regulation, order, judgment or
decree
applicable to it and does not and will not result in the creation
of any Lien
(as hereinafter defined) on any assets of NAC or of any of its
current
subsidiaries or result in, or constitute grounds for, the
termination,
suspension, revocation, forfeiture, lapse, impairment or
non-renewal of any
Permit the absence or loss of which would have, or could be
reasonably
anticipated to have, a Materially Adverse Effect on NAC. The
execution, delivery
and performance by NAC of any Collateral Document to which NAC is
contemplated
hereunder to become a party will not be in breach or violation of,
or be in
conflict with or constitute, with or without the passage of time or
the giving
of notice (or both), a default under, (a) NAC's Certificate of
Incorporation or
Bylaws, (b) any agreement, arrangement or understanding to which
NAC is a party
or by which NAC is otherwise bound, (c) any Permit applicable to
NAC or (d) any
law, regulation, order, judgment or decree applicable to NAC and
will not result
in the creation of any Lien on any assets of NAC or (except as
contemplated by
or provided for in the Collateral Documents) of any of its current
subsidiaries
or result in, or constitute grounds for, the termination,
suspension,
revocation, forfeiture, lapse, impairment or non-renewal of any
Permit the
absence or loss of which would have, or could be reasonably
anticipated to have,
a Materially Adverse Effect on NAC. Except for such filings as are
to be made
pursuant to federal or state securities laws, no authorization,
consent or
approval of, or filing with, any public body, court or authority is
(a)
necessary on the part of NAC for the
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consummation by NAC of the transactions contemplated by this
Agreement to be
performed by it or (b) necessary on the part of NAC for the
consummation by NAC
of the transactions contemplated to be performed by it pursuant to
any
Collateral Document to which NAC is contemplated hereunder to
become a party. As
used herein, "COLLATERAL DOCUMENTS" mean, collectively, the
Promissory Notes,
the Employment Agreement, the Consulting Agreements, the Voting
Agreement (as
hereinafter defined), the Non-Compete Agreement, the OTI Security
Agreement (as
hereinafter defined), the Surety Agreement (as hereinafter
defined), the NAC
Security Agreement (as hereinafter defined) and the Registration
Rights
Agreement (as hereinafter defined).
2.3 No Materially Adverse Changes. Except as set forth in Section
2.3
of the letter, dated as of the date hereof, furnished by NAC to the
Holders (the
"NAC DISCLOSURE LETTER"), a copy of which letter is attached hereto
as Exhibit
H, or in the NAC Business Reports (as defined in Section 2.6
below), there has
not been any Materially Adverse Change with respect to NAC since
April 30, 2005.
2.4 Capitalization. The authorized equity capitalization of NAC
consists of 40,000,000 shares of common stock ("NAC COMMON STOCK"),
par value
$.05 per share, and 2,000,000 shares of preferred stock. As of the
date hereof,
8,530,614 shares of NAC Common Stock are issued and outstanding,
all of which
shares are validly issued, fully paid and non-assessable, and no
shares of
preferred stock are outstanding. Except as disclosed in Section 2.4
of the NAC
Disclosure Letter or in the NAC Business Reports or provided for
herein or in
any of the Collateral Documents, there are no options, warrants,
conversion
privileges or other rights, agreements, arrangements or commitments
obligating
NAC to issue or sell any shares of capital stock of NAC or
securities or
obligations of any kind convertible into or exchangeable for any
shares of
capital stock of NAC or of any other corporation, nor are there any
stock
appreciation, phantom stock or similar rights outstanding based
upon the book
value or any other attribute of NAC. Except as disclosed in the NAC
Business
Reports, no holders of outstanding shares of NAC Common Stock are
entitled to
any preemptive or other similar rights.
2.5 Financial Statements and SEC Filings. NAC has made available to
the Holders true and correct copies of each report, registration
statement (on a
form other than Form S-8) and definitive proxy statement
(collectively, the
"REPORTS") filed by NAC with the U.S. Securities and Exchange
Commission (the
"SEC") between January 31, 2005 and the date of this Agreement. NAC
will also
deliver to the Holders, on or before the Closing, any other reports
that are
filed by NAC with the SEC after the date hereof and prior to the
Closing, and
any other reports or other information sent by NAC generally to
NAC's
stockholders after the date hereof and prior to the Closing, but
not required to
be filed with the SEC. (The Reports and all other reports and
information
referred to in the immediately preceding sentence, whether or not
filed with the
SEC, are herein collectively referred to as the "NAC BUSINESS
REPORTS," and the
financial statements, including the notes thereto, contained in the
NAC Business
Reports are hereinafter collectively referred to as the "NAC
FINANCIAL
STATEMENTS.") NAC has duly filed all the Reports required to be
filed by it with
the SEC under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and
the Securities Exchange Act of 1934, as amended, and no such
Report, nor any
Report sent to NAC's stockholders generally, contains any untrue
statement of
material fact or omits to state any material fact required to be
stated therein
or necessary to make the statements in such Report, in light of the
circumstances under which they were made, not
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misleading. The NAC Financial Statements were prepared in
accordance with GAAP
applied on a consistent basis throughout the periods involved and
present fairly
in all material respects the consolidated financial condition,
results of
operations and cash flows of NAC and its consolidated subsidiaries
as of the
dates and for the periods indicated therein, subject, in the case
of unaudited
interim statements, to normal year-end accounting adjustments and
the absence of
complete footnote disclosure.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
stated in Section 2.6 of the NAC Disclosure Letter or in the NAC
Business
Reports (inclusive of the NAC Financial Statements) or as may be
provided for
herein or in the Collateral Documents or contemplated hereby or
thereby, to the
best knowledge of NAC, NAC does not have any material liabilities
or obligations
(whether accrued, absolute, contingent, unliquidated or of any
other nature),
other than (i) liabilities incurred in the ordinary course of
business and (ii)
obligations under contracts and commitments incurred in the
ordinary course of
business, which, in both subsections (i) and (ii), individually or
in the
aggregate, are not material to the financial condition or operating
results of
NAC (determined on a consolidated basis).
2.7 Litigation. Except as set forth in Section 2.7 of the NAC
Disclosure Letter or in the NAC Business Reports, (a) there are no
actions,
suits, proceedings or orders, at law or in equity, pending or
threatened against
NAC, (b) to the best knowledge of NAC, there are no investigations
pending or
threatened against NAC before or by any federal, state, municipal
or other
governmental department, commission, board, bureau, agency or
instrumentality,
domestic or foreign, and (c) to the best knowledge of NAC, there is
no basis for
any of the foregoing.
2.8 No Commissions. NAC has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar
compensation in
connection with the transactions contemplated hereby or by any of
the Collateral
Documents.
2.9 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or
filing with, any federal, state or local governmental authority on
the part of
NAC is required in connection with the consummation of the
transactions
contemplated by this Agreement or any of the Collateral Documents,
except (a)
the filing of financing statements as contemplated by the Security
Agreement and
(b) such filings as may be required under federal and/or state
securities laws,
which filings NAC agrees to make to the extent (but only to the
extent) provided
for in the Registration Rights Agreement. The foregoing
representations and
warranties set forth in this Section 2.9 are subject to and
conditioned upon the
truth and accuracy of the representations of the Holders as set
forth in Article
4 below.
2.10 Disclosure. Neither this Article 2 nor the NAC Disclosure
Letter
contains any untrue statement of a material fact or omits a
material fact
necessary to make the statements contained herein or therein, in
light of the
circumstances under which they were made, not misleading, and to
the best
knowledge of NAC, there is no fact that has not been disclosed to
the Holders
that materially and adversely affects, or could reasonably be
anticipated to
materially and adversely affect, the business, including the
operating results,
assets, customer, supplier or employee relations and business
prospects, of NAC
(determined on a consolidated basis); provided, however, that the
foregoing
shall not be deemed to extend or apply to any fact or
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circumstance that relates to the Purchased Entity (including,
without
limitation, the operating results, assets, customer, supplier or
employee
relations or business prospects of the Purchased Entity).
2.11 Disclaimer. Except as set forth in this Agreement or in the
Collateral Documents, NAC makes no representation, express or
implied, at law or
in equity, in respect of NAC (or any of its subsidiaries), and any
such
representation or warranty not set forth in this Agreement or in
the Collateral
Documents is hereby expressly disclaimed.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE HOLDERS
As an inducement to NAC to enter into this Agreement, Holders,
jointly
and severally, represent and warrant to NAC as follows:
3.1 Organization and Qualification. The Purchased Entity is a
limited
liability company duly organized, validly existing and in good
standing under
the laws of the State of Florida and has the requisite limited
liability company
power and authority, and has all necessary governmental approvals,
to own or
lease and operate its properties and to carry on its business as it
is now being
conducted (exclusive, however, of any governmental approvals the
absence of
which would not have, and could not be reasonably anticipated to
have, a
Materially Adverse Effect on the Purchased Entity). The Purchased
Entity is duly
qualified to do business in every jurisdiction where the failure to
do so would
have, or could be reasonably anticipated to have, a Materially
Adverse Effect on
the Purchased Entity. The copies of the Purchased Entity's
certificate of
formation or article of organization (and each other document
pursuant to which
it was formed) and operating agreement or limited liability company
agreement
(and each other document governing its operations, management or
conduct) (the
foregoing are hereinafter referred to collectively as the
"PURCHASED ENTITY
GOVERNING DOCUMENTS"), which have been furnished by the Holders to
NAC prior to
the date of this Agreement, reflect all amendments made thereto and
are correct
and complete. Such organizational documents are in full force and
effect. The
Purchased Entity is not in violation of any of its organizational
documents.
3.2 Authority Relative to this Agreement. Each of the Holders has
the
requisite corporate power and authority, and the Purchased Entity
has the
requisite limited liability company power and authority to enter
into each of
the Collateral Documents to which it is contemplated hereunder to
become a party
and to carry out its obligations thereunder. The execution and
delivery by the
Purchased Entity of each Collateral Document to which it is
contemplated
hereunder to become a party and the consummation by the Purchased
Entity of the
transactions contemplated thereby to be performed by it have been
duly
authorized by all necessary limited liability company action on the
part of the
Purchased Entity and have been duly approved by each Holder, and no
other
proceedings on the part of the Purchased Entity are necessary to
authorize the
execution, delivery and performance by the Purchased Entity of such
Collateral
Document and the performance of such transactions. The execution
and delivery by
each Holder of each Collateral Document to which it is contemplated
hereunder to
become a party and the consummation by each Holder of the
transactions
contemplated thereby to be
12
performed by it have been duly authorized by all necessary
corporate action on
the part of such Holder and have been duly approved by the board of
directors of
each Holder, and no other corporate proceedings on the part of
either Holder are
necessary to authorize the execution, delivery and performance by
either Holder
of such Collateral Documents and the performance of such
transactions. Each
Collateral Document to which the Purchased Entity is contemplated
hereunder to
become a party will, when executed and delivered by the Purchased
Entity,
constitute a legal, valid and binding obligation of the Purchased
Entity,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization
or other similar laws relating to the enforcement of creditors'
rights generally
or by general principles of equity, regardless of whether such
enforceability is
considered at law or in equity. Each Collateral Document to which
either Holder
is contemplated hereunder to become a party will, when executed and
delivered by
such Holder, constitute a legal, valid and binding obligation of
such Holder,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization
or other similar laws relating to the enforcement of creditors'
rights generally
or by general principles of equity, regardless of whether such
enforceability is
considered at law or in equity. Except as expressly set forth in
Section 3.2 of
the letter, dated as of the date hereof, furnished by the Holders
to NAC (the
"HOLDERS DISCLOSURE LETTER"), a copy of which letter is attached
hereto as
Exhibit I, the execution, delivery and performance of this
Agreement by the
Holders is not, and will not be, in breach or violation of (a) the
Certificate
of Incorporation or Bylaws of either Holder, (b) (subject to the
Required
Waivers (as defined below) having been obtained) any agreement,
arrangement or
understanding to which the Purchased Entity and/or either Holder is
a party or
by which the Purchased Entity and/or either Holder is otherwise
bound, (c)
(subject to the Required Waivers having been obtained) any Permit
applicable to
the Purchased Entity and/or either Holder or (d) any law,
regulation, order,
judgment or decree, applicable to the Purchased Entity and/or
either Holder and
does not and will not result in, create or trigger the termination
or
acceleration of, or any right of termination or acceleration under,
any such
agreement, arrangement or understanding or any payment or other
obligation or
duty thereunder, result in the creation of any Lien on any assets
of the
Purchased Entity or either Holder or result in, or constitute
grounds for, the
termination, suspension, revocation, forfeiture, lapse, impairment
or
non-renewal of any Permit the absence or loss of which would have,
or could be
reasonably anticipated to have, a Materially Adverse Effect on the
Purchased
Entity. The execution, delivery and performance by the Purchased
Entity of any
Collateral Document to which it is contemplated hereunder to become
a party will
not be in breach or violation of, or be in conflict with or
constitute, with or
without the passage of time or the giving of notice (or both), a
default under,
(a) any Purchased Entity Governing Document, (b) (subject to the
Required
Waivers having been obtained) any agreement, arrangement or
understanding to
which the Purchased Entity and/or either Holder is a party or by
which the
Purchased Entity and/or either Holder is otherwise bound, (c)
(subject to the
Required Waivers having been obtained) any Permit applicable to the
Purchased
Entity and/or either Holder or (d) any law, regulation, order,
judgment or
decree applicable to the Purchased Entity and/or either Holder and
will not
result in, create or trigger the termination or acceleration of, or
any right of
termination or acceleration under, any such agreement, arrangement
or
understanding, result in the creation of any Lien on any assets of
the Purchased
Entity or result in, or constitute grounds for, the termination,
suspension,
revocation, forfeiture, lapse, impairment or non-renewal of any
Permit the
absence or loss of which would have, or could be
13
reasonably anticipated to have, a Materially Adverse Effect on the
Purchased
Entity. The execution, delivery and performance by either Holder of
any
Collateral Document to which it is contemplated hereunder to become
a party will
not be in breach or violation of, or be in conflict with or
constitute, with or
without the passage of time or the giving of notice (or both), a
default under,
(a) the Certificate of Incorporation or Bylaws of either Holder,
(b) (subject to
the Required Waivers having been obtained) any agreement,
arrangement or
understanding to which either Holder is a party or by which either
Holder is
otherwise bound, (c) (subject to the Required Waivers having been
obtained) any
Permit applicable either Holder or (d) any law, regulation, order,
judgment or
decree applicable to either Holder and will not result in, create
or trigger the
termination or acceleration of, or any right of termination or
acceleration
under, any such agreement, arrangement or understanding, result in
the creation
of any Lien on any assets of the Purchased Entity and/or either
Holder or result
in, or constitute grounds for, the termination, suspension,
revocation,
forfeiture, lapse, impairment or non-renewal of any Permit the
absence or loss
of which would have, or could be reasonably anticipated to have, a
Materially
Adverse Effect on the Purchased Entity. No authorization, consent
or approval
of, or filing with, any public body, court or authority is
necessary on the part
of the Purchased Entity or either Holder for the consummation by
the Purchased
Entity and/or either Holder of the transactions contemplated by
this Agreement
or any Collateral Document.
3.3 Capitalization and Voting Rights.
(a) Except for the Purchased Interests, there are no issued or
outstanding interests in or with respect to the Purchased Entity.
(b) All of the Purchased Interests are duly and validly authorized
and
issued, fully paid and non-assessable and were issued in accordance
with the registration or qualification provisions of the Securities
Act and any relevant state securities laws, or pursuant to valid
exemptions therefrom.
(c) There are no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments obligating the
Purchased Entity to issue or sell any units or interests in the
Purchased Entity or securities or obligations of any kind
exercisable
for, convertible into or exchangeable for any units or interests in
the Purchased Entity, nor are there any appreciation or similar
rights
outstanding based upon the book value or any other attribute of the
Purchased Entity (or any group of Persons including the Purchased
Entity). No Person is entitled to any preemptive or other similar
rights with respect to any such units or interests.
(d) The Purchased Entity is not a party or otherwise subject to any
agreement or understanding, and there is no agreement or
understanding
between any Persons, that affects or relates to the voting or
giving
of written consents with respect to any units or interests of the
Purchased Entity or by any member of the Purchased Entity or the
holder of any such units or interests.
(e) The Holders own all of the Purchased Interests free and clear
of
any and all Liens, and upon the consummation of the transactions
contemplated hereby, NAC shall acquire
14
good and valid title to all units and other interests in the
Purchased
Entity, free and clear of any and all Liens.
3.4 Financial Statements of the Purchased Entity.
(a) Unaudited Interim Financial Statements. The Holders have
provided
NAC with an unaudited balance sheet of the Purchased Entity, dated
as
of June 30, 2005 (the "INTERIM BALANCE SHEET"), a statement of
profit
and loss and of cash flows of the Purchased Entity for the period
from
January 1, 2005 through June 30, 2005 (the "INTERIM CASH STATEMENT"
and, collectively with the Interim Balance Sheet, the "INTERIM
FINANCIAL STATEMENTS"). The Interim Balance Sheet presents fairly
in
all material respects the financial condition of the Purchased
Entity
as of the date thereof, subject to normal year-end accounting
adjustments and the absence of footnote disclosure. Except as set
forth in the Interim Balance Sheet, the Purchased Entity has no
liabilities or obligations (whether accrued, absolute, contingent,
unliquidated or of any other nature), other than (i) liabilities
incurred in the ordinary course of business consistent with past
practices after June 30, 2005 and (ii) obligations under contracts
and
commitments incurred in the ordinary course of business consistent
with past practices, which, in both clauses (i) and (ii),
individually
or in the aggregate, are not material to the financial condition or
operating results of the Purchased Entity. The Interim Cash
Statement
presents fairly in all material respects the results of operations
and
cash flows of the Purchased Entity for the period covered thereby.
(b) Audited Financials. The Holders have provided NAC with audited
balance sheets and statements of profit and loss and of cash flows
for
the Purchased Entity as of the ends of, and for, each of the prior
three (3) years ended December 31, 2004 (collectively, the "AUDITED
FINANCIAL STATEMENTS"). The Audited Financial Statements present
fairly in all material respects the financial condition of the
Purchased Entity as of the respective dates thereof and the results
of
operations and cash flows of the Purchased Entity for the periods
covered thereby.
(c) The Interim Financial Statements and the Audited Financial
Statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except that the
Interim Financial Statements do not include full footnote
disclosure).
(d) The Purchased Entity has, in the aggregate, (I) net book value
of
at least six hundred thousand dollars ($600,000), determined in
accordance with GAAP, and (II) cash in an amount equal to at least
seventy-five thousand dollars ($75,000).
(e) Except for the indebtedness expressly set forth in Section
3.4(e)
of the Holders Disclosure Letter (any such indebtedness, the
"SCHEDULED INDEBTEDNESS"), the Purchased Entity is not indebted or
obligated (directly, pursuant to any guaranty or surety or
otherwise)
with respect to any obligation for borrowed money. True and
complete
copies of all contracts, instruments and other agreements
(inclusive
of all amendments, supplement and other modifications) evidencing
or
providing for any Scheduled Indebtedness have been delivered to
NAC.
15
(f) Except for any credit agreement or facility expressly set forth
in
Section 3.4(f) of the Holders Disclosure Letter (any such credit
agreement or facility, the "SCHEDULED CREDIT AGREEMENTS"), the
Purchased Entity is not party to or otherwise bound by any credit
agreement or facility. True and complete copies of each of the
Scheduled Credit Agreements (inclusive of all amendments,
supplement
and other modifications) have been delivered to NAC.
3.5 No Materially Adverse Changes. Except as expressly set forth in
Section 3.5 of the Holders Disclosure Letter or reflected in the
Interim Balance
Sheet, since December 31, 2004, there has not been any Materially
Adverse Change
with respect to the Purchased Entity. Without limiting the
generality or scope
of the foregoing, since December 31, 2004, there has not (except as
reflected in
the Interim Balance Sheet) been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Purchased Entity from that reflected in
the
Audited Financial Statements, except for changes in the ordinary
course of business that have not been, in the aggregate, materially
adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets,
properties,
financial condition, operating results or business of the Purchased
Entity (as such business is presently conducted);
(c) any waiver by the Purchased Entity of a material right or of a
material debt owed to it;
(d) any satisfaction or discharge of any Lien or payment of any
obligation by the Purchased Entity, except (i) in the ordinary
course
of business and (ii) that is not material to the assets,
liabilities,
properties, financial condition, operating results or business of
the
Purchased Entity (as such business is presently conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Purchased Entity or any of its assets or
properties is bound or subject;
(f) any material change in any compensation arrangement or
agreement
with any employee of the Purchased Entity;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the
Purchased
Entity;
(h) any resignation or termination of employment of any key officer
of
the Purchased Entity; and neither Holder has received notice of the
intent of any employee of the Purchase Entity to resign or
otherwise
terminate his or her employment; and to the best knowledge of the
Holders, there is no impending resignation or termination of
employment by any employee of the Purchased Entity;
(i) any receipt of notice that there has been a loss of, or
material
order cancellation by, any material customer of the Purchased
Entity;
and to the best knowledge of the
16
Holders, no material customer of the Purchased Entity has
threatened
to, or is planning to, cancel any order or terminate any contract
or
arrangement with the Purchased Entity;
(j) any Lien created by the Purchased Entity, or otherwise created
or
attaching, on or with respect to any of its material properties or
assets, except Liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Purchased Entity
(including,
without limitation, to or for the benefit of any of its members,
managers, employees, officers or directors or any members of their
immediate families), other than travel advances and other advances
made to employees of the Purchased Entity in the ordinary course of
its business;
(l) any declaration, setting aside or payment or other distribution
in
respect of any units or interests of, or capital accounts held in,
the
Purchased Entity, or any direct or indirect redemption, purchase or
other acquisition of any of such units or interests by the
Purchased
Entity;
(m) any receipt by the Purchased Entity of any notice from any
customer or client that such client or customer intends to cease
doing
business with the Purchased Entity or, to the best knowledge of the
Holders, any other loss of any customer or client by the Purchased
Entity, exclusive of any client or customer the loss of which would
not, or could not reasonably be anticipated to have, a Materially
Adverse Effect on the Purchased Entity;
(n) to the best knowledge of the Holders, any other event or
condition
of any character that would have, or could reasonably be expected
to
have, a Materially Adverse Effect on the Purchased Entity; or
(o) any agreement or commitment by the Purchased Entity to do any
of
the things described in this Section 3.5.
3.6 Litigation. There (a) are no actions, suits, proceedings or
orders, at law or in equity, pending or (to the best knowledge of
the Holders)
threatened against the Purchased Entity, (b) are no investigations
pending or,
to the best knowledge of the Holders, threatened against the
Purchased Entity
before or by any federal, state, municipal or other governmental
department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, and
(c) is, to the best knowledge of the Holders, no basis for any of
the foregoing.
3.7 Subsidiaries. Except as described in Section 3.7 of the Holders
Disclosure Letter, (i) the Purchased Entity does not own or
control, directly or
indirectly, any interest in any other Person and (ii) the Purchased
Entity is
not a participant in any joint venture, partnership or similar
arrangement.
3.8 Patents and Trademarks. The Purchased Entity has sufficient
ownership or rights to all patents, trademarks, service marks,
trade names,
copyrights, trade secrets, licenses, information, proprietary
rights and
processes and other intellectual property (all of the foregoing,
collectively,
the "INTELLECTUAL PROPERTY") necessary for its business as now
conducted or as
17
proposed to be conduced. None of such Intellectual Property
conflicts with or
infringements the rights of any other Person. Part A of Section 3.8
of the
Holders Disclosure Letter contains a complete list of all
Intellectual Property
owned by the Purchased Entity (such Intellectual Property, the
"OWNED
INTELLECTUAL PROPERTY"), and Part B of Section 3.8 of the Holders
Disclosure
Letter contains a complete list of all Intellectual Property leased
by, or
licensed to, the Purchased Entity or in which the Purchased Entity
otherwise has
an interest (other than ownership) (such Intellectual Property, the
"LICENSED
INTELLECTUAL PROPERTY"). All of the Owned Intellectual Property is
(except as
expressly set forth in Part C of Section 3.8 the Holders Disclosure
Letter)
owned by the Purchased Entity, free and clear of any lien, pledge,
security
interest, competing claim or other encumbrance of any nature
whatsoever (each of
the foregoing, a "LIEN"). Except as expressly set forth in Part D
of Section 3.8
of the Holders Disclosure Letter, there are no outstanding options,
licenses or
agreements of any kind relating to any of the Owned Intellectual
Property, nor
is the Purchased Entity bound by, or a party to, any options,
licenses or
agreements of any kind with respect to any Intellectual Property of
any other
Person. Neither of the Holders nor the Purchased Entity has
received any
communication alleging that the Purchased Entity has violated or,
by conducting
its business as presently conducted or as proposed to be conducted,
would
violate, any Intellectual Property (or rights therein) of any other
Person, and
the Purchased Entity is not violating, and (by conducting its
business as
presently conducted or as proposed to be conducted) the Purchased
Entity does
not and would not violate any Intellectual Property (or rights
therein) of any
other Person. To the best knowledge of the Holders, no employee of
the Purchased
Entity is obligated under any contract (including licenses,
covenants or
commitments of any nature) or other agreement, or subject to any
judgment,
decree or order of any court or administrative agency, that would
interfere with
his duties to the Purchased Entity or that would conflict with the
business of
the Purchased Entity as now conducted or as proposed to be
conducted. To the
best knowledge of the Holders, neither the execution, delivery or
performance of
this Agreement or any of the Collateral Documents, nor the carrying
on of the
business of the Purchased Entity by its employees, nor the conduct
of the
business of the Purchased Entity as now conducted or as proposed to
be
conducted, will conflict with or result in a breach of the terms,
conditions or
provisions of, or constitute a default under, any contract,
covenant or
instrument under which any employee of the Purchased Entity is now
obligated. It
is not and will not be necessary for the Purchased Entity to
utilize any
inventions or other Intellectual Property of any of its employees
(or people it
currently intends to hire) made prior to or outside the scope of
their
employment by the Purchased Entity.
3.9 Compliance with Other Instruments. The Purchased Entity is not
in
violation or default of any provision of any of the Purchased
Entity Governing
Documents, or of any instrument, judgment, order, writ, decree or
contract to
which it is a party or by which it is bound. The Purchased Entity
is not in
violation or default of any provision of any federal or state
statute, rule or
regulation applicable to the Purchased Entity.
3.10 Agreements; Action. Except as expressly set forth in the
section
of Section 3.10 of the Holders Disclosure Letter corresponding with
the
following items or matters,
(a) There are no agreements, understandings or proposed
transactions
between the Purchased Entity and any of its members, managers,
officers, directors, partners and affiliates or any affiliate of
such
members, managers, officers, directors, partners and affiliates;
18
(b) There are no agreements, understandings, instruments,
contracts,
proposed transactions, judgments, orders, writs or decrees to which
the Purchased Entity is a party or by which it is otherwise bound
that
may involve (i) obligations (contingent or otherwise) of, or
payments
to, the Purchased Entity in excess of $50,000 in the aggregate,
(ii)
the license of any Intellectual Property to or from the Purchased
Entity (other than the license by the Purchased Entity of
non-customized software in the ordinary course of business), (iii)
provisions restricting or affecting the development, manufacture or
distribution of the products or services of the Purchased Entity or
(iv) indemnification by the Purchased Entity with respect to
infringements of any proprietary rights or other Intellectual
Property;
(c) Since January 1, 2005, the Purchased Entity (i) has not
declared
or paid any dividend or authorized or made any distribution upon or
with respect to any of its interests or units (including, without
limitation, the Purchased Interests) or any capital account of, or
maintained in, the Purchased Entity, (ii) incurred any indebtedness
for money borrowed or any other liabilities individually in excess
of
$20,000 or in excess of $50,000 in the aggregate, (iii) made any
loan
or advance to any Person, other than ordinary advances to employees
for travel expenses, or (iv) sold, exchanged or otherwise disposed
of
any of its assets or rights, other than the sale of its inventory
in
the ordinary course of business consistent with past practices;
(d) The Purchased Entity is not party to, or otherwise
