SHARE EXCHANGE AGREEMENT

Exhibit 10.1

 

SHARE EXCHANGE AGREEMENT

BY AND AMONG

NEW CENTURY COMPANIES, INC.,

PRECISION AEROSTRUCTURES, INC.,

AND

THE SHAREHOLDER OF PRECISION AEROSTRUCTURES, INC.

Dated:  October 6, 2009

 

 

Exhibit 10.1

 

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT, dated as of October 6, 2009 (this “ Agreement ”), by and among NEW CENTURY COMPANIES, INC., a corporation incorporated in the State of Delaware, (“ NCCI ”), on the one hand; and PRECISION AEROSTRUCTURES, INC. (“ PAI ”), a corporation incorporated in the State of California, and Michael Cabral; (the “ PAI Shareholder ”), on the other hand. Each of PAI, the PAI Entities and the PAI Shareholder is sometimes individually referred to herein as a “ PAI Party ,” and collectively as the “ PAI Parties .”  Each of NCCI and the NCCI Entities is sometimes individually referred to as a “ NCCI Party ” and collectively as the “ NCCI Parties ”.  Each of the Parties to this Agreement is individually referred to herein as a “ Party ” and collectively as the “ Parties .”  Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Exhibit A hereto.

RECITALS

A.      The PAI Shareholder is the owner of and has good and valid title to all of the issued and outstanding capital stock of PAI (the “ PAI Shares ”), free and clear of any Liens.

B.       The Board of Directors of NCCI believes it is advisable and in the best interests of NCCI and its stockholders that NCCI acquire the PAI Shares from the PAI Shareholder pursuant to the terms of this Agreement (the “ Share Exchange ”).

C.       The Parties intend the Share Exchange to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

Share Exchange; Closing

Section 1.1        Exchange of Shares .  Upon the terms and subject to the conditions of this Agreement, and in reliance on the representations and warranties set forth herein, at the Closing, the PAI Shareholder agrees to convey, assign, transfer and deliver to NCCI, and NCCI agrees to acquire from the PAI Shareholder, all of the PAI Shareholder’s right, title and interest in the PAI Shares owned of record or beneficially by the PAI Shareholder, free and clear of any Liens.   Schedule I hereto sets forth the number and type of PAI Shares that the PAI Shareholder will convey, assign, transfer and deliver to NCCI hereunder subject to the terms of this Agreement.  In exchange for the PAI Shares, at the Closing, NCCI shall sell, issue and deliver to the PAI Shareholder free and clear of all Liens, subject to the terms and conditions of this Agreement, (a) 5,000,000 shares of NCCI Common Stock (the “ Transaction Shares ”)and (b) a note for $500,000 (the “Note”) which note will be payable from the proceeds of any equity financing with gross proceeds of at least $2,000,000 provided that the investors in such financing permit the proceeds thereof to be used for such purpose.  The Note shall be in the form of Exhibit A.

 

Section 1.2        Earn-Out Warrants .

(a)      At such time (the “ Vesting Date ”) as the cumulative Net Income of PAI is at least $3,000,000 (the “ Target ”), NCCI shall issue and deliver to the PAI Shareholder, free and clear of all Liens, warrants to purchase that 3,000,000 of NCCI Common Stock (the “ Earn-Out Warrants ”).  The Earn-Out Warrants shall be for a term of the earlier of three years from the Vesting Date or five years from the Commencement Date, shall have an exercise price of $0.10 per share and may be exercised on a cashless basis.  The Earn Out Warrants shall be in the form of Exhibit B.  In determining whether the Target has been met, the calculation shall (a) commence on the first day of the quarterly period following the Closing (the “ Commencement Date ”), (b) be in accordance with U.S. GAAP, and (c) include a reasonable charge against Net Income for g&a expense.  Until the earlier to occur of the date when the Target has been achieved or three years from the Commencement Date, NCCI shall maintain the separate existence of PAI and use its best efforts to maintain the continuity of management.  If the Target has not been achieved by the end of such three-year period, the Earn-Out Warrants shall be null and void.

Section 1.3        Closing .  The Closing (the “ Closing ”) of the Share Exchange and the other transactions contemplated hereby (the “ Transactions ”), shall take place at the offices of TroyGould PC, 1801 Century Park East, 16 ^th Floor, Los Angeles, California 90067 commencing at 9:00 a.m. local time on the business day following the satisfaction or waiver of all conditions and obligations of the Parties to consummate the Transactions contemplated hereby or on such other date and at such other time as the Parties may mutually determine (the “ Closing Date ”) .

Section 1.4        Deliveries of the Parties .  At the Closing, (i) the PAI Parties (directly and/or through their nominees) shall deliver to the NCCI Parties the various certificates, instruments, agreements and documents referred to in Section 8.2 below, (ii) the NCCI Parties shall deliver to the PAI Parties, as applicable, the various certificates, instruments, agreements and documents referred to in Section 8.1 below, and (iii) the PAI Shareholder shall deliver to the NCCI Parties a certificate representing the right, title and interest in and to the PAI Shares free and clear of all Liens.

Section 1.5        Further Assurances .  Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, each of the Parties shall execute and deliver such other documents and instruments, provide such materials and information and take such other actions as may be commercially reasonable, to the extent permitted by law, to fulfill its obligations under this Agreement and to effectuate and consummate the Transactions.

 

ARTICLE II

Representations and Warranties of PAI Parties

Subject to the exceptions set forth in the Disclosure Schedule of the PAI Parties (the “ PAI Disclosure Schedule ”), each of the PAI Parties jointly and severally represents and warrants to the NCCI Parties as of the date hereof and as of the Closing as follows:

Section 2.1        PAI Shares .

(a)       Good Title .  The PAI Shareholder is the registered owners of the PAI Shares and has good and marketable title to the PAI Shares, with the right and authority to sell and deliver such PAI Shares.  Such shares constitute all of the capital stock of PAI.  Upon delivery of any certificate or certificates duly assigned, NCCI will receive good title to the PAI Shares, free and clear of all Liens.

(b)       Capital Structure .  The capitalization of each PAI Entity, including the total number of shares and type of all authorized, issued and outstanding capital stock of each PAI Entity, and all shares of capital stock of a PAI Entity reserved for issuance under such PAI Entity’s various options, warrants, convertible notes and incentive plans, are set forth in Section 2.1(b) of the PAI Disclosure Schedule.  Except as set forth in Section 2.1(b) of the PAI Disclosure Schedule:  (i) no shares of capital stock or other voting securities of the PAI Entities are issued, reserved for issuance or outstanding; (ii) all outstanding shares of the capital stock of the PAI Entities are duly authorized, validly issued, fully paid and nonassessable and are not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the PAI Constituent Instruments or any Contract to which any of the PAI Parties is a party or otherwise bound; (iii) there are no bonds, debentures, notes or other indebtedness of any of the PAI Entities having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of the shares of capital stock of any PAI Entity may vote (“ Voting PAI Debt ”); (iv) there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which any of the PAI Entities is a party or is bound (A) obligating any of the PAI Entities to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, any of the PAI Entities or any Voting PAI Debt, or (B) obligating any of the PAI Entities to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking, and (v) as of the date of this Agreement, there are no outstanding contractual obligations of any of the PAI Entities to repurchase, redeem or otherwise acquire any shares of capital stock of such entity.

Section 2.2       Organization and Standing .  Each of the PAI Entities is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization or formation.  Each of the PAI Entities is duly qualified to do business in each of the jurisdictions in which the property owned, leased or operated by it or the nature of the business which it conducts requires qualification, except where the failure to so qualify would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.  Each of the PAI Entities has all requisite power and authority to own, lease and operate its tangible assets and properties and to carry on its business as now being conducted.  Each PAI Entity has delivered to NCCI true and complete copies of its PAI Constituent Instruments.

 

Section 2.3        Authority; Execution and Delivery; Enforceability .  Each of the PAI Parties, if an entity, has all requisite or other power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a party and to consummate the Transactions contemplated hereby and thereby.  The execution and delivery by the PAI Parties of this Agreement and the consummation by them of the Transactions have been duly authorized and approved by the boards of directors or other governing body of each of the PAI Parties (if an entity), such authorization and approval remains in effect and has not been rescinded or qualified in any way, and no other proceedings on the part of any such entities are necessary to authorize this Agreement and the Transactions.  Each of this Agreement and the Transaction Documents to which any PAI Party is a party has been duly executed and delivered by such party and constitutes the valid, binding, and enforceable obligation of each of them, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 2.4        Subsidiaries .  Section 2.4 of the PAI Disclosure Schedule lists, as of the date hereof, all Subsidiaries and affiliated entities of PAI and indicates as to each the type of entity, its jurisdiction of organization and its Shareholders or other equity holders.  Except as set forth in Section 2.4 of the PAI Disclosure Schedule, PAI does not directly or indirectly own any other equity or similar interest in or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.  Except as set forth in Section 2.4 of the PAI Disclosure Schedule, PAI is the direct or indirect owner of all outstanding shares of capital stock of its Subsidiaries, and all such shares are duly authorized, validly issued, fully paid and nonassessable and are owned by PAI free and clear of all Liens.  Except as set forth in Section 2.4 of the PAI Disclosure Schedule, there are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements of any character relating to the issued or unissued capital stock or other securities of any Subsidiaries PAI or otherwise obligating any Subsidiaries of PAI to issue, transfer, sell, purchase, redeem or otherwise acquire any such securities.

Section 2.5        No Conflicts .  Except as set forth in Section 2.5 of the PAI Disclosure Schedule, the execution and delivery of this Agreement or any of the Transaction Documents contemplated hereby by each of the PAI Parties and the consummation of the Transactions and compliance with the terms hereof and thereof will not, (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the assets and properties of any PAI Entity under any provision of:  (i) any PAI Constituent Instrument; (ii) any PAI Material Contract (as defined in Section 2.18 herein) to which any PAI Entity is a party or to or by which it (or any of its assets and properties) is subject or bound; or (iii) conflict with any Material Permit of a PAI Entity; (b) subject to the filings and other matters referred to in Section 2.6, any material Judgment applicable to any PAI Entity, or its properties or assets, (c) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any Contract to which any PAI Entity is a party; or (d) cause any of the assets owned by any PAI Entity to be reassessed or revalued by any Governmental Authority.

 

Section 2.6        Consents and Approvals .  Except as set forth in Section 2.6 of the PAI Disclosure Schedule, no consent, approval, license, permit, order or authorization of, or registration, declaration or filing with any Governmental Authority (“ Consent ”) is required to be obtained or made by or with respect to any PAI Party, in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions, except for (a) such Consents as may be required under applicable state securities laws and the securities laws of any foreign country; and (b) such other Consents which, if not obtained or made, would not have a Material Adverse Effect on the PAI Entities and would not prevent or materially alter or delay any of the Transactions.

Section 2.7        Financial Statements .

PAI has furnished to NCCI its (i) reviewed consolidated balance sheets for the fiscal years ended December 31, 2006, 2007 and 2008,   and the related consolidated statements of income and statements of cash flows of PAI for the periods then ended; and (ii) unaudited consolidated balance sheets for the three months ended August 31, 2009 , and the related consolidated statements of income and statements of cash flows of PAI for the period then ended ((i)-(ii), collectively, the “ PAI Financial Statements ”).  The PAI Financial Statements, including the notes thereto, if any, have been prepared in accordance with U.S.  GAAP applied on a consistent basis throughout the periods involved (except as may be otherwise specified in the notes thereto).  The PAI Financial Statements fairly present in all material respects the financial condition and operating results, change in Shareholders’ equity and cash flow of the PAI Entities, as of the dates, and for the periods, indicated therein.

Section 2.8        Absence of Certain Changes or Events .  Except as disclosed in the PAI Financial Statements, the PAI 2008 Financial Statements or in Section 2.8 of the PAI Disclosure Schedule, from August 31, 2009 to the date of this Agreement, there has not been:

(a)      any event, situation or effect (whether or not covered by insurance) that has resulted in, or to the PAI Entities’ Knowledge, is reasonably likely to result in, a Material Adverse Effect on the PAI Entities;

(b)      any damage, destruction or loss to, or any material interruption in the use of, any of the assets of any of the PAI Entities (whether or not covered by insurance) that has had or could reasonably be expected to have a Material Adverse Effect on the PAI Entities;

(c)      any material change to a Material Contract by which any of the PAI Entities or any of its respective assets is bound or subject;

(d)      any mortgage, pledge, transfer of a security interest in, or Lien, created by any of the PAI Entities, with respect to any of its material properties or assets;

 

(e)      any loans or guarantees made by any of the PAI Entities to or for the benefit of its officers or directors, or any members of their immediate families, or any material loans or guarantees made by the PAI Entities to or for the benefit of any of its employees or any members of their immediate families, in each case, other than travel advances and other advances made in the ordinary course of its business;

(f)      any change of the identity of its auditors or material alteration of any PAI Entities’ method of accounting or accounting practice;

(g)      any declaration, accrual, set aside or payment of dividend or any other distribution of cash or other property in respect of any shares of capital stock of any PAI Entities or any purchase, redemption or agreements to purchase or redeem by any PAI Entities of any shares of capital stock or other securities;

(h)      any sale, issuance or grant, or authorization of the issuance of equity securities of any PAI Entities, except pursuant to existing stock option plans of PAI Entities;

(i)      any amendment to any PAI Constituent Instruments, any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction involving any PAI Entities;

(j)      any creation of any Subsidiary of any of the PAI Entities or acquisition by any of the PAI Entities of any equity interest or other interest in any other Person;

(k)      any material Tax election by any PAI Entities;

(l)      any commencement or settlement of any material Actions (as defined below) by any of the PAI Entities; or

(m)     any negotiations, arrangement or commitment by any of the PAI Entities to take any of the actions described in this Section 2.8.

Section 2.9        No Undisclosed Liabilities .  Except as set forth in Section 2.9 of the PAI Disclosure Schedule, the PAI Entities have no material obligations or liabilities of any nature (matured or unmatured, fixed or contingent, including any obligations to issue capital stock or other securities of PAI Entities) due after the date hereof, other than (a) those set forth or adequately provided for in the most recent Balance Sheet included in the PAI Financial Statements (the “ PAI Balance Sheet ”), (b) those not required to be set forth in the PAI Balance Sheet under U.S. GAAP, and (c) those incurred since the date of the PAI Balance Sheet in the ordinary course of business and not reasonably likely to result in a Material Adverse Effect on PAI Entities.

 

 

Section 2.10      Litigation .  As of the date of this Agreement, there is no private or governmental action, suit, inquiry, notice of violation, claim, arbitration, audit, proceeding (including any partial proceeding such as a deposition) or investigation (“ Action ”) pending or threatened in writing against any of the PAI Entities, any of their respective executive officers or directors (in their capacities as such) or any of their respective properties before or by any Governmental Authority which (a) adversely affects or challenges the legality, validity or enforceability of this Agreement or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or would reasonably be expected to result in a Material Adverse Effect on the PAI Entities.  As of the date of this Agreement, there is no Judgment imposed upon any of the PAI Entities or any of their respective properties, that would prevent, enjoin, alter or materially delay any of the Transactions contemplated by this Agreement, or that would reasonably be expected to have a Material Adverse Effect on the PAI Entities.  Neither the PAI Entities, nor any director or executive officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a material claim or material violation of or material liability under the securities laws of any Governmental Authority or a material claim of breach of fiduciary duty.

Section 2.11      Licenses, Permits, Etc.   Each of the PAI Entities possesses or will possess prior to the Closing all Material Permits.  Such Material Permits are described or set forth on Section 2.11 of the PAI Disclosure Schedule.  True, complete and correct copies of the Material Permits issued to the PAI Entities have previously been delivered to NCCI.  As of the date of this Agreement, all such Material Permits are in full force and effect.

Section 2.12      Title to Properties .

(a)       Real Property .  Section 2.12(a) of the PAI Disclosure Schedule contains an accurate and complete list and description of (i) all real properties owned or leased by any PAI Entity (collectively, the “ PAI Real Property ”), and (ii) any lease under which any such Real Property is possessed (the “ PAI Real Estate Leases ”).  None of the PAI Entities is in default under any of the Real Estate Leases, and, as of the date of this Agreement, the Chief Executive Officer and the Chief Financial Officer of the PAI Entities, or the persons performing similar functions for the PAI Entities, are not aware of any default by any of the lessors thereunder, except any such default that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

(b)       Tangible Personal Property .  Except as would not reasonably be expected to have a Material Adverse Effect on the PAI Entities, the PAI Entities are in possession of and have good title to, or have valid leasehold interests in or valid contractual rights to use all tangible personal property as reflected in the PAI Financial Statements, and tangible personal property acquired (and not otherwise disposed of in the ordinary course of business with a value not exceeding $10,000) since March 31, 2009   (collectively, the “ PAI Tangible Personal Property ”).  All PAI Tangible Personal Property is free and clear of all Liens, and is in good order and condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws.

(c)       Accounts Receivable and Inventory .  The accounts receivable and inventory of the PAI Entities reflected in the PAI Balance Sheet included in the PAI Financial Statements have been presented in accordance with U.S. GAAP applied in a manner consistent with the accounting principles applied in the preparation of the PAI Financial Statements.

 

 

Section 2.13      Intellectual Property .  Section 2.13 of the PAI Disclosure Schedule sets forth a description of any patents, trademarks, domain names, copyrights, and any applications therefor which are material to the conduct of the business of the PAI Entities taken as a whole.  The PAI Entities own, or are validly licensed or otherwise have the right to use, all patents trademarks, domain names and copyrights listed on Section 2.13 of the PAI Disclosure Schedules and all trade names, service marks, computer software and trade secrets material to the conduct of their business (taken as a whole) as currently conducted (“ PAI Intellectual Property Rights ”), except for failures to own, license or have rights to such PAI Intellectual Property Rights as would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.  Except as set forth in Section 2.13 of the PAI Disclosure Schedule and except as would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on the PAI Entities, (i) no claims are pending or, to the Knowledge of PAI Entities, threatened that any of the PAI Entities is infringing or otherwise adversely affecting the rights of any Person with regard to any PAI Intellectual Property Right; and (ii) to the Knowledge of PAI Entities, no Person is infringing the rights of PAI Entities with respect to any PAI Intellectual Property Right.

Section 2.14      Taxes .

(a)      The PAI Entities have timely filed, or have caused to be timely filed on their behalf, all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of group of corporations, pursuant to applicable Legal Requirements.  All Tax Returns filed by (or that include on a consolidated basis) any of the PAI Entities were (and, as to a Tax Return not filed as of the date hereof, will be) in all respects true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed Tax returns, individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.  There are no unpaid Taxes claimed to be due by any Governmental Authority in charge of taxation of any jurisdiction, nor any claim for additional Taxes for any period for which Tax Returns have been filed, except to the extent any failure to file or any inaccuracies in any filed Tax returns, individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

(b)      Section 2.14(b) of the PAI Disclosure Schedule lists all the relevant Governmental Authorities in charge of taxation in which Tax Returns are filed with respect to the PAI Entities, and indicates those Tax Returns that have been audited or that are currently the subject of an audit since January 1, 2004.  None of the PAI Entities has received any notice that any Governmental Authority will audit or examine (except for any general audits or examinations routinely performed by such Governmental Authorities), seek information with respect to, or make material claims or assessments with respect to any Taxes for any period.  The PAI Entities have delivered or made available to NCCI correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies filed by, assessed against or agreed to by any of the PAI Entities, for and during fiscal years 2004 through 2008.

(c)      The PAI Financial Statements reflect an adequate reserve for all Taxes payable by PAI Entities (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements.  None of the PAI Entities is either a party to or bound by any Tax indemnity, Tax sharing or similar agreement and the PAI Entities currently have no material liability and will not have any material liabilities for any Taxes of any other Person under any agreement or by the operation of any Law.  No deficiency with respect to any Taxes has been proposed, asserted or assessed against any of the PAI Entities, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

 

(d)      None of the PAI Entities has requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed.  None of the PAI Entities has executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns.  No power of attorney currently in force has been granted by any of the PAI Entities concerning any Taxes or Tax Return.

Section 2.15      Employment Matters .

(a)       Benefit Plan .  Except as set forth in Section 2.15(a) of the PAI Disclosure Schedule, none of the PAI Entities has or maintains any material bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing material benefits to any current or former employee, officer or director of any of the PAI Entities (collectively, “ PAI Benefit Plans ”).  Except as set forth in Section 2.15(a) of the PAI Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the Transactions will result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee of any of the PAI Entities.  Except as set forth in Section 2.15(a) of the PAI Disclosure Schedule, as of the date of this Agreement, there are no severance or termination agreements or arrangements currently in effect between any of the PAI Entities and any of its current or former employees, officers or directors, nor do any of the PAI Entities have any general severance plan or policy currently in effect for any of its employees, officers or directors.  Since December 31, 2008, there has not been any adoption or amendment in any material respect by any of the PAI Entities of any PAI Benefit Plan.

(b)       Labor Matters .  Except as disclosed in Section 2.15(b) of the PAI Disclosure Schedule, (a) there are no collective bargaining or other labor union agreements to which any of the PAI Entities is a Party or by which it is bound; (b) no material labor dispute exists or, to the Knowledge of PAI Entities, is imminent with respect to any of the employees of any of the PAI Entities; (c) to the Knowledge of the PAI Entities, none of the PAI Entities is the subject of any Actions asserting that any of the PAI Entities has committed an unfair labor practice or seeking to compel it to bargain with any labor organization as to wages or conditions of employment; (d) there is no strike, work stoppage or other labor dispute involving any of the PAI Entities pending or, to PAI Entities’ Knowledge, threatened; (e) no complaint, charge or Actions by or before any Governmental Authority brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization or other representative of its employees is pending or, to the PAI Entities’ Knowledge, threatened against any of the PAI Entities; (e) no material grievance is pending or, to the PAI Entities’ Knowledge, threatened against any of the PAI Entities; and (f) none of the PAI Entities is a party to, or otherwise bound by, any consent decree with, or to the Knowledge of the PAI Entities, citation by, any Governmental Authorities relating to employees or employment practices.

 

Section 2.16      Transactions With Affiliates and Employees .  Except as disclosed in Section 2.16 of the PAI Disclosure Schedule, none of the executive officers or directors of PAI Entities and none of the PAI Shareholders is presently a party, directly or indirectly, to any transaction with any of the PAI Entities that is required to be disclosed under Rule 404(a) of Regulation S-K (other than for services as employees, officers and directors), including any Contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any executive officer, director or, to the Knowledge of PAI Entities, any entity in which any executive officer or director has a substantial interest or is an officer, director, trustee or partner.

Section 2.17      Insurance .  Section 2.17 of the PAI Disclosure Schedule lists all true and correct copies of all material contracts of insurance, as amended and supplemented to which any of the PAI Entities is a party.  All such insurance policies are in full force and effect, all premiums due thereon have been paid or provided for and the PAI Entities have complied with the material provisions of such policies.  The PAI Entities have not been advised of any defense to coverage in connection with any claim to coverage asserted or noticed by the PAI Entities under or in connection with any of their extant insurance policies.  Except as set forth in Section 2.17 of the PAI Disclosure Schedule, the PAI Entities are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which PAI Entities are engaged and in the geographic areas where any of which engages in such businesses, except as would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

Section 2.18      Material Contracts .

(a)      PAI has made available to NCCI, prior to the date of this Agreement, true, correct and complete copies of each of the following written Contracts, as amended and supplemented to which any of the PAI Entities is a party:  (i) agreements that would be considered a material contract pursuant to Item 601(b)(10) of Regulation S-K; (ii) loan agreements or indentures relating to any indebtedness of the PAI Parties; and (iii) agreements pursuant to which any of the PAI Entities receives or pays amounts in excess of $10,000 (each, a “ PAI Material Contract ”).  A list of each such PAI Material Contract is set forth on Section 2.18 of the PAI Disclosure Schedule.  Except as set forth on Section 2.18 of the PAI Disclosure Schedule, as of the date of this Agreement, none of the PAI Entities is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the PAI Entities; and, to the Knowledge of the PAI Entities, except as set forth on Section 2.18 of the PAI Disclosure Schedule, as of the date of this Agreement, no other Person has violated or breached, or committed any default under, any Material Contract, except for violations, breaches and defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

 

 

(b)      Each PAI Material Contract is a legal, valid and binding agreement, and is in full force and effect, and (i) none of the PAI Entities is in breach or default of any PAI Material Contract to which it is a party in any material respect; (ii) no event has occurred or circumstance has existed that (with or without notice or lapse of time), will or would reasonably be expected to, (A) contravene, conflict with or result in a violation or breach of, or become a default or event of default under, any provision of any PAI Material Contract; (B) permit PAI Entities or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any PAI Material Contract; or (iii) none of the PAI Entities has received notice of the pending or threatened cancellation, revocation or termination of any PAI Material Contract to which it is a party.  Since December 31, 2008, none of the PAI Entities has received any notice or other communication regarding any actual or possible violation or breach of, or default under, any PAI Material Contract, except in each such case for defaults, acceleration rights, termination rights and other rights that have not had and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

Section 2.19      Compliance with Applicable Laws .  The PAI Entities are in compliance with all applicable Laws, including those relating to occupational health and safety and the environment to which they are subject, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.  Except as set forth in Section 2.19 of the PAI Disclosure Schedule, none of the PAI Entities has received any written communication during the past two years from a Governmental Authority alleging that any of the PAI Entities is not in compliance in any material respect with any applicable Law.

Section 2.20      Foreign Corrupt Practices .  Neither the PAI Entities, nor PAI Shareholders, nor to the Knowledge of the PAI Entities, any of their respective Representatives, has, in the course of its actions for, or on behalf of, the PAI Entities, directly or indirectly, (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any Governmental Authority or any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S.  Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “ FCPA ”); or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment in connection with the operations of PAI Entities to any foreign or domestic government official or employee, except, in the case of clauses (a) and (b) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on the PAI Entities.

Section 2.21      Money Laundering Laws .  None of the PAI Entities has violated any money laundering statute or any rules and regulations relating to money laundering statutes (collectively, the “ Money Laundering Laws ”) and no proceeding involving any PAI Entities with respect to the Money Laundering Laws is pending or, to the Knowledge of the PAI Entities, is threatened.

Section 2.22      Brokers; Schedule of Fees and Expenses .  Except as set forth in Section 2.22 of the PAI Disclosure Schedule, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement or the Transactions based upon arrangements made by or on behalf of PAI Entities.

 

Section 2.23      OFAC .  None of the PAI Entities, any director or officer of the PAI Entities, or, to the Knowledge of the PAI Entities, any agent, employee, affiliate or Person acting on behalf of the PAI Entities is currently identified on the specially designated nationals or other blocked person list or otherwise currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.  Treasury Department (“ OFAC ”); and the PAI Entities have not, directly or indirectly, used any funds, or loaned, contributed or otherwise made available such funds to any Subsidiary, joint venture partner or other Person, in connection with any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to, or otherwise in violation of, any U.S. sanctions administered by OFAC.

Section 2.24      Environmental Matters .  Each of the PAI Entities is in substantial compliance with, and has not been and is not in material violation of or subject to any material liability under, any Environmental Law and no proceeding involving any PAI Entities with respect to any Environmental Law is pending or, to the Knowledge of the officers of the PAI Entities, is threatened.

Section 2.25      Purchase for Investment .

(a)      The PAI Shareholder is acquiring the NCCI Securities for investment for such Shareholder's own account and not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the PAI Shareholder has no present intention of selling, granting any participation in, or otherwise distributing the same.

(b)      The PAI Shareholder understands that the NCCI Securities are not registered under the Securities Act on the ground that the sale and the issuance of securities hereunder is exempt from registration under the Act pursuant to Section 4(a) thereof, and that the Company's reliance on such exemption is predicated on the representations set forth herein.

Section 2.26      Investment Experience .  The PAI Shareholder acknowledges that he or it can bear the economic risk of his or its investment, and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the investment in the NCCI Securities. The PAI Shareholder acknowledges that neither the Securities and Exchange Commission (“ SEC ”), nor the securities regulatory body of any state or other jurisdiction has received, considered or passed upon the accuracy or adequacy of the information and representations made in this Agreement or any of the information provided to the PAI Shareholder as described in Section 2.27 below.

Section 2.27      Information .  The PAI Shareholder has carefully reviewed such information as the PAI Shareholder deemed necessary to evaluate an investment in the NCCI Securities.  To the full satisfaction of the PAI Shareholder, he has been furnished all materials that he or it has requested relating to the Company and the issuance of the NCCI Securities hereunder, and the PAI Shareholder has been afforded the opportunity to ask questions of representatives of NCCI to obtain any information necessary to verify the accuracy of any representations or information made or given to the PAI Shareholder.

 

Section 2.28      Restricted Securities .  Each certificate representing NCCI Securities issued to the PAI Shareholders shall be endorsed with the following legends, in addition to any other legend required placed thereon by applicable federal or state securities laws:

The PAI Shareholder understands that the NCCI Securities may not be sold, transferred, or otherwise disposed of without registration under the Act or an exemption there from, and that in the absence of an effective registration statement covering the NCCI Securities or any available exemption from registration under the Act, the NCCI Securities must be held indefinitely.  The PAI Shareholder is aware that the NCCI Securities may not be sold pursuant to Rule 144 promulgated under the Act unless all of the conditions of that Rule are met.

ARTICLE III

Representations and Warranties of NCCI

Except as set forth in the Disclosure Schedule of NCCI (the “ NCCI Disclosure Schedule ”), NCCI represents and warrants to the PAI Parties as follows:

Section 3.1        Capital Structure .

(a)      Section 3.1(a) of the NCCI Disclosure Schedule sets forth, as of the date hereof, the share capitalization of NCCI and all the outstanding options, warrants or rights to acquire any share capital of NCCI.  Other than those set forth on Section 3.1(a) of the NCCI Disclosure Schedule:  there are no options, warrants or other rights outstanding which give any Person the right to acquire any share capital of NCCI or to subscribe to any increase of any share capital of NCCI.

(b)      Except as set forth in Section 3.1(b) of the NCCI Disclosure Schedule:  (i) no shares of capital stock or other voting securities of NCCI were issued, reserved for issuance or outstanding and there have not been any issuances of capital securities or options, warrants or rights to acquire the capital securities of NCCI; (ii) all outstanding shares of the capital stock of NCCI are, and all such shares that may be issued prior to the date hereof will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the NCCI Constituent Instruments (as defined below) or any Contract to which NCCI is a party or otherwise bound; and (iii) there are no outstanding contractual obligations of NCCI to repurchase, redeem or otherwise acquire any shares of capital stock of NCCI.

 

(c)      Except as set forth in Section 3.1(c) of the NCCI Disclosure Schedule, as of the date of this Agreement:  (i) there are no bonds, debentures, notes or other indebtedness of NCCI having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Common Stock may vote (“ Voting NCCI Debt ”); and (ii) there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which NCCI is a Party or by which it is bound (A) obligating NCCI to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, NCCI or any Voting NCCI Debt, or (B) obligating NCCI to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking.

(d)      Except as set forth in Section 3.1(d) of the NCCI Disclosure Schedule, NCCI is not a party to any agreement granting any security holder of NCCI the right to cause NCCI to register shares of the capital stock or other securities of NCCI held by such security holder under the Securities Act.

Section 3.2        Organization and Standing .  NCCI is duly organized, validly existing and in good standing under the laws of the State of Delaware.  NCCI is duly qualified to do business in each of the jurisdictions in which the property owned, leased or operated by NCCI or the nature of the business which it conducts requires qualification, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect on NCCI.  NCCI has the requisite power and authority to own, lease and operate its tangible assets and properties and to carry on its business as now being conducted and, subject to necessary approvals of the relevant Government Authorities, as presently contemplated to be conducted.  NCCI has delivered to PAI true and complete copies of the certificate of incorporation of NCCI, as amended to the date of this Agreement and the bylaws of NCCI, as amended to the date of this Agreement (the “ NCCI Constituent Instruments ”).

Section 3.3        Authority; Execution and Delivery; Enforceability .  NCCI has all requisite corporate power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a Party and to consummate the Transactions.  The execution and delivery by NCCI of this Agreement and the consummation by NCCI of the Transactions have been duly authorized and approved by the NCCI Board and no other corporate proceedings on the part of NCCI are necessary to authorize this Agreement and the Transactions.  All action, corporate and otherwise, necessary to be taken by NCCI to authorize the execution, delivery and performance of this Agreement, the Transaction Documents and all other agreements and instruments delivered by NCCI in connection with the Transactions have been duly and validly taken.  Each of this Agreement and the Transaction Documents to which NCCI is a Party has been duly executed and delivered by NCCI and constitutes the valid, binding, and enforceable obligation of NCCI, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

Section 3.4        Subsidiaries .  Section 3.4 of the NCCI Disclosure Schedule lists, as of the date hereof, all Subsidiaries and affiliated entities of NCCI and indicates as to each the type of entity, its jurisdiction of organization and its Shareholders or other equity holders.  Except as set forth in Section 3.4 of the NCCI Disclosure Schedule, NCCI does not directly or indirectly own any other equity or similar interest in or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.  Except as set forth in Section 3.4 of the NCCI Disclosure Schedule, NCCI is the direct or indirect owner of all outstanding shares of capital stock of its Subsidiaries, and all such shares are duly authorized, validly issued, fully paid and nonassessable and are owned by NCCI free and clear of all Liens.  Except as set forth in Section 3.4 of the NCCI Disclosure Schedule, there are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements of any character relating to the issued or unissued capital stock or other securities of any Subsidiaries NCCI or otherwise obligating any Subsidiaries of NCCI to issue, transfer, sell, purchase, redeem or otherwise acquire any such securities.

Section 3.5        No Conflicts .  Except as set forth in Section 3.5 of the NCCI Disclosure Schedule, the execution and delivery of this Agreement or any of the Transaction Documents by NCCI and the consummation of the Transactions and compliance with the terms hereof and thereof will not, (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien (other than a Permitted Lien) upon any of the assets and properties of NCCI, under, any provision of:  (i) any NCCI Constituent Instrument; (ii) any NCCI Material Contract (as defined in Section 3.24 hereof) to which NCCI is a party or to or by which it (or any of its assets and properties) is subject or bound; or (iii) any Material Permit; (b) subject to the filings and other matters referred to in Section 3.6, conflict with any material Judgment or Law applicable to NCCI, or its properties or assets; (c) result in any suspension, revocation, impairment, forfeiture or nonrenewal of any Permit applicable to NCCI; (d) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any Contract to which NCCI is a party; or (e) cause any of the assets owned by NCCI to be reassessed or revalued by any Governmental Authority.

Section 3.6        Consents and Approvals .  Except as set forth in Section 3.6 of the NCCI Disclosure Schedule, no Consent of, or registration, declaration or filing with, or permit from, any Governmental Authority is required to be obtained or made by or with respect to NCCI in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions, other than (i) the filing of a Form 8-K with the SEC within four (4) business days after the execution of this Agreement and of the Closing Date; (ii) any filings as required under applicable securities laws; and (iii) the procurement of such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a Material Adverse Effect on NCCI and would not prevent, or materially alter or delay consummation of any of the Transactions.

 

Section 3.7        SEC Documents .  NCCI has filed all reports, schedules, forms, statements and other documents required to be filed by NCCI with the SEC, pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act (the “ NCCI SEC Documents ”).  As of its respective filing date, each NCCI SEC Document complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such NCCI SEC Document, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Except to the extent that information contained in any NCCI SEC Document has been revised or superseded by a later filed NCCI SEC Document, none of the NCCI SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The consolidated financial statements of NCCI included in the NCCI SEC Documents (the “ NCCI Financial Statements ”) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with U.S.  GAAP (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of NCCI as of the dates thereof and the consolidated results of their operations and cash flows as at the respective dates of and for the periods referred to in such financial statements (subject, in the case of unaudited financial statements, to normal year-end audit adjustments and the omission of notes to the extent permitted by Regulation S-X of the SEC).

Section 3.8        Absence of Certain Changes or Events .  Except as disclosed in Section 3.8 of the NCCI Disclosure Schedule, from the date of the most recent audited financial statements and interim financial statements included in the filed NCCI S