EXHIBIT 10.1
ACQUISITION AND MERGER AGREEMENT
by and among
MARKETING PROFILES, INC.
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ COMPANY
and
JH ACQUISITION CORPORATION
and
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
dated
January 7, 1994
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ACQUISITION AND MERGER AGREEMENT
Table of Contents
ARTICLE I
THE MERGER
Section 1.1. The Merger
Section 1.2. Effective Time of the Merger
Section 1.3. Terms and Conditions: Conversion of Shares
ARTICLE 2
PURCHASE PRICE
Section 2.1 Amount
Section 2.2 Earn-Out Amount
Section 2.3 Payment of Purchase Price
Section 2.4 Time and Place of Closing
Section 2.5 Deliveries at Closing
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF CONTROLLING SHAREHOLDERS
Section 3.1. Incorporation Authorization etc.
Section 3.2. Capitalization Structure
Section 3.3. Financial Statements
Section 3.4. Undisclosed Liabilities
Section 3.5. Properties
Section 3.6. Litigation
Section 3.7. Intellectual Property
Section 3.8 Adequacy of Technical Documentation
Section 3.9 Third-Party Components in Software
Section 3.10 Third-Party Interests or Marketing Rights in Software
Section 3.11 Licenses
Section 3.12 Compliance with Laws
Section 3.13 Insurance
Section 3.14. Material Contracts
Section 3.15. Brokers, Finders, etc.
Section 3.16. Taxes
Section 3.17. Pension and Employee Benefits Plans
Section 3.18. Labor and Employment Matters
Section 3.19. Controlling Shareholders' Environmental Disclosure
Section 3.20. Agreements Affecting Competition
Section 3.21. Transactions with Related Parties
Section 3.22. Major Vendors and Customers
Section 3.23. Investment Company; Holding Company
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Section 3.24. Absence of Certain Commercial Practices
Section 3.25. Closing Financial Position
Section 3.26. Disclosure
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1. Incorporation; Authorization; etc.
Section 4.2. Litigation
Section 4 3. Brokers, Finders, etc.
ARTICLE 5
SURVIVAL INDEMNIFICATION
Section 5.1. Survival
Section 5.2. Indemnification
Section 5 3. Limitation on Indemnification
Section 5 4. Procedure for Third-Party Claims
Section 5 5. Right of Offset
ARTICLE 6
EXCESS CASH DISTRIBUTIONS
Section 6.1 Determination of Cash Balance and Adjusted Net Worth
Section 6.2 Excess Cash Distribution
Article 7
MISCELLANEOUS
Section 7.1. Counterparts
Section 7.2. Governing Law
Section 7 3. No Third-Party Beneficiaries
Section 7.4. Entire Agreement
Section 7.5. Expenses
Section 7.6. Notices
Section 7.7. Successors and Assigns
Section 7.8. Headings Definitions
Section 7.9. Amendments and Waivers
Section 7.10. Specific Performance
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LIST OF EXHIBITS
Exhibit A Consenting Shareholders
Exhibit B Dissenting Shareholders
Exhibit 1.2 Articles of Merger and Plan of Merger
Exhibit 2.3 Controlling Shareholders and Consenting Share-
holders
Exhibit 2.5(a)(iv) List of Directors & Officers Tendering Resigna-
tion
Exhibit 2.5(a)(v)(A) Form of Employment Agreement for ▇▇▇▇
Exhibit 2.5(a)(v)(B) Form of Employment Agreement for ▇▇▇▇▇▇
Exhibit 2.5(a)(vi)(A) Form of Noncompetition Agreement for ▇▇▇▇
Exhibit 2.5(a)(vi)(B) Form of Noncompetition Agreement for ▇▇▇▇▇▇
Exhibit 2 5(a)(vii) Forms of Opinion of Counsel for Controlling
Shareholders and the Company
Exhibit 2 5(a)(ix)(A) Form of Stock Option Redemption Agreement
Exhibit 2.5(a)(ix)(B) Form of Stock Option Redemption Agreement
Exhibit 2.5(a)(x) Agreements Terminating Shareholder Agreements
Exhibit 3.2 Capitalization
Exhibit 3.3(A) Audited Financial Statements of the Company
Exhibit 3.3(B) Interim Financial Statements of the Company
LIST OF DELIVERABLES
Paragraph # Item
2.5(a)(i) Stock Certificates of Controlling Shareholders,
Stock Powers
2.5(a)(ii) Certified Copy of Articles of Incorporation,
Certified Copy of the Bylaws
2.5(a)(iii) Florida Certificate of Status and Texas Certifi-
cate of Good Standing
2.5(a)(iv) Letter of Resignation
2.5(a)(v) Employment Agreements for ▇▇▇▇ and ▇▇▇▇▇▇
2.5(a)(vi) Noncompetition Agreements for ▇▇▇▇ and ▇▇▇▇▇▇
2.5(a)(vii) Legal Opinion
2.5(a)(viii) Minute Books, Stock Ledger, Corporate Seal, and
Secretary's Certificate re: same
2.5(a)(ix) Stock Option Redemption Agreements
2.5(a)(x) Termination Agreements
2.5(a)(xi) Stock Certificates of Consenting Shares
2.5(a)(xii) Incumbency Certificate
2.5(a)xiii) Authorizing Resolutions of Board of Directors,
Secretary's Certificate
2.5(a)(xiv) Consent Agreements
2.5(b)(i) Incumbency Certificate (Buyer)
2 5(b)(ii) Authorizing Resolution of Board of Directors,
Secretary's Certificate (Buyer)
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LIST OF SCHEDULES
Schedule
Number Title
3. 1(b) Contracts Requiring Consent
3.4(a) Undisclosed Liabilities
3.4(b) Absence of Certain Events
3.5 Liens on Real Estate
3.6 Litigation
3.7 Software Programs
3.7(a) Trademarks, Service Marks, Trade Names, Copy-
rights
3.7(b) Proprietary Legends and Copyright Notices
3.7(c) List of Consultants
Form of Employee and Former Employee Noninterfer-
ence and Confidentiality Agreement
3.7(e) Absence of Claims
3.9 Licenses from Third Parties
3.10 Licenses and Sublicenses to Third Parties
Distributorships, Dealerships, Franchises and
Manufacturer's Representative Contracts
Source Code Escrow Agreements
Standard Form of End-User Agreement and Source
Code Escrow Agreement
3.13 Insurance
3.14 Material Contracts
3.15 Brokers, Finders
3.16(b) Tax Contingency Reserves
3.16(c) Tax Audit History
3 17(b) Employee Plans, Etc.
3 17(d) Employee Plan Approvals
3.17(g) ERISA Welfare Plans
3.17(j) Parachute Payments
3.18 Labor and Employment
3.18(k) Employment, Retainer, Etc. Contracts
3.18(l) Employee List
3.19 Environmental Matters
3.20 Noncompetition Arrangements
3.21 Related Party Transactions
3.22 Major Vendors and Customers
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ACQUISITION AND MERGER AGREEMENT
THIS ACQUISITION AND MERGER AGREEMENT ("Agreement") dated as of the 7th
day of January, 1994, is made and entered into by and among: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ COMPANY, a Georgia corporation ("Buyer"); JH ACQUISITION
CORPORATION, a Florida corporation and a wholly owned subsidiary of
Buyer ("Acquisition"); MARKETING PROFILES, INC., a Florida corporation (
the "Company" or "Marketing Profiles" or "MPI"); ▇▇▇▇ ▇. ▇▇▇▇, ▇▇., a
resident of the State of Florida ("▇▇▇▇"); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident
of the State of Florida ("▇▇▇▇▇▇"; ▇▇▇▇ and ▇▇▇▇▇▇, each a "Controlling
Shareholder" and collectively, the "Controlling Shareholders").
WITNESSETH:
WHEREAS, immediately prior to the execution of this Agreement, MPI
declared a distribution to be paid to shareholders then of record in an
amount to be determined by a formula as described herein; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Controlling Shareholders, the Company, Buyer and Acquisition desire and
deem it in their respective best interests that Acquisition be merged
into the Company; and
WHEREAS, certain other shareholders in the Company identified on Exhibit
A (the"Consenting Shareholders") have consented to the Merger, as
defined below: and
WHEREAS, the Company's issued and outstanding capital stock currently
consists of 1,722,714 issued and outstanding shares of the Company's
common stock, par value: .001 per share (the "Common Stock"), of which
1,310,000 shares are owned by the Controlling Shareholders (the "
Controlling Shares") and 397,000 shares are owned by the Consenting
Shareholders (the "Consenting Shares"); and
WHEREAS, the holder(s) of 15,714 shares of the Company's Common Stock
listed on Exhibit B, has (have) not consented to the Merger and may
exercise his or her appraisal rights under the provisions of the Florida
Business Corporation Act (the "Dissenting Shares" or "Dissenting
Shareholders", as the case may be); and
WHEREAS, certain persons currently hold options granted pursuant to the
Company's Modified Nonqualified Stock Option Plan to purchase 40,000
shares of Common Stock (the"Options") which will not be extinguished
hereunder, but which will be subject to redemption by the Company, and
which will be redeemed by the Company after the merger hereunder
pursuant to those certain Stock Option Redemption Agreements between the
Company and the Option Holders (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1.
THE MERGER
Section 1.1. The Merger. Subject to the terms and conditions hereof, the
parties hereto agree that Acquisition shall be merged into the Company
in accordance with the applicable provisions of the Florida Business
Corporation Act (the "FBCA"), and the separate existence of Acquisition
shall thereupon cease (such merger transaction is referred to
hereinafter as the "Merger"). The Company shall be the surviving
corporation in the Merger, and its name shall remain Marketing Profiles,
Inc. Subject to the terms and conditions hereof, the parties hereto
shall take all actions necessary in accordance with applicable law and
their respective Articles of Incorporation and Bylaws to cause the
Section 1.2. Effective Time of the Merger. The Merger shall become
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effective at the time (the "Effective Time") when Articles of Merger (
the "Articles of Merger") in the form attached hereto as Exhibit 1.2,
together with the Plan of Merger (the "Plan of Merger") attached to the
Articles of Merger as Exhibit 1 thereto, are executed by the Company and
Acquisition in accordance with the applicable provisions of the FBCA and
are duly filed with the Department of State of Florida, which actions
shall be taken on the "Closing Date" (as hereinafter defined).
Section 1.3. Terms and Conditions: Conversion of Shares. The effect of
the Merger on the Articles of Incorporation, Bylaws, directors and
officers of the surviving corporation, and the manner and basis of
converting the shares of capital stock of Acquisition and the Company
into stock in the surviving corporation or cash, shall be as set forth
in the Plan of Merger.
ARTICLE 2
PURCHASE PRICE
Section 2.1. Amount. Pursuant to Section 6 of the Plan of Merger, all of
the outstanding shares of capital stock of the Company (including the
Controlling Shares, the Consenting Shares and the Dissenting Shares) are
being converted into the right to receive the aggregate amount of
Seventeen Million Seven Hundred Thousand Two Hundred Sixty Four Dollars
($17,700,264) (the "Closing Purchase Price"). Assuming the accuracy of
the representation and warranty that there are outstanding 1,722,714
shares of Common Stock, the Closing Purchase Price equates to $10.274639
per share. In addition to the pro rata portion of the Closing Purchase
Price, the shares of Common Stock held by the Controlling Shareholders
are being converted into the right to receive the Earn-Out Amount (as
such term is defined herein), if applicable. The Closing Purchase Price
and the Earn-Out Amount represent the total maximum price payable for
all of the outstanding shares of capital stock in the Company hereunder,
excluding certain options held by the Option Holders which will not be
extinguished hereunder, but will be redeemed pursuant to those certain
Stock Option Redemption Agreements between the Company and each of the
Option Holders.
Section 2.2. Earn-Out Amount.
(a) As an additional component of the merger
consideration as a premium for the Controlling Shares and for the
indemnities provided herein by the Controlling Shareholders, Buyer shall
pay to the Controlling Shareholders an aggregate amount (the "Earn-Out
Amount") equal to the positive difference, if any, determined by taking
(i) the product of (A) the "1996 Operating Income" (as hereinafter
defined), multiplied by (B) seven and four-tenths (7.4), and subtracting
(ii) Eighteen Million Dollars ($18,000,000).
(b) The term " 1996 Operating Income" shall mean
the Company's earnings from operations before interest and taxes for the
twelve-month period ending on December 31, 1996, computed in accordance
with generally accepted accounting principles ("GAAP"), applied in a
manner consistent with the "Financial Statements" (as hereinafter
defined); provided, however, that:
(i) Any charge or expense for the
amortization of goodwill or amortization of software or research and
development arising out of the fact the Buyer has purchased the stock of
the Company, pursuant to this Agreement or otherwise, or that the
purchase price of the Company is in excess of the net worth of the
Company, shall be excluded from the computation.
(ii) If there is an election for the
Company pursuant to section 338 of the Internal Revenue Code of 1986, as
amended, the computation shall be made as though the election had not
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been made.
(iii) Any loss, charge or expense not
related to or arising out of the ordinary business operations of the
Company ordered by the Buyer shall be excluded from the computation
unless the Controlling Shareholders consent to the transaction giving
rise to, or the payment or assumption of the obligation to pay, the
loss, charge or expense.
(iv) Any and all expenses paid or incurred
by the Company which would not have been so paid or incurred if not for
the Merger shall be excluded from the computation.
(v) No inter-corporate expenses or charges
from Buyer or any of its affiliates to the Company shall be included in
the computation unless such charges relate to services actually provided
which are either (A) approved in writing by the Controlling Shareholders
or (B) the amounts assessed do not exceed the lesser of (1) the fully
allocated cost of Buyer in providing such services or (2) the amount
which the company historically incurred in connection with such
services.
(vi) In the event that the Controlling
Shareholders cause revenues to be deferred from fiscal year 1995 until
fiscal year 1996 or accelerated into fiscal year 1996 from fiscal year
1997 outside of the ordinary and historical course of business of the
Company, as determined based on the operations of the Company during
1994 and 1995, an adjustment to the revenues and the 1996 Operating
Income shall be made to reflect the elimination of such revenues (the
"Revenue Adjustment").
(c) During fiscal year 1994, 1995 and 1996, the
Controlling Shareholders shall have free and unrestricted access to the
financial books and records of the Company so long as the Controlling
Shareholders are employed by the Company and otherwise shall have full
access during normal business hours.
(d) During fiscal years 1994, 1995 and 1996, Buyer shall
cooperate with the Company in maintaining and increasing the Company's
earnings from operations, and shall provide adequate working capital to
the Company.
(e) On or before April 15, 1997, Buyer shall prepare and
provide Controlling Shareholders with a statement determining the 1996
Operating Income and calculating the Earn-Out Amount in accordance with
the provisions of this Section 2.2 (the "Preliminary Statement''). The
Controlling Shareholders shall have the right to request in writing on
or before September 30, 1996 that the Preliminary Statement be audited
by the independent accounting firm performing the annual audit for the
Buyer. If such request is timely made, the Preliminary Statement shall
be so audited with the Controlling Shareholders and the Buyer sharing
equally the incremental expense of such audit charged to the Buyer.
Controlling Shareholders shall then be afforded the opportunity to
review the underlying financial records and work papers pertaining to
the Preliminary Statement. If the Controlling Shareholders shall fail
to object as specified herein to the determination and calculation as
set forth in the Preliminary Statement within twenty (20) business days
of receipt of such Preliminary Statement, then the determination of the
1996 Operating Income and the calculation of the Earn-Out Amount set
forth on such Preliminary Statement shall be deemed to be final,
conclusive and binding for the purposes of this Agreement. If the
Controlling Shareholders shall provide Buyer with a written notice of
disagreement with any values set forth in the Preliminary Statement
within the aforementioned twenty (20) business days, then Buyer and the
Controlling Shareholders shall negotiate in good faith for a period not
to exceed five (5) business days to resolve such dispute. If, at the
expiration of such five-day negotiation period, Buyer and the
Controlling Shareholders are unable to resolve such disagreement, then
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Buyer and the Controlling Shareholders shall jointly engage a nationally
recognized accounting firm mutually satisfactory to Buyer and the
Controlling Shareholders (the "Independent Accountant") and shall
jointly instruct such Independent Accountant to determine and resolve
only those issues still in dispute. The Independent Accountant shall
issue its determination within thirty (30) days of the submission of the
dispute, which determination shall be set forth in a written statement
delivered to Controlling Shareholders and Buyer and shall be final,
conclusive and binding on Controlling Shareholders and Buyer.
Section 2.3. Payment of Purchase Price.
(a) (i) At the Closing (as hereinafter defined),
and based upon the representations and warranties set forth herein as to
ownership of the Company's issued and outstanding capital stock, Buyer
has paid $13,459,777.09 Of the Closing Purchase Price, in the aggregate,
by wire transfer of immediately available funds to the accounts of the
Controlling Shareholders identified on Exhibit 2.3 attached hereto in
the amounts set forth therein and $4,079,031.70 of the Closing Purchase
Price to the trust account of Boroughs, ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Association (the "Disbursing Agent") for disbursement to
the Consenting Shareholders as set forth on Exhibit 2.3 and in
accordance with instructions delivered to the Disbursing Agent by each
of the Consenting Shareholders. The Disbursing Agent is acting as the
agent for the Consenting Shareholders for the purpose of receiving said
funds. The Buyer shall offer to pay the pro rata portion of the Closing
Purchase Price to each of the Dissenting Shareholders subject to the
Dissenting Shareholder waiving his or her appraisal rights under the
FBCA or upon expiration of the period within which such rights must be
properly asserted.
(ii) After the Closing, Buyer will pay to
each Other Stockholder who does not exercise dissenters' rights and who
was not a Consenting Shareholder as of the Closing Date his or her pro
rata portion of the Closing Purchase Price, without interest, upon
surrender of the certificate or certificates representing such Other
Stockholder's shares of Common Stock and upon completion and endorsement
of such other transmittal documents as the Company may reasonably
require.
(iii) Any holder of shares of Common Stock
who complies with Section 607.1320 of the FBCA shall not be entitled to
surrender his or her certificate or certificates representing shares of
Common Stock and receive in exchange therefore the consideration
provided in Section 2.1 of this Agreement. Such holder of shares of
Common Stock who becomes entitled, pursuant to Section 607.1320 of the
FBCA, to the payment of the fair value of his or her shares shall
receive payment therefor from Buyer (but only after the value therefor
shall have been agreed upon or finally determined as provided in Section
607.1320 of the FBCA.
(b) Buyer shall pay the Earn-Out Amount, if any, promptly
after the determination of 1996 Operating Income and the calculation of
the Earn-Out Amount have been finally resolved in accordance with the
procedures set forth in Section 2.2 above, by delivery of certified or
cashier's checks payable to the order of each Controlling Shareholder,
in amounts equal to the Earn-Out Amount multiplied by the percentage set
Controlling Shareholder Percentage
▇▇▇▇ ▇. ▇▇▇▇, ▇▇. 51.1756%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 48.8244%
Each Controlling Shareholder hereby acknowledges that payment of the
Earn-Out Amount, if any, is subject to possible reduction through the
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exercise of Buyer's right of offset as set forth in Section 5.5 herein.
Section 2.4. Time and Place of Closing. The closing (the "Closing") of
the transactions contemplated hereunder is being held contemporaneously
with the execution and delivery of this Agreement and such other
instruments, certificates and legal opinions required hereunder on the
date hereof at the offices of Boroughs, ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Suite
500, Southeast Bank Building, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, at 10:00 am. Eastern Standard Time (the date of the Closing being
hereinafter referred to as the "Closing Date").
Section 2.5. Deliveries at Closing. At the Closing, in addition to the
payment of the Closing Purchase Price set forth in Section 2.3, the
following actions have occurred:
(a) Deliveries by Controlling Shareholders. The Controlling
Shareholders have delivered or have caused to be delivered to Buyer:
(i) Stock certificates evidencing all of the
Controlling Shares, which certificates have been canceled or have been
duly endorsed in blank or have appropriate stock powers endorsed in
blank attached hereto, in proper form for transfer;
(ii) True and correct copy of the Articles of
Incorporation of the Company, certified by the Secretary of State of the
State of Florida as of a date not less than five business days preceding
the Closing Date, and a true and correct copy of the bylaws of the
Company, certified as of the Closing Date by the Secretary of the
Company;
(iii) Good standing certificates or certificates
of active status relating to the Company from the State of Florida and
each other jurisdiction in which the Company is qualified to conduct
business;
(iv) Letters of resignation effective at the
Closing executed by those officers and directors of the Company set
forth on Exhibit 2.5(a)(iv) hereto;
(v) Employment Agreements executed by ▇▇▇▇ and
▇▇▇▇▇▇, in the forms attached hereto as Exhibit 2.5(a)(v)(A) and Exhibit
2.5(a)(v)(B), respectively;
(vi) Noncompetition Agreements executed by ▇▇▇▇
and ▇▇▇▇▇▇ in the forms attached hereto as Exhibit 2.5(a)(vi)(A) and
Exhibit 2.5(a)(vi)(B), respectively;
(vii) An opinion of counsel to the Controlling
Shareholders and the Company, in the form of Exhibit 2.5(a)(vii) hereto;
(viii) The corporate seal and all stock ledgers
and minute books of the Company in existence as of the Closing,
accompanied by a certificate of the Secretary of the Company certifying
that the stock ledgers and minute books are, to the best of his informa-
tion and belief, true, correct and complete as of the Closing Date;
(ix) Stock Option Redemption Agreements executed
by each of the Option Holders, in the form attached hereto as Exhibit 2.
5(a)(ix)(A) and Exhibit 2.5(a)(ix)(B), respectively;
(x) Agreements terminating those certain
Controlling Shareholder Agreements, each between the Company and the
party thereto, as listed on Exhibit 2.5(a)(x);
(xi) Stock certificates evidencing all of the
Consenting Shares, which certificates have been canceled or have been
duly endorsed in blank or have appropriate stock powers endorsed in
blank attached thereto, in proper form for transfer;
(xii) A Secretary's Certificate attesting to the
incumbency of the officers of the Company executing this Agreement and
the other certificates and agreements delivered by the Company at the
Closing;
(xiii) Resolutions of the board of directors of
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the Company authorizing the execution and delivery of this Agreement and
the performance of the transactions contemplated hereby, certified by
the Secretary of the Company; and
(xiv) Original consents executed by the holders
of all Consenting Shares.
(b) Deliveries by Buyer and Acquisition. Buyer and
Acquisition have delivered or caused to be delivered to Controlling
Shareholders:
(i) A Secretary's Certificate attesting to the
incumbency of the officers of Buyer and Acquisition executing this
Agreement and the other certificates and agreements delivered by Buyer
and Acquisition at the Closing;
(ii) Resolutions of the board of directors of
Buyer and Acquisition authorizing the execution and delivery of this
Agreement and the performance of the transactions contemplated hereby,
certified by the Secretary of the Buyer and Acquisition, respectively.
(c) Post Closing Deliveries. Controlling Shareholders and
Buyer agree that, from time to time after the Closing, each of them will
execute and deliver such further instruments of conveyance and transfer
and take such other action as may be necessary to carry out the purposes
and intents of this Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF CONTROLLING SHAREHOLDERS
Controlling Shareholders, jointly and severally, hereby represent and
warrant to Buyer as follows:
Section 3.1. Incorporation; Authorization; etc.
(a) This Agreement, the Employment Agreements and the
Noncompetition Agreements have been duly executed and delivered by each
of the Controlling Shareholders and the Company and constitute the
legal, valid and binding obligations of each of the Controlling
Shareholders and the Company, enforceable against each of the
Controlling Shareholders and the Company in accordance with their
respective terms.
(b) The execution, delivery and performance of this
Agreement by Controlling Shareholders and the Company and the
consummation of the transactions contemplated hereby will not, with or
without the giving of notice or the passage of time, or both, conflict
with, result in a violation, breach, default, right to accelerate, loss
of rights or increase in obligations under, or result in the creation of
any lien or encumbrance pursuant to:
(i) any provision of the Company's governing
documents;
(ii) any law, ordinance, rule or regulation or
any order, judgment or, decree by which either of the Controlling
Shareholders or the Company is bound or affected;
(iii) except for the agreements identified in
Schedule 3. 1(b), any license, lease or other agreement to which the
Company is a party or by which its assets and business may be affected (
including, without limitation, the agreements disclosed on Schedule 3.
14); or
(iv) any license, lease or other agreement to
which either Controlling Shareholder is a party or by which their
respective assets or business may be affected.
(c) The Controlling Shareholders are the sole record and
beneficial owners of the Controlling Shares, free and clear of any
liens, claims, charges, security interests, options or other legal or
equitable encumbrances of any nature. Controlling Shareholders each have
the full legal right, power and authority to vote the Controlling
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Shares.
(d) The Company is a corporation duly organized and validly
existing and in good standing under the laws of Florida. The Company:
(i) has all requisite corporate power and
authority to own, lease or operate its properties and assets and to
carry on its business as now being conducted and
(ii) is in good standing and is duly qualified
to transact business in each jurisdiction in which the nature of
property owned or leased by it or the conduct of its business requires
it to be so qualified, except where the failure to be duly qualified to
transact business would not have a material adverse effect on the
Company, its business or any significant portion of the agreements to
which it is a party.
The Company's Articles of Incorporation, Bylaws, minute
books and stock book are complete and correct and contain all
amendments thereto to date (in the case of the Articles of
Incorporation and Bylaws), a record of all corporate proceedings of the
Company (in the case of the minute books), and a record of all stock
issuances and transfers of the Company (in the case of the stock book).
(e) The Company currently has no subsidiaries and never has
had any subsidiaries.
(f) The Company has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the Merger and the other transactions
provided for herein. The Board of Directors of the Company has
unanimously approved the execution, delivery and performance of this
Agreement and the consummation of the Merger and the other transactions
provided for herein. The Merger and the other transactions provided for
herein have received all requisite approvals from the shareholders of
the Company.
Section 3.2. Capitalization; Structure.
(a) The authorized capital stock of the Company consists of
7,500,000 shares of Common Stock, of which 1,722,714 shares are
outstanding, 1,310,000 shares are owned by the Controlling Shareholders,
397,000 shares are owned by the Consenting Shareholders, 15,714 shares
are owned by the Dissenting Shareholders, 0 shares are held as treasury
shares, and 6,190,000 shares are authorized but unissued, all as set
forth on Exhibit 3.2. All of the outstanding shares of Common Stock
have been duly and validly authorized and issued, and such shares are
all fully paid and non assessable. No shares of the Company's capital
stock have been issued in violation of any preemptive rights which have
not been waived, any rights of first refusal or any similar
restrictions. Except for certain employee stock options to purchase 10,
000 shares and 30,000 shares of Common Stock granted under the Company's
Employee Stock Option Plan to ▇▇▇▇▇ ▇. Derange and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
respectively (together, the "Option Holders"), there are no:
(i) outstanding options, warrants, liens,
pledges, mortgages, encumbrances, or other rights (including preemptive
rights) of any kind relating to the sale, issuance or voting of any
shares of capital stock of any class of the Company which have been
issued, granted or entered into by the Company;
(ii) securities convertible into, exchangeable
for or evidencing the right to purchase any shares of capital stock of
any class of the Company; or
(iii) contracts, commitments, agreements,
understandings, or arrangements of any kind relating to the issuance of
shares of capital stock of any class of the Company, any such
convertible or exchangeable securities or any such options, warrants or
rights.
(b) All securities heretofore sold by the Company have been
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issued in compliance with all applicable corporate and securities laws,
including without limitation, the Securities Act of 1933, as amended,
and all applicable state "blue sky" laws.
(c) The Stock Option Redemption Agreements have been duly
executed and delivered by each of the Option Holders and by the Company,
and constitute the legal, valid and binding obligations of the Option
Holders and the Company, enforceable against any of them in accordance
with their respective terms.
(d) All transactions whereby the Company repurchased,
redeemed, canceled or reacquired shares of its capital stock and the
solicitation of shareholder consents in connection with the Merger have
been effected in compliance with all applicable corporate and securities
laws, and documentation prepared by or on behalf of the Company in
connection therewith did not include any untrue statement of any
material fact or omit to state any material fact necessary to make the
statements made therein to be correct and complete.
Section 3.3. Financial Statements. Attached hereto as Exhibit 3.3(A) is
a true and complete copy of the audited balance sheet of the Company at
December 31, 1992, and the related audited statements of income,
shareholder's equity and cash flows for the year then ended, including
related footnotes (collectively, the "Audited Financial Statements"), in
each case as examined by and accompanied by the report of Price
Waterhouse, independent certified public accountants.
Attached hereto as Exhibit 3.3(B) is a true and complete copy of the
unaudited balance sheet of the Company at September 30, 1993 (the "
Interim Balance Sheet"), and the related unaudited statements of income,
shareholders' equity, and cash flows for the period then ended (
collectively, the "Interim Financial Statements"; the Audited Financial
Statements and the Interim Financial Statements being sometimes
hereinafter collectively referred to as the "Financial Statements").
The Financial Statements:
(a) have been prepared from, and are in accordance with, the books
and records of the Company;
(b) fairly present the results of operations, cash flows and
financial position of the Company as of and for the periods set forth
therein; and
(c) have been prepared in accordance with GAAP consistently
applied throughout the indicated periods;
except that, in the case of the Interim Financial Statements, not all
period-end adjustments and period-end accruals have been made, and there
are no footnotes.
Section 3.4. Undisclosed Liabilities.
(a) Except as disclosed in Schedule 3.4(a) hereto, and
except as reflected, expressly reserved against or otherwise disclosed
in the Financial Statements, the Company has no other liabilities or
obligations of any nature, known or unknown (whether accrued, absolute,
contingent or otherwise).
(b) Except as set forth on Schedule 3.4(b) or Schedule 3.4(
a), since December 31, 1992, the Company has not:
(i) suffered any physical damage, destruction or
casualty loss (whether or not such loss or damage shall have been
covered by insurance) which adversely affects the properties, business
or business prospects of the Company or suffered any deterioration in
the operating condition of the assets of the Company;
(ii) incurred, created, assumed or guaranteed
any liability or obligation of any nature (whether absolute, accrued,
contingent, or otherwise), except in the ordinary and regular course of
business;
(iii) increased, or made any change in any
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assumptions underlying the method of calculating any bad debt,
contingency, or other reserves;
(iv) made any change in the method of valuing
assets included in its financial statements;
(v) made any change in any method of accounting
or keeping its books of account or accounting practices or systems of
internal accounting controls;
(vi) paid, discharged or satisfied any liability
or obligation (whether absolute, accrued, contingent, or otherwise),
other than by payment, discharge, or satisfaction, in the ordinary and
regular course of business;
(vii) permitted or allowed any of its assets (
real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction, or
charge of any kind, except those of a kind described in Section 3.5
hereof or liens arising in the ordinary course of business by operation
of law;
(viii) written down the value of any inventory
or written off as uncollectible any notes or accounts receivable, except
for write-downs and write-offs in the ordinary and regular course of
business;
(ix) canceled or waived any claims or rights, or
sold, transferred, distributed, or otherwise disposed of any assets or
properties, except in the ordinary and regular course of business or in
connection with the transactions contemplated by this Agreement;
(x) disposed of any of its assets except in the
ordinary course of business;
(xi) made any commitment for additions to
property, plant, or equipment which in the aggregate exceed Twenty-Five
Thousand Dollars ($25,000) except as set forth on Schedule 3.14 hereto;
(xii) declared, paid or set aside for payment any
dividend or declared or made any distribution on or in respect of its
capital stock, or directly or indirectly redeemed, purchased, or
otherwise acquired any shares of its capital stock, any securities con-
vertible into or exchangeable for any shares of its capital stock, or
any options, warrants, or other rights to purchase or subscribe to any
of the foregoing, or authorized the creation or issuance of, or issued,
sold or committed to sell (or granted any options or rights to purchase)
any additional shares of its capital stock, or agreed to take any such
action, or sold, issued or incurred (or agreed to sell, issue or incur)
any indebtedness;
(xiii) experienced any strike, walkout, labor
trouble or any other new or continued event, development or condition of
any such character;
(xiv) increased the salaries or other
remuneration payable or to become payable to, or made any advance (
excluding advances for ordinary business expenses) or loan to, any
officer, director or employee (except normal merit increases made in the
ordinary course of business and consistent with past practice), or made
any increase in, or any addition to, other benefits (including, without
limitation, any bonus, Employee Plans (as hereinafter defined) or other
plan) to which any of its officers, directors, employees or shareholders
may be entitled, or made any payments to any pension, retirement,
profit-sharing, bonus or similar plan, except payments in the ordinary
course of business and consistent with past practice made pursuant to
the Employee Plans or made any other payment of any kind to, or on
behalf of, any such officer, director or employee of base compensation
and reimbursement for reasonable business expenses not in the ordinary
course of business, or failed to pay when due any payment necessary under
any Employee Plans;
(xv) established any new bonus, stock option,
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profit sharing, pension, retirement or other similar plan or arrangement
for or on behalf of its employees;
(xvi) made any payment, loan or advance of any
amount to or in respect of, or made any sale, transfer or lease of any
properties or assets (whether real, personal or mixed, tangible or
intangible) to, or entered into any agreement, arrangement or trans-
action with, any officer, director or shareholder except for expenses or
remuneration to officers and employees at rates not exceeding the rates
of compensation in effect on the date of the Audited Financial
Statements (except normal merit increases made in the ordinary course of
business and consistent with past practice);
(xvii) otherwise failed to conduct its business
in the ordinary and usual course; or
(xviii) agreed, whether or not in writing, to do
any of the foregoing.
Section 3.5. Properties. The Company has good, marketable and insurable
title to, or holds by valid and existing lease or license (which lease
or license is not in default in any respect and which gives it the right
to occupy, control and use, free and clear of all mortgages, pledges,
liens, encumbrances or security interests), with respect to each piece
of real and personal property used in its business as now conducted,
except in any of the foregoing cases for such imperfections of title,
mortgages, pledges, liens, encumbrances or security interests as:
(a) are set forth in Schedule 3.5 hereof;
(b) are reflected or reserved against in the
Financial Statements;
(c) arise out of taxes or general or special
assessments not in default and payable without penalty or interest; or
(d) in the case of real property, are of a kind
generally found in property of similar character and which are not
substantial in character, amount or extent in relation to the specific
asset affected and do not detract materially from the value of or
interfere with the present use of the property subject thereto or affected
thereby.
The real and personal property owned, leased or licensed by
the Company constitutes, and the real and personal property to be owned,
leased or licensed by the Company immediately after the Closing will
constitute, all real or personal property that is material to and
necessary for the operation of its business as currently conducted.
Section 3.6. Litigation. Except as set forth in Schedule 3.6, there are
no suits, claims, investigations or legal, administrative or arbitration
proceedings pending or, to the knowledge of each Controlling
Shareholder, threatened against
(a) either Controlling Shareholder or the
Company,
(b) the officers or directors of the Company (
other than the Controlling Shareholders) in their capacities as officers
or directors, or
(c) any other person or entity for whom the
Controlling Shareholders or the Company may be vicariously liable at law
or in equity.
Controlling Shareholders are not subject to, and the Company
is not operating under or subject to, any order, writ, injunction or
decree of any court or governmental authority
Section 3.7. Intellectual Property. The Company has developed and
conducts an active program of licensing certain computer code to banks,
savings and loans, credit unions and other financial institutions for
their use in connection with marketing and promotional activities (the "
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Software Programs") and, in connection therewith, the Company has
developed certain related technical and user documentation (the "
Documentation"). The Software Programs and the Documentation are
collectively referred to as the "Software." The Software Program are
listed on Schedule 3.7 hereto.
(a) Ownership. Except as set forth in Section 3.9, the
Company owns all trademarks, service marks, trade names, and copyrights
(including registrations, licenses, and applications pertaining thereto)
and all other proprietary information used by the Company in the conduct
of its business, including, without limitation, the Software. Schedule
3.7(a) sets forth all trademarks and service marks, all trade names, and
all copyrights owned or used by the Company and lists all federal and
state registrations thereof. The Company neither owns nor licenses any
patents or any applications therefor.
(b) Procedures for Copyright Protection. Schedule 3.7(b)
sets forth the form and placement of the proprietary legends and
copyright notices displayed in or on the Software including screen
displays. In no instance has the eligibility of the Software for
protection under copyright law been forfeited to the public domain.
(c) Procedures for Trade Secret Protection. The Company has
never disclosed its source code to a third party other than the
consultants identified on Schedule 3.7(c), each of which has executed a
nondisclosure agreement, and discloses its source code to employees only
on a need-to-know basis in connection with the performance of their
duties to the Company. Except as described on Schedule 3.7(c), each
current employee of the Company and each former employee of the Company
employed after January 2, 1992 has executed and delivered to the Company
a noninterference and confidentiality agreement in the form attached to
Schedule 3.7(c). The source code and system documentation comprising the
Software have at all times been maintained by the Company in confidence,
and the Company has not taken (nor has it failed to take) any action
which would result in such source code and system documentation not
being protectible as a trade secret under applicable law.
(d) Ownership of Software. All persons who have contributed
to or participated in the conception and development of the Software on
behalf of the Company have been full-time employees of the Company hired
to prepare such works within the scope of employment, except for the
consultants identified on Schedule 3.7(c). Each such consultant
identified on Schedule 3.7(c) has executed and delivered to the Company
a valid assignment of such consultant's rights in works prepared by the
consultant on behalf of the Company and included in the Software. As a
consequence, the Company has all ownership interests in the Software.
(e) Absence of Claims. No claims have been asserted by any
person to rights in the Software, and no valid basis for any such claim
exists. The use of the Software by the Company and its licensees does
not infringe on the rights of any person (whether arising under
copyright, trade secret, patent, unfair competition or other state or
federal laws which protect intellectual property rights). The use by the
Company of the trademarks, trade names and service marks identified on
Schedule 3.7(a) does not infringe the rights of any person. Except as
disclosed on Schedule 3.7(e), no claim has been asserted by any person
that the use by the Company of any of the trademarks, trade names or
service marks identified on Schedule 3.7(a) infringes the rights of any
person.
(f) Licenses to Third-Party Software. The Company has
obtained valid, fully-paid licenses to use all third-party software
utilized by the Company and its employees for internal purposes in the
conduct of the Company's business (such as accounting general ledger
packages, word processing software, and the like), and the number of
copies of such third-party software programs being used by the Company
and its employees does not exceed the number of copies authorized by the
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licensors of such third-party software products.
Section 3.8. Adequacy of Technical Documentation. The Software includes
the source code, system documentation, statements of principles of
operation, and schematics for all Software Programs, as well as any
pertinent commentary or explanation that may be necessary to render such
materials understandable and usable by a trained computer programmer.
The Software also includes any program (including compilers), "
workbenches," tools, and higher level (or ''proprietary') language used
for the development, maintenance, and implementation of a Software
Program.
Section 3.9. Third-Party Components in Software. The Company has validly
obtained the right and license to use, copy, modify, and distribute any
third-party programming and materials contained in the Software pursuant
to the contracts identified as "Licenses from Third Parties" in Schedule
3.9, subject to no further license fee, royalty or other payment
obligations. The Software contains no other programming or materials in
which any third party may claim superior, joint, or common ownership,
including any right or license. The Software does not contain derivative
works of any programming or materials not owned in their entirety by the
Company.
Section 3.10. Third-Party Interests or Marketing Rights in Software. The
Company has not granted, transferred, or assigned any right or interest
in the Software to any person, except pursuant to the contracts
identified as "Distributorships, Dealerships, Franchises, and
Manufacturer's Representative Contracts" or "Licenses and Sublicenses to
Third Parties" or "Source Code Escrow Agreements" in Schedule 3.10. All
contracts identified as "Licenses and Sublicenses to Third Parties" in
Schedule 3.10 constitute only end-user agreements, each of which grants
the end-user thereunder solely the nonexclusive right and license to use
identified Software for internal purposes only. All such end-user
agreements are substantially in the form of the Company's standard form
of end-user license agreement, a copy of which is attached to Schedule
3.10 There are no contracts, agreements, licenses, and other commitments
and arrangements in effect with respect to the marketing, distribution,
licensing, or promotion of the Software by any independent salesperson,
distributor, sublicensor, or other remarketer or sales organization,
except for the contracts identified as "Distributorships, Dealerships,
Franchises, and Manufacturer's Representative Contracts" in Schedule 3.
10. All of the source code escrow agreements entered into by the
Company with licensees of the Software are identified as "Source Code
Escrow Agreements" in Schedule 3.10, and all such agreements are
substantially in the form of the Company's standard source code escrow
agreement, a copy of which is attached to Schedule 3.10.
Section 3.11. Licenses. The Company has all government licenses, permits
franchises, approvals and other governmental authorizations ("Licenses")
required for its business as currently conducted where the failure to
hold, maintain or obtain such Licenses would have a materially adverse
effect on the business or operations of the Company. No proceeding is
pending or, to Controlling Shareholders' respective knowledge,
threatened seeking the revocation or suspension of any License.
Section 3.12. Compliance with Laws. The conduct of the Company's
business has complied and complies in all material respects with all
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto.
Section 3.13. Insurance. Schedule 3.13 lists all policies of casualty,
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liability, workers' compensation, life and other forms of insurance by
which the Company is currently insured or has been insured during the
previous five years and includes for each policy in effect the period
through which premiums have been paid.
Except as set forth on Schedule 3.13, all of the policies
indicated as in force on Schedule 3.13
a) are in full force and effect,
(b) are sufficient for compliance by the Company
with all requirements of law and all agreements to which the Company is
a party, and
(c) are valid, binding and enforceable policies.
Section 3.14. Material Contracts. Schedule 3.14 lists the following
agreements (including, without limitation, leases, purchase contracts
and commitments) to which the Company is a party or by which the Company
or any of its properties is bound:
(a) all contracts which involve future
obligations on the part of the Company
(i) in an amount exceeding $25,000 in the
aggregate in the case of purchase orders and commitments or
(ii) in an amount exceeding $100,000 in the
aggregate in the case of any other type of contract;
(b) all joint ventures, sales agency, sales
representative or distributorship, franchise, license or similar
contracts;
(c) all real estate leases
(d) all notes, bonds mortgages, security
agreements, guarantees and other agreements and instruments for or
relating to any lending by the Company of any amount (exclusive of
advances to employees for expenses in the ordinary course of business)
or any borrowing (including assumed debt) of $100,000 or more; and
(e) all powers of attorney, guarantees,
suretyships or similar agreements given by the Company.
Except as set forth in Schedule 3.14, each contract set
forth in Schedule 3.14 is valid, binding and enforceable in accordance
with its terms, and neither the Company nor, to the Controlling
Shareholders' knowledge, any other party to any such contract are in
material breach or material default of the express written terms of such
contracts, and there does not exist under any provision thereof, to the
Controlling Shareholders' knowledge, any event that, with the giving of
notice or the passage of time or both, would constitute such a breach or
default.
Section 3.15. Brokers, Finders, etc. Except as described in Schedule
3.15, neither Controlling Shareholders nor the Company have employed any
broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who might be entitled to a
fee or commission in connection with such transactions.
Section 3.16. Taxes.
(a) Filing of Tax Returns. Controlling Shareholders and the
Company have timely filed with the appropriate taxing authorities all
returns (including, without limitation, information returns and other
material information) in respect of Taxes (as hereinafter defined)
required to be filed through the date hereof. All such returns and other
information filed are complete and accurate in all material respects.
(b) Payment of Taxes. All Taxes that are due and payable by
the Company (whether or not shown on any return) before the date hereof
have been paid. To the extent required by GAAP, an adequate reserve has
been established on the Financial Statements (disregarding any reserve f
or deferred Taxes established to reflect timing differences between book
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and taxable income) for all unpaid Taxes payable by the Company with
respect to all periods through the date of such Financial Statements,
and the Company is not required under GAAP to reserve for any liability
for Taxes in excess of the reserves so established. Except as described
in Schedule 3.16(b), no portion of the reserve established on the
Financial Statements for Taxes reflects any contingent liability or
other potential liability for Taxes that are due and payable, or that
may become due and payable in the future, as a result of an audit,
amended return or otherwise.
(c) Audit History. Except as set forth in Schedule 3.16(c):
(i) no deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority
against the Company which have not been paid or otherwise finally
settled and resolved;
(ii) the Company has not waived the statute of
limitations in respect of any Tax or agreed to any extension of time
with respect to the assessment of any Tax; and
(iii) the Company is not currently under audit
with respect to Taxes by any governmental authority, and no such
authority in a jurisdiction where the Company does not file Tax returns
or pay Taxes has claimed that the Company is required to file Tax
returns or otherwise is subject to taxation.
(d) Tax Sharing or Allocation Agreements. The Company is not a
party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement.
(e) Prior Affiliated Groups. The Company has never been a member
of an affiliated group of corporations, within the meaning of Section
1504 of the Internal Revenue Code.
(f) Tax Status of Property. None of the assets of the
Company
(i) is property which the Company is required to
treat as being owned by any other person pursuant to the so-called "safe
harbor lease" provisions of former section 168(f)(8) of the Internal
Revenue Code of 1954,
(ii) directly or indirectly secures any debt
the interest on which is tax-exempt under section 103(a) of the Internal
Revenue Code, or
(iii) is "tax-exempt use property" within the
meaning of section 168(h) of the Internal Revenue Code.
(g) Subchapter S Election. Effective as of January 1, 1993
the Company made a valid election pursuant to Section 1362(a) of the
Internal Revenue Code to be an "S" Corporation within the meaning of
Section 1361(a)(1) of the Internal Revenue Code. During the Company's
tax year beginning January 1, 1993 to and including the Closing Date,
the Company is and has been subject to taxation as an "S" corporation.
(h) Taxes. For purposes of this Agreement, "Taxes" shall
mean all federal, state, local, foreign and other taxes, assessments, or
other governmental charges, including, without limitation, income,
estimated income, business, occupation, franchise, property, sales,
employment, or withholding taxes, including interest, penalties and
additions in connection therewith.
(i) Tax Accounting. The Company uses the [cash/accrual]
method of accounting for income tax purposes. All accounting periods and
methods used by the Company for purposes of any Tax returns are
permissible accounting periods and methods under applicable law.
(j) Section 341(f) Election. No consent under section 341(f)
of the Internal Revenue Code has been filed with respect to the Company.
Section 3.17. Pension and Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the terms
set forth below shall have the following meaning:
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(i) Code: The Internal Revenue Code of 1986, as amended,
together with the regulations promulgated thereunder;
(ii) Employee Plans: All plans, programs, arrangements,
practices or contracts (including any plan, program, arrangement,
practice or contract established, maintained or contributed to under the
laws of any foreign country pursuant to which the Company or its ERISA
Affiliate provides or is obligated to provide or has within the last six
years been obligated to provide (directly or indirectly, individually or
jointly with others, or through a government program) benefits or
compensation to or on behalf of employees or former employees of the
Company or any ERISA Affiliates, whether formal or informal, whether or
not written, whether or not terminated, including but not limited to the
following:
(A) Executive Arrangements -- any bonus, incentive
compensation, stock option, deferred compensation,
commission, severance, golden parachute or other executive
compensation plan, or rabbi trust program, contract,
arrangement or practice;
(B) ERISA plans -- any ERISA Pension Plan or ERISA
Welfare Plan, including but not limited to any multi-
employer plan (as defined in Section 3(37) and Section 4001(
3) of ERISA), defined benefit pension plan, profit sharing
plan, money purchase pension plan, savings or thrift plan,
stock bonus plan, employee stock ownership plan, or any
plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical),
hospitalization, accident, sickness, disability, severance
pay or life insurance (including post-retirement life
insurance) benefits; and
(C) Other Employee Fringe Benefits -- any stock
purchase, vacation, scholarship, day care, prepaid legal
services, severance pay, or fringe benefit plan, program,
arrangement, contract, or practice;
(iii) ERISA: The Employee Retirement Income Security Act of
1974, as amended, and the rulings and regulations thereunder;
(iv) ERISA Affiliate: A corporation that is or was a member
of a controlled group of corporations with the Company within the
meaning of Section 414(b) of the Code, a trade or business (including a
sole proprietorship, partnership, trust, estate or corporation) that is
under common control with the Company within the meaning of Section 414(
m) of the Code, or a trade or business which together with the Company
is treated as a single employer under Section 414(o) of the Code;
(v) ERISA Pension Plan: Any Employee Plan that is or was an
employee pension benefit plan as defined in Section 3(2) of ERISA which
is established, maintained or contributed to by the Company or any ERISA
Affiliate;
(vi) ERISA Welfare Plan: Any employee welfare benefit plan
as defined in Section 3(l) of ERISA which is established maintained or
contributed to by the Company or any ERISA Affiliate.
(b) Schedule 3.17(b) lists or describes
(i) all Employee Plans maintained or contributed
to by the Company or an ERISA Affiliate pursuant to which the Company or
its ERISA Affiliates provides benefits or compensation to or on behalf
of employees or former employees of the Company and
(ii) all Employee Plans currently maintained or
contributed to by an ERISA Affiliate which are employee pension benefit
plans as defined in Section 3(2) of ERISA including money purchase plans
but excluding other individual account plans as defined in Section 3(34)
of ERISA.
Controlling Shareholders shall furnish a copy of each
Employee Plan which provides benefits or compensation to or on behalf of
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employees or former employees of the Company and a copy of any related
materials which have been furnished to participants or beneficiaries in
such Employee Plans or to any government agency. On request by Buyer,
Controlling Shareholders shall furnish or make available to Buyer a copy
of any other Employee Plan (and any materials related to such Employee
Plan) maintained or contributed to by an ERISA Affiliate.
(c) Each Employee Plan (and related trust or
funding vehicle, if any) has at all times been administered and
maintained in accordance with its terms and the applicable law
including, without limitation, the filing of all applicable reports.
(d) Except to the extent set forth on Schedule
3.17(d), to the extent any Employee Plan is subject to approval by any
governmental agency (or such approval is available under applicable law)
such Employee Plan has received such approval and such approval is
current.
(e) The Company is not subject to, and no facts
exist which could subject the Company to, any liability whatsoever which
is directly or indirectly related to any Employee Plan including, but
not limited to, liability for benefits payments or related claims (other
than the ordinary usual claims by participants or beneficiaries which
have been made for benefits called for under the terms of such Employee
Plans), any liability for any tax or related penalty under the Code, or
liability for any damages or penalties arising under Title I or Title IV
of ERISA.
(f) No Employee Plan has participated in,
engaged in or been a party to any "prohibited transaction" (as defined
in ERISA or the Code) and the Company has not incurred, or does not
reasonably expect to incur, any liability under Chapter 43 of the Code
under ERISA Sections 502 with respect to any Employee Plan.
(g) Except as set forth in Schedule 3.17(g), no
ERISA Welfare Plan provides benefits to former employees of the Company,
other than continuation coverage required by Code Section 4980B and
ERISA Section 601.
(h) There are no pending or threatened claims,
suits or other proceedings with respect to any Employee Plan other than
the ordinary usual claims by participants or beneficiaries which have
been made for benefits called for under the terms of such Employee Plans
and which will be paid under such Employee Plans in the ordinary course.
(i) There is no requirement that the Buyer or
the Company make any further contributions to any Employee Plan after
the Closing Date and each Employee Plan which provides benefits to or on
behalf of employees or former employees of the Company may be terminated
by the Company or Buyer in its sole discretion on or after the Closing
Date without liability of any kind or description whatsoever to the
Company, Buyer, any of Buyer's ERISA affiliates, or any other person,
entity or governmental agency.
(j) Except as set forth on Schedule 3.17(j), the
Company is not a party to or obligated under any agreement, plan,
contract or other arrangements that will result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code.
Section 3.18. Labor and Employment Matters. Except to the extent set
forth in Schedule 3.18:
(a) The Company is not a party to any collective
bargaining agreements;
(b) The Company is in compliance in all material
respects with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety and health, and is not
engaged in any unfair labor or unfair employment practices;
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(c) There is no unfair labor practice, charge or
complaint or any other matter against or involving the Company pending
or, to the knowledge of the Company, threatened before the National
Labor Relations Board or any court of law;
(d) There is no labor strike, dispute, slowdown
or stoppage actually pending or, to the knowledge of the Company,
threatened against the Company;
(e) No certification or decertification question
or organizational drive exists or has existed within the past twenty-
four months respecting the employees of the Company;
(f) No grievance proceeding or arbitration
proceeding arising out of or under any collective bargaining agreement
is pending against the Company or, to the knowledge of the Company,
threatened;
(g) No agreement (including any collective
bargaining agreement), arbitration or court decision or governmental
order which is binding on the Company in any way limits or restricts the
Company from relocating or closing any of its operations;
(h) The Company has not experienced any
organized work stoppage or other labor difficulty since its inception:
(i) There are no charges, investigations,
administrative proceedings or formal complaints of discrimination (
including discrimination based upon sex, age, marital status, race,
national origin, sexual preference, handicap or veteran status) pending
or, to the knowledge of the Company, threatened before the Equal
Employment Opportunity Commission or any federal, state or local agency
or court against the Company. There have been no governmental audits of
the equal employment opportunity practices of the Company and, to the
knowledge of the Company, no basis for any such claim exists;
(j) There are no citations, investigations,
administrative proceedings or formal complaints of violations of local,
state, or federal occupational safety and health laws pending or, to the
knowledge of the Company, threatened before the Occupational Safety and
Health Review Commission or any federal, state or local agency or court
against the Company; and
(k) Schedule 3.18(k) lists all employment
consulting loan-out retainer or other contracts or agreements involving
any person employed by the Company as an employee or independent
contractor to which the Company is a party or by which it is bound. The
Company is not and, to the knowledge of Controlling Shareholders, no
other party to any such agreement, plan or contract is in default with
respect to any material term or condition thereof (including the making
of contributions and recording services therefor) nor has any event
occurred which through the passage of time or the giving of notice, or
both, would constitute a default thereunder or would cause the
acceleration of any obligation of any party thereto.
(l) Schedule 3.18(l) lists the names and current
compensation levels of all employees and consultants of the Company.
Section 3.19. Controlling Shareholders' Environmental Representation.
Except as disclosed on Schedule 3.19 hereto,
(a) the operations of the Company comply, and
have complied, in all respects with all applicable Environmental Laws;
(b) the Company has obtained all environmental
health and safety Permits necessary for the operation of the Company's
business, as contemplated to be conducted by the Company subsequent to
the Closing Date, and all such Permits are valid and in good standing
and are not subject to any modification or revocation proceeding, and
the Company is in compliance in all respects with all terms and
conditions of such Permits;
(c) the Company and all of its present
-22-
facilities or operations, as well as its past facilities or operations,
are not subject to any outstanding written order or agreement with any
governmental authority or private party respecting
(i) any Environmental Laws,
(ii) any Remedial Actions, or
(iii) any Environmental Claims arising from the
Release of a
Contaminant into the environment;
(d) none of the operations of the Company on or
prior to the Closing are subject to any judicial or administrative
proceeding alleging a violation of any Environmental Law or otherwise
related to an Environmental Claim;
(e) none of the operations of the Company on or
prior to the Closing are the subject of any federal or state
investigation evaluating whether any Remedial Action is needed to
respond to a Release of any Contaminant into the environment under any
applicable law;
(f) neither the Company nor any predecessor of
the Company, has filed any notice under any Environmental Law indicating
past or present treatment, storage, or disposal of a hazardous waste or
solid waste or reporting a spill or Release of a Contaminant into the
environment under any applicable law;
(g) the Company has no contingent liability in
connection with any Release of any Contaminant into the environment;
(h) none of the Company's operations involve, or
have involved, the generation, transportation, treatment or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent;
(i) the Company has not disposed of any
Contaminant by placing it in or on the ground, waters, or other
environmental medium of any premises owned, leased or used by the
Company and neither has any lessee, other prior owner, or other person;
(j) no underground storage tanks or surface
impoundments are or ever have been on the Company's property; and
(k) no Lien in favor of any governmental
authority for
(i) any liability under Environmental Laws, or
(ii) damages arising from or costs incurred by
such governmental authority in response to a Release of a Contaminant
into the environment, has been filed or attached to the Company's
property.
For purposes of this Agreement, the terms set forth below
shall have the following meaning:
"Contaminant" shall mean those substances, whether waste
materials raw materials, finished products or any other material or
article which are regulated by or form the basis of liability under
federal, state or local environmental health and safety statutes or
regulations including, without limitation, petroleum or any by-products
or fractions thereof, any form of natural gas, asbestos, polychlorinated
biphenyls ("PCBs"), radon and other radioactive substances, infectious,
carcinogenic, mutagenic, or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives, urea formaldehyde, or any other
material or substance which constitutes a material health, safety or
environmental hazard to any person, property or natural resource.
"Environmental Claim" shall mean any notice of violation,
claim, demand, abatement or other order or direction (conditional or
otherwise) by any governmental authority or any person for personal
injury (including sickness, disease or death), tangible or intangible
property damage, damage to the environment, nuisance, pollution,
contamination, other adverse effects on the environment, cleanup costs,
remediation, removal, other response costs (which without limitation
-23-
shall include costs to come into compliance with Environmental Laws), or
investigation costs (including without limitation fees of consultants,
counsel and other experts in connection with any environmental
investigation, testing, audits, or studies), and/or for fines,
penalties, losses, liabilities (including any actual, punitive or
consequential damages under any statutory or common law cause of action,
regardless of whether the liabilities are imposed through operation of
strict liability or otherwise), or restrictions, resulting from or based
upon
(a) the existence or the continuation of the
existence, of a Release or the potential for a Release (including,
without limitation, sudden or non-sudden, accidental or non-accidental
Releases) of, or exposure to, any Contaminant, odor or audible noise or
other release or emission in, on, into or under the environment (
including, without limitation, the air, soil, subsurface strata, ground
water, any surface water or any sediments associated with any water
body) and, in, by, from, or related to the Company's properties,
(b) the environmental aspects of the
transportation, storage, treatment, disposal, generation, recycling,
reclamation, use or other handling of any Contaminants or other
materials on the properties or in connection with the operation of the
Company, or
(c) the violation, or alleged violation, of any
statutes, ordinances, orders, rules, regulations, Permits, licenses,
registrations or approvals of or from any governmental authority, agency
or court relating to environmental matters connected with the Company's
properties.
"Environmental Laws" shall mean all laws relating to the
environment, safety, health, and the regulation of Contaminants,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 ▇.▇.▇ ▇▇▇▇ et seq.), the Hazardous
Material Transportation Act (49 U.S.C. 1801 et seq.), the Resource
Conservation and Recovery Act (42 ▇.▇.▇ ▇▇▇▇ et seq.), the Clean Water
Act (33 ▇.▇.▇ ▇▇▇▇ et seq.), the Clean Air Act (42 ▇.▇.▇ ▇▇▇▇ et seq.),
the Toxic Substances Control Act (15 ▇.▇.▇ ▇▇▇▇ et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 ▇.▇.▇ ▇▇▇ et seq.), the
Emergency Planning and Community Right to Know Act (41 ▇.▇.▇ ▇▇▇▇▇ et
seq.), the Safe Drinking Water Act (42 ▇.▇.▇ ▇▇▇▇ et seq.) and the
Occupational Safety and Health Act (29 ▇.▇.▇ ▇▇▇ et seq.), as such laws
have been and hereafter may be amended or supplemented, and any
analogous future federal, or present or future state, local or foreign
laws and all rules, orders, and regulations promulgated pursuant to any
of such federal, state, local or foreign laws, and any common law cause
of action relating to the environment, safety, health, or the management
of contaminants.
"Permit" shall mean any permit, approval, authorization,
license, variance, permission or similar item required from a
governmental authority having jurisdiction under an applicable
Environmental Law.
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, abandonment, deposit, disposal, discharge,
dispersal, leaching or migration of Contaminants (including, but not
limited to, Contaminants in barrels, drums or other containers) into the
environment, including the movement of Contaminants through, on, under,
or in the air, soil, subsurface strata, surface water or ground water.
"Remedial Action" shall mean all actions required to
(a) clean up, remove, treat, minimize the effect
of, or in any other way address Contaminants in the indoor or outdoor
environment;
(b) prevent the Release or threat of Release or
minimize the further Release of Contaminants so they do not migrate or
-24-
endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; or
c) perform pre-remedial studies and
investigations and post-remedial monitoring and care in respect of
actions contemplated in the preceding clauses (a) and (b).
Section 3.20. Agreements Affecting Competition. Except as set forth on
Schedule 3.20, the Company is neither a party to nor bound by any
agreement which, in whole or in part,
(a) presently restricts or precludes the Company
or any present or future affiliate of the Company from conducting any
business anywhere in the world, or
(b) upon the occurrence of any event, the giving
of notice or the passage of time, by its terms would have such an
effect.
Section 3.21. Transactions with Related Parties. Except as set forth on
Schedule 3.21, no Related Party:
(a) owes money to the Company;
(b) has any claim against the Company;
(c) has any interest in any property or assets
used by the Company in its business;
(d) has any benefits which are contingent on the
transactions contemplated by this Agreement;
(e) has any agreement with the Company that is
not terminable by the Company without penalty or notice;
(f) has any agreement providing severance
benefits or other benefits (which are conditioned upon a change of
control) after the termination of employment of such employee regardless
of the reason for such termination of employment; or
(g) has any agreement or plan, any of the
benefits of which will be increased or the vesting of benefits which
will be accelerated by the occurrence of any of the transactions
contemplated by this Agreement where the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
For the purposes of this Section, the term "Related Party"
shall mean any of officer, director or stockholder of the Company or any
affiliate or associate of any such person.
Section 3.22. Major Vendors and Customers. Schedule 3.22 sets forth a
list of each licenser, developer, remarketer, distributor and supplier
of property or services to, and each licensee, end-user or customer of,
the Company, to whom the Company paid or billed in the aggregate in
excess of $100,000 (in the case of customers, remarketers or
distributors of the Company's products) and $20,000 in all other cases
during the year ended December 31, 1992.
Section 3.23. Investment Company; Holding Company. Neither the Company
nor any of its stockholders or affiliates is an "investment company" or
a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or a "holding company,"
a "subsidiary company" of a "holding company" or an "affiliate" of a "
holding company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 3.24. Absence of Certain Commercial Practices. Since January
1988, none of the Company, any of its directors, officers, agents,
affiliates or employees, or any other person duly authorized to act on
behalf of any of them, has
(a) given, proposed to give, or agreed to give
-25-
any material gift or similar benefit to any customer, supplier or
governmental employee or official or any other person, for the purpose
of directly or indirectly furthering the business of the Company or
(b) in connection with the business of the
Company used any corporate or other funds for contributions, payments,
gifts, or entertainment, or made any expenditures relating to political
activities to government officials or others in violation of any
applicable laws or established or maintained any unlawful or unrecorded
funds.
None of the Controlling Shareholders, the Company, any of
its directors, officers, agents or employees, or any other person acting
on behalf of any of them, has accepted or received any unlawful
contributions, payments, gifts or expenditures in connection with the
business of the Company.
Section 3.25. Closing Financial Position. Effective immediately prior to
the Closing, the Company had
(a) cash or cash equivalents (a "Cash Balance")
of not less than Three Million Dollars ($3,000,000), and
(b) Total Assets which exceeded Total
Liabilities (excluding the note payable from the Company to Buyer and
Net Customer Deposits, as defined on Schedule 2.25) (an "Adjusted Net
Worth") by not less than Two Million Four Hundred Thousand Dollars ($2,
400,000).
Section 3.26. Disclosure. All of the representations and warranties of
Controlling Shareholders set forth in this Agreement and in any exhibit,
schedule or certificate furnished by or on behalf of the Controlling
Shareholders in connection with this Agreement are true, correct and
complete. There is no fact known to the Controlling Shareholders
relating to the business, condition or prospects of the Company, as the
transactions contemplated hereunder, which may materially and adversely
affect the Company or Buyer which has not been disclosed to Buyer or its
counsel.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the
Controlling Shareholders as follows:
Section 4.1. Incorporation; Authorization; etc.
(a) Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of Georgia.
Acquisition is a corporation duly incorporated, validly existing and in
good standing under the laws of Florida.
(b) Buyer and Acquisition each has full
corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(c) The execution and delivery of this Agreement
by Buyer and Acquisition, the performance of Buyer's and Acquisition's
respective obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate proceedings on the part of Buyer and
Acquisition.
(d) This Agreement has been duly executed and
delivered by Buyer, and, assuming the due execution and delivery hereof
by Controlling Shareholders and the Company, this Agreement constitutes
the legal valid and binding obligation of Buyer and Acquisition,
enforceable against Buyer and Acquisition in accordance with its terms.
-26-
(e) The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby will not:
(i) violate any provision of the Articles of
Incorporation or Bylaws of Buyer or Acquisition;
(ii) violate any provision of, or be an event
that is (or with the passage of time will result in) a violation of, or
result in the acceleration of, or entitle any party to accelerate (
whether after the giving of notice or lapse of time or both) any
obligation under, or result in the imposition of any lien upon or the
creation of a security interest in any of Buyer's or Acquisition's
assets or properties pursuant to, any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which Buyer
or Acquisition is a party or by which Buyer or Acquisition is bound, the
effect of which would prevent the consummation of the transactions
contemplated hereby; or
(iii) violate or conflict with any law,
ordinance, rule or regulation or any other material restriction of any
kind or character to which Buyer or Acquisition is subject, the effect
of which would prevent the consummation of the transactions contemplated
hereby.
Section 4.2. Litigation. There is no claim, action, proceeding or
investigation pending or, to the best knowledge of Buyer, threatened in
writing, nor is there outstanding any writ, order, decree or injunction
that (a) calls into question the Buyer's or Acquisition's authority or
right to enter into this Agreement and consummate the transactions
contemplated hereby, or (b) would otherwise prevent or delay the
transactions contemplated by this Agreement.
Section 4.3. Brokers, Finders, etc. Neither Buyer nor Acquisition has
employed any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who
might be entitled to a fee or commission in connection with such
transactions.
ARTICLE 5.
SURVIVAL; INDEMNIFICATION
Section 5.1. Survival. The parties' respective representations and
warranties contained in this Agreement will survive the Closing and
shall remain in full force and effect for a period of eighteen months
from and after the Closing Date; provided, however, that the
representations and warranties set forth in Sections 3.1 and 3.2 shall
survive the Closing without limitation; and provided, further, that the
representations and warranties set forth in Section 3.16 shall survive
until expiration of any applicable statute of limitations which will
preclude assertion of Tax claims against the Company for matters
existing on or prior to the Closing Date. Any claim made or notice of a
claim given as to any breach or alleged breach of a representation or
warranty shall extend the applicable survival period set forth above
until such claim has been resolved and satisfied by agreement of the
parties or by the entry of a final non-appealable judgment of a court
having jurisdiction over such claim.
Section 5.2. Indemnification.
(a) Indemnification by Controlling Shareholders. Subject to the
terms of this Article 5, Controlling Shareholders hereby, severally,
covenant and agree to indemnify, defend, save and hold harmless Buyer,
the Company, and their respective officers, directors, employees, agents
-27-
or representatives, or any of their respective successors, assigns or
personal representatives (collectively, the "Buyer Indemnified Parties")
from and against any demands, claims, actions, losses, damages,
deficiencies, liabilities, and costs and expense (including, without
limitation, reasonable attorneys' and accountants' fees and expenses),
together with interest and penalties (collectively, "Indemnifiable
Damages") suffered by the Buyer Indemnified Parties which arise out of
or result from:
(i) any inaccuracy or misrepresentation in or
breach of any of the representations, warranties or covenants made by
Controlling Shareholders in this Agreement; provided, however, that
Controlling Shareholders shall only be required to indemnify Buyer
against 74.8% of the Indemnifiable Damages resulting from a breach of the
representation and warranty set forth in Section 3.25;
(ii) any inaccuracy or misrepresentation in a
document, certificate or affidavit delivered by Controlling Shareholders
at the Closing in accordance with the provisions of this Agreement;
(iii) the creation or continued existence of any
lien, charge, encumbrance, guarantee or commitment in violation of this
Agreement;
(iv) any guarantee of the Company not otherwise
disclosed hereunder;
(v) claims of customers for defective products
or services to the extent such claims exceed the amount of any warranty
reserve if not covered by third-party warranties to the extent
attributable to periods prior to the Closing;
(vi) any claim by anyone against the Company for
death, personal injury or property damage attributable to or related
acts or omissions of the Company prior to the Closing;
(vii) except as otherwise provided herein,
claims of any past or present employee of the Company or prospective
employee to the extent attributable to events occurring prior to
Closing;
(viii) any claim alleging misconduct of, by, or
on behalf of, the Company which is criminal or of a grossly negligent
character that is attributable to events occurring prior to the Closing;
(ix) the payment to dissenting shareholders of
the Company of any amount in excess of their pro rata portion of the
Closing Purchase Price; or
(x) the assertion of dissenters' rights by any
shareholder of the Company, including without limitation, participation
in an appraisal proceeding, provided that, to the extent the Company
pays less than $10.274639 per share to the Dissenting Shareholders for
the Dissenting Shares (the "Dissenting Savings"), the Controlling
Shareholders shall be entitled to a credit for the Dissenting Savings
against any indemnity obligation they have to the Company or the Buyer.
(b) Assignment of Cause of Action Against Customers for
Sales Taxes. In the event the Buyer or Acquisition asserts a claim or
claims against the Controlling Shareholders under this indemnification
section for losses, damages, liabilities or the like arising out of the
failure of the Company to collect and pay applicable sales taxes in any
jurisdiction, the Company shall, at the time it asserts the claim(s),
assign to the Controlling Shareholders any cause of action the Company
has against the customers from whom the sales taxes in question should
have been collected and the Controlling Shareholders shall have the
right to take any action against such customers to collect the subject
sales taxes as well as any legal fees or costs incurred connection with
such actions.
(c) Indemnification by Buyer. Subject to the terms of this
Article 5, Buyer covenants and agrees to indemnify and hold harmless the
Controlling Shareholders and the Consenting Shareholders, from and
-28-
against any Indemnifiable Damages suffered by the Controlling
Shareholders or the Consenting Shareholders which arise out of or result
from:
(i) any material inaccuracy or misrepresentation
in or material breach of any of the representations, warranties or
covenants made by Buyer in this Agreement; and
(ii) any material inaccuracy or
misrepresentation in a document, certificate or affidavit delivered by
Buyer at the Closing in accordance with the provisions of this
Agreement.
Section 5.3. Limitation on Indemnification. Notwithstanding the
provisions of Section 5.2 hereof, Controlling Shareholders will not be
obligated to indemnify, defend or hold harmless the Buyer Indemnified
Parties from or against any Indemnifiable Damages, until the aggregate
amount of Indemnifiable Damages exceeds One Hundred Thousand Dollars ($
100,000) (the "Threshold"), after which the amount of all Indemnifiable
Damages (including those constituting the initial $100,000) shall be
subject to indemnity by Controlling Shareholders, provided, however,
that the Threshold shall not apply with respect to breaches of the
representations and warranties contained in Sections 3.1, 3.2 and 3.25
or with respect to indemnification asserted pursuant to Section 5.2(a)(
ix) or (x). Controlling Shareholders' total obligation to the Buyer
Indemnified Parties under this Article 5 shall not exceed, in the
aggregate, the sum of Eighteen Million One Hundred Eleven Thousand Two
Hundred Fifty Dollars ($18,111,250), plus the Earn-Out Amount, if any.
Section 5.4. Procedure for Third-Party Claims.
(a) Promptly after obtaining knowledge of any
claim or demand which has given rise to, or could reasonably give rise
to, a claim for indemnification hereunder, the party seeking
indemnification shall give written notice of such claim ("Notice of
Claim") to the other party. The Notice of Claim shall set forth a brief
description of the facts giving rise to such claim and the amount (or a
reasonable estimate) of the liability, loss, damage or expense suffered,
or which may be suffered, by the party seeking indemnification.
(b) Upon receiving the Notice of Claim, the
indemnifying party shall resist, settle or otherwise dispose of such
claim in such manner as it shall deem appropriate, including the
employment of counsel, and shall be responsible for the payment of all
settlements, judgments, costs and expenses, including the reasonable
fees and expenses of any counsel retained. The indemnified party shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the indemnified party's expense unless:
(i) the employment has been specifically
authorized by the indemnifying party in writing;
(ii) the indemnifying party has improperly
failed to assume the defense and employ counsel; or
(iii) the named parties to any action (including
any impleaded parties) include the Buyer and/or the Company and the
Controlling Shareholders, and the indemnified party has been advised by
such counsel that representation of Buyer and/or the Company and
Controlling Shareholders by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them (in which case, if the indemnified
party notifies the indemnifying party in writing that the indemnified
party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall have neither the right
nor the obligation to assume the defense of such action on behalf of the
indemnified party).
-29-
(c) The party seeking indemnification shall
comply with the foregoing procedure for each claim arising hereunder,
whether or not the amount of such claim exceeds any minimum amount. The
indemnified party shall cooperate with the indemnifying party in defending
any such claim and provide any books, records, information or
testimony requested, which is in the hands of or under the control of
the indemnified party.
Section 5.5. Right of Offset. If any of the Buyer Indemnified Parties
shall become entitled to indemnification from Controlling Shareholders
pursuant to this Article 5, Buyer may, but shall not be obligated to,
exercise a right of offset (for its own account or on behalf of any of
the Buyer Indemnified Parties) with respect to any unpaid Earn-Out
Amount. In the event through settlement or adjudication, it is
determined that the amount of offset exceeded the amount justly due the
Buyer Indemnified Parties, the buyer shall promptly pay to the
Controlling Shareholders interest on the excess amount at the rate of 6%
per year compounded from the date of the offset to the date of payment
of such interest.
ARTICLE 6
EXCESS CASH DISTRIBUTION
Section 6.1. Determination of Cash Balance and Adjusted Net
Worth. On or before February 15, 1994, the Controlling Shareholders and
the Buyer shall determine, based on a balance sheet of the Company as of
the closing, the Cash Balance and the Adjusted Net Worth of the Company
as of the Closing Date.
Section 6.2. Excess Cash Distribution. If the Cash Balance of the
Company immediately prior to the Closing exceeds $3,000,000 (the amount
of such excess being hereinafter referred to as "Excess Cash"), then
promptly after completion of the determination required by Section 6.1,
Buyer shall cause the Company to distribute an amount equal to the
lesser of:
(a) the Excess Cash, or
(b) the amount by which the Adjusted Net Worth
exceeds $2,400,000 to shareholders of record in the Company immediately
prior to the Closing in accordance with the resolutions of the Company's
Board of Directors adopted prior to the Closing.
ARTICLE 7.
MISCELLANEOUS
Section 7.1. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party.
Section 72. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without
reference to the choice of law principles thereof.
Section 7.3. No Third-Party Beneficiaries. Nothing in this Agreement is
intended, nor shall it be construed, to confer any rights or benefits
upon any person (including, but not limited to, any employee or former
employee of the Company) other than Controlling Shareholders, Buyer and
Buyer Indemnified Parties (except for Buyer, only to the extent of
indemnification expressly provided to such Buyer Indemnified Parties
under this Agreement) (and their successors and assigns permitted by
Section 7.7) and no other person not a party hereto shall have any
-30-
rights or remedies hereunder.
Section 7.4. Entire Agreement. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the
entire agreement between the parties with respect to the subject matter
hereof, and there are no agreements, understanding, representations and
warranties between the parties other than those set forth or referred to
herein.
Section 7.5. Expenses. Except as set forth in this Agreement, all legal
and other costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, except that the Controlling Shareholders
shall pay and be responsible for all expenses incurred by the
Company, including the fees and expenses of the Company's counsel and
accountants, in connection with this Agreement and the transactions
contemplated hereby which exceed Fifty Thousand Dollars ($50,000) in the
aggregate.
Section 7.6. Notices. All notices hereunder shall be sufficiently given
for all purposes hereunder if in writing and delivered personally, sent
by documented overnight delivery service, or to the extent receipt is
confirmed, telecopy, telefax or other electronic transmission service to
the appropriate address or number as follows:
SHAREHOLDERS:
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 328I9
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Boroughs, ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇ ▇▇▇▇▇▇▇
BUYER AND ACQUISITION:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company
P. O. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
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and
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
COMPANY:
Marketing Profiles, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company
P. O. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
or such other address as the party may notify the others in accordance
with this Section.
Section 7.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, personal representatives and permitted assigns; provided,
however, except as expressly contemplated hereunder, no party hereto
will assign its rights or delegate its obligations under this Agreement
without the express prior written consent of the other party hereto;
provided further, that Buyer may, at its election, assign its rights
under this Agreement in whole to any one or more of its affiliates so
long as the representations and warranties of Buyer made herein are
equally true of such assignee, and provided that such assignment shall
not relieve Buyer of liability hereunder. Notwithstanding the foregoing,
the Controlling Shareholders, and each of them, may assign the right to
receive part or all of the Earn-Out to one or more of the following
relatives or trusts for such relatives, of the respective Controlling
Shareholders: spouse, mother, father, child, grandchild; provided that
the assignee agrees in writing to Buyer's right of offset as set forth
in Section 5.5.
Section 7.8. Headings; Definitions. The section and article headings
contained in this Agreement are inserted for convenience and reference
only and will not affect the meaning or interpretation of this
Agreement. All references to Sections or Articles contained herein mean
Sections or Articles of this Agreement unless otherwise stated. All
capitalized terms defined herein are equally applicable to both the
singular and plural forms of such terms.
Section 7.9. Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment
is sought. Either party hereto may, only by an instrument in writing,
waive compliance by the other party hereto with any term or provision of
this Agreement. The waiver by any party hereto of a breach of any term
or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
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Section 7.10. Specific Performance. Each of the parties acknowledges
that money damages would not be a sufficient remedy for any breach of
this Agreement and that irreparable harm would result if this Agreement
were not specifically enforced. Therefore, the rights and obligations of
the parties under this Agreement shall be enforceable by a decree of
specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in
connection therewith. A party's right to specific performance shall be
in addition to all other legal or equitable remedies available to such
party.
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IN WITNESS WHEREOF, this Acquisition and Merger Agreement
has been signed by or on behalf of each of the parties as of the date
first above written.
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ COMPANY
By; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman,President and CEO
JH ACQUISITION CORPORATION
By; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
MARKETING PROFILES, INC.
By: ▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Title: President
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