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Exhibit 2.1
PIONEER-DDS MERGER AGREEMENT
EXECUTED COPY
JANUARY 15, 1998
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG:
▇▇▇▇▇▇▇ DATA SYSTEMS, INC.
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., AS TRUSTEE OF
THE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MINOR'S TRUST
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., AS TRUSTEE OF
THE ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ MINOR'S TRUST
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., AS EXECUTOR OF
THE ESTATE OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
AND
PIONEER-STANDARD ELECTRONICS, INC.
AND
PIONEER-STANDARD OF GEORGIA, INC.
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TABLE OF CONTENTS
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1. DEFINITIONS...............................................................................1
1.1 Closing ..............................................................................1
1.2 Closing Date .........................................................................1
1.3 Code..................................................................................1
1.4 DDS Shares ...........................................................................2
1.5 ▇▇▇▇▇▇▇ Employment Agreement..........................................................2
1.6 ERISA.................................................................................2
1.7 Escrow Agreement .....................................................................2
1.8 Escrow Agent .........................................................................2
1.9 Financial Statements..................................................................2
1.10 GAAP ................................................................................2
1.11 Law .................................................................................2
1.12 Liabilities .........................................................................2
1.13 Lien.................................................................................2
1.14 Noncompetition Agreements............................................................2
1.15 Person ..............................................................................2
1.16 ProAmerica Acquisition...............................................................2
1.17 Real Property .......................................................................2
1.18 SEC .................................................................................2
1.19 Software and Services Business.......................................................3
1.20 Subsidiary...........................................................................3
1.21 Tax..................................................................................3
1.22 Tax Return...........................................................................3
1.23 Other Defined Terms..................................................................3
2. THE MERGER................................................................................5
2.1 The Merger............................................................................5
2.2 Effective Time of the Merger..........................................................5
2.3 Articles of Incorporation; Bylaws.....................................................5
2.4 Merger Consideration..................................................................5
2.5 Payment Adjustment....................................................................6
2.6. Conversion of Shares.................................................................6
2.7 Conduct of Business Prior to Closing..................................................7
2.8 Obligations Prior and Subsequent to the Closing......................................10
2.9 Conditions to the Obligations of DDS and the Selling Shareholders....................17
2.10 Conditions to the Obligations of Pioneer and Merger Subsidiary......................18
3. THE CLOSING..............................................................................20
3.1 Deliveries by Selling Shareholders...................................................20
3.2 Deliveries by Pioneer................................................................21
3.3 Deliveries to Escrow Agent...........................................................22
4. REPRESENTATIONS AND WARRANTIES...........................................................22
4.1 Several Representations and Warranties of Selling Shareholders.......................22
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4.2 Joint and Several Representations and Warranties of Selling Shareholders.............24
4.3 Representations and Warranties of Pioneer............................................36
4.4 Survival of Representations and Warranties...........................................37
4.5 Effect of Representations, Warranties and Waivers if the Merger is not Consummated...37
5. INDEMNIFICATION..........................................................................38
5.1 Selling Shareholders.................................................................38
5.2 Limitations on Selling Shareholders' Liability......................................38
5.3 Pioneer Generally....................................................................39
5.4 Notification of and Participation in Claims..........................................39
5.5 Net Losses...........................................................................42
6. OTHER COVENANTS..........................................................................42
6.1 Further Assurances...................................................................42
6.2 Investment in Sof-Serv Entities......................................................42
6.3 Shareholder Notes....................................................................42
6.4 Insurance............................................................................43
6.5 Selling Shareholders' Representative.................................................43
6.6 Termination of Shareholders Agreement................................................44
6.7 Termination of ProAmerica Acquisition Escrow Agreements..............................44
6.8 Miscellaneous........................................................................44
7. TERMINATION..............................................................................44
7.1 Termination, Amendment, and Waiver...................................................44
7.2 Effect of Termination................................................................45
7.3 Confidentiality......................................................................45
7.4 Termination Fee......................................................................45
8. MISCELLANEOUS............................................................................45
8.1 Amendment............................................................................45
8.2 Waiver...............................................................................45
8.3 Fees and Expenses....................................................................46
8.4 Notices..............................................................................46
8.5 Binding Effect.......................................................................48
8.6 Headings.............................................................................48
8.7 Disclosure Schedules, Exhibits and Amendments to Disclosure Schedules................48
8.8 Counterparts.........................................................................48
8.9 Governing Law........................................................................48
8.10 Severability........................................................................48
8.11 Waivers.............................................................................49
8.12 Entire Agreement....................................................................49
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of the 15th
day of January, 1998, by and among ▇▇▇▇▇▇▇ Data Systems, Inc., a Georgia
corporation ("DDS"); ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇., as Trustee (the "Trustee") of The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Minor's
Trust and as Trustee of The ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Minor's Trust (the "Trusts");
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., as Executor
(the "Executor") of the Estate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. (hereinafter referred to
individually as a "Selling Shareholder" and collectively as the "Selling
Shareholders"); Pioneer-Standard Electronics, Inc., an Ohio corporation
(hereinafter referred to as "Pioneer"), and Pioneer-Standard of Georgia, Inc., a
Georgia corporation and a wholly owned subsidiary of Pioneer (hereinafter
referred to as "Merger Subsidiary") to be incorporated prior to the Closing Date
(as defined herein).
W I T N E S S E T H
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WHEREAS, the Selling Shareholders collectively own all the issued and
outstanding shares of the capital stock of DDS and desire to sell all of such
shares to Pioneer in accordance with the terms of this Agreement;
WHEREAS, this Agreement provides for the merger of the Merger
Subsidiary into DDS (the "Merger") in accordance with the applicable statutes of
the State of Georgia.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the mutual
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS
For purposes of this Agreement the following terms shall have the
meanings herein given them:
1.1 CLOSING - the transfers and deliveries contemplated by
this Agreement shall take place at 9:00 a.m. on Tuesday, March 31, 1998, in
Atlanta, Georgia, at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel to
DDS and Selling Shareholders, or at such other date, time and place as the
parties may establish. A pre-Closing will be held at such office1.
1.2 CLOSING DATE - 12:01 a.m. on April 1, 1998 or such other
time and date as the parties may establish.
1.3 CODE - means the Internal Revenue Code of 1986, as
amended.
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1.4 DDS SHARES - shares of Common Stock, no par value, of DDS.
1.5 ▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT - the Employment and
Noncompetition Agreement to be entered into between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III and
DDS as of the Closing in the form attached hereto as EXHIBIT 1.6.
1.6 ERISA - means the Employee Retirement Income Security Act
of 1974, as amended.
1.7 ESCROW AGREEMENT - the Escrow Agreement of even date
herewith by and among Selling Shareholders, Pioneer and Wachovia National Bank,
Atlanta, Georgia ("Wachovia"), a copy of which is attached hereto as EXHIBIT
1.9.
1.8 ESCROW AGENT - the Escrow Agent as defined in the Escrow
Agreement.
1.9 FINANCIAL STATEMENTS - means the Audited Statements
(including the December 31, 1997 audited financial statements) and the Interim
Statements provided for in Section 4.2.7.
1.10 GAAP - means United States generally accepted accounting
principles consistently applied.
1.11 LAW - means any common law and any federal, state,
regional, local or foreign law, rule statute, ordinance, rule, order or
regulation.
1.12 LIABILITIES - responsibilities, obligations, duties,
commitments, claims, and liabilities of any and every kind, whether known or
unknown, accrued, absolute, contingent or otherwise.
1.13 LIEN - means any mortgage, lien, pledge, charge, security
interest, restriction, claim or encumbrance of every kind, nature and
description.
1.14 NONCOMPETITION AGREEMENTS - the two (2) Noncompetition
Agreements to be entered into between DDS and each of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as of the Closing, the form of which are attached hereto as
EXHIBIT 1.16.
1.15 PERSON - means any individual, corporation, partnership,
association or any other entity or organization.
1.16 PROAMERICA ACQUISITION - means the acquisition of
ProAmerica, Inc. and ProAmerica Systems, Inc. by DDS on March 31, 1997, pursuant
to an Agreement and Plan of Merger dated as of February 25, 1997, as amended.
1.17 REAL PROPERTY - means any real property which is or has
been owned or leased by DDS or any of its Subsidiaries.
1.18 SEC - - the Securities and Exchange Commission.
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1.19 SOFTWARE AND SERVICES BUSINESSES - the assets,
liabilities, operations, business and associated employees of DDS's (a)
ProAmerica Service Call Manager(TM) Software product ("Software Business"), (b)
proprietary DDS hardware and related technological services provided to IBM
("Hardware Business") and (c) professional implementation and application
services ("Professional Services Business"), each as more fully described on
EXHIBIT 1.21.
1.20 SUBSIDIARY - means any Person or other business entity in
which DDS owns, directly or indirectly, an equity interest representing at least
25% of the voting stock or voting interests of such organization.
1.21 TAX - means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
1.22 TAX RETURN - means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.23 OTHER DEFINED TERMS.
3/31/97 Employment Agreements Section 2.7(f)
Accounting Referee Section 2.7(e)
Agreement Preamble
Allocable Share Section 2.4(a)
Antitrust Division Section 2.8(b)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Section 4.2.7
Audited Statements Section 4.2.7
Consideration Section 2.4
DDS Preamble
Disclosed Claims Section 5.1(b)
Effective Time Section 2.2
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Excess Tax Distribution Section 2.7(h)
FTC Section 2.8(b)
GBCC Section 2.1
Hardware Business Section 1.19
HSR Act Section 4.1.3
IBM Section 1.1
Indemnitee Section 5.4(I)
Indemnitor Section 5.4(I)
Interim Statements Section 4.2.7
Letter of Section 2.8(i)
Losses Section 5.4(I)
Merger Subsidiary Preamble
Pioneer Preamble
Plans Section 4.2.26(b)
Professional Services Business Section 1.19
Professional Services Entity Section 2.7(g)
Promissory Note Section 2.8(i)
Representative Section 6.5
Section 338(h)(10) Election Section 2.8(d)
Selling Shareholder(s) Preamble
Shareholders Agreement Section 6.6
SIP Section 2.7(d)
Sof-Serv Entities Section 2.7(g)
Software Business Section 1.19
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Surviving Corporation Section 2.1
Third Party Claim Section 5.4(i)
Wachovia Section 1.9
2. THE MERGER
2.1 THE MERGER. At the Effective Time (as defined in Section
2.2), the Merger Subsidiary shall be merged with and into DDS in accordance with
the terms of this Agreement and the applicable provisions of the Georgia
Business Corporation Code ("GBCC") and the separate existence of the Merger
Subsidiary shall thereupon cease. The name of ▇▇▇▇▇▇▇ Data Systems, Inc., as the
surviving corporation in the Merger (the "Surviving Corporation"), shall by
virtue of the Merger remain "▇▇▇▇▇▇▇ Data Systems, Inc.". Subject to the terms
and conditions hereof, the parties hereto shall take all action necessary in
accordance with applicable law and their respective charters and bylaws to cause
the Merger to be consummated as soon as is reasonably practicable.
2.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at 12:01 a.m. on April 1, 1998, or such other time and date as the
parties may establish (the "Effective Time"). Articles of Merger, properly
executed under the GBCC, will be duly filed with the Secretary of State of
Georgia with such effective date and time stated thereon. The Articles of Merger
shall be in the form attached hereto as EXHIBIT 2.2.
2.3 ARTICLES OF INCORPORATION; BYLAWS. The Articles of
Incorporation of Merger Subsidiary as in effect as of the Effective Time shall
be the Articles of Incorporation of the Surviving Corporation until altered,
amended or repealed. The By-Laws of Merger Subsidiary as in effect as of the
Effective Time shall be the Bylaws of the Surviving Corporation until altered,
amended or repealed.
2.4 MERGER CONSIDERATION. The consideration (the
"Consideration") to be delivered at the Closing by or on behalf of Pioneer shall
be cash in an amount equal to $121,025,000. Subject to the terms of Section 2.5
below, the Consideration shall be payable as follows:
(a) Subject to any amount withheld and deposited into the Escrow pursuant
to Section 2.7(e)(vi), ninety-two and one-half percent (92.5%) of the
Consideration ($111,948,125) will be paid by wire transfer to and as
instructed in writing by each Selling Shareholder in accordance with
their respective percentage of ownership of the DDS Shares ("Allocable
Share"):
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▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 20.239%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III 47.425%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee
of The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Minor's Trust 0.107%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 5.931%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee
of The ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Minor's Trust 0.107%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 20.239%
Estate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 5.952%
(b) Seven and one-half percent (7.5%) of the Consideration ($9,076,875)
will be deposited into the Escrow as provided for in and subject to the
terms of the Escrow Agreement.
(c) Any Consideration withheld pursuant to Section 2.7(h) pending
finalization of the excess tax distribution calculation will be
deposited into the Escrow as provided for and subject to the terms of
Section 2.7(h) hereof and the Escrow Agreement.
2.5 PAYMENT ADJUSTMENT. The payments provided for in Section
2.4(a) above will be reduced by the aggregate amount of (a) any payments made
with respect to termination of any SIP and redemption of related employee
options and other interests thereunder pursuant to the terms of Section 2.7(d)
below if and to the extent funded by Pioneer pursuant to Section 2.7(d) and (b)
the amount of the excess tax distribution provided for in Section 2.7(h).
2.6. CONVERSION OF SHARES.
(a) Each DDS Share issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, be converted
into (as provided in and subject to the limitations set forth in this
Section 2.6) the right to receive cash (net of any applicable
withholding tax) as provided in Sections 2.4 and 2.5 above.
(b) Each share of the common stock of Merger Subsidiary, issued and
outstanding immediately prior to the Effective Time, shall, at the
Effective Time, by virtue of the Merger and without any action on the
part of Pioneer or any other person, be converted into one fully paid
and nonassessable DDS Share.
(c) All DDS Shares that are owned by DDS as treasury stock shall, at the
Effective Time, be canceled and retired and shall cease to exist
without any consideration payable therefor.
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(d) At and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding DDS
Shares shall cease to have any rights as stockholders of DDS, except
the right to receive the cash into which their DDS Shares have been
converted by the Merger as provided in Section 2.6(a) above.
(e) At the Effective Time, the Selling Shareholders shall surrender
certificate or certificates representing all DDS Shares issued and
outstanding (other than treasury shares, if any) to Pioneer, and
Pioneer shall deliver to each Selling Shareholder the amount of cash as
provided in Sections 2.4 and 2.5 above.
2.7 CONDUCT OF BUSINESS PRIOR TO CLOSING. DDS and the Selling
Shareholders covenant and agree that except as provided for herein or otherwise
consented to in writing by Pioneer after the date hereof and prior to the
Closing:
(a) CONDUCT OF BUSINESS. Each of DDS and its Subsidiaries shall not take
any action except in the ordinary course of its business, and shall use
reasonable efforts to preserve its assets, business and relationships
with material customers and suppliers and others having material
business relationships with DDS or any Subsidiary.
(b) RESTRICTED ACTIVITIES. Neither DDS nor any of its Subsidiaries shall
engage in any one or more of the following:
(i) amend its Articles of Incorporation or By-Laws or issue, sell,
pledge or dispose of (or agree to issue, sell, pledge or
dispose of or acquire or redeem) any shares of its capital
stock, or grant or issue (or agree to grant or issue or,
except as provided in Section 2.7(d), acquire or redeem) any
options, warrants or other rights calling for the issue
thereof, split, combine or reclassify any DDS Shares, declare,
set aside or pay any dividend or other distribution with
respect to the DDS Shares, or redeem, purchase or offer to
acquire any DDS Shares;
(ii) except in the ordinary course of business, sell, dispose of or
encumber any of its property or assets or incur indebtedness
with respect to borrowed money;
(iii) except in the ordinary course of business, terminate or permit
to be terminated any contract or agreement to which it is a
party or surrender or forfeit any license or other
qualification to conduct its business;
(iv) except for salary increases or other changes in employee
benefits in the ordinary course of business (such salary
increases are contemplated to be made in the first quarter of
the 1998 fiscal year and such salary increases will not
exceed, on the average, six percent (6%)) and except as
required by law, increase or otherwise change the rate or
nature of compensation paid or payable to employees or adopt
or amend any profit sharing, compensation, bonus, deferred
compensation, pension, retirement or other
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similar employee benefit plan, employment, severance, or other
agreement, fund, trust or arrangement for the benefit or
welfare of any employee of DDS or any of its Subsidiaries;
(v) make any changes in its accounting principles or practices;
(vi) fail to pay any obligation or liability, except in the
ordinary course of business;
(vii) make any capital expenditures (or commitment therefor) in
excess of $100,000; or
(viii) loan or advance funds to, or forgive any debt of, any person,
except in the ordinary course of business.
(c) PERMITTED DISTRIBUTIONS. Notwithstanding the terms of Section 2.7(b) above,
after the date of this Agreement and prior to the Effective Time DDS may effect
the following distributions to the Selling Shareholders:
(i) Distributions calculated as set forth in DISCLOSURE SCHEDULE
2.7(c) for the purpose of making January 15, 1998, fourth
quarter 1997 tax estimate payments with respect to income of
DDS for such quarter, the actual amount of which shall be
determined by DDS's public accountants on or before January
14, 1998, and shall be promptly communicated to Pioneer and
its public accountants;
(ii) Distributions with respect to the Sof-Serv Entities as
provided for in Section 2.7(g); and
(iii) Cash distributions in an amount up to $4,250,000.
(d) REDEMPTION AND TERMINATION OF STOCK INCENTIVE PLANS. Notwithstanding
the terms of Section 2.7(b) above, after the date of this Agreement and
prior to the Effective Time, DDS shall cause all options, restricted
stock and stock appreciation rights issued under any stock incentive
plan ("SIP") to be redeemed or canceled and released in exchange for
consideration to holders and participants in the same per share amount
(net of any related, unpaid exercise price) to be paid to Selling
Shareholders as Consideration hereunder and otherwise in compliance
with the terms of each SIP and all applicable Laws. Prior to the
Effective Time, DDS shall have terminated all such SIP's in accordance
with their respective terms and shall have obtained written releases
from all holders and participants with respect to such options,
restricted stock, stock appreciation rights, and all other rights under
such SIP's. If and to the extent requested by DDS and subject to
receipt of releases as provided for above, Pioneer will advance to DDS
at Closing the amount necessary to fund and effectuate such redemption
prior to the Effective Time.
(e) 12/31/97 FINANCIAL STATEMENTS. (i) Promptly following December 31,
1997, and in any event no later than February 20, 1998, the Selling
Shareholders and DDS shall cause to
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be prepared and delivered to Pioneer the audited financial statements
of DDS and its Subsidiaries for the fiscal year ending December 31,
1997, prepared by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in accordance with GAAP using best
efforts to otherwise comply in form and substance with Regulation S-X
of the SEC.
(ii) Prior to delivery of the audited financial statements
provided for in Section 2.7(e)(i) above, Selling Shareholders and DDS
will, and will cause DDS's independent accountants to, cooperate with
and provide access to Pioneer and its independent accountants in the
preparation of such December 31, 1997 financial statements and the
conduct of related audits and reviews, including, without limitation,
making available books, records, work papers, and personnel. Selling
Shareholders and DDS shall cause DDS's independent accountants to
deliver to Pioneer and its independent accountants a proposed final
draft of such audited financial statements (and all related work
papers, documents and records) as soon as possible and in any event no
later than February 7, 1998.
(iii) If Pioneer disagrees with the draft financial statements
delivered pursuant to Section 2.7(e)(ii) above, Pioneer may, within ten
(10) business days after such deliveries, deliver a notice of
disagreement to the Selling Shareholders setting forth in reasonable
detail Pioneer's objections. In the event Pioneer does not timely
deliver such a notice, such draft financial statements shall be deemed
accepted by Pioneer and the Selling Shareholders and DDS shall deliver
final audited financial statements (consistent in all material respects
with such drafts) pursuant to Section 2.7(e)(i) above.
(iv) If a notice of disagreement is delivered pursuant to
Section 2.7(e)(iii) above, Pioneer and the Selling Shareholders shall,
during the thirty (30) days following such delivery, use their
respective best efforts to reach agreement on the disputed items and
amounts. If Pioneer and Selling Shareholders remain unable to resolve
disputed matters on February 20, 1998, Selling Shareholders and DDS
shall deliver the audited financial statements provided for in Section
2.7(e)(i) above and the parties shall continue efforts to reach
agreement as provided in this Section 2.7(e)(iv) and in Sections
2.7(e)(v) below. If after such thirty (30) day period Pioneer and
Selling Shareholders remain unable to so resolve disputed matters, they
will promptly thereafter jointly retain a nationally recognized
independent accounting firm (the "Accounting Referee") to review this
Agreement and such disputed items and amounts. The Accounting Referee
will deliver to Selling Shareholders and Pioneer, as promptly as
practicable, a report in reasonable detail resolving disputed matters
and calculating disputed amounts. Such report and its conclusions shall
be final and binding upon Pioneer and the Selling Shareholders.
(v) The Selling Shareholders and Pioneer shall each be
responsible for one-half (1/2) of the cost and expenses of the
Accounting Referee.
(f) TERMINATION OF EMPLOYMENT AGREEMENTS. Notwithstanding the terms of
Section 2.7(b) above, after the date of this Agreement and prior to the
Closing, DDS shall cause each of the Employment Agreements entered into
as of March 31, 1997 between DDS and each
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of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "3/31/97 Employment Agreements") to be
terminated by mutual written agreement of the parties thereto and DDS
shall obtain a written release from each of the other parties with
respect to all obligations under such 3/31/97 Employment Agreements.
(g) SPIN-OFF OF SOFTWARE AND SERVICES BUSINESSES. Notwithstanding the terms
of Section 2.7(b) above, prior to the Closing and subject to the terms
and conditions of Section 2.10 (Pioneer's Conditions to Closing) and
Section 6.2 (Investment in Professional Services Entity): (i) DDS and
its Subsidiaries will form two or more separate limited liability
companies (the "Sof-Serv Entities") and will contribute the Software
and Services Businesses to such Sof-Serv Entities as a capital
contribution, (ii) the Professional Services Business will be
contributed to a separate Sof-Serv Entity (the "Professional Services
Entity"), (iii) the Sof-Serv Entities will be distributed to the
Selling Shareholders in proportion to their respective Allocable
Shares, and (d) such distributions shall be without recourse or
continuing obligation of DDS or its Subsidiaries. The Professional
Services Entity shall be subject to operating and governance
agreements, ownership interest transfer restrictions and obligations,
noncompetition obligations, and similar terms and conditions as
outlined in EXHIBIT 2.7(g) hereto and otherwise reasonably
satisfactory to Pioneer in all material respects.
(h) EXCESS TAX DISTRIBUTION AND ADJUSTMENT. (i) Within ten (10) days prior
to the Closing Date, DDS's public accountants shall provide Pioneer's
public accountants with a calculation of the "excess tax distribution".
"Excess tax distribution" shall be defined as the amount by which DDS's
Tax distributions to the Selling Shareholders made after November 30,
1997 exceed (by more than $1,750,000) the amount of Taxes associated
with DDS's taxable income, for the period from April 1, 1997 through
the Closing Date, taking into account the tax benefit associated with
the effect of the increase in shareholder tax basis in the stock of DDS
(and corresponding reduction in capital gain) as a result of such
taxable income for the period and taking into account the respective
1997 and 1998 shareholder tax periods. For purpose of this calculation,
the highest marginal ordinary income and capital gains tax rates will
be utilized.
(ii) Within five (5) days after receipt of such computation, Pioneer's
public accountants will notify DDS's public accountants in writing if
there is any disagreement with such computation. Upon any such
disagreement, Pioneer, DDS, the Selling Shareholders and their
respective representatives will cooperate in good faith to agree upon
the calculation and amount of the "excess tax distribution" prior to
Closing. If the parties are unable to agree, the amount of such
disagreement will be deposited into Escrow under the Escrow Agreement
until resolved pursuant to the dispute resolution provisions of Section
5.4(iv). The amount of the "excess tax distribution" will be a payment
adjustment pursuant to the terms of Section 2.5.
2.8 OBLIGATIONS PRIOR AND SUBSEQUENT TO THE CLOSING. The
parties agree that, prior to the Closing and, where specifically indicated
below, subsequent to the Closing:
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(a) ACCESS TO INFORMATION. DDS shall afford the officers, employees and
representatives of Pioneer access, at all reasonable times from the
date hereof to the Closing, to the officers, employees, agents,
properties, books and records of DDS and its Subsidiaries, and shall
furnish Pioneer with all financial, operating and other data and
information relating to DDS and its Subsidiaries as Pioneer may
reasonably request, provided that nothing herein will obligate DDS or
its Subsidiaries to take any actions that would unreasonably disrupt
the normal course of DDS's or any of its Subsidiary's business or to
violate the terms of any contract to which DDS or any of its
Subsidiaries is a party or to which any of its assets are subject.
(b) CONSENTS; ADDITIONAL AGREEMENTS.
(i) Each of the parties hereto shall cooperate with the other
party and use its or their best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions
contemplated by this Agreement, including (v) removal of any
legal impediment to the consummation of such transactions, (w)
obtaining an assignment to Pioneer from IBM of all DDS's
authorizations and related agreements and otherwise obtaining
all necessary consents from IBM and IBM Credit Corporation,
(x) obtaining IBM's and IBM Credit Corporation's agreement to
provide DDS and Pioneer subsequent to the Closing with a trade
credit facility, (y) obtaining all other necessary waivers,
consents and approvals of third parties and governmental
bodies, and (z) effecting all necessary filings, including
filings under the HSR Act (as hereinafter defined).
(ii) DDS and Pioneer shall: (x) have made all required filings
under the HSR Act, including all submissions to the Federal
Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") required
under the HSR Act to the fullest extent reasonably possible;
(y) consult with each other with respect to the preparation of
the Notification and Report Forms and any other submissions
required to be filed pursuant to the HSR Act by DDS and
Pioneer in connection with the transactions contemplated
hereby and incorporate each other's reasonable comments in
such forms and submissions; and (z) use all reasonable efforts
to cooperate and consult with each other with respect to any
written or oral responses to any requests for additional
information or documenting material by the FTC or the
Antitrust Division in connection with the transactions
contemplated hereby.
(iii) INSURANCE. Until the Closing Date, the Selling Shareholders
shall use all commercially reasonable efforts to cause DDS and
its Subsidiaries to maintain in full force and effect all of
its presently existing insurance
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coverage as set forth in DISCLOSURE SCHEDULE 4.2.15 or, if
available at a comparable cost, insurance comparable to such
existing coverage.
(iv) BOOKS AND RECORDS. After the Closing Date, Selling
Shareholders and Pioneer shall to the extent reasonably
necessary in connection with any matter relating to DDS or its
Subsidiaries prior to the Closing Date or to the sale of the
DDS Shares hereunder (and in no event for less than five (5)
years), (x) retain and permit the other party, at its own
expense, to inspect and copy all books and records of DDS or
its Subsidiaries which relate to the period prior to the
Closing Date, and (y) assist in arranging discussions with
(and, at the requesting party's own expense, the calling of
such individuals as witnesses) officers, employees and agents
of DDS and its Subsidiaries on matters which relate to DDS and
its Subsidiaries with respect to the period prior to the
Closing Date.
(c) CONSENT OF DDS'S ACCOUNTANTS. It is understood that Pioneer will
require the inclusion of DDS's Financial Statements in connection with
Pioneer's periodic filing requirements with the SEC, including a
current report on Form 8-K in connection with the transactions
contemplated by this Agreement and any offering memorandum, prospectus
or similar document used by Pioneer to offer or sell securities.
Promptly following execution of this Agreement, the Selling
Shareholders shall cause DDS's accountants, at Pioneer's expense, to
certify the DDS Financial Statements as required by Section 2.7(e) and
Section 2.10(h). Promptly following the execution of this Agreement,
the Selling Shareholders shall obtain the consent and agreement of
DDS's accountants to the use of the DDS Financial Statements required
in connection with Pioneer's periodic filing requirements and any
subsequent registration statements filed by Pioneer with the SEC.
(d) CERTAIN TAX MATTERS.
(i) SECTION 338(h)(10) ELECTION. At Pioneer's option upon written
notice to the Selling Shareholders delivered prior to
expiration of the date upon which the Section 338(h)(10)
Election must be made pursuant to the Code, DDS and Selling
Shareholders will join with Pioneer in making an election
under Section 338(h)(10) of the Code (and any corresponding
election under state and local tax law) with respect to the
purchase and sale of the DDS Shares hereunder (a "Section
338(h)(10) Election") in accordance with Section 338(g) of the
Code. Selling Shareholders will include any income, gain,
loss, deduction, or other Tax item (except for any Tax imposed
under Section 1374 of the Code or applicable provisions of
state laws, which shall be assumed and paid by Pioneer)
resulting from the Section 338(h)(10) Election on the final
DDS S-Corporation Tax Return or the Selling Shareholders' Tax
Returns to the extent permitted by applicable law. The Selling
Shareholders will include all Schedule K-1 items from the DDS
final Tax Return on their individual Tax Returns. At the
Closing all parties will execute and deliver an appropriate
Form 8023A
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with respect to the Section 338(h)(10) Election for filing in
accordance with the Code.
(ii) ALLOCATION OF PURCHASE PRICE. If Pioneer elects to make the
Section 338(h)(10) Election as provided for above, Pioneer,
DDS and Selling Shareholders agree that the Consideration and
the liabilities of DDS (plus other relevant items) will be
allocated to the assets of DDS for all tax purposes in
accordance with Section 338(b)(5) of the Code and the
regulations thereunder. Prior to the Effective Time, and as a
condition to Closing, Pioneer, DDS and Selling Shareholders
will reach an agreement as to the purchase price allocation of
the Consideration. Pioneer, DDS and Selling Shareholders will
file all Tax Returns (including amended returns and claims for
refund) and information reports in a manner consistent with
such allocation.
(iii) S CORPORATION STATUS. DDS, its Subsidiaries and Selling
Shareholders will not revoke DDS's or any Subsidiary's
election to be taxed as a S corporation within the meaning of
Sections 1361 and 1362 of the Code. DDS, its Subsidiaries and
Selling Shareholders will not take or allow any action (other
than the sale of DDS Shares pursuant to this Agreement) that
would result in the termination of DDS's or any Subsidiary's
status as a validly electing S corporation within the meaning
of Sections 1361 and 1362 of the Code.
(iv) TAX PERIODS ENDING ON OR BEFORE THE EFFECTIVE TIME. Selling
Shareholders shall prepare or cause to be prepared all Tax
Returns for DDS for all periods ending on or prior to the
Effective Time which are to be filed after the Effective Time.
Pioneer shall have the right to review and comment on such Tax
Returns. Pioneer will file or cause to be filed such Tax
Returns after any mutually acceptable revisions or corrections
are made by Selling Shareholders or Selling Shareholders'
preparer.
(v) COOPERATION ON TAX MATTERS.
(A) Pioneer, DDS and Selling Shareholders shall cooperate
fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax
Returns pursuant to this Section 2.8(d) and any
audit, litigation or other proceeding with respect to
Taxes applicable to DDS, any of its Subsidiaries, any
predecessor, successor, or acquired or related
entities or any Selling Shareholder. Such cooperation
shall include the retention and (upon the other
party's request) the provision of records and
information which are reasonably relevant to any such
audit, litigation or other proceeding and making
employees available on a mutually convenient basis to
provide additional information and explanation of any
material provided hereunder. Pioneer, DDS and Selling
Shareholders
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agree (I) to retain all books and records with
respect to Tax matters pertinent to DDS relating to
any taxable period beginning before the Effective
Time until the expiration of the statute of
limitations (and, to the extent modified by DDS or
Selling Shareholders, any extensions thereof) of the
respective taxable periods, and to abide by all
record retention agreements entered into with any
taxing authority, and (II) to give the other party
reasonable written notice prior to transferring,
destroying or discarding any such books and records
and, if the other party so requests, Pioneer, DDS and
Selling Shareholders, as the case may be, shall allow
the other party to take possession of such books and
records.
(B) Pioneer, DDS and Selling Shareholders further agree,
upon request, to use their best efforts to obtain any
certificate or other document from any governmental
authority or any other person as may be necessary to
mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect
to the transactions contemplated hereby).
(vi) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this
Agreement (including any corporate-level gains tax triggered
by the sale of DDS Shares and any similar tax imposed in other
states or subdivisions), shall be paid by Selling Shareholders
when due, and Selling Shareholders will, at Selling
Shareholders' own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, DDS will join in
the execution of any such Tax Returns and other documentation.
(vii) TAX DISPUTES. In addition to and in accordance with Section
2.8(d)(v)(A) above (Cooperation on Tax Matters), subsequent to
the Effective Time and except as otherwise provided in this
Agreement:
(A) Pioneer and its representatives will assist in all
audits, investigations and examinations by any taxing
authority (whether federal, state local or foreign) of any Tax
Return for DDS or its Subsidiaries (but not for individual
Selling Shareholder Tax Returns) for any period prior to, or
prior to and including, the Effective Time,
(B) (I) if Pioneer, DDS, Selling Shareholders or their
respective representatives receive notice of any audit,
investigation or examination by any taxing authority of any
Tax Return for DDS or any of its Subsidiaries (or any
individual Selling Shareholder Tax Return) for any period
prior to, or prior to and including, the Effective Time, then
the parties receiving such notice shall promptly notify each
of the other parties in writing of such notice,
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(II) Pioneer or DDS and their respective
representatives shall defend any such audit, investigation or
examination, PROVIDED, that Pioneer shall have no liability or
responsibility for any resultant or related Tax except as may
be expressly otherwise provided in this Agreement and,
PROVIDED FURTHER, that Pioneer will not adjust, revise,
settle, compromise or otherwise resolve such audit,
examination or investigation in any way which would adversely
affect the Selling Shareholders, without prior written
approval from the Selling Shareholders, which approval shall
not be unreasonably withheld or delayed,
(III) If Selling Shareholders do not wish Pioneer or
DDS to defend such audit, investigation, or examination
pursuant to (II) above, they and their representatives shall
assume responsibility for such defense, at their cost and
expense, and Pioneer and its representatives, at Pioneer's
cost and expense, may elect to participate in such defense,
PROVIDED, that Selling Shareholders will not adjust, revise,
settle, compromise or otherwise resolve such audit,
examination or investigation in any way which would adversely
affect Pioneer or DDS, without prior written approval from
Pioneer, which approval shall not be unreasonably withheld or
delayed,
(IV) Selling Shareholders, Pioneer and DDS shall and
shall cause their respective representatives to keep each
other party apprised of significant developments in and the
status of any such audit, investigation or examination,
(V) except as provided above with respect to
Pioneer's participation in any action defended by the Selling
Shareholders and their representatives, Pioneer and DDS shall
bear the initial $50,000 of costs and expenses of any
assistance and defense which their third party representatives
provide under this Section 2.7(d)(vii) and Selling
Shareholders shall jointly and severally be responsible for
and pay any excess.
(C) subject to the terms of Section 5 (Indemnification),
Selling Shareholders agree that they will indemnify Pioneer
and DDS from any liability for Taxes associated with the
filing of any Tax Return for DDS, its Subsidiaries and any
predecessor, successor, or acquired or related entities for
any period prior to, or prior to and including, the Effective
Time, PROVIDED, that, if the Section 338(h)(10) Election is
made, Pioneer shall be responsible for and shall pay any Taxes
imposed under Section 1374 of the Code and any other Taxes
actually incurred and paid by the Selling Shareholders that
are incurred and paid solely as a result of the Section
338(h)(10) Election and are in excess of Taxes that would have
been incurred and paid if the Section 338(h)(10) Election had
not be made. Such payment by Pioneer will be increased so that
the net after tax amount
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received by the Selling Shareholders shall be not less than
the amount that the Selling Shareholders would have received
had such Section 338(h)(10) Election not been made.
Conversely, if Taxes actually incurred and paid by the Selling
Shareholders as a result of the Section 338(h)(10) Election
are less than the Taxes that would have been paid by the
Selling Shareholders had the Section 338(h)(10) Election not
been made, the Selling Shareholders shall reimburse Pioneer in
the amount of such difference, accounting for the Tax effect
of such reimbursement.
(e) APPROVAL OF SELLING SHAREHOLDERS. DDS shall cause a meeting of its
shareholders to be duly called and held promptly following execution
and delivery of this Agreement by the parties hereto, for the purpose
of approving the Merger, this Agreement and all actions contemplated
hereby which require the approval of DDS shareholders and waiving all
dissenters rights provided under the GBCC with respect thereto. DDS
will, through its Board of Directors, recommend to its shareholders,
approval of the transactions contemplated by this Agreement and the
Selling Shareholders agree to provide such approvals and waivers at
such meeting.
(f) ACQUISITION PROPOSALS. DDS and the Selling Shareholders shall not, and
DDS shall cause its Subsidiaries not to, directly or indirectly, (i)
solicit, initiate or encourage the submission of any inquiries,
discussions or proposals or offers from any other person or entity
relating to a possible disposition of stock or any material portion of
the assets of DDS or any of its Subsidiaries, (ii) continue, propose,
solicit initiate, encourage, or enter into negotiations or discussions
relating to a possible disposition of the stock or any material portion
of the assets of DDS or any of its Subsidiaries, (iii) enter into or
consummate any agreement or understanding providing for the disposition
of the stock or any material portion of the assets of DDS or any of its
Subsidiaries, (iv) assist, participate in, facilitate or encourage any
effort or attempt by any other person or entity to do or seek any of
the foregoing, or (v) take, solicit or encourage any action
inconsistent with consummation of the transactions as provided for in
this Agreement.
(g) PUBLICITY. So long as this Agreement is in effect, none of Pioneer, DDS
or its Subsidiaries, the Selling Shareholders or any of their
respective agents or representatives shall issue or cause the
publication of any press release or other public statement or
announcement with respect to this Agreement, the transactions
contemplated hereby, or the existence or substance of any discussions
among the parties with respect thereto without the prior written
consent of all the parties hereto, except as may otherwise be required
by Law or except as may be reasonably necessary to permit ordinary
course discussions by Pioneer with investors, financial analysts,
institutional lenders and similar third parties and satisfy
requirements of any applicable securities Laws, and in such case shall
use all reasonable efforts to consult with all of the parties hereto
prior to such required release or announcement being issued.
(h) NOTIFICATION OF CERTAIN MATTERS. DDS and the Selling Shareholders shall
give prompt notice to Pioneer, and Pioneer shall give prompt notice to
DDS and the Selling
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Shareholders, of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect and (ii) any material failure of DDS, any Selling
Shareholder, or Pioneer, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied
by it hereunder.
(i) PROMISSORY NOTE AND LETTER OF CREDIT AMENDMENT. In lieu of deposits of
Consideration to the Escrow as provided in Section 2.4 (other than with
respect to any Escrow deposit pursuant to Section 2.4(c)), the Selling
Shareholders have proposed that Pioneer deliver its Promissory Note
("Promissory Note") and a supporting Letter of Credit ("Letter of
Credit") substantially as detailed in the summary attached hereto as
EXHIBIT 2.8(i). Promptly following execution and delivery of this
Agreement by the parties, Pioneer will contact its principal
institutional bank lender with respect to this revised structure and
will use all reasonable efforts to obtain such bank's agreement and
commitment to issue the contemplated Letter of Intent. Subject to such
bank's agreement and commitment, DDS, the Selling Shareholders and
Pioneer will enter into a good faith effort to structure and document
the Promissory Note and Letter of Credit and will thereupon amend this
Agreement and the Escrow Agreement as necessary to accommodate and
conform to such structure and the terms and conditions of such
documentation. However, in the event such a commitment to issue the
Letter of Credit is not obtained substantially as provided in Exhibit
2.8(i) or the parties in good faith do not agree with respect to terms,
conditions and documentation, then this Section 2.8(i) shall be of no
force or effect and the parties shall effect the Closing as presently
provided for in this Agreement.
2.9 CONDITIONS TO THE OBLIGATIONS OF DDS AND THE SELLING
SHAREHOLDERS. Each and every obligation of DDS and the Selling Shareholders
under this Agreement to be performed at the Closing shall be subject to the
satisfaction, at or before the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
of Pioneer contained in Section 4.3 hereof shall be in all material
respects true and accurate as of the date when made and at and as of
the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. Pioneer shall have performed and complied
in all material respects with each and every covenant, agreement and
condition required by this Agreement and the related transaction
documents to be performed or complied with by it prior to or on the
Closing Date.
(c) NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any
court or administrative agency shall be in effect which restrains the
transactions contemplated hereby, and no suit, action, investigation or
other proceeding by any governmental body or other legal proceeding
arising out of or relating to this Agreement shall have been instituted
which, if adversely determined, would have a material adverse effect on
the
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ability of the Selling Shareholders or Pioneer to consummate the
transactions contemplated hereby or on the business or financial
condition of Pioneer.
(d) APPROVALS AND CONSENTS. All approvals, or the absence of disapprovals
within applicable time periods, from public authorities, federal,
state, foreign or local (or exemptions from the requirement therefor)
and all approvals of any other persons shall have been obtained, the
failure to obtain which would have a material adverse effect on the
ability of DDS and the Selling Shareholders or Pioneer and Merger
Subsidiary to consummate the transactions contemplated hereby or on the
business or financial condition of Pioneer.
(e) ANTITRUST NOTIFICATION. Any applicable waiting period under the HSR Act
shall have expired or been terminated without action by the Antitrust
Division or the FTC to prevent consummation of this Agreement.
(f) APPROVAL OF MERGER. The Merger and this Agreement shall have been
validly approved by all of the Selling Shareholders, and the
Certificate of Merger shall have been executed by the duly authorized
officer(s) of Merger Subsidiary.
2.10 CONDITIONS TO THE OBLIGATIONS OF PIONEER AND MERGER
SUBSIDIARY. Each and every obligation of Pioneer and Merger Subsidiary under
this Agreement to be performed at the Closing shall be subject to the
satisfaction, at or before the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
of the Selling Shareholders and DDS contained in Sections 4.1 and 4.2
hereof shall be in all material respects true and accurate as of the
date when made and at and as of the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. The Selling Shareholders and DDS shall have
performed and complied in all material respects with each and every
covenant, agreement and condition required by this Agreement and the
related transaction documents to be performed or complied with by them
prior to or on the Closing Date.
(c) NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any
court or administrative agency shall be in effect which restrains the
transactions contemplated hereby, and no suit, action, investigation,
or other proceeding by any governmental body or other legal proceeding
arising out of or relating to this Agreement shall have been instituted
which, if adversely determined, would have a material adverse effect on
the ability of the Selling Shareholders or DDS or Pioneer or Merger
Subsidiary to consummate the transactions contemplated hereby or on the
business or financial condition of DDS and its Subsidiaries.
(d) APPROVALS AND CONSENTS. All approvals, or the absence of disapprovals
within applicable time periods, from public authorities, federal,
state, foreign or local (or exemptions from the requirements therefor)
and all approvals of any other persons shall have been obtained, the
failure to obtain which would have a material adverse effect on the
ability of the Selling Shareholders or DDS or Pioneer or Merger
Subsidiary to consummate the
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transactions contemplated hereby or on the business or financial
condition of DDS and its Subsidiaries. Without limiting the foregoing,
IBM and IBM Credit Corporation shall have delivered to DDS and to
Pioneer each of the written consents and agreements provided for in
Section 2.8(b)(i) and DDS's accountants shall have delivered the
consents provided for in Section 2.8(c).
(e) ANTITRUST NOTIFICATION. Any applicable waiting period under the HSR Act
shall have expired or been terminated without action by the Antitrust
Division or the FTC to prevent consummation of this Agreement.
(f) NO MATERIAL CHANGE. The businesses of DDS and its Subsidiaries shall
not have been materially and adversely affected after the date of this
Agreement in any way except for changes reasonably attributable to a
decline in general economic conditions or as expressly permitted or
provided for in this Agreement.
(g) NO CASUALTY, ETC. No event shall have occurred after the date of this
Agreement which would have a material adverse effect on the business or
prospects of DDS and its Subsidiaries as a result of any casualty or
disaster, accident, labor dispute, exercise of power or eminent domain
or other governmental action, or act of God.
(h) FINANCIAL STATEMENTS. The Financial Statements shall have been
delivered to Pioneer as provided in Sections 2.7(e)(i), (ii), (iii) and
(iv) and shall as of the Closing Date be in a form such that they can
be used in connection with Pioneer's required periodic reports and/or
registration statements to be filed with the SEC. Any changes to the
Financial Statements or any other financial statements of DDS required
to satisfy Pioneer's periodic reporting obligations shall be done under
the direction and at the sole expense of Pioneer.
(i) SELLING SHAREHOLDER APPROVALS. The Merger and this Agreement shall have
been validly approved by all of the Selling Shareholders and the
Certificate of Merger shall have been executed by the duly authorized
officer(s) of DDS .
(j) COMPLETION OF DUE DILIGENCE. Pioneer shall have completed its
legal, financial and business due diligence with respect to DDS and the
transactions provided for in this Agreement and shall complete such
diligence on or before January 31, 1998 (or on or before the date ten
(10) days following delivery of the draft financial statements provided
for in Section 2.7(e)(ii) with respect to the income statement and
results of operations for DDS's 1997 fiscal year) and shall be
satisfied in all material respects with the results. In the event that
Pioneer does not notify DDS in writing on or before January 31, 1998
(or such later date with respect to 1997 financial results) that the
results of such diligence examination have been satisfied, this
condition shall be satisfied as of such date and this condition shall
be deemed satisfied and shall no longer be a condition to the Closing.
(k) SOF-SERV ENTITIES. Each of the terms and conditions set forth in
Section 2.7(g) (Spin-off of Software and Services Businesses) and
Section 6.2 (Investment in Professional Services Entity) shall have
been satisfied.
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3. THE CLOSING
3.1 DELIVERIES BY SELLING SHAREHOLDERS. Each of the Selling
Shareholders shall satisfy the following conditions and deliver the following
documents to Pioneer and Merger Subsidiary at or before the Closing, all of
which shall be in form and substance acceptable to Pioneer and Merger Subsidiary
and their counsel and shall be a condition of Closing:
(a) Certificates representing all the issued and outstanding DDS Shares,
including, without limitation, all DDS Shares held in escrow pursuant
to the ▇▇▇▇▇▇▇ Data Escrow Agreement or the ProAmerica Escrow Agreement
entered into in connection with the ProAmerica Acquisition, duly
endorsed in blank, or accompanied by stock powers endorsed in blank, by
the appropriate Selling Shareholder, with such Selling Shareholder's
signature guaranteed by a national bank or trust company;
(b) Certificate representing all of the issued and outstanding DDS Shares
issued to Pioneer;
(c) Consents of third parties necessary for Selling Shareholders and DDS to
execute, deliver and perform this Agreement and any other agreement
provided for herein;
(d) Consents and waivers of all third parties having material business
relationships with DDS or any of its Subsidiaries if consent to or
approval of transactions of the nature herein contemplated is or may be
required in order to prevent a material adverse change in such business
relationship, including, without limitation, consents and waivers from
lenders, landlords, IBM and IBM Credit Corporation;
(e) Certified copy of resolutions adopted by DDS's Board of Directors and
the Selling Shareholders approving this Agreement (including
authorizing and approving the Merger) and each of the ▇▇▇▇▇▇▇
Employment Agreement and the Non-Competition Agreements and the
transactions contemplated thereby;
(f) Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., Atlanta, Georgia, counsel
for Selling Shareholders and DDS, addressed to Pioneer and dated the
Closing Date substantially in the form attached hereto as EXHIBIT
3.1(f), with supporting opinions of local Texas counsel with respect to
matters of Texas law, reasonably satisfactory to Pioneer in form and
substance;
(g) Certificate of good standing of DDS from the Secretary of the State of
Georgia and certificates of good standing from each Subsidiary from the
Secretary of State of the relevant state in each case dated not more
than thirty (30) days prior to the Closing Date;
(h) The Escrow Agreement executed by the Selling Shareholders and by a duly
authorized officer of the Escrow Agent;
(i) Noncompetition Agreements executed by each of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇;
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(j) The ▇▇▇▇▇▇▇ Employment Agreement executed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III;
(k) Satisfactory evidence of termination of all SIP's and releases from all
holders and participants as provided for in Section 2.7(d);
(l) Each of the written terminations and releases with respect to the
3/31/97 Employment Agreements provided for in Section 2.7(f);
(m) A complete and absolute lessors' release of DDS from any pre-Closing
liabilities, claims, or causes of action under any existing or past
leases or real or personal property from any of the Selling
Shareholders, members of their families, or other affiliates;
(n) The Form 8023A provided for in Section 2.8(d) with respect to the
Section 338(h)(10) Election;
(o) Each agreement, instrument and other document provided for in Section
2.7(g) (Spin-off of Software and Services Businesses) and in Section
6.2 (Investment in Sof-Serv Entities);
(p) A complete and absolute release of DDS from the Selling Shareholders
with respect to any pre-Closing liabilities, claims, or causes of
action relating to any employment relationship with DDS or arising out
of being an employee, shareholder, officer of Director of DDS,
including rights of indemnification as corporate officers and directors
under Articles of Incorporation or Bylaws but excluding any insurance
provided pursuant to Section 6.4.
3.2 DELIVERIES BY PIONEER. Pioneer shall deliver the following
documents to the Selling Shareholders at or before the Closing, all of which
shall be in form and substance acceptable to the Selling Shareholders and their
counsel and shall be a condition of Closing:
(a) The cash Consideration to be delivered to Selling Shareholders pursuant
to Section 2.4 and 2.5 hereof;
(b) Certified copy of resolutions adopted by the Board of Directors of
Pioneer and/or its Executive Committee approving this Agreement, the
Escrow Agreement, the Noncompetition Agreements and the transactions
contemplated thereby;
(c) Opinion of Calfee, Halter, & ▇▇▇▇▇▇▇▇ LLP, counsel to Pioneer,
addressed to the Selling Shareholders and dated the Closing Date
substantially in the form attached hereto as EXHIBIT 3.2(c);
(d) Certificate of good standing for Pioneer from the Secretary of State of
Ohio dated not more than thirty (30) days prior to the Closing Date;
(e) The Escrow Agreement executed by a duly authorized officer of Pioneer
and the Escrow Agent;
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(f) The ▇▇▇▇▇▇▇ Employment Agreement, executed by a duly authorized officer
of Pioneer;
(g) The Noncompetition Agreements, executed by a duly authorized officer of
Pioneer;
(h) Certified copy of resolutions adopted by Merger Subsidiary's Board of
Directors and Pioneer as the sole stockholder approving and authorizing
the Merger;
(i) Certificate of Good Standing of Merger Subsidiary from the Secretary of
State of Georgia, dated not more than thirty (30) days prior to the
Closing;
(j) The Form 8023A provided for in Section 2.8(d) with respect to the
Section 338(h)(10) Election;
(k) Each agreement, instrument and other document provided for in Section
2.7(g) (Spin-off of Software and Services Businesses) and in Section
6.2 (Investment in Sof-Serv Entities).
3.3 DELIVERIES TO ESCROW AGENT. As of the Closing, Pioneer
will deliver to the Escrow Agent the cash Consideration to be deposited in the
Escrow pursuant to Section 2.4 hereof and each of DDS, the Selling Shareholders
and Pioneer will deliver the Escrow Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 SEVERAL REPRESENTATIONS AND WARRANTIES OF SELLING
SHAREHOLDERS. Each Selling Shareholder hereby severally represents and warrants
to Pioneer, DDS and Merger Subsidiary that the following statements are now true
and correct and will be true and correct as of the Closing with respect to such
Selling Shareholder, including, without limitation, with respect to the Trusts,
the Trustee, the Estate, and the Executor, as applicable:
4.1.1 CAPACITY. To the extent such Selling
Shareholder is a party to the agreements referred to in this Section 4.1.1, each
Selling Shareholder has full legal power, authority and capacity to execute,
deliver and perform this Agreement, the Escrow Agreement, the Noncompetition
Agreements, and the ▇▇▇▇▇▇▇ Employment Agreement.
4.1.2 ENFORCEABILITY. This Agreement, the Escrow
Agreement, the Noncompetition Agreements, and the ▇▇▇▇▇▇▇ Employment Agreement
have been duly and validly executed and delivered by each Selling Shareholder to
the extent such Selling Shareholder is a party to the agreements referred to in
this Section 4.1.2 and constitute, to the extent such agreements contain
obligations of such Selling Shareholder, the valid and binding obligations
thereof enforceable in accordance with their respective terms.
4.1.3 CONSENTS. Except for filings with the Federal
Trade Commission and the Department of Justice pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the filing of
the Certificate of Merger under the GBCC, the approval of this Agreement and the
transactions contemplated herein by the Board of Directors
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of Pioneer and the Board of Directors and Selling Shareholders of DDS and Merger
Subsidiary, no authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or agency or other
public or private body, entity or person is required in connection with the
execution, delivery and performance of this Agreement, the Escrow Agreement, the
Noncompetition Agreements, or the ▇▇▇▇▇▇▇ Employment Agreement by any Selling
Shareholder to the extent such Selling Shareholder is a party to any of the
agreements referred to in this Section 4.1.3.
4.1.4 ABSENCE OF CONFLICTS. Except as set forth on
DISCLOSURE SCHEDULE 4.1.4, neither the execution, delivery nor performance of
this Agreement, the Escrow Agreement, the Noncompetition Agreements, or the
▇▇▇▇▇▇▇ Employment Agreement by any Selling Shareholder to the extent such
Selling Shareholder is a party to the agreements referred to in this Section
4.1.4 does or will (i) conflict with or result in any violation by such Selling
Shareholder of any judgment, decree, award, order, statute, rule or regulation
applicable to such Selling Shareholder or to the DDS Shares held by such Selling
Shareholder, or (ii) conflict with, violate or result in any breach of any
agreement or instrument to which such Selling Shareholder is a party or by which
such Selling Shareholder is bound, or constitute a default thereunder, or (iii)
result in the creation of any right, lien, security interest, claim, charge,
restriction or encumbrance of any kind or nature against or with respect to the
DDS Shares held by such Selling Shareholder.
4.1.5 OWNERSHIP OF DDS SHARES. Each DDS Selling
Shareholder is the record and beneficial owner of the number of DDS Shares set
forth by his or her name below, has good, marketable and indefeasible title to
such shares free and clear of all Liens, and has the absolute right to transfer
such shares without the consent or approval (except as provided in Section 4.1.3
above) of any other person or entity:
SELLING SHAREHOLDER NUMBER OF DDS SHARES
------------------- --------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,020,037 Shares
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III 2,390,272 Shares
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee of The 5,404 Shares
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Minor's Trust
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 298,920 Shares
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee of The 5,404 Shares
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Minor's Trust
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1,020,037 Shares
The Estate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 300,000 Shares
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-----------------
Total 5,040,074 Shares
4.1.6 CONFLICTS OF INTEREST. Except as set forth on
Disclosure Schedule 4.1.6, each Selling Shareholder or any relative thereof, or
any entity controlled by any such Selling Shareholder: (i) does not own,
directly or indirectly, any interest in (excepting not more than a 2% interest
for investment purposes in securities of publicly held and traded companies),
and is not an employee or representative of or consultant to, any corporation,
firm, association or other business entity or organization which is, or is
engaged in business as, a competitor, lessor, lessee, customer or supplier of
DDS or any of its Subsidiaries; and (ii) does not own, directly or indirectly,
in whole or in part, any tangible or intangible property which DDS or any of its
Subsidiaries are using or the use of which is necessary for the conduct of its
business (including, without limitation, any real estate, buildings, machinery,
equipment, permit, trade name, patent, trade secret or confidential
information); and (iii) does not have any cause of action or other claim
whatsoever against, or owe any amount to, DDS or any of its Subsidiaries.
4.2 JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
SELLING SHAREHOLDERS. Selling Shareholders hereby jointly and severally
represent and warrant to Pioneer, DDS and Merger Subsidiary that the following
statements are now true and correct and, except for changes in the ordinary
course of business none of which will be materially adverse to DDS and its
Subsidiaries, will be true and correct as of the Closing:
4.2.1 ORGANIZATION AND STANDING. Each of DDS and its
Subsidiaries (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii) has
full corporate power and authority to own, lease and operate its properties and
carry on its business as and where such properties are now owned or leased and
as such business is presently being conducted and (iii) is duly qualified to
conduct business as a foreign corporation in each jurisdiction in which
qualification is necessary under applicable law where failure to so qualify
would have a material adverse effect on the assets, business or financial
condition of DDS or any such Subsidiary. Pioneer has heretofore been delivered
complete and correct copies of the Articles of Incorporation and any other
charter documents (certified by the Secretary of the State of the respective
jurisdiction) and By-Laws or other organizational documents of like import as
currently in effect, of DDS and each of its Subsidiaries.
4.2.2 CAPITALIZATION OF DDS. The entire authorized
capital stock of DDS consists of (i) 10,000,000 shares of Common Stock, no par
value, of which 5,040,074 shares are issued and outstanding and no shares are
held in treasury and (ii) 10,000 shares of Preferred Stock, no par value, of
which no shares are issued or outstanding and no shares are held in treasury.
Except for the SIP's and related employee options and other interests provided
for in Section 2.7(d) and the related Redemption Agreement dated November 1,
1995, between DDS and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, which DDS and the Selling
Shareholders will cause to be terminated, redeemed and released prior to the
Closing, there are no existing options, warrants, calls, rights or other
commitments of any character to purchase, receive or otherwise cause to be
issued any of DDS's authorized but unissued or outstanding shares of any class,
nor are there any
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outstanding securities convertible into or exchangeable for shares of any class
of DDS capital stock. By the execution of this Agreement, each Selling
Shareholder expressly waives all preemptive rights which such Selling
Shareholder has ever had or may now have in the issuance of any DDS Shares. All
of the DDS Shares issued and outstanding are duly authorized and validly issued,
fully paid and nonassessable and free of all Liens.
4.2.3 SUBSIDIARIES. Except as set forth in DISCLOSURE
SCHEDULE 4.2.3, all of the outstanding shares of capital stock of each
Subsidiary of DDS are duly authorized, validly issued, fully paid and
nonassessable, and all of such shares are owned by DDS or by a Subsidiary of DDS
free and clear of any and all Liens or limitations on voting rights. All
Subsidiaries and their respective jurisdictions of incorporation are identified
in DISCLOSURE SCHEDULE 4.2.3.
4.2.4 AUTHORIZATION AND ENFORCEABILITY. All requisite
corporate action to approve, execute, deliver and perform this Agreement and the
Escrow Agreement has been or by Closing will have been taken by the Board of
Directors and shareholders of DDS. This Agreement and the Escrow Agreement have
been, or when delivered at the Closing will have been, duly and validly executed
and delivered by DDS and constitute the valid and binding obligations of DDS
enforceable in accordance with their respective terms.
4.2.5 CONSENTS. Except for filings with the Federal
Trade Commission and the Department of Justice pursuant to the HSR Act, the
filing of the Certificate of Merger under the GBCC, the approval of this
Agreement and the transactions contemplated herein by the Board of Directors of
Pioneer and the Board of Directors and shareholders of DDS and Merger
Subsidiary, no authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or agency or other
public or private body, entity or person is required in connection with the
acquisition of DDS herein contemplated.
4.2.6 ABSENCE OF CONFLICTS. Except as set forth in
DISCLOSURE SCHEDULE 4.2.6, neither the execution, delivery or performance of
this Agreement by the Selling Shareholders nor the acquisition of DDS herein
contemplated, does or will (i) conflict with or result in any violation of any
judgment, decree, order, statute, rule or regulation applicable to DDS or any of
its Subsidiaries, (ii) conflict with, violate or result in any breach of any
agreement or instrument (which agreement or instrument either provides for
purchases of inventory for resale in excess of $50,000 yearly or otherwise is
material to DDS or its assets, business or prospects) to which DDS or any of its
Subsidiaries is a party or by which it is bound, or constitute a default
thereunder, or give rise to a right of termination against DDS or any of its
Subsidiaries or accelerate any obligation thereof, (iii) conflict with or
violate any provision of the Articles of Incorporation, By-Laws or Code of
Regulations of DDS or any of its Subsidiaries, (iv) result in the creation of
any right, lien, security interest, claim, charge, restriction or encumbrance of
any kind or nature against or with respect to DDS or any of its Subsidiaries or
any of their assets, or (v) disrupt or impair any material business relationship
which DDS or any of its Subsidiaries has with any current supplier, customer,
dealer, distributor or sales representative.
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4.2.7 FINANCIAL STATEMENTS. DDS has heretofore
delivered to Pioneer (i) audited balance sheets for DDS, ProAmerica, Inc. and
ProAmerica Systems, Inc., each individually, as of December 31, 1996, 1995, and
1994 and the related audited statements of income and stockholders' equity and
cash flows for DDS, ProAmerica, Inc. and ProAmerica Systems, Inc., each
individually, for the twelve (12) months then ended (including in each case the
notes thereto) audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), certified
public accountants who are "independent" under the provisions of SEC Regulation
S-X (the "Audited Statements"), and (ii) the unaudited consolidated DDS balance
sheet at September 30, 1997 and the related unaudited consolidated statements of
DDS income and stockholders' equity and cash flows for the portion of the year
then ended (the "Interim Statements"). In addition, pursuant to Section 2.7(e),
DDS shall have delivered to Pioneer a consolidated audited DDS balance sheet as
at December 31, 1997 and the related consolidated audited statements of DDS
income and stockholders' equity and cash flows for the twelve (12) months then
ended (including the notes thereto) audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. These December
31, 1997 financial statements shall be included as Audited Statements hereunder.
All such financial statements are true, correct and complete and have been
prepared in accordance with GAAP, except that the Interim Statements are subject
to normal year-end audit adjustments and do not contain the disclosures required
by GAAP to be disclosed in the notes to financial statements. The balance sheets
included therein present fairly the financial condition of DDS and its
consolidated Subsidiaries as at their respective dates, and the statements of
income and stockholders' equity and cash flows included therein present fairly
the results of operations for the respective periods covered thereby.
4.2.8 LIABILITIES. Except as set forth on the
DISCLOSURE SCHEDULE 4.2.8, neither DDS nor any of its Subsidiaries have
Liabilities other than (i) such Liabilities as are adequately reflected or
reserved against on the September 30, 1997 unaudited balance sheet and which, in
accordance with GAAP, should have been reflected therein, and (ii) such current
Liabilities which have been incurred in the ordinary course of business and
consistent with past practices since September 30, 1997, all of which are
reflected in the journals and ledgers of DDS.
4.2.9 ABSENCE OF CERTAIN CHANGES. Since September 30,
1997, the businesses of DDS and its Subsidiaries have been operated only in the
ordinary course and consistent with past practices, and, except as set forth in
DISCLOSURE SCHEDULE 4.2.9 or as permitted by this Agreement, there has not been
with respect to DDS or any of its Subsidiaries:
(a) Any change in its condition (financial or other), assets, Liabilities,
business, or earnings except changes in the ordinary course of
business, none of which individually or in the aggregate has been
materially adverse;
(b) Any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting its properties, assets, business or
prospects, or any known threat to take by condemnation or eminent
domain any real property owned or leased by it;
(c) Except as provided in Section 2.7(c) (Accumulated Adjustments Account)
or Section 2.7(d) (Redemption and Termination of Stock Incentive Plans)
or Section 2.7(g) (Spin-off of Software and Services Businesses), any
declaration, setting aside or payment of any
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dividend or other distribution in respect of its capital stock or any
direct or indirect redemption, retirement, purchase or other
acquisition by it of any shares of its capital stock;
(d) Any executory purchase commitment greater than $200,000 ($500,000 with
respect to IBM) in aggregate amount (as to inventory) or greater than
$25,000 in aggregate amount (as to non-inventory) and which is in any
material respect in excess of its normal business requirements or other
than for normal operations or at prices higher than the market prices
at the time the commitment was entered into by DDS or any of its
Subsidiaries;
(e) Any general increase in the level or rate of salaries or compensation
of employees, representatives or agents, or any specific increases in
the salary or compensation paid to or accrued for the benefit of any
employee, representative or agent whose compensation (including
bonuses) after such increase would be at an annual rate in excess of
$25,000, or any increase in the benefits payable under any bonus,
insurance, pension or other benefit plan;
(f) Any indebtedness incurred which will mature more than one year from the
date it was incurred, or incurred otherwise than in the ordinary course
of business;
(g) Any change in existing credit arrangements with any bank or other
institution;
(h) Any Liability incurred or assumed, or any contract, agreement,
arrangement, lease (as lessor or lessee), license or other commitment
entered into or assumed, by it or on its behalf, whether written or
oral, involving more than $5,000 in each instance, except in the
ordinary course of business;
(i) Any loan or advance made to any officer, director, consultant, agent,
employee or shareholder or any other loan or advance made otherwise
than in the ordinary course of business;
(j) Any payment of, or commitment to pay, any severance or termination pay
to any officer, director, consultant, agent or shareholder;
(k) Any change in its accounting methods or practices or any change in
depreciation or amortization policies or rates theretofore adopted by
it;
(1) Except as referred to in and as contemplated by Section 4.2.9(a) above,
any purchase or sale of assets in anticipation of this Agreement, or
any purchase, lease, sale, abandonment or other disposition of assets
otherwise than in the ordinary course of business;
(m) Any acquisition of all or any substantial part of the stock or the
business or operating assets of any other person, firm, association,
corporation or business organization;
(n) Any actual or threatened material adverse change in its revenues,
earnings, business, operations, condition, prospects or business
relationships;
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(o) Any mortgage, pledge, lien (other than statutory liens arising in the
ordinary course and securing liabilities not yet due and payable),
charge, security interest or other encumbrance against any of its
assets;
(p) Any discharge or satisfaction of any security interest, lien or
encumbrance or payment of any Liability except in the ordinary course
of business or in an amount less than $20,000;
(q) Any waiver or release of any rights, except for rights of insubstantial
value;
(r) Any cancellation or compromise of any debts (other than accounts
receivable) owed to it or known claims against others exceeding $10,000
in the aggregate;
(s) Any write off or reduction of any account receivable other than in good
faith and the ordinary course of business;
(t) Any sale, transfer or grant of any material rights under any leases,
licenses, agreements, patents, inventions, trademarks, trade names,
service marks, copyrights or with respect to any trade secrets or
know-how; and
(u) Any form of cash compensation paid to any of the Selling Shareholders
in an aggregate amount exceeding cash compensation provided for in
their respective, written employment agreements.
4.2.10 TAX MATTERS.
(a) DDS, its Subsidiaries and each predecessor, successor and acquired or
related entity has filed all of the Tax Returns that it is required to
file. All such Tax Returns were correct and complete in all respects
and all Taxes owed by DDS, its Subsidiaries or any such other entity
(whether or not shown on any Tax Return) have been paid. DDS is not
currently under any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where DDS or its Subsidiaries do not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Liens on any
of the assets of DDS or its Subsidiaries or the DDS Shares that arose
in connection with any failure (or alleged failure) to pay any Tax.
(b) DDS and its Subsidiaries have withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, shareholder, or other
third party.
(c) Neither DDS, Selling Shareholders nor any director or officer (or
employee responsible for tax matters) has any reason to believe that
any authority exists to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim
concerning any Tax liability of DDS, any of its Subsidiaries or any
predecessor, successor or acquired or related entities either (i)
claimed or raised by any authority in writing, or (ii) as to which
Selling Shareholders and the directors and officers (or employee
responsible for tax matters) of DDS or its Subsidiaries have knowledge
based
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upon personal contact with any agent of such authority. Except as set
forth in DISCLOSURE SCHEDULE 4.2.10(c), no Tax Returns filed by DDS, it
Subsidiaries or any predecessor, successor or acquired or related
entities are currently the subject of an audit nor, to the best of
Selling Shareholders' knowledge, are being proposed for an audit.
Selling Shareholders have caused DDS to deliver to Pioneer correct and
complete copies of all Tax Returns, examination reports, and any
statements of deficiencies assessed against or agreed to by DDS, its
Subsidiaries or any predecessor, successor or acquired or related
entities.
(d) Neither DDS nor any Subsidiary has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any
Tax assessment or deficiency. Neither DDS nor any Subsidiary has made
any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that would not be deductible under Section 280(G) of the
Code. Neither DDS nor any Subsidiary or any predecessor, successor or
acquired or related entity has or has been a United States real
property holding corporation within the meaning of Section 897(C)(2) of
the Code. Neither DDS nor any Subsidiary or any predecessor, successor
or acquired or related entity is a party to any Tax allocation or Tax
sharing agreement, and, except as set forth in DISCLOSURE SCHEDULE
4.2.10(d), has been a member of an affiliated group filing a
consolidated federal income Tax Return nor has any liability for the
Taxes of any other person as a transferee or successor, by contract or
otherwise.
(e) The unpaid Taxes of DDS and its Subsidiaries (i) did not, as of the
most recent fiscal month end, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes to reflect timing
differences between book and Tax income) set forth on the face of the
most recent balance sheet (rather than in any notes thereto) and (ii)
do not exceed that reserve as adjusted for the passage of time through
the Effective Time in accordance with the past custom and practice of
DDS in filing its Tax Returns.
(f) DDS, its Subsidiaries and each predecessor, successor and acquired or
related entity has been a validly electing S corporation with the
meaning of Sections 1361 and 1362 of the Code at all times since 1990
and DDS and each of its Subsidiaries will be an S Corporation up to and
including the Effective Time.
(g) Except as set forth in DISCLOSURE SCHEDULE 4.2.10(g), neither DDS nor
any of its Subsidiaries will be liable for any Tax under Section 1374
of the Code in connection with the deemed sale of the assets of DDS
caused by the Section 338(h)(10) Election under the Code. Except as set
forth in DISCLOSURE SCHEDULE 4.2.10(g), DDS has not in the past ten
(10) years, (i) acquired assets from another corporation in a
transaction in which DDS's Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis of the
acquired assets (or any other property) in the hands of the transferor
or (ii) acquired the stock of any corporation which is not a Qualified
Subchapter S Subsidiary.
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4.2.11 COMPLIANCE WITH LAWS. Except as set forth on
DISCLOSURE SCHEDULE 4.2.11, neither DDS nor any of its Subsidiaries (i) is in
violation of, in any respect, any outstanding judgment, order, injunction, award
or decree specifically relating to it, or (ii) is in violation of, in any
respect, any federal, state, foreign or local Law, ordinance or regulation which
is applicable to its business or assets, including, without limitation, The
Federal Occupational Safety and Health Act, federal and state and foreign
environmental protection laws and regulations, federal and state and foreign
antitrust laws and regulations and applicable state and local zoning, building
and health and safety laws and ordinances. Except as set forth on DISCLOSURE
SCHEDULE 4.2.11, DDS and its Subsidiaries have all permits, licenses, orders,
approvals, authorizations, concessions and franchises of any federal, state,
local or foreign governmental or regulatory body that are necessary in the
conduct of its business. Except as set forth on DISCLOSURE SCHEDULE 4.2.11, all
such permits, licenses, orders, approvals, concessions and franchises are in
full force and effect, and no proceeding is pending or, to the knowledge of any
Selling Shareholder, threatened to revoke or limit any of them.
4.2.12 LITIGATION. Except as set forth on DISCLOSURE
SCHEDULE 4.2.12, no claim, litigation, action, investigation or proceeding is
pending or, to the knowledge of any Selling Shareholder, threatened, and no
order, injunction or decree is outstanding, against or relating to DDS or any of
its Subsidiaries or their assets or business, and no Selling Shareholder knows
or has a reasonable basis for knowing of any information which may result in
such a claim, litigation, action, investigation or proceeding.
4.2.13 GENERAL LIABILITY. Except as set forth on
DISCLOSURE SCHEDULE 4.2.13, there are no product warranty or product liability
claims pending or, to the knowledge of any Selling Shareholder, threatened
against DDS or any of its Subsidiaries, and no Selling Shareholder has knowledge
of any state of facts or of the occurrence of any event forming the basis for
any specific product warranty, product liability or other tort claim against DDS
or any of its Subsidiaries, which is not adequately reflected or reserved
against in the September 30, 1997 balance sheet or adequately covered by
insurance.
4.2.14 LABOR. Except as set forth on DISCLOSURE
SCHEDULES 4.2.14 or 4.2.26, DDS and its Subsidiaries have complied with all
applicable federal, state and local laws and ordinances relating to the
employment of labor, including the provisions thereof relating to wages, hours
and the payment of social security taxes, and are not liable for any arrears of
wages or any tax relating thereto (except for currently accrued and unpaid wages
and except for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure to
comply with any of the foregoing and has received no notice to the contrary from
any governmental agency. Except as set forth on DISCLOSURE SCHEDULE 4.2.14,
there have not been any disputes between DDS or any of its Subsidiaries and
their respective employees or any of them which have involved (i) organized
labor strikes or work stoppages, (ii) proceedings before any court or
governmental agency alleging any unfair labor practice, wage-hour violation,
unlawful discrimination in employment practices or other violation of labor law,
or (iii) any grievance or arbitration proceedings. Neither DDS nor any of its
Subsidiaries is a party to a collective bargaining agreement with any labor
union.
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4.2.15 LISTS OF PROPERTIES, CONTRACTS, ETC.
DISCLOSURE SCHEDULE 4.2.15 contains complete and accurate lists and brief
descriptions of the following with respect to DDS and its Subsidiaries :
(a) All real property owned of record or beneficially, or leased to or from
others;
(b) All machinery, equipment, furniture, fixtures, vehicles, leasehold
improvements and other personal property acquired or leased within the
past five (5) years with an original cost in excess of $25,000,
acquired or leased prior to the last five (5) years and having a
current market or book value in excess of $100,000, or which are leased
to or from others pursuant to a lease commitment in excess of $25,000;
(c) All licenses, franchises, permits, orders, authorizations and
concessions used in the conduct of the business;
(d) All agreements for the purchase, sale or other disposition of goods,
materials, equipment, supplies or capital assets which cannot be
terminated at any time on less than 30 days notice without liability,
which by their terms will not be fully performed on or before the date
which is 90 days after the Closing Date or which involve terms or
quantities exceeding normal commitments in the ordinary course of
business;
(e) All instruments or agreements evidencing liens, financing arrangements
or secured transactions;
(f) All insurance policies, indicating the type and amount of coverage,
including title insurance with respect to owned real estate;
(g) All management, employment, noncompete, option and agency agreements;
(h) All employee benefit plans or agreements or other Plans not described
in Section 4.2.15(g);
(i) All agreements with distributors, dealers or sales representatives;
(j) All agreements with directors, officers or shareholders or with the
spouse or other relative thereof;
(k) All licenses or other agreements relating to trade secrets, processes
or technical know-how;
(1) All patents, trademarks, service marks, trade names, brand names and
copyrights, and all applications and agreements related thereto, and
all trade secrets, know how and other confidential information;
(m) All agreements, promissory notes or other instruments pursuant to which
credit has or may be obtained or indebtedness for borrowed money has
been or may be incurred;
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(n) All agreements to which DDS or any of its Subsidiaries or any DDS
Selling Shareholder is a party relating to rights or restrictions with
respect to the transfer or other disposition of any of the DDS Shares
or shares of capital stock of any of DDS's Subsidiaries;
(o) All other contracts, agreements, commitments or understandings by which
DDS and its Subsidiaries is bound other than in the ordinary course of
business at the time entered into;
(p) The names of all present directors and officers and their current
annual compensation rates (including all bonuses, whether deferred,
accrued or otherwise), and the names, current annual compensation rates
and other compensation arrangements of all salaried employees whose
current compensation is at the rate of $25,000 or more per annum;
(q) The name of each financial institution and stock or other broker with
which DDS and its Subsidiaries has an account, credit line or safe
deposit box or vault, or otherwise maintains relations and the names of
all persons presently authorized to draw against any such account or
credit line or have access to such safe deposit box or vault;
(r) The names of all persons, if any, now holding proxies, powers of
attorney or other like instruments to act on behalf of DDS or its
Subsidiaries (none of which proxies, powers of attorney, or other like
instruments is irrevocable), and a summary of the terms thereof;
(s) The names of the issuers, account numbers and names of the individual
holders of all credit cards issued to or on behalf of DDS or its
Subsidiaries; and
(t) Name and address of the current statutory agents for DDS and each of
its Subsidiaries..
As used above, the term "agreement" includes any commitment,
understanding or promise, whether written or oral. True and complete copies of
all written documentation pertaining to the foregoing and written summaries of
all oral arrangements have been previously delivered to, or made available for
inspection by, Pioneer.
4.2.16 PHYSICAL CONDITION OF TANGIBLE ASSETS. All of
the real property, equipment, furniture and fixtures, leasehold improvements,
motor vehicles and other tangible assets used by DDS and its Subsidiaries in
their business are, subject to ordinary wear and tear, in good operational
condition and repair and capable of being used for their intended purpose in the
ordinary course of business.
4.2.17 TITLE. Except as set forth in DISCLOSURE
SCHEDULE 4.2.17, DDS and its Subsidiaries own all of their real and personal
properties and assets, tangible and intangible, free and clear of any and all
Liens.
4.2.18 COMPLETENESS. DDS and its Subsidiaries own, or
have under lease or by contract, all of the properties and assets, tangible and
intangible, necessary in order to operate the business conducted by them in the
ordinary course as presently conducted.
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4.2.19 ACCOUNTS RECEIVABLE. All of the accounts
receivable of DDS and its Subsidiaries arose from valid sales in the ordinary
course of business, reflect goods actually sold and delivered or services in
fact rendered, are not subject to counterclaims or set-offs, and are good and
collectible by DDS in the ordinary course of business within one hundred eighty
(180) days at the amounts recorded on DDS's books of account, net of any reserve
for doubtful accounts set forth in the Financial Statements. For purposes of the
preceding sentence, customary and contractual discounts provided by DDS shall
not be deemed counterclaims or set-offs.
4.2.20 INVENTORIES. All of DDS's and its
Subsidiaries' inventories are good and usable, are not obsolete, are capable of
being sold in the usual and ordinary course of business, and are valued in
accordance with GAAP at the lower of cost (determined on the first-in, first-out
method) or market. DDS has adequately reserved on its books of account and in
the Financial Statements for all obsolete items, all items significantly below
standard quality, and all items which otherwise do not satisfy the foregoing
representations.
4.2.21 PROPRIETARY PROPERTY. Neither DDS nor any of
its Subsidiaries has infringed, misappropriated or misused or been charged, or
threatened to be charged, with infringement, misappropriation or misuse of, any
patent, trademark, trade name, copyright (or application for any of the
foregoing), trade secret, know-how or confidential information or data of
another. DDS and each of its Subsidiaries have the complete and unrestricted
right to use, own and have good title to, and the exclusive right to assign the
entire right, title and interest in and to each item of proprietary property
(and any and all goodwill associated therewith) identified on DISCLOSURE
SCHEDULES 4.2.15(k) AND (1) as owned by DDS or any of its Subsidiaries. Each of
such items is in full force and effect. Neither DDS nor any of its Subsidiaries
nor any Selling Shareholder has any information or knows of any information
which would invalidate any of such items of proprietary property. The items of
proprietary property identified in DISCLOSURE SCHEDULE 4.2.15(k) AND (1) as
owned by others are the only items of proprietary property owned by others and
used or necessary in connection with the business of DDS and its Subsidiaries as
presently conducted. Except as set forth on DISCLOSURE SCHEDULE 4.2.21, neither
DDS nor any of its Subsidiaries nor any Selling Shareholder is aware of any
infringement, misappropriation or misuse of such proprietary property by others.
4.2.22 COMPLIANCE WITH CONTRACTS AND COMMITMENTS.
Except as set forth on DISCLOSURE SCHEDULE 4.2.22, with respect to the
agreements, commitments, instruments, documents and undertakings, oral or
written, to which DDS or any of its Subsidiaries is a party or by which they are
bound, as of the Closing Date (i) DDS and its Subsidiaries have each performed
all of the obligations to be performed by it, (ii) DDS and its Subsidiaries are
not in default under or in violation of any thereof (iii) there is no basis for
a valid claim of such a violation or default and (iv) no event has occurred
which, with notice or lapse of time or both, would constitute such a default. No
Selling Shareholder is aware of any default under or any violation of any of the
foregoing by any other party thereto. All of such agreements, commitments,
instruments, documents and undertakings are valid and in full force and effect.
The agreements, commitments, instruments, documents and undertakings set forth
on DISCLOSURE SCHEDULE 4.2.15 (except as permitted to be excluded therefrom)
constitute all those of a material
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nature necessary in order to operate the business of DDS and its Subsidiaries as
presently conducted.
4.2.23 INSURANCE. All of the insurance policies
carried by DDS and its Subsidiaries and listed in DISCLOSURE SCHEDULE 4.2.15 are
in full force and effect and all premiums which are due have been paid.
4.2.24 SUPPLIERS AND CUSTOMERS. Except as set forth
on DISCLOSURE SCHEDULE 4.2.24 and except with respect to products that have
ceased to be sold by a supplier to or to be purchased by a customer, none of the
five (5) largest suppliers to or twenty (20) largest customers of DDS or each of
its Subsidiaries during its fiscal year ended December 31, 1996, nor any
supplier who is the sole source of supply of any product essential to DDS's or
any of its Subsidiaries' businesses, has canceled or otherwise terminated, or
communicated to DDS or any of its Subsidiaries or a Selling Shareholder any
threat to cancel or otherwise terminate, its relationship with DDS or any of its
Subsidiaries since December 31, 1996. Except as set forth on DISCLOSURE SCHEDULE
4.2.24, no Selling Shareholder or officer of DDS or any of its Subsidiaries has
any knowledge that any such supplier or customer intends to cancel or otherwise
terminate its relationship with DDS or any of its Subsidiaries or to decrease
its sale of services or supplies to DDS or any of its Subsidiaries or its
purchase of products from DDS or any of its Subsidiaries.
4.2.25 BROKERS AND FINDERS. DDS has engaged The
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company, Inc. as DDS's financial advisor with respect to the
transactions provided for in this Agreement pursuant to their July 9, 1996
engagement agreement, the fees and costs of which shall be allocated as provided
in Section 8.3 hereof. Other than the foregoing engagement of The
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company, Inc., no broker, finder or other person or entity
acting in a similar capacity has participated on behalf of DDS or the Selling
Shareholders in bringing about the transaction herein contemplated, rendered any
services with respect thereto or been in any way involved therewith.
4.2.26 EMPLOYEE BENEFIT PLAN MATTERS
(a) DISCLOSURE SCHEDULE 4.2.26(a) sets forth a list of all of the following
arrangements which DDS or any of its Subsidiaries maintains or to which
it contributes:
(i) any nonqualified deferred compensation, retirement or
severance plans, contracts or arrangements.
(ii) any qualified defined contribution plans (as defined in
Section 3(34) of ERISA or Section 414(i) of the Code);
(iii) any qualified defined benefit plans (as defined in Section
3(35) of ERISA or Section 414(l) of the Code); and
(iv) any employee welfare benefit plans (as defined in Section 3(1)
of ERISA).
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(b) Except as set forth on DISCLOSURE SCHEDULE 4.2.26(b), all employee
benefit plans (as defined in Section 3(3) of ERISA) which DDS or any of
its Subsidiaries maintains or to which it contributes (collectively,
the "Plans") comply with the requirements of ERISA and the Code.
(c) DDS has made available to Pioneer true and complete copies of (i) each
of the plans, contracts or arrangements listed in DISCLOSURE SCHEDULE
4.2.26(a), including any amendments thereto; (ii) the most recent
determination letter, if any, received by DDS or any of its
Subsidiaries from the Internal Revenue Service regarding the Plans
which DDS or any of its Subsidiaries maintains or to which it
contributes; (iii) the most recent financial statements and annual
report or return for the Plans; and (iv) the most recently prepared
actuarial valuation reports for the Plans.
(d) Neither DDS nor any of its Subsidiaries has any plan or commitment to
create any additional plan, contract or arrangement of the type
descried in Section 4.2.26(a). All of the plans and arrangements
described in Section 4.2.26(a) which DDS or any of its Subsidiaries
maintains or to which it contributes is funded to the extent required
by law or contract and all contributions required of DDS or any of its
Subsidiaries have been made in a timely fashion.
(e) Neither DDS nor any of its Subsidiaries has ever contributed to any
multi-employer plan (as defined in Section 3(37) of ERISA), or has
actual or potential liabilities under Section 4201 of ERISA for any
complete or partial withdrawal from a multi-employer plan. To the
knowledge of DDS and the Selling Shareholders, neither DDS nor any of
its Subsidiaries has incurred any liability for any tax or civil
penalty or any disqualification of any employee benefit plan (as
defined in Section 3(3) of ERISA) imposed by Sections 4980(b) and 4975
of the Code and Part 6 of Title I and Section 502(i) of ERISA.
4.2.27 ENVIRONMENTAL MATTERS. DDS, its Subsidiaries
and their respective predecessors and affiliates have complied with all
environmental, health, and safety laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, DDS, its Subsidiaries
and their respective predecessors and affiliates have obtained and been in
compliance with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in all environmental,
health, and safety laws. DDS and its Subsidiaries have no liability (and neither
DDS, its Subsidiaries nor their respective predecessors and affiliates have
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future action, suit, proceeding,
hearing, investigation, charge, compliant, claim, or demand against DDS or any
of its Subsidiaries for damage to any site, location, or body of water (surface
or subsurface), for any illness of or personal injury to any employee or other
individual for any reason under any environmental, health, and safety law. All
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properties and equipment use in DDS's and its Subsidiaries' businesses have been
free of asbestos, PCB's, methylene chloride, trichloralethylene, and other
hazardous material.
4.2.28 PROAMERICA ACQUISITION. No claim has been made
or is otherwise pending or, to the best of the Selling Shareholders' knowledge,
threatened or presently available with respect to either the ProAmerica Escrow
Agreement or the ▇▇▇▇▇▇▇ Data Escrow Agreement executed and delivered in
connection with the ProAmerica Acquisition. Each of the Selling Shareholders and
DDS and, to the best of the Selling Shareholders' knowledge, each of the other
parties to the ProAmerica Acquisition and related Agreement and Plan of Merger
have complied with and satisfied in all material respects all terms and
conditions thereof applicable to such parties.
4.2.29 ACCURACY AND COMPLETENESS OF REPRESENTATIONS
AND WARRANTIES. No representation or warranty made by the Selling Shareholders
or DDS in this Agreement and no statement contained in any exhibit, certificate
or disclosure schedule delivered to Pioneer or Merger Subsidiary pursuant hereto
or in connection with the transactions contemplated hereby contains, or will
contain, any untrue statement of a material fact, or omits, or will omit, to
state a material fact necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading.
4.3 REPRESENTATIONS AND WARRANTIES OF PIONEER. Pioneer hereby
represents and warrants to the Selling Shareholders that the following
statements are now true and correct and will be true and correct as of the
Closing:
4.3.1 ORGANIZATION AND STANDING. Each of Pioneer and
Merger Subsidiary (i) is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Ohio and the State of Georgia,
respectively, and (ii) has full corporate power and authority to own, lease and
operate its properties and carry on its business as and where such properties
are now owned or leased and as such business is presently being conducted and to
execute, deliver and perform this Agreement, the Escrow Agreement and the other
agreements provided for therein (to the extent it is a party thereto).
4.3.2 AUTHORIZATION AND ENFORCEABILITY. All requisite
corporate action to approve, execute, deliver and perform this Agreement the
Escrow Agreement and the other agreements provided for therein (to the extent it
is a party thereto) has been taken by the Board of Directors of Pioneer and
Merger Subsidiary. This Agreement, the Escrow Agreement and the other agreements
provided for therein (to the extent it is a party thereto) have been, or when
delivered at the Closing will be, duly and validly executed and delivered by
Pioneer and Merger Subsidiary and constitute the valid and binding obligations
of Pioneer and Merger Subsidiary enforceable in accordance with their terms.
4.3.3 ABSENCE OF CONFLICTS. Neither the execution,
delivery nor performance of this Agreement, the Escrow Agreement and the other
agreements provided for therein (to the extent it is a party thereto) by Pioneer
and Merger Subsidiary does or will (i) conflict with, violate or result in any
breach of any judgment, decree, order, statute, rule or regulation applicable to
Pioneer or Merger Subsidiary, (ii) conflict with, violate or result in any
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breach of any material agreement or instrument to which Pioneer or Merger
Subsidiary is a party or by which they are bound, or constitute a default
thereunder or give rise to a right of acceleration of any obligation of Pioneer
or Merger Subsidiary or (iii) conflict with or violate any provision of the
Articles of Incorporation, Code of Regulations or By-Laws of Pioneer or Merger
Subsidiary.
4.3.4 MERGER SUBSIDIARY. Prior to the Closing,
Pioneer shall cause Merger Subsidiary to be incorporated under the GBCC and
copies of all organization documents shall be provided to counsel for DDS and
the Selling Shareholders for review prior to filing with the Secretary of State
of Georgia.
4.3.5 BROKERS AND FINDERS. No broker, finder or other
person or entity acting in a similar capacity has participated on behalf of
Pioneer in bringing about the transaction herein contemplated, rendered any
services with respect thereto or been in any way involved therewith.
4.3.6 ACCURACY AND COMPLETENESS OF REPRESENTATIONS
AND WARRANTIES. No representation or warranty made by Pioneer in this Agreement
and no statement contained in any exhibit, certificate or other document
delivered to Selling Shareholders pursuant hereto or in connection with the
transactions contemplated hereby contains, or will contain, any untrue statement
of a material fact, or omits, or will omit, to state a material fact necessary
to make the statements contained therein, in light of the circumstances in which
they are made, not misleading.
4.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
provided in Section 5.1(b) regarding Disclosed Claims, the parties hereto agree
that the representations and warranties contained in this Agreement, or any
exhibit, certificate, disclosure schedule or other document delivered in
connection therewith shall survive the Closing as follows: (i) Section 4.1 and
Sections 4.2.1 through 4.2.5 of this Agreement shall survive indefinitely; (ii)
Section 4.2.10 (Tax Matters) shall survive for the longest period with respect
to which any taxing authority can assess additional Taxes (including any
extensions thereof); (iii) Section 4.2.26 (Employee Benefit Plan Matters) shall
survive for the longest period with respect to which any statute of limitations
plus extensions may apply, and (iv) all other representations and warranties
shall expire on the later of March 31, 1999 or the first anniversary of the
Closing Date. No investigation, or lack thereof, by either party or any of their
agents shall be deemed to constitute or imply a waiver of any representation,
warranty, covenant or agreement.
4.5 EFFECT OF REPRESENTATIONS, WARRANTIES AND WAIVERS IF THE
MERGER IS NOT CONSUMMATED. The representations, warranties and waivers of
Selling Shareholders in this Agreement shall be of no force or effect if the
Merger contemplated hereby is not consummated. If the Merger is not consummated,
any rights or cause of action any Selling Shareholder may have had against DDS
or against any other Selling Shareholder prior to the execution of this
Agreement shall not be affected or deemed waived or released by virtue of any
representation, warranty, covenant or waiver set forth in this Agreement.
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5. INDEMNIFICATION
5.1 SELLING SHAREHOLDERS. (a) GENERALLY. Selling Shareholders
shall, for so long as their applicable representations and warranties survive in
accordance with Section 4.4 hereof, (i) severally indemnify Pioneer, DDS and
Merger Subsidiary against and hold them harmless from any and all loss, damage,
liability or deficiency resulting from or arising out of any inaccuracy in or
breach of any representation or warranty made by them in Section 4.1 hereof,
(ii) jointly and severally indemnify Pioneer, DDS and Merger Subsidiary against
and hold them harmless from any and all loss, damage, liability or deficiency
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty made by them in Section 4.2 hereof, and (iii) jointly
and severally indemnify Pioneer, DDS and Merger Subsidiary against and hold them
harmless from any and all loss, damage, liability or deficiency resulting from
or arising out of any breach of any covenant or obligation made or incurred by
any one or more of them herein or in the Escrow Agreement.
(b) SPECIFIC DISCLOSURE MATTERS. In addition to the indemnification
contained in Section 5.1(a) above, the Selling Shareholders shall jointly and
severally indemnify Pioneer, DDS and Merger Subsidiary against and hold them
harmless from any and all loss, damage, liability or deficiency resulting from
or arising out of the following matters regardless of the disclosure with
respect thereto in the Disclosure Schedules ("Disclosed Claims"):
(i) Any failure to qualify and related filing or Tax
matters with respect to disclosures in DISCLOSURE
SCHEDULE 4.2.11 or DISCLOSURE SCHEDULE 4.2.15(c).
(ii) The tax audits disclosed in DISCLOSURE SCHEDULE
4.2.10(c).
Indemnification pursuant to the foregoing provisions shall survive until each
and all of the Disclosed Claims have been fully and finally resolved.
(c) COSTS AND EXPENSES. Indemnification for any claim under this
Agreement shall also include any and all related costs and expenses (including
legal and accounting fees), fines, taxes, penalties, consequential and
incidental damages, compliance costs, indemnification procedure costs and
similar amounts.
5.2 LIMITATIONS ON SELLING SHAREHOLDERS' LIABILITY. (a)
THRESHOLD AMOUNTS. Except for the Disclosed Claims for which there shall be no
threshold amounts, no Selling Shareholder shall have an obligation to indemnify
Pioneer, DDS or Merger Subsidiary pursuant to Section 5.1 unless (i) the claim
for indemnity is in excess of $5,000 (provided, that claims with respect to
accounts receivable, inventory and similar matters shall be aggregated for
purposes of meeting the $5,000 amount) and (ii) the aggregate of all claims made
by Pioneer, DDS or Merger Subsidiary is in excess of $150,000. In the event the
$150,000 aggregate threshold on liability for indemnification in clause (ii)
above is satisfied, each Selling Shareholder shall thereafter be liable (subject
to clause (i) above) for the entire amount of all subsequent claims against him
or her, but subject to the limitations on recovery as provided in this Section.
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(b) LIMITATION AND ALLOCATION OF SELLING SHAREHOLDERS' LIABILITY.
Except as provided below, the aggregate obligations of Selling Shareholders
under this Agreement shall be limited to the amount deposited into Escrow
pursuant to Section 2.4(b) plus undistributed interest, if any, accrued thereon.
Except as provided below, the aggregate, maximum joint and several obligation of
each Selling Shareholder under this Agreement shall be limited to his or her
Allocable Share of the amount deposited into Escrow pursuant to Section 2.4(b)
plus undistributed interest, if any, accrued thereon. In addition, to the extent
each Selling Shareholder's Allocable Share of the Escrow balance is sufficient,
joint and several claims shall be satisfied pro rata in accordance with such
Allocable Shares. Notwithstanding the foregoing, with respect to claims related
to Section 4.1, Sections 4.2.1 through 4.2.5, or Section 4.2.10 of this
Agreement the maximum, aggregate obligation of Selling Shareholders under this
Agreement shall be the Consideration amount and the maximum, aggregate
obligation of any Selling Shareholder shall be such Selling Shareholder's
Allocable Share of the Consideration amount.
5.3 PIONEER GENERALLY. Pioneer agrees to indemnify Selling
Shareholders against and hold them harmless from any and all loss, damage,
liability or deficiency resulting from or arising out of any inaccuracy in or
breach of any representation, warranty, covenant or obligation made or incurred
by it herein and any and all related costs and expenses (including reasonable
legal and accounting fees).
5.4 NOTIFICATION OF AND PARTICIPATION IN CLAIMS. (i)
GENERALLY. (a) An indemnification claim shall be made by an indemnified party
("Indemnitee") by delivery of a written notice to each indemnifying party
("Indemnitor") requesting indemnification and specifying the basis on which
indemnification is sought and the amount of asserted costs, losses, damages,
penalties, litigation and related costs and expenses (including legal and
accounting costs) and similar amounts ("Losses") and, in the case of any claim
involving legal or similar proceedings or otherwise involving third parties
("Third Party Claim"), containing (by attachment or otherwise) such other
information as such Indemnitee shall have concerning such Third Party Claim.
(b) If the indemnification claim involves a Third Party Claim
the procedures set forth in Section 5.4(ii) shall be observed by each Indemnitee
and Indemnitor.
(c) If the indemnification claim involves a matter other than
a Third Party Claim, the Indemnitor shall have thirty (30) days to object to
such indemnification claim by delivery of a written notice of objection to the
Indemnitee specifying in reasonable detail the basis for such objection. Failure
to timely so object shall constitute a final and binding acceptance of the
indemnification claim and responsibility for related Losses by the Indemnitor,
and the Indemnification Claim shall be paid in accordance with Section 5.4(i)(d)
hereof. If an objection is timely delivered by the Indemnitor and the dispute is
not resolved by the Indemnitee and the Indemnitor within fifteen (15) days from
the date the Indemnitee receives such objection, such dispute shall be resolved
by arbitration as provided in Section 5.4(iv) below.
(d) Upon determination of the amount of an indemnification
claim, whether by agreement between the Indemnitor and the Indemnitee or by an
arbitration award or by any
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other final adjudication, the Indemnitors shall pay the amount of such
indemnification claim within five (5) days after the date such amount is
determined.
(ii) THIRD PARTY CLAIMS. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor written notice of
a Third Party Claim promptly after receipt by the Indemnitee of notice thereof,
and (subject to Section 5.4(ii)(b) below) the Indemnitor may undertake the
defense and (subject to Section 5.4(ii)(c) below) the compromise and settlement
thereof by counsel and representatives of its own choosing reasonably acceptable
to the Indemnitee. The failure of the Indemnitee to notify the Indemnitor of
such claim shall not relieve the Indemnitors of any liability that they may have
with respect to such claim except to the extent the Indemnitor demonstrates that
the defense of such claim is materially prejudiced by such failure. The
assumption of the defense of any such Third Party Claim by an Indemnitor shall
be an acknowledgment of the unconditional obligation of the Indemnitors to
indemnify the Indemnitee with respect to such claim and all related Losses
hereunder. If the Indemnitee desires to participate in, but not control, any
such defense, compromise and settlement, it may do so at its sole cost and
expense. If, however, an Indemnitor fails or refuses to undertake the defense of
such Third Party Claim within ten (10) days after written notice of such claim
has been given to the Indemnitor by the Indemnitee, the Indemnitee shall have
the right to undertake and control the defense, compromise and settlement of
such claim with counsel and representatives of its own choosing. In the
circumstances described in the preceding sentence, the Indemnitee shall, prior
to or promptly upon its assumption of the defense of such claim, make an
indemnification claim as specified in Section 5.4(i) above, which shall be
deemed an indemnification claim that is not a Third Party Claim for the purposes
of the procedures set forth herein.
(b) Notwithstanding any provision herein to the contrary, if,
in the reasonable opinion of the Indemnitee, either (I) any Third Party Claim or
the litigation or resolution thereof involves an issue or matter which could
have a material adverse effect on the business, operations, assets, properties
or prospects of the Indemnitee (including, without limitation, any matter
involving Taxes or Tax Returns) or (II) the Indemnitor lacks the resources
reasonably necessary to undertake and continue defense of such Third Party
Claim, the Indemnitee shall have the right to control the defense, compromise
and settlement of such Third Party Claim, and the costs and expenses of the
Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the Indemnitors hereunder. If the Indemnitee
shall elect to exercise such right, the Indemnitor shall have the right to
participate in, but not control, the defense, compromise and settlement of such
Third Party Claim at its sole cost and expense.
(c) No compromise or settlement of a Third Party Claim
involving the asserted liability of the Indemnitors under this Section 5.4 shall
be made without the prior written consent of the Indemnitor, which consent shall
not be unreasonably withheld or delayed. Consent shall be presumed in the case
of compromises and settlements of $50,000 or less where the Indemnitor has not
responded within five (5) business days of notice of a proposed settlement. If
the Indemnitor has assumed the defense of such a Third Party Claim, (a) no
compromise or
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settlement thereof may be effected by or on behalf of the Indemnitor without the
Indemnitee's consent unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect on
any other claim that may be made against the Indemnitee (ii) the sole relief
provided is monetary damages that are paid in full by the Indemnitor and (iii)
the compromise or settlement includes, as an unconditional term thereof, the
giving by the claimant or the plaintiff to the Indemnitee of a release, in form
and substance satisfactory to the Indemnitee, from all liability in respect of
such Third Party Claim, and (b) the Indemnitee shall have no liability with
respect to any compromise or settlement thereof effected without its consent.
(d) In connection with the defense, compromise or settlement
of any Third Party Claim, the parties to this Agreement hereby grant and shall
execute such powers of attorney as may reasonably be necessary or appropriate to
permit participation of counsel selected by any party hereto and, as may
reasonably be related to any such claim or action, shall provide access to the
counsel, accountants and other representatives of each party during normal
business hours to all properties, personnel, books, tax records, contracts,
commitments and all other business records of such other party and will furnish
to such other party copies of all such documents as may reasonably be requested
(certified, if requested).
(iii) SUBROGATION. Upon final resolution and payment in full of any
indemnification claim, whether such payment is effected by set-off, the payment
of any judgment or settlement with respect to a Third Party Claim, or otherwise,
the Indemnitors shall be subrogated to the extent of any such payment to the
rights of the Indemnitees against any person or entity with respect to the
subject matter of such indemnification claim, provided, that, until such final
resolution and payment in full, Indemnitees shall retain the unconditional right
to compromise or settle any claims, rights and other interests with respect to
such persons and entities.
(iv) ARBITRATION. All disputes arising under this Section 5.4 and all
disputes regarding the calculation or amount of "excess tax distribution" under
Section 2.7(e) hereof (in any instance other than claims in equity) shall be
resolved by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Arbitration shall be by a single
arbitrator experienced in the matters at issue and selected by the Indemnitor
and Indemnitee in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The arbitration shall be held in such place in
Atlanta, Georgia as may be specified by the arbitrator (or any place agreed to
by the Indemnitor, Indemnitee and the arbitrator). The decision of the
arbitrator shall be final and binding as to any matters submitted under this
Section 5.4; provided, however, if necessary, such decision and satisfaction
procedure may be enforced by either the Indemnitor or the Indemnitee in any
court of record having jurisdiction over the subject matter or over any of the
parties to this Agreement. All costs and expenses incurred in connection with
any such arbitration proceeding (including reasonable attorneys fees) shall be
borne by the party against which the decision is rendered, or, if no decision is
rendered, such costs and expenses shall be borne equally by the Indemnitors as
one party and the Indemnitees as the other party. If the arbitrator's decision
is a compromise, the determination of which party or parties bears the costs and
expenses incurred in connection with any such arbitration proceeding
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shall be made by the arbitrator on the basis of the arbitrator's assessment of
the relative merits of the parties' positions.
5.5 NET LOSSES. Any indemnification pursuant to this Section 5
shall be net of (i) any reasonably anticipated federal or state income tax
benefit specifically arising from the facts and circumstances giving rise to the
loss, realizable by the Indemnitee (or any of its affiliates) by a reduction in
taxes payable, or by the receipt of a refund of taxes, by the Indemnitee (or
such affiliate); (ii) any insurance proceeds received by the Indemnitee (or its
affiliates) with respect to the Loss and (iii) any payments received and
retained by the Indemnitee (or its affiliates) from other persons or entities
with respect to the Loss. The tax benefit shall be determined in good faith by
the independent public accountants of the indemnified party and shall apply to
the earliest year reasonably permissible.
6. OTHER COVENANTS
6.1 FURTHER ASSURANCES. Each of the Selling Shareholders
agrees to execute and deliver to Pioneer any and all documents and instruments
in addition to those provided for herein that may be necessary or appropriate to
effectuate the provisions of this Agreement, whether before, on or after the
Closing Date. Each of the Selling Shareholders further agrees that at any time
and from time to time after the Closing Date such Selling Shareholder will
execute and deliver to Pioneer or its designee such further assignments or other
written assurances as Pioneer may reasonably request in order to perfect and
protect Pioneer's title to the DDS Shares and/or the title of DDS, any of its
Subsidiaries to its assets and properties.
6.2 INVESTMENT IN PROFESSIONAL SERVICES ENTITY.
Contemporaneously with the Closing and subject to the terms of Section 2.7(g)
(Spin-off of Software and Services Businesses) and Section 2.10 (Pioneer
Conditions to Closing), Pioneer will either (a) loan $2,500,000 in the aggregate
to the Professional Services Entity or (b) make a preferred equity investment
aggregating $2,500,000 in the Professional Services Entity, convertible in
either instance at any time after one (1) year at Pioneer's option into
ownership in the Professional Services Entity constituting fifty-one percent
(51%) of all ownership interests of the Professional Services Entity. Pioneer
and the Selling Shareholders acknowledge and agree that Pioneer's ownership
interest in the Professional Services Entity shall be increased to account for
new or incremental business referred or contributed to the Professional Services
Entity from time to time by Pioneer as the owners of the Professional Services
Entity may mutually agree. The interest rate, default, preference terms,
conversion terms, transfer provisions and other terms and conditions of such
loan or investment and all related agreements, instruments and documents with
respect thereto shall be as set forth in Exhibit 2.7(g) and otherwise shall be
reasonably satisfactory to Pioneer in all material respects.
6.3 SHAREHOLDER NOTES. Immediately following the Closing,
Pioneer will cause DDS to pay in full the notes set forth in Exhibit 6.3
("Shareholder Notes") in the aggregate principal amount of $1,702,000 plus
interest accrued and unpaid under the Shareholder Notes from January 1, 1998
through the Closing. Upon and as a condition to such payment, each of the
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Selling Shareholders holding Shareholder Notes shall deliver them to Pioneer
with any release reasonably requested by Pioneer.
6.4 INSURANCE. Following the Closing, Pioneer will cause DDS
to maintain general liability and electronics errors and omissions insurance
coverage on terms not materially less favorable than those provided under
policies owned by DDS prior to the Closing and set forth in DISCLOSURE SCHEDULE
6.4.
6.5 SELLING SHAREHOLDERS' REPRESENTATIVE. For purposes of this
Agreement, including, without limitation, for purposes of Section 5.4 hereof,
each and all of the Selling Shareholders hereby appoint ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
("Representative") as representative of each and all of the Selling Shareholders
and as the attorney-in-fact for and on behalf of each and all of the Selling
Shareholders for all purposes under this Agreement. Subject to the express
limitation set forth below and notwithstanding any other provision of this
Agreement or the Escrow Agreement, the Representative may take or refrain from
taking any and all actions and make any decisions required or permitted to be
taken by the Selling Shareholders under this Agreement, including, without
limitation, the exercise of the power to (i) authorize delivery to Pioneer or
DDS of any proceeds held in the Escrow, or any portion thereof, (ii) agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to any
indemnification claims or other matters arising under this Agreement or the
Escrow Agreement, (iii) receive all notices and other deliveries otherwise to be
provided to the Selling Shareholders hereunder or under the Escrow Agreement,
(iv) provide any and all waivers, consents and amendments with respect to this
Agreement, the Escrow Agreement or the performance of any of the parties'
thereto, and (v) take all actions necessary in the judgment of the
Representative for the accomplishment of the foregoing and all of the other
terms, conditions and limitations of this Agreement. The Representative will
have unlimited authority and power to act on behalf of each Selling Shareholder
with respect to this Agreement and the Escrow Agreement and the disposition,
settlement or other handling of all claims, rights, actions or obligations
arising under this Agreement or the Escrow Agreement. Each of the Selling
Shareholders will be unconditionally bound by all actions taken or refrained
from by the Representative in connection with this Agreement or the Escrow
Agreement, and each of Pioneer and DDS will be entitled to rely on any action,
inaction or decision of the Representative without further inquiry. In
performing the functions specified in this Agreement, the Representative will
not be liable to the Selling Shareholders in the absence of gross negligence or
willful misconduct. The Representative may resign from such position, effective
upon a new representative being appointed in writing by Selling Shareholders who
represent a majority of the aggregate Allocable Shares. Any such new
representative shall be and become the Representative hereunder and shall have
the same powers, interests, rights and protections as provided the
Representative herein. The Representative will not be entitled to receive any
compensation in connection with this Agreement. Any out-of-pocket costs and
expenses reasonably incurred by the Representative in connection with this
Agreement or the Escrow Agreement will be paid by the Selling Shareholders to
the Representative in proportion to their respective Allocable Shares.
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6.6 TERMINATION OF SHAREHOLDERS AGREEMENT. Each of DDS and the
Selling Shareholders hereby (a) waives any rights of first refusal and other
rights, conditions or limitations otherwise applicable to the Merger or other
transactions and transfers provided for in this Agreement pursuant to the
Shareholders Agreement ("Shareholders Agreement") entered into as of March 31,
1997, among DDS and the Selling Shareholders and (b) acknowledges and agrees
that the Shareholders Agreement shall be terminated upon and as of the Effective
Time.
6.7 TERMINATION OF PROAMERICA ACQUISITION ESCROW AGREEMENTS.
As of but not before the Closing Date, each of DDS and the Selling Shareholders
agree to terminate the ProAmerica Escrow Agreement and the ▇▇▇▇▇▇▇ Data Escrow
Agreement executed and delivered in connection with the ProAmerica Acquisition,
PROVIDED, that DDS will duly pursue and file any claim which it may have against
the applicable escrow prior to the Closing Date and such escrow agreement will
not be terminated as to any pending claims.
6.8 MISCELLANEOUS. Following the Closing, DDS will continue to
provide office space and reasonable administrative support for Messrs. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ for a period, not to exceed thirty (30) days
following the Closing, to assist in their transition away from the business and
affairs of DDS.
7. TERMINATION
7.1 TERMINATION, AMENDMENT, AND WAIVER. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval of the Selling Shareholders of DDS:
(a) By mutual consent of the Boards of Directors of Pioneer and DDS;
(b) By either Pioneer or DDS if the Merger shall not have been consummated
on or before April 1, 1998;
(c) By Pioneer if there has been a material misrepresentation or breach of
the representations and warranties set forth herein of the Selling
Shareholders or DDS or by DDS if there has been a material breach of
the representations and warranties set forth herein of Pioneer or the
Merger Subsidiary, but in any case if the misrepresentations or breach
arises after the date hereof, only after passage of a reasonable period
of time in which to cure;
(d) By Pioneer if it shall have determined in its exercise of good faith
business judgment that the proposed Merger has become inadvisable or
impracticable by reason of any material judgment, decree, or order
entered or issued after the date hereof in litigation or a proceeding
involving Pioneer or DDS by reason of the institution after the date
hereof by state, local or federal governmental authorities or by any
other person of material litigation or proceedings against DDS or
against Pioneer;
(e) By either Pioneer or DDS if Pioneer delivers a Rejection Notice with
respect to any material amendment to a Disclosure Schedule proposed by
DDS as provided for in
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Section 8.7 and DDS shall fail to agree to delete the objectionable
portion of the amending Disclosure Schedule within ten (10) days of the
receipt of such Rejection Notice; or
(f) By Pioneer if it terminates this Agreement solely because of its
failure to fund the Consideration provided for herein, provided, that
Pioneer shall then be obligated to pay the Termination Fee provided for
in Section 7.4.
7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by Pioneer or DDS as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability hereunder on the part of
Pioneer or Merger Subsidiary, DDS, Selling Shareholders or their respective
officers or directors except for willful breach and except that the agreements
with respect to expenses contained in Section 8.3 hereof shall survive the
termination hereof.
7.3 CONFIDENTIALITY. In the event this Agreement is
terminated, Pioneer will not use information concerning DDS's business received
in the course of negotiating this Agreement and investigation in connection with
the merger of DDS and Merger Subsidiary contemplated herein and will hold such
information in confidence until the earlier of three (3) years after the date
hereof or until such time as such information is or otherwise becomes publicly
available or as may be required by applicable law. In the event of the
termination of this Agreement each party will deliver to the other any copies of
nonpublic documents furnished it by the other.
7.4 TERMINATION FEE. If Pioneer terminates this Agreement or
fails to consummate the Merger solely because of its failure to fund the
Consideration provided for herein or its failure to obtain any requisite
consents to the Merger and related transactions from the holders of Pioneer
indebtedness for borrowed money, then Pioneer will pay DDS the sum of $1,000,000
as a condition to such termination ("Termination Fee"). The Termination Fee will
be DDS's and the Selling Shareholders' exclusive remedy in the event Pioneer
terminates this Agreement as provided in Section 7.1(f) and this Section 7.4.
8. MISCELLANEOUS
8.1 AMENDMENT. This Agreement may be amended by the parties
hereto at any time before or after approval of this Agreement and the Merger by
the Selling Shareholders and before the Effective Time. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.2 WAIVER. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements of the other parties or satisfaction of
any of the conditions to its obligations contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in writing signed on behalf of such party.
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8.3 FEES AND EXPENSES. Each of Pioneer, DDS and its
Subsidiaries, and each Selling Shareholder (but only to the extent such Selling
Shareholder elects to engage separate counsel or accountants) will be solely
responsible for and pay its respective fees, costs and expenses (including any
fees, costs and expenses of its representatives) incurred at any time in
connection with pursuing or consummating the transactions provided for in this
Agreement. Notwithstanding the foregoing sentence, Pioneer will pay the HSR Act
filing fee and the Selling Shareholders shall assume and pay fifty percent (50%)
of DDS's obligation to compensate The ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company, Inc. under the
engagement agreement referenced in Section 4.2.25 hereof.
8.4 NOTICES. All notices and other communications required by
this Agreement shall be in writing and shall be deemed given if delivered by
hand or mailed by registered or certified mail to the appropriate party at the
following address (or at such other address for a party as shall be specified by
notice pursuant hereto):
(i) If to Pioneer or Merger Subsidiary, to:
Pioneer-Standard Electronics, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and CEO
With a copy to:
▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP
1400 ▇▇▇▇▇▇▇▇ Investment Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
(ii) If to the Selling Shareholders, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, as Representative
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee of
The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Minor's Trust
▇▇▇▇▇▇▇ & Associates
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇ & Associates
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Trustee of
The ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Minor's Trust
▇▇▇▇▇▇▇ & Associates
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
- and -
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., as Executor of
The Estate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
In each case with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esq.
(iii) If to ▇▇▇▇▇▇▇ Data Systems, Inc., to:
▇▇▇▇▇▇▇ Data Systems., Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, CEO
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With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esq.
8.5 BINDING EFFECT. Except as otherwise provided herein, this
Agreement and all the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
8.6 HEADINGS. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
8.7 DISCLOSURE SCHEDULES, EXHIBITS AND AMENDMENTS TO
DISCLOSURE SCHEDULES. The Disclosure Schedules and Exhibits referred to in this
Agreement constitute an integral part of this Agreement as if fully rewritten
herein. To the extent applicable, a disclosure set forth on one Disclosure
Schedule will serve as a disclosure for purposes of all other Disclosure
Schedules.
Initial Disclosure Schedules referred to herein shall be
delivered on the date of execution hereof. At or prior to the Closing, DDS shall
have the right to deliver amended Disclosure Schedules for review and either
approval thereof or rejection thereof by Pioneer, which approval shall not be
unreasonably withheld or delayed by Pioneer. Any amendments to Disclosure
Schedules will be delivered sufficiently in advance of the Closing Date to allow
Pioneer to fully review the contents thereof. Pioneer may reject any amended
Disclosure Schedule which differs from the original Disclosure Schedule in any
material respect within five (5) days of receipt (but not later than five (5)
days prior to Closing). In the event Pioneer rejects any such amended Disclosure
Schedule in writing (the "Rejection Notice") and Selling Shareholders and
Pioneer fail to mutually agree on an acceptable basis for addressing the
objectionable portion as a Disclosed Claim within three (3) days of receipt of
the Rejection Notice, either DDS or Pioneer may terminate this Agreement
pursuant to Section 7.1(e).
8.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. This Agreement shall be
effective upon execution and delivery of either manually signed or facsimile
signed signature pages.
8.9 GOVERNING LAW. This Agreement and all disputes hereunder
shall be construed in accordance with and governed by the laws of the State of
Ohio. The Merger shall be governed by the laws of the State of Georgia.
8.10 SEVERABILITY. If any provision of this Agreement shall be
held unenforceable, invalid or void to any extent for any reason, such provision
shall remain in force
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and effect to the maximum extent allowable, if any, and the enforceability or
validity of the remaining provisions of this Agreement shall not be affected
thereby.
8.11 WAIVERS. No waiver of any of the provisions of this
Agreement shall be valid and enforceable unless such waiver is in writing and
signed by the party to be charged, and, unless otherwise stated therein, no such
waiver shall constitute a waiver of any other provisions hereof (whether or not
similar) or a continuing waiver.
8.12 ENTIRE AGREEMENT. This Agreement and the agreements and
documents to be delivered hereunder constitute the entire understanding and
agreement between the parties hereto concerning the subject matter hereof. All
negotiations between the parties hereto are merged into this Agreement and the
agreements and documents to be delivered hereunder, and there are no
representations, warranties, covenants, understandings or agreements, oral or
otherwise, in relation thereto between the parties other than those incorporated
herein and to be delivered hereunder. Except as otherwise expressly contemplated
by this Agreement, nothing expressed or implied in this Agreement is intended or
shall be construed so as to grant or confer on any person, firm or corporation
other than the parties hereto any rights or privileges hereunder. No supplement,
modification, amendment or termination of this Agreement shall be binding unless
executed in writing by the parties to be bound thereby.
[SIGNATURES ON FOLLOWING PAGE]
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[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
▇▇▇▇▇▇▇ DATA SYSTEMS, INC. SHAREHOLDERS:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Executive Officer and President
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Chairman and CEO
THE ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ MINOR'S
TRUST
And /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as
President and COO Trustee of The ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ Minor's Trust
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
PIONEER-STANDARD OF GEORGIA, INC. THE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MINOR'S
TRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as
Chairman and CEO Trustee of The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Minor's Trust
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
ESTATE OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., as
Executor of the Estate of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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EXHIBITS
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Exhibit 1.6 ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 1.9 Escrow Agreement
Exhibit 1.16 Form of Noncompetition Agreement
Exhibit 1.21 Software and Services Businesses Description
Exhibit 2.2 Articles of Merger
Exhibit 2.7(g) Professional Services Entity Summary
Exhibit 2.8(i) Promissory Note and Letter of Credit Summary
Exhibit 3.1(f) Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
Exhibit 3.2(c) Opinion of ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP
Exhibit 6.3 Shareholder Notes
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DISCLOSURE SCHEDULES
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Disclosure Schedule 2.7(c) - Tax Estimate Distribution
Disclosure Schedule 4.1.4 - Absence of Conflicts
Disclosure Schedule 4.1.6 - Conflicts of Interest
Disclosure Schedule 4.2.3 - Subsidiaries
Disclosure Schedule 4.2.6 - Absence of Conflicts
Disclosure Schedule 4.2.8 - Liabilities
Disclosure Schedule 4.2.9 - Absence of Certain Changes
Disclosure Schedule 4.2.10 - Tax Matters
Disclosure Schedule 4.2.11 - Compliance with Laws
Disclosure Schedule 4.2.12 - Litigation
Disclosure Schedule 4.2.13 - General Liability
Disclosure Schedule 4.2.14 - Labor
Disclosure Schedule 4.2.15 - Lists of Properties, Contracts, Etc.
Disclosure Schedule 4.2.17 - Title
Disclosure Schedule 4.2.21 - Proprietary Property
Disclosure Schedule 4.2.22 - Compliance
Disclosure Schedule 4.2.24 - Suppliers and Customers
Disclosure Schedule 4.2.26 - Employee Benefit Plan Matters
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