<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 30, 1998
----------------
THE INTERCEPT GROUP, INC.
----------------------------
(Exact Name of Registrant
as Specified in its Charter)
Georgia 01-14213 58-2237359
- -------------------------------------------------------------------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071
-----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (770) 248-9600
--------------
N/A
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the terms of the Acquisition and Merger Agreement dated October
30, 1998 (the "Agreement") by and between ProVesa, Inc., a wholly owned
subsidiary of The InterCept Group, Inc. ("InterCept"), IPA Acquisition
Corporation, a wholly owned subsidiary of ProVesa, Inc. ("Acquisition Corp"),
Item Processing of America, Inc. ("IPA") and certain shareholders of IPA,
effective as of October 31, 1998, Acquisition Corp merged with and into IPA, and
IPA became a wholly-owned subsidiary of ProVesa, Inc. In exchange for all
shares of common and preferred stock of IPA, InterCept paid a purchase price of
approximately $1,255,000 in cash using proceeds from the initial public offering
of its common stock. InterCept intends to continue to use the acquired business
to provide item processing services to customers in Florida.
IPA is a Miami, Florida based provider of item capture and disaster recovery
services to customers throughout South Florida. IPA currently serves 25
customers and has 28 employees.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is impractical to provide the required financial statements for IPA
at the date of the filing of this Form 8-K. The required financial
statements will be provided as soon as practicable but not later than
sixty days after the date on which this Form 8-K must be filed.
(B) PRO FORMA FINANCIAL INFORMATION.
It is impractical to provide the required pro forma financial
information at the date of the filing of this Form 8-K. The required pro
forma financial information will be provided as soon as practicable but
not later than sixty days after the date on which this Form 8-K must be
filed.
(C) EXHIBITS.
2.1 Acquisition and Merger Agreement dated October 30, 1998 by and between
ProVesa, Inc., IPA Acquisition Corporation, Item Processing of America,
Inc. ("IPA") and certain shareholders of IPA.*
99.1 Press Release dated October 30, 1998.
*Pursuant to Item 601(b)(2) of Regulation S-K, the Company agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon request.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE INTERCEPT GROUP, INC.
By: /s/ Scott R. Meyerhoff
----------------------
Scott R. Meyerhoff
Chief Financial Officer
Dated: November 13, 1998
4
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
2.1 Acquisition and Merger Agreement dated October 30, 1998 by and between
ProVesa, Inc., IPA Acquisition Corporation, Item Processing of America,
Inc. ("IPA") and certain shareholders of IPA.*
99.1 Press Release dated October 30, 1998.
*Pursuant to Item 601(b)(2) of Regulation S-K, the Company agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon request.
5
<PAGE>
ACQUISITION AND MERGER AGREEMENT
BY AND AMONG
IPA ACQUISITION CORP.,
a Florida corporation,
PROVESA INC.,
a Georgia corporation,
AND
ITEM PROCESSING OF AMERICA, INC.,
a Florida corporation,
AND
NORMAN S. EDELCUP & ROBERT L. JACKSON,
shareholders of Item Processing of America, Inc.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1................................................................... 2
SECTION 1.1. MERGER TRANSACTION................................... 2
---------------------------------------------------------------------------
SECTION 1.2. EFFECTIVE TIME OF THE MERGER......................... 2
---------------------------------------------------------------------------
SECTION 1.3. TERMS AND CONDITIONS; CONVERSION OF SHARES........... 2
---------------------------------------------------------------------------
ARTICLE 2................................................................... 2
SECTION 2.1. PURCHASE PRICE; PAYMENT FOR SHARES................... 2
---------------------------------------------------------------------------
ARTICLE 3................................................................... 2
SECTION 3.1. AUTHORIZATION; ORGANIZATION.......................... 2
--------------------------------------------------------------------------
SECTION 3.2. CAPITALIZATION; STRUCTURE............................ 4
--------------------------------------------------------------------------
SECTION 3.3. FINANCIAL STATEMENTS................................. 4
---------------------------------------------------------------------------
SECTION 3.4. UNDISCLOSED LIABILITIES.............................. 5
---------------------------------------------------------------------------
SECTION 3.5. PROPERTIES........................................... 6
---------------------------------------------------------------------------
SECTION 3.6. LITIGATION........................................... 6
---------------------------------------------------------------------------
SECTION 3.7. INTELLECTUAL PROPERTY................................ 6
---------------------------------------------------------------------------
SECTION 3.8. ADEQUACY OF TECHNICAL DOCUMENTATION.................. 8
---------------------------------------------------------------------------
SECTION 3.9. THIRD-PARTY COMPONENTS IN SOFTWARE................... 8
---------------------------------------------------------------------------
SECTION 3.10. THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN SOFTWARE 8
---------------------------------------------------------------------------
SECTION 3.11. LICENSES............................................. 8
---------------------------------------------------------------------------
SECTION 3.12. COMPLIANCE WITH LAWS................................. 8
---------------------------------------------------------------------------
SECTION 3.13. INSURANCE............................................ 9
---------------------------------------------------------------------------
SECTION 3.14. MATERIAL CONTRACTS................................... 9
---------------------------------------------------------------------------
SECTION 3.15. BROKERS, FINDERS, ETC................................ 10
---------------------------------------------------------------------------
SECTION 3.16. TAXES................................................ 10
---------------------------------------------------------------------------
SECTION 3.17. PENSION AND EMPLOYEE BENEFIT PLANS................... 11
---------------------------------------------------------------------------
SECTION 3.18. LABOR AND EMPLOYMENT MATTERS......................... 13
---------------------------------------------------------------------------
SECTION 3.19. ENVIRONMENTAL MATTERS................................ 14
---------------------------------------------------------------------------
SECTION 3.20. AGREEMENTS AFFECTING COMPETITION..................... 14
---------------------------------------------------------------------------
SECTION 3.21. TRANSACTIONS WITH RELATED PARTIES.................... 14
---------------------------------------------------------------------------
SECTION 3.22 MAJOR VENDORS AND CUSTOMERS.......................... 15
---------------------------------------------------------------------------
SECTION 3.23 ABSENCE OF CERTAIN COMMERCIAL PRACTICES.............. 15
---------------------------------------------------------------------------
SECTION 3.24. ACCOUNTS RECEIVABLE.................................. 15
---------------------------------------------------------------------------
SECTION 3.25. DISCLOSURE........................................... 15
---------------------------------------------------------------------------
SECTION 3.26. YEAR 2000............................................ 16
---------------------------------------------------------------------------
SECTION 3.27. SHAREHOLDERS' ADDITIONAL REPRESENTATIONS............. 16
---------------------------------------------------------------------------
ARTICLE 4................................................................... 17
ARTICLE 5................................................................... 17
SECTION 5.1. GENERAL RELEASE...................................... 17
- --------------------------------------------------------------------------------
-i-
<PAGE>
SECTION 5.2. COVENANT NOT TO SUE.................................. 18
---------------------------------------------------------------------------
SECTION 5.3. CONFIDENTIALITY...................................... 18
---------------------------------------------------------------------------
SECTION 5.4. NON-SOLICITATION OF CUSTOMERS........................ 18
---------------------------------------------------------------------------
SECTION 5.5. NON-SOLICITATION OF EMPLOYEES........................ 19
---------------------------------------------------------------------------
SECTION 5.6. TRADE SECRETS........................................ 19
---------------------------------------------------------------------------
SECTION 5.7. CONSIDERATION........................................ 19
---------------------------------------------------------------------------
ARTICLE 6................................................................... 19
SECTION 6.1. CONDUCT OF BUSINESS.................................. 19
---------------------------------------------------------------------------
SECTION 6.2. VOTING OF THE SHARES................................. 21
---------------------------------------------------------------------------
ARTICLE 7................................................................... 21
SECTION 7.1. ACCURACY OF REPRESENTATIONS.......................... 21
---------------------------------------------------------------------------
SECTION 7.2. PERFORMANCE OF COMPANY AND SHAREHOLDERS.............. 21
---------------------------------------------------------------------------
SECTION 7.3. MATERIAL CHANGES..................................... 22
---------------------------------------------------------------------------
SECTION 7.4. ABSENCE OF LITIGATION................................ 22
---------------------------------------------------------------------------
SECTION 7.5. CERTIFICATES OF THE COMPANY AND SHAREHOLDERS......... 22
---------------------------------------------------------------------------
SECTION 7.6. CORPORATE APPROVAL................................... 22
---------------------------------------------------------------------------
SECTION 7.7. APPROVALS............................................ 22
---------------------------------------------------------------------------
SECTION 7.8. EMPLOYMENT AGREEMENTS................................ 22
---------------------------------------------------------------------------
ARTICLE 8................................................................... 22
SECTION 8.1. ACCURACY OF REPRESENTATIONS.......................... 23
---------------------------------------------------------------------------
SECTION 8.2. PERFORMANCE OF BUYER................................. 23
---------------------------------------------------------------------------
SECTION 8.3. ABSENCE OF LITIGATION................................ 23
---------------------------------------------------------------------------
SECTION 8.4. CERTIFICATES OF THE BUYER............................ 23
---------------------------------------------------------------------------
SECTION 8.5. CORPORATE APPROVAL................................... 23
---------------------------------------------------------------------------
SECTION 8.6. THIRD PARTY APPROVALS................................ 23
---------------------------------------------------------------------------
SECTION 8.7. EMPLOYMENT AGREEMENTS................................ 23
---------------------------------------------------------------------------
ARTICLE 9................................................................... 23
SECTION 9.1. TIME AND PLACE OF CLOSING............................ 23
---------------------------------------------------------------------------
SECTION 9.2. DELIVERIES BY THE COMPANY............................ 24
---------------------------------------------------------------------------
SECTION 9.3. DELIVERIES BY BUYER.................................. 24
---------------------------------------------------------------------------
SECTION 9.4. POST CLOSING DELIVERIES AND POWER OF ATTORNEY........ 25
---------------------------------------------------------------------------
ARTICLE 10.................................................................. 25
SECTION 10.1. TERMINATION.......................................... 25
---------------------------------------------------------------------------
SECTION 10.2. EFFECT OF TERMINATION................................ 25
---------------------------------------------------------------------------
ARTICLE 11.................................................................. 26
SECTION 11.1. SURVIVAL............................................. 26
---------------------------------------------------------------------------
SECTION 11.2. INDEMNIFICATION...................................... 26
---------------------------------------------------------------------------
SECTION 11.3. PROCEDURE FOR THIRD-PARTY CLAIMS..................... 27
---------------------------------------------------------------------------
ARTICLE 12.................................................................. 28
-ii-
<PAGE>
SECTION 12.1. EFFECTIVE DATE....................................... 28
---------------------------------------------------------------------------
SECTION 12.2. ARBITRATION.......................................... 28
---------------------------------------------------------------------------
ARTICLE 13.................................................................. 29
SECTION 13.1. INTEGRATION; SEVERABILITY............................ 29
---------------------------------------------------------------------------
SECTION 13.2. JOINT AND SEVERAL LIABILITY.......................... 29
---------------------------------------------------------------------------
SECTION 13.3. EXPENSES............................................. 29
---------------------------------------------------------------------------
SECTION 13.4. NOTICES.............................................. 29
---------------------------------------------------------------------------
SECTION 13.5. PUBLIC ANNOUNCEMENTS................................. 30
---------------------------------------------------------------------------
SECTION 13.6. INVALIDITY OF ANY PART............................... 31
---------------------------------------------------------------------------
SECTION 13.7. REMEDIES............................................. 31
---------------------------------------------------------------------------
SECTION 13.8. ASSISTANCE OF COUNSEL................................ 31
---------------------------------------------------------------------------
SECTION 13.9. GOVERNING LAW AND JURISDICTION....................... 31
---------------------------------------------------------------------------
SECTION 13.10. ASSIGNMENT; AMENDMENTS; BINDING AGREEMENT............ 31
---------------------------------------------------------------------------
-iii-
<PAGE>
ACQUISITION AND MERGER AGREEMENT
--------------------------------
THIS ACQUISITION AND MERGER AGREEMENT ("Agreement") is dated as of
October 30, 1998, by and among ProVesa Inc., a Georgia corporation ("ProVesa"),
IPA Acquisition Corp., a Florida corporation and wholly-owned subsidiary of
ProVesa ("Buyer"), Item Processing of America, Inc., a Florida corporation (the
"Company"), Norman S. Edelcup, a resident of the State of Florida ("Edelcup")
and Robert L. Jackson, a resident of the State of Florida ("Jackson") (Edelcup
and Jackson, each a "Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Edelcup owns 138,000 shares (or 64.2%) of the Common Stock, par
value $1.00 per share (the "Common Stock") of the Company; and
WHEREAS, Jackson owns 42,100 shares (or 19.6%) of the Common Stock
(together with the shares of the Common Stock owned by Edelcup, the "Shareholder
Shares"); and
WHEREAS, subject to the terms and conditions of this Agreement, the
Shareholders, the Company, ProVesa and the Buyer desire and deem it in their
respective best interests that the Buyer be merged with and into the Company
(the "Merger"); and
WHEREAS, the Company's Board of Directors has recommended approval of
the Merger by the Company's shareholders at a special meeting of shareholders to
be held on October 23, 1998;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
----------
SECTION 1.1. MERGER TRANSACTION. Subject to the terms and conditions
------------------
hereof, the parties hereto agree that the Buyer shall be merged with and into
the Company in accordance with the applicable provisions of the Florida Business
Corporation Act (the "FBCA"), and the separate existence of the Buyer shall
thereupon cease. The Company shall be the surviving corporation in the Merger
and shall be a wholly-owned subsidiary of ProVesa. Subject to the terms and
conditions hereof, the parties hereto shall take all actions necessary in
accordance with applicable law and their respective Articles of Incorporation
and Bylaws to cause the Merger to be consummated.
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
----------------------------
effective on the date and time (the "Effective Time") that the Articles of
Merger (the "Articles of Merger") in the form attached hereto as Exhibit 1.2
-----------
become effective with the Department of State of the State of Florida in
accordance with the applicable provisions of the FBCA.
<PAGE>
SECTION 1.3. TERMS AND CONDITIONS; CONVERSION OF SHARES. The effect of
------------------------------------------
the Merger on the Articles of Incorporation, Bylaws, directors and officers of
the surviving corporation, and the manner and basis of converting the shares of
capital stock of Buyer and the Company into stock or cash, shall be as set forth
in the Plan of Merger executed by the Buyer and the Company and attached hereto
as Exhibit 1.3.
-----------
ARTICLE 2
PURCHASE PRICE; EXCHANGE OF SHARES
----------------------------------
SECTION 2.1. PURCHASE PRICE; PAYMENT FOR SHARES. At the Closing (as
----------------------------------
hereinafter defined), the Buyer will deliver certified or cashier's checks in
the aggregate amount of $1,255,473 representing payment in full for the shares
of stock and options as computed pursuant to the Plan of Merger. The purchase
price for each share of the Company's Common Stock and preferred stock, and each
option to purchase Common Stock, shall be as follows:
(a) Common Stock. The purchase price for each outstanding share
------------
of Common Stock shall be $5.04.
(b) Preferred Stock. The purchase price for each outstanding
---------------
share of 8.4% Preferred Stock (as defined in Section 3.2) shall be $26.00.
(c) Options. The purchase price for each outstanding option to
-------
purchase Common Stock shall be $4.04, which equals the purchase price of one
share of Common Stock less the exercise price of each option ($1.00).
No shares of Buyer common stock will be issued to the sellers of the
Company's Common Stock, preferred stock or options.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
AND THE SHAREHOLDERS
--------------------
The Company and the Shareholders, jointly and severally, hereby
represent and warrant to Buyer and ProVesa as follows:
SECTION 3.1 AUTHORIZATION; ORGANIZATION.
---------------------------
(a) The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Florida and has all
requisite corporate power and authority to own, lease or operate its properties
and assets and to carry on its business as now being conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the nature of property owned or leased by it or the conduct of its
business requires it to be so qualified, except where the failure to do so would
not have a
-2-
<PAGE>
material adverse effect on its business, operations, properties, assets or
condition, financial or otherwise (a "Material Adverse Effect").
(b) The Company has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Merger and the other transactions provided for herein and in the
Articles of Merger, the Plan of Merger, and all other documents and agreements
executed in connection herewith and therewith (collectively, the "Merger
Documents"). The Board of Directors of the Company and the Shareholders have
unanimously approved the execution, delivery and performance of this Agreement
and the consummation of the transactions provided for herein.
(c) This Agreement has been duly and voluntarily executed and
delivered by each of the Shareholders and the Company and constitutes the legal,
valid and binding obligations of each of them, enforceable in accordance with
its terms.
(d) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not conflict
with or result in a violation, breach, default, right to accelerate or increase
in obligations under the Company's Articles of Incorporation or Bylaws, any law
or statute or any order, judgment or decree by which the Company is bound by
name or any license, lease or other agreement to which the Company is a party or
by which its assets and business may be affected.
(e) The Company's Articles of Incorporation, Bylaws and stock
book and, in all material respects, its minute books are complete and correct
and contain all amendments thereto to date, a record of all corporate
proceedings of the Company, and a record of all stock issuances and transfers of
the Company.
(f) Except as set forth in Schedule 3.1(f), the Company has no
---------------
subsidiaries and never has had any subsidiaries, and the Company does not
conduct and never has conducted any business under any trade name or other
fictitious name.
(g) The Company is not a party to any joint venture or other
similar agreement or arrangement that involves any sharing of profits of the
Company or its assets or is similar to or competitive with the business.
(h) The Shareholders are the sole record and beneficial owners
of the Shareholder Shares, free and clear of all mortgages, liens, pledges,
security interests, charges, proxies, claims, restrictions, options and
encumbrances of any nature whatsoever (collectively, "Liens"). The Shareholders
each have the full legal right, power and authority to vote the shares of Common
Stock held by them. The Shareholders have not transferred or assigned any right,
power or authority with respect to the Shareholder Shares to any other person or
entity.
-3-
<PAGE>
SECTION 3.2. CAPITALIZATION; STRUCTURE.
-------------------------
(a) The authorized capital stock of the Company consists of (i)
500,000 authorized shares of Common Stock, of which 214,840 shares are issued
and outstanding, (ii) 3,000 authorized shares of 8% cumulative, convertible,
redeemable non-voting preferred stock, $20.00 par value per share, of which
1,562 shares have been issued and converted to common stock and 416 shares have
been issued and subsequently repurchased and retired, and (iii) 12,000
authorized shares of 8.4% non-voting preferred stock, $25.00 par value per share
("8.4% Preferred Stock"), of which 3,000 shares have been issued and redeemed
and 4,000 shares are issued and outstanding. All of the outstanding shares of
Common Stock have been duly and validly authorized and issued, and are all fully
paid and nonassessable. No shares of the Company's capital stock have been
issued in violation of any preemptive rights, any rights of first refusal or any
similar restrictions. There are no: (i) outstanding options (including phantom
options), warrants or other rights (including preemptive rights) of any kind
relating to the sale, issuance or voting of any shares of capital stock of the
Company, except as provided on Schedule 3.2(a); (ii) securities convertible
---------------
into, exchangeable for or evidencing the right to purchase any such shares; or
(iii) contracts, commitments, agreements, understandings or arrangements of any
kind relating to the issuance, transfer or voting of such shares, any such
convertible or exchangeable securities or any such options, warrants or rights.
(b) All transactions whereby the Company repurchased, redeemed,
canceled or reacquired shares of its capital stock and the solicitation of
shareholder consents in connection with this Agreement have been effected in
compliance with all applicable corporate and securities laws, and documentation
prepared by or on behalf of the Company in connection therewith did not include
any untrue statement of any material fact or omit to state any material fact
necessary to make the statements made therein correct and complete.
SECTION 3.3. FINANCIAL STATEMENTS. Attached hereto as Exhibit 3.3(a) is
-------------------- --------------
a true and complete copy of the balance sheet of the Company at September 30,
1998 and December 31, 1997 and 1996, and the related statements of operations,
changes in stockholders' equity and cash flows for the periods then ended,
including related footnotes (collectively, the "Financial Statements").
The Financial Statements:
(a) have been prepared from, and are in accordance with, the
books and records of the Company;
(b) fairly present the financial position, results of operations
and cash flows of the Company as of and for the periods set forth therein; and
(c) have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the indicated
periods (except that, in the case of the monthly unaudited Financial Statements,
there are no footnotes).
-4-
<PAGE>
SECTION 3.4. UNDISCLOSED LIABILITIES.
-----------------------
(a) Except as disclosed in Schedule 3.4 or any other Schedule
------------
hereto, and except as reflected, expressly reserved against or otherwise
disclosed in the Financial Statements, the Company has no material liabilities
or obligations of any nature, known or unknown (whether accrued, absolute,
contingent or otherwise).
(b) Except as set forth in Schedule 3.4, since December 31,
------------
1997, the Company has conducted its business only in the normal course and has
not:
(i) suffered any physical damage, destruction or
casualty loss (whether or not such loss or damage shall have been
covered by insurance) which adversely affects the properties, business
or prospects of the Company, or suffered any deterioration in the
operating condition of any physical assets of the Company, normal wear
and tear excepted;
(ii) incurred, created, assumed or guaranteed any
liability or obligation of any nature (whether absolute, accrued,
contingent or otherwise), except in the ordinary course of business;
(iii) increased, or made any change in any assumptions
underlying the method of calculating, any bad debt, contingency or other
reserves;
(iv) made any change in the method of valuing assets
included in the Financial Statements;
(v) made any change in any method of accounting or
keeping its books of account or accounting practices or systems of
internal accounting controls;
(vi) paid, discharged or satisfied any liability or
obligation (whether absolute, accrued, contingent or otherwise), other
than by payment, discharge or satisfaction in the ordinary course of
business;
(vii) permitted or allowed any of its assets (real,
personal or mixed, tangible or intangible) to be subjected to any Lien;
(viii) written down the value of any inventory or
written off as uncollectible any notes or accounts receivable, except
for write-downs and write-offs in the ordinary course of business;
(ix) canceled or waived any claims or rights, or sold,
transferred, distributed or otherwise disposed of any assets or
properties, except in the ordinary course of business;
-5-
<PAGE>
(x) declared or paid any dividend or distribution on or
in respect of the Common Stock, or directly or indirectly redeemed,
purchased, or otherwise acquired any shares of its capital stock, any
securities convertible into or exchangeable for its capital stock, or
any options, warrants or other rights to purchase any of the foregoing,
or authorized the issuance of, or issued, sold or committed to sell (or
granted any options or rights to purchase) any additional shares of its
capital stock, or sold, issued or incurred any indebtedness;
(xi) experienced any strike, walkout, similar labor
trouble or other similar event; or
(xii) increased the salaries or other remuneration
payable or to become payable to, or made any advance (excluding advances
for ordinary business expenses) or loan to, any officer, director,
employee or shareholder (except normal merit increases made in the
ordinary course of business and consistent with past practice), or
established, made any increase in, or any addition to, other benefits
(including, without limitation, any Employee Plans, as defined in
Section 3.17 below) to which any of them may be entitled, or made any
payments to any Employee Plan, except payments in the ordinary course of
business and consistent with past practice, or entered into any
agreement, arrangement or transaction with any such person not in the
ordinary course of business, or failed to make any required payment
under any Employee Plan.
SECTION 3.5. PROPERTIES. The Company has good and marketable title to,
----------
or holds by valid and existing lease or license, free and clear of all Liens,
each piece of real and personal property used in its business as now conducted,
except in any of the foregoing cases for such imperfections of title or Liens as
(a) are set forth in Schedule 3.5 hereof, (b) are reflected or reserved against
in the Financial Statements, or (c) arise out of taxes or general or special
assessments which are not yet due and payable or are not in default and payable
without penalty or interest. The real and personal property owned, leased or
licensed by the Company constitutes all real or personal property that is
material to and necessary for the operation of its business as currently
conducted.
SECTION 3.6. LITIGATION. Except as set forth in Schedule 3.6, there are
---------- ------------
no suits, claims, investigations or proceedings pending or, to the knowledge of
each Shareholder, threatened against the Company, its officers or directors in
their capacities as officers or directors, any Shareholder or any other person
or entity for whom the Shareholders or the Company may be vicariously liable at
law or in equity. The Shareholders are not subject to, and the Company is not
operating under or subject to, any order, writ, injunction or decree of any
court or governmental authority in which any of them is named.
SECTION 3.7. INTELLECTUAL PROPERTY. The Company conducts an active
---------------------
business using proprietary application software products and systems and
provides processing and imaging services utilizing such products and systems
(the "Software Programs"), and in connection therewith the Company has developed
certain related technical documentation and user reference manuals (the
"Documentation"). The Software Programs and the Documentation are
-6-
<PAGE>
collectively referred to as the "Software." The Software Programs and
Documentation are listed in Schedule 3.7 hereto.
------------
(a) Ownership. Except as set forth in Section 3.9, the Company
---------
owns all patents, trademarks, service marks, trade names and copyrights
(including registrations, licenses and applications pertaining thereto) and all
other proprietary information used by the Company in the conduct of its
business, including, without limitation, the Software. Schedule 3.7(a) sets
forth all patents, trademarks, service marks, trade names and copyrights owned
or used by the Company and all applications therefor and registrations thereof.
(b) Procedures for Copyright Protection. Schedule 3.7(b) sets
-----------------------------------
forth the form and placement of the proprietary legends and copyright notices
displayed in or on the Software, including screen displays. In no instance has
the eligibility of the Software for protection under copyright law been
forfeited to the public domain.
(c) Procedures for Trade Secret Protection. The Company has
--------------------------------------
never disclosed its source code to a third party other than the consultants
identified in Schedule 3.7(c), each of which has executed a nondisclosure
---------------
agreement in favor of the Company, and discloses its source code to employees
only on a need-to-know basis in connection with the performance of their duties
to the Company. Except as described in Schedule 3.7(c), each current employee of
---------------
the Company and each former employee of the Company employed after January 1,
1995 has executed and delivered to the Company a Non-Disclosure & Assignment
Agreement substantially in the form attached to Schedule 3.7(c). The source code
---------------
and system documentation comprising the Software Company has not taken (nor has
it failed to take) any action which would result in such source code and system
documentation not being protectable as a trade secret under applicable law.
(d) Ownership of Software. All persons who have contributed to
---------------------
or participated in the conception and development of the Software on behalf of
the Company have been full-time employees of the Company hired to prepare such
works within the scope of employment, except for the consultants identified in
Schedule 3.7(c). Each such consultant identified in Schedule 3.7(c) has executed
- --------------- ---------------
and delivered to the Company a valid assignment of such consultant's rights in
works prepared by the consultant on behalf of the Company and included in the
Software. As a consequence, the Company has all ownership interests in the
Software.
(e) Absence of Claims. Except as set forth in Schedule 3.7(e),
----------------- ---------------
no claims have been asserted by any person to rights in the Software, and no
valid basis for any such claim exists. The use of the Software by the Company
and its licensees does not infringe on the rights of any person (whether arising
under copyright, trade secret, patent, unfair competition or other state or
federal laws which protect intellectual property rights). The use by the Company
of the patents, trademarks, service marks, trade names and copyrights identified
in Schedule 3.7(a) does not infringe the rights of any person, and no claim has
---------------
been asserted that the use by the Company of any of the foregoing infringes the
rights of any person. No claim
-7-
<PAGE>
has been asserted by any person to the effect that any current or former
employee of the Company has violated the provisions of any noncompete or
nondisclosure agreement with such person, or has disclosed any proprietary
information of such person to the Company or any third party.
SECTION 3.8. ADEQUACY OF TECHNICAL DOCUMENTATION. The Software includes
-----------------------------------
the source code, system documentation, statements of principles of operation,
and schematics for all Software Programs, as well as any pertinent commentary or
explanation that may be reasonably necessary to render such materials
understandable and usable by a trained computer programmer. The Software also
includes any program (including compilers), workbenches, tools, and higher level
language used for the development, maintenance and implementation of a Software
Program.
SECTION 3.9. THIRD-PARTY COMPONENTS IN SOFTWARE. The Company has
----------------------------------
validly obtained the right and license to use, copy, modify and distribute any
third-party programming and materials contained in the Software pursuant to the
contracts identified in Schedule 3.9, subject to no further license fee, royalty
or other payment obligations, other than software maintenance payments
customarily associated therewith. The Software contains no other programming or
materials in which any third party may claim superior, joint or common
ownership, including any right or license. The Software does not contain
derivative works of any programming or materials not owned in their entirety by
the Company.
SECTION 3.10. THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN SOFTWARE.
-----------------------------------------------------
The Company has not granted, transferred, or assigned any right or interest in
the Software to any person, except pursuant to the contracts identified in
Schedule 3.10. There are no contracts, agreements, licenses, commitments or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the Software by any independent salesperson, distributor,
sublicensor or other remarketer or sales organization, except as set forth in
Schedule 3.10.
- -------------
SECTION 3.11. LICENSES. The Company has all government licenses,
--------
consents, permits, franchises, approvals and other governmental authorizations
("Licenses") required for its business as currently conducted except where the
failure to hold, maintain or obtain such Licenses would not have a Material
Adverse Effect. No proceeding is pending or threatened seeking the revocation or
suspension of any License.
SECTION 3.12. COMPLIANCE WITH LAWS. The Company's business has been
--------------------
operated and maintained in all material respects in compliance with all
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. There is not outstanding and, to the Shareholders' best
knowledge, there are no threatened orders, writs, injunctions, or decrees of any
court, governmental agency, or arbitration tribunal against Company affecting,
involving, or relating to its business or assets. Company is not in violation of
any applicable federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree affecting,
involving, or relating to its business or assets except where noncompliance has
no material adverse effect upon the financial condition,
-8-
<PAGE>
operation, or prospects of the business (including under ownership by ProVesa or
Buyer) or the Company's assets, and neither Company nor any Shareholder has
received any notices of any allegation of any such violation. The foregoing
shall be deemed to include laws and regulations relating to the patent,
copyright, and trademark laws, state trade secret and unfair competition laws of
the U.S. and foreign jurisdictions, environmental laws and to all other
applicable laws, including equal opportunity, wage and hour, and other
employment matters, and antitrust and trade regulation laws.
SECTION 3.13. INSURANCE. Schedule 3.13 lists all policies of casualty,
--------- -------------
liability, workers' compensation, life and other forms of insurance by which the
Company is currently insured or has been insured during the previous three years
and includes for each policy in effect the period through which premiums have
been paid. All of the policies indicated as in force in Schedule 3.13 are in
-------------
full force and effect and no notice of cancellation has been received with
respect thereto and are sufficient for compliance in all material respects with
all requirements of law and all agreements to which the Company is a party.
SECTION 3.14. MATERIAL CONTRACTS. Schedule 3.14 lists the following
------------------ -------------
agreements (including, without limitation, leases, purchase contracts and
commitments) to which the Company is a party or by which the Company or any of
its properties is bound:
(a) all contracts which involve future obligations on the part
of the Company in an aggregate amount exceeding $10,000 in the case of purchase
orders and commitments or $25,000 in the case of any other type of contract;
(b) all joint ventures, sales agency, sales representative or
distributorship, broker, franchise, license or similar contracts;
(c) all real estate leases;
(d) all notes, bonds, mortgages, security agreements, guarantees
and other agreements and instruments for or relating to any lending by the
Company in any amount (exclusive of advances to employees for expenses in the
ordinary course of business) or any borrowing of $25,000 or more;
(e) all powers of attorney, guarantees, suretyships or similar
agreements given by the Company; and
(f) all other written material agreements to which any
Shareholder is a party or to which the Shareholder Shares may be or become
subject.
Each contract set forth in Schedule 3.14 is valid, binding and
-------------
enforceable in accordance with its terms, and neither the Company nor any other
party to any such contract is in material breach or material default of the
express written terms of such contracts.
-9-
<PAGE>
SECTION 3.15. BROKERS, FINDERS, ETC. Except as described in Schedule
--------------------- --------
3.15, neither the Shareholders nor the Company have employed any broker, finder,
- ----
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who might be entitled to a fee or commission in
connection with such transactions.
SECTION 3.16. TAXES.
-----
(a) Filing of Tax Returns. The Company has timely filed with the
---------------------
appropriate taxing authorities all returns (including, without limitation,
information returns and other material information) in respect of Taxes (as
hereinafter defined) required to be filed through the date hereof. All such
returns and other information filed are complete and accurate in all material
respects.
(b) Payment of Taxes. Except as set forth in Schedule 3.16(b),
---------------- ----------------
all Taxes that are due and payable by the Company (whether or not shown on any
return) before the date hereof have been paid. To the extent required by GAAP,
an adequate reserve has been established on the Financial Statements for all
unpaid Taxes payable by the Company with respect to all periods through the date
of such Financial Statements, and the Company is not required under GAAP to
reserve for any liability for Taxes in excess of the reserves so established.
Except as described in Schedule 3.16(b), no portion of the reserve established
----------------
on the Financial Statements for Taxes reflects any contingent liability or other
potential liability for Taxes that are due and payable, or that may become due
and payable in the future, as a result of an audit, amended return or otherwise.
(c) Audit History. Except as set forth in Schedule 3.16(c):
------------- ----------------
(i) no deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority against
the Company which have not been paid or otherwise finally settled and
resolved;
(ii) the Company has not waived the statute of
limitations in respect of any Tax or agreed to any extension of time with
respect to the assessment of any Tax; and
(iii) the Company is not currently under audit with
respect to Taxes by any governmental authority, and no such authority in a
jurisdiction where the Company does not file Tax returns or pay Taxes has
claimed that the Company is required to file Tax returns or otherwise is
subject to taxation.
(d) Withholding Taxes. The Company has 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.
(e) Tax Sharing or Allocation Agreements. The Company is not a
------------------------------------
party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement.
-10-
<PAGE>
(f) Prior Affiliated Groups. The Company has never been a member
-----------------------
of an affiliated group of corporations, within the meaning of Section 1504 of
the Code (as hereinafter defined).
(g) Taxes. For purposes of this Agreement, "Taxes" shall mean
-----
all federal, state, local, foreign and other taxes, assessments, or other
governmental charges, including, without limitation, income, estimated income,
business, occupation, franchise, property, sales, gross receipts, excise,
employment, or withholding taxes, including interest, penalties and additions in
connection therewith.
SECTION 3.17. PENSION AND EMPLOYEE BENEFIT PLANS.
----------------------------------
(a) For purposes of this Agreement, the terms set forth below
shall have the following meanings:
(i) "Code": The Internal Revenue Code of 1986, as
----
amended, together with the regulations promulgated thereunder;
(ii) "Employee Plans": All plans, programs,
--------------
arrangements, practices or contracts pursuant to which the Company provides
or is obligated to provide or has within the last six years been obligated
to provide, directly or indirectly, benefits or compensation to or on
behalf of employees or former employees of the Company, whether formal or
informal, whether or not written, whether or not terminated, including but
not limited to the following:
(A) Executive Arrangements -- any bonus,
incentive compensation, stock option, deferred compensation, commission,
severance, golden parachute or other executive compensation plan,
employment contract, arrangement or practice;
(B) ERISA plans -- any Pension Plan or Welfare
Plan, as defined in Section 3 of ERISA, including but not limited to any
multi-employer plan, defined benefit pension plan, profit sharing plan,
savings or thrift plan, stock bonus plan, employee stock ownership plan,
or any plan, fund, program, arrangement or practice providing for
medical hospitalization, accident, sickness, disability, severance pay
or life insurance benefits; and
(C) Other Employee Fringe Benefits -- any stock
purchase, vacation, scholarship, day care, prepaid legal services,
severance pay, or fringe benefit plan, program, arrangement, contract,
or practice;
(iii) "ERISA": The Employee Retirement Income Security
-----
Act of 1974, as amended, and the rulings and regulations thereunder; and
-11-
<PAGE>
(iv) "ERISA Affiliate": A corporation that is or was a
---------------
member of a controlled group of corporations with the Company or a trade or
business that is under common control with the Company or which together
with the Company is treated as a single employer, in each case within the
meaning of Section 414 of the Code.
(b) Schedule 3.17 lists or describes all Employee Plans
-------------
maintained or contributed to by the Company pursuant to which the Company
provides benefits or compensation to or on behalf of employees or former
employees of the Company. The Company has no ERISA Affiliates.
(c) Each Employee Plan (and related trust or funding vehicle, if
any) has at all times been administered and maintained in accordance with its
terms and the applicable law including, without limitation, the filing of Forms
5500 and all other applicable reports.
(d) Except to the extent set forth in Schedule 3.17, to the
-------------
extent any Employee Plan is subject to approval by any governmental agency, such
Employee Plan has received such approval and such approval is current.
(e) The Company is not subject to, and no facts exist which
could subject the Company to, any liability whatsoever which is directly or
indirectly related to any Employee Plan, including, but not limited to,
liability for benefits payments or related claims (other than the ordinary
claims by participants or beneficiaries which have been made for benefits called
for under the terms of such Employee Plans), any liability for any Tax or
related penalty under the Code, or liability for any damages or penalties
arising under Title I or Title IV of ERISA.
(f) No Employee Plan has engaged in or been a party to any
"prohibited transaction" (as defined in ERISA or the Code), and the Company has
not incurred, and does not reasonably expect to incur, any liability under
Chapter 43 of the Code or Section 502 of ERISA with respect to any Employee
Plan.
(g) Except as set forth in Schedule 3.17, no ERISA Welfare Plan
-------------
provides benefits to former employees of the Company, other than continuation
coverage required by Section 4980B of the Code and Section 601 of ERISA.
(h) There are no pending or threatened claims, suits or other
proceedings with respect to any Employee Plan other than the ordinary claims by
participants or beneficiaries which have been made for benefits called for under
the terms of such Employee Plans and which will be paid under such Employee
Plans in the ordinary course.
(i) There is no requirement that the Buyer or ProVesa make any
further contributions to any Employee Plan after the date of this Agreement, and
each Employee Plan which provides benefits to or on behalf of employees or
former employees of the Company may be terminated by the Buyer or ProVesa in its
sole discretion without liability of any kind
-12-
<PAGE>
or description whatsoever to Buyer, ProVesa or any other person, entity or
governmental agency.
(j) The Company is not a party to or obligated under any
agreement, plan, contract or other arrangements that will result, separately or
in the aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 28OG of the Code.
SECTION 3.18. LABOR AND EMPLOYMENT MATTERS. Except to the extent set
----------------------------
forth in Schedule 3.18:
-------------
(a) the Company is not a party to any collective bargaining
agreements;
(b) the Company is in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and is
not engaged in any unfair labor or unfair employment practices;
(c) there is no unfair labor practice, charge or complaint or
any other matter against or involving the Company pending or, to the knowledge
of the Shareholders, threatened before the National Labor Relations Board or any
court of law;
(d) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to the knowledge of the Shareholders, threatened against
the Company, and the Company has not experienced any organized work stoppage,
organizational drive or other labor difficulty since its inception;
(e) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, sexual preference,
handicap or veteran status) pending or, to the knowledge of the Shareholders,
threatened before the Equal Employment Opportunity Commission or any federal,
state or local agency or court against the Company, and to the knowledge of the
Shareholders, no basis for any such claim exists; and
(f) there are no citations, investigations, administrative
proceedings or formal complaints of violations of local, state or federal
occupational safety and health laws pending, or to the knowledge of the
Shareholders, threatened before the Occupational Safety and Health Review
Commission or any federal, state or local agency or court against the Company.
(g) Schedule 3.18(g) lists all employment, consulting, loan-out,
----------------
retainer or other contracts or agreements involving any person employed by the
Company as an employee or independent contractor to which the Company is a party
or by which it is bound. The Company is not and no other party to any such
agreement or contract is in default with respect to any material term or
condition thereof (including the making of contributions and recording services
therefor), nor has any event occurred which through the passage of time or the
giving
-13-
<PAGE>
of notice, or both, would constitute a default thereunder or would cause the
acceleration of any obligation of any party thereto.
(h) Schedule 3.18(h) lists the names and current compensation
----------------
levels of all employees and consultants of the Company.
SECTION 3.19. ENVIRONMENTAL MATTERS.
---------------------
(a) The operations of the Company comply, and have complied, in
all respects with all applicable environmental laws.
(b) The Company has obtained all environmental, health and
safety permits, approvals, licenses and other authorizations necessary for the
operation of the Company's business, all of which are valid and in good standing
and are not subject to any modification or revocation proceeding, and the
Company is in compliance in all respects with all terms and conditions thereof.
(c) The Company has not received any written notice of any
pending or threatened investigation, proceeding or claim to the effect that it
is or may be liable to any person, or responsible or potentially responsible for
the costs of any remedial or removal action or other cleanup costs, as a result
of noncompliance with any applicable environmental laws or arising out of the
presence, generation, storage or disposal of hazardous waste, including
liability under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, or any state superfund law, and there is no past or
present action, activity, condition or circumstance that could be expected to
give rise to any such liability on the part of the Company to any person, or for
any such cleanup costs.
SECTION 3.20. AGREEMENTS AFFECTING COMPETITION. Except as set forth in
--------------------------------
Schedule 3.20, the Company is neither a party to nor bound by any agreement
- -------------
which presently restricts or precludes the Company or any present or future
affiliate of the Company from conducting any business anywhere in the world, or
upon the occurrence of any event, the giving of notice or the passage of time,
by its terms would have such an effect.
SECTION 3.21. TRANSACTIONS WITH RELATED PARTIES. Except as set forth in
---------------------------------
Schedule 3.21 or in connection with customary transactions in the ordinary
- -------------
course of business, no officer, director or shareholder of the Company or any
relative or affiliate thereof:
(a) owes money to the Company;
(b) has any claim against the Company;
(c) has any interest in any property or assets used by the
Company in its business;
-14-
<PAGE>
(d) has any benefits which are contingent on the transactions
contemplated by this Agreement, other than as stated herein;
(e) has any agreement with the Company that is not terminable by
the Company without penalty or notice;
(f) has any agreement providing severance benefits or other
benefits (which are conditioned upon a change of control) after the termination
of employment of such employee regardless of the reason for such termination of
employment; or
(g) has any agreement or plan, any of the benefits of which will
be increased, vested or accelerated by the occurrence of any of the transactions
contemplated by this Agreement.
SECTION 3.22. MAJOR VENDORS AND CUSTOMERS. Schedule 3.22 sets forth a
--------------------------- -------------
list of each licensor, developer, remarketer, distributor and supplier of
property or services to, and each licensee, end-user or customer of, the
Company, to whom the Company paid or billed in the aggregate in excess of
$25,000 during calendar year 1996 or 1997.
SECTION 3.23. ABSENCE OF CERTAIN COMMERCIAL PRACTICES. Since January 1,
---------------------------------------
1995, neither the Company, any of its directors, officers, agents, affiliates or
employees, nor any other person acting on behalf of the Company or any
shareholder, has (a) given or agreed to give any gift or similar benefit having
a value of $1,000 or more to any customer, supplier or governmental employee or
official or any other person, for the purpose of directly or indirectly
furthering the business of the Company, (b) used any corporate funds for
contributions, payments, gifts or entertainment, or made any expenditures
relating to political activities to government officials or others in violation
of any applicable laws, or (c) received any unlawful contributions, payments,
gifts or expenditures in connection with the business of the Company.
SECTION 3.24. ACCOUNTS RECEIVABLE. Schedule 3.24 is a complete and
------------------- -------------
accurate schedule of the accounts receivable of the Company as of September 30,
1998, as reflected in the balance sheet as of that date, included in the
Financial Statements, together with an accurate aging of these accounts. These
accounts receivable, and all accounts receivable of the Company created after
that date, arose from valid transactions in the ordinary course of business and
will be good and collectible at the recorded amounts thereof. No portion of the
accounts receivable is subject to counterclaim or setoff.
SECTION 3.25. DISCLOSURE. No representation, warranty, or statement
----------
made by the Company or any Shareholder in this Agreement or in any document or
certificate furnished or to be furnished to Buyer and ProVesa pursuant to this
Agreement contains or will contain any untrue statement or omits or will omit to
state any fact necessary to make the statements contained herein or therein not
misleading. All facts known or reasonably available to the Company and all
Shareholders that are material to the financial condition, operation, or
prospects of the Company's business and assets have been disclosed to Buyer and
ProVesa.
-15-
<PAGE>
SECTION 3.26. YEAR 2000. The Software is designed to be used prior to,
---------
during, and after the calendar year 2000 AD, and the Software will operate
during each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century or any leap year (the
"Year 2000 issue"). The Company's internal systems and software and the network
connections it maintains are adequately programmed to address the Year 2000
issue. Copies of any certificates or warranties made by or given to the Company
regarding the Year 2000 issue are attached to this Agreement as Schedule 3.26.
-------------
SECTION 3.27. SHAREHOLDERS' ADDITIONAL REPRESENTATIONS'. To induce the
-----------------------------------------
Buyer and ProVesa to enter into this Agreement, each Shareholder represents and
warrants to the Buyer and ProVesa as follows:
(a) Such Shareholder has the right, power, capacity and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; this Agreement has been duly and validly
executed and delivered by such Shareholder and is entered into voluntarily
without promise or benefit other than as set forth herein; and this Agreement
constitutes such Shareholder's legal, valid and binding obligation, enforceable
in accordance with its terms.
(b) Such Shareholder owns, of record and beneficially, valid
title to his respective Shareholder Shares, and such shares are free and clear
of all Liens, Claims (as defined below) and encumbrances. Other than the
Shareholder Shares owned by each Shareholder and the 4,000 shares of 8.4%
Preferred Stock owned by Edelcup, such Shareholder does not own, beneficially or
of record, or have any right to acquire, now or in the future, any shares of
Common Stock or other securities of any kind of the Company. The execution,
delivery and performance of this Agreement by such Shareholder will not conflict
with or result in a breach of any agreement, instrument, order, injunction,
decree, statute, rule or regulation applicable to such Shareholder or any of its
material assets. The execution, delivery and performance of this Agreement by
such Shareholder does not require the consent or approval of any third party or
governmental agency or authority which has not been obtained (and a copy of
which is attached hereto).
(c) Each Shareholder represents and warrants that the Company
generally has good relationships with its customers and that such Shareholder
has no reason to believe that any of those customers would not be agreeable to
consider entering into item or data processing contracts with Buyer or its
affiliates.
-16-
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND PROVESA
---------------------------------------------------
The Buyer and ProVesa hereby represent and warrant to the Company and the
Shareholders as follows:
(a) Corporate Existence. Buyer is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the State of Florida.
ProVesa is a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia.
(b) Corporate Power and Authorization. Buyer and ProVesa have
---------------------------------
the corporate power, authority and legal right to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by
Buyer and ProVesa have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by Buyer and ProVesa and
constitutes the legal, valid and binding obligation of Buyer and ProVesa
enforceable against them in accordance with its terms.
(c) Validity of Contemplated Transactions, etc. The execution,
------------------------------------------
delivery and performance of this Agreement by Buyer and ProVesa does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other party to, (a) any existing
law, ordinance, or governmental rule or regulation to which Buyer or ProVesa is
subject, (b) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to Buyer or ProVesa, (c) the charter documents or By-Laws
of, or any securities issued by, Buyer or ProVesa, or (d) any mortgage,
indenture, agreement, contract, commitment, lease, plan or other instrument,
document or understanding, oral or written, to which Buyer or ProVesa is a party
or by which either is otherwise bound. Except as aforesaid, no authorization,
approval or consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery and performance of this Agreement by Buyer or ProVesa.
(d) Broker's or Finder's Fees. Neither ProVesa nor Buyer has
-------------------------
authorized any person to act as broker, finder, or in any other similar capacity
in connection with the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS AND AGREEMENTS OF SHAREHOLDERS
----------------------------------------
SECTION 5.1. GENERAL RELEASE. As part of the agreements set forth
---------------
herein and in consideration of the Buyer's agreement to purchase the shares as
set forth herein, to the fullest extent permitted by law, each Shareholder
hereby fully and forever releases, remises, acquits, and discharges the Company,
ProVesa and the Buyer, and their past, present and future subsidiaries,
officers, directors, employees, shareholders, attorneys, agents, successors,
assigns, representatives and affiliates (collectively, the "Releasees"), of and
from all claims (as
-17-
<PAGE>
defined by Section 101 of the United States Bankruptcy Code, as amended), debts,
demands, actions, causes of action, suits, accounts, damages and liabilities of
every name and nature, both in law and in equity, whether known or unknown
(collectively, the "Claims"), that the Shareholder now has, ever had or may, at
any time, claim to have had against any of the Releasees, including any and all
Claims arising on or prior to the date of this Agreement.
SECTION 5.2. COVENANT NOT TO SUE. Each Shareholder covenants not to sue
-------------------
or otherwise institute, cause to be instituted or in any way participate in, any
legal or administrative proceeding against any of the Releasees with respect to
any Claims. Each Shareholder represents and warrants to the Releasees that it
has not voluntarily or involuntarily assigned or suffered any transfer of any of
the Claims to any other person or entity, and it agrees to indemnify and hold
harmless the Releasees from and against any loss, damage, liability, cost and
expense (including, but not limited to, attorneys' fees incurred in connection
therewith or in connection with enforcing this indemnity) asserted against,
imposed on or incurred by any Releasee by reason of any of such Claims which
were effectively or purportedly assigned or transferred by the Shareholder.
SECTION 5.3. CONFIDENTIALITY. Each Shareholder recognizes the interest
---------------
of ProVesa, Buyer and the Company in maintaining the confidential nature of the
proprietary and other business and commercial information of the Company. In
connection therewith, each Shareholder covenants that, for a period of two (2)
years after the date of this Agreement, such Shareholder shall not, directly or
indirectly, except as authorized by the Board of Directors of the Company (the
"Board of Directors"), publish, disclose or use for his own benefit or for the
benefit of a business or entity or otherwise, any secret or confidential matter,
or proprietary or other information not in the public domain that was acquired
by Shareholder relating to the Company's businesses, operations, customers,
suppliers, products, employees, financial affairs or industry practices,
technology, know-how or intellectual property or other similar information (the
"Proprietary Information").
Each Shareholder will abide by the Buyer's and the Company's policies
and regulations, as established from time to time, for the protection of its
Proprietary Information. Each Shareholder acknowledges that all records, files,
data, documents and the like relating to suppliers, customers, costs, prices,
systems, methods, personnel, technology and other materials relating to the
Company and/or the Buyer or their affiliated entities shall be and remain the
sole property of the Company and/or the Buyer and/or such affiliated entity and
shall, upon the request of the Company, ProVesa or the Buyer, turn over all
copies of such Proprietary Information to the Company, ProVesa or the Buyer
(together with a written statement certifying as to his compliance with the
foregoing).
SECTION 5.4. NON-SOLICITATION OF CUSTOMERS. For a period of two (2)
-----------------------------
years after the date of this Agreement, each Shareholder shall not directly or
indirectly, through one or more intermediaries or otherwise, solicit, direct or
appropriate, or attempt to solicit, direct or appropriate, Customers, to induce
or encourage them to acquire or obtain from anyone other than the Company,
ProVesa or the Buyer, service competitive with or substitute for any Company
Service. For purposes of this Section, a "Customer" refers to any person or
group
-18-
<PAGE>
of persons with whom the Shareholder has direct material contact with regard to
selling, delivery or support of Company Services, including servicing such
person's or group's account, during the period of one (1) year preceding the
date hereof; and "Company Services" refers to the services that the Company,
ProVesa or the Buyer offered or sold within six (6) months prior to the date
hereof.
SECTION 5.5. NON-SOLICITATION OF EMPLOYEES. For a period of two (2)
-----------------------------
years after the date of this Agreement, each Shareholder shall not, directly or
indirectly, through one or more intermediaries or otherwise, employ, induce,
solicit for employment, or assist others in employing, inducing or soliciting
for employment any individual who is at any time during such period an employee
or consultant of the Company, ProVesa or the Buyer for the purpose of providing
services that are the same or similar to the types of services offered to or
engaged in by the Company, ProVesa or the Buyer as of the date hereof.
SECTION 5.6. TRADE SECRETS. Each Shareholder shall not, at any time,
-------------
use or disclose any Trade Secrets (as defined under applicable law) of the
Company, ProVesa, or the Buyer, or any of their respective subsidiaries, except
in fulfillment of his duties as an employee of the Company or any affiliate
thereof, for so long as the pertinent information or data remain Trade Secrets,
whether or not the Trade Secrets are in written or tangible form.
SECTION 5.7. CONSIDERATION. Each Shareholder agrees and acknowledges
-------------
that the covenants contained herein are provided in connection with the sale of
all of the capital stock of a business by Shareholder to the Buyer. Each
Shareholder acknowledges that his entering into the agreements provided for in
this Article constitutes a major portion of the consideration for the entry by
the Buyer and ProVesa into this Agreement, and that this Agreement (including
payment by the Buyer of the Purchase Price) is of direct and material benefit to
Shareholder and is good and adequate consideration for the covenants given
herein. Each Shareholder also acknowledges that ProVesa, the Buyer and the
Company have a legitimate present and future expectation of business within the
geographic areas presently served by the Company and from the present customers
of the Company. Each Shareholder acknowledges the reasonableness of the term and
scope of the covenants set forth in this Agreement, and agrees that he will not,
in any action, suit or other proceeding, deny the reasonableness of, or assert
the unreasonableness of, the premises, consideration or scope of the covenants
set forth herein. Each Shareholder further acknowledges that complying with the
provisions contained in this Agreement will not preclude him from engaging in a
lawful profession, trade or business, or from becoming gainfully employed in
such a way as to provide a standard of living for himself, the members of his
family, and those dependent upon him or the sort and fashion to which he and
they have become accustomed and may expect.
ARTICLE 6
COVENANTS AND AGREEMENTS OF THE PARTIES
---------------------------------------
SECTION 6.3. CONDUCT OF BUSINESS. Between the date hereof and the Closing Date,
-------------------
-19-
<PAGE>
(a) The Company shall conduct its business diligently and in the
ordinary course, consistent with past practice. Without limiting the generality
of the foregoing, the Company will use commercially reasonable efforts to:
(i) maintain its status in good standing in all
jurisdictions in which it is required to be qualified or registered to conduct
its business;
(ii) maintain all of its tangible assets in good
operating condition and maintain the protection of all intellectual property in
substantially the same standing as exists on the date hereof;
(iii) continue performance in the ordinary course of its
obligations under its contracts and agreements;
(iv) preserve its business organization intact, keep
available its present officers and employees, and preserve its present
relationships with suppliers, customers and others having business relationships
with it; and
(v) maintain its existing insurance, subject to
variations in amount required by the ordinary operations of its business.
(b) The Company will not (a) amend its Articles of Incorporation
or Bylaws, (b) issue any shares of its capital stock, or (c) issue or create any
warrants, obligations, subscriptions, options, convertible securities, or other
commitments under which any additional shares of its capital stock of any class
might be directly or indirectly authorized or issued.
(c) Except as consented to in writing by the Buyer or ProVesa,
the Company will not grant any increase in salaries to any officer, employee,
sales agent or representative, or alter or increase benefits payable to any such
person under any Employee Plan or other contract or commitment, other than in
the ordinary course of business.
(d) The Company will not, without the Buyer's or ProVesa's
written consent:
(i) incur or consent to the incurrence of any single
obligation or other liability in excess of $25,000 except for inventory and
supplies purchased in the ordinary course of business consistent with past
practices;
(ii) consent to any Lien on any of its assets, except as
set forth in Schedule 6.5; or
(iii) sell or otherwise dispose of any of its assets,
except in the ordinary course of business.
-20-
<PAGE>
(e) The Company will not modify, amend, cancel or terminate any
of its existing contracts or agreements with any party named in Schedule 3.22,
or agree to do any of those acts, except in the ordinary course of business.
(f) The Company and the Shareholders shall not, and shall use
their best efforts to cause the Company's officers, directors, employees, agents
and representatives not to, directly or indirectly, encourage, solicit, engage
in discussions with, or provide any information to any person or group (other
than Buyer) concerning any sale or other disposition of all or any substantial
part of the Company. The Company shall promptly communicate to Buyer or ProVesa
any inquiries or communications concerning any such transaction that it or any
of its executive officers may receive or of which it or any such person may
become aware.
(g) The Shareholders agree to obtain the consent of Buyer or
ProVesa prior to settling any Tax audit or other examination which relates to
periods ending prior to the Closing Date.
SECTION 6.3. VOTING OF THE SHARES. Each Shareholder agrees to vote
--------------------
all shares of capital stock owned by such Shareholder in favor of the Merger at
the special meeting of the Company's shareholders on October 23, 1998. Each
Shareholder will use his best efforts to obtain unanimous approval of the Merger
as shall not take any action to encourage any shareholder of the Company to vote
its shares against the Merger or to assert dissenter's rights.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER'S AND PROVESA'S OBLIGATIONS
---------------------------------------------------------
The obligations of Buyer and ProVesa to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of all the conditions set forth below. The Buyer and ProVesa may waive
any or all of these conditions in whole or in part without prior notice;
provided, however, that except to the extent, if any, that such waiver
- -------- -------
constitutes an election of remedies under Georgia law, no such waiver of a
condition shall constitute a waiver by the Buyer or ProVesa of any of their
other rights or remedies, at law or in equity, if the Company or the
Shareholders shall be in default of any of their representations, warranties or
covenants under this Agreement.
SECTION 7.1. ACCURACY OF REPRESENTATIONS. The representations and
---------------------------
warranties of the Company and the Shareholders in this Agreement or any Schedule
hereto or in any written statement delivered by them at or prior to the Closing
to the Buyer or ProVesa under this Agreement shall be true in all material
respects as of the date hereof and on and as of the Closing Date as though made
at that time.
SECTION 7.2. PERFORMANCE OF COMPANY AND SHAREHOLDERS. The Company and
---------------------------------------
the Shareholders shall have performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by them on or before the Closing Date.
-21-
<PAGE>
SECTION 7.3. MATERIAL CHANGES. During the period from September 30,
----------------
1998 to the Closing Date, there shall not have been any material adverse change
in the financial condition or the results of operations of the Company, and the
Company shall not have sustained any material loss or damage to its assets,
whether or not insured, that materially affects its ability to conduct a
material part of its business.
SECTION 7.4. ABSENCE OF LITIGATION. No action, suit or proceeding
---------------------
before any court, governmental body or authority, other than routine regulatory
and tax inspections, audits and reviews, pertaining to the transactions
contemplated by this Agreement or its consummation, shall have been instituted
or threatened.
SECTION 7.5. CERTIFICATES OF THE COMPANY AND SHAREHOLDERS. The Buyer
--------------------------------------------
and ProVesa shall have received certificates, dated the Closing Date, signed by
the Company and the Shareholders, certifying that the conditions specified in
Sections 7.1, 7.2, 7.3 and 7.4 have been fulfilled.
SECTION 7.6. CORPORATE APPROVAL. The execution and delivery of this
------------------
Agreement by the Company, and the performance of its covenants and obligations
hereunder, shall have been duly authorized by the Company's Board of Directors
and its shareholders, and the Buyer and ProVesa shall have received copies of
all resolutions pertaining to those authorizations, certified by the Secretary
of the Company.
SECTION 7.7. APPROVALS. This Agreement and the transactions
---------
contemplated hereby shall have received all approvals, consents, authorizations
and waivers from governmental and regulatory agencies and other third parties
(including lenders and lessors) required to consummate the transactions
contemplated hereby, which, either individually or in the aggregate, if not
obtained would have a Material Adverse Effect.
SECTION 7.8. EMPLOYMENT AGREEMENTS. At or prior to Closing, each of the
---------------------
Shareholders shall have entered into Employment Agreements substantially in the
form attached hereto as Exhibit 7.8, the effectiveness of which shall be
expressly contingent upon the occurrence of Closing.
ARTICLE 8
CONDITIONS PRECEDENT TO THE COMPANY'S AND
------------------------------------------
THE SHAREHOLDER'S OBLIGATIONS
-----------------------------
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or before the Closing, of all the conditions set forth below. The Company and
the Shareholders may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
-------- -------
shall constitute a waiver by the Company or the Shareholders of any of their
other rights
-22-
<PAGE>
or remedies, at law or at equity, if the Buyer or ProVesa shall be in default of
any of their representations, warranties or covenants under this Agreement.
SECTION 8.1. ACCURACY OF REPRESENTATIONS. The representations and
---------------------------
warranties by the Buyer and ProVesa in this Agreement or in any written
statement delivered to the Company under this Agreement shall be true in all
material respects as of the date hereof and on and as of the Closing Date as
though made at that time.
SECTION 8.2. PERFORMANCE OF BUYER AND PROVESA. The Buyer and ProVesa
--------------------------------
shall have performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it on
or before the Closing Date.
SECTION 8.3. ABSENCE OF LITIGATION. No action, suit or proceeding
---------------------
before any court, governmental body or authority, other than routine regulatory
and tax inspections, audits and reviews, pertaining to the transactions
contemplated by this Agreement or its consummation, shall have been instituted
or threatened.
SECTION 8.4. CERTIFICATES OF THE BUYER. The Company shall have received
-------------------------
a certificates, dated the Closing Date, signed by the Buyer's and ProVesa's
president or vice president and secretary or assistant secretary, certifying
that the conditions specified in Sections 8.1, 8.2 and 8.3 have been fulfilled.
SECTION 8.5. CORPORATE APPROVAL. The execution and delivery of this
------------------
Agreement by the Buyer and ProVesa and the performance of their respective
covenants and obligations hereunder, shall have been duly authorized by the
Board of Directors of Buyer and ProVesa and the sole shareholder of Buyer. The
Shareholders and the Company shall have received copies of all resolutions
pertaining to these authorizations, certified by their respective corporate
secretaries.
SECTION 8.6. THIRD PARTY APPROVALS. This Agreement and the transactions
---------------------
contemplated hereby shall have received all approvals, consents, authorizations
and waivers from governmental and regulatory agencies required to consummate the
transactions, which, either individually or in the aggregate, if not obtained
would have a Material Adverse Effect on the financial condition, results of
operation or business of the Company.
SECTION 8.7. EMPLOYMENT AGREEMENTS. At or prior to Closing, each of the
---------------------
Shareholders and ProVesa shall have entered into Employment Agreements
substantially in the form attached hereto as Exhibit 7.9, the effectiveness of
which shall be expressly contingent upon the occurrence of Closing.
ARTICLE 9
CLOSING
-------
SECTION 9.1. TIME AND PLACE OF CLOSING. The closing ("Closing") of the
-------------------------
transactions contemplated hereunder shall take place as soon as practicable
after execution and delivery of this
-23-
<PAGE>
Agreement on such date as the parties shall agree, but in no event later than
October 31, 1998 ("Closing Date"), and effective as of the Effective Time. The
Closing shall take place at the offices of Nelson Mullins Riley & Scarborough,
L.L.P., 999 Peachtree Street, Suite 1400, Atlanta, Georgia 30309 at 10:00 a.m.,
Atlanta Time, on the Closing Date.
SECTION 9.2. DELIVERIES BY THE COMPANY. At the Closing, the Company and
-------------------------
the Shareholders shall deliver to Buyer and ProVesa:
(a) stock certificates evidencing all of the shares of Common
Stock and 8.4% Preferred Stock, canceled or duly endorsed in blank or with stock
powers endorsed in blank;
(b) original option agreements for the options to be purchased
by the Buyer, marked canceled;
(c) Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Florida, and a true and correct copy of the
Bylaws of the Company, certified as of the Closing Date by the Secretary of the
Company;
(d) good standing certificates relating to the Company from the
State of Florida and each other jurisdiction in which the Company is qualified
to conduct business;
(e) the corporate seal and all stock ledgers and minute books of
the Company in existence as of the Closing, accompanied by a certificate of the
Secretary of the Company certifying that the stock ledgers and minutes books
are, to the best of his information and belief, true, correct and complete as of
the Closing Date;
(f) the Merger Documents, including the Articles of Merger and
Plan of Merger, duly executed by the Company;
(g) a Secretary's Certificate attesting to the incumbency of the
officers of the Company executing this Agreement and the other certificates and
agreements delivered by the Company at the Closing; and
(h) the documents and instruments referred to in Article 7
hereof.
SECTION 9.3. DELIVERIES BY BUYER AND PROVESA. At the Closing, Buyer and
-------------------------------
ProVesa shall deliver to the Company:
(a) a Secretary's Certificate attesting to the incumbency of the
officers of Buyer and ProVesa executing this Agreement and the other
certificates and agreements delivered by Buyer and ProVesa at the Closing;
(b) resolutions of the Board of Directors of Buyer and ProVesa
authorizing the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby, certified by the respective Secretary of
Buyer and ProVesa;
-24-
<PAGE>
(c) the Merger Documents, including the Articles of Merger and
Plan of Merger, duly executed by Buyer and ProVesa, as applicable; and
(d) the documents and instruments referred to in Article 8
hereof.
SECTION 9.4. POST CLOSING DELIVERIES AND POWER OF ATTORNEY. The
---------------------------------------------
Shareholders, ProVesa and Buyer agree that, from time to time after the Closing,
each of them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be necessary to carry out the
purposes and intent of this Agreement. Each Shareholder absolutely and
irrevocably appoints Buyer and ProVesa as his true and lawful agent and
attorney-in-fact, with full power of substitution, in the name of such
Shareholder, to execute and do all such assurances, acts and things which such
Shareholder has covenanted and agreed to do under this Agreement but which such
Shareholder has failed to execute or do within three (3) days of Buyer's or
ProVesa's request therefor, including but not limited to executing, on behalf of
such Shareholder, such transfer or conveyance documents and other agreements
that Buyer or ProVesa may deem proper in and for the exercise of any such
powers, authorities or discretion. This Power of Attorney grants to Buyer and
ProVesa, as agent for each Shareholder, all powers granted to agents and
attorneys-in-fact generally under applicable law. Each Shareholder hereby
ratifies and confirms and agrees to ratify and confirm whatever lawful acts
Buyer or ProVesa shall do in the exercise of the power of attorney granted to
Buyer and ProVesa hereby, which power of attorney shall be deemed to be coupled
with an interest, is irrevocable and shall survive the disability, incapacity or
incompetency of each Shareholder.
ARTICLE 10
TERMINATION
-----------
SECTION 10.1. TERMINATION. Notwithstanding anything herein to the
-----------
contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Shareholders, the Company,
the Buyer and ProVesa;
(b) by the party not in breach in the event of a material breach
of this Agreement by the Company or the Shareholders on the one hand and Buyer
or ProVesa on the other hand; or
(c) by any of the Company, ProVesa or the Buyer if the Closing
has not occurred prior to November 15, 1998.
SECTION 10.2. EFFECT OF TERMINATION. If this Agreement is terminated as
---------------------
provided above, this Agreement shall become void and be of no further force or
effect, and no party shall have any further liability to any other party
hereunder as a result of such termination.
-25-
<PAGE>
ARTICLE 11
SURVIVAL; INDEMNIFICATION
-------------------------
SECTION 11.1. SURVIVAL. The parties' respective representations and
--------
warranties contained in this Agreement will survive execution and delivery of
this Agreement and Closing and shall remain in full force and effect until
December 31, 2001; provided, however, that the representations and warranties
-------- -------
set forth in Sections 3.1, 3.2 and 3.4 shall survive the execution and delivery
of this Agreement for a period of five years from the date of this Agreement;
and provided, further, that the representations and warranties set forth in
-------- -------
Section 3.16 shall survive until expiration of any applicable statute of
limitations (including any extensions thereof) which will preclude assertion of
Tax claims against the Company for matters existing on or prior to the date of
this Agreement. Any claim made or notice of a claim given as to any breach or
alleged breach of a representation or warranty shall extend the applicable
survival period set forth above until such claim has been resolved and satisfied
by agreement of the parties or by the entry of a final, non-appealable judgment
of a court having jurisdiction over such claim.
SECTION 11.2. INDEMNIFICATION.
---------------
(a) Indemnification by Shareholders. Subject to the terms of
-------------------------------
this Article 11, the Shareholders hereby, jointly and severally, covenant and
agree to indemnify, defend, save and hold harmless Buyer, ProVesa and the
Company and their respective officers, directors, employees, agents, affiliates
or any of their respective successors, assigns or personal representatives
(collectively, the "Buyer Indemnified Parties"), from and against any demands,
claims, actions, losses, damages, deficiencies, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' and accountants' fees and
expenses), together with interest and penalties, if any, awarded by court order
or otherwise agreed to (collectively, "Indemnifiable Damages"), suffered by the
Buyer Indemnified Parties which arise out of or result from:
(i) any misrepresentation in or breach of any of the
representations, warranties or covenants made by the Shareholders in this
Agreement;
(ii) any misrepresentation in a document, certificate or
affidavit delivered by or on behalf of the Shareholders in connection with
this Agreement; or
(iii) the continued existence after the execution of
this Agreement of any Lien in violation of this Agreement;
(iv) any guaranty or other material liability of the
Company not otherwise disclosed hereunder or in any Schedule hereto; or
-26-
<PAGE>
(v) the assertion of any claim by any Shareholder or any
other person or entity arising out of consummation of the transactions
contemplated by this Agreement.
(vi) any claim alleging misconduct of, by or under the
control of the Company or any Shareholder which is criminal or of a grossly
negligent character that is attributable to events occurring prior to the
execution of this Agreement.
(b) Indemnification by Buyer and ProVesa. Subject to the terms
------------------------------------
of this Article 11, Buyer and ProVesa covenant and agree to indemnify and hold
harmless the Shareholders from and against any Indemnifiable Damages suffered by
them which arise out of or result from:
(i) any misrepresentation in or breach of any of the
representations, warranties or covenants made by Buyer or ProVesa in this
Agreement; or
(ii) any misrepresentation in a document, certificate or
affidavit delivered by Buyer or ProVesa in connection with this Agreement
when executed.
(c) Limitations on Amount. None of ProVesa, Buyer or the
---------------------
Shareholders will have liability (for indemnification or otherwise) with respect
to the matters described in clause 11.2(a) or 11.2(b) or for any other matter
unless and until the total of all damages with respect to such matters exceeds
$25,000. However, this provision in Section 11.3(c) will not apply to any breach
of any of the representations and warranties of the Company, the Shareholders,
ProVesa or the Buyer where said party had knowledge at any time prior to the
date on which such representation or warranty is made that the representation or
warranty was not accurate. Further, the provisions of this Section 11.3(c) will
not apply to an intentional breach by either the Buyer, ProVesa or the
Shareholders of any covenant or obligation.
SECTION 11.3. PROCEDURE FOR THIRD-PARTY CLAIMS.
--------------------------------
(a) Promptly after obtaining knowledge of any claim or demand
which has given rise to, or could reasonably give rise to, a claim for
indemnification hereunder, the party seeking indemnification shall give written
notice of such claim ("Notice of Claim") to the other party. The Notice of Claim
shall set forth a brief description of the facts giving rise to such claim and
the amount (or a reasonable estimate) of the liability, loss, damage or expense
suffered, or which may be suffered, by the party seeking indemnification, and
shall be accompanied by all documentation in the case of a third-party claim
against the indemnified party.
(b) Upon receiving the Notice of Claim, the indemnifying party
shall resist, settle or otherwise dispose of such claim in such manner as it
shall deem appropriate, including the employment of counsel, and shall be
responsible for the payment of all settlements, judgments, costs and expenses,
including the reasonable fees and expenses of any counsel retained. The
indemnified party shall have the right to employ separate counsel in any such
-27-
<PAGE>
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the indemnified party's expense unless:
(i) the employment has been specifically authorized by
the indemnifying party in writing;
(ii) the indemnifying party has improperly failed to
assume the defense and employ counsel; or
(iii) the named parties to any action (including any
impleaded parties) include the Buyer, ProVesa and/or the Company and the
Shareholders, and the indemnified party has been advised by such counsel that
representation of Buyer, ProVesa and/or the Company and Shareholders by the same
counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them (in which
case, if the indemnified party notifies the indemnifying party in writing that
the indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall have neither the right nor the
obligation to assume the defense of such action on behalf of the indemnified
party).
(c) The party seeking indemnification shall comply with the
foregoing procedure for each claim arising hereunder, whether or not the amount
of such claims exceeds any minimum amount. The indemnified party shall cooperate
with the indemnifying party in defending any such claim and provide any books,
records, information or testimony requested, which is in the hands of or under
the control of the indemnified party or obtainable by the indemnified party
without unreasonable expense.
ARTICLE 12
OTHER AGREEMENTS
----------------
SECTION 12.1. EFFECTIVE DATE. Notwithstanding the actual date of
--------------
execution and delivery of this Agreement, the parties agree that, for all
purposes (including legal, tax and accounting), this Agreement shall be deemed
dated and effective as of October 31, 1998.
SECTION 12.2. ARBITRATION. Any dispute, controversy or claim arising
-----------
out of or relating to this Agreement or any other related Merger Documents,
agreements, certificates or other writing, or the breach, termination,
construction, validity or enforceability hereof or thereof, shall be settled by
binding arbitration held in Atlanta, Georgia in accordance with the rules of the
American Arbitration Association in force at the time. Termination or limitation
of the Buyer's or ProVesa's rights in any of its software, products, or any
associated intellectual property rights or documents may not be awarded under
any circumstances. The right to demand arbitration and to receive damages and
obtain other available remedies as provided hereunder shall be the exclusive
remedy in the event an arbitration demand is made, except that the Buyer and/or
ProVesa shall be entitled to obtain equitable relief, such as
-28-
<PAGE>
injunctive relief, from any court of competent jurisdiction to protect its
rights in any of its software products or any associated intellectual property
rights or documents while such proceeding is pending or in support of any award
made pursuant to such arbitration.
ARTICLE 13
MISCELLANEOUS
-------------
SECTION 13.1. INTEGRATION; SEVERABILITY. This Agreement represents the
-------------------------
entire understanding of the Company, Buyer, ProVesa and the Shareholders with
respect to the subject matter hereof and there are no other written or oral
agreements or understandings between the parties with respect thereto. If for
any reason any term, provision or portion thereof of this Agreement is held to
be unenforceable, invalid or illegal, such provision or portion thereof shall be
deemed modified to the minimum extent necessary to make such provision
consistent with the applicable law and the remaining portions and provisions of
this Agreement shall continue in full force and effect thereafter.
SECTION 13.2. JOINT AND SEVERAL LIABILITY. All obligations and
---------------------------
liabilities of the Shareholders hereunder shall be joint and several.
SECTION 13.3. EXPENSES. All legal, accounting and other costs and
--------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
SECTION 13.4. NOTICES. All notices hereunder shall be sufficiently
-------
given for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service, or to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as follows:
To the Shareholders:
Norman S. Edelcup
-------------------------
-------------------------
and
Robert L. Jackson
-------------------------
-------------------------
with a copy to:
Wintter & Associates, P.A.
-29-
<PAGE>
2239 Hollywood Boulevard
Hollywood, Florida 33020-6707
Attn: Christopher Q. Wintter, Esq.
To the Company:
Item Processing of America
5190 Northwest 167th Street
Suite 300
Miami, Florida 33014
Attn: President
Facsimile: (305) 621-6963
To Buyer:
IPA Acquisition Corp.
c/o The InterCept Group, Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30071
Attn: John W. Collins and Donny R. Jackson
Facsimile: (770) 248-9600
To ProVesa:
ProVesa Inc.
c/o The InterCept Group, Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30071
Attn: John W. Collins and Donny R. Jackson
Facsimile: (770) 248-9600
With a copy to:
Susan L. Spencer, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Facsimile: (404) 817-6151
SECTION 13.5. PUBLIC ANNOUNCEMENTS. No Shareholder shall make any
--------------------
public announcement or other public disclosure regarding this Agreement or its
terms without the consent of the Buyer or ProVesa except to the extent that such
disclosure is required by applicable law. Notwithstanding the foregoing, the
parties may communicate with their
-30-
<PAGE>
respective employees, customers, suppliers, creditors, shareholders and relevant
governmental agencies as may be necessary and appropriate in connection with the
implementation and consummation of the terms of this Agreement.
SECTION 13.6. INVALIDITY OF ANY PART. In any provision or part of this
----------------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement and shall be construed as if such invalid,
illegal or unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability.
SECTION 13.7. REMEDIES. Each of the parties acknowledges that money
--------
damages would not be a sufficient remedy for any breach of this Agreement and
that irreparable harm would result if this Agreement were not specifically
enforced. Therefore, the rights and obligations of the parties under this
Agreement shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. A party's right to specific
performance shall be in addition to all other legal or equitable remedies
available to such party.
SECTION 13.8. ASSISTANCE OF COUNSEL. Each party hereto acknowledges
---------------------
that they have had the assistance of counsel in negotiating and preparing the
terms of this Agreement; therefore, this Agreement shall be construed without
regard to any presumption or other rule requiring construction against the party
causing the Agreement to be drafted.
SECTION 13.9. GOVERNING LAW AND JURISDICTION. This Agreement shall be
------------------------------
interpreted and enforced construed in accordance with the laws of the State of
Georgia (excluding conflict of laws principles). The Shareholders consent to the
exclusive jurisdiction and venue of the courts of any county in the State of
Georgia and the United States District Court for any District of Georgia in any
action or judicial proceeding brought to enforce, construe or interpret this
Agreement or any other Documents or agreements contemplated hereby. The
Shareholders agree that any forum other than the State of Georgia is an
inconvenient forum and that a suit (or non-compulsory counterclaim) brought by
any Shareholder against Buyer or ProVesa or any of their affiliates (including
the Releasees) in a court of any state other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
SECTION 13.10. ASSIGNMENT; AMENDMENTS; BINDING AGREEMENT. The
-----------------------------------------
Shareholders may not assign any of their rights or responsibilities hereunder
without the prior written consent of the Buyer or ProVesa; any attempted
assignment without such prior written consent of the Buyer or ProVesa shall be
null and void. No amendment or modification of this Agreement shall be binding
unless the same shall be in writing and executed by the parties hereto. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their successors, representatives, receivers, trustees and permitted
assigns.
SECTION 13.11. COUNTERPARTS; FACSIMILES. This Agreement may be executed
------------------------
in two or more counterparts, each of which shall be deemed an original, but all
of which together
-31-
<PAGE>
shall constitute one and the same instrument. To the maximum extent permitted by
law or by any applicable governmental authority, any document may be signed and
transmitted by facsimile with the same validity as if it were an ink-signed
document.
[Signatures begin on the following page]
-32-
<PAGE>
IN WITNESS WHEREOF, this Acquisition and Merger Agreement has been
executed by each of the parties as of the date first above written.
Witness: IPA Acquisition Corp.
By: /s/ Donny R. Jackson
- -------------------------------------- -----------------------------------
Name: Donny R. Jackson
Title: President
Witness: ProVesa Inc.
By: /s/ Donny R. Jackson
- -------------------------------------- -----------------------------------
Name: Donny R. Jackson
Title: President
Witness: Item Processing of America, Inc.
/s/ Ernst G. Wintter By: /s/ Norman S. Edelcup
- -------------------------------------- -----------------------------------
Name: Norman S. Edelcup
Title: Secretary
Shareholders
State of FL. /s/ Norman S. Edelcup
----------------------------- ---------------------------------------
Norman S. Edelcup
County of Brevard
----------------------------
/s/ Robert L. Jackson
---------------------------------------
The foregoing instrument was Robert L. Jackson
acknowledged before me this 26th day
of October, 1998, by Norman S.
Edelcup and Robert L. Jackson.
Witness my hand and official seal.
/s/ Elizabeth Arroyo
- --------------------------------------
Notary Public
My commission expires: APR. 20, 2002
[Affix Notarial Seal]
-33-
<PAGE>
Contact: Scott R. Meyerhoff
Chief Financial Officer
(770) 840-2530
THE INTERCEPT GROUP EXPANDS INTO FLORIDA:
ANNOUNCES ACQUISITIONS OF TWO COMPANIES
Norcross, Georgia (October 30, 1998) - The InterCept Group, Inc., (AMEX:ICG) a
provider of fully integrated electronic commerce products and services for
financial institutions, announced today two acquisitions in Florida. The
businesses, purchased for cash, are Item Processing of America (IPA), an item
processing capture center located in the Miami/Fort Lauderdale metropolitan
area, and the assets of Premier Imaging, a check imaging facility based in
Jacksonville. Both businesses cover what InterCept believes are explosive growth
markets in North and South Florida.
As a single-source provider of a broad range of electronic solutions and
support for community banks across the U.S., InterCept felt the need to expand
into Florida in order to provide additional value-added products and services
for customers. The acquisition of Item Processing and Premier Imaging creates a
strong presence for The InterCept Group in Florida.
"We are very pleased to announce these acquisitions, which mark InterCept's
expansion into the state of Florida", stated John W. Collins, Chairman and Chief
Executive Officer of The InterCept Group. With the increased activity Florida is
experiencing from both denovo and existing financial institutions, we felt that
this market deserved more attention. These acquisitions are important because
they cover distinct geography and provide us with the opportunity to serve these
growing markets with additional products and services. An integral part of our
growth strategy is to seek acquisition opportunities that enable us to penetrate
new markets and expand our customer base. The addition of these two businesses
are right in line with our acquisition goals to expand geographically and cross-
market our products and services.
<PAGE>
ICG Announces Florida Acquisitions
Page 2
October 30, 1998
InterCept's broad range of flexible products and services allow community
banks to remain competitive in today's financial market. In addition to
providing Electronic Funds Transfer and ATM processing, The InterCept Group
offers financial institutions a variety of other services, including core
banking software and processing, data communications management, sales of
banking related equipment and service, merchant bankcard portfolio management
and debit card programs. The company also created the InterCept Switch, The
Surcharge Free Network, which gained rapid market acceptance when it was
introduced mid 1997. Through the InterCept Switch, community financial
institutions gain the power to compete with larger regional institutions by
offering surcharge free usage at hundreds of ATMs across the nation to member
cardholders.
The InterCept Group is a publicly held corporation with headquarters in
Norcross, Georgia. Additional information about The InterCept Group can be
found by accessing their web site at www.intercept.net.
This release contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended. These statements
appear in a number of places in this release and include all statements that are
not statements of historical fact regarding the intent, belief or expectations
of the Company and its management with respect to , among other things: (i) the
anticipated impact of certain events and circumstances; (ii) trends affecting
the Company; and (iii) the Company's growth and operating strategy. The words
may, will, anticipate, believe, intend, plans, allows, strategy and similar
expressions are intended to identify forward-looking statements. Such forward-
looking statements are not guarantees of future performance and actual results
may differ materially from those projected in the forward-looking statements as
a result of the Company's brief combined operating history, its ability to
obtain and manage growth, risks related to acquisitions and the integration of
acquired assets and businesses, customer attrition and competition and various
other factors discussed in detail in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section in InterCept's
Registration Statement on Form S-1 (Registration No. 333-47197), as declared
effective by the Securities and Exchange Commission on June 9, 1998.
