<PAGE> 1
________________________________________________________________________________
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)
August 28, 1995
REPUBLIC WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-9787 73-1105145
_________________ ________________ _______________
(State of other (Commission File (I.R.S. Employer
jurisdiction Number) Identification
of incorporation) No.)
200 East Las Olas Blvd.
Suite 1400
Ft. Lauderdale, Florida 33301
(Address of principal executive offices)
Registrant's telephone number, including area code
(305) 761-8333
________________________________________________________________________________
<PAGE> 2
With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commission (the "Commission")
as an exhibit to this report, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
ITEM 5. OTHER EVENTS.
ACQUISITION OF KERTZ SECURITY SYSTEMS, INC. AND AFFILIATE
A. MERGER AGREEMENT.
As of August 24, 1995, Republic Waste Industries, Inc., a Delaware
corporation ("Republic"), RKSA, Inc., a Florida corporation and wholly-owned
subsidiary of Republic ("RKSA I"), RKSA II, Inc., a Florida corporation and
wholly-owned subsidiary of Republic ("RKSA II"), Kertz Security Systems, Inc.,
a Florida corporation ("Kertz I"), Kertz Security Systems II, Inc., a Florida
corporation ("Kertz II" and together with Kertz I, "Kertz"), and the
shareholders of Kertz, Leon H. Brauser, Robert Brauser, Michael Brauser and
Joel Brauser, each a resident of the State of Florida (together, the
"Brausers") entered into a Merger Agreement (the "Merger Agreement"), pursuant
to which, on August 28, 1995, (i) RKSA I was merged with and into Kertz I,
resulting in Kertz I becoming a wholly-owned subsidiary of Republic (the "Kertz
I Merger"); and (ii) RKSA II was merged with and into Kertz II, resulting in
Kertz II becoming a wholly-owned subsidiary of Republic (the "Kertz II Merger"
and together with the Kertz I Merger, the "Merger") on the terms set forth in
the Merger Agreement. The Merger Agreement is attached hereto as Exhibit
(c)(2.1) and is incorporated herein by reference for all purposes.
The Merger will be accounted for as a pooling of interests business
combination. In exchange for all of the issued and outstanding shares of
capital stock of Kertz in the Merger, the Brausers were issued an aggregate of
1,090,000 shares of common stock, $.01 per share par value, of Republic
("Common Stock"). Certain of the shares of Common Stock were held back by
Republic in connection with certain indemnification obligations of the Brausers
pursuant to the Merger Agreement. The terms and conditions of the Merger were
determined by arm's-length negotiations between Republic and Kertz. The
1,090,000 shares of Common Stock issued in the Merger are restricted under Rule
145 promulgated under the Securities Act of 1933, as amended (the "Act"), and,
pursuant to the terms and conditions of the Merger Agreement, are to be
registered under the Act for resale by the Brausers as soon as practicable.
At the closing of the Merger, Republic entered into a consulting
agreement with Leon Brauser pursuant to which Leon Brauser agreed to perform
certain consulting services for Kertz
1
<PAGE> 3
and to certain covenants not to compete with Kertz, and pursuant to which Leon
Brauser was granted options to purchase 100,000 shares of Common Stock at an
exercise price of $22.125 per share (which was the closing sale price of a
share of Common Stock as reported by the Nasdaq Stock Market on August 25,
1995). In addition, Republic agreed to employ Michael, Robert and Joel
Brauser, and Michael Brauser was named Senior Vice President of Kertz.
Michael, Robert and Joel Brauser will be eligible to receive option grants from
time to time under Republic's employee stock option plans.
B. EXPANSION OF BUSINESS OPERATIONS
The Merger is consistent with Republic's previously announced business
strategy of expanding its operations outside of solid waste management and
related lines of business to become a more diversified service company. As
a result of the Merger, Republic has expanded its operations to include the
business of providing electronic security services through Kertz.
Kertz is engaged in the electronic security services business, which
consists of the sale, installation, and maintenance of electronic security
systems for commercial and residential use as well as the continuous electronic
monitoring of installed security systems. Kertz installs modern electronic
devices in its customers' businesses and residences to provide detection of
events, such as intrusion or fire. Kertz purchases the components of the
systems it installs and maintains from various manufacturers. The products and
services marketed in the electronic security services industry by Kertz and
others range from basic residential systems that provide entry and fire
detection to sophisticated commercial systems incorporating closed circuit
television systems and access control. Detection systems may be continuously
monitored by centralized monitoring stations which are linked to the customer
through telephone lines. Kertz operates a central monitoring station in Fort
Lauderdale, Florida, from which it monitors over 30,000 businesses and
residences predominantly in the Miami/Fort Lauderdale, Orlando and Tampa,
Florida areas by local and long distance telephone lines. Upon detecting an
intrusion or other event at a customer's business or residence, the central
monitoring station calls the customer and, if necessary, the local police,
fire, ambulance or other authorities.
The electronic security services industry has high fixed costs associated
with owning and operating a central monitoring station, but has low marginal
costs associated with providing monitoring services to additional customers.
Management of Republic believes that there is a significant opportunity for
achieving economies of scale by consolidation of monitoring and administrative
functions, as the electronic security services industry in the United States is
highly fragmented. Republic estimates that the five largest companies in the
electronic security services industry in the United States have a combined
2
<PAGE> 4
market share of approximately 13 per cent, based on sales revenue, with well
over 12,000 local and regional companies constituting the remainder of the
market. According to an industry trade journal, Security Distributing and
Marketing, Kertz is the 22nd largest provider of electronic security services
in the nation. Republic estimates that Kertz will have approximately $14
million in revenue in 1995.
Republic's strategy is to market and install large numbers of new
residential security systems and to provide continuous electronic monitoring of
such new systems. Republic plans to implement this strategy by expanding
Kertz's sales, advertising and marketing programs to achieve internal growth.
In addition, Republic plans to expand the customer base of its electronic
security services business through acquisitions of other entities providing
such services in various Florida markets and other areas. However, there is
substantial competition in the industry, and some of Republic's competitors
have substantial financial and other resources.
ITEM 7. FINANCIAL INFORMATION AND EXHIBITS.
(a)-(b) Not applicable.
*(c)(2.1) Merger Agreement.
_______________
* Filed herewith.
3
<PAGE> 5
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 thereunto duly authorized.
REPUBLIC WASTE INDUSTRIES, INC.
Date: September 1, 1995 By: /s/ Gregory K. Fairbanks
---------------------------
Gregory K. Fairbanks,
Chief Financial Officer and
Executive Vice President
4
<PAGE> 6
INDEX TO EXHIBITS
Exhibit
Number
(a)-(b) Not applicable.
*(c)(2.1) Merger Agreement entered into as of August 24, 1995 among Republic
Waste Industries, Inc., a Delaware corporation; RKSA, Inc., a
Florida corporation; RKSA II, Inc., a Florida corporation; Kertz
Security Systems, Inc., a Florida corporation; Kertz Security
Systems II, Inc., a Florida corporation; Leon H. Brauser, Robert
Brauser, Michael Brauser and Joel Brauser.
_______________
* Filed herewith.
5
<PAGE> 1
MERGER AGREEMENT
This Merger Agreement (this "Agreement") is entered into as of August
24, 1995 among Republic Waste Industries, Inc., a Delaware corporation
("Republic"), RKSA, Inc., a Florida corporation and wholly-owned subsidiary of
Republic ("RKSA I"), RKSA II, Inc., a Florida corporation and wholly-owned
subsidiary of Republic ("RKSA II", and together with Republic and RKSA I, the
"Republic Companies"), Kertz Security Systems, Inc., a Florida corporation
("Kertz I"), Kertz Security Systems II, Inc. ("Kertz II," and together with
Kertz I, the "Kertz Companies"), and the shareholders of the Kertz Companies,
Leon H. Brauser, Robert Brauser, Michael Brauser and Joel Brauser, each a
resident of the State of Florida (together, the "Brausers"). The Brausers and
the Kertz Companies are sometimes referred to herein as the "Brauser Group".
Certain other capitalized terms used herein are defined in Article XI.
RECITALS
The Boards of Directors of Republic and each of the Kertz Companies
have determined that it is in the best interests of their respective
shareholders for Republic to acquire the Kertz Companies upon the terms and
subject to the conditions set forth in this Agreement. In order to effectuate
the transaction, Republic has organized RKSA I and RKSA II as wholly-owned
subsidiaries and the parties have agreed, subject to the terms and conditions
set forth in this Agreement, to merge RKSA I with and into Kertz I, with Kertz
I as the surviving corporation, and RKSA II with and into Kertz II, with Kertz
II as the surviving corporation. As a result, Kertz I and Kertz II will become
wholly-owned subsidiaries of Republic.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 THE MERGERS. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined below), (a) RKSA I shall be merged
with and into Kertz I (the "Kertz I Merger") on the terms and conditions set
forth in the Plan of Merger annexed hereto as Exhibit A (the "Kertz I Plan of
1
<PAGE> 2
Merger"), and (b) RKSA II shall be merged with and into Kertz II (the "Kertz II
Merger" and together with the Kertz I Merger, the "Mergers") on the terms and
conditions set forth in the Plan of Merger annexed hereto as Exhibit B (the
"Kertz II Plan of Merger" and together with the Kertz I Plan of Merger, the
"Plans of Merger"). The terms and conditions of each of the Plans of Merger
are incorporated herein by reference as if fully set forth herein. As a result
of the Mergers, the separate corporate existences of RKSA I and RKSA II shall
cease and Kertz I and Kertz II shall continue as surviving corporations and
wholly-owned subsidiaries of Republic.
1.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Mergers (the "Closing") shall take place as
promptly as practicable (and in any event within five (5) business days) after
satisfaction or waiver of the conditions set forth in Articles VI and VII, at
the offices of Akerman, Senterfitt & Eidson, P.A., 801 Brickell Avenue, 24th
Floor, Miami, Florida 33131.
1.3 FILING OF ARTICLES OF MERGER. At the time of the Closing,
the parties shall cause each of the Kertz I Merger and the Kertz II Merger to
be consummated at the same time by filing duly executed Articles of Merger
(with the respective completed Plan of Merger annexed thereto) with the
Department of State of the State of Florida, in such form as Republic
determines is required by and is in accordance with the relevant provisions of
the Florida Business Corporation Act (the "FBCA") (the date and time of such
filing is referred to herein as the "Effective Time").
1.4 ISSUANCE OF REPUBLIC SHARES. As of the Effective Time, by
virtue of the Mergers and without any further action on the part of the parties
hereto:
(a) Republic shall be deemed to have issued to each
shareholder of record of Kertz I listed on Schedule 3.5 that number of
shares of the common stock, $0.01 par value per share, of Republic
("Republic Common Stock") set forth next to such shareholder's name on
Schedule 1.4(a); and
(b) Republic shall be deemed to have issued to each
shareholder of record of Kertz II listed on Schedule 3.5 that number
of shares of Republic Common Stock set forth next to such shareholder's
name on Schedule 1.4(b).
1.5 DELIVERY OF CERTIFICATES. At the Closing, each holder of
shares of Kertz I Common Stock and Kertz II Common Stock shall deliver the
certificates representing such shares to Republic for cancellation, and as soon
as reasonably practicable following Closing, Republic shall deliver duly
executed certificates, in valid form, representing the shares of Republic
Common Stock to be issued pursuant to Section 1.4 in the following manner: (i)
Republic shall deliver to each such holder one or more
2
<PAGE> 3
certificates evidencing ninety percent (90%) of such shares of Republic Common
Stock (rounded to the nearest whole share), and (ii) Republic shall set aside
and hold in accordance with Article IX the certificates evidencing the balance
of such shares of Republic Common Stock (the "Held Back Shares"). The shares
of Republic Common Stock issuable by Republic in exchange for the Kertz Common
Stock and Kertz II Common Stock (including the Held Back Shares) are sometimes
referred to herein as the "Republic Shares".
1.6 ACCOUNTING TREATMENT. The parties hereto acknowledge and
agree that the transactions contemplated hereby shall be treated as a pooling
of interests combination and as a reorganization under Section 368(a)(2) of
the Internal Revenue Code of 1986, as amended.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE REPUBLIC COMPANIES
As a material inducement to each of the Brausers to enter into this
Agreement and to consummate the transactions contemplated hereby, each of the
Republic Companies jointly and severally make the following representations and
warranties to the Brausers:
2.1 CORPORATE STATUS. Republic is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of RKSA I and RKSA II is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida. Each of RKSA I
and RKSA II is a wholly-owned subsidiary of Republic.
2.2 CORPORATE POWER AND AUTHORITY. Each of the Republic
Companies has the corporate power and authority to execute and deliver this
Agreement, to perform its respective obligations hereunder and to consummate
the transactions contemplated hereby. Each of the Republic Companies has taken
all action necessary to authorize its execution and delivery of this Agreement,
the performance of its respective obligations hereunder and the consummation of
the transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each of the Republic Companies and constitutes a legal, valid and
binding obligation of each of the Republic Companies, enforceable against each
of the Republic Companies in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether
3
<PAGE> 4
such enforceability is considered in a proceeding at law or in equity.
2.4 REPUBLIC COMMON STOCK. Upon consummation of the Mergers and
the issuance and delivery of certificates representing the Republic Shares to
the Brausers, the Republic Shares will be validly issued, fully paid and
non-assessable shares of Republic Common Stock.
2.5 NO COMMISSIONS. None of the Republic Companies has incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BRAUSERS
As a material inducement to each of the Republic Companies to enter
into this Agreement and to consummate the transactions contemplated hereby,
each of the Brausers jointly and severally makes the following representations
and warranties to the Republic Companies:
3.1 CORPORATE STATUS. Each of the Kertz Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida and has the requisite power and authority to own
or lease its properties and to carry on its business as now being conducted.
Each of the Kertz Companies is legally qualified to transact business as a
foreign corporation in all jurisdictions where the nature of its properties and
the conduct of its business requires such qualification (all of which
jurisdictions are listed on Schedule 3.1) and is in good standing in each of
the jurisdictions in which it is so qualified. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of either of the Kertz Companies.
3.2 POWER AND AUTHORITY. Each of the Kertz Companies has the
power and authority to execute and deliver this Agreement, to perform its
respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Kertz Companies has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby. Each of the Brausers are individuals
residing in the State of Florida with the requisite competence and authority to
execute and deliver this Agreement, to perform his respective obligations
hereunder and to consummate the transactions contemplated hereby.
4
<PAGE> 5
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each member of the Brauser Group and constitutes the legal, valid
and binding obligation of each member of the Brauser Group, enforceable against
each member of the Brauser Group in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. Schedule 3.4 sets forth, with respect to
each of the Kertz Companies, (a) the number of authorized shares of each class
of capital stock, (b) the number of issued and outstanding shares of each class
of capital stock, and (c) the number of shares of each of class of capital
stock which are held in treasury. All of the issued and outstanding shares of
capital stock of each of the Kertz Companies (a) have been duly authorized and
validly issued and are fully paid and non-assessable, (b) were issued in
compliance with all applicable state and federal securities laws, (c) were not
issued in violation of any preemptive rights or rights of first refusal, and
(d) no preemptive rights or rights of first refusal exist, and no such rights
arise by virtue of or in connection with the transactions contemplated hereby.
There are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require either of the Kertz
Companies to issue or sell any shares of its capital stock (or securities
convertible into or exchangeable for shares of its capital stock). There are
no outstanding stock appreciation, phantom stock, profit participation or other
similar rights with respect to either of the Kertz Companies. There are no
proxies, voting rights or other agreements or understandings with respect to
the voting or transfer of the capital stock of either of the Kertz Companies.
Neither of the Kertz Companies has any obligation to redeem or otherwise
acquire any of its outstanding shares of capital stock.
3.5 SHAREHOLDERS OF THE KERTZ COMPANIES. Schedule 3.5 sets
forth, with respect to each of the Kertz Companies, (a) the name, address and
social security number of, and the number of outstanding shares of each class
of capital stock owned by, each shareholder of record as of the close of
business on the date of this Agreement; and (b) the name, address and social
security number of, and number of shares of each class of capital stock
beneficially owned by each beneficial owner of outstanding shares of capital
stock (to the extent that record and beneficial ownership of any such shares
are different). Each of the holders of shares of capital stock of the Kertz
Companies owns such shares free and clear of all Liens, restrictions and claims
of any kind.
5
<PAGE> 6
3.6 NO VIOLATION. Except as set forth on Schedule 3.6, the
execution and delivery of this Agreement by each member of the Brauser Group,
the performance by each member of the Brauser Group of its respective
obligations hereunder and the consummation by each member of the Brauser Group
of the transactions contemplated by this Agreement will not (i) contravene any
provision of the articles of incorporation or bylaws of either of the Kertz
Companies, (ii) violate or conflict with any federal, state or local law,
statute, ordinance, rule, regulation or any decree, writ, injunction, judgment
or order of any Governmental Authority or of any arbitration award which is
either applicable to, binding upon or enforceable against any of the members of
the Brauser Group, (iii) conflict with, result in any breach of, or constitute
a default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against any member of the Brauser
Group, (iv) result in or require the creation or imposition of any Lien upon or
with respect to any of the property or assets of either of the Kertz Companies,
or (v) require the consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, any court or
tribunal or any other Person, except any applicable filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR") and
any filings required to be made by the Republic Companies.
3.7 RECORDS OF THE KERTZ COMPANIES. The copies of the articles
of incorporation and bylaws of each of the Kertz Companies which were provided
to Republic are true, accurate and complete and reflect all amendments made
through the date of this Agreement. The minute books for each of the Kertz
Companies made available to Republic for review were correct and complete as of
the date of such review, no further entries have been made through the date of
this Agreement, each contains the true signatures of the persons purporting to
have signed them. All material corporate actions taken by either of the Kertz
Companies have been duly authorized or ratified.
3.8 SUBSIDIARIES. Neither of the Kertz Companies owns,
directly or indirectly, any outstanding voting securities of or other interests
in, or controls, any corporation, partnership, joint venture or other business
entity.
3.9 FINANCIAL STATEMENTS. The Brauser Group has delivered to
Republic the combined financial statements of the Kertz Companies, including
the notes pertaining thereto, audited by Arthur Andersen LLP (collectively, the
"Financial Statements") a copy of which is attached to Schedule 3.9 hereto.
The combined balance sheet dated as of December 31, 1994 of the Kertz
Companies included in the Financial Statements is referred to herein as the
"Current Balance Sheet". The Financial Statements fairly present the combined
financial position of the Kertz
6
<PAGE> 7
Companies at the balance sheet date and the results of operations for the
period covered thereby, and have been prepared in accordance with GAAP
consistently applied throughout the period indicated. The books and records of
the Kertz Companies fully and fairly reflect all transactions, properties,
assets and liabilities of the Kertz Companies which are material or otherwise
required to be disclosed by GAAP. There are no material special or
non-recurring items of income or expense during the period covered by the
Financial Statements and the balance sheet included in the Financial Statements
does not reflect any write-up or revaluation increasing the book value of any
assets, except as specifically disclosed in the notes thereto.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as
disclosed in Schedule 3.10, since the date of the Current Balance Sheet,
neither of the Kertz Companies has (i) issued any capital stock or other
securities; (ii) made any distribution of or with respect to its capital stock
or other securities or purchased or redeemed any of its securities; (iii) paid
any bonus to or increased the rate of compensation of any of its officers or
salaried employees or amended any other terms of employment of such persons
other than in the ordinary course of business consistent with past practice;
(iv) sold, leased or transferred any of its properties or assets other than in
the ordinary course of business consistent with past practice; (v) made or
obligated itself to make capital expenditures out of the ordinary course of
business consistent with past practice; (vi) made any payment in respect of its
liabilities other than in the ordinary course of business consistent with past
practice; (vii) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of transactions
involving in excess of $25,000 in the aggregate out of the ordinary course of
business, except for this Agreement and the transactions contemplated hereby;
(viii) suffered any theft, damage, destruction or casualty loss, not covered by
insurance for which a timely claim was filed, other than in the ordinary course
of business consistent with past practice; (ix) suffered any extraordinary
losses (whether or not covered by insurance); (x) waived, cancelled,
compromised or released any rights other than in the ordinary course of
business consistent with past practice; (xi) made or adopted any change in its
accounting practice or policies; (xii) made any adjustment to its books and
records (including, without limitation, any write-up or revaluation increasing
the book value of any assets) other than in respect of the conduct of its
business activities in the ordinary course consistent with past practice;
(xiii) entered into any transaction with any Affiliate other than intercompany
transactions in the ordinary course of business consistent with past practice;
(xiv) entered into any employment agreement; (xv) terminated, amended or
modified any agreement other than in the ordinary course of business consistent
with past practice; (xvi) imposed any security interest on the Owned
Properties, the Leasehold Premises or any of the Assets other than in the
7
<PAGE> 8
ordinary course of business consistent with past practice; (xvii) delayed
paying any accounts payable which is due and payable except to the extent being
contested in good faith; (xviii) made or pledged any charitable contribution
other than in the ordinary course of business consistent with past practice; or
(xix) entered into any other transaction or been subject to any event which has
or may have a Material Adverse Effect on either of the Kertz Companies; or (xx)
agreed to do or authorized any of the foregoing.
3.11 LIABILITIES OF THE KERTZ COMPANIES. Except as set forth on
Schedule 3.11 and other than in the ordinary course of business consistent with
past practice, neither of the Kertz Companies has any liabilities or
obligations whether accrued, absolute, contingent or otherwise, except (a) to
the extent reflected or taken into account in the Current Balance Sheet and not
heretofore paid or discharged, (b) to the extent specifically set forth in or
incorporated by express reference in any of the Schedules attached hereto, (c)
normal accruals, reclassifications, and audit adjustments which would be
reflected on an audited financial statement and which would not be material in
the aggregate, and (d) liabilities incurred in the ordinary course of business
prior to the date of the Current Balance Sheet which, in accordance with GAAP
consistently applied, were not recorded thereon, which in any such case do not
relate to breach of contract, breach of warranty, tort, infringement or
violation of law or arose out of any action, suit, claim, governmental
investigation or arbitration proceeding.
3.12 LITIGATION. Except as set forth on Schedule 3.12, there is
no action, suit, or other legal or administrative proceeding or governmental
investigation pending, threatened, anticipated or contemplated against, by or
affecting either of the Kertz Companies, or any of their respective properties
or assets, or the Brausers, or which question the validity or enforceability of
this Agreement or the transactions contemplated hereby, and there is no basis
for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
either of the Kertz Companies is or was a party which have not been complied
with in full or which continue to impose any material obligations on either of
the Kertz Companies.
3.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.13:
(a) Each of the Kertz Companies is and has at all times complied
in all material respects with all Environmental, Health and Safety Laws (as
defined herein) governing its business, operations, properties and assets,
including, without limitation, Environmental, Health and Safety Laws with
respect to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage, treatment,
8
<PAGE> 9
transportation, labeling, handling, manufacturing, use, spilling, leaking,
dumping, discharging, release or disposal of Hazardous Substances (as defined
herein). Neither of the Kertz Companies is currently liable for any penalties,
fines or forfeitures for failure to comply with any Environmental, Health and
Safety Laws. Each of the Kertz Companies has complied in all material respects
with all notice, record keeping and reporting requirements of all
Environmental, Health and Safety Laws, and has complied with all informational
requests or demands arising under the Environmental, Health and Safety Laws.
(b) Each of the Kertz Companies has obtained, or caused to be
obtained, all material licenses, permits, approvals and registrations required
by the Environmental, Health and Safety Laws for the ownership of its
properties and assets and the operation of its business as presently conducted,
including, without limitation, all air emission, water discharge and solid and
hazardous waste generation, storage, treatment or disposal permits and
registrations, and each of the Kertz Companies is in all material respects in
compliance with all the terms, conditions and requirements of such licenses,
permits, approvals and registrations, and that copies of such current licenses,
permits, approvals and registrations have been made available or provided to
the Republic Companies. There are no environmental administrative, judicial or
regulatory proceedings pending or threatened by any Governmental Authority, or
third parties against either of the Kertz Companies, their businesses,
operations, properties, or assets, which question the validity or entitlement
of either of the Kertz Companies to any permit, license, order, approval or
registration required by the Environmental, Health and Safety Laws for the
ownership of each of the Kertz Companies' properties and assets and the
operation of its business or wherein an unfavorable decision, ruling or finding
could have a Material Adverse Effect on either of the Kertz Companies, or which
would impose any liability upon the Republic Companies in the event that the
merger contemplated by this Agreement closes.
(c) Neither of the Kertz Companies has received or is aware of any
notice of any outstanding or threatened non-compliance order, warning letter,
notice of violation, claim, suit, action, judgment, administrative or judicial
proceeding pending against or involving either of the Kertz Companies, its
businesses, operations, properties, or assets (collectively, "Actions"),
issued by any Governmental Authority or third party with respect to any
Environmental, Health and Safety Laws in connection with the ownership by
either of the Kertz Companies of its businesses, operations, properties and
assets or the operation of its business, operations, properties or assets, which
has not been resolved to the satisfaction of the issuing Governmental Authority
or
9
<PAGE> 10
third party in a manner that would not impose any obligation, burden or
continuing liability on the Republic Companies in the event that the merger
contemplated by this Agreement closes, or which could have a Material Adverse
Effect on either of the Kertz Companies.
(d) Each of the Kertz Companies is in compliance with, and is not
in breach of or default under any applicable writ, order, judgment, injunction,
governmental communication or decree issued pursuant to the Environmental,
Health and Safety Laws and no event has occurred or is continuing which, with
the passage of time or the giving of notice or both, would constitute a
material non-compliance, or a material breach or default thereunder, or affect
the Owned Properties or Leasehold Premises.
(e) Neither of the Kertz Companies has generated, manufactured,
used, transported, stored, handled, treated, spilled, leaked, dumped,
discharged, released or disposed, nor have they permitted without authorization
or arranged for any third parties to generate, manufacture, use, transport,
store, handle, treat, spill, leak, dump, discharge, release or dispose of,
Hazardous Substances or other waste to or at any location other than a site
lawfully permitted to receive such Hazardous Substances or other waste for such
purposes, nor has it performed, arranged for or permitted without authorization
by any method or procedure such generation, manufacture, use, transportation,
storage, treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental, Health and Safety Laws. Neither of the
Kertz Companies has generated, manufactured, used, stored, handled, treated,
spilled, leaked, dumped, discharged, released or disposed of, or permitted
without authorization or arranged for any third parties to generate,
manufacture, use, store, handle, treat, spill, leak, dump, discharge, release
or dispose of, Hazardous Substances or other waste upon property owned or
leased by it, except as permitted by law. For purposes of this Section 3.13,
the term "Hazardous Substances" includes any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, by-products, pesticides, asbestos
containing materials, petroleum or petroleum products, and polychlorinated
biphenyls, which are regulated, listed or controlled by, under or pursuant to
any Environmental, Health and Safety Laws including, without limitation, the
United States Department of Transportation Table (49 CFR 172, 101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302) and
any amendments thereto; the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendment and
Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
10
<PAGE> 11
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act
("FIFRA"), as amended, 7 U.S.C. Section 136-136y; the Emergency Planning and
Community Right-to-Know Act of 1986 ("EPCRA"), as amended, 42 U.S.C. Section
11001, et seq. (Title III of SARA); the Occupational Safety and Health Act of
1970 ("OSHA"), as amended, 29 U.S.C. Section 651, et seq.; any similar state
statute, including without limitation, and by way of example, Chapters 376 or
403 Florida Statutes; or in any future amendments to, or regulations
implementing such statutes, laws, ordinances, codes, rules, regulations,
orders, rulings, or decrees, or which has been or shall be determined or
interpreted at any time by any Governmental Authority to be a hazardous or
toxic substance regulated under any other statute, law, regulation, order,
code, rule, or decree.
(f) Neither of the Kertz Companies has caused, or permitted
without authorization to be caused, either by action or inaction, a Release or
Discharge, or threatened Release or Discharge, of any Hazardous Substance on,
into or beneath the surface of any parcel of the Owned Properties or the
Leasehold Premises. There has not occurred, nor is there presently occurring,
a Release or Discharge, or threatened Release or Discharge, of any Hazardous
Substance on, into or beneath the surface of any parcel of the Owned Properties
or the Leasehold Premises. For purposes of this Section, the terms "Release"
and "Discharge" shall have the meanings given them in the Environmental, Health
and Safety Laws.
(g) Neither of the Kertz Companies has generated, handled,
manufactured, treated, stored, used, shipped, transported or disposed of, nor
have they allowed or arranged, by contract, agreement or otherwise, for any
third parties to generate, handle, manufacture, treat, store, use, ship,
transport or dispose of, any Hazardous Substance or other waste to or at a site
which, pursuant to CERCLA or any similar state law, (i) has been placed on the
National Priorities List or its state equivalent; or (ii) the Environmental
Protection Agency or the relevant state agency has notified the Kertz Companies
that it has proposed or is proposing to place on the National Priorities List
or its state equivalent. No member of the Brauser Group has received notice of
and no member of the Brauser Group has knowledge of, any facts which could give
rise to any notice,
11
<PAGE> 12
that either of the Kertz Companies is a potentially responsible party
for a federal or state environmental cleanup site or for corrective
action under CERCLA, RCRA or any other applicable law or regulation.
Neither of the Kertz Companies has submitted nor was required to
submit any notice pursuant to Section 103(c) of CERCLA with respect to
the Leasehold Premises or the Owned Properties. Neither of the Kertz
Companies has received any written or oral request for information in
connection with any federal or state environmental cleanup site.
Neither of the Kertz Companies has been required to or has not
undertaken any response or remedial actions or clean-up actions of any
kind at the request of any Governmental Authority, or at the request
of any other third party.
(h) Except as set forth on Schedule 3.13, neither of the
Kertz Companies uses, nor have they used, any Aboveground Storage
Tanks or Underground Storage Tanks, and there are not now nor have
there ever been any Underground Storage Tanks on the Leasehold
Premises or the Owned Properties. For purposes of this Section 3.13,
the terms "Aboveground Storage Tanks" and "Underground Storage Tanks"
shall have the meanings given them in Section 6901 et seq., as
amended, of RCRA, or any applicable state or local statute, law,
ordinance, code, rule, regulation, order, ruling, or decree governing
Aboveground Storage Tanks or Underground Storage Tanks.
(i) Schedule 3.13 identifies (i) all environmental
audits, assessments or occupational health studies undertaken by
either of the Kertz Companies or their agents or, to the knowledge of
any member of the Brauser Group, undertaken by any Governmental
Authority, or any third party, relating to or affecting the Kertz
Companies or any of the Leasehold Premises or the Owned Properties;
(ii) the results of any ground, water, soil, air or asbestos
monitoring undertaken by either of the Kertz Companies or their agents
or, to the knowledge of any member of the Brauser Group, undertaken by
any Governmental Authority, or any third party, relating to or
affecting either of the Kertz Companies or any of the Leasehold
Premises or the Owned Properties; (iii) all written communications
between either of the Kertz Companies and any Governmental Authority
arising under or related to Environmental, Health and Safety Laws; and
(iv) all citations issued under the Occupational Safety and Health Act
of 1970, 29 U.S.C. Sections 651 et seq., as amended ("OSHA"), or
similar state or local statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, relating to or affecting
either of the Kertz Companies or any of the Leasehold Premises or the
Owned Properties.
(j) Neither of the Kertz Companies has any liability
under any Environmental, Health and Safety laws for personal
12
<PAGE> 13
injury, property damage, natural resource damages or clean up
obligations.
(k) Schedule 3.13 contains a list of the assets of the
Kertz Companies which contain "asbestos" or "asbestos-containing
material" (as such terms are identified under the Environmental,
Health and Safety Laws). Schedule 3.13 also identifies (i) the degree
of friability of all existing asbestos and asbestos-containing
material and (ii) all actions taken by the Kertz Companies, directly
or indirectly, or by any of their agents, employees, representatives
or contractors with respect to asbestos or asbestos-containing
materials, including but not limited to all methods and manner of
abatement, removal, containment, encapsulation, repair, maintenance,
renovation, demolition, salvage, installation, storage,
transportation, disposal, monitoring, spill/emergency clean-up,
protective health and safety measures and training of personnel
(whether employees or independent contractors or otherwise). Except
as set forth in Schedule 3.13, each of the Kertz Companies has
operated and continues to operate in compliance with all
Environmental, Health & Safety Laws governing the handling, use and
exposure to and disposal of asbestos or asbestos-containing materials.
Except as set forth in Schedule 3.13, there are no claims, actions,
suits, governmental investigations or proceedings before any
Governmental Authority or third party pending, or threatened against
or directly affecting either of the Kertz Companies, or any of their
assets or operations relating to the use, handling or exposure to and
disposal of asbestos or asbestos-containing materials in connection
with their assets and operations.
(l) As used in this Agreement, "Environmental, Health
and Safety Laws" means all federal, state, regional or local statutes,
laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, whether currently in existence or hereafter
enacted or promulgated, any of which govern (or purport to govern) or
relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic
substances, solid or hazardous waste or occupational health and
safety, as any of these terms are or may be defined in such statutes,
laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA,
the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and
OSHA.
3.14 REAL ESTATE
13
<PAGE> 14
(a) The Kertz Companies do not own any real property or
any interest therein except as set forth on Schedule 3.14(a) (the "Owned
Properties"), which Schedule sets forth the location and size of, and principal
improvements and buildings on, the Owned Properties. Except as set forth on
Schedule 3.14(a), with respect to each such parcel of Owned Property:
(i) The Kertz Company owning such Owned
Property has good and marketable title to the parcel of Owned
Property, free and clear of any Lien other than (x) liens for real
estate taxes not yet due and payable; (y) recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy or value of the property subject thereto, and (z)
encumbrances and restrictions described in the title insurance
policies listed on Schedule 3.14(a), all of which policies have been
previously delivered or made available to Republic by the Brauser
Group;
(ii) there are no pending or, to the knowledge
of any of the member of the Brauser Group, threatened condemnation
proceedings, suits or administrative actions relating to the Owned
Properties or other matters affecting adversely the current use,
occupancy or value thereof;
(iii) the legal descriptions for the parcels of
Owned Property contained in the deeds thereof describe such parcels
fully and adequately; the buildings and improvements are located
within the boundary lines of the described parcels of land, are not in
violation of applicable setback requirements, zoning laws and
ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications) and do not encroach on any
easement which may burden the land; the land does not serve any
adjoining property for any purpose inconsistent with the use of the
land; and the Owned Properties are not located within any flood plain
(such that a mortgagee would require a mortgagor to obtain flood
insurance) or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been
obtained;
(iv) all facilities have received all approvals
of Governmental Authorities (including licenses and permits) required
in connection with the ownership or operation thereof and have been
operated and maintained in accordance with applicable laws,
ordinances, rules and regulations;
(v) there are no Contracts written or oral,
granting to any party or parties the right of use or occupancy of any
portion of the parcels of Owned Property;
14
<PAGE> 15
(vi) there are no outstanding options or rights
of first refusal to purchase the parcels of Owned Property, or any
portion thereof or interest therein;
(vii) there are no parties (other than the Kertz
Companies) in possession of the parcels of Owned Property, other than
tenants under any leases disclosed in Schedule 3.14(a) who are in
possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Owned Property are supplied with utilities and other services
necessary for the operation of such facilities, including gas,
electricity, water, telephone, sanitary sewer and storm sewer, all of
which services are adequate in accordance with all applicable laws,
ordinances, rules and regulations, and are provided via public roads
or via permanent, irrevocable, appurtenant easements benefitting the
parcels of Owned Property;
(ix) the parcels of Owned Property abut on and
have direct vehicular access to a public road, or has access to a
public road via a permanent, irrevocable, appurtenant easement
benefitting the parcels of Owned Property, access to the property is
provided by paved public right-of-way with adequate curb cuts
available, and there is no pending or threatened termination of the
foregoing access rights;
(x) All improvements and buildings on the Owned
Property are in good repair and are safe for occupancy and use, free
from termites or other wood-destroying organisms, the roofs are
watertight, and the structural components and systems (including
plumbing, electrical, air conditioning/heating, and sprinklers) are in
good working order and adequate for the use of such Owned Property in
the manner in which presently used; and
(xi) there are no service contracts, management
agreements or similar agreements which affect the parcels of Owned
Property.
(b) Schedule 3.14(b) sets forth a list of all leases,
licenses or similar agreements ("Leases") to which either of the Kertz
Companies is a party (copies of which have previously been furnished to
Republic), in each case, setting forth (A) the lessor and lessee thereof and
the date and term of each of the Leases, (B) the location, including address,
of each property covered thereby, and (C) a brief description (including size
and function) of the principal improvements and buildings thereon (the
"Leasehold Premises"), all of which are within the property set-back and
building lines of the respective property. The Leases are in full force and
effect and have not been amended except as set forth on Schedule 3.14(b), and
no party thereto is in default or breach under any such Lease. No event has
occurred
15
<PAGE> 16
which, with the passage of time or the giving of notice or both, would cause a
material breach of or default under any of such Leases. There is no breach or
anticipated breach by any other party to such Leases. Except as set forth on
Schedule 3.14(b), with respect to each such Leasehold Premises:
(i) The Kertz Companies have valid leasehold
interests in the Leasehold Premises, free and clear of any Liens,
covenants and easements or title defects of any nature whatsoever;
(ii) The portions of the buildings located on
the Leasehold Premises that are used in the Kertz Companies'
businesses are each in good repair and condition, normal wear and tear
excepted, and are in the aggregate sufficient to satisfy each of the
Kertz Companies' current and reasonably anticipated normal business
activities as conducted thereat;
(iii) Each of the Leasehold Premises (A) has
direct access to public roads or access to public roads by means of a
perpetual access easement, such access being sufficient to satisfy the
current and reasonably anticipated normal transportation requirements
of each of the Kertz Companies' business as presently conducted at
such parcel; and (B) is served by all utilities in such quantity and
quality as are sufficient to satisfy the current normal business
activities as conducted at such parcel; and
(iv) None of the Kertz Companies has received
notice of (A) any condemnation proceeding with respect to any portion
of the Leasehold Premises or any access thereto, and no such
proceeding is contemplated by any Governmental Authority; or (B) any
special assessment which may affect any of the Leasehold Premises, and
no such special assessment is contemplated by any Governmental
Authority.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS
(a) Each of the Kertz Companies has good and marketable
title to all of its assets (as hereinafter defined), free and clear of any
liens (other than liens referenced in the Current Balance Sheet and notes
thereto and liens of public record) or restrictions on use. For purposes of
this Agreement, the term "Assets" means all of the properties and assets of the
Kertz Companies, other than the Owned Properties and the Leasehold Premises,
whether personal or mixed, tangible or intangible, wherever located.
(b) The Fixed Assets (as hereinafter defined) currently
in use or necessary for the business and operations of the Kertz Companies are
in good operating condition, normal wear and tear excepted, and have been
maintained in accordance with all applicable manufacturer's specifications and
warranties. For
16
<PAGE> 17
purposes of this Agreement, the term "Fixed Assets" means all vehicles,
machinery, equipment, tools, supplies, furniture and fixtures used by or
located on the premises of each of the Kertz Companies or set forth on the
Current Balance Sheet or acquired by the Kertz Companies since the date of the
Current Balance Sheet. Schedule 3.15 lists the vehicles owned, leased or used
by the Kertz Companies, setting forth the make, model, description of body and
chassis, vehicle identification number, and year of manufacture, and for each
vehicle, whether it is owned or leased, and if owned, the name of any
lienholder and the amount of the lien, and if leased, the name of the lessor
and the general terms of the lease.
3.16 COMPLIANCE WITH LAWS.
(a) Each of the Kertz Companies is and has been in
compliance with all laws, regulations and orders applicable to its business and
operations (as conducted by it now and in the past), the payment of employees
and independent contractors, the Assets, the Owned Properties and the Leasehold
Premises and any other properties and assets (in each case owned or used by it
now or in the past). Except as set forth on Schedule 3.16 and on other
Schedules attached hereto, neither of the Kertz Companies has been cited, fined
or otherwise notified of any asserted past or present failure to comply with
any laws, regulations or orders and no proceeding with respect to any such
violation is pending or threatened.
(b) Neither of the Kertz Companies or any of their
employees has made any payment of funds in connection with the businesses of
the Kertz Companies which is prohibited by law, and no funds have been set
aside to be used in connection with the businesses of the Kertz Companies for
any payment prohibited by law.
(c) Each of the Kertz Companies is and at all times has
been in full compliance with the terms and provisions of the Immigration Reform
and Control Act of 1986, as amended (the "Immigration Act"). With respect to
each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Kertz Companies for
whom compliance with the Immigration Act by any of the Kertz Companies as
employer is required, the Kertz Companies and the Brausers have previously made
available to Republic a true, accurate and complete copy of (i) each Employee's
Form I-9 (Employment Eligibility Verification Form) and (ii) all other records,
documents or other papers prepared, procured and/or retained by the Kertz
Companies pursuant to the Immigration Act. Neither of the Kertz Companies has
been cited, fined, served with a Notice of Intent to Fine or with a Cease and
Desist Order, nor has any action or administrative proceeding been initiated or
threatened against either of the Kertz Companies by reason of any actual or
alleged failure to comply with the Immigration Act.
17
<PAGE> 18
(d) Neither of the Kertz Companies is subject to any
Contract, decree or injunction in which either of the Kertz Companies is a
party which restricts the continued operation of any business or the expansion
thereof to other geographical areas, customers and suppliers or lines of
business.
3.17 LABOR AND EMPLOYMENT MATTERS. Schedule 3.17 sets forth the
name, address, social security number and current rate of compensation of each
of the employees of each of the Kertz Companies. Neither of the Kertz
Companies is a party to or bound by any collective bargaining agreement or any
other agreement with a labor union, and there has been no effort by any labor
union during the 24 months prior to the date hereof to organize any employees
of any of the Kertz Companies into one or more collective bargaining units.
There is no pending or threatened labor dispute, strike or work stoppage which
affects or which may affect the business of either of the Kertz Companies or
which may interfere with their continued operation. Neither of the Kertz
Companies or any agent, representative or employee of either of the Kertz
Companies has within the last 24 months committed any unfair labor practice as
defined in the National Labor Relations Act, as amended, and there is no
pending or threatened charge or complaint against either of the Kertz Companies
by or with the National Labor Relations Board or any representative thereof.
There has been no strike, walkout or work stoppage involving any of the
employees of either of the Kertz Companies during the 24 months prior to the
date hereof. No member of the Brauser Group is aware that any executive or key
employee or group of employees has any plans to terminate his, her or their
employment with either of the Kertz Companies as a result of the Mergers or
otherwise. Schedule 3.17 contains detailed information about each contract,
agreement or plan of the following nature, whether formal or informal, and
whether or not in writing, to which either of the Kertz Companies is a party or
under which either of the Kertz Companies has an obligation: (i) employment
agreements, (ii) employee handbooks, policy statements and similar plans, (iii)
noncompetition agreements and (iv) consulting agreements (copies of which have
been made available to Republic). Each of the Kertz Companies has complied
with applicable laws, rules and regulations relating to employment, civil
rights and equal employment opportunities, including but not limited to, the
Civil Rights Act of 1964, the Fair Labor Standards Act, and the Americans with
Disabilities Act, as amended.
3.18 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans. Schedule 3.18 contains a
list for each of the Kertz Companies setting forth each employee benefit plan
or arrangement, including but not limited to employee pension benefit plans, as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), multiemployer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA,
deferred compensation plans, stock option plans,bonus
18
<PAGE> 19
plans, stock purchase plans, hospitalization, disability and other insurance
plans, severance or termination pay plans and policies, whether or not
described in Section 3(3) of ERISA, in which employees, their spouses or
dependents, of the Kertz Companies participate ("Employee Benefit Plans") (true
and accurate copies of which, together with the most recent annual reports on
Form 5500 and summary plan descriptions with respect thereto, were furnished to
Republic).
(b) Compliance with Law. With respect to each Employee
Benefit Plan (i) each has been administered in all material respects in
compliance with its terms and with all applicable laws, including, but not
limited to, ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"); (ii) no actions, suits, claims or disputes are pending, or threatened;
(iii) no audits, inquiries, reviews, proceedings, claims, or demands are
pending with any governmental or regulatory agency; (iv) there are no facts
which could give rise to any material liability in the event of any such
investigation, claim, action, suit, audit, review, or other proceeding; (v) all
material reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee
Benefit Plan intended to qualify under Code Section 401(a) or 403(a) (i) the
Internal Revenue Service has issued a favorable determination letter, true and
correct copies of which have been furnished to Republic, that such plans are
qualified and exempt from federal income taxes; (ii) no such determination
letter has been revoked nor has revocation been threatened, nor has any
amendment or other action or omission occurred with respect to any such plan
since the date of its most recent determination letter or application therefor
in any respect which would adversely affect its qualification or materially
increase its costs; (iii) no such plan has been amended in a manner that would
require security to be provided in accordance with Section 401(a)(29) of the
Code; (iv) no reportable event (within the meaning of Section 4043 of ERISA)
has occurred, other than one for which the 30-day notice requirement has been
waived; and (v) as of the Effective Date, the present value of all liabilities
that would be "benefit liabilities" under Section 4001(a)(16) of ERISA if
benefits described in Code Section 411(d)(6)(B) were included will not exceed
the then current fair market value of the assets of such plan (determined using
the actuarial assumptions used for the most recent actuarial valuation for such
plan); (vi) except as disclosed on Schedule 3.18, all contributions to, and
payments from and with respect to such plans, which may have been required to
be made in accordance with such plans and, when applicable, Section 302 of
ERISA or Section 412 of the Code, have been timely made; (vii) all such
contributions to the plans, and all payments under the plans
19
<PAGE> 20
(except those to be made from a trust qualified under Section 401(a) of the
Code) and all payments with respect to the plans (including, without
limitation, PBGC and insurance premiums) for any period ending before the
Effective Date that are not yet, but will be, required to be made are properly
accrued and reflected on the Current Balance Sheet or are disclosed on Schedule
3.18.
(d) Multiemployer Plans. With respect to any
multiemployer plan, as described in Section 4001(a)(3) of ERISA ("MPPA Plan")
(i) all contributions required to be made with respect to employees of the
Kertz Companies have been timely paid; (ii) neither of the Kertz Companies has
incurred or is expected to incur, directly or indirectly, any withdrawal
liability under ERISA with respect to any such plan (whether by reason of the
transactions contemplated by the Agreement or otherwise); (iii) Schedule 3.18
sets forth (A) the withdrawal liability under ERISA to each MPPA Plan, (B) the
date as of which such amount was calculated, and (C) the method for determining
the withdrawal liability; and (iv) no such plan is (or is expected to be)
insolvent or in reorganization and no accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists or is expected to exist with respect to any such plan.
(e) Welfare Plans. Other than as disclosed in Schedule
3.18, (i) neither of the Kertz Companies is obligated under any employee
welfare benefit plan as described in Section 3(1) of ERISA ("Welfare Plan"),
whether or not disclosed in Schedule 3.18, to provide medical or death benefits
with respect to any employee or former employee of either of the Kertz
Companies or their predecessors after termination of employment; (ii) the Kertz
Companies have complied with the notice and continuation coverage requirements
of Section 4980B of the Code and the regulations thereunder with respect to
each Welfare Plan that is, or was during any taxable year of the Kertz
Companies for which the statute of limitations on the assessment of federal
income taxes remains open, by consent or otherwise, a group health plan within
the meaning of Section 5000(b)(1) of the Code, and (iii) there are no reserves,
assets, surplus or prepaid premiums under any Welfare Plan which is an Employee
Benefit Plan. The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount of
compensation, due to any individual.
(f) Controlled Group Liability. Neither of the Kertz
Companies, or any entity that would be aggregated with either of the Kertz
Companies under Code Section 414(b), (c), (m) or (o): (i) has ever terminated
or withdrawn from an employee benefit plan under circumstances resulting (or
expected to result) in liability to the Pension Benefit Guaranty Corporation
("PBGC"), the fund by which the employee benefit plan is funded, or any
employee or beneficiary for whose benefit the plan is or was maintained (other
than routine claims for benefits); (ii) has
20
<PAGE> 21
assets subject to (or expected to be subject to) a lien for unpaid
contributions to any employee benefit plan; (iii) has failed to pay premiums to
the PBGC when due; (iv) is subject to (or expected to be subject to) an excise
tax under Code Section 4971; (v) has engaged in any transaction which would
give rise to liability under Section 4069 or Section 4212(c) of ERISA; or (vi)
has violated Code Section 4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. Except as set forth on Schedule
3.18, (i) none of the Employee Benefit Plans obligates either of the Kertz
Companies to pay separation, severance, termination or similar benefits solely
as a result of any transaction contemplated by this Agreement or solely as a
result of a "change of control" (as such term is defined in Section 280G of the
Code), (ii) all required or discretionary (in accordance with historical
practices) payments, premiums, contributions, reimbursements, or accruals for
all periods ending prior to or as of the Effective Date shall have been made or
properly accrued on the Current Balance Sheet or will be properly accrued on
the books and records of the Kertz Companies as of the Closing, and (iii) none
of the Employee Benefit Plans has any unfunded liabilities which are not
reflected on the Current Balance Sheet or the books and records of the Kertz
Companies.
3.19 TAX MATTERS. Except as set forth in Schedule 3.19 hereto,
all Tax Returns required to be filed prior to the date hereof with respect to
each of the Kertz Companies or any of their income, properties, franchises or
operations have been timely filed, each such Tax Return has been prepared in
compliance with all applicable laws and regulations, and all such Tax Returns
are true and accurate in all respects. All Taxes due and payable by or with
respect to each of the Kertz Companies have been paid and are accrued on the
Current Balance Sheet or will be accrued on the books and records of each of
the Kertz Companies as of the Closing. Each of the Kertz Companies have duly
and validly filed elections for "S" corporation status under the Code, and such
"S" elections have not been revoked or terminated and neither of the Kertz
Companies or their respective shareholders have taken any action which would
cause a termination of the "S" election. Except as set forth in Schedule 3.19
hereto: (i) with respect to each taxable period of each of the Kertz Companies,
either such taxable period has been audited by the relevant taxing authority or
the time for assessing or collecting Taxes with respect to each such taxable
period has closed and such taxable period is not subject to review by any
relevant taxing authority; (ii) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for any amount of Taxes has been
asserted or assessed by any taxing authority against either of the Kertz
Companies; (iii) neither of the Kertz Companies has consented to extend the
time in which any Taxes may be assessed or collected by any taxing authority;
(iv) neither of the Kertz Companies has requested or been granted an extension
of the time for filing any Tax Return to a date later
21
<PAGE> 22
than the Effective Time; (v) there is no action, suit, taxing authority
proceeding, or audit or claim for refund now in progress, pending or threatened
against or with respect to either of the Kertz Companies regarding Taxes; (vi)
neither of the Kertz Companies has made an election or filed a consent under
Section 341(f) of the Code (or any corresponding provision of state, local or
foreign law) on or prior to the Effective Time; (vii) there are no Liens for
Taxes (other than for current Taxes not yet due and payable) upon the assets of
either of the Kertz Companies; (viii) neither of the Kertz Companies will be
required (A) as a result of a change in method of accounting for a taxable
period ending on or prior to the Effective Date, to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of state,
local or foreign law) in taxable income for any taxable period (or portion
thereof) beginning after the Effective Time or (B) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign law), to include any item of income or
exclude any item of deduction from any taxable period (or portion thereof)
beginning after the Effective Time; (ix) neither of the Kertz Companies has
been a member of an affiliated group (as defined in Section 1504 of the Code)
or filed or been included in a combined, consolidated or unitary income Tax
Return; (x) neither of the Kertz Companies is a party to or bound by any tax
allocation or tax sharing agreement and has no current or potential contractual
obligation to indemnify any other Person with respect to Taxes; (xi) no taxing
authority is entitled to any additional Taxes against either of the Kertz
Companies for any period for which Tax Returns have been filed; (xii) neither
of the Kertz Companies has made any payments, and is not and will not become
obligated (under any contract entered into on or before the Effective Date) to
make any payments, that will be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign law); (xiii) neither
of the Kertz Companies has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code (or any
corresponding provision of state, local or foreign law) during the applicable
period specified in Section 897(c)(1)(a)(ii) of the Code (or any corresponding
provision of state, local or foreign law); (xiv) no claim has ever been made by
a taxing authority in a jurisdiction where either of the Kertz Companies does
not file Tax Returns that such Kertz Company is or may be subject to Taxes
assessed by such jurisdiction; (xv) neither of the Kertz Companies has
permanent establishment in any foreign country, as defined in the relevant tax
treaty between the United States of America and such foreign country; (xvi)
true, correct and complete copies of all income and sales Tax Returns filed by
or with respect to the Kertz Companies for the past three years have been
furnished or made available to Republic; (xvii) neither of the Kertz Companies
will be subject to any Tax for the period ending at the Effective Time for any
period for which a Tax Return has not been filed imposed pursuant to Section
1374 or Section 1375 of the Code (or any corresponding provision of state,
local or foreign law); (xviii)
22
<PAGE> 23
no sales or use tax (other than sales tax on aircraft, boats, mobile homes and
motor vehicles), non-recurring intangibles tax, documentary stamp tax or other
excise tax (or comparable tax imposed by any governmental entity) will be
payable by either the Kertz Companies or Republic by virtue of the transactions
completed in this Agreement; and (xix) no taxing authority is entitled to any
Taxes against Republic by virtue of the Mergers, including, without limitation,
as a purchaser of a business pursuant to Section 212.10, Florida Statutes.
3.20 INSURANCE. Each of the Kertz Companies is covered by valid,
outstanding and enforceable policies of insurance issued to it by reputable
insurers covering its properties, assets and business against risks of the
nature normally insured against by corporations in the same or similar lines of
business and in coverage amounts typically and reasonably carried by such
corporations (the "Insurance Policies"). Such Insurance Policies are in full
force and effect, and all premiums due thereon have been paid. As of the
Effective Time, each of the Insurance Policies will be in full force and
effect. None of the Insurance Policies will lapse or terminate as a result of
the transactions contemplated by this Agreement. Each of the Kertz Companies
has complied with the provisions of such Insurance Policies. Schedule 3.20
contains (i) a complete and correct list of all Insurance Policies and all
amendments and riders thereto (copies of which have been provided to Republic)
and (ii) a detailed description of each pending claim under any of the
Insurance Policies for an amount in excess of $10,000 that relates to loss or
damage to the properties, assets or businesses of either of the Kertz Companies
(other than those which are covered in full by insurance). Neither of the
Kertz Companies has failed to give, in a timely manner, any notice required
under any of the Insurance Policies to preserve its rights thereunder.
3.21 RECEIVABLES. All of the Receivables (as hereinafter
defined) are valid and legally binding, represent bona fide transactions and
arose in the ordinary course of business of the Kertz Companies. All of the
Receivables are good and collectible receivables, and will be collected in full
in accordance with the terms of such receivables (and in any event within six
months following the Closing), without setoff or counterclaims, subject to the
allowance for doubtful accounts, if any, set forth on the Current Balance
Sheet, as such allowance for doubtful accounts shall be reasonably adjusted
since the date of the Current Balance Sheet in the ordinary course of business
consistent with past practice to account for Receivables accruing since the
date of the Current Balance Sheet. For purposes of this Agreement, the term
"Receivables" means all receivables of the Kertz Companies, including all trade
account receivables arising from the provision of services, sale of inventory,
notes receivable, and insurance proceeds receivable.
3.22 LICENSES AND PERMITS. Each of the Kertz Companies possesses
all licenses and required governmental or official
23
<PAGE> 24
approvals, permits or authorizations (collectively, the "Permits") for its
business and operations, including with respect to providing security alarm
installation, maintenance and monitoring services and with respect to the
operation of each of the Owned Properties and Leasehold Premises. All such
Permits are valid and in full force and effect, each of the Kertz Companies is
in full compliance with their requirements, and, except as disclosed in
Schedule 3.12, no proceeding is pending or threatened to revoke or amend any of
them. None of such Permits is or will be impaired or in any way affected by
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. The Assets, Owned Properties and Leasehold
Premises constitute, in the aggregate, all of the assets and property necessary
for the conduct of the businesses of the Kertz Companies in the manner in which
and to the extent to which such businesses are currently being conducted. No
current supplier to either of the Kertz Companies of items essential to the
conduct of their business will or has threatened to terminate its business
relationship with the Kertz Companies for any reason. Except as set forth on
Schedule 3.23, neither of the Kertz Companies has any direct or indirect
interest in any customer, supplier or competitor of the Kertz Companies, or in
any person from whom or to whom the Kertz Companies lease real or personal
property. Except as set forth on Schedule 3.23 or as disclosed in the Current
Balance Sheet (including the notes thereto), no officer, director or
shareholder of any of the Kertz Companies, or any person related by blood or
marriage to any such person or any entity in which any such person owns any
beneficial interest, is a party to any Contract or transaction with any of the
Kertz Companies or has any interest in any property used by any of the Kertz
Companies.
3.24 INTELLECTUAL PROPERTY. Each of the Kertz Companies has full
legal right, title and interest in and to all trademarks, service marks,
tradenames, copyrights, know how, patents, trade secrets, licenses (including
licenses for the use of computer software programs), and other intellectual
property used in the conduct of its business (the "Intellectual Property").
The conduct of each of the Kertz Companies' business as presently conducted and
the unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property does not infringe or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the Intellectual
Property. No payments are required for the continued use of the Intellectual
Property. None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or threatened action for
opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
Neither "Kertz" nor "Kertz Securities" is a registered tradename or trademark.
24
<PAGE> 25
3.25 CONTRACTS. Schedule 3.25 sets forth a list of each Contract
to which either of the Kertz Companies is a party or by which either of the
Kertz Companies or their properties and assets are bound and which is material
to the business, assets, properties or prospects of either of the Kertz
Companies (the "Designated Contracts"), true and correct copies of which have
been provided to Republic. The copy of each Designated Contract supplied by
the Brauser Group to Republic is a true and complete copy of the document it
purports to represent and reflects all amendments thereto made through the date
of this Agreement. Except as set forth on Schedule 3.25, neither of the Kertz
Companies has violated any of the material terms or conditions of any
Designated Contract (as such terms and conditions may have been modified or
amended by Kertz and each of the other parties thereto) or any term or
condition which would permit termination or material modification of any
Designated Contract, and all of the covenants to be performed by any other
party thereto have been fully performed and there are no material uninsured
claims for breach of indemnification or notice of default or termination under
any Designated Contract. Except as set forth on Schedule 3.25 or any other
Schedule attached to this Agreement, no event has occurred, which constitutes,
or after notice or the passage of time, or both, would constitute a material
default by either of the Kertz Companies under any Designated Contract, and no
such event has occurred which constitutes or would constitute a material
default by any other party. Neither of the Kertz Companies is subject to any
material liability or payment resulting from renegotiation of amounts paid it
under any Designated Contract. As used in this Section, Designated Contracts
shall include, without limitation, (a) loan agreements, indentures, mortgages,
pledges, hypothecations, deeds of trust, conditional sale or title retention
agreements, security agreements, equipment financing obligations or guaranties,
or other sources of contingent liability in respect of any indebtedness or
obligations to any other Person, or letters of intent or commitment letters
with respect to same; (b) contracts obligating the Kertz Companies to provide
products or services for a period of one year or more, excluding standard alarm
monitoring contracts entered into in the ordinary course of business without
material modification from the preprinted forms used by the Kertz Companies in
the ordinary course of its business; (c) leases of real property, and leases of
personal property not cancelable without penalty on notice of sixty (60) days
or less or calling for payment of an annual gross rental exceeding Twenty-Five
Thousand Dollars ($25,000.00); (d) distribution, sales agency or franchise or
similar agreements, or agreements providing for an independent contractor's
services, or letters of intent with respect to same; (e) employment agreements,
management service agreements, consulting agreements, confidentiality
agreements, non-competition agreements and any other agreements relating to any
employee, officer or director of either of the Kertz Companies; (f) licenses,
assignments or transfers of trademarks, trade names, service marks, patents,
copyrights, trade secrets or know how, or other agreements
25
<PAGE> 26
regarding proprietary rights or intellectual property; (g) any Contract
relating to pending capital expenditures by either of the Kertz Companies; and
(h) other material Contracts or understandings, irrespective of subject matter
and whether or not in writing, not entered into in the ordinary course of
business and not otherwise disclosed on the Schedules.
3.26 CUSTOMER LISTS AND RECURRING REVENUE. Schedule 3.26 is a
true, correct and complete list of all existing customers of the Kertz
Companies who have entered into valid and enforceable alarm monitoring
contracts in substantially the form of one or more of the preprinted standard
forms attached to Schedule 3.26, and who represent in the aggregate
substantially all of the customers of the Kertz Companies that are subscribing
to its alarm monitoring services as of the date of this Agreement. Schedule
3.26 sets forth each such customer's name, address, account number, billing
cycle, type of service and rates charged. Except as set forth on Schedule
3.26, no customer of the Kertz Companies will account for more than 1% of its
combined annual revenue for the current fiscal year. The average gross
combined monthly billing for monitoring and service provided by the Kertz
Companies (but expressly excluding billing for installation done by the Kertz
Companies) to the customers listed on Schedule 3.26 during the three calendar
month period ended June 30, 1995 (the "Test Period") was not less than Five
Hundred Fifty-One Thousand Dollars ($551,000.00).
3.27 ACCURACY OF INFORMATION FURNISHED BY BRAUSER GROUP. No
representation, statement or information made or furnished by a member of the
Brauser Group to Republic or any of Republic's representatives, including those
contained in this Agreement and the various Schedules attached hereto and the
other information and statements referred to herein and previously furnished by
members of the Brauser Group, contains or shall contain any untrue statement of
a material fact or omits or shall omit any material fact necessary to make the
information contained therein not misleading. The Brauser Group has provided
or made available to Republic true, accurate and materially complete copies of
all documents listed or described in the various Schedules attached hereto.
3.28 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS; SECURITIES
DOCUMENTS. Each of Brausers is acquiring the Republic Shares hereunder for his
own account for investment and not with a view to, or for the sale in
connection with, any distribution of any of the Republic Shares, except in
compliance with applicable state and federal securities laws. Each of the
Brausers has had the opportunity to discuss the transactions contemplated
hereby with Republic and has had the opportunity to obtain such information
pertaining to the Republic Companies as has been requested. Each of the
Brausers is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act, and has such knowledge and experience in
business or financial matters that he is capable of evaluating
26
<PAGE> 27
the merits and risks of an investment in the Republic Shares. Each of the
Brausers represents that he has received the filings made by Republic with the
SEC and the notice set forth on Schedule 3.28.
3.29 BUSINESS LOCATIONS. As of the date hereof, neither of the
Kertz Companies has any office or place of business other than as identified on
Schedules 3.14(a) and 3.14(b) and the Kertz Companies' principal place of
business and chief executive offices (as such terms are used in subsection
9-401 of the Uniform Commercial Code as enacted in the State of Florida as of
the date hereof) are indicated on Schedule 3.14(a) or 3.14(b) and, except for
equipment leased to customers in the ordinary course of business, all locations
where the Kertz Companies' equipment, inventory, chattel paper and books and
records are located as of the date hereof are fully identified on Schedules
3.14(a) and 3.14(b).
3.30 NAMES; PRIOR ACQUISITIONS. All names under which each of
the Kertz Companies does business as of the date hereof are notified on
Schedule 3.30. Except as set forth on Schedule 3.30, neither of the Kertz
Companies has changed its name or used any assumed or fictitious name, or been
the surviving entity in a merger, acquired any business or changed its
principal place of business or chief executive office, within the past three
years.
3.31 NO COMMISSIONS. No member of the Brauser Group has incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
3.32 NO OTHER INTERESTS. Except for the Brausers' interests in
the Kertz Companies, the Brausers do not own, directly or indirectly, any other
interests in Persons or entities that are engaged in the business conducted by
the Kertz Companies consisting of the installation and monitoring of alarm and
security systems for residential and commercial customers.
3.33 NET WORTH. The combined net worth of the Kertz Companies
was not be less than $588,000.00 as of July 31, 1995, and there has not been
(and will not be prior to the Effective Time) any reduction in the combined net
worth of the Kertz Companies since that date.
3.34 CERTAIN ACCOUNTING AND TAX LETTER. All representations,
warranties and other statements made in the letter from the Brausers to Arthur
Anderson LLP (a copy of which is attached to Schedule 3.34 hereto) relating to
certain accounting and tax matters are true and correct, and Republic may rely
on each such representation, warranty and statement as if such letter were
addressed to it.
3.35 CERTAIN LICENSES. Each of Michael Brauser and Robert
Brauser possesses all licenses and permits required by any
27
<PAGE> 28
Governmental Authority that is necessary for the operation of the Kertz
Companies' business, including with respect to providing security and alarm
installation, maintenance and monitoring services, and all such licenses and
permits are in full force and effect. Except as set forth on Schedule 3.12, no
proceeding is pending or threatened to revoke or amend any such licenses or
permits, and each of Michael Brauser and Robert Brauser is in full compliance
with the requirements of such licenses and permits.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESSES BY THE KERTZ COMPANIES PENDING THE
MERGER. Except as set forth on Schedule 4.1 and any other Schedule attached
hereto, each of the Kertz Companies covenants and agrees that, between the date
of this Agreement and the Effective Time, the businesses of each of the Kertz
Companies shall be conducted only in, and neither of the Kertz Companies shall
take any action except in, the ordinary course of business, consistent with
past practice. Each of the Kertz Companies shall use its best efforts to
preserve intact its business organization, to keep available the services of
its current officers, employees and consultants and to preserve its present
relationships with customers, suppliers and other persons with which it has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, neither of the Kertz Companies shall,
between the date of this Agreement and the Effective Time, directly or
indirectly, do or propose or agree to do any of the following without the prior
written consent of Republic:
(a) amend or otherwise change its articles of
incorporation or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or,
authorize the issuance, sale, pledge, disposition, grant or
encumbrance of (i) any shares of its capital stock of any class, or
any options, warrants, convertible securities or other rights of any
kind to acquire any shares of such capital stock, or any other
ownership interest, of it or (ii) any of its assets, tangible or
intangible, except in the ordinary course of business consistent with
past practice;
(c) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock;
28
<PAGE> 29
(d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(e) (i) acquire (including, without limitation, for cash
or shares of stock), by merger, consolidation, or acquisition of stock
or assets) any interest in any corporation, partnership or other
business organization or division thereof or any assets, or make any
investment either by purchase of stock or securities, contributions of
capital or property transfer, or, except in the ordinary course of
business, consistent with past practice, purchase any property or
assets of any other Person, (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse or
otherwise as an accommodation become responsible for, the obligations
of any Person, or make any loans or advances, or (iii) enter into any
Contract other than in the ordinary course of business, consistent
with past practice;
(f) increase the compensation payable or to become
payable to its officers or employees, or, except as presently bound to
do, grant any severance or termination pay to, or enter into any
employment or severance agreement with, any of its directors, officers
or other employees, or establish, adopt, enter into or amend or take
any action to accelerate any rights or benefits which any collective
bargaining, bonus, profit sharing, trust, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any directors, officers
or employees;
(g) take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or procedures;
(h) pay, discharge or satisfy any existing claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with
past practice of due and payable liabilities reflected or reserved
against in its financial statements, as appropriate, or liabilities
incurred after the date hereof in the ordinary course of business and
consistent with past practice;
(i) except as disclosed in Schedule 3.11, increase or
decrease prices charged to its customers, except for previously
announced price changes, or take any other action which might
reasonably result in any material increase in the loss of customers
through non-renewal or termination of service contracts or other
causes; or
29
<PAGE> 30
(j) agree, in writing or otherwise, to take or
authorize any of the foregoing actions or any action which would make
any representation or warranty in Article III untrue or incorrect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver
such additional instruments and other documents and shall take such further
actions as may be necessary or appropriate to effectuate, carry out and comply
with all of the terms of this Agreement and the transactions contemplated
hereby.
5.2 COVENANTS OF THE KERTZ COMPANIES. The Brausers shall cause
the Kertz Companies to comply with all of the covenants of the Kertz Companies
under this Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with
the other in the preparation and filing of all forms, notifications, reports
and information, if any, required or reasonably deemed advisable pursuant to
any law, rule or regulation or the rules of any exchange on which the Republic
Common Stock is listed or the NASDAQ National Market in connection with the
transactions contemplated by this Agreement and to use their respective best
efforts to agree jointly on a method to overcome any objections by any
Governmental Authority to any such transactions.
5.4 OTHER ACTIONS. Each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated herein, including, without limitation, using its best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to Contracts
with the Kertz Companies as are necessary for the consummation of the
transactions contemplated hereby. Each of parties shall make on a prompt and
timely basis all governmental or regulatory notifications and filings required
to be made by it for the consummation of the transactions contemplated hereby.
5.5 ACCESS TO INFORMATION. From the date hereof to the
Effective Time, each of the Kertz Companies shall (and shall cause its
directors, officers, employees, auditors, counsel and agents) to afford
Republic and Republic's officers, employees, auditors, counsel and agents
reasonable access at all reasonable times to its properties, offices, and other
facilities, to its officers and employees and to all books and records, and
shall furnish such persons with all financial, operating and other data
30
<PAGE> 31
and information as may be requested. No information provided to or obtained by
Republic shall affect any representation or warranty in this Agreement.
Following the Effective Date, the Brausers shall have full and complete access
to all financial information of the Kertz Companies regarding any period
occurring on or prior to December 31, 1995, and, at their expense, shall be
entitled to copies of such books, records and other information as may be
reasonably requested.
5.6 NOTIFICATION OF CERTAIN MATTERS. Each of the Kertz
Companies shall give prompt notice to Republic of the occurrence or
non-occurrence of any event which would likely cause any representation or
warranty contained herein to be untrue or inaccurate, or any covenant,
condition, or agreement contained herein not to be complied with or satisfied.
5.7 TAX AND ACCOUNTING TREATMENT. Republic and each of the
Kertz Companies will use its reasonable best efforts to cause the Merger to:
(a) qualify as a reorganization under the provisions of Section 368(a)(2) of
the Code and (b) treated as a pooling of interests combination. Republic
agrees that from and after the Mergers, it will not take any action after the
Mergers are effected to cause the Mergers to lose their tax-free status. All
parties hereto agree to file the Plans of Merger with their respective federal
income tax returns for the year in which the Mergers are effective, and to
comply with the reporting requirements of Treasury Regulation 1.368-3. The
parties agree and acknowledge that (a) no election will be made in 1995 under
Section 338 of the Code, and (b) an election not to a apply a pro rata
allocation of "C" income will be made pursuant to Treasury Regulation Section
1.1362-6(a)(5).
5.8 CONFIDENTIALITY; PUBLICITY. Except as may be required by
law or as otherwise permitted or expressly contemplated herein, no party hereto
or their respective Affiliates, employees, agents and representatives shall
disclose to any third party this Agreement or the subject matter or the
consideration or other terms and conditions hereof without the prior consent of
the other parties hereto. No press release or other public announcement
related to this Agreement or the transactions contemplated hereby shall be
issued by any party hereto without the prior approval of the other parties,
except that Republic may make such public disclosure which it believes in good
faith to be required by law or by the terms of any listing agreement with a
securities exchange (in which case Republic will consult with the other parties
prior to making such disclosure).
5.9 NO OTHER DISCUSSIONS. The members of the Brauser Group and
their respective Affiliates, employees, agents and representatives will not (i)
initiate, encourage the initiation by others of discussions or negotiations
with third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,
business or properties of the Kertz Companies (whether by merger,
31
<PAGE> 32
consolidation, sale of stock or otherwise) or (ii) enter into any agreement or
commitment (whether or not binding) with respect to any of the foregoing
transactions. The Brauser Group will immediately notify Republic if any third
party attempts to initiate any solicitation, discussion or negotiation with
respect to any of the foregoing transactions.
5.10 RIGHTS TO "KERTZ" MARK. The Brausers agree to execute any
documents reasonably required by Republic to transfer to Republic any and all
rights to and interest in the marks "Kertz" and "Kertz Security Systems" to the
extent such marks are not registered in the name of either of the Kertz
Companies. Within thirty (30) days following the Closing, the Brausers agree
to change the corporate name of Kertz Telecom, Inc. to another name which does
not contain the mark "Kertz" or any similar or derivative mark and to otherwise
cease and desist from any other use of the mark "Kertz" or any similar or
derivative mark in any business or context.
5.11 BRAUSERS' RIGHT TO REMOVE CERTAIN PROPERTY. Notwithstanding
anything to the contrary set forth herein, the Brausers shall have the right on
or prior to the Effective Time to transfer to themselves, individually, those
Assets which are set forth on Schedule 5.11, provided that such Assets are free
and clear of all Liens and no purchase money financing or other debt with
respect to such Assets remains outstanding.
5.12 TRADING IN REPUBLIC COMMON STOCK. Except as otherwise
expressly consented to by Republic, from the date of this Agreement until the
Effective Time, no members of the Brauser Group (nor any Affiliate thereof)
will directly or indirectly purchase or sell (including short sales) any shares
of Republic Common Stock in any transactions effected on NASDAQ National
Market, the Toronto Stock Exchange or otherwise.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE REPUBLIC COMPANIES
The obligations of the Republic Companies to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the
following conditions, any or all of which may be waived in whole or in part by
the Republic Companies:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE
WITH OBLIGATIONS. The representations and warranties of each of the Brausers
contained in this Agreement shall be true and correct at and as of the
Effective Time with the same force and effect as though made at and as of that
time except (i) for changes specifically permitted by or disclosed pursuant to
this Agreement, and (ii) that those representations and warranties which
address matters only as of a particular date shall remain true and correct as
of such date. Each of the members of the
32
<PAGE> 33
Brauser Group shall have performed and complied with all of its obligations
required by this Agreement to be performed or complied with at or prior to the
Effective Time. Each member of the Brauser Group shall have delivered to the
Republic Companies a certificate, dated as of the Effective Time, and signed in
the case of each of the Kertz Companies, by the Chief Executive Officer and
Chief Financial Officer, certifying that such representations and warranties
are true and correct and that all such obligations have been performed and
complied with.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY.
Between the date hereof and the Effective Time, (i) there shall have been no
Material Adverse Change of either of the Kertz Companies, (ii) there shall have
been no adverse federal, state or local legislative or regulatory change
affecting in any material respect the services, products or business of either
of the Kertz Companies, and (iii) none of the properties and assets of the
Kertz Companies shall have been damaged by fire, flood, casualty, act of God or
the public enemy or other cause (regardless of insurance coverage for such
damage) which damages may have a Material Adverse Change on either of the Kertz
Companies, and there shall have been delivered to the Republic Companies a
certificate to that effect, dated the Effective Time and signed by or on behalf
of each member of the Brauser Group.
6.3 CORPORATE CERTIFICATE. The Brauser Group shall have
delivered to the Republic Companies (i) true, correct and complete copies of
the articles of incorporation and bylaws of each of the Kertz Companies as in
effect immediately prior to the Effective Time, (ii) copies of resolutions
adopted by the Board of Directors and shareholders of each of the Kertz
Companies authorizing the transactions contemplated by this Agreement, and
(iii) a certificate of good standing of the Kertz Companies issued by the
Department of State of the State of Florida and each other state in which the
Kertz Companies are qualified to do business as of a date not more than ten
days prior to the Effective Time, certified in each case as of the Effective
Time by the Secretary of each of the Kertz Companies as being true, correct and
complete.
6.4 OPINION OF COUNSEL. The Republic Companies shall have
received an opinion dated as of the Effective Time from counsel for the Brauser
Group, in form and substance acceptable to the Republic Companies.
6.5 CONTRACT AND LEASE CONSENTS. The Kertz Companies shall have
received consents to the transactions contemplated hereby and waivers of rights
to terminate or modify any material rights or obligations of the Kertz
Companies from any person from whom such consent or waiver is required under
any Designated Contract or instrument as of a date not more than ten days prior
to the Effective Time, or who, as a result of the transactions contemplated
hereby, would have such rights to terminate or
33
<PAGE> 34
modify such Contracts or instruments, either by the terms thereof or as a
matter of law.
6.6 SECURITIES LAWS. Republic shall have received all necessary
consents and otherwise complied with any state Blue Sky or securities laws
applicable to the issuance of the Republic Shares, in connection with the
transactions contemplated hereby.
6.7 POOLING LETTERS. Republic shall have received from Arthur
Andersen LLP, independent certified public accounts for the Kertz Companies, a
letter dated the Effective Time, in form and substance acceptable to Republic,
confirming that, to their knowledge after due and diligent inquiry of
management, there have been no transactions or events with respect to the Kertz
Companies which would, and the structure of the Kertz Companies and the
Brausers would not, prescribe the transactions contemplated hereby, if
consummated, from being considered as a pooling of interests combination.
Republic shall have received from Arthur Andersen LLP, a letter dated the
Effective Time, confirming that the transactions contemplated hereby, if
consummated, can properly be accounted for as a pooling of interests
combination in accordance with GAAP and the criteria of Accounting Principles
Board Opinion No. 16 and the regulations of the SEC.
6.8 UNDERTAKINGS. At or prior to the Closing, the Brausers
shall have delivered to Republic a letter agreement relating to Rule 145 under
the Securities Act and "pooling of interests" criteria, in form and substance
satisfactory to the Republic Companies.
6.9 KERTZ COMMON STOCK. At the Closing, each of the Brausers
shall have delivered to the Republic Companies all certificates evidencing the
Kertz Common Stock held by him.
6.10 STOCK POWERS. At the Closing, each of the Brausers shall
have delivered to Republic, for use in connection with the Held Back Shares,
ten stock powers executed in blank.
6.11 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or collect
damages arising out of the Merger or any other transaction contemplated hereby,
and which, in the judgment of Republic, makes it inadvisable to proceed with
the Merger and other transactions contemplated hereby.
6.12 BOARD APPROVAL. The Board of Directors of Republic shall
have authorized and approved this Agreement, the Merger and transactions
contemplated hereby and thereby.
34
<PAGE> 35
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE BRAUSER GROUP
The obligations of the members of the Brauser Group to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions, any or all of which may be waived in whole or in part
by the Brauser Group:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE
WITH OBLIGATIONS. The representations and warranties of each of the Republic
Companies contained in this Agreement shall be true and correct at and as of
the Effective Time with the same force and effect as though made at and as of
that time except (i) for changes specifically permitted by or disclosed
pursuant to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date. Each of the Republic Companies shall have performed
and complied with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Effective Time. Each of the
Republic Companies shall have delivered to the Brausers a certificate, dated as
of the Effective Time, and signed by the Chief Executive Officer and Chief
Financial Officer, certifying that such representations and warranties are true
and correct and that all such obligations have been performed and complied
with.
7.2 REPUBLIC SHARES. As soon as reasonably practicable
following the Closing, Republic shall deliver to the Brausers (i) certificates
representing the Republic Shares required to be issued to them hereunder, other
than the Held Back Shares, and (ii) copies of stock certificates representing
the Held Back Shares.
7.3 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or collect
damages arising out of the Merger or any other transaction contemplated hereby,
and which in the judgment of the members of the Brauser Group makes it
inadvisable to proceed with the Merger and other transactions.
ARTICLE VIII
REGISTRATION RIGHTS
The Brausers shall have the following registration rights with respect
to the Republic Shares issued to them hereunder:
8.1 REGISTRATION RIGHTS FOR REPUBLIC SHARES; FILING OF
REGISTRATION STATEMENT. Republic will utilize its reasonable best efforts to
cause, as soon as practicable following the Effective Time, a registration
statement to be filed under the Securities Act or an existing registration
statement to be amended for the
35
<PAGE> 36
purpose of registering the Republic Shares for resale by a Holder thereof (the
"Registration Statement"). For purposes of this Article, a person is deemed to
be a "Holder" of Republic Shares whenever such person owns Republic Shares.
Republic will use its reasonable best efforts to have the Registration
Statement become effective and cause the Republic Shares to be registered under
the Securities Act, and registered, qualified or exempted under the state
securities laws of such jurisdictions as any Holder of Republic Shares
reasonably requests, as soon as is reasonably practicable.
8.2 EXPENSES OF REGISTRATION. Republic shall pay all expenses
incurred by Republic in connection with the registration, qualification and/or
exemption of the Republic Shares, including any SEC and state securities law
registration and filing fees, printing expenses, fees and disbursements of
Republic's counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by Republic in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses contained
therein. Republic shall not, however, be liable for any sales, broker's or
underwriting commissions upon sale by any Holder of any of the Republic Shares.
8.3 FURNISHING OF DOCUMENTS. Republic shall furnish to the
Holders such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holders may reasonably request in order to facilitate the
offering of the Republic Shares.
8.4 AMENDMENTS AND SUPPLEMENTS. Republic shall prepare and
promptly file with the SEC and promptly notify the Holders of the filing of
such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions
if, at the time when a prospectus relating to the Republic Shares is required
to be delivered under the Securities Act, any event shall have occurred as a
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Republic shall also
advise the Holders promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its reasonable best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued.
8.5 DURATION. Republic shall maintain the effectiveness of the
Registration Statement until such time as Republic
36
<PAGE> 37
reasonably determines, based on an opinion of counsel, that the Holders will be
eligible to sell all of the Republic Shares then owned by the Holders without
the need for continued registration of the shares, in the three month period
immediately following the termination of the effectiveness of the Registration
Statement. Republic's obligations contained in Sections 8.1 and 8.4 shall
terminate on the third anniversary of the Effective Dates.
8.6 FURTHER INFORMATION. If Republic Shares owned by a Holder
are included in any registration, such Holder shall furnish Republic such
information regarding itself as Republic may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
8.7 INDEMNIFICATION
(a) Republic will indemnify and hold harmless the
Holders and each person, if any, who controls a Holder within the meaning of
the securities act, from and against any and all losses, damages, liabilities,
costs and expenses to which the Holders or any such controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that, Republic will
not be liable in any such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of any Holder or such
controlling person in writing specifically for use in the preparation thereof.
(b) The obligation of Republic to include in the
Registration Statement the Republic Shares of each Holder is subject to the
requirement that such Holder deliver to Republic an agreement pursuant to which
the Holders, jointly and severally, will indemnify and hold harmless Republic
and each person, if any, who controls Republic within the meaning of the
Securities Act, from and against any and all losses, damages, liabilities,
costs and expenses to which Republic or any such controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the
37
<PAGE> 38
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was so made in reliance upon and in strict conformity with written
information furnished by or on behalf of any Holder specifically for use in the
preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 8.7 of
notice of the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim thereof
is to be made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have hereunder unless the
indemnifying party has been materially prejudiced thereby nor will such failure
to so notify the indemnifying party relieve it from any liability which it may
have to any indemnified party otherwise than hereunder. In case such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified
party, the indemnified party or parties shall have the right to select separate
counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
Notwithstanding anything to the contrary set forth in this Agreement, the
indemnifying party shall not in the defense of any such claim, except with the
prior written consent of the indemnified party, consent to the entry of any
judgment or enter into any settlement which (i) does not include as an
38
<PAGE> 39
unconditional term the release by the claimant or plaintiff of the indemnified
party from all further liability in respect of such claim, and (ii) will not,
in the sole judgment of the indemnified party, result in or have a Material
Adverse Effect on the indemnified party.
(d) In the event any of the Republic Shares are sold by
any Holder or Holders in an underwritten public offering consented to by
Republic, Republic shall provide indemnification to the underwriters of such
offering and any person controlling any such underwriter on behalf of the
Holder or Holders making the offering; provided, however, that Republic shall
not be required to consent to any such underwriting or to provide such
indemnification in respect of the matters described in the proviso to the first
sentence of Section 8.7(a).
ARTICLE IX
INDEMNIFICATION
9.1 AGREEMENT BY THE BRAUSERS TO INDEMNIFY. The Brausers
jointly and severally agree to indemnify and hold each of the Republic
Companies harmless from and against the aggregate of all Indemnifiable Damages
(as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by any of the Republic Companies, on a pre-tax
basis, to the extent (i) resulting from any breach of a representation
or warranty made by any of the Brausers in or pursuant to this
Agreement, (ii) resulting from any breach of the covenants or
agreements made by any member of the Brauser Group in this Agreement,
(iii) resulting from any inaccuracy in any certificate delivered by
any member of the Brauser Group pursuant to this Agreement, or (iv)
resulting from any liability or obligation of the Brausers or their
Affiliates (other than the Kertz Companies) related to the ownership
of the Kertz Companies or the operation of their respective businesses
prior to the Closing.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, each of the
Republic Companies shall have the right to be put in the same pre-tax
financial position as it would have been in had each of the
representations and warranties of each of the member of the Brauser
Group been true and correct and had the covenants of each of the
members of the Brauser Group been performed in full.
39
<PAGE> 40
(c) Each of the representations and warranties made by
the Brausers in this Agreement or pursuant hereto, shall survive for a
period of one year after the Effective Time, notwithstanding any
investigation at any time made by or on behalf of the Republic
Companies, and upon expiration of such one year period, such
representations and warranties shall expire except that (i) with
respect to claims resulting from a breach of any representation,
warranty or covenant relating to Republic incurring any Taxes because
of the disqualification of either of the Kertz Companies' "S"
corporation elections prior to the date preceding the Effective Date
(a "Tax Claim"), written notice of any such Tax Claim must be received
prior to the expiration of the statutory period during which any
taxing authority may bring a claim against the Kertz Companies, the
Brausers or Republic for Taxes which are the subject of any such Tax
Claim and (ii) with respect to any claim relating to a breach of the
representations and warranties of the Brausers contained in Sections
3.1, 3.2, 3.3, 3.4, and 3.5, no such time limitations shall be
applicable. No claim for the recovery of Indemnifiable Damages may be
asserted by the Republic Companies against the Brausers after such
representations and warranties shall thus expire, provided, however,
that claims for Indemnifiable Damages first asserted within the
applicable period shall not thereafter be barred. Notwithstanding any
knowledge of facts determined or determinable by any party by
investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other
parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this
Agreement is independent of each other representation, warranty,
covenant and agreement.
(d) In the event that Republic shall have determined,
based on a report of a firm of independent certified public
accountants, that the actual average gross combined monthly billing
for monitoring and service provided by the Kertz Companies (but
expressly excluding billing for installment done by the Kertz
Companies) to the customers listed in Schedule 3.26 during the Test
Period were less than the amount represented and warranted in Section
3.26, then, notwithstanding any other provision of this Agreement to
the contrary, an amount equal to thirty-six (36) times the deficiency
shall be deemed to be the amount of the Indemnifiable Damages incurred
as a result of such breach of the representation and warranty set
forth in Section 3.26 for purposes of Section 9.1(a) and (b) above.
Such determination shall be made by Republic within one year following
the Effective Date.
(e) In the event that Republic believes that it is
entitled to a claim for any Indemnifiable Damages hereunder,
40
<PAGE> 41
Republic shall promptly give written notice to the Brausers of such
claim and the amount or the estimated amount of such claim, and the
basis for such claim. If the Brausers do not pay the amount of the
claim for Indemnifiable Damages to Republic within ten (10) days, then
Republic may set off the amount of such claim by selling some or all
of the Held Back Shares and retaining the net proceeds thereof as a
set off against the claim in accordance with the procedures, and
subject to the Brausers right to contest such claim, as set forth in
Section 9.2 below. If the Held Back Shares are insufficient to set
off the claim (or have been delivered to the Brausers prior to the
making or resolution of such claim), then Republic may take any action
or exercise any remedy available to it by appropriate legal
proceedings to collect the Indemnifiable Damages.
(f) Notwithstanding anything to the contrary in this
Section 9.2, the Brausers shall not be liable to Republic with respect
to any claim for Indemnifiable Damages unless all Indemnifiable
Damages (other than claims for Indemnifiable Damages arising from a
breach of any representation, warranty or covenant contained in
Section 3.13 or Section 3.33) incurred by Republic exceed an aggregate
of $500,000 (the "Indemnification Threshold"), in which case the
Brausers shall be liable for the full amount of such Indemnifiable
Damages. Notwithstanding anything to the contrary set forth herein,
(i) the Brausers shall be responsible for the full amount of any claim
for Indemnifiable Damages arising as a result of a breach of any
representation, warranty or covenant set forth in Section 3.13 or
Section 3.33 and such claim shall not be subject to the limitation set
forth in the immediately preceding sentence, and (ii) any claim for
Indemnifiable Damages arising as a result of a breach of any
representation, warranty or covenant set forth in Section 3.13 or
Section 3.33 shall not be included in determining whether the
Indemnification Threshold has been met.
(g) Notwithstanding anything to the contrary set forth
herein, Republic shall not be entitled to recover Indemnifiable
Damages in excess of the aggregate of the fair market value of the
Republic Shares at the Effective Time.
(h) Promptly after receipt by any Republic Company of
notice of the commencement of any action by a third party, which is
likely to give rise to Indemnifiable Damages, such Republic Company
shall promptly notify the Brausers of the commencement thereof; but
the omission to so notify the Brausers will not relieve them from any
liability which they may have hereunder unless the Brausers have been
materially prejudiced thereby nor will such failure to so notify the
Brausers relieve them from any liability which they may have to any of
the Republic Companies otherwise than hereunder. In case such action
is brought against any Republic Company
41
<PAGE> 42
and it notifies the Brausers of the commencement thereof, the Brausers
shall have the right to participate in, and, to the extent that they
may wish, to assume the defense thereof, with counsel satisfactory to
such Republic Company; provided, however, if the defendants in any
action include both a Republic Company and any of the Brausers and
there is a conflict of interest which would prevent counsel for the
Brausers from also representing such Republic Company, the Republic
Company or Companies shall have the right to select separate counsel
to participate in the defense of such action on behalf of such
Republic Company or Companies. After notice from the Brausers to such
Republic Company of its election to so assume the defense thereof, the
Brausers will not be liable to such Republic Company for any legal or
other expense subsequently incurred by such Republic Company in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the Republic Company shall have employed
counsel in accordance with the provisions of the preceding sentence,
(ii) the Brausers shall not have employed counsel satisfactory to the
Republic Company to represent the Republic Company within a reasonable
time after the notice of the commencement of the action, or (iii) the
Brausers have authorized the employment of counsel for the Republic
Company at the expense of the Brausers. Notwithstanding anything to
the contrary set forth in this Agreement, the Brausers shall not in
the defense of any such claim, except with the prior written consent
of Republic, consent to the entry of any judgment or enter into any
settlement which (i) does not include as an unconditional term the
release by the claimant or plaintiff of the Republic Companies from
all further liability in respect of such claim, and (ii) will not, in
the sole judgment of Republic, result in or have a Material Adverse
Effect on Republic or the any of the Republic Companies.
(i) The parties agree that any payment made by the Kertz
Companies to or for the benefit of the Brausers on or prior to the
date of Closing shall not be subject to a claim for Indemnifiable
Damages hereunder; provided, however, the preceding clause shall not
affect the tax and net worth representations, in sections 3.19 and
3.33, respectively.
9.2 SECURITY FOR THE BRAUSER INDEMNIFICATION OBLIGATION. As
security for the agreement by the Brausers to indemnify and hold the Republic
Companies harmless as described in Sections 9.1, at the Closing, Republic shall
set aside and hold certificates representing the Held Back Shares issued
pursuant to this Agreement on the following terms and conditions:
(a) Each of the Republic Companies may set off against
the Held Back Shares any Indemnifiable Damages for which any member of
the Brauser Group may be responsible pursuant to this Agreement
(including without limitation, any Indemnifiable Damages for which any
member of the
42
<PAGE> 43
Brauser Group may be responsible pursuant to this Agreement) subject,
however, to the following terms and conditions:
(1) The Republic Companies shall give
written notice to the Brausers of any claim for
Indemnifiable Damages or any other damages hereunder, which
notice shall set forth (i) the amount or estimated amount of
Indemnifiable Damages or other loss, damage, cost or expense
which the Republic Companies' claim to have sustained by
reason thereof, and (ii) the basis of the claim therefore;
(2) Unless the Brausers otherwise pay
the amount of Indemnifiable Damages to Republic, such set
off shall be effected on the later to occur on the
expiration of 10 days from the date of such notice (the
"Notice of Contest Period") or, if such claim is contested,
the date the dispute is resolved, and such set off shall be
charged proportionally against the shares set aside;
(3) If, prior to the expiration of the Notice of
Contest Period, the Brausers shall notify the Republic Companies in
writing of an intention to dispute the claim and if such dispute is
not resolved within 30 days after expiration of the Notice of Contest
Period (the "Resolution Period"), then Republic may elect that such
dispute shall be resolved by a committee of three arbitrators (one
appointed by the Brausers, one appointed by Republic and one appointed
by the two arbitrators so appointed), which shall be appointed within
60 days after the expiration of the Resolution Period. The
arbitrators shall abide by the rules of the American Arbitration
Association and their decision shall be made within 45 days of being
appointed and shall be final and binding on all parties;
(4) As soon as the Held Back Shares are registered
and any restrictions on sale imposed under Rule 145 of the Securities
Act are terminated, the Brausers may instruct Republic to sell some or
all of the Held Back Shares and the net proceeds thereof shall be
substituted for such Held Back Shares in any set off to be made by the
Republic Companies pursuant to any claim hereunder; and
(5) For purposes of this Section 9.2, the shares of
Republic Common Stock held as Held Back Shares not sold as provided in
clause (4) of this Section 9.2 shall be valued at their fair market
value at the Effective Time.
(b) Except with respect to shares transferred
pursuant to the foregoing right of setoff (and in the case of such
shares, until the same are transferred), all Held Back Shares shall be
deemed to be owned by the Brausers and the Brausers shall be entitled
to vote the same; provided,
43
<PAGE> 44
however, that, there shall also be deposited with Republic subject to
the terms of this Section 9.2, all shares of Republic Common Stock
issued to the Brausers as a result of any stock dividend or stock
split and all cash issuable to the Brausers as a result of any cash
dividend, with respect to the Held Back Shares. All stock and cash
issued or paid upon Held Back Shares shall be distributed to the
person or entity entitled to receive such Held Back Shares together
with such Held Back Shares.
(c) The Republic Companies agree to deliver to the
Brausers, no later than the first anniversary of the Effective Date,
any Held Back Shares then held by them (or proceeds from the Held Back
Shares) unless there then remains unresolved any claim for
Indemnifiable Damages or other damages hereunder as to which notice
has been given, in which event any Held Back Shares remaining on
deposit (or proceeds from the sale of Held Back Shares) after such
claim shall have been satisfied shall be returned to the Brausers
promptly after the time of satisfaction.
(d) The remedies provided for in this Section 9.2
shall be in addition to and not in lieu of any other remedies
available to the Republic Companies under this Agreement.
9.3 ADJUSTMENTS TO MERGER CONSIDERATION. All payments for
Indemnifiable Damages made pursuant to this Article IX shall be treated as
adjustments to the consideration granted in the Merger.
ARTICLE X
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Effective time of the Republic Shares:
10.1 DISPOSITION OF SHARES. The Brausers represent and warrant
that the shares of Republic Common Stock being acquired by them hereunder are
being acquired and will be acquired for their own respective accounts and will
not be sold or otherwise disposed of, except pursuant to (a) an exemption from
the registration requirements under the Securities Act, which does not require
the filing by Republic with the SEC of any registration statement, offering
circular or other document, in which case, the Brausers shall first supply to
the Republic Companies an opinion of counsel (which counsel and opinions shall
be satisfactory to the Republic Companies) that such exception is available, or
(ii) a registration statement filed by Republic with the SEC under the
Securities Act.
44
<PAGE> 45
10.2 LEGEND. The certificate representing the Republic Shares
shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE
HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT BEING
FILED UNDER OR PURSUANT TO SAID ACT OR AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS OF RULE 145(D) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED OR DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE
WITH SAID RULE AND SECURITIES AND EXCHANGE COMMISSION
ACCOUNTING SERIES RELEASES 130 AND 135.
Republic may, unless a registration statement is in effect covering such shares
and the holding periods under the Commission's regulations and requirements
regarding "pooling of interests" combinations are complied with, place stop
transfer orders with its transfer agents with respect to such certificates.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall
have the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on
the date hereof.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust,
commitment, obligation or other contract, agreement or instrument,
whether written or oral.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
45
<PAGE> 46
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity
or official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any
conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable law or any
jurisdiction in connection with such mortgage, pledge, security
interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects
which change (or effect) individually or in the aggregate, is
materially adverse to such condition, properties, assets, liabilities,
rights, obligations, operations, business or prospects.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever
nature.
"Register", "registered" and "registration" refer to a registration of
the offering and sale of securities effected by preparing and filing a
registration statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration
statement.
"Republic Shares" means the shares of Republic Common Stock which the
Brausers receive in connection with the Mergers.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes,
reporting of income or related matters; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise,
46
<PAGE> 47
property, sales, franchise, intangible, withholding, social security
and unemployment taxes imposed by any federal, state, local or foreign
governmental agency, and any interest or penalties related thereto.
11.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection
with this Agreement and the transactions contemplated hereby shall be
determined in accordance with GAAP applied on a basis consistent with prior
periods, where applicable.
(d) As used herein, the neuter gender shall also denote
the masculine and feminine, and the masculine gender shall also denote the
neuter and feminine, where the context so permits.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of all of the parties
hereto at any time prior to the Closing;
(b) by Republic at any time prior to the Effective Date
if there shall be a pending or threatened action or proceeding before
any court or other governmental body which shall seek to restrain,
prohibit or invalidate the transactions contemplated hereby, and
which, in the judgment of Republic, makes it inadvisable to proceed
with the transactions contemplated by this Agreement;
(c) by Republic in the event of a material breach by any
member of the Brauser Group of any provision of this Agreement, or by
the Brauser Group in the event of a material breach by the Republic
Companies of any provision of this Agreement; or
(d) if the Closing shall not have occurred by August
31, 1995.
47
<PAGE> 48
12.2 EFFECT OF TERMINATION. Except as provided in Article IX, in
the event of termination of this Agreement pursuant to Section 12.1, this
Agreement and the Plans of Merger shall forthwith become void, there shall be
no liability on the part of the parties hereto or thereto to each other and all
rights and obligations of the parties hereto or thereto shall cease; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by
certified or registered mail (first class postage pre-paid), guaranteed
overnight delivery, or facsimile transmission if such transmission is confirmed
by delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
designate in writing to the other party):
(a) IF TO ANY OF THE REPUBLIC COMPANIES TO:
Republic Waste Industries, Inc.
200 East Las Olas Blvd., Suite 1400
Ft. Lauderdale, FL 33301
Attn: Harris W. Hudson, President
Telecopy: (305) 779-3884
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
24th Floor, One Brickell Square
801 Brickell Avenue
Miami, Florida 33131
Attention: Stephen K. Roddenberry, Esq.
Telecopy: (305) 374-5095
(b) IF TO ANY MEMBER OF THE BRAUSER GROUP TO:
Kertz Security Systems, Inc.
1830 West Broward Blvd.
Ft. Lauderdale, FL
Attention: Michael Brauser
Telecopy: (305) 523-2363
WITH A COPY TO:
48
<PAGE> 49
Gutter, Josepher, Ruffin & Sheehy, P.A.
Trade Center South, Suite 900
100 West Cypress Creek Road
Ft. Lauderdale, FL 33309
Attention: Marvin C. Gutter, Esq.
Telecopy: (305) 938-9555
13.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits
and Schedules attached hereto) and the other documents delivered at the Closing
pursuant hereto or in connection herewith, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior
agreements and understandings (oral or written) between or among the parties
with respect to such subject matter. The Exhibits and Schedules constitute a
part hereof as though set forth in full above.
13.3 EXPENSES. Except as otherwise provided herein, the parties
shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby.
13.4 AMENDMENT; WAIVER. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising,
any right, power or privilege under this Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude the exercise of any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision, nor shall
any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder or
under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. The rights and
remedies of the parties under this Agreement are in addition to all other
rights and remedies, at law or equity, that they may have against each other.
13.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of
this Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall
be construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by any member of the Brauser Group without the
prior written consent of Republic.
13.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
49
<PAGE> 50
13.7 INTERPRETATION. When a reference is made in this Agreement
to an article, section, paragraph, clause, schedule or exhibit, such reference
shall be deemed to be to this Agreement unless otherwise indicated. The
headings contained herein and on the schedules are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or the schedules. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Time shall be of the essence in this Agreement.
13.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of Florida applicable to contracts executed and to be wholly performed
within such State.
13.9 INVESTMENT REPRESENTATIONS. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party
has had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arms' length negotiations conducted by and among the
parties and their respective counsel.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
REPUBLIC WASTE INDUSTRIES, INC.
By: /s/ Gregory K. Fairbanks
-------------------------------
Name: Gregory K. Fairbanks
--------------------------
Title: Executive Vice President
-------------------------
RKSA, INC.
By: /s/ Gregory K. Fairbanks
-------------------------------
Name: Gregory K. Fairbanks
--------------------------
Title: Executive Vice President
-------------------------
50
<PAGE> 51
RKSA II, INC.
By: /s/ Gregory K. Fairbanks
-------------------------------
Name: Gregory K. Fairbanks
--------------------------
Title: Executive Vice President
-------------------------
KERTZ SECURITY SYSTEMS, INC.
By: /s/ Leon H. Brauser
-------------------------------
Leon H. Brauser, President
KERTZ SECURITY SYSTEMS II, INC.
By: /s/ Michael Brauser
----------------------------
Michael Brauser, President
/s/ Leon H. Brauser
-------------------------------
Leon H. Brauser
/s/ Michael Brauser
-------------------------------
Michael Brauser
/s/ Joel Brauser
-------------------------------
Joel Brauser
/s/ Robert Brauser
-------------------------------
Robert Brauser
51
