<PAGE> 1
As filed with the Securities and Exchange Commission on May 25, 1995
________________________________________________________
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE REYNOLDS AND REYNOLDS COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
31-0421120
(I.R.S. Employer Identification No.)
115 South Ludlow Street
Dayton, Ohio 45402
(513) 443-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ADAM M. LUTYNSKI, ESQ.
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, Ohio 45402
(513) 443-2000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------------
Title of each Amount to be Proposed Proposed Amount of
of securities to be registered maximum maximum registration fee*
registration price per share* aggregate offering
price
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Shares 33,235 shares $30.1875 $1,003,281.50 $345.96
$.625 par value
---------------------------------------------------------
<FN>
* Calculated pursuant to Section 6 of the Securities Act of 1933, as amended,
and Rule 457(c) promulgated thereunder based upon the average of the high and
low prices of the Class A Common Shares $.625 par value, on the New York Stock
Exchange on May 24, 1995, as reported in The Wall Street Journal.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
</TABLE>
<PAGE> 2
THE REYNOLDS AND REYNOLDS COMPANY
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
(513)443-2000
33,235 Class A Common Shares
($.625 par value)
PROSPECTUS
This Prospectus covers the resale of 33,235 Class A Common Shares, $.625 par
value ("Shares"), of The Reynolds and Reynolds Company (the "Company"), from
time to time on the New York Stock Exchange or in the over-the counter market
at prices current at the time of sale by Pioneer Systems, Inc., a Florida
corporation ("Pioneer"), Victor J. Osborne, Jr. and Steven A. Thomas
(collectively, the "Selling Shareholders"). This Prospectus also covers any
interim distribution by Pioneer to Victor J. Osborne, Jr. and Steven A. Thomas.
See "SELLING SHAREHOLDERS." The Shares include rights to purchase from the
Company a unit consisting of one one-thousandth of a share of the Company's
Series A Participating Preferred Shares, without par value, at a price of $80,
subject to adjustments under certain circumstances (individually, a "Right" and
collectively, the "Rights"). Since May 17, 1991, the Company issues one Right
with each Class A Common Share that becomes outstanding. The Selling
Shareholders hereunder have not entered into any arrangement or agreements with
any broker or dealer for the offering or sale of the Shares. In any
transaction, a Selling Shareholder may be deemed an "underwriter" as defined in
the Securities Act of 1933, as amended. The Company will receive no part of
the proceeds of any such resales.
The Shares are traded on the New York Stock Exchange ("NYSE"). On May 24,
1995, the reported high and low sale prices of the Class A Common Shares on
the NYSE were $30.125 and $30.25 per share.
No person has been authorized in connection with this offering to give any
information or to make any representations, other than as contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon. This Prospectus is not an offer or solicitation in any
jurisdiction to any person to whom such offer may not lawfully be made.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is May 25, 1995.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and at 7 World Trade Center, Suite 1300, New York, New York 10048; and
copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Company's Class A Common Shares are listed on the New York Stock
Exchange and reports, proxy and information statements and other information
concerning the Company can be inspected at such exchange at 20 Broad Street,
New York, New York 10005.
A Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, has been filed by the Company with the Commission with respect to the
Shares. This Prospectus does not contain all the information set forth in such
registration statement, amendments thereto and exhibits thereto which the
Company has filed with the Commission. For further information with respect to
the Company and the securities to which this Prospectus relates, reference is
made to such Registration Statement including the exhibits thereto.
The Company's principal executive offices are located at 115 South Ludlow
Street, Dayton, Ohio 45402, and its telephone number at that address is
513/443-2000.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, all of which have been filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"),
are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K (including financial
statements together with the report of independent certified public
accountants thereon) for the fiscal year ended September 30, 1994
(File Number 0-132).
(b)(1) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1994 (File Number 0-132).
(b)(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1995 (File Number 0-132).
(c)(1) The "Description of Registrant's Securities to be Registered" on pages
2 and 3 of the Company's Registration Statement on Form 8-A which
became effective on January 12, 1989 (File No. 1-10147).
(c)(2) The "Description of Registrant's Securities to be Registered" on pages
2 through 6 of the Company's Registration Statement on Form 8-A which
was filed on May 8, 1991 (File No. 1-10147).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act, subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares hereunder, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of any such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified by or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
2
<PAGE> 4
A copy of any document or part thereof incorporated by reference in the
registration statement of which this Prospectus constitutes a part (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that the registration statement incorporates) shall be provided without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon written or oral request made to the Company at
115 South Ludlow Street, Dayton, Ohio 45402, Attention: General Counsel and
Secretary, (513) 443-2000.
SELLING SHAREHOLDERS
On March 31, 1995, the Company acquired from Pioneer Systems, Inc., a Florida
corporation ("Pioneer"), substantially all of the assets of Pioneer. The
purchase price for such assets was paid by the Company in Class A Common
Shares, resales of which are, to the extent disclosed in the table below,
covered by this Prospectus.
The Selling Shareholders named herein have informed the Company that they
desire to be in a position to sell the Shares set forth opposite their names
from time to time on the NYSE or in the over-the-counter market at prices
current at the time of sale. The Selling Shareholders have not entered into
any arrangements or agreements with any broker or dealer for the offering or
sale of the Shares.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OWNED SHARES TO BE
AS OF OFFERED FOR OWNER'S
MAY 4, 1995 ACCOUNT
<S> <C> <C>
Pioneer Systems, Inc. 5006 Fifth Street 33,235 33,235
Zephyrhills, FL 33541-4922
Victor J. Osborne, Jr. 1 38824 Columbia Avenue 0 0
Zephyrhills, FL 33540
Steven A. Thomas 2 38747 Central Avenue 0 0
Zephyrhills, FL 33540
-------------------------------------------
<FN>
1 Victor J. Osborne, Jr. has been a Director and President of Pioneer for more
than three years. Victor J. Osborne, Jr. now serves as an Operations Manager
for the Company.
2 Steven A. Thomas has been a Director and the Vice President and Secretary of
Pioneer for more than three years. Steven A. Thomas now serves as a General
Manager for the Company.
</TABLE>
RECENT DEVELOPMENTS
On March 31, 1995 the Company purchased substantially all of the assets and
assumed certain of the liabilities of Pioneer. Pioneer provides customized
service menu pricing guides to automobile dealerships. The purchase price for
the Pioneer assets was $900,000, plus the assumption of certain liabilities,
plus the contingent future right to receive additional consideration based upon
performance of the acquired business. The negotiated purchase price was paid
by delivery of 33,235 shares.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K have been audited by Deloitte & Touche LLP, independent
3
<PAGE> 5
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended December 31, 1994 and March 31, 1995, which is incorporated herein by
reference, Deloitte & Touche LLP has applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their reports included in the Company's Quarterly Report on Form 10-Q
for the quarters ended December 31, 1994 and March 31, 1995, and incorporated
by reference herein, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP is not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their reports on the unaudited interim financial information because those
reports are not "reports" or a "part" of the Registration Statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
4
<PAGE> 6
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
An estimate of such expenses, none of which shall be borne by the Selling
Shareholders, is as follows:
Registration fee - Securities and Exchange Commission $ 346
Accountants' fees and expenses $ 3,000
Legal fees and expenses $ 6,000
Financial printer fees $ 500
Total $ 9,846
The Selling Shareholders shall bear brokerage fees incurred in connection with
the resale of the registered securities, as well as any federal or state income
taxes on the proceeds of any such resale.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 1701.13(E) of the Ohio Revised Code, the Company is
permitted to indemnify any director, officer, employee or agent of the Company
against costs and expenses incurred in connection with any action, suit or
proceeding brought against any such person by reason of his having served the
Company in such capacity, provided that he meets certain "good faith" tests
provided by law, and provided further that, with respect to suits brought on
behalf of the Company, he is not adjudged to be liable for negligence or
misconduct unless the relevant court finds indemnification to be nevertheless
appropriate in view of all the circumstances. The statute also provides that
in the event an officer or director has been successful on the merits in
defense of any such action, suit or proceeding, such officer or director shall
be indemnified by the Company against actual and reasonable expenses in
connection therewith.
Article Ninth of the Company's Amended Articles of Incorporation provides that,
as more specifically set forth in the Company's Consolidated Code of
Regulations, the Company may provide to any director, officer, other employee
or agent of the Company or any person who serves at the request of the Company
as a director, trustee, other employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, the maximum
indemnification permitted under Section 1701.13(E) of the Ohio Revised Code,
including amendments thereto, or any comparable provisions of any future Ohio
statute.
Paragraph B of Section 1 of Article IX of the Company's Consolidated Code of
Regulations provides for indemnification of directors, officers and employees
of the Company, and persons who, at the request of the Company, act as a
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
actually and reasonably incurred in connection with any action as to which he
was or is or may be made a party by reason of his acting in such capacity,
involving a matter as to which it shall be determined, as provided therein,
that he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal matter or proceeding, in addition, that he had no reasonable cause to
believe that his conduct was unlawful; provided, however, that in the case of
an action by or in the right of the Company to procure a judgment in its favor,
no such indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged liable for negligence or
misconduct in the performance of his duty to the Company unless, and only to
the extent that, the Court of Common Pleas or other court where such action was
brought shall determine such indemnification to be proper.
ITEM 16. EXHIBITS
See Exhibit Index on page 9.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by
the
5
<PAGE> 7
registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
6
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dayton, State of Ohio, on May 25, 1995.
THE REYNOLDS AND REYNOLDS COMPANY
By /s/David R. Holmes
------------------------------------------
David R. Holmes, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David R. Holmes and Adam M. Lutynski, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all future amendments to this
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/David R. Holmes
-------------------------------------------------- May 25, 1995
David R. Holmes, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer) and Director
/s/Dale L. Medford
-------------------------------------------------- May 25, 1995
Dale L. Medford, Vice President,
Corporate Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
and Director
/s/Joseph N. Bausman
-------------------------------------------------- May 25, 1995
Joseph N. Bausman, President,
Automotive Systems Division and Director
/s/David E. Fry
-------------------------------------------------- May 25, 1995
Dr. David E. Fry, Director
/s/Richard H. Grant, Jr.
-------------------------------------------------- May 25, 1995
Richard H. Grant, Jr., Chairman of the Steering
Committee and Director
/s/Richard H. Grant, III
-------------------------------------------------- May 25, 1995
Richard H. Grant, III, Director
/s/Robert C. Nevin
-------------------------------------------------- May 25, 1995
Robert C. Nevin, President,
Business Forms Division and Director
7
<PAGE> 9
/s/Gayle B. Price, Jr.
-------------------------------------------------- May 25, 1995
Gayle B. Price, Jr., Director
/s/William H. Seall
-------------------------------------------------- May 25, 1995
William H. Seall, Director
/s/Kenneth W. Thiele
-------------------------------------------------- May 25, 1995
Kenneth W. Thiele, Director
/s/Martin D. Walker
-------------------------------------------------- May 25, 1995
Martin D. Walker, Director
8
<PAGE> 10
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(1) Inapplicable
(2) Acquisition Agreement dated March 31, 1995 among The
Reynolds and Reynolds Company; Pioneer Systems, Inc.;
Victor J. Osborne, Jr.; and Steven A. Thomas.*
(4)(a) Specimen Certificate for Class A Common Shares ($.625
par value) of the Company incorporated by reference
to Exhibit (4)(c) to the Company's Registration
Statement on Form S-8 filed with the Securities and
Exchange Commission on March 4, 1992 (Registration
No. 33-46222).
(4)(b) Amended and Restated Articles of Incorporation of the
Company, incorporated by reference to Exhibit A to
the Company's definitive proxy statement dated
January 5, 1995, and filed with the Securities and
Exchange Commission.
(4)(c) Consolidated Code of Regulations of the Company,
incorporated by reference to Exhibit B to the
Company's definitive proxy statement dated January 8,
1990, and filed with the Securities and Exchange
Commission.
(4)(d) Shareholder Rights Plan incorporated by reference to
Exhibit 1 to the Company's Form 8-A (File No.
1-10147), which was adopted on May 6, 1991, and filed
with the Securities and Exchange Commission on May 8,
1991.
(5) Opinion of Coolidge, Wall, Womsley & Lombard Co.,
L.P.A., regarding legality of securities*
(8) Inapplicable
(12) Inapplicable
(15) Letter on interim financial information*
(23)(a) Consent of Coolidge, Wall, Womsley & Lombard
(incorporated by reference to Exhibit 5 hereto).
(23)(b) Consent of Deloitte & Touche LLP, independent auditors*
(24) Inapplicable
(25) Inapplicable
(26) Inapplicable
(27) Inapplicable
(28) Inapplicable
(99) Inapplicable
_________________________________________
* Filed herein.
9
<PAGE> 1
EXHIBIT 2
ACQUISITION AGREEMENT
AMONG
THE REYNOLDS AND REYNOLDS COMPANY,
PIONEER SYSTEMS, INC.,
VICTOR J. OSBORNE, JR.
AND
STEVEN A. THOMAS
dated as of March 31, 1995
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
1. ACQUISITION AND TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . 1
----------------------------------
1.1 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------------
1.2 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------
1.3 Books and Records, etc . . . . . . . . . . . . . . . . . . . . . . . 1
----------------------
1.4 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------------
1.5 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
1.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . 2
----------------------
1.7 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------------
1.8 Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------------
2. EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---------------
2.1 Certain Balance Sheet Assets. . . . . . . . . . . . . . . . . . . . 2
----------------------------
2.2 Certain Books and Records. . . . . . . . . . . . . . . . . . . . . . 2
-------------------------
2.3 Certain Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------------
2.4 Certain Tradenames, Trademarks and Service Marks. . . . . . . . . . 2
------------------------------------------------
2.5 Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------
3. ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------------------
3.1 Executory Obligations. . . . . . . . . . . . . . . . . . . . . . . . 2
---------------------
3.2 Balance Sheet Liabilities. . . . . . . . . . . . . . . . . . . . . . 3
-------------------------
3.3 Certain Transaction Expenses. . . . . . . . . . . . . . . . . . . . 3
----------------------------
4. EXCLUDED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------------
4.1 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------
4.2 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------
4.3 Product-related Liabilities . . . . . . . . . . . . . . . . . . . . 3
---------------------------
4.4 Affiliate Payables . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------
4.5 Tax Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------
4.6 Employee-related and Contractor-related Liabilities. . . . . . . . . 4
---------------------------------------------------
4.7 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------
4.8 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------
4.9 Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------
5. CONSIDERATION AND DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------------
5.1 Closing Consideration . . . . . . . . . . . . . . . . . . . . . . . 4
---------------------
5.2 Post-Closing Consideration. . . . . . . . . . . . . . . . . . . . . . . 4
--------------------------
5.3 Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
----------
5.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----
6. PURCHASER'S SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------------
6.1 Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------
6.2 Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------
6.3 Securities Filings . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------
6.4 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------
7. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS . . . . . . . 7
-------------------------------------------------------------
7.1 Power and Capacity . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------
7.2 No Conflict with Other Agreements or Laws . . . . . . . . . . . . . 7
-----------------------------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER . . . . . . . . . . . . . . . . . . . 8
--------------------------------------------------------
8.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
----------------
8.2 No Conflict With Other Agreements or Laws . . . . . . . . . . . . . . . . . . . . . . 8
-----------------------------------------
8.3 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------------------
8.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------
8.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------
8.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-----
8.7 Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------
8.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
---------
8.9 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------
8.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-----------------
8.11 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------
8.12 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------
8.13 Litigation; Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------------------------
8.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------
8.15 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------------
8.16 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------
8.17 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------------------------
8.18 Intellectual Property Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---------------------------------
8.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------
8.20 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------
8.21 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------------
8.22 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------
8.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------
8.24 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------------
8.25 Environmental Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
------------------------
8.26 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-----------------
8.27 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------
8.28 Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------
9. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------------------------------------
9.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
----------------
9.2 No Conflict With Other Agreements or Laws . . . . . . . . . . . . . . . . . . . . . . 19
-----------------------------------------
9.3 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------------------
9.4 Material Adverse Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------------
9.5 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------
10. COVENANTS OF SELLER AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-------------------------------------
10.1 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------------------------
10.2 Notification of Material Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------------------------
10.3 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------
10.4 Consents, Waivers and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------------------------
10.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-----------------------
10.6 Additional Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
------------------
10.7 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------------
10.8 Purchaser's Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------------------
10.9 Distribution of Purchaser's Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 22
----------------------------------
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . 22
------------------------------------------------
11.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---------------
11.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---------
11.3 No Injunction, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
11.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------
11.5 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
----------
11.6 Consents, Waivers and Approvals . . . . . . . . . . . . . . . . . . . . 23
-------------------------------
11.7 Absence of Material Adverse Changes . . . . . . . . . . . . . . . . . . 23
-----------------------------------
11.8 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------------
11.9 Pay-off Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------
11.10 Miscellaneous Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 23
------------------------
11.11 Basic Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . 23
-------------------------
11.12 Transaction Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------------
11.13 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------
11.14 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------------
11.15 Intellectual Property Intangibles . . . . . . . . . . . . . . . . . . . . 24
---------------------------------
11.16 Instruments of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------------
11.17 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
------------
11.18 McClellan Settlement Agreement . . . . . . . . . . . . . . . . . . . . . 24
------------------------------
11.19 Miscellaneous Agreements . . . . . . . . . . . . . . . . . . . . . . . . 24
------------------------
11.20 License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SHAREHOLDER . . . . . . . . . . 25
-------------------------------------------------------------
12.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------
12.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------
12.3 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------------
12.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
------------------
12.5 No Injunction, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
------------------
12.6 Consents, Waivers and Approvals . . . . . . . . . . . . . . . . . . . . 25
-------------------------------
12.7 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------
12.8 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------------
12.9 McClellan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------
13. MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------------
13.1 Pre-closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----------
13.2 Tax Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------
13.3 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----
13.4 McClellan Position. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------------
14. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------
14.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------------
14.2 Transactions at the Closing . . . . . . . . . . . . . . . . . . . . . . 27
---------------------------
14.3 Default at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------
15. EMPLOYEES AND CONTRACTORS OF SELLER . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------------------
16. SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------------
17. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------
18. MCCLELLAN SETTLEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------------------
19. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------
19.1 Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------
19.2 Indemnification by Seller and Shareholders . . . . . . . . . . . . . . . 29
------------------------------------------
19.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . 29
----------------------------
</TABLE>
iii
<PAGE> 5
<TABLE>
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19.4 Procedures for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------------
19.5 Defense of Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------------------
19.6 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-----------
20. TRANSACTION EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--------------------
20.1 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-------
20.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--------
21. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-------------
21.1 Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------------
21.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------
21.3 Assignment; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------------------
21.4 Headings; Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------------------------
21.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------
21.6 Integration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------------------
21.7 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
---------------
21.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-------------
21.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------
21.10 Partial Illegality or Unenforceability . . . . . . . . . . . . . . . . . . . . . . 35
--------------------------------------
21.11 Singular or Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------------------
21.12 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------------------
21.13 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------
21.14 "Knowledge." . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------
21.15 "Person." . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
---------
21.16 "Best Efforts." . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
---------------
21.17 "Including.". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------
22. SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------------
23. COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-----------------------
23.1 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-----------------------
23.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-----------
23.3 Equitable Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
----------------
23.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
------------
24. TAX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-------------------
24.1 Indemnification by Seller and Shareholders. . . . . . . . . . . . . . . . . . . . . 38
------------------------------------------
24.2 Indemnification By Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
----------------------------
24.3 Calculation of Indemnity Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 39
--------------------------------
24.4 Tax Contests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------------
24.5 Time of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
---------------
24.6 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-----------
24.7 Floor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-----
</TABLE>
iv
<PAGE> 6
LIST OF EXHIBITS
<TABLE>
<S> <C>
1.2 Contracts
1.7 Real Property
2.5 Certain Excluded Assets
3.2(a) Restated Balance Sheet
3.2(b) Excluded Balance Sheet Liabilities
4.9 Certain Excluded Liabilities
5.2 Post-closing Consideration
8.3 Articles and Bylaws
8.4 Subsidiaries
8.5(a) Financial Statements
8.5(b) Liabilities
8.5(c) Defaults
8.6 Taxes
8.7 Receivables
8.8 Insurance
8.9 Changes
8.10(a) Owned Personal Property
8.10(b) Leased Personal Property
8.10(c) Defects
8.11 Real Property
8.12 Affiliates
8.13 Litigation
8.14 Labor Relations
8.15 Licenses and Permits
8.16 Contracts
8.17 Title to Properties; Encumbrances
8.18 Intellectual Property Intangibles
8.19 Employee Benefit Plans
8.20 Consents and Approvals
8.21 Customers and Suppliers
8.22 Warranties
8.23 Bank Accounts
8.25 Environmental Protection
10.4 Permitted Encumbrances
11.4 Opinion of Counsel for Seller and Shareholders
11.12 Transaction Expense Confirmations
11.13 Employment and Non-competition Agreements
12.4 Opinion of Counsel for Purchaser
</TABLE>
v
<PAGE> 7
ACQUISITION AGREEMENT
THE REYNOLDS AND REYNOLDS COMPANY ("PURCHASER"), PIONEER SYSTEMS, INC.
("SELLER"), VICTOR J. OSBORNE, JR., and STEVEN A. THOMAS (individually, a
"SHAREHOLDER" and collectively, the "SHAREHOLDERS") agree as follows:
RECITALS:
Seller produces customized service menu pricing guides for automobile dealers
(the "BUSINESS").
Shareholders are the owners of all of the issued and outstanding capital
stock of Seller.
The parties intend that this agreement (the "AGREEMENT") constitute a plan of
reorganization and that the transfer by Seller of substantially all of its
assets and certain of its liabilities qualify for Federal income tax purposes
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE").
1. ACQUISITION AND TRANSFER OF ASSETS. Subject to the terms and conditions of
this Agreement, Purchaser agrees to acquire and Seller agrees to transfer on
the Closing Date (as defined in Section 14.1), all of the rights and assets of
Seller used in or useful to the Business, wherever located, excluding the
Excluded Assets (as defined in Section 2), but including without limitation,
the following, as the same may change in the ordinary course through the
Closing Date:
1.1 PERSONAL PROPERTY. All furniture, fixtures, machinery, equipment,
inventory and other personal property and all related warranties (collectively,
the "PERSONAL PROPERTY").
1.2 CONTRACTS. Those contracts, agreements, leases, licenses, purchase
orders, sale orders or commitments, which are identified on Exhibit 1.2 hereto
(individually, a "CONTRACT" and collectively, the "CONTRACTS").
1.3 BOOKS AND RECORDS, ETC. All books, records, accounts, customer lists,
files, catalogues, sales materials, employment records and related materials,
but excluding all of Seller's corporate minute books, stock records and other
documents (including without limitation miscellaneous receipts and other
documents required in the preparation of tax returns) which are not reasonably
of use to Purchaser in the conduct of the Business (collectively, the "BOOKS
AND RECORDS").
1.4 LICENSES AND PERMITS. To the extent permitted under applicable law or
regulation, all licenses, permits, certificates and governmental authorizations
of Seller.
<PAGE> 8
1.5 RECEIVABLES. All accounts, notes or other receivables (collectively, the
"RECEIVABLES").
1.6 INTELLECTUAL PROPERTY. All Intellectual Property Intangibles (as
defined in Section 8.18) and all goodwill associated with the Intellectual
Property Intangibles.
1.7 REAL PROPERTY. The real property (and improvements located thereon and
rights associated therewith) described on Exhibit 1.7 (the "REAL PROPERTY").
1.8 OTHER ASSETS. All other assets used in or useful to the Business,
wherever located, tangible or intangible, including cash, cash equivalents and
securities, prepaid expenses, deposits, causes of action and claims and
demands.
The assets described in this Section 1 collectively referred to in this
Agreement as the "ACQUIRED ASSETS."
2. EXCLUDED ASSETS. Purchaser shall not acquire any right or interest of
Seller in the following assets:
2.1 CERTAIN BALANCE SHEET ASSETS. Those assets identified on the Restated
Balance Sheet (as defined in Section 3.2) as Salesman Draw Receivable and Other
Assets - Deposits.
2.2 CERTAIN BOOKS AND RECORDS. Seller's corporate minute books, records and
other documents (including without limitation miscellaneous receipts and other
documents required in the preparation of tax returns) which are not reasonably
of use to Purchaser in the conduct of the Business.
2.3 CERTAIN CONTRACTS. All contracts, agreements, leases, licenses,
purchase orders, sales orders or commitments not identified on Exhibit 1.2.
2.4 CERTAIN TRADENAMES, TRADEMARKS AND SERVICE MARKS. The "Pioneer",
"Pioneer Systems" and "Pioneer Service Systems" tradenames, trademarks and
service marks.
2.5 OTHER ASSETS. Those assets identified in Exhibit 2.5.
The items described in this Section 2 are collectively referred to in this
Agreement as the "EXCLUDED ASSETS."
3. ASSUMED LIABILITIES. As of the Closing Date, Purchaser shall assume
responsibility for the performance and satisfaction of:
3.1 EXECUTORY OBLIGATIONS. The executory obligations of Seller under the
Contracts, excluding any obligations or liabilities arising from any breach or
default thereunder by Seller.
2
<PAGE> 9
3.2 BALANCE SHEET LIABILITIES. The liabilities of Seller identified in the
restated balance sheet of Seller as of January 31, 1995 (the "RESTATED BALANCE
SHEET"), a copy of which is attached hereto as Exhibit 3.2(a), subject to
changes in the amount of such liabilities in the ordinary course from January
31, 1995 to the Closing Date, but excluding those liabilities which are
identified in Exhibit 3.2(b).
3.3 CERTAIN TRANSACTION EXPENSES. Purchaser shall assume Seller's liability
for unpaid professional expenses related solely and directly to the transfer of
the Acquired Assets pursuant to this Agreement which are incurred by Seller (as
opposed to such expenses incurred by Shareholders or any employees of Seller),
exclusive of any brokers' or agents' fees or expenses which shall be retained
by Seller, up to $10,000 (the "TRANSACTION EXPENSES").
The foregoing items described in this Section 3 are collectively referred to as
the "ASSUMED LIABILITIES".
4. EXCLUDED LIABILITIES. Except as set forth in Section 3 of this Agreement,
Purchaser shall not assume or become liable for any liabilities of Seller of
any kind or character including without limitation the following:
4.1 UNDISCLOSED LIABILITIES. Except for the executory obligations described
in Section 3.1 and certain expenses described in Section 3.3, any liabilities
or obligations of Seller not reflected in the Restated Balance Sheet (as the
same may change in the ordinary course of business through the Closing Date),
whether known or unknown, absolute, contingent or otherwise, including without
limitation liabilities arising out of any claim for infringement,
misappropriation or other unauthorized use of information, data or other
intellectual property of another Person.
4.2 DEFAULTS. Any obligation or liability arising from or relating to any
breach or default by Seller under any Contract.
4.3 PRODUCT-RELATED LIABILITIES. Any liability or obligation arising out of
or related to any product produced by or service rendered by Seller prior to
the Closing Date (including without limitation claims for breach of warranty).
4.4 AFFILIATE PAYABLES. Any liabilities of Seller for certain payables
required to be disclosed on Exhibit 8.12 pursuant to Section 8.12(b).
4.5 TAX LIABILITIES. Any liabilities or obligations arising out of or
related to Taxes other than those liabilities assumed by Purchaser pursuant to
Sections 3.2, 5.4 and 24.
3
<PAGE> 10
4.6 EMPLOYEE-RELATED AND CONTRACTOR-RELATED LIABILITIES. Except for those
liabilities assumed by Purchaser pursuant to Section 3.2, any liabilities or
obligations arising out of or related to employees or independent contractors
or former employees or former independent contractors of Seller, including
without limitation liabilities or obligations for unpaid wages, salaries,
commissions, benefits (including without limitation obligations under COBRA or
any similar state law, except with respect to any employees who become
employees of Purchaser after the Closing), vacation pay, sick pay, or holiday
pay, withholding, unemployment or workers compensation taxes, contributions or
benefits, and contributions or premiums payable to, under or with respect to
any employee benefit plan or arrangement or obligations under any self- funded
employee benefit plan or arrangement.
4.7 TRANSACTION EXPENSES. Except for those liabilities assumed by Purchaser
pursuant to Section 3.3, any expenses incurred by Seller or Shareholders in
connection with the authorization, preparation, negotiation and consummation of
this Agreement, including without limitation, fees and expenses of counsel,
brokers and accountants.
4.8 EXCLUDED ASSETS. Any liabilities or obligations arising out of or
associated with the Excluded Assets, unless and to the extent assumed by
Purchaser pursuant to Section 3.2.
4.9 OTHER LIABILITIES. Those liabilities identified in Exhibit 4.9.
The items described in this Section 4 are collectively referred to as the
"EXCLUDED LIABILITIES."
5. CONSIDERATION AND DELIVERY. The consideration for the Acquired Assets, in
addition to the assumption of the Assumed Liabilities by Purchaser, and subject
to adjustment pursuant to Section 5.3, shall be as provided in Sections 5.1 and
5.2.
5.1 CLOSING CONSIDERATION. At Closing, Purchaser deliver to Seller
certificates representing that number of Purchaser's class A common shares
determined by dividing (i) $900,000 (the "BASE VALUE"), by (ii) the Base Price
(as defined in this Section), rounded up to the next whole number
(collectively, the "CLOSING SHARES"). "BASE PRICE" means the average closing
price for Purchaser's class A common shares on the New York Stock Exchange for
the thirty (30) trading days up to and including March 24, 1995.
5.2 POST-CLOSING CONSIDERATION. Purchaser shall also deliver certificates for
additional class A common shares of Purchaser on and subject to the conditions
described in Exhibit 5.2 (the "POST-CLOSING SHARES"). The Closing Shares and
the Post-
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closing Shares are collectively referred to in this Agreement as the
"PURCHASER'S SHARES".
5.3 ADJUSTMENT. The Closing Shares issuable under shall be adjusted as
follows:
(a) Purchaser shall deliver to Seller and Shareholders, not later than
sixty (60) days after the Closing Date, a balance sheet (the "CLOSING BALANCE
SHEET") for the Acquired Assets and Assumed Liabilities as of the Closing Date.
The Closing Balance Sheet shall be prepared in accordance with generally
accepted accounting principles ("GAAP") and otherwise consistent with the
Restated Balance Sheet; provided, however, that (a) that portion of the payment
due to McClellan (as defined in Section 18) under the McClellan Settlement
Agreement (as defined in Section 18) in excess of the repayment of principal,
and (b) the Transaction Expenses shall not be reflected as Assumed Liabilities
on the Closing Balance Sheet. The Closing Balance Sheet shall be accompanied
by Purchaser's determination of the amount of the adjustment, if any, to the
Closing Shares required by Section 5.3(b) and supporting information reasonably
sufficient to allow Seller to evaluate Purchaser's determination. Seller and
Shareholders shall have thirty (30) days from receipt of the Closing Balance
Sheet and adjustment determination to object to either by written notice to
Purchaser. If Purchaser does not receive notice of an objection within such
time, the Closing Balance Sheet and adjustment determination prepared by
Purchaser shall be final and binding on the parties. If Seller and
Shareholders timely notify Purchaser of an objection, the parties shall have
ten (10) days from the date of Seller's notice to resolve the objection. If
the parties do not resolve the objection within such time, the certified public
accounting firm of Arthur Andersen & Co. (the "INDEPENDENT AUDITORS") shall
resolve the objection within thirty (30) days after expiration of such 10-day
period and such resolution shall be final and binding on the parties. The fees
and expenses of the Independent Auditors shall be borne by Seller and Purchaser
in proportion the respective differences between their positions submitted to
the Independent Auditors and the final determination of the Independent
Auditors.
(b) The Base Value shall be reduced dollar-for-dollar by the amount the
Acquired Net Book Value on the Closing Balance Sheet is less than negative
$350,000. "ACQUIRED NET BOOK VALUE" shall mean the difference of the Acquired
Assets less the Assumed Liabilities as shown on the Closing Balance Sheet.
There shall be no adjustment to the Base Value if the Acquired Net Book Value
is greater than negative $350,000. The adjustment to the number of Closing
Shares shall be determined by dividing (i) the difference of (A) the Acquired
Net Book Value, less (B) negative $350,000 by (ii) the Base Price, and rounding
down to the next whole number. For example, if the Acquired Net Book Value is
negative $375,000 and the Base Price if $25 per share, the adjustment would be
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($375,000 - $350,000)/$25 = 1,000 Purchaser's Shares. If the Acquired Net Book
Value in the previous example was negative $340,000, there would be no
adjustment.
(c) If there is to be an adjustment pursuant to Section 5.3(b) (a "CLOSING
SHARES ADJUSTMENT"), within ten (10) days after final determination of the
adjustment (whether by Seller's and Shareholders' failure to object, agreement
of the parties or determination by the Independent Auditors), Seller shall
deliver either (i) cash (by wire transfer of immediately available funds to the
account designated by Purchaser) in an amount equal to the adjustment
multiplied by the Base Price, or (ii) certificates for Purchaser's Shares
(accompanied by duly executed stock powers sufficient to transfer to Purchaser
the required number of Purchaser's Shares). In the event payment is effected
pursuant to clause (ii) of the preceding sentence, Purchaser shall promptly
surrender such certificates and stock powers to its transfer agent and cause
the transfer agent to issue to Seller certificates for the balance of any
shares represented by a certificate submitted pursuant to clause (ii) in excess
of the amount of shares required to be transferred to Purchaser. In the event
of any merger, consolidation, reorganization, recapitalization, stock split,
exchange or similar transaction affecting the Purchaser Shares prior to the
payment of a Closing Shares Adjustment, the Base Price shall be appropriately
adjusted as agreed to by Purchaser and Seller. The parties acknowledge that an
adjustment pursuant to this Section 5.3 shall be treated as an adjustment to
the purchase price for the Acquired Assets for all purposes.
5.4 TAXES. Subject to Section 24, Seller shall pay all income or similar
taxes arising out of the sale of the Acquired Assets pursuant to this
Agreement. Purchaser shall pay all sales or transfer taxes, recording fees and
similar fees or charges arising out of the sale of the Acquired Assets. Seller
shall timely file all Returns (as defined in Section 8.6) for Taxes described
in this Section 5.4 (provided that Purchaser shall have a reasonable
opportunity to review and comment upon Returns for Taxes payable by Purchaser
prior to the respective due dates).
6. PURCHASER'S SHARES.
6.1 ISSUANCE. The Purchaser's Shares may be newly issued or treasury
shares, at Purchaser's election, provided that Purchaser will comply with the
following provisions of this Section 6. In any event, all of the Purchaser's
Shares will be duly and validly authorized and issued, fully paid and
nonassessable and, not later than 60 days after the date issued pursuant to
this Agreement, covered by an effective listing application with the New York
Stock Exchange.
6.2 EXEMPTIONS. Seller acknowledges that the parties intend that (a) the
issuance of Purchaser's Shares pursuant to Section 5.1
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and the distribution of the Purchaser's Shares to Shareholders upon the
required dissolution of Seller pursuant to Section 10.9, and (b) each issuance
of the Post-closing Shares, if any, pursuant to Section 5.2 shall qualify as
exempt transactions under (a) Section 4(2) of the Securities Act of 1933, as
amended, and (b) applicable state securities laws (collectively, the
"EXEMPTIONS"). All certificates for the Purchaser's Shares shall bear the
legends restricting the sale, transfer or disposition of the Purchaser's Shares
necessary to assure compliance with the Exemptions. Such restrictions shall be
removed as soon as the applicable listing application(s) and registration
statement(s) contemplated by this Section 6 become effective.
6.3 SECURITIES FILINGS. Purchaser shall, at its expense, and within sixty
(60) days following the date any Purchaser's Shares are issued pursuant to this
Agreement, prepare and file with the Securities and Exchange Commission a
registration statement and any amendments (including post-effective amendments
thereto or supplements to any prospectus contained therein), relating to the
resale of the Purchaser's Shares and will use its best efforts to cause such
registration statement and prospectus to become and remain effective for a
period of not less than three (3) years from the applicable issue date.
6.4 COOPERATION. Seller and Shareholders will cooperate with Purchaser and
provide such information in connection with any registration statement, report
of sale or other document reasonably required by Purchaser in the performance
of its obligations under Sections 5 and 6 of this Agreement.
7. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder severally represents and warrants to Purchaser as follows:
7.1 POWER AND CAPACITY. Shareholder has the power and authority to execute
and consummate this Agreement. This Agreement and each other agreement
contemplated hereby which is executed by Shareholder constitute the valid and
legally binding obligations of Shareholder, enforceable in accordance with
their terms, except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
7.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The execution and
consummation by Shareholder of this Agreement and each other agreement
contemplated hereby which is executed by Shareholder will not (a) violate the
terms of any agreement, instrument, judgment or decree to which Shareholder is
a party or by which Shareholder or any of Shareholder's properties is bound,
(b) be in conflict with, or result in a breach of or constitute (with giving of
notice or lapse of time or both) a default under any such agreement,
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instrument, judgment or decree, or (c) violate any applicable federal, state,
local or foreign law, regulation or order.
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and
Shareholders jointly and severally represent and warrant to Purchaser as
follows:
8.1 CORPORATE ACTION. Seller has taken all action required by its Articles
of Incorporation and Bylaws or otherwise to authorize the execution and
consummation of this Agreement and the other agreements, documents or
instruments to be executed by Seller pursuant to this Agreement (collectively,
the "SELLER AGREEMENTS"). The Seller Agreements will constitute the valid and
legally binding obligations of Seller, enforceable in accordance with their
terms, except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
8.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The execution and
consummation by Seller of the Seller Agreements will not (a) violate the terms
of Seller's Articles of Incorporation or Bylaws or any instrument, agreement,
judgment or decree to which Seller is a party, or by which Seller or any of its
properties is bound, (b) conflict with, result in a breach of or constitute
(with giving of notice or lapse of time or both) a default under any such
instrument, agreement, judgment or decree, (c) result in the creation or
imposition of any lien upon Seller or its properties or assets, or (d) violate
any applicable federal, state, local or foreign law, regulation or order if the
result of such violation, conflict, breach, default or lien would have a
material adverse affect on Seller or the Business.
8.3 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Florida. Seller has
full power and authority to carry on its business as it is now being conducted,
to own and lease the properties and assets which it now owns or leases and to
consummate the Seller Agreements. Seller is not required to be qualified to
transact business in any jurisdiction other than Florida. Except for
marketable securities and instruments issued by financial institutions, Seller
does not own any securities of or investment or interest in any other entity or
person. Complete and correct copies of Seller's Articles of Incorporation and
Bylaws (including all amendments to either to date) are attached in Exhibit
8.3.
8.4 SUBSIDIARIES. Seller has no subsidiaries. Seller does not control, and
is not controlled by or under common control with any person, firm,
corporation, partnership, association or entity, and Seller is not a partner or
participant in any partnership or joint venture or other arrangement of any
kind other than as described in Exhibit 8.4.
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8.5 FINANCIAL STATEMENTS.
(a) Attached as Exhibit 8.5(a) hereto are copies of (i) the Restated
Balance Sheet and a profit and loss statement for Seller from January 1, 1995
to the close of business on January 31, 1995 (the Restated Balance Sheet and
the profit and loss statement for such period shall be referred to herein as
the "JANUARY FINANCIAL STATEMENTS"), and (ii) Seller's annual financial
statements as of December 31, 1994 and December 31, 1993 (such financial
statements are collectively referred to as the "ANNUAL FINANCIAL STATEMENTS";
the January Financial Statements and the Annual Financial Statements are
collectively referred to as the "FINANCIAL STATEMENTS"). Except as set forth
on Exhibit 8.5(a), the Financial Statements (i) are true and correct in all
material respects (based on the cash basis method of accounting for all
Financial Statements other than the Restated Balance Sheet), and (ii) fairly
present the financial condition of Seller as of the respective dates thereof
and the results of operation of Seller for such periods (based on the
applicable accounting methods used). Except as disclosed in Exhibit 8.5(a),
the Financial Statements do not contain any items of nonrecurring income or
loss or other income or loss not earned or incurred in the ordinary course of
business.
(b) Except as disclosed in Exhibit 8.5(b) hereto and except for (i) the
liabilities of Seller disclosed or reserved against in the Restated Balance
Sheet, (ii) current liabilities incurred in the ordinary course of business
since January 31, 1995, and (iii) executory obligations under contracts,
agreements, leases, licenses, purchase orders and sales orders, Seller has no
material liability or obligation, whether accrued, absolute, contingent or
otherwise.
(c) Except as disclosed in Exhibit 8.5(c) hereto, no default exists as to
any of the material (either individually or in the aggregate) liabilities of
Seller.
8.6 TAXES. Except as disclosed in Exhibit 8.6 hereto, Seller (a) has
properly filed all foreign, federal, state, and local tax returns, statements
or other filings required of Seller (collectively, the "RETURNS") with respect
to any foreign, federal, state or local taxes, assessments, interest,
penalties, fees or other governmental impositions, including without limitation
income, franchise, retailers' occupation, sales, use, gross receipts, excise,
withholding, unemployment, workers compensation, windfall profits, customs,
duties, property, intangible and transfer taxes (collectively, the "TAXES")
related to or arising in whole or in part out of operation of the Business
prior to the Closing Date or any assets owned or used by Seller prior to the
Closing Date, and (b) paid all Taxes due prior to the Closing Date. Seller has
not received any notice of assessment or proposed assessment with respect to
the Taxes. Seller has not extended the
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statute of limitations for assessment or collection of any Taxes. Seller has
made all required deposits with respect to any withholding or other
employee-related Taxes. Except for liens for Taxes accrued but not yet
payable, no lien exists on any of the Acquired Assets with respect to the
Taxes.
8.7 RECEIVABLES. Except as set forth on Exhibit 8.7 hereto, all of the
Receivables have been generated in the ordinary course of business and
represent valid debts due and owing to Seller. Except as set forth in Exhibit
8.7, to Seller's and Shareholders' knowledge, no Receivable is subject to any
counterclaim or any right of setoff. Exhibit 8.7 sets forth, as of January 31,
1995, a detailed aging of the Receivables.
8.8 INSURANCE. Except as set forth in Exhibit 8.8, to Seller's and
Shareholders' knowledge, there are no outstanding requirements or
recommendations by any current insurer or underwriter with respect to the
Acquired Assets or otherwise which requires or recommends changes in the
conduct of the Business of, or requires any repairs or other work to be done
with respect to any of the Acquired Assets.
8.9 ABSENCE OF CHANGES. Since January 31, 1995 and except as disclosed on
Exhibit 8.9 hereto and except for the transactions contemplated by the Seller
Agreements, Seller has not:
(a) engaged in any activity other than in the ordinary course (as to both
type and amount), including without limitation, the sale, transfer or
conveyance of any assets, entering into any Contract, the borrowing of any
amounts or the making of or committing to make any capital expenditures in an
aggregate amount greater than $1,000;
(b) suffered any material adverse change in the Business (including
prospects, both customer and product or service), the Acquired Assets, the
Assumed Liabilities, or Seller's financial condition, and to Seller's and
Shareholders' knowledge, no fact or condition exists or has been threatened,
which is reasonably likely to cause such a change in the future;
(c) incurred or increased the amount subject to any lien, encumbrance or
claim upon any of the Acquired Assets, except for any lien with respect to
taxes not yet due and payable;
(d) discharged or reduced any lien or encumbrance other than as required
by its terms, paid any liability other than current liabilities incurred in the
ordinary course of business and paid in accordance with their terms, or delayed
payment of any account payable or other liability of the Business beyond its
due date;
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(e) to Seller's and Shareholders' knowledge, incurred any default in any
liability (accrued or otherwise);
(f) made any change adverse to it in the terms of any agreement or
instrument to which it is a party;
(g) declared or made any distribution or other payment to its security
holders, or issued any additional securities or redeemed, purchased or
otherwise acquired any of its securities, or made any change in its capital
structure;
(h) paid any bonus to or granted any increase in the rates of pay or any
increase in the pension, retirement or other benefits of its directors,
officers or other employees, other than normal cost-of-living and merit salary
increases made in accordance with regular company policies; or
(i) incurred or agreed to incur any material indebtedness or entered into
any material (alone or in the aggregate) capitalized leases.
8.10 PERSONAL PROPERTY.
(a) Except for inventory, Exhibit 8.10(a) hereto sets forth a true and
correct list of all items of Personal Property owned by Seller and all
furniture, fixtures, machinery, equipment, vehicles and other personal property
leased by Seller pursuant to a capitalized lease.
(b) Exhibit 8.10(b) hereto sets forth a true and correct list of all items
of furniture, fixtures, vehicles, machinery, equipment or other personal
property leased by Seller pursuant to an operating lease.
(c) Except as identified in Exhibit 8.10(c) and except for normal wear and
tear, each item of personal property required to be identified in Exhibit
8.10(a) or Exhibit 8.10(b) is in good condition and repair.
8.11 REAL PROPERTY. Exhibit 8.11 hereto sets forth a true and correct list
of all real property leased or used by Seller. Except as set forth in Exhibit
8.11, to Seller's and Shareholders' knowledge, all improvements thereon are in
good condition and repair, normal wear and tear excepted.
8.12 AFFILIATES.
(a) Except as set forth in Exhibit 8.12, no Shareholder, nor any affiliate
(as defined in Exhibit 8.12; an "AFFILIATE") of any Shareholder owns, of
record, or beneficially, any outstanding voting securities or other equity
interests, or any other securities exchangeable, convertible or exercisable for
or into,
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whether or not for any additional consideration, any voting securities or other
equity interests, in any corporation, partnership, joint venture or other
entity (except the Seller) which is involved in or related to the Business.
(b) Except as set forth in Exhibit 8.12, Seller is not indebted to any
current or former shareholder, Affiliate of any shareholder, or to any
director, officer, employee, contractor or agent of the Seller except for
amounts due as normal salaries, wages, commissions, benefits or reimbursement
of ordinary current business expenses, and no current or former shareholder,
Affiliate of any shareholder or director, officer, employee, contractor or
agent of Seller is indebted to Seller except for ordinary business expense
advances.
8.13 LITIGATION; COMPLIANCE WITH LAWS, ETC. Except as set forth in Exhibit
8.13, there is no action, claim or investigation pending, or, to Seller's or
Shareholders' knowledge, threatened, against Seller, nor is there any judgment
of any court, governmental agency, instrumentality, or arbitration outstanding
against Seller. Seller has not received any notice of any violation of any
law, regulation or ordinance applicable to the Seller, its properties or assets
(whether owned or leased) or the Business. Except as set forth in Exhibit
8.13, Seller and the Acquired Assets have complied with all applicable laws,
regulations, covenants, restrictions and ordinances (including, without
limitation, Environmental Laws, the Americans with Disabilities Act, laws
relating to occupational health and safety, zoning and land use regulations and
restrictions and the terms and conditions of those licenses, permits, approvals
and authorizations which are required to be identified on Exhibit 8.15) where
the consequences of failure to comply (alone or in the aggregate) would have a
material adverse effect on Seller, the Business or the Acquired Assets.
8.14 LABOR RELATIONS. Except as set forth in Exhibit 8.14:
(a) There are no material controversies pending between Seller and any of
its employees or contractors, nor, to Seller's or Shareholders' knowledge, are
any such material controversies threatened;
(b) Seller is not liable for any arrears of wages, commissions or benefits
or taxes or any penalties for failure to timely pay any of the foregoing
(except for the payment of wages and commissions in the ordinary course of
business);
(c) Seller is not a party to nor does it have any obligations under any
written, oral or implied agreement with any person or party regarding the
salary, commissions, rates of pay, benefits, or working conditions of any
employees, or contractors
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and all of Seller's employees and contractors are terminable at will; and
(d) Seller has no policy or past practice and is not a party to any
agreement relating to payment of any severance or similar benefit upon
termination of employment or contractor relationship, and no employees or
contractors of Seller will be entitled to any severance or similar benefit upon
termination of employment as contemplated by Section 15.
8.15 LICENSES AND PERMITS. To Seller's and Shareholders' knowledge, Seller
has obtained all licenses, permits and governmental authorizations from all
appropriate federal, state, foreign and other public authorities necessary for
the conduct of Seller's business. Exhibit 8.15 sets forth a list of each such
license, permit or authorization.
8.16 CONTRACTS. Except as disclosed in Exhibit 8.16 and except for the
Contracts identified in Exhibit 1.2, the agreements identified in Exhibit 8.14
and the Employee Benefit Plans identified in Exhibit 8.19, Seller is not a
party or subject to any contracts, commitments, agreements, leases, purchase
orders, sales orders or licenses. To Seller's and the Shareholders' knowledge,
except as set forth in Exhibit 8.16, all Contracts are in full force and effect
and are valid and binding obligations enforceable against the parties thereto,
except as may be limited by applicable equitable principles or bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally. Correct and complete copies of all Contracts have been delivered to
Purchaser. Except as set forth in Exhibit 8.5(c), 8.9 or 8.16, Seller is not
in default under and, to Seller's and Shareholders' knowledge, no condition
exists with respect to Seller which, with notice or the passage of time, or
both, would constitute a default by Seller under any of the Contracts. Seller
is not subject to any agreement requiring it to obtain all or substantially all
of its supply of any goods or services from another person or to refrain from
competing or otherwise offering its services to any person or in any location.
Seller is not subject to any agreement or commitment to deliver or provide any
new, modified or enhanced product or service to any customer or to develop any
new, modified or enhanced product or service. Except as set forth in Exhibit
8.16, none of the Contracts was entered into, issued or accepted other than in
the ordinary course of business.
8.17 TITLE TO PROPERTIES; ENCUMBRANCES. Seller has good and marketable title
to all of the Acquired Assets, free and clear of any liens or encumbrances
except (a) those items disclosed on Exhibit 8.17; and (b) liens for current
personal and real property taxes assessed but not yet due and payable. No
representation or warranty is made with respect to matters insured against in
the title insurance policy or disclosed in the survey acquired pursuant to
Section 11.10.
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8.18 INTELLECTUAL PROPERTY INTANGIBLES.
(a) The following items are described more fully in Exhibit 8.18: all
United States, common law and foreign patents, trademarks, trade names, service
marks and copyrights and all software and inventions, each as owned, licensed
or used by Seller in connection with the Business.
(b) As used in this Agreement, the term "INTELLECTUAL PROPERTY
INTANGIBLES" shall mean (i) those items required to be disclosed by Section
8.18(a) (including all registrations, and, if applicable, goodwill related to
those items) and (ii) any of the following assets of Seller owned or used in
the Business: all mask works, trade secrets, know-how, formulations, trade
dress, designs, drawings, logos, technology, mailing lists, inventions, uses of
ideas, software rights, registered, assumed or fictitious business names under
which Seller is conducting the Business, confidential information, and
industrial and commercial property, whether any of the foregoing items
described in clause (i) or (ii) is owned, licensed or held for use, all without
geographical limitation and including, without limitation, the right to
infringement and other claims related thereto.
(c) All agreements to which Seller is a party relating to Intellectual
Property Intangibles, including without limitation research, development,
programming or similar services in connection therewith, are identified in
Exhibit 1.2.
(d) Seller further represents and warrants as follows:
(i) All Intellectual Property Intangibles are
owned by or are licensed to Seller without limitation or encumbrance, and, to
the extent applicable, in good standing and, to Seller's knowledge, without any
challenge.
(ii) To Seller's and Shareholders' knowledge,
the Intellectual Property Intangibles identified in Exhibit 8.18 have been in
continuous use since the date of their adoption by Seller and first use by
Seller as shown in Exhibit 8.18.
(iii) To Seller's and Shareholders' knowledge,
all copyrights described in Exhibit 8.18 are original works of authorship of
Seller or Seller has acquired all rights thereto or Seller has a valid license
to use the same.
(iv) To Seller's knowledge, no infringement or
unlawful use of any of the Intellectual Property Intangibles or use of the same
or similar item so as to create a likelihood of confusion has occurred.
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(v) To Seller's and the Shareholders'
knowledge, no infringement of any intellectual property rights of any other
party has occurred or results from operation of the Business.
(vi) No proceedings or claims are pending or,
to Seller's knowledge, threatened, with respect to the validity or ownership of
the Intellectual Property Intangibles.
(vii) No present or former employee, officer,
director, shareholder, agent or contractor of Seller has any ownership
interest, direct or indirect, in any Intellectual Property Intangibles.
(e) Without in any way limiting the other representations
and warranties contained in this Agreement or the application of the same to
the Software (as defined below), Seller makes the following additional
representations and warranties with respect to the software identified in
Exhibit 8.18 as owned by Seller (the "SOFTWARE"). Except as disclosed in
Exhibit 8.18:
(i) Seller has delivered to Purchaser
complete, current copies of all user and technical documentation related to the
Software. The Software performs in accordance with the documentation and other
written material used in connection with the Software and is free from defects
in programming and operation, is in machine-readable form, contains all current
revisions of such Software, and includes all computer programs, materials,
tapes, know-how, object and source codes related to the Software.
(ii) Neither Seller nor any employee,
contractor, or agent thereof has developed or assisted in the enhancement of
the Software (except for enhancements included in the Software as delivered to
Purchaser pursuant hereto) or the development of any program or product based
on the Software or any part thereof without assigning all of such person's
rights and interest in the same to Seller pursuant to an agreement included in
the Contracts.
(iii) The Software was developed entirely by
employees of Seller during the time they were employees of Seller and the
Software does not include (A) any inventions of the employees prior to the time
they became employees of Seller or (B) any intellectual property of any
previous employer of any such employee.
(iv) No party other than Seller has any
interest in the Software. Seller's development, use, license or exploitation
of the Software does not violate any rights of any other person. Seller does
not have any obligation to compensate any person or entity for the development,
use, license or exploitation of the Software. Except as contemplated by this
Agreement, Seller has not granted any license, option or other rights to
develop, use, sublicense, distribute or exploit in any
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manner the Software, regardless of whether requiring the payment of royalties.
Seller acknowledges that all rights in the Software shall be vested in
Purchaser from and after the Closing.
(vi) Seller has taken reasonable efforts to
keep secret the source code for the Software other than for disclosure to
certain employees of, or independent contractors to, Seller in connection with
their services to Seller.
8.19 EMPLOYEE BENEFIT PLANS.
(a) Except for the health insurance program and the
agreements described in Exhibit 8.19, Seller has never been a party to or
otherwise obligated under or in connection with any plans, policies and
arrangements and contracts, whether written or oral including, without
limitation, employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") providing or relating to any
retirement, profit sharing, stock bonus, stock option, incentive compensation,
deferred compensation, fringe benefit or welfare benefit to or on behalf of
employees or contractors or former employees or former contractors of Seller.
Seller has provided Purchaser with summary plan or other descriptions of the
health insurance program, and will, prior to the Closing, make available to
Purchaser, upon request, any related documents, including, without limitation,
agreements with third-party service providers.
(b) Except as disclosed in Exhibit 8.19, the health
insurance program (and the administration thereof) has at all times been in
compliance with all applicable laws.
(c) Except as set forth in Exhibit 8.19, no person has
asserted any claim under which Seller has any liability under the health
insurance program or any other benefit (whether or not disclosed on Exhibit
8.19) maintained by the Seller or to which Seller is a party or may be bound,
or under any worker's compensation or similar law, which is not fully covered
by insurance maintained with responsible insurers, paid out of a state fund (to
which Seller has made all payments due prior to the date of this Agreement) or
reserved for under the Restated Balance Sheet.
(d) Except as otherwise required by COBRA or disclosed on
Exhibit 8.19, Seller does not provide benefits to retirees or former employees
or contractors.
8.20 CONSENTS AND APPROVALS. Except as set forth in Exhibit 8.20,
no waiver, consent or approval from or filing with any party (governmental or
otherwise) is required to consummate the Seller Agreements.
8.21 CUSTOMERS AND SUPPLIERS.
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(a) Seller has delivered to Purchaser a list of the Seller's
customers. Except as identified on Exhibit 8.21, Seller and Shareholders have
no knowledge that any of such customers intends to reduce or has threatened to
reduce materially its purchases from or business dealings with Seller whether
by reason of the consummation of this Agreement or otherwise.
(b) Seller has delivered to Purchaser a list of Seller's
suppliers. Except as identified on Exhibit 8.21, Seller and Shareholders have
no knowledge that any of such suppliers intends to alter or has threatened to
alter materially the terms of supply to Seller whether by reason of the
consummation of this Agreement or otherwise.
8.22 WARRANTIES. Except for the warranties under the standard form
customer agreements or as otherwise specifically identified in Exhibit 8.16
hereto, there are no other warranties or guaranties now in effect issued by
Seller or outstanding with respect to the products or services of Seller.
8.23 BANK ACCOUNTS. Exhibit 8.23 sets forth the name, location and
account number of each bank, trust company, savings and loan association or
other financial institution in which Seller has an account or safe deposit box.
8.24 BOOKS AND RECORDS. To Seller's and Shareholders' knowledge,
all of the Books and Records are true and correct in all material respects.
8.25 ENVIRONMENTAL PROTECTION. To Seller's and Shareholders'
knowledge, except as set forth on Exhibit 8.25, Seller has complied with all
federal, state and local statutory and common laws, regulations or orders
relating to pollution or protection of the environment, pollutants,
contaminants, hazardous or toxic materials, wastes or nuisance (collectively,
the "ENVIRONMENTAL LAWS") and no permits, licenses or authorizations are
required in connection with such laws as a result of the ownership of Seller's
assets or the operation of its business.
8.26 INVESTMENT INTENT. Seller and Shareholders acknowledge that
the Purchaser's Shares to be issued pursuant to Section 5.1 will be issued
pursuant to the Exemptions, and that Purchaser is relying on the
representations and warranties of Seller and Shareholders in this Section 8.26
as the basis for Purchaser's determination that the Exemptions are available.
Accordingly, Seller and Shareholders jointly and severally represent and
warrant that:
(a) they are acquiring the Purchaser's Shares for
investment purposes only and without a view to the resale thereof until such
time as such resale has been registered (or exemptions from registration
perfected) under the Act and all applicable state
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securities laws, and they will not sell, encumber, dispose or otherwise
transfer (collectively, "TRANSFER") any right or interest in the Purchaser's
Shares, whether voluntarily, by gift, operation of law, testamentary
disposition or otherwise, except for the distribution of the Purchaser's Shares
to Shareholders upon dissolution of Seller or surrender of Purchaser's Shares
to Purchaser in satisfaction of a Closing Shares Adjustment Claim, unless such
Transfer has been registered (or an exemption from registration has been
perfected) under the Act and applicable state securities laws.
(b) Seller and Shareholders are experienced investors and
are aware of the risks inherent in an investment in the Purchaser's Shares.
(c) Seller and the Shareholders have had access to such
information about Purchaser and its operations (including Purchaser's most
recent filings on Forms 10-K and 10-Q, Purchaser's proxy statement for its 1995
annual meeting of shareholders and Purchaser's annual report to shareholders
for the fiscal year ended September 30, 1994) as they deem necessary to
evaluate fully an investment in the Purchaser's Shares and Seller and
Shareholders are relying solely on the information provided by their advisors
and information publicly available regarding Purchaser and its operations and
not upon any statement of or information supplied by any employee, agent,
contractor or representative of Purchaser.
(d) Seller is a Florida corporation. Shareholders are residents of the
state of Florida.
8.27 DISCLOSURE. No representation or warranty by Seller contained
in this Agreement, and no statement contained in any certificate, exhibit, list
or other instrument furnished by the Seller to Purchaser pursuant to the
provisions hereof contains or will contain any untrue statement of material
fact or omits or will omit to state a material fact necessary in order to make
the statement contained herein or therein not misleading.
8.28 LIMITATION. Notwithstanding anything to the contrary
in this Agreement or the Exhibits, no representation or warranty is made by
Seller or the Shareholders with respect to (a) the need to obtain consent to
assignment under the loans and related security documents described in Exhibit
1.2 or any other Contract in that Exhibit or the consequences of failure to
obtain any such consent, or (b) the presence or impact of any "due-on-sale" or
similar clauses in any of such documents. Accordingly, the representations and
warranties in Sections 7.2, 8.2 and 8.20 are deemed modified to the extent that
they conflict with the preceding sentence.
9. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller and Shareholders as follows:
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9.1 CORPORATE ACTION. Purchaser has taken all action required by
its Articles of Incorporation and Code of Regulations or otherwise to authorize
the execution and consummation of this Agreement and each other agreement,
document or instrument to be executed by Purchaser pursuant to this Agreement
(collectively, the "PURCHASER AGREEMENTS"). The Purchaser Agreements
constitute the valid and legally binding obligations of Purchaser, enforceable
in accordance with their terms, except that enforceability may be limited by
applicable equitable principles or bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors rights generally.
9.2 NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The execution and
consummation by Purchaser of the Purchaser Agreements will not (a) violate the
terms of Purchaser's Articles of Incorporation or Code of Regulations or any
instrument, agreement, judgment or decree to which Purchaser is a party, or by
which Purchaser or any of its properties is bound, (b) be in conflict with,
result in a breach of or constitute (with giving of notice or lapse of time or
both) a default under any such instrument, agreement, judgment or decree, (c)
result in the creation or imposition of any lien upon Purchaser or its
properties or assets, or (d) violate any applicable federal, state, local or
foreign law, regulation or order if the result of such violation, conflict,
breach, default or lien would have a material adverse affect on Purchaser.
9.3 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. Purchaser has full power and authority to carry on its business
as it is now being conducted, to own and lease the properties and assets which
it now owns or leases and to consummate the Purchaser Agreements. Purchaser is
duly qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership of its property or the
conduct of its business requires it to be so qualified as a foreign
corporation, except for jurisdictions in which such failure to be so qualified
or in good standing would not, alone or in the aggregate, have a material
adverse effect on the financial condition of Purchaser.
9.4 MATERIAL ADVERSE CHANGES. Since December 31, 1994 and
excluding matters generally affecting the economy or the lines of business in
which Purchaser is engaged, Purchaser has not suffered any material adverse
change in its business or financial condition.
9.5 TAX MATTERS. Purchaser hereby represents and warrants
as follows with respect to certain tax matters concerning the transactions
contemplated in this Agreement:
(a) Purchaser has no plan or intention to sell or
otherwise dispose of any of the Acquired Assets, except for sales or
dispositions made in the ordinary course of business;
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(b) Purchaser has no plan or intention to discontinue the
historic business of Seller or use a significant portion of Seller's historic
business assets in a business following the transactions contemplated in this
Agreement as contemplated in Treasury Regulation Section 1.368-1(d).
(c) Purchaser is not an "investment company" as defined in Section
386(a)(2)(F) of the Code.
(d) The Purchaser's Shares issued pursuant to this
Agreement will constitute "voting stock" within the meaning of Section
368(a)(1)(C) of the Code.
10. COVENANTS OF SELLER AND SHAREHOLDERS. Seller and Shareholders
covenant and agree with Purchaser as follows:
10.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Until the Closing, and
unless Purchaser shall otherwise consent in writing, Seller shall take the
following actions:
(a) operate the Business substantially as previously operated
and only in the ordinary course, and use its best efforts to preserve intact
Seller's goodwill, reputation, present business organization and relationships
with persons having business dealings with it;
(b) maintain all personal property in good order and
condition, reasonable wear and use excepted, and maintain all policies of
insurance covering such properties in effect on the date hereof;
(c) pay Seller's accounts payable and attempt to collect the
Receivables in a manner consistent with past business practices;
d) comply in all material respects with all laws applicable
to the conduct of the Business; and
(e) maintain Seller's books and records in the usual, regular
and ordinary manner on a basis consistent with past practices.
10.2 NOTIFICATION OF MATERIAL ADVERSE CHANGES. Between the date
hereof and the Closing Date, Seller shall promptly notify Purchaser in writing
of the occurrence of any of the matters described in Section 8.9.
10.3 OTHER TRANSACTIONS. Seller and the Shareholders shall deal
exclusively and in good faith with Purchaser regarding the sale of the Acquired
Assets, the capital stock of Seller or a merger involving Seller (a "SALE
TRANSACTION") and will not, and will direct the Seller's officers, directors,
financial advisors,
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accountants, agents and counsel not to, (i) solicit submission of offers from
any person relating to a Sale Transaction, (ii) participate in any discussions
or negotiations regarding, or furnish any nonpublic information to any person
regarding any Sale Transaction by any person other than Purchaser, or (iii)
enter into any agreement or understanding, whether oral or written, that would
have the effect of preventing consummation of this Agreement. If Seller or
Shareholders or their representatives or agents should receive any proposal for
a Sale Transaction or any inquiry regarding such proposal from a third party,
Seller will promptly so inform Purchaser.
10.4 CONSENTS, WAIVERS AND APPROVALS. Seller shall obtain prior to
the Closing all consents, waivers, approvals, and releases of liens or
encumbrances necessary to effect the transactions contemplated herein and the
operation of the Business after the Closing Date in the ordinary course
substantially as operated by Seller prior to Closing, free and clear of any and
all liens or encumbrances except those permitted encumbrances identified in
Exhibit 10.4 (the "PERMITTED ENCUMBRANCES"). All such consents, waivers,
releases and approvals will be in writing and in form and substance
satisfactory to Purchaser, and executed counterparts thereof will be delivered
to Purchaser promptly after receipt thereof but in no event later than the
Closing.
10.5 SUPPLEMENTAL DISCLOSURE. Seller shall have the continuing
obligation up to and including the Closing Date to supplement promptly or amend
the Exhibits with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or listed in the Exhibits. For the purpose of the rights and
obligations of the parties hereunder, any such supplemental disclosure shall be
deemed to have been disclosed as of the date of this Agreement if Purchaser
proceeds with the Closing of the transactions contemplated herein following
receipt of such supplemental or amended Exhibits.
10.6 ADDITIONAL REPORTS. Promptly after they become available,
Seller will deliver to Purchaser copies of all management and control reports
(including agings of accounts receivable, listings of accounts payable and
inventory control reports) and financial statements routinely prepared by
Seller.
10.7 CONDITIONS PRECEDENT. Seller shall use its best efforts in
good faith to satisfy the conditions enumerated in Section 11 hereof.
10.8 PURCHASER'S DUE DILIGENCE. Seller and Shareholders shall give
Purchaser and its counsel, accountants and other representatives full access
during normal business hours to all of the books, records, files, documents,
assets, properties, contracts, and commitments of Seller, provided that such
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examinations shall be conducted in such a manner so as not to disrupt the
normal business operations of Seller, and Seller shall furnish Purchaser with
such information concerning the affairs of Seller which Purchaser may
reasonably request, so that Purchaser may have a full opportunity to verify the
representations and warranties contained in this Agreement and to ascertain
such other matters concerning the financial condition, operations, employees,
business or prospects of Seller as Purchaser may deem necessary or appropriate.
Notwithstanding the foregoing, contacts with customer and sales persons and the
content of such contacts, whether written or oral, will be subject to the prior
approval of Seller which shall not be unreasonably withheld, conditioned or
delayed. Seller shall deliver to Purchaser correct and complete copies of all
documents referred to in the Exhibits.
10.9 DISTRIBUTION OF PURCHASER'S SHARES. As soon as
practicable after the Closing Date and as part of the transactions contemplated
by this Agreement, Seller shall liquidate and distribute to the Shareholders
the Purchaser's Shares it has received under this Agreement and any of its
other properties in accordance with Section 368(a)(2)(G) of the Code.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation of
Purchaser to consummate this Agreement shall be subject to the satisfaction, on
or before the Closing Date, of the following conditions, all or any of which
may be waived by Purchaser in writing.
11.1 REPRESENTATIONS. The representations and warranties made by
Seller and Shareholders in Sections 7 and 8 hereof shall be true and correct in
all material respects on the Closing Date as though such representations and
warranties had been made on such date and Seller and Shareholders shall deliver
to Purchaser a certificate dated as of the Closing Date to the foregoing
effect.
11.2 COVENANTS. Seller and Shareholders shall have duly performed
all of the covenants, acts and undertakings to be performed by them on or prior
to the Closing Date, and Seller and Shareholders shall deliver to Purchaser a
certificate dated as of the Closing Date to the foregoing effect.
11.3 NO INJUNCTION, ETC. No proceeding, investigation, or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, or prohibit, or to
obtain substantial damages in respect of this Agreement, or which is related to
the Seller, Shareholders, the Acquired Assets, the Assumed Liabilities, or
which arises out of the Business.
11.4 OPINION OF COUNSEL. An opinion of counsel for Seller and
Shareholders shall have been delivered to Purchaser, dated as of the Closing
Date, in form and substance reasonably satisfactory to
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Purchaser and its counsel and containing the opinions identified in Exhibit
11.4.
11.5 INCUMBENCY. Seller shall have delivered a certificate of
incumbency executed by the president and secretary of Seller listing each
officer and director of Seller and the persons authorized to execute the Seller
Agreements.
11.6 CONSENTS, WAIVERS AND APPROVALS. Purchaser shall have
received a true and correct copy of each consent, waiver or approval required
to be identified in Exhibit 8.21 hereto or otherwise required pursuant to
Section 10.4.
11.7 ABSENCE OF MATERIAL ADVERSE CHANGES. Since January 31, 1995,
(a) Seller shall not have suffered any material adverse change in its financial
condition, business or the Acquired Assets or Assumed Liabilities, and (b)
Seller and Shareholders shall not have taken, omitted, permitted or suffered
any transaction or event described in Section 8.9 hereof which is not described
in Exhibit 8.9 hereto.
11.8 CERTIFIED RESOLUTIONS. Seller shall have delivered to
Purchaser a certificate executed by a duly authorized officer of Seller
containing a true and correct copies of the resolutions duly adopted by the
board of directors of Seller and the Shareholders approving and authorizing the
Seller Agreements and their consummation. Such officer shall also certify that
such resolutions have not been revoked or modified and remain in full force and
effect.
11.9 PAY-OFF LETTERS. Purchaser shall have received pay-off letters
with respect to all loans included in the Assumed Liabilities confirming the
outstanding balances under those loans and the undertaking by the lenders to
release all collateral therefor upon receipt of the balance and containing such
other terms as Purchaser may reasonably request. Such letters shall not
require the payment of any pre-payment penalty or fee or require any other
undertaking by Purchaser.
11.10 MISCELLANEOUS ASSURANCES. Purchaser shall have received
uniform commercial code and judgment and tax lien searches from all applicable
jurisdictions and a title commitment and survey of the Real Property confirming
title to Seller's assets as represented in Section 8.17. Purchaser shall also
have received and been satisfied with the results of its environmental
assessment of the Real Property.
11.11 BASIC CORPORATE DOCUMENTS. Seller shall have delivered to
Purchaser copies of the Seller's Articles of Incorporation, certified as of a
date within 30 days prior thereto by the Secretary of State of Seller's state
of incorporation, Seller's Bylaws, certified as of such a date by Seller's
Secretary, and
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certificates of good standing (long-form where available) or authority from the
Secretary of State of the state of incorporation and those other jurisdictions
identified in Exhibit 8.3.
11.12 TRANSACTION EXPENSES. Seller shall have delivered to Purchaser
a written confirmation and release in the form of Exhibit 11.12 from each
person to whom Seller is obligated with respect to the Transaction Expenses.
11.13 EMPLOYMENT AGREEMENTS. Shareholders shall have executed an
Employment and Non-competition Agreement in substantially the form of Exhibit
11.13, and such other key employees as Purchaser shall identify in writing at
least 10 days prior to Closing shall have executed employment agreements in
such form as Purchaser may require.
11.14 INTENTIONALLY OMITTED.
11.15 INTELLECTUAL PROPERTY INTANGIBLES. Seller shall have ceased to
use in any manner the names "Pioneer", "Pioneer Systems" and "Pioneer Service
Systems" and any other Intellectual Property Intangibles, except in connection
with tax returns, filings with other governmental authorities and for similar
purposes.
11.16 INSTRUMENTS OF TRANSFER. Seller shall have delivered to
Purchaser on the Closing Date such bills of sale, warranty deeds, endorsements,
assignments and other instruments of transfer as are provided for herein, or as
otherwise necessary to vest in Purchaser all of Seller's title and rights with
respect to the Acquired Assets, free and clear of all liens or encumbrances
(except the Permitted Encumbrances).
11.17 CERTIFICATES. Seller shall have delivered to Purchaser all such
certificates, dated as of the Closing Date, as Purchaser shall reasonably
request to evidence the fulfillment by Seller, or other satisfaction as of the
Closing Date, of the terms and conditions of this Agreement.
11.18 MCCLELLAN SETTLEMENT AGREEMENT. Seller shall have delivered to
Purchaser the McClellan Settlement Agreement as executed by all parties thereto
and performed all obligations thereunder to be performed at or prior to the
Closing.
11.19 MISCELLANEOUS AGREEMENTS. Seller shall have delivered to
Purchaser intellectual property assignment agreements with Michael Hoffman and
Bradley Casper in the form required by Purchaser.
11.20 LICENSE. Purchaser and Seller shall have entered into a
mutually satisfactory, royalty-free, exclusive license to Purchaser for use of
the "Pioneer", "Pioneer Systems" and "Pioneer Service Systems" tradenames,
trademarks and service marks.
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12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SHAREHOLDERS. The
obligation of Seller and Shareholders to consummate this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of the following
conditions, all or any of which may be waived by Seller and Shareholders in
writing.
12.1 REPRESENTATIONS. The representations and warranties made by
Purchaser in Section 9 hereof shall be true and correct in all material
respects on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such date and
Purchaser shall deliver to Seller and Shareholders a certificate dated as of
the Closing Date to the foregoing effect for Purchaser.
12.2 COVENANTS. Purchaser shall have duly performed all of the
covenants, acts or undertakings to be performed by Purchaser on or before the
Closing Date, and Purchaser shall deliver to Seller and Shareholders
certificates dated as of the Closing Date to the foregoing effect.
12.3 CERTIFIED RESOLUTIONS. Purchaser shall have delivered to
Seller and Shareholders certificates executed by a duly authorized officers of
Purchaser containing a true and correct copy of resolutions duly adopted by
Purchaser's Board of Directors approving and authorizing the issuance of the
Closing Shares and the obligations of Purchaser with respect to registration of
the resale thereof pursuant to Section 6 of this Agreement. Such officers
shall also certify that such resolutions have not been revoked or modified and
remain in full force and effect.
12.4 OPINION OF COUNSEL. An opinion of counsel for Purchaser shall
have been delivered to Seller and Shareholders, dated as of the Closing Date,
in form and substance reasonably satisfactory to Seller and its counsel, and
containing the opinions identified in Exhibit 12.4.
12.5 NO INJUNCTION, ETC. No proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, or prohibit, or to
obtain substantial damages in respect of this Agreement.
12.6 CONSENTS, WAIVERS AND APPROVALS. Seller and Shareholders
shall have received a true and correct copy of each consent, waiver or approval
obtained by Purchaser and required for Purchaser's execution and consummation
of this Agreement.
12.7 INCUMBENCY. Purchaser shall have delivered a certificate of
incumbency executed by the president or a vice president and the secretary or
an assistant secretary of Purchaser listing the persons authorized to execute
the Purchaser Agreements and confirming that no further action by or approval
of the board of
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directors or shareholders of Purchaser is required under Purchaser's Articles
of Incorporation or Code of Regulations as a condition to the validity and
binding effect of the Purchaser Agreements.
12.8 EMPLOYMENT AGREEMENTS. Purchaser shall have executed an
Employment and Non-competition Agreement with each Shareholder in substantially
the form of Exhibit 11.13.
12.9 MCCLELLAN. The required parties shall have executed the
McClellan Settlement Agreement.
12.10 MATERIAL ADVERSE CHANGE. Since December 31, 1994 and excluding
matters generally affecting the economy or the lines of business in which
Purchaser is engaged, Purchaser shall not have suffered any material adverse
change in its business or financial condition.
13. MUTUAL COVENANTS.
13.1 PRE-CLOSING. Each of the parties hereto shall refrain
from taking any action which would render any representation or warranty
contained in Sections 8 or 9 of this Agreement inaccurate as of the Closing
Date. Each party shall promptly notify the other of any action or proceeding
that shall be instituted or threatened against such party to restrain, prohibit
or otherwise challenge the legality of any transaction contemplated by this
Agreement.
13.2 TAX REPORTING. The parties will file their respective income
tax returns on the basis that this transaction qualifies as a "reorganization"
under Section 368(a) of the Code. The parties will not take a tax return
position inconsistent with the foregoing tax return positions unless such
inconsistent position shall arise out of or through an audit of such returns by
the Internal Revenue Service or other taxing authority. Seller and
Shareholders shall cooperate with Purchaser to enable Purchaser to identify the
tax attributes which shall carry over to Purchaser from Seller under Section
381 of the Code and tax basis information and shall provide Purchaser with all
relevant records related thereto.
13.3 NAME. From and after the Closing Date, Purchaser shall not use
the names "Pioneer", "Pioneer Systems" or "Pioneer Service Systems" in the
conduct of any active trade or business.
13.4 MCCLELLAN POSITION. Shareholders, in their capacities as
employees of Purchaser, shall not hire any employee or engage any contractor to
perform the duties performed by McClellan prior to the Closing Date.
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14. CLOSING.
14.1 TIME AND PLACE. The closing (the "CLOSING") shall be held at
the offices of MacFarlane, Ausley, Ferguson & McMullen on March 31, 1995, at
9:00 a.m., or at such other place or time or on such other date as the parties
hereto may mutually agree. The date on which the Closing is held is referred
to in this Agreement as the "CLOSING DATE", and unless otherwise expressly
provided, all transactions contemplated hereby shall be deemed to have become
effective immediately following the close of business on the Closing Date.
14.2 TRANSACTIONS AT THE CLOSING. At the Closing, each of the
following transactions shall occur:
(a) Seller and Shareholders shall deliver to Purchaser
the following:
(i) all instruments of transfer, duly executed
and in recordable form, where appropriate, reasonably satisfactory in form and
substance to Purchaser and its counsel;
(ii) the certificates, opinion, agreements and
documents required of Seller and/or the Shareholders described in Sections 11;
(iii) copies of the consents, waivers and
approvals described in Section 10.4;
(iv) the updated Exhibits required by Section 10.5;
(v) the certificate of Seller and Shareholders
required by Section 21.12; and
(vi) such other evidence of the performance of
all covenants and satisfaction of all conditions required of the Seller and
Shareholders by this Agreement, at or prior to the Closing, as Purchaser or its
counsel may reasonably require.
(b) Purchaser shall deliver to Seller, Shareholders, or
certain other parties, as applicable, the following:
(i) certificates for the Closing Shares
required under Section 5.1 shall be delivered to Seller;
(ii) the certificates, opinion, agreements and
documents required of Purchaser described in Section 12;
(iii) copies of the consents, waivers and approvals
described in Section 12.6;
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(iv) a certificate of good standing of
Purchaser from the Secretary of State of Ohio as of the most recent practicable
date; and
(v) such other evidence of the performance of
all the covenants and satisfaction of all of the conditions required of the
Purchaser by this Agreement, at or before the Closing, as Seller and
Shareholders or their counsel may reasonably require.
14.3 DEFAULT AT CLOSING. If Seller or Shareholders shall fail or
refuse to consummate the transactions set forth in this Agreement on or prior
to the Closing Date, and if Purchaser shall not then be in material breach
under terms of this Agreement, all other conditions to the Closing shall have
been satisfied and Purchaser shall stand ready, willing and able to make tender
of its deliveries required under Section 14.2, then, in addition to any other
remedies available to Purchaser, Purchaser may invoke any equitable remedies to
cause the consummation of the transactions set forth in this Agreement,
including, without limitation, an action or suit for specific performance.
15. EMPLOYEES AND CONTRACTORS OF SELLER. From the date hereof to the
Closing, Seller will use its best efforts to maintain its existing relations
with its employees and not to alter current personnel policies and practices.
On the Closing Date, Seller shall terminate all of its employees and
contractors and shall permit Purchaser to hire or engage, as applicable, any of
such employees or contractors; provided, however, that this Agreement shall not
be construed as an obligation of Purchaser to hire or engage any of Seller's
former employees or contractors or to offer any specific terms, benefits or
compensation (this sentence shall not affect Purchaser's obligations under the
employment agreements described in Section 11.13).
16. SURVIVAL OF REPRESENTATIONS. All statements contained in the Seller
Agreements or the Purchaser Agreements, as the case may be, shall be deemed
representations and warranties hereunder by Seller, Shareholders or Purchaser,
as the case may be. Except as provided in this Section 16, all representations
and warranties made by Seller, Shareholders or Purchaser shall survive until
the third (3rd) anniversary of the Closing Date. The representations and
warranties of Seller and Shareholders in Section 8.6 shall survive until 30
days after expiration of the applicable statutes of limitation and the
representations and warranties in Sections 7 and 8.17 shall survive for a
period of five (5) years after the Closing Date. The representations and
warranties of Purchaser in Section 9.5 shall survive for a period of five (5)
years after the Closing Date. No claim for breach of a representation or
warranty (including an Indemnification Claim as defined in Section 19) may be
brought by any person unless written notice of such claim shall have been given
on a prior to the last day of the applicable survival period in this Section 16
(in which event each
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representation and warranty with respect to any asserted claim shall survive
until such claim is finally resolved and all obligations with respect thereto
are fully satisfied).
17. TERMINATION. This Agreement may be terminated, and the transactions
contemplated herein abandoned (a) by the mutual written consent of Seller and
Purchaser; (b) by either Seller or Purchaser upon the failure of the other to
comply substantially with its or their conditions precedent to Closing and
other obligations set forth herein on or before the Closing Date; or (c)
automatically at 5:00 p.m. Dayton, Ohio time on April 15, 1995, if the Closing
has not been completed by that time. Termination pursuant to this Section
shall relieve the parties of their obligations hereunder with each party
responsible for its own, fees, costs and expenses; provided, however that if
the Agreement is terminated pursuant to (b) or (c) above because one party
fails to use its reasonable best efforts to fulfill its obligations hereunder,
such party shall remain liable to the other party for all losses, costs,
expenses (including attorney's fees through all appellate levels) and
liabilities incurred by such other party as a result of such failure; and,
provided, further, that Purchaser shall in any event reimburse Seller for up to
$4,000 in Transaction Expenses.
18. MCCLELLAN SETTLEMENT AGREEMENT. Prior to the Closing Date, Seller
shall enter into a written agreement with Edward McClellan ("MCCLELLAN") in
form and substance satisfactory to Purchaser (the "MCCLELLAN SETTLEMENT
AGREEMENT").
19. INDEMNIFICATION.
19.1 LOSSES. For purposes of this Section 19, "LOSSES" shall mean
all damages, losses, costs, expenses (including attorneys' fees through all
appellate levels), interest, penalties, charges and liabilities.
19.2 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. Seller and
Shareholders jointly and severally agree to indemnify, defend and hold harmless
Purchaser from and against any Loss incurred by Purchaser related to or arising
out of (a) the breach of any of the warranties, representations, covenants or
agreements of Seller or Shareholders in the Seller Agreements, or (b) any
Excluded Liability or Excluded Asset.
19.3 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify,
defend and hold harmless Seller and Shareholders from and against any Loss
incurred by any of them related to or arising out of (a) the breach of any of
the warranties, representations, covenants or agreements (including without
limitation under Section 6 of this Agreement) of Purchaser in the Purchaser
Agreements, or (b) any Acquired Asset or Assumed Liability.
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19.4 PROCEDURES FOR INDEMNIFICATION. "INDEMNITOR" shall mean the
party against whom indemnity is sought, and "INDEMNITEE" shall mean the party
seeking indemnification.
(a) A claim for indemnification hereunder
("INDEMNIFICATION CLAIM") shall be made by Indemnitee by delivery of a written
declaration to Indemnitor requesting indemnification and specifying the basis
on which indemnification is sought and the amount of asserted Losses and, in
the case of a Third Party Claim (as defined in Section 19.5 hereof), containing
such other information as Indemnitee shall have concerning such Third Party
Claim.
(b) If the Indemnification Claim involves a Third Party
Claim the procedures set forth in Section 19.5 hereof shall be observed by
Indemnitee and Indemnitor.
(c) If the Indemnification Claim involves a matter other
than a Third Party Claim, the Indemnitor shall have ten (10) days to object to
such Indemnification Claim by delivery of a written notice of such objection to
Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute acceptance of the Indemnification
Claim by the Indemnitor and the Indemnification Claim shall be paid in
accordance with Section 19.4(d). If any objection is timely interposed by the
Indemnitor and the dispute is not resolved within fifteen (15) days from the
date Indemnitee receives such objection, such dispute will be resolved as
provided in Section 21.13 of this Agreement.
(d) Upon determination of the amount of an
Indemnification Claim, whether by agreement between Indemnitor and Indemnitee,
by an arbitration award or otherwise, Indemnitor shall pay the amount of such
Indemnification Claim within ten (10) days of the date such amount is
determined.
19.5 DEFENSE OF THIRD PARTY CLAIMS.
(a) Should any claim be made, or suit or proceeding
(including, without limitation, a binding arbitration or an audit by any taxing
authority) be instituted against Indemnitee which, if prosecuted successfully,
would be a matter for which Indemnitee is entitled to indemnification under
this Agreement (a "THIRD PARTY CLAIM"), the obligations and liabilities of the
parties with respect to such Third Party Claim shall be subject to the
following terms and conditions.
(b) Within a reasonable time (i.e., such time as will not
prejudice the contest, defense, litigation, or settlement of a Third Party
Claim) following the receipt of notice of a Third Party Claim, the party
receiving the notice of the Third Party Claim shall (i) notify the other party
of its existence setting forth in writing and with reasonable specificity the
facts and circumstances
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<PAGE> 37
of which such party has received notice, and (ii) if the party giving such
notice is an Indemnitee, specifying in writing the basis hereunder upon which
the Indemnitee's claim for indemnification is asserted and tendering defense of
the Third Party Claim to Indemnitor. If the defense of a Third Party Claim is
so tendered and within fifteen (15) days thereafter such tender is accepted
without qualification by the Indemnitor as evidenced by written notice to
Indemnitee, then, except as hereinafter provided, the Indemnitee shall not, and
the Indemnitor shall, have the right to contest, defend, litigate and settle
such Third Party Claim. The Indemnitee shall have the right to be represented
by counsel at its own expense in any such contest, defense, litigation or
settlement conducted by the Indemnitor, provided that the Indemnitee shall be
entitled to reimbursement therefor if the Indemnitor shall lose its right to
contest, defend, litigation and settle the Third Party Claim as herein
provided. The Indemnitor shall lose its right to contest, defend, litigate and
settle the Third Party Claim if it shall fail to diligently contest the Third
Party claim (except in connection with a settlement thereof in accordance with
the terms hereof). So long as the Indemnitor has not lost its right to defend,
contest, litigate and settle as herein provided, the Indemnitor shall have the
exclusive right to contest, defend and litigate the Third Party Claim and shall
have the exclusive right, in its discretion exercised in good faith, and with
the advice of counsel, to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable, provided that at least ten (10) days prior to any such settlement,
written notice of its intention to settle shall be given to the Indemnitee.
All expenses (including without limitation reasonable attorneys' fees through
all appellate levels) incurred by the Indemnitor in connection with the
foregoing shall be paid by the Indemnitor. No failure by an Indemnitor to
acknowledge in writing its indemnification obligations under this Section 19
shall relieve it of such obligations to the extent they exist. If an
Indemnitee is entitled to indemnification against a Third Party Claim, and the
Indemnitor fails to accept or assume the defense of a Third Party claim
pursuant to clause (i) or clause (ii) of this Section 19.5(a), or if, in
accordance with the foregoing, the Indemnitor shall lose its right to contest,
defend, litigate and settle such a Third Party Claim, the Indemnitee shall have
the right, without prejudice to its right of indemnification hereunder, in its
discretion exercised in good faith, and upon the advice of counsel, to contest,
defend and litigate such Third Party Claim, and may, in its discretion
exercised in good faith, and with the advice of counsel, settle such Third
Party Claim, either before or after the initiation of litigation, at such time
and upon such terms as it deems fair and reasonable, provided that at least ten
(10) days prior to any such settlement, written notice of its intention to
settle is given to the Indemnitor. If, pursuant to this Section 19.5, the
Indemnitee so contests, defends, litigates or settles a Third Party claim for
which it is entitled to indemnification hereunder, as hereinabove
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provided, the Indemnitee shall be reimbursed by the Indemnitor for the
reasonable attorneys' fees (through all appellate levels) and other expenses of
defending, contesting, litigating and/or settling the Third Party Claim which
are incurred from time to time, forthwith following the presentation to the
Indemnitor of itemized bills for said attorneys' fees and other expenses.
19.6 LIMITATIONS.
(a) All notices of Loss must be delivered to the
Indemnitor prior to expiration of the applicable periods for the warranties and
representations as set forth in Section 16 hereof.
(b) Notwithstanding anything to the contrary herein,
except for the obligations (the "EXEMPT INDEMNIFICATION OBLIGATIONS") under
Section 19.2 with respect to Excluded Liabilities and breaches of the
representations and warranties contained in Sections 8.6 and 8.17 or under
Section 19.3 with respect to Assumed Liabilities and Purchaser's obligations
under Section 6, neither Seller and Shareholders nor Purchaser, as an
Indemnitor, shall have any obligation until the aggregate of all Losses payable
by the Indemnitor to the Indemnitee exceeds $10,000 (the "FLOOR"). Upon the
aggregate of all Losses payable by Seller and Shareholders (except the Exempt
Indemnification Obligations) or Purchaser as Indemnitor exceeding the Floor,
Seller and Shareholders or Purchaser, as applicable, shall be liable to the
Indemnitee on a dollar-for-dollar basis, for the amount above the Floor.
(c) With respect to Losses payable by Seller and
Shareholders or Purchaser in respect of Exempt Indemnification Obligations,
Seller and Shareholders or Purchaser, as applicable, shall be liable for all
such Losses from the first dollar in any event.
(d) The payment of any Loss hereunder shall constitute an
additional adjustment to the Closing Shares under Section 5.
(e) A Closing Shares Adjustment Claim shall not be an
Indemnification Claim and shall not be subject to the Floor.
(f) Notwithstanding anything to the contrary in this
Agreement, the maximum amount of indemnification payable by Seller and the
Shareholders under Section 19.2 shall be the consideration received for the
Acquired Assets (i.e., the Base Value, as adjusted, plus the Assumed
Liabilities, plus the aggregate amount of the contingent payments pursuant to
Section 5.2).
(g) Notwithstanding anything in this Section 19 to the
contrary, the rights and obligations of the parties with respect to
indemnification for any and all Taxes shall be determined under Section 24.
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20. TRANSACTION EXPENSES.
20.1 BROKERS. Purchaser, Seller and Shareholders each represent
and warrant to the other that no broker or finder has acted for it or them in
connection with this Agreement.
20.2 EXPENSES. Except as provided in Sections 3.3 and 17, all
expenses incurred by the parties in connection with or related to the
authorization, preparation, negotiation and consummation of this Agreement and
the agreements, documents or instruments contemplated hereby shall be borne
solely by the party which has incurred the same.
21. MISCELLANEOUS.
21.1 ACCOUNTING RECORDS. From and after the Closing Date, Seller
and the Shareholders and their representatives shall have reasonable access to
all of the Books and Records for the period prior to the Closing Date, but only
to the extent that such access may reasonably be required by such persons in
connection with matters relating to or affected by the operations of Seller
prior to the Closing Date. Such access shall be afforded by Purchaser upon
receipt of reasonable advance notice and during normal business hours. Seller
and Shareholders shall provide similar rights to Purchaser with respect to
those books and records retained by them.
21.2 NOTICE. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given and
received (a) on the date of delivery when delivered by hand or when transmitted
by confirmed simultaneous telecopy, (b) on the following business day when sent
by receipted overnight courier, or (c) three (3) business days after deposit in
the United States Mail when mailed by registered or certified mail, return
receipt requested, first class postage prepaid, as follows:
(a) If to Seller or Shareholder to:
Pioneer Systems, Inc.
5006 Fifth Street
Zephyrhills, FL 33541-4922
Fax: (813) 780-6024
With a copy to:
Mark F. Mooney, Esq.
13907 Dale Mabry Hwy., Suite 201
Tampa, FL 33618
Fax: (813) 265-3110
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(b) If to Purchaser to:
The Reynolds and Reynolds Company
800 Germantown Street
Dayton, Ohio 45407
ATTN: Peter A. Granson, Jr.
Fax: (513) 443-2094
With a copy to:
The Reynolds and Reynolds Company
Karen J. Blackwell, Esq.
800 Germantown Street
Dayton, Ohio 45407
Fax: (513) 443-2094
Any party may change the address to which notices are to be sent to it by
giving written notice of such change of address to the other parties in the
manner above provided for giving notice.
21.3 ASSIGNMENT; BINDING EFFECT. This Agreement may not be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto. This Agreement shall be binding upon the parties hereto
and their respective permitted successors, assigns and transferees.
21.4 HEADINGS; EXHIBITS AND SCHEDULES. The Section, Subsection
and other headings in this Agreement are inserted solely as a matter of
convenience and for reference, and are not a part of this Agreement. The
Exhibits and Schedules attached hereto are a material part of this Agreement
and are incorporated herein by this reference.
21.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
21.6 INTEGRATION OF AGREEMENT. This Agreement supersedes all
prior agreements, oral and written, between the parties hereto with respect to
the subject matter hereunder. Neither this Agreement, nor any provision
hereof, may be changed, waived, discharged, supplemented or terminated orally,
but only by an agreement in writing signed by the party against which the
enforcement of such change, waiver, discharge or termination is sought.
21.7 TIME OF ESSENCE. Time is of the essence in this Agreement.
21.8 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the state of Florida.
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21.9 DISCLOSURE. Purchaser, Seller and Shareholders each agree
not to issue any press release or make any public announcement or other
disclosure to competitors, customers, employees or any other person (except to
employees and agents on a need-to-know basis in order to complete transactions
and who agree to bound hereby) concerning this Agreement except as required by
law or with the advance written approval of the other party, which approval
shall not be unreasonably withheld.
21.10 PARTIAL ILLEGALITY OR UNENFORCEABILITY. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be illegal or unenforceable in any respect,
such illegality or unenforceability shall not affect any other provisions of
this Agreement, and this Agreement shall be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless
the deletion of such provision or provisions would result in such a material
change as to cause completion of the transactions contemplated hereby to be
unreasonable.
21.11 SINGULAR OR PLURAL. All defined terms used herein shall have
the same meaning, whether used in the singular or plural form, unless the
context clearly requires otherwise.
21.12 INTENTIONALLY OMITTED.
21.13 ARBITRATION.
(a) Any controversy, dispute or claim arising out of or
relating to this Agreement shall be submitted to arbitration in accordance with
the commercial rules of the American Arbitration Association ("AAA"), by which
each party will be bound.
(b) If the parties have not agreed during their
negotiations on a single arbitrator to whom the controversy, dispute or claim
will be submitted, either party may select an arbitrator and send written
notice to the other party of the selection. The party receiving such notice
will have 10 days from the date such party receives such notice of such
selection to select a second arbitrator and send notice of such to the party
who selected the first arbitrator. Failure to select the second arbitrator and
to send timely notice, as provided above, empowers the arbitrator first
selected to resolve the controversy. If both arbitrators have been duly named,
they will as soon as is reasonably practicable (but within 30 days from the
date the latter of the two arbitrators is named) name a third arbitrator who
shall not be from the Dayton, Ohio or Tampa, Florida metropolitan areas. The
provisions of the Federal Rules of Civil Procedure which provide for discovery
shall be applicable to any such arbitration. The parties agree that such
discovery must be completed within six
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(6) months after the claim has been filed with the AAA and service on the other
party effected.
(c) Any arbitration proceedings will be conducted in
Atlanta, Georgia, unless the parties otherwise agree.
(d) The parties agree to be bound by the decision of the
arbitrator and the decision thereof to be entered into any appropriate court or
other jurisdiction. Unless otherwise provided in this Agreement, the
prevailing party in the arbitration shall be promptly reimbursed for its
reasonable costs and fees (including attorneys' fees) incurred in connection
with the arbitration and shall not be responsible for the costs of arbitration.
21.14 "KNOWLEDGE." For purposes of this Agreement, "to the
best of ________'s knowledge" or "to ______________'s knowledge" shall mean
the actual knowledge of the subject party (if not a natural person, the actual
knowledge of that party's officers and directors) after due inquiry (including,
as it relates to Seller, consultation with responsible employees of Seller)
into the subject matter.
21.15 "PERSON." The term "person" shall be broadly interpreted to
include, without limitation, any corporation, partnership, association, limited
liability company, other association, trust or individual.
21.16 "BEST EFFORTS." The use of the term "best efforts" herein shall
in no event require any party to (a) expend funds which are not commercially
reasonable in relation to the transactions contemplated hereby or (b) take, or
cause to be taken, any action which would have a material adverse effect with
respect to it.
21.17 "INCLUDING." Whenever the term "including" is used in this
Agreement, it shall mean "including, without limitation," (whether or not such
language is specifically set forth) and shall not be deemed to limit the range
of possibilities of those items specifically enumerated.
22. SELLER'S OBLIGATIONS. Shareholders hereby jointly and severally
guarantee the prompt performance by Seller of its obligations under this
Agreement, subject to the limitations in Section 19.6(f). This guaranty is one
of payment, not collection. Upon the dissolution and liquidation of Seller,
Shareholders shall automatically and without further action assume all
obligations of the Seller hereunder and shall receive all rights and benefits
of Seller hereunder; provided, however, that Section 23 shall not apply to the
Shareholders and they shall be subject to the corresponding provisions of their
respective Employment Agreements.
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23. COVENANT NOT TO COMPETE.
23.1 COVENANT NOT TO COMPETE. Seller covenants and agrees that,
prior to the first (1st) anniversary of the Closing Date, Seller shall not,
either directly or indirectly, compete with the Purchaser in the Subject
Business in the United States, Canada, or Mexico.
23.2 DEFINITIONS. The following definitions shall apply to this
Section 23:
(a) "COMPETE" shall mean: (i) calling on, soliciting or
accepting as a client or customer, any person that on the applicable date is
presently or was a client or customer of the Business during the twelve (12)
month period prior to the applicable date; or (ii) entering into, or attempting
to enter into, the Subject Business, either alone or in conjunction with any
person.
(b) "DIRECT OR INDIRECT" competition shall include (i)
acting (directly through Seller or indirectly through its employees, agents or
contractors), with respect to the Subject Business, as an agent,
representative, consultant, officer, director, independent contractor or
employee of any person that is competing with the Purchaser in the Subject
Business or competing on Seller's own behalf with Purchaser in the Subject
Business, or (ii) participating in any such competing person as an owner,
partner, limited partner, joint venturer, creditor, stockholder, or member.
"Direct" or "indirect" competition shall not include the ownership of voting
securities or other equity interest representing less than 5% (collectively
among Seller, Shareholders, and their Affiliates) of the voting power of an
entity.
(c) "SUBJECT BUSINESS" shall mean the provision of
services, systems or databases (including customized service menu pricing
guides) to new automobile franchise retail dealerships (this shall not include
the provision of services to a single dealership or affiliated group of
dealerships), or to the extent revenues from any of the following markets are
included for the purpose of determining "Annual Net Sales" under Section 7 of
Exhibit 5.2, to dealers or other users in the following markets: motorcycle,
truck, used automobile or health care (this shall not include provision of such
services to a single dealer or end user or group of affiliated dealers or end
users).
23.3 EQUITABLE RELIEF. Seller acknowledges that a breach of any
provision of this Section 23 cannot be compensated adequately by damages in an
action at law, and that such a breach would cause the Purchaser irreparable
harm. Seller agrees that the Purchaser shall be entitled to temporary and
permanent injunctive and other equitable relief, provided that such equitable
remedies shall be in addition to and not in lieu of other remedies available at
law or in equity to the Purchaser as a result of such a breach. Seller
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agrees that the duration, geographical scope and subject matter of this Section
23 are reasonable in light of all of the facts and circumstances. To the
extent permitted by law, Seller waives any defenses or objections related to
the reasonableness of the items specified in the next preceding sentence.
23.4 SEVERABILITY. If any court of competent jurisdiction shall
determine that any provision of this Section 23 is invalid or unenforceable,
such determination shall not affect the other provisions of this Agreement
(including Section 23). The invalid or unenforceable provision shall be
modified to the minimum degree necessary to make such provision valid and
enforceable, and this Agreement shall thereafter be enforced to the fullest
extent possible.
24. TAX INDEMNIFICATION.
24.1 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. Seller and
Shareholders jointly and severally agree to indemnify, defend, and hold
harmless Purchaser and its successors and assigns from and against: (a) any
and all Taxes and Tax Losses (as defined in Section 24.6) that are Excluded
Liabilities or that arise out of the breach of any representation or warranty
set forth in Section 8.6 or any covenant set forth in Section 10.9 or Section
13.2, and (b) any and all Taxes imposed on Seller for all taxable periods or
portions thereof ending on or before the Closing Date (except those Taxes which
are Assumed Liabilities and those Taxes described in Section 5.4 as being
Purchaser's obligation) and all related Tax Losses incurred by Purchaser;
PROVIDED, HOWEVER, that the Taxes and Tax Losses described in this Section 24.1
shall not include the Taxes and Tax Losses described in Section 24.2 to the
extent that Purchaser is obligated to indemnify Seller and/or Shareholders
under Section 24.2 for such Taxes and Tax Losses, and nothing in this Section
24.1 shall reduce, limit, or otherwise affect Purchaser's obligation to
indemnify Seller and/or Shareholders pursuant to Section 24.2.
24.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify,
defend, and hold harmless Seller and its successors and assigns from and
against:
(a) any and all sales or transfer Taxes and Tax Losses imposed in
connection with any of the transactions contemplated by this Agreement;
(b) any and all Taxes and Tax Losses imposed on the Seller (and
any liability for such Taxes imposed on Shareholders by reason of them being
the transferee or successor of Seller, including any Tax Losses incurred by the
Shareholders with respect to such Taxes) if a court of competent jurisdiction
determines that Purchaser's acquisition of the Acquired Assets does not qualify
as a reorganization under Section 368(a) of the Code solely by reason of
Purchaser's breach of any of the representations, warranties and
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covenants contained in Section 9.5 or the fact that less than 50% of the total
Purchaser's Shares which may be payable to Seller under this Agreement were not
paid at Closing.
24.3 CALCULATION OF INDEMNITY PAYMENT. Notwithstanding anything to
the contrary herein, the amount of any indemnification payable under this
Section 24 shall be calculated as follows:
(a) In the case of an indemnity payable under Section 24.1 and
Section 24.2(a), the amount of any indemnification payment shall be an amount
which is equal to the sum of (i) the applicable Tax imposed and (ii) the Tax
Losses associated with such Tax.
(b) In the case of an indemnity payable under Section 24.2(b), the
amount of any indemnification payment shall be equal to the excess of (i) the
sum of the applicable Tax imposed and the Tax Losses associated with such Tax
over (ii) the Tax that would have been imposed if the Shareholders had sold all
of their shares in the Seller to Purchaser in a taxable transaction.
24.4 TAX CONTESTS.
(a) After the Closing, Purchaser shall notify Shareholders, and
Shareholders shall notify Purchaser, as the case may be, in writing of any
written notice of a proposed assessment of Tax or claim for Tax raised in an
audit or administrative or judicial proceeding that, if determined adversely to
the taxpayer, would be grounds for indemnification under this Section 24. Any
failure of one party to give timely notice to the other pursuant to this
Section 24.4 shall preclude any claim for indemnification for such Tax if such
failure materially prejudices such other.
(b) In the event of a proposed assessment of Tax described in
Section 24.1, Seller or Shareholders shall have the sole right to participate
in and control the audit or other proceeding for the determination of such Tax.
(c) In the event of a proposed assessment of Tax described in
Section 24.2(a) or (b), Seller and Shareholders shall have the right to
participate in and control the audit or proceeding for the determination of
such Tax. Purchaser shall have the right, at its expense, to participate in
such audit or proceeding, but shall not have any right to control all or any
portion of such audit or proceeding. Notwithstanding any of the foregoing,
Seller and Shareholders shall not settle, compromise or abandon without
Purchaser's prior written consent any claim for Tax described in Section
24.2(a) or (b).
(d) Seller, Shareholders and Purchaser agree to cooperate in the
defense against or the compromise of a proposed assessment of Tax described in
Section 24.1 or Section 24.2.
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24.5 TIME OF PAYMENT. Payment of any Tax or any Tax Losses for
which a party is entitled to indemnification under Section 24.1 or Section 24.2
shall be made on or before the later to occur of (a) five (5) business days
following an agreement between Shareholders and the Purchaser that one party is
obligated to indemnify the other for such Tax, and (b) five (5) business days
before the due date of the payment of such Tax to the relevant taxing
authority.
24.6 DEFINITIONS. For purposes of this Section 24, the following
terms shall have the following meanings:
(a) "TAX" or "TAXES" means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to the tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority including,
without limitation, taxes or other charges on or with respect to income and
franchises, property, sales, use, employment, social security and withholding.
(b) "TAX LOSS" means all costs and expenses (including reasonable
attorneys' fees through all appellate levels) directly incurred with respect to
any Taxes for which a party is entitled to indemnification under Sections 24.1
and 24.2.
24.7 FLOOR. Claims for indemnification pursuant to this Section 24
shall not be subject to the Floor and shall be payable from the first dollar.
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The parties have executed this Agreement as of this 31st day of March,
1995.
PIONEER SYSTEMS, INC.
BY VICTOR J. OSBORNE, JR.
-------------------------------
TITLE: PRESIDENT
THE REYNOLDS AND REYNOLDS COMPANY
BY PETER GRANSON
-------------------------------
TITLE: VICE PRESIDENT
/s/ VICTOR J. OSBORNE, JR.
-------------------------------
VICTOR J. OSBORNE, JR.
/s/ STEVEN A. THOMAS
-------------------------------
STEVEN A. THOMAS
41
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[COOLIDGE WALL WOMSLEY & LOMBARD CORPORATION LETTERHEAD]
Exhibit (5)
May 24, 1995
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, Ohio 45402
Gentlemen:
As counsel for The Reynolds and Reynolds Company (the "Company"), we are
familiar with the Amended Articles of Incorporation of the Company under the
laws of the state of Ohio, its Consolidated Code of Regulations, and the
respective actions taken by the Shareholders and by the Board of Directors in
connection therewith, and all subsequent corporate proceedings with respect
thereto.
In addition, we are familiar with the preparation of the Form S-3 Registration
Statement currently being filed with the Securities and Exchange Commission.
We are also acquainted with the business activities of the Company and have
examined corporate minute books, records and such other documents as we have
deemed necessary in order to render to you the following opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly organized and is a validly existing
corporation in good standing under the laws of the state of Ohio.
2. As of May 24, 1995, the 33,235 Class A Common Shares proposed to be
sold by the Selling Shareholders, as defined in such Registration
Statement have been duly authorized and validly issued, and are
fully paid and nonassessable as described in such Registration
Statement.
<PAGE> 2
[COOLIDGE WALL WOMSLEY & LOMBARD CORPORATION LOGO]
The Reynolds and Reynolds Company
Page 2
May 24, 1995
We hereby consent to the references to our firm in the Registration Statement
on Form S-3 and in the Prospectus constituting a part thereof, and to the use
of this opinion as an exhibit to such Registration Statement.
Very truly yours,
COOLIDGE, WALL, WOMSLEY & LOMBARD
<PAGE> 1
EXHIBIT 15
The Reynolds and Reynolds Company
115 S. Ludlow Street
Dayton, Ohio 45402
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of The Reynolds and Reynolds Company and subsidiaries for the
periods ended December 31, 1994 and March 31, 1995, as indicated in our reports
dated February 7, 1995 and May 11, 1995, respectively; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended December 31, 1994 and
March 31, 1995, are incorporated by reference in this Registration Statement on
Form S-3.
We also are aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Dayton, Ohio
May 24, 1995
<PAGE> 1
EXHIBIT 23(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Reynolds and Reynolds Company on Form S-3 of our report dated November
14, 1994, which includes an explanatory paragraph concerning a change in the
method of accounting for post-retirement benefits other than pensions in 1993
and a change in the method of accounting for income taxes in 1992,
appearing in the Annual Report on Form 10-K of The Reynolds and Reynolds
Company for the year ended September 30, 1994, and to the reference to us under
the heading "Experts" in the Prospectus, which is part of such Registration
Statement.
DELOITTE & TOUCHE LLP
Dayton, Ohio
May 24, 1995
