STOCK PURCHASE AGREEMENT dated as of May 19, 2006, by and among RURBANC DATA SERVICES, INC., LANCE THOMPSON and ROBERT CHURCH
Exhibit 2.1
dated as of
May 19, 2006,
by and among
RURBANC DATA SERVICES, INC.,
XXXXX XXXXXXXX
and
XXXXXX XXXXXX
TABLE OF CONTENTS
Page | ||||
ARTICLE I CERTAIN DEFINITIONS |
1 | |||
ARTICLE II PURCHASE AND SALE OF SHARES |
8 | |||
2.01 Purchase of Shares |
8 | |||
2.02 Purchase Price |
8 | |||
2.03 Determination of Additional Cash Payment |
9 | |||
ARTICLE III CLOSING |
10 | |||
3.01 Closing |
10 | |||
3.02 Closing Deliveries Required by the Shareholders |
10 | |||
3.03 Closing Deliveries Required by RDSI |
12 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES |
12 | |||
4.01 Disclosure Schedules |
12 | |||
4.02 Standard |
13 | |||
4.03 Representations and Warranties of the Shareholders |
13 | |||
4.04 Representations and Warranties |
25 | |||
ARTICLE V COVENANTS AND AGREEMENTS OF THE SHAREHOLDERS PRIOR TO
THE CLOSING DATE |
26 | |||
5.01 Access and Investigation |
26 | |||
5.02 Operation of the Businesses of the Companies |
26 | |||
5.03 Negative Covenant |
27 | |||
5.04 Required Approvals |
27 | |||
5.05 Financial Information; Notification |
27 | |||
5.06 Indebtedness and Other Amounts Payable by Related Persons |
28 | |||
5.07 No Negotiation |
28 | |||
5.08 Tax Filings |
28 | |||
5.09 Best Efforts |
28 | |||
5.10 Spin-Off of Disaster Recovery Business |
28 | |||
5.11 Bonus to Xxxxxx Xxxx |
29 | |||
ARTICLE VI COVENANTS AND AGREEMENTS OF RDSI PRIOR TO THE CLOSING DATE |
30 | |||
6.01 Required Approvals |
30 | |||
6.02 Best Efforts |
30 | |||
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS |
30 | |||
7.01 Employees and Employee Benefits |
30 | |||
7.02 Tax Covenants |
31 | |||
7.03 Use of Names |
32 | |||
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES |
32 | |||
8.01 Conditions Precedent to RDSI’s Obligation to Close |
32 | |||
8.02 Conditions Precedent to the Shareholders’ Obligation to Close |
34 |
i
Page | ||||||
8.03 | Mutual Conditions |
34 | ||||
ARTICLE IX INDEMNIFICATION; REMEDIES |
35 | |||||
9.01 | Survival; Right to Indemnification Not Affected by Knowledge |
35 | ||||
9.02 | Indemnification and Payment of Damages by the Shareholders |
35 | ||||
9.03 | Indemnification and Payment of Damages by RDSI |
35 | ||||
9.04 | Time Limitations |
36 | ||||
9.05 | Limitations on Amount – the Shareholders |
36 | ||||
9.06 | Limitations on Amount – RDSI |
36 | ||||
9.07 | Procedure for Indemnification – Third Party Claims |
37 | ||||
9.08 | Procedure for Indemnification – Other Claims |
38 | ||||
9.09 | Other Rights and Remedies |
38 | ||||
9.10 | Right of Set-Off; Escrow |
38 | ||||
9.11 | Joint and Several Liability of Shareholders |
38 | ||||
ARTICLE X TERMINATION |
39 | |||||
10.01 | Termination |
39 | ||||
10.02 | Effect of Termination and Abandonment; Enforcement of Agreement |
39 | ||||
ARTICLE XI MISCELLANEOUS |
40 | |||||
11.01 | Press Releases |
40 | ||||
11.02 | Waiver; Amendment; Remedies |
40 | ||||
11.03 | Expenses |
40 | ||||
11.04 | Counterparts |
40 | ||||
11.05 | Governing Law |
40 | ||||
11.06 | Notices |
40 | ||||
11.07 | Entire Understanding; Joint and Several Obligations; No Third Party Beneficiaries |
41 | ||||
11.08 | Interpretation; Effect |
42 | ||||
11.09 | Waiver of Jury Trial |
42 | ||||
11.10 | Successors and Assigns |
42 | ||||
11.11 | Severability |
42 | ||||
11.12 | Disclosure Schedules |
42 | ||||
LIST OF EXHIBITS |
44 |
ii
THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of May 19, 2006, is made and
entered into by and among Rurbanc Data Services, Inc., an Ohio corporation (“RDSI”), Xxxxx
Xxxxxxxx, an individual resident of Michigan (“Xxxxxxxx”), and Xxxxxx Xxxxxx, an individual
resident of Indiana (“Church” and, collectively with Xxxxxxxx, the “Shareholders”).
RECITALS
X. Xxxxxxxx owns all of the issued and outstanding shares of capital stock of Diverse Computer
Marketers, Inc., a Michigan corporation (“DCM Michigan”).
X. Xxxxxxxx and Church collectively own all of the issued and outstanding shares of capital
stock of DCM Indiana, Inc., an Indiana corporation (“DCM Indiana”).
C. DCM Michigan and DCM Indiana (sometimes hereinafter referred to individually as a “Company”
or collectively as the “Companies”) are engaged in the business of providing check processing
services to financial institutions located in several Midwest states.
D. The Shareholders desire to sell to RDSI, and RDSI desires to purchase from the
Shareholders, all of the issued and outstanding shares of capital stock of the Companies, on the
terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations,
warranties and agreements contained herein, RDSI and the Shareholders agree as follows:
ARTICLE I
Certain Definitions
Certain Definitions
For purposes of this Agreement, the following terms have the meanings specified or referred to
in this Article I:
“Additional Cash Payment” has the meaning specified in Section 2.03(b).
“Agreement” has the meaning specified in the first paragraph of this document.
“Applicable Contracts” has the meaning specified in Section 4.03(n)(iv).
“Audit Period” has the meaning specified in Section 2.03(a).
“Average Recurring Revenue” has the meaning specified in Section 2.03(a).
“CERCLA” has the meaning specified in Section 4.03(t).
“Chan Bonus” has the meaning specified in Section 5.11.
“Church” has the meaning specified in the first paragraph of this Agreement.
“Closing” has the meaning specified in Section 3.01.
“Closing Date” means the date as of which the Closing actually takes place.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” or “Companies” has the meaning specified in the recitals to this Agreement.
“Compensation and Benefit Plans” has the meaning specified in Section 4.03(s)(i).
“Confidentiality Agreement” has the meaning specified in Section 2.03(a).
“Consultants” has the meaning specified in Section 4.03(s)(i).
“Contemplated Transactions” means all of the transactions contemplated by this Agreement,
including: (a) the sale of the Shares by the Shareholders to RDSI; (b) the performance by RDSI and
the Shareholders of their respective covenants and obligations under this Agreement; and (c) the
execution, delivery and performance of the Shareholder Ancillary Agreements.
“Continuing Employees” has the meaning specified in Section 7.01.
“Copyrights” means United States and foreign copyrights, copyrightable works, and mask works,
whether registered or unregistered, and pending applications to register the same.
“Damages” has the meaning specified in Section 9.02.
“DCM Indiana” has the meaning specified in the recitals to this Agreement.
“DCM Michigan” has the meaning specified in the recitals to this Agreement.
“Directors” has the meaning specified in Section 4.03(s)(i).
“Disaster Recovery Companies” has the meaning specified in Section 5.10(a).
“DOL” has the meaning specified in Section 4.03(s)(iii).
“Effective Time” means 11:59 P.M., EST, on the Closing Date.
“Employees” has the meaning specified in Section 4.03(s)(i).
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“Encumbrance” means any lien (statutory or other), claim, charge, security interest, mortgage,
deed of trust, pledge, hypothecation, assignment, conditional sale or other title retention
agreement, preference, priority or other security agreement or preferential arrangement of any kind
or nature, and any easement, encroachment, covenant, restriction, right of way, defect in title or
other encumbrance of any kind.
“Environmental Law” has the meaning specified in Section 4.03(t).
“ERISA” has the meaning specified in Section 4.03(s)(i).
“ERISA Affiliate” has the meaning specified in Section 4.03(s)(iii).
“Escrow Agreement” has the meaning specified in Section 3.02(h).
“Escrow Amount” means an amount equal to (a) $350,000.00 less (b) the amount of the
Spin-Off Taxes on the value of the Disaster Recovery Companies as determined pursuant to Section
5.10.
“Exchange Act” has the meaning specified in Section 4.03(s)(ii).
“FDIC” means the Federal Deposit Insurance Corporation.
“Financial Statements” has the meaning specified in Section 4.03(e).
“FRB” means the Board of Governors of the Federal Reserve System.
“GAAP” has the meaning specified in Section 4.03(e).
“Governmental Authority” or “Governmental Authorities” means any court, administrative agency
or commission or other federal, state, local or foreign governmental authority, agency or
instrumentality, including, but not limited to, the FDIC, the FRB and the IRS.
“Hazardous Substances” has the meaning specified in Section 4.03(t).
“Indebtedness” means, for either Company: (a) any obligations created, issued or incurred by
such Company for borrowed money (whether by loan, the issuance or sale of debt securities, or the
sale of property to another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such property from such Person); (b) any obligations of such Company to
pay the deferred purchase or acquisition price of property or services, other than trade accounts
payable or other current liabilities; (c) any indebtedness of another Person secured by an
Encumbrance on the property of such Company, whether or not the respective indebtedness so secured
has been assumed by such Company; (d) obligations of such Company in respect of letters of credit
or similar instruments issued or accepted by banks and other
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financial institutions
for account of such Company; (e) any indebtedness of such Company under any synthetic lease or
other off-balance sheet financing arrangement; and (f) indebtedness of others guaranteed by such
Company.
“Indemnification Basket” has the meaning specified in Section 9.05.
“Indemnification Ceiling” has the meaning specified in Section 9.05.
“Indemnified Persons” has the meaning specified in Section 9.02.
“Initial Cash Payment” has the meaning specified in Section 2.02.
“Intellectual Property” means Copyrights, Patent Rights and Trademarks and all agreements,
contracts, licenses, sublicenses, assignments and indemnities which relate or pertain to any of the
foregoing.
“IRS” has the meaning specified in Section 4.03(s)(ii).
“Knowledge” has the meaning specified in Section 4.02.
“Leased Real Property” has the meaning specified in Section 4.03(k).
“Legal Requirement” means any federal, state, local, municipal, foreign, international,
multinational, or other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
“Liability” means any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes.
“Material Adverse Effect” means, with respect to RDSI or the Companies, any event, change,
effect, development, circumstance or occurrence that, individually or together with any other
event, change, effect, development, circumstance or occurrence, (a) is or is reasonably likely to
be material and adverse to the financial position, results of operations, business, capitalization,
assets (tangible or intangible), liabilities (accrued, contingent or otherwise), regulatory
affairs, financial performance or prospects of RDSI or the Companies, respectively, or (b)
materially impairs the ability of RDSI or the Shareholders to perform their respective obligations
under this Agreement or otherwise materially threaten or materially impede the consummation of the
Contemplated Transactions; provided, however, that Material Adverse Effect shall not be deemed to
include the impact of actions or omissions of a party which have been waived by the other parties
in accordance with the provisions hereof. In no event shall any of the following constitute a
Material Adverse Effect: (i) any change resulting from conditions affecting the industry in which
the Companies operate (and not specifically relating to the Companies) or from changes in general
business or economic conditions; (ii) any change resulting from the announcement or pendency of
any of the transactions contemplated by this
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Agreement; or (iii) any change resulting from
compliance by the Shareholders with the terms of this Agreement.
“Noncompetition Agreements” has the meaning specified in Section 3.02(d).
“Officers” has the meaning specified in Section 4.03(s)(i).
“Order” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or other Governmental
Authority or by any arbitrator.
“Ordinary Course of Business” means an action taken by a Person if such action is consistent
with the past practices of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person.
“Organizational Documents” means the articles or certificate of incorporation and the bylaws
or code of regulations of a corporation, including any amendments thereto.
“Patent Rights” means United States and foreign patents, patent applications, continuations,
continuations-in-part, divisions, reissues, patent disclosures, inventions (whether or not
patentable or reduced to practice) and improvements thereto.
“PCBs” has the meaning specified in Section 4.03(t).
“Pension Plan” has the meaning specified in Section 4.03(s)(ii).
“Permitted Encumbrances” means: (a) liens for Taxes and other governmental charges and
assessments arising in the Ordinary Course of Business which are not yet due and payable, and (b)
liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like
liens arising in the Ordinary Course of Business for sums not yet due and payable.
“Person” means any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Authority.
“Pre-Closing Tax Period” has the meaning specified in Section 7.02(a).
“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard
by or before, or otherwise involving, any Governmental Authority or arbitrator.
“Pro Rata Share” has the meaning specified in Section 2.02.
“Purchase Price” has the meaning specified in Section 2.02.
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“RDSI” has the meaning specified in the first paragraph of this Agreement.
“RDSI Disclosure Schedule” has the meaning specified in Section 4.01.
“Recurring Revenue” means the gross revenue generated by the Companies net of any third party
fees incurred in the Ordinary Course of Business (such as communication lines or other pass-through
fees) with respect to the sale of services to customers, excluding any “set-up” or other one-time
fees associated with establishing customers onto the Companies’ service.
“Recurring Revenue Statement” has the meaning specified in Section 2.03(a).
“Referral Agreements” has the meaning specified in Section 3.02(c).
“Related Person” means, with respect to a particular individual: (a) each other member of
such individual’s Family; (b) any Person in which such individual or members of such individual’s
Family hold (individually or in the aggregate) a Material Interest; (c) any Person with respect to
which such individual or one or more members of such individual’s Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity); and (d) any Person that is
directly or indirectly controlled by such individual or one or more members of such individual’s
Family. With respect to a specified Person other than an individual, “Related Person” means: (i)
any Person that directly or indirectly controls, is directly or indirectly controlled by, or is
directly or indirectly under common control with such specified Person; (ii) any Person that holds
a Material Interest in such specified Person; (iii) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar capacity); (iv) any Person
in which such specified Person holds a Material Interest; (v) any Person with respect to which such
specified Person serves as a general partner or trustee (or in a similar capacity); and (vi) any
Related Person of any individual described in clause (i) or (ii). For purposes of this definition,
(A) the “Family” of an individual includes (1) the individual, (2) the individual’s spouse, (3) any
other natural person who is related to the individual or the individual’s spouse within the second
degree, and (4) any other natural person who resides with such individual, and (B) “Material
Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other voting interests representing at
least 10% of the outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or equity interests in a
Person.
“Representative” means with respect to a particular Person, any director, officer, employee,
agent, consultant, advisor, or other representative of such Person, including legal counsel,
accountants, and financial advisors.
“Required Consents” mean the consents identified in Section 4.03(b)(ii) of the Shareholder
Disclosure Schedule and in Section 4.04(b)(ii) of the RDSI Disclosure Schedule, as applicable.
“Rurban” means Rurban Financial Corp., an Ohio corporation.
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“Securities Act” has the meaning specified in Section 4.03(s)(ii).
“Shareholder” or “Shareholders” has the meaning specified in the first paragraph of this
Agreement.
“Shareholder Ancillary Agreements” means all contracts, instruments and documents being or to
be executed and delivered by a Shareholder or a Related Person of a Shareholder under this
Agreement or in connection herewith, including, without limitation, the Noncompetition Agreements,
the Referral Agreement, the Shareholder Releases, the Escrow Agreement and the Disaster Recovery
Agreement.
“Shareholder Disclosure Schedules” has the meaning specified in Section 4.01(a).
“Shareholder Releases” has the meaning specified in Section 3.02(b).
“Shares” means, collectively, all of the issued and outstanding shares of capital stock of DCM
Michigan and all of the issued and outstanding shares of capital stock of DCM Indiana.
“Software” means computer software programs and software systems, including all databases,
compilations, tool sets, compilers, higher level or “proprietary” languages, related documentation
and materials, whether in source code, object code or human readable form.
“Spin-Off” has the meaning specified in Section 5.10(a).
“Spin-Off Taxes” has the meaning specified in Section 5.10(c).
“Straddle Period” has the meaning specified in Section 7.02(a).
“Target Recurring Revenue” has the meaning specified in Section 2.03(b).
“Tax” means any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, franchise, profits, license, withholding on amounts paid to or
by the Companies, payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to
tax or additional amount imposed by any Governmental Authority responsible for the imposition of
any such tax.
“Tax Return” means any report, return, declaration, statement or other information required to
be supplied to a Governmental Authority in connection with Taxes.
“Xxxxxxxx” has the meaning specified in the first paragraph of this Agreement.
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“Trademarks” means United States, state and foreign trademarks, service marks, logos, trade
dress and trade names (including all assumed or fictitious names under which either Company is
conducting business or has within the previous five years conducted business),
corporate names (including, with respect to each of the foregoing, all of the goodwill
associated therewith), whether registered or unregistered, and pending applications to register the
foregoing.
“Trade Secrets” means confidential information, ideas, compositions, trade secrets, know-how,
manufacturing and production processes and techniques, research information, drawings,
specification, designs, plans, improvements, concepts, methods, processes, formulae, reports, data,
customer and supplier lists, mailing lists, financial, business and marketing plans, or other
proprietary information.
ARTICLE II
Purchase and Sale of Shares
Purchase and Sale of Shares
2.01 Purchase of Shares. On the terms and subject to the conditions of this Agreement, RDSI
agrees to purchase from the Shareholders, and the Shareholders agree to sell, transfer, convey and
deliver to RDSI free and clear of all Encumbrances, all of the Shareholders’ Shares at the Closing.
2.02 Purchase Price. Subject to the terms and conditions of this Agreement, the aggregate
purchase price (the “Purchase Price”) to be paid by RDSI to the Shareholders for the Shares shall
consist of the following:
(a) The excess, which shall be payable to the Shareholders at the Closing, of $7,000,000.00
over the sum of the following: (i) the amount of the Chan Bonus; (ii) the amount of any
Indebtedness of the Companies on the Closing Date (including any Indebtedness to Related Persons of
the Shareholders, which shall continue to be a liability of the Companies after the Closing Date to
the extent not paid on the Closing Date), together with all interest, termination fees, pre-payment
fees, filing fees and other costs and expenses chargeable to the Companies in connection with the
pay off of such Indebtedness on the Closing Date, as set forth in pay off letters to be provided by
the Shareholders to RDSI not less than five (5) business days prior to the Closing; (iii) the
amount of the Spin-Off Taxes on the value of the Disaster Recovery Companies determined pursuant to
Section 5.10; (iv) the outstanding balance, as of the Closing Date, of any indebtedness or other
amount payable to the Companies by a Shareholder or any Related Person of a Shareholder; and (v)
the Escrow Amount (such excess being the “Initial Cash Payment”);
(b) The Escrow Amount, which shall be delivered to the escrow agent under the Escrow Agreement
at the Closing; and
(c) The Additional Cash Payment, which shall be payable, without interest, to the Shareholders
within ten (10) days following the final determination of such Additional Cash Payment pursuant to
Section 2.03.
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The Purchase Price shall be paid to the Shareholders based on the following percentages:
Xxxxxxxx — 88% and Church — 12% (each Shareholder’s “Pro Rata Share”). RDSI shall pay to
each Shareholder, at the Closing or when otherwise due and payable pursuant to this Section 2.02,
an amount equal to the product of (i) such Shareholder’s Pro Rata Share and (ii) the amount of the
Initial Cash Payment or Additional Cash Payment, as applicable. Such amount shall be payable by
wire transfer in accordance with written instructions delivered to RDSI by such Shareholder at or
prior to the Closing Date or the date when the Additional Cash Payment is due, as applicable. In
the absence of such written wire instructions, RDSI shall deliver to such Shareholder a cashiers or
certified check payable to the order of such Shareholder.
The parties agree that the Purchase Price shall be allocated pursuant to the schedule attached
hereto as Exhibit 2.02. Each of the parties hereby covenants and agrees that such party
will not take a position on any federal, state, local or foreign Tax Return, before any
Governmental Authority charged with the collection of any Tax, or in any Proceeding, that is in any
way inconsistent with the Purchase Price allocation set forth in Exhibit 2.02.
2.03 Determination of Additional Cash Payment.
(a) On or before July 30, 2007, RDSI shall prepare and deliver to the Shareholders a statement
(the “Recurring Revenue Statement”) setting forth (a) the aggregate Recurring Revenue of the
Companies for the month ended May 31, 2007, (b) the aggregate Recurring Revenue of the Companies
for the month ended June 30, 2007, and (c) the average monthly Recurring Revenue for the Companies
for the months ended May 31 and June 30, 2007 (calculated by averaging the amounts in (a) and (b))
(the “Average Recurring Revenue”). If, within thirty (30) days after the delivery of the Recurring
Revenue Statement (the “Audit Period”), the Shareholders dispute any item(s) or amount(s) on such
Recurring Revenue Statement, the Shareholders shall give RDSI written notice of such disagreement
prior to the end of the Audit Period, which notice shall specifically identify the item(s) and
amount(s) in dispute and the basis for such dispute. During the Audit Period and subject to the
prior execution by the Shareholders of a confidentiality agreement in the form attached hereto as
Exhibit 2.03 (the “Confidentiality Agreement”), RDSI shall deliver to the Shareholders any
workpapers and other documents and information that the Shareholders may reasonably request, and
shall permit the Shareholders and their Representatives reasonable access to the records of the
Companies, to enable the Shareholders to verify the accuracy of the items and amounts set forth in
the Recurring Revenue Statement. RDSI and the Shareholders shall use commercially reasonable
efforts to reach agreement with respect to all disputed items and amounts within fifteen (15) days
following the delivery of the notice of dispute by the Shareholders, or such longer period as may
be agreed upon by such parties. If such parties are unable to reach agreement on all disputed
items and amounts within such period, all items and amounts that remain in dispute shall be
submitted to an arbitrator jointly selected by RDSI and the Shareholders for resolution. The
determination of the arbitrator with respect to such disputed items and amounts shall be final and
binding on RDSI and the Shareholders. RDSI and the Shareholders shall request the arbitrator to
make his determination within thirty (30) days of the arbitrator’s engagement. The cost of the
arbitrator shall be split by RDSI (50%) and the Shareholders (50%).
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(b) If the Average Recurring Revenue of the Companies, as finally determined pursuant to
Section 2.03(a) above, equals or exceeds $247,420 (the “Target Recurring Revenue”), RDSI shall pay
to the Shareholders $250,000.00 (the “Additional Cash Payment”) in accordance with Section 2.02(c).
If the Average Recurring Revenue of the Companies, as finally determined pursuant to Section
2.03(a) above, does not equal or exceed the Target Recurring Revenue, RDSI shall not be required to
make any additional payment to the Shareholders pursuant to Section 2.02(c) or this Section 2.03
(i.e., the Additional Cash Payment shall be zero).
ARTICLE III
Closing
Closing
3.01 Closing. The closing (the “Closing”) of the Contemplated Transactions shall take place
(a) at the offices of RDSI, 0000 XX 00X, Xxxxxxxx, Xxxx 00000, commencing at 10:00 a.m., local
time, on such business day as RDSI may elect, which date shall not be less than seven (7) nor more
than sixty (60) calendar days after the last of the conditions set forth in Article VIII shall have
been satisfied or waived in accordance with the terms of this Agreement (excluding conditions that,
by their terms, cannot be satisfied until the Closing Date), provided that no such election shall
cause the Closing Date to fall after the date specified in Section 10.01(c) hereof or after the
date or dates on which any Governmental Authority approval or any extension thereof expires), or
(b) at such other time and place as the parties may mutually agree. The parties agree that the
Closing of the Contemplated Transactions shall be effective as of the Effective Time.
3.02 Closing Deliveries Required by the Shareholders. At the Closing, the Shareholders shall
deliver or cause to be delivered to RDSI the following:
(a) valid share certificates evidencing all of the Shares owned of record by the Shareholders,
duly endorsed in blank or with separate stock powers duly endorsed in blank attached;
(b) a shareholder release in the form of Exhibit 3.02(b), executed by each of the
Shareholders (collectively, the “Shareholder Releases”);
(c) a
referral agreement in the form of Exhibit 3.02(c), executed by each of the
Disaster Recovery Companies (collectively, the “Referral Agreements”);
(d) a noncompetition, nonsolicitation and nondisclosure agreement in the form of Exhibit
3.02(d), executed by Xxxxxx Xxxx and each of the Shareholders (collectively, the
“Noncompetition Agreements”);
(e) the certificates of the Shareholders contemplated by Section 8.01(a) and (b) of this
Agreement;
(f) good standing certificates for DCM Michigan issued by the Secretary of State of Michigan
and by the Secretary of State (or comparable state authority) of each other state in
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which DCM
Michigan is qualified to do business, which good standing certificates shall be dated not more than
five (5) days prior to the Closing Date;
(g) good standing certificates for DCM Indiana issued by the Secretary of State of Indiana and
by the Secretary of State (or comparable state authority) of each other state in
which DCM Indiana
is qualified to do business, which good standing certificates shall be dated not more than five (5)
days prior to the Closing Date;
(h) an escrow agreement in the form of Exhibit 3.02(h), executed by the Shareholders
(the “Escrow Agreement”);
(i) an opinion of the Shareholders’ legal counsel, dated the Closing Date, in the form of
Exhibit 3.02(i);
(j) a statement in the form of Exhibit 3.02(j), issued by each Shareholder pursuant to
Section 1.1445-2(b) of the Treasury Department regulations promulgated under the Code, certifying
that the Shareholders are not foreign persons as of the Closing Date;
(k) written resignations of all of the directors and officers of the Companies effective as of
the Closing;
(l) a disaster recovery service agreement in the form of Exhibit 3.02(l), executed by
the Disaster Recovery Companies (the “Disaster Recovery Agreement”);
(m) the Confidentiality Agreement executed be each of the Shareholders;
(n) a copy of the Articles of Incorporation of DCM Michigan, including all amendments thereto,
certified by the Secretary of State of Michigan as of a date not more than five (5) days prior to
the Closing Date;
(o) a copy of the Articles of Incorporation of DCM Indiana, including all amendments thereto,
certified by the Secretary of State of Indiana as of a date not more than five (5) days prior to
the Closing Date;
(p) a copy of the Bylaws of DCM Michigan, including all amendments thereto, certified by the
Secretary of DCM Michigan as being complete and correct as of the Closing Date;
(q) a copy of the Bylaws of DCM Indiana, including all amendments thereto, certified by the
Secretary of DCM Indiana as being complete and correct as of the Closing Date;
(r) a release agreement, in the form of Exhibit 3.02(r), executed by Xxxxxx Xxxx and
Xxxxx Lock Xxxx;
(s) the original minute books of the Companies; and
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(t) such other documents as RDSI may reasonably request for the purpose of evidencing the
accuracy of any of the Shareholders’ representations and warranties or otherwise facilitating the
consummation or performance of any of the transactions contemplated by this Agreement.
3.03 Closing Deliveries Required by RDSI. At the Closing, RDSI shall deliver or cause to be
delivered to the Shareholders (or other specified party) the following:
(a) payment of the Initial Cash Payment to the Shareholders in accordance with Section 2.02;
(b) the Escrow Agreement, executed by RDSI and the escrow agent, together with the delivery of
the Escrow Amount to the escrow agent thereunder, by wire transfer to an account specified by the
escrow agent;
(c) the Noncompetition Agreements, executed by RDSI;
(d) the Referral Agreement, executed by RDSI;
(e) the Disaster Recovery Agreement, executed by RDSI;
(f) the certificates of RDSI contemplated by Section 8.02(a) and (b) of this Agreement;
(g) an opinion of RDSI’s legal counsel, dated the Closing Date, in the form of Exhibit
3.03(g);
(h) the Confidentiality Agreement executed by RDSI; and
(i) such other documents as the Shareholders may reasonably request for the purpose of
evidencing the accuracy of any of RDSI’s representations and warranties or otherwise facilitating
the consummation or performance of any of the transactions contemplated by this Agreement.
ARTICLE IV
Representations and Warranties
Representations and Warranties
4.01 Disclosure Schedules. On or prior to the date of this Agreement, RDSI has delivered to
the Company a schedule (the “RDSI Disclosure Schedule”), and the Shareholders have delivered to
RDSI a schedule (the “Shareholder Disclosure Schedule”), setting forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an express disclosure
requirement contained in a
provision hereof or as an exception to one or more representations or warranties contained in
Section 4.03 or 4.04 or to one or more of the covenants contained in Article V or VI. Disclosure
in any section of the Shareholder Disclosure Schedule
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or the RDSI Disclosure Schedule, as
appropriate, of any facts or circumstances shall be deemed to be adequate response and disclosure
of such facts or circumstances with respect to representations or warranties of another section of
the Agreement calling for disclosure of such information, whether or not such disclosure is
specifically associated with or purports to respond to one or more or all of such representations
or warranties, (a) if the description of such matter contains sufficient facts to make the
relevance of such matter to such other section of the Agreement readily apparent on its face, or
(b) if a specific cross reference is made to such other section of the Agreement in the
corresponding section of the RDSI Disclosure Schedule or the RDSI Disclosure Schedule, as
appropriate. The Shareholders’ representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached as a result of effects arising solely from
actions taken in compliance with a written request of RDSI.
4.02 Standard. For purposes of this Agreement, “Knowledge” shall mean, with respect to RDSI,
Knowledge of its President or its Chief Executive Officer; and with respect to the Shareholders,
Knowledge of either of the Shareholders; and an individual will be deemed to have “Knowledge” of a
particular fact or other matter if (a) such individual is actually aware of such fact or other
matter or (b) a prudent individual would be expected to discover or otherwise become aware of such
fact or other matter in the course of conducting a reasonable investigation concerning the
existence of such fact or other matter.
4.03 Representations and Warranties of the Shareholders. Subject to Sections 4.01 and 4.02
and except as disclosed in a Section of the Shareholder Disclosure Schedule corresponding to the
relevant Section below, the Shareholders hereby jointly and severally (subject to Section 9.11)
represent and warrant to RDSI as follows:
(a) Organization and Qualification; Directors and Officers; Minute Books.
(i) DCM Michigan is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Michigan and is qualified as a foreign corporation and is in good standing
in each jurisdiction where the character of its properties owned or leased or the nature of its
activities makes such qualification necessary. Section 4.03(a)(i) of the Shareholder Disclosure
Schedule sets forth each jurisdiction in which DCM Michigan is qualified to transact business as a
foreign corporation. DCM Michigan has full corporate power and authority to conduct its business
as it is now being conducted.
(ii) DCM Indiana is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Indiana and is qualified as a foreign corporation and is in good standing
in each jurisdiction where the character of its properties owned or leased or the nature of its
activities makes such qualification necessary. Section 4.03(a)(ii) of the Shareholder Disclosure
Schedule sets forth each jurisdiction in which DCM Indiana is qualified to transact
business as a foreign corporation. DCM Indiana has full corporate power and authority to
conduct its business as it is now being conducted.
(iii) Neither of the Companies has any subsidiaries or owns any equity interest in any other
Person.
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(iv) Complete and correct copies of the Organizational Documents of each Company as of the
date hereof have been previously delivered to RDSI.
(v) The minute books of the Companies, including the shareholder records and the minutes of
meetings of, and actions taken in writing by, the shareholders and the directors contained therein,
are complete and correct in all respects.
(b) Authority; No Conflict.
(i) Each Shareholder has the absolute and unrestricted right, power, authority and capacity to
execute and deliver this Agreement and each Shareholder Ancillary Agreement to which it is a party.
This Agreement and each Shareholder Ancillary Agreement constitutes the valid and legally binding
obligation of each Shareholder who is a party thereto, enforceable against each such Shareholder in
accordance with its terms and conditions.
(ii) Except as set forth in Section 4.03(b)(ii) of the Shareholder Disclosure Schedule,
neither the execution and delivery of this Agreement or any of the Shareholder Ancillary
Agreements, nor the consummation or performance of this Agreement, any of the Shareholder Ancillary
Agreements, or any of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time): (A) contravene, conflict with, or result in a violation of any provision
of the Organizational Documents of any Company or any Legal Requirement or Order to which any
Company, any Shareholder, or any of the assets owned or used by any Company may be subject,
provided that the Shareholders express no warranty with respect to the obligations of RDSI or
Rurban as a result of the transactions set forth in this Agreement; (B) contravene, conflict with,
or result in a violation or breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any material note, bond, mortgage, indenture, deed of trust, license,
lease, Governmental Authorization, agreement or other instrument or obligation to which any
Company, any Shareholder, or any of the assets owned or used by any Company may be subject; or (C)
result in the imposition or creation of any Encumbrance upon or with respect to any of the assets
owned or used by any Company. Except as set forth in Section 4.03(b)(ii) of the Shareholder
Disclosure Schedule, neither the Companies nor the Shareholders will be required to give any notice
to or obtain any consent or approval from any Person (including from any Governmental Authority) in
connection with the execution and delivery of this Agreement or the Shareholder Ancillary
Agreements or the consummation or performance of any of the Contemplated Transactions, provided
that the Shareholders express no warranty with respect to the obligations of RDSI or Rurban as a
result of the transactions set forth in this Agreement.
(c) Capitalization and Title to Shares; Directors and Officers.
(i) The authorized capital stock of DCM Michigan consists solely of 50,000 shares of common
stock, par value $1.00 per share, of which 124 shares are issued and outstanding.
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(ii) The authorized capital stock of DCM Indiana consists solely of 1,000 shares of common
stock, without par value, of which 100 shares are issued and outstanding.
(iii) All of the issued and outstanding Shares have been validly issued, are fully paid and
nonassessable and are owned of record and beneficially by the Shareholders as set forth in Section
4.03(c)(iii) of the Shareholder Disclosure Schedule, free and clear of all Encumbrances.
(iv) There are no outstanding subscriptions, options, warrants, calls, rights (including
unsatisfied preemptive rights), convertible securities, obligations to make capital contributions
or advances, or voting trust arrangements, proxies, stockholders’ agreements or other agreements,
commitments or understandings of any character relating to the issued or unissued capital stock of
any Company or securities convertible into, exchangeable for or evidencing the right to subscribe
for any shares of such capital stock, or otherwise obligating a Shareholder or any Company to
issue, transfer or sell any of such capital stock or such other securities. There are no
outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights
with respect to any Company or its securities.
(v) Upon the endorsement and delivery of the certificates evidencing the Shares held of record
by the Shareholders to RDSI at the Closing, RDSI shall receive good and valid title to such Shares
free and clear of all Encumbrances.
(vi) Section 4.03(c)(vi) of the Shareholder Disclosure Schedule sets forth a correct and
complete list of the directors and officers of DCM Michigan and DCM Indiana as of the date hereof.
(d) Title to Assets. Each Company has good and marketable title to, or a valid
leasehold interest in, the real and personal property and other assets used by it in the conduct of
its business, free and clear of all Encumbrances other than Permitted Encumbrances.
(e) Financial Statements. The Shareholders have provided to RDSI (i) the financial
statements (including balance sheets, statements of cash flows, statements of stockholders’ equity
and statements of income) of DCM Indiana as of and for the fiscal years ended December 31, 2005 and
2004, which financial statements were reviewed for the fiscal year ended December 31, 2005 and
compiled for the fiscal year ended December 31, 2004, (ii) a balance sheet and statement of income
of DCM Indiana as of and for the three-month period ended Xxxxx 00, 0000, (xxx) the financial
statements (including balance sheets, statements of cash flows, statements of stockholders’ equity
and statements of income) of DCM Michigan as of and for the fiscal years ended January 31, 2006 and
2005, which financial statements were reviewed for the fiscal year ended January 31, 2006 and
compiled for the fiscal year ended January 31, 2005, and (iv) a
balance sheet and statement of income of DCM Michigan as of and for the two-month period ended
March 31, 2006 (collectively, the “Financial Statements”). Except as set forth in Section 4.03(e)
of the Shareholder Disclosure Schedule, the Financial Statements have been prepared in accordance
with Generally Accepted Accounting Principles (“GAAP”) applied on a
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consistent basis throughout the
periods covered thereby, present fairly in all material respects the financial condition of the
Companies as of such dates and the results of operations for such periods and are consistent in all
material respects with the books and records of the Companies (which books and records are correct
and complete in all material respects). In addition, the Shareholders have delivered to RDSI pro
forma financial statements separately identifying the two business segments (check processing
services and disaster recovery services) that consolidate into the reviewed financial statements.
(f) Absence of Undisclosed Liabilities; Indebtedness.
(i) Neither of the Companies has any Liability, except for (a) Liabilities set forth on the
face of the Financial Statements and (b) Liabilities which have arisen after March 31, 2006 in the
Ordinary Course of Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of any Legal Requirement).
(ii) Except as set forth in Section 4.03(f)(ii) of the Shareholder Disclosure Schedule,
neither of the Companies has any Indebtedness.
(g) Subsequent Events. Except as set forth in Section 4.03(g) of the Shareholder
Disclosure Schedule, since March 31, 2006, the Companies have conducted their businesses only in
the Ordinary Course of Business and there has not been any:
(i) change in either Company’s authorized or issued capital stock; grant of any stock option
or right to purchase shares of capital stock of any Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by either Company of any shares of any such capital stock;
(ii) declaration or payment of any dividend or other distribution or payment in respect of
shares of capital stock;
(iii) amendment to the Organizational Documents of either Company;
(iv) payment or increase by either Company of any bonuses, salaries, or other compensation to
any shareholder, director, officer, or employee other than the payment of salaries and compensation
in the Ordinary Course of Business, or entry into or amendment of any employment, severance, or
similar contract with any shareholder, director, officer, or employee;
(v) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for
or with any employees of either Company;
(vi) material damage to or destruction or loss of any material asset or property of either
Company, whether or not covered by insurance;
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(vii) entry into, termination of, or receipt of notice of termination of (A) any license,
distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (B)
any contract or transaction involving a total remaining commitment by either Company of at least
$5,000;
(viii) sale (other than sales of inventory in the Ordinary Course of Business), lease, or
other disposition of any material asset or property of either Company or mortgage, pledge, or
imposition of any Encumbrance on any asset or property of either Company, including the sale,
lease, or other disposition of any Intellectual Property;
(ix) cancellation, compromise, waiver, or release of any material claims or rights by either
Company;
(x) capital expenditure (or series of related capital expenditures) by the Companies involving
more than $5,000;
(xi) delay or postponement by either Company of the payment of any accounts payable or other
liability, other than any delay or postponement resulting from a Company’s good faith dispute as to
the validity or amount of such accounts payable or other liability;
(xii) material change in the accounting methods used by either Company; or
(xiii) agreement, whether oral or written, by either Company to do any of the foregoing.
(h) Compliance with Legal Requirements; Governmental Authorizations. Each of the
Companies is and has been in compliance with each Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any of its assets, except
where the failure to comply would not have a Material Adverse Effect, and neither of the Companies
has received any notice or other communication (whether oral or written) from any Governmental
Authority or any other Person regarding any actual or alleged violation of, or failure to comply
with, any Legal Requirement. Section 4.03(h) of the Shareholder Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by the Companies or that
otherwise relates to the business of, or to any of the assets owned or used by the Companies. Each
Governmental Authorization listed or required to be listed in Section 4.03(h) of the Shareholder
Disclosure Schedule is valid and in full force and effect.
(i) Legal Proceedings; Orders. There is no pending Proceeding that has been commenced
by or against either Company. To the Knowledge of the Shareholders, no such Proceeding has been
threatened. There is no Order to which either Company, or any of the assets owned or used by
either Company, is subject, and no officer, director, agent, or employee of
either Company is subject to any Order that prohibits such officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to the business of
either Company.
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(j) Taxes. Except as set forth in Section 4.03(j) of the Shareholder Disclosure
Schedule: (i) all Tax Returns required to be filed with any Governmental Authority on or before the
Closing Date by or on behalf of the Companies have been filed when due (taking into account
extensions) in accordance with all applicable Legal Requirements; (ii) all such Tax Returns are
true, correct and complete in all material respects; (iii) the Companies have timely paid all Taxes
due and payable, whether or not shown as due on such Tax Returns; (iv) except for such Taxes
payable with respect to such periods arising in the Ordinary Course of Business after March 31,
2006, the Companies have paid or made provision for all Taxes payable by the Companies for any
Pre-Closing Tax Period for which no Tax Return has yet been filed and for the elapsed portion of
any Straddle Portion; (v) there is no claim or Proceeding now proposed in writing or pending
against or with respect to the Companies in respect of any Tax; (vi) the Companies have delivered
to RDSI correct and complete copies of all federal, state and local income Tax Returns of the
Companies requested by RDSI or its Representatives; (vii) the Companies have not waived or extended
any statute of limitations with respect to a Tax audit, examination, assessment or deficiency, in
each case, which shall not have expired on or prior to the Closing Date; (viii) the Companies have
withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor, stockholder or other third party; (ix)
no Company has ever been a member of a combined, consolidated or unitary group for any Tax purpose;
(x) the Companies have disclosed on their federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income tax within the meaning of
Section 6662 of the Code; and (xi) the Companies have not made any payments, nor is any Company
obligated to make any payments or a party to any agreement that could obligate it to make any
payments, that may be treated as an “excess parachute payment” under Section 280G of the Code.
(k) Real Property.
(i) No real property is owned by the Companies.
(ii) Section 4.03(k)(ii) of the Shareholder Disclosure Schedule sets forth a list and brief
description of each lease (showing the parties thereto, monthly rental, expiration date, renewal,
and the location of the real property covered by such lease or other agreement) under which each
Company is lessee or sublessee of, or holds, uses or operates, any real property (the “Leased Real
Property”). With respect to each such real property lease, all facilities leased or subleased
thereunder have received all Governmental Authorizations required in connection with the operation
thereof, except where the failure to obtain such Governmental Authorization would not have a
Material Adverse Effect, and have been operated and maintained in material compliance with all
Legal Requirements (including all Legal Requirements relating to zoning).
(iii) To the Knowledge of Shareholders, neither the whole nor any part of any Leased Real
Property is subject to any Proceeding for condemnation, eminent domain or other taking by any
public authority, and no such condemnation or other taking is threatened.
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(l) Intellectual Property.
(i) Section 4.03(l)(i) of the Shareholder Disclosure Schedule contains (A) a list and
description (showing in each case any product, device, process, service, business or publication
covered thereby, the registered or other owner, expiration date and number, if any) of all
Copyrights, Patent Rights and Trademarks owned by, licensed to or used by the Companies, and (B) a
list and description (showing in each case any owner, licensor or licensee) of all Software owned
by, licensed to or used by the Companies, except Software licensed to the Companies that is
available in consumer retail stores and subject to “shrink-wrap” license agreements. The
Shareholders have delivered to RDSI a copy of each agreement, contract, license, sublicense and
assignment which relates to any Copyrights, Patent Rights, Trademarks or Software listed in Section
4.03(l)(i) of the Shareholder Disclosure Schedule.
(ii) Except as disclosed in Section 4.03(l)(ii) of the Shareholder Disclosure Schedule: (A)
the Companies either (1) own the entire right, title and interest in and to the Intellectual
Property and Software used in the business of the Companies, free and clear of any Encumbrance of
any Shareholder, employee, consultant, or contractor of the Companies, or of any other Person, or
(2) use the Intellectual Property pursuant to a valid and enforceable license, sublicense, or other
agreement with a third party; (B) to the Knowledge of the Shareholders, no third party has
interfered with, infringed upon, misappropriated or otherwise come into conflict with any of the
Companies’ rights with respect to the Intellectual Property and Software owned by the Companies;
(C) no infringement of any Intellectual Property, Trade Secrets or Software of any other Person has
occurred or results in any way from the operations, activities, products, software, equipment,
machinery or processes used in the business of the Companies; (D) no claim of any infringement of
any Intellectual Property, Trade Secrets or Software of any other Person has been made or asserted
in respect of the operations of the business of the Companies; (E) no claim of invalidity of any
Intellectual Property has been made; and (F) no Proceedings are pending or threatened which
challenge the validity, ownership or use of any Intellectual Property, Trade Secrets or Software of
the Companies.
(m) Condition and Sufficiency of Assets. To the Knowledge of the Shareholders, the
buildings, plants, structures, and equipment owned or leased by the Companies are structurally
sound, in good operating condition and repair, and adequate for the uses to which they are being
put, and none of such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not material in nature or
cost.
(n) Contracts.
(i) Section 4.03(n)(i) of the Shareholder Disclosure Schedule contains a complete and accurate
list, and the Shareholders have delivered to RDSI true and complete copies, of the following:
(A) each contract that involves performance of services or delivery of goods by one or more of
the Companies of an amount in excess of $10,000;
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(B) each contract that involves performance of services or delivery of goods to one or more of
the Companies of an amount in excess of $10,000;
(C) each contract that was not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of one or more Companies in excess of $5,000;
(D) each lease, rental or occupancy agreement, license, installment and conditional sale
agreement, and other contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or aggregate payments of less
than $500 and with terms of less than one year) of a Company;
(E) each licensing agreement or other contract with respect to Intellectual Property used by a
Company, including agreements with current or former employees, consultants, or contractors
regarding the assignment, appropriation or non-disclosure of any such Intellectual Property;
(F) each joint venture, partnership and other contract (however named) involving a sharing of
profits, losses, costs, or liabilities by any Company with any other Person;
(G) each contract containing covenants that in any way purport to restrict the business
activity of either Company or any affiliate of a Company or limit the freedom of either Company or
any affiliate of a Company to engage in any line of business or to compete with any Person;
(H) each contract providing for commissions or other payments to or by any Person based on
sales, revenues or profits of a Company;
(I) each power of attorney granted by either Company that is currently effective and
outstanding;
(J) each contract for capital expenditures in excess of $5,000 to which a Company is a party;
(K) each written warranty, guaranty, or other similar undertaking with respect to contractual
performance extended by either Company other than in the Ordinary Course of Business; and
(L) each amendment, supplement, and modification (whether oral or written) in respect of any
of the foregoing.
(ii) Except as set forth in Section 4.03(n)(ii) of the Shareholder Disclosure Schedule, each
contract identified or required to be identified in Section 4.03(n)(i) of the
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Shareholder
Disclosure Schedule is in full force and effect and is valid and enforceable in accordance with its
terms;
(iii) Except as set forth in Section 4.03(n)(iii) of the Shareholder Disclosure Schedule: (A)
no officer, director, shareholder or Related Person of either of the Companies has or may acquire
any rights under any Applicable Contract that relates to the business of, or any of the assets
owned or used by, the Companies; and (B) no officer, director, or employee of the Companies is
bound by any contract that purports to limit the ability of such officer, director, or employee, to
(1) engage in or continue any conduct, activity, or practice relating to the business of the
Companies, or (2) assign to the Companies or to any other Person any rights to any invention,
improvement, or discovery;
(iv) Except as set forth in Section 4.03(n)(iv) of the Shareholder Disclosure Schedule: (A)
each Company is, and at all times since January 1, 2006 has been, in compliance with all applicable
terms and requirements of each contract under which such Company has any right, obligation or
liability or by which such Company or any of the assets owned or used by such Company is bound
(each, an “Applicable Contract”), except where the failure to comply would not give rise to any
right of termination of the Applicable Contract or claim for material damages; (B) to the Knowledge
of Shareholders, each other Person that has or had any obligation or liability under any Applicable
Contract is, and at all times since January 1, 2006 has been, in material compliance with all
applicable terms and requirements of such contract; (C) to the Knowledge of the Shareholders, no
event has occurred or circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give any Company or other
Person the right to declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable Contract; (D) neither Company
has given to or received from any other Person, at any time since January 1, 2006, any written
notice or, to the Knowledge of the Shareholders, oral notice regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any Applicable Contract; and (E)
there are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any
material amounts paid or payable to either Company under any Applicable Contract with any Person.
(o) Receivables. All receivables of the Companies (including notes receivable and
accounts receivable) are reflected properly on their books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, subject only to the reserve
for bad debts set forth on the face of the most recent Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with the past custom and practice of the
Companies.
(p) Bank Accounts; Powers of Attorney. Section 4.03(p) of the Shareholder Disclosure
Schedule contains a complete and accurate list of all bank accounts and safe deposit
boxes of the Companies and all Persons who are signatories thereunder or who have access thereto.
There are no outstanding powers of attorney executed on behalf of any Company.
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(q) Insurance. Section 4.03(q) of the Shareholder Disclosure Schedule contains a
summary of all policies of insurance currently maintained by the Companies and any self-insurance
arrangement by or affecting the Companies (including any reserves established thereunder). The
Companies have paid all premiums due, and have otherwise performed all of their respective
obligations, under each insurance policy and all claims thereunder have been filed in due and
timely fashion. Section 4.03(q) of the Shareholder Disclosure Schedule sets forth, by year, for
the current policy year and each of the two (2) preceding policy years: (A) a summary of the loss
experience under each policy; (B) a description of each claim under each policy (including the name
of the claimant, the amount of the claim, and a brief description of the claim); and (C) a
statement describing the loss experience for all claims that were self-insured, including the
number and aggregate cost of such claims.
(r) Employee Matters.
(i) Section 4.03(r)(i) of the Shareholder Disclosure Schedule contains a complete and accurate
list of each employee of each Company and, with respect to each employee, the following: name; job
title; current compensation paid or payable and any change in compensation since January 1, 2006;
vacation accrued; and length of service.
(ii) No work stoppage involving either Company is pending or, to Knowledge of Shareholders,
threatened. Neither Company is involved in or, to the Knowledge of Shareholders, threatened with
or affected by, any labor dispute, arbitration, lawsuit or administrative proceeding involving the
employees of either Company. The employees of the Companies are not represented by any labor union
nor are any collective bargaining agreements otherwise in effect with respect to such employees,
and to the Shareholders’ Knowledge, there have been no efforts to unionize or organize any
employees of either Company during the past five years.
(s) Employee Benefit Plans.
(i) Section 4.03(s)(i) of the Shareholder Disclosure Schedule contains a complete and accurate
list of all bonus, incentive, deferred compensation, pension (including, without limitation,
Pension Plans, as defined below), retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, phantom stock, restricted stock, stock option, severance,
welfare (including, without limitation, “welfare plans” within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), fringe benefit plans,
employment or severance agreements and all similar practices, policies and arrangements maintained
or contributed to (currently or within the last six years) by (A) either Company or in which any
employee or former employee (the “Employees”), consultant or former consultant (the “Consultants”),
officer or former officer (the “Officers”), or director or former director (the “Directors”) of
either Company participates or to which any such Employees, Consultants, Officers or Directors are
parties or (B) any ERISA Affiliate (as defined below)
(collectively, the “Compensation and Benefit Plans”). Neither of the Companies has any
commitment to create any additional Compensation and Benefit Plan or to modify or change any
existing Compensation and Benefit Plan, nor will either Company make discretionary
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contributions to
a Compensation or Benefit Plan during the 2006 calendar year (prior to the Effective Time) in
excess of the amounts contributed for the 2005 calendar year to such plan, except to the extent
required by law or as contemplated by this Agreement.
(ii) (A) Each Compensation and Benefit Plan has been operated and administered in accordance
with its terms and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), the Age Discrimination in Employment Act, or any regulations or rules
promulgated thereunder, and all filings, disclosures and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act and any other applicable
law have been timely made; (b) each Compensation and Benefit Plan which is an “employee pension
benefit plan” within the meaning of Section 3(2) of ERISA (a “Pension Plan”) and which is intended
to be qualified under Section 401(a) of the Code has been amended, or amended and restated, to
meet the qualification requirements set forth in Section 401(a) of the Code and applicable guidance
thereunder not later than by the date or dates specified by the Internal Revenue Service (the
“IRS”); (C) there is no material pending or, to the Knowledge of the Shareholders, threatened,
legal action, suit or claim relating to the Compensation and Benefit Plans other than routine
claims for benefits thereunder; and (D) neither of the Companies has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit Plan that would reasonably
be expected to subject either Company to a tax or penalty imposed by either Section 4975 of the
Code or Section 502 of ERISA, assuming for purposes of Section 4975 of the Code that the taxable
period of any such transaction expired as of the date hereof.
(iii) (A) None of the Companies or any entity which is considered one employer with either
Company under Section 4001(a)(14) of ERISA or Section 414(b), (c) or (m) of the Code (an “ERISA
Affiliate”), has ever sponsored, maintained or been obligated to contribute to any Pension Plan
subject to either Title IV of ERISA or the funding requirements of Section 412 of the Code; (B)
none of the Companies or any ERISA Affiliate has contributed, or has been obligated to contribute,
to either a multiemployer plan under Subtitle E of Title IV of ERISA (as defined in ERISA Sections
3(37)(A) and 4001(a)(3)) at any time since September 26, 1980, or a multiple employer plan (as
defined in Section 413 of the Code); and (C) there is no pending investigation or enforcement
action by the PBGC, the Department of Labor (the “DOL”), the IRS or any other Governmental
Authority with respect to any Compensation and Benefit Plan.
(iv) All contributions required to be made under the terms of any Compensation and Benefit
Plan or ERISA Affiliate Plan or any employee benefit arrangements under any collective bargaining
agreement to which either Company is a party have been timely made or have been reflected on the
Financial Statements.
(v) Neither Company has any obligations to provide retiree health and life insurance or other
retiree death benefits under any Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code.
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(vi) With respect to each Compensation and Benefit Plan, if applicable, the Shareholders have
provided or made available to RDSI, true and complete copies of: (A) Compensation and Benefit Plan
documents and all amendments thereto; (B) trust instruments and insurance contracts; (C) the most
recent annual returns (Forms 5500) and financial statements; (D) the most recent summary plan
descriptions; (E) the most recent determination letter issued by the IRS; and (F) any Form 5310,
Form 5310A, Form 5300 or Form 5330 filed within the past year with the IRS.
(vii) Except as disclosed in Section 4.03(s)(vii) of the Shareholder Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement would not, directly or indirectly
(including, without limitation, as a result of any termination of employment prior to or following
the Effective Time), reasonably be expected to (A) entitle any Employee, Officer, Consultant or
Director to any payment (including severance pay or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any benefits under any Compensation and
Benefit Plan, or (C) result in any material increase in benefits payable under any Compensation and
Benefit Plan.
(t) Environmental Matters. Except as otherwise disclosed in Section 4.03(t) of the
Shareholder Disclosure Schedule: (i) each of the Companies is and has been at all times in
material compliance with all applicable Environmental Laws and neither Company has engaged in any
activity in violation of any applicable Environmental Law; (ii) no investigations, inquiries,
orders, hearings, actions or other proceedings by or before any court or Governmental Authority are
pending or, to the Knowledge of the Shareholders, have been threatened in writing in connection
with any activities of the Companies, (iii) to the Knowledge of the Shareholders, no claims are
pending or have been threatened by any third party against the Companies relating to damage,
contribution, cost recovery, compensation, loss, injunctive relief, remediation or injury resulting
from any Hazardous Substance which have not been resolved to the satisfaction of the parties
involved; (iv) to the Knowledge of the Shareholders, there have been no releases or threatened
releases of Hazardous Substances at either of the Companies’ leased real properties or improvements
thereon or any component thereof in violation of any Environmental Law; and (v) the Shareholders do
not have Knowledge that (A) either of the Companies’ leased real properties or improvements thereon
has been used for the treatment, storage or disposal of Hazardous Substances or has been
contaminated by Hazardous Substances, (B) any of the business operations of the Companies have
contaminated lands, waters or other property of others with Hazardous Substances, or (C) either of
the Companies’ leased real properties or improvements thereon have in the past or presently contain
underground storage tanks, friable asbestos containing materials or PCB-containing equipment in
violation of Environmental Law.
For purposes of this Agreement, (i) “Environmental Law” means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (“CERCLA”); the Solid Waste Disposal
Act, as amended; the Hazardous Materials Transportation Act, as amended; the Toxic Substances
Control Act, as amended; the Federal Water Pollution Control Act, as amended; the Safe Drinking
Water Act, as amended; the Clean Air Act, as amended; the Occupational Safety and Health Act of
1970, as amended; the regulations promulgated thereunder, and any other federal, state, county,
municipal, local or other statute, law, ordinance or regulation which may relate to or deal with
human health or the
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environment, as of the date of this Agreement, and (ii) “Hazardous Substances” means, at any time:
(A) any “hazardous substance” as defined in §101(14) of CERCLA or regulations promulgated
thereunder; (B) any “solid waste,” “hazardous waste,” or “infectious waste,” as such terms are
defined in any other Environmental Law as of the date of this Agreement; and (C) friable asbestos,
urea-formaldehyde, polychlorinated biphenyls (“PCBs”), nuclear fuel or material, chemical waste,
radioactive material, explosives, petroleum products and by-products, and other dangerous, toxic or
hazardous pollutants, contaminants, chemicals, materials or substances regulated by any
Environmental Law.
(u) Brokers’ Fees. Except for fees paid or payable to Xxxx Xxxxxxxx, there are no
fees or commissions of any sort whatsoever claimed by, or payable by either Company or either
Shareholder to, any broker, finder, intermediary attorney, accountant or any other similar person
in connection with effecting this Agreement, the Shareholder Ancillary Agreements or the
Contemplated Transactions, except for ordinary and customary legal and accounting fees. The
Shareholders shall be responsible for the payment of all fees to Xxxx Xxxxxxxx, and neither RDSI
nor the Companies shall be liable for the payment of any such fees.
4.04 Representations and Warranties of RDSI. Subject to Sections 4.01 and 4.02 and except as
disclosed in a Section of RDSI Disclosure Schedule corresponding to the relevant Section below,
RDSI hereby represents and warrants to the Shareholders as follows:
(a) Organization and Good Standing. RDSI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio. RDSI has full corporate power
and authority to conduct its business as it is now being conducted.
(b) Authority; No Conflict.
(i) RDSI has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of RDSI, enforceable against RDSI in
accordance with its terms and conditions.
(ii) Except as set forth in Section 4.04(b)(ii) of the RDSI Disclosure Schedule, neither the
execution and delivery of this Agreement or any of the Shareholder Ancillary Agreements, nor the
consummation or performance of this Agreement, any of the Shareholder Ancillary Agreements, or any
of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of
time): (A) contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of RDSI; (B) contravene, conflict with, or result in a violation of any
Legal Requirement or any Order to which RDSI may be subject; (C) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any Governmental Authority
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by RDSI. Except as set forth in the RDSI Disclosure Schedule, RDSI is
not or will not be required to give any notice to or obtain any consent or approval from any Person
(including from any Governmental Authority) in connection
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with the
execution and delivery of this Agreement or the Shareholder Ancillary Agreements, or the
consummation or performance of any of the Contemplated Transactions.
(c) Certain Proceedings. There is no pending Proceeding that has been commenced
against RDSI and that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To RDSI’s Knowledge, no such
Proceeding has been threatened, and no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding.
(d) Brokers’ Fees. Except for fees paid or payable to Xxxx Xxxx & Co., there are no
fees or commissions of any sort whatsoever claimed by, or payable by RDSI to, any broker, finder,
intermediary attorney, accountant or any other similar person in connection with effecting this
Agreement, the Shareholder Ancillary Agreements or the Contemplated Transactions, except for
ordinary and customary legal and accounting fees. RDSI shall be responsible for the payment of all
fees to Xxxx Xxxx & Co., and neither of the Shareholders shall be liable for the payment of any
such fees.
ARTICLE V
Covenants and Agreements of the Shareholders Prior to the Closing Date
Covenants and Agreements of the Shareholders Prior to the Closing Date
5.01 Access and Investigation. Between the date of this Agreement and the Closing Date, the
Shareholders will, and will cause each Company and its Representatives to, (a) afford RDSI and its
Representatives full and free access to each Company’s personnel, properties, contracts, books and
records, and other documents and data, (b) furnish RDSI and its Representatives with copies of all
such contracts, books and records, and other existing documents and data as RDSI may reasonably
request, and (c) furnish RDSI and its Representatives with such additional financial, operating and
other data and information as RDSI may reasonably request; provided, RDSI shall not contact or
communicate with any customers, suppliers or personnel of the Companies unless one or more of the
Shareholders or their Representatives is present or RDSI has obtained the prior written approval of
the Shareholders, which approval will not be unreasonably withheld.
5.02 Operation of the Businesses of the Companies. Between the date of this Agreement and the
Closing Date, the Shareholders will, and will cause each Company to:
(a) conduct the business of such Company only in the Ordinary Course of Business;
(b) use their reasonable best efforts to preserve intact the current business organization of
such Company, keep available the services of the current officers, employees and agents of such
Company, and maintain the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Company;
(c) confer with RDSI concerning operational matters of a material nature; and
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(d) otherwise report periodically to RDSI concerning the status of the business, operations
and finances of such Company.
5.03 Negative Covenant. Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, the Shareholders will not, and will cause each
Company not to, without the prior consent of RDSI, take any affirmative action, or fail to take any
reasonable action within their control, as a result of which any of the changes or events listed in
Section 4.03(g) is likely to occur.
5.04 Required Approvals. As promptly as practicable after the date of this Agreement, the
Shareholders will, and will cause each Company to, make all filings required by Legal Requirements
to be made by them in order to consummate the transactions contemplated by this Agreement,
including, without limitation, any applications and/or notices required to be filed with
Governmental Authorities. Between the date of this Agreement and the Closing Date, the
Shareholders will, and will cause each Company to, (a) cooperate with RDSI with respect to all
filings that RDSI elects to make in connection with the transactions contemplated by this
Agreement, and (b) cooperate with RDSI in obtaining all consents identified in Section 4.04(b)(ii)
of the RDSI Disclosure Schedule.
5.05 Financial Information; Notification.
(a) Within fifteen (15) calendar days after the end of each monthly accounting period after
March 31, 2006 and prior to the Closing Date, the Shareholders will provide RDSI with copies of
monthly unaudited balances sheets and statements of income for the Companies and with copies of all
other financial information reasonably requested by RDSI.
(b) Between the date of this Agreement and the Closing Date, each Shareholder will promptly
notify RDSI in writing if such Shareholder becomes aware of any fact or condition that causes or
constitutes a breach of any of the Shareholders’ representations and warranties as of the date of
this Agreement, or if such Shareholder becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or condition. During the
same period, each Shareholder will promptly notify RDSI of the occurrence of any breach of any
covenant of the Shareholders in this Article 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Article VII impossible or unlikely.
(c) The Shareholders will promptly notify RDSI in writing of any development after the
execution of this Agreement that causes a breach of the Shareholders’ representations and
warranties. Unless RDSI has the right to terminate this Agreement pursuant to Section 10.01(b)
below by reason of the development and exercises that right in accordance with Section 10.01(b)
below, the written notice pursuant to this Section 5.05(c) will be deemed to have amended the
Shareholder Disclosure Schedule, to have qualified Shareholders’ representations and warranties,
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and to have cured any misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
5.06 Indebtedness and Other Amounts Payable by Related Persons. Except as expressly provided
in this Agreement, the Shareholders will cause all indebtedness and other amounts payable to the
Companies by a Shareholder or any Related Person of a Shareholder to be paid in full prior to the
Closing. In the event that any such indebtedness or other amount payable to the Companies by a
Shareholder or any Related Person of a Shareholder is not paid in full prior to the Closing, the
outstanding balance thereof shall be deducted from the Initial Cash Payment pursuant to Section
2.02(a)(iv), and the Companies hereby assign all of their rights to receive payment of such
indebtedness or other amount to the Shareholders.
5.07 No Negotiation. Until such time, if any, as this Agreement is terminated pursuant to
Section 10, the Shareholders will not, and will cause each Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, or provide any non-public information to any Person
(other than RDSI) relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of any Company, or any of the capital stock of any
Company, or any merger, consolidation, business combination, or similar transaction involving any
Company.
5.08 Tax Filings. Between the date of this Agreement and the Closing Date, the Shareholders
shall not, and shall cause each of the Companies not to, without the prior written consent of RDSI
(which consent shall not be unreasonably withheld or delayed), file any income Tax Return, make any
material Tax election, compromise or settle any Tax controversy, extend any statute of limitations
relating to a Tax matter, or make any other material decision with respect to the treatment of any
transaction for Tax purposes.
5.09 Best Efforts. Between the date of this Agreement and the Closing Date, the Shareholders
will use their reasonable best efforts to cause the conditions in Article VIII to be satisfied.
5.10 Spin-Off of Disaster Recovery Business.
(a) Terms of Spin-Off. Immediately prior to the Effective Time, the Shareholders will
cause the Companies to complete the spin-off of their respective disaster recovery businesses (the
“Spin-Off”). The Spin-Off shall be completed as follows: (i) the Companies will form new
corporations and/or limited liability companies as wholly-owned subsidiaries (the “Disaster
Recovery Companies”); (ii) following the formation of the Disaster Recover Companies, the Companies
will contribute, assign and transfer to the Disaster Recovery Companies all of the
assets, liabilities and employees relating to or attributable to the Companies’ disaster
recovery businesses, and the Disaster Recovery Companies will expressly assume all of the
liabilities relating to or attributable to the Companies’ disaster recovery businesses; (iii)
following such contribution, assignment and transfer and prior to the Closing, the Companies will
distribute to the Shareholders all of the issued and outstanding shares of stock or limited
liability company
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interests, as the case may be, of the Disaster Recovery Companies. Section 5.10
of the Shareholder Disclosure Schedule contains (A) the balance sheets for the disaster recovery
business of DCM Indiana at December 31, 2005, and for the disaster recovery business of DCM
Michigan at January 31, 2006, which balance sheets are accurate and complete in all material
respects; (B) a list of all tangible assets of the disaster recovery businesses of DCM Michigan and
DCM Indiana as of the respective balance sheet dates; and (C) a list of the employees of the
Companies who will be transferred to the Disaster Recovery Companies in connection with the
Spin-Off; and the assets, liabilities and employees included in the Spin-Off shall be consistent
with those set forth thereon, except for changes resulting from the operation of the disaster
recovery businesses of the Companies in the Ordinary Course of Business prior to the Closing.
(b) Spin-Off Documentation. At least ten (10) days prior to the Closing Date, the
Shareholders shall provide to RDSI draft copies of all of the agreements, instruments and other
documentation relating to the Spin-Off for review by RDSI and its legal counsel. All such
documents shall be in form and substance reasonably satisfactory to RDSI and its legal counsel.
(c) Third-Party Valuation. Following the execution of this Agreement, the parties
will mutually select and engage an independent third-party appraiser to value the disaster recovery
businesses of the Companies that will be transferred to the Disaster Recovery Companies in the
Spin-Off on the basis of fair market value as a going concern. The cost of such valuation shall be
paid one-half by RDSI and one-half by the Shareholders.
(d) Taxes. The Shareholders shall be responsible for all of the Companies’ Tax
liabilities arising from, and attributable to, the Spin-Off and the Chan Bonus, net of any Tax
benefit attributable to the Chan Bonus (the “Spin-Off Taxes”). Prior to the Closing, the parties
shall calculate the amount of Spin-Off Taxes using the valuation of the disaster recovery
businesses determined by the third-party appraiser pursuant to Section 5.10(c), which amount shall
be deducted from the Purchase Price pursuant to Section 2.02(a)(iii).
(e) Expenses. Except as otherwise provided herein, the Shareholders shall be
responsible for the payment of all fees and expenses relating to the Spin-Off, and neither RDSI nor
the Companies shall be liable for the payment of any such fees or expenses.
5.11 Bonus to Xxxxxx Xxxx. The Shareholders covenant and agree that, prior to the
Closing Date, the Companies shall declare a bonus payment to Xxxxxx Xxxx in the gross amount of
$1,000,000.00 (the “Chan Bonus”), and the Shareholders further acknowledge, covenant and agree that
the Chan Bonus shall represent and constitute Xx. Xxxx’x vested right to the Chan Bonus prior to
the Closing Date and shall be reflected as an accrued liability of the Companies on the Companies’
books and records and financial statements as of the Closing Date. RDSI covenants and agrees that
it will cause the
Companies to pay the Chan Bonus, less any amounts required to be withheld by the Companies
under applicable Legal Requirements, to Xx. Xxxx within two (2) business days following the Closing
Date.
5.12 Foreign Qualifications. The Shareholders covenant and agree to cause the
Companies make all filings and to take all other actions necessary to cause (a) DCM Michigan to
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be
duly qualified as a foreign corporation and in good standing as of the Closing Date in each of the
jurisdictions set forth in Section 4.03(b)(i) of the Shareholder Disclosure Schedule and (b) DCM
Indiana to be duly qualified as a foreign corporation and in good standing as of the Closing Date
in each of the jurisdictions set forth in Section 4.03(b)(ii) of the Shareholder Disclosure
Schedule. All fees, penalties, Taxes and other costs and expenses related to the Shareholders’
compliance with this Section 5.12 shall be paid or accrued by the Company prior to the month-end
immediately preceding the Closing Date and reflected in the calculation of the minimum
stockholders’ equity under Section 8.01(h).
ARTICLE VI
Covenants and Agreements of RDSI Prior to the Closing Date
Covenants and Agreements of RDSI Prior to the Closing Date
6.01 Required Approvals. As promptly as practicable after the date of this Agreement, RDSI
will, and will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the transactions contemplated by this Agreement,
including, without limitation, all applications and/or notices required to be filed with the FRB.
Between the date of this Agreement and the Closing Date, RDSI will, and will cause each Related
Person to, (i) cooperate with the Shareholders with respect to all filings that the Shareholders
are required by Legal Requirements to make in connection with the transactions contemplated by this
Agreement, and (ii) cooperate with the Shareholders in obtaining all consents identified in Section
4.03(b)(ii) of the Shareholder Disclosure Schedule; provided that this Agreement will not require
RDSI or any of its Related Persons to dispose of or make any change in any portion of its business
or to incur any other material burden to obtain any consent or Governmental Authorization.
6.02 Best Efforts. Except as set forth in the proviso to Section 6.01, between the date of
this Agreement and the Closing Date, RDSI will use its reasonable best efforts to cause the
conditions in Article VIII to be satisfied.
ARTICLE VII
Additional Covenants and Agreements
Additional Covenants and Agreements
7.01 Employees and Employee Benefits. RDSI and the Shareholders acknowledge that the
employees of each Company who are actively employed at the Effective Time (excluding those
transferred to the Disaster Recovery Companies pursuant to Section 5.10) and who RDSI determines to
retain after the Effective Time (and who elect to continue with the Companies after the Effective
Time) will continue as employees of such Company (“Continuing Employees”) after the Effective Time and, except
for any Continuing Employees who are covered by written employment agreements, will be employed as
at will employees after the Effective Time. The Companies shall have the right and obligation to
deal with the terms and conditions of employment of the Continuing Employees after the Effective
Time. Continuing Employees shall continue to participate in the Compensation and Benefit Plans
unless and until RDSI, in its sole discretion, shall determine that all or some of the Compensation
and Benefit Plans shall be terminated, modified or merged into certain employee benefit plans of
RDSI or Rurban. Following the termination or merger of all or some of the Compensation and Benefit
Plans, RDSI
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will provide each Continuing Employee with employee benefits to replace those programs
that have been terminated or merged (other than equity or equity-based plans and programs) that are
no less than the benefits provided to similarly situated employees of RDSI. At such time as the
Continuing Employees shall participate in any employee benefit plans of RDSI or Rurban pursuant to
the foregoing, each such Continuing Employee shall be credited with years of service with the
Companies, for purposes of eligibility and vesting (but not for benefit accrual purposes), in the
employee benefit plans of RDSI or Rurban, and shall not be subject to any exclusion or penalty for
pre-existing conditions that were covered under the Compensation and Benefit Plans immediately
prior to the Effective Time, or to any waiting period relating to such coverage.
7.02 Tax Covenants.
(a) Preparation and Filing of Tax Returns. RDSI shall prepare and timely file, or
cause to be prepared and/or timely filed, all Tax Returns that are required to be filed by, or with
respect to, the Companies after the Closing Date for (i) taxable periods ending on or before the
Closing Date (“Pre-Closing Tax Periods”) and (ii) taxable periods that begin before the Closing
Date and end after the Closing Date (“Straddle Periods”). RDSI shall provide a copy of each such
Tax Return to the Shareholders not later than thirty (30) days before the due date for such Tax
Return (taking into account any extensions of such due date). All such Tax Returns shall be
prepared in accordance with applicable Legal Requirements and in a manner consistent with the
historic tax reporting practices of the Companies (unless such historic tax reporting practices are
less likely than not correct as a matter of law).
(b) Responsibility for Taxes – Pre-Closing Tax Periods. RDSI and the Companies shall
be responsible for all Taxes relating to the Companies for Pre-Closing Tax Periods to the extent
that: (i) such Taxes (other than deferred Taxes established to reflect timing differences between
book and Tax income) are accrued on the March 31, 2006 balance sheets of the Companies, as adjusted
for transactions arising in the Ordinary Course of Business through the Closing Date; or (ii) such
Taxes were a component of the Spin-Off Taxes determined pursuant to Section 5.10 and deducted from
the Purchase Price pursuant to Section 2.02(a)(iii). The Shareholders shall be responsible for all
other Taxes relating to the Companies for Pre-Closing Tax Periods.
(c) Responsibility for Taxes – Straddle Periods. RDSI and the Companies shall be
responsible for the following Taxes relating to the Companies for Straddle Periods: (i) all Taxes
relating to the portion of any Straddle Period beginning after the Closing Date; and (ii) all Taxes
relating to the portion of any Straddle Period ending on the Closing Date to the extent that: (x)
such Taxes (other than deferred Taxes established to reflect timing differences between book and
Tax income) are accrued on the March 31,
2006 balance sheets of the Companies, as adjusted for
transactions arising in the Ordinary Course of Business through the Closing Date; or (y) such Taxes
were a component of the Spin-Off Taxes determined pursuant to Section 5.10 and deducted from the
Purchase Price pursuant to Section 2.02(a)(iii). The Shareholders shall be responsible for all
Taxes relating to the Companies for the portion of any Straddle Period ending on the Closing Date
to the extent (if any) that such Taxes (other than deferred Taxes established to reflect timing
differences between book and Tax income) are not accrued on the March 31,
-31-
2006 balance sheets of
the Companies, as adjusted for transactions arising in the Ordinary Course of Business through the
Closing Date.
(d) Cooperation and Records Retention. The Shareholders and RDSI shall (i) each
provide the other, and RDSI shall cause the Companies to provide the Shareholders, with such
assistance as may be reasonably requested by any of them in connection with the preparation of any
Tax Return, audit, or other examination by any taxing authority or judicial or administrative
proceeding relating to liability for Taxes, (ii) each retain and provide the other, and RDSI shall
cause the Companies to retain and provide the Shareholders, with any records or other information
that may be relevant to such Tax Return, audit, examination, or proceeding, and (iii) each provide
the other with any final determination of any such audit, examination, or proceeding that affects
any amount required to be shown on any Tax Return of either of the Companies for any Pre-Closing
Tax Period or Straddle Period. Without limiting the generality of the foregoing, RDSI shall
retain, and shall cause the Companies to retain, and the Shareholders shall retain, until the
applicable statutes of limitations (including any extensions) have expired, copies of all Tax
Returns, supporting work schedules, and other records or information that may be relevant to such
returns for all Pre-Closing Tax Periods and Straddle Periods and shall not destroy or otherwise
dispose of any such records without first providing the other party with a reasonable opportunity
to review and copy the same. Each party shall bear its own expenses in complying with the
foregoing provisions.
(e) Tax Proceedings. RDSI shall exercise at its expense complete control over the
handling, disposition and settlement of any governmental inquiry, examination, or proceeding that
could result in a determination with respect to Taxes due or payable by either of the Companies for
which the Shareholders may be liable or against which the Shareholders may be required to indemnify
RDSI or the Companies pursuant hereto; provided, however, that the Shareholders may
retain separate co-counsel at their sole cost and expense and participate in, but not control, the
defense, and RDSI may not consent to the entry of any judgment or enter into any settlement without
the prior written consent of the Shareholders, which consent shall not be unreasonably withheld.
RDSI shall notify the Shareholders in writing within ten (10) days after learning of any such
inquiry, examination, or proceeding. The Shareholders shall cooperate with the Shareholders, as
RDSI may reasonably request, in any such inquiry, examination or proceeding.
7.03 Use of Names. From and after the Closing Date, the Shareholders shall not, and shall
cause their Related Persons (including, without limitation, the Disaster Recovery Companies) not
to, use the name “Diversified Computer Marketers” or “DCM” or any names similar thereto or variants
thereof.
ARTICLE VIII
Conditions Precedent to the Obligations of the Parties
Conditions Precedent to the Obligations of the Parties
8.01 Conditions Precedent to RDSI’s Obligation to Close. RDSI’s obligation to purchase the
Shares and to take the other actions required to be taken by RDSI at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be
waived by RDSI, in whole or in part):
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(a) Accuracy of Representations and Warranties. The representations and warranties of
the Shareholders set forth in this Agreement shall be true and correct in all material respects
(except for representations and warranties that contain qualifications as to materiality, which
shall be true and correct in all respects) as of the date of this Agreement and as of the Closing
Date as though such representations and warranties were also made as of the Closing Date, except
that those representations and warranties which by their terms speak as of a specific date shall be
true and correct as of such date; and RDSI shall have received a certificate, dated the Closing
Date, signed by each of the Shareholders to such effect.
(b) Performance of Covenants and Obligations. The Shareholders shall have performed
in all material respects all of their covenants and obligations under this Agreement to be
performed by them on or prior to the Closing Date, including those relating to the Closing and the
closing deliveries required by Section 3.02; and RDSI shall have received a certificate, dated the
Closing Date, signed by each of the Shareholders to such effect.
(c) No Encumbrances. All Encumbrances on the assets of the Companies, except for
Permitted Encumbrances, shall have been terminated and released to the satisfaction of RDSI.
(d) No Indebtedness. All Indebtedness of the Companies shall have been paid in full,
and the Shareholders shall have provided evidence of the payment in full of such Indebtedness to
RDSI; provided, however, that in lieu of payment in full prior to the Closing, the Shareholders may
deliver to RDSI a pay off letter, in form and substance reasonably satisfactory to RDSI, with
respect to any Indebtedness to be paid directly by RDSI pursuant to Section 2.02.
(e) Consents. Each of the Required Consents identified in Section 4.03(b)(ii) of the
Shareholder Disclosure Schedule shall have been obtained and shall remain in full force and effect.
(f) No Claim Regarding Stock Ownership or Sale Proceeds. There must not have been
made or threatened by any Person any claim asserting that such Person (i) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any capital
stock of, or any other voting, equity, or ownership interest in, any of the Companies, or (ii) is
entitled to all or any portion of the Purchase Price payable for the Shares.
(g) New Leases. DCM Michigan shall have entered into a new three-year lease of its
principal business location in Lansing, Michigan, and DCM Indiana shall have entered into a new
three-year lease for its principal business location in Indianapolis, Indiana, in each case on
terms and conditions reasonably satisfactory to RDSI (including provisions permitting the
assignment of such leases to RDSI or an affiliate of RDSI). If the new leases contain the
foregoing terms and are otherwise substantially similar to the current leases, then the new leases
shall be deemed to be reasonably satisfactory to RDSI.
(h) Minimum Stockholders’ Equity. The aggregate stockholders’ equity of the Companies
on a pro forma basis (assuming the completion of the Spin-Off) as of the month-end
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immediately
preceding the Closing Date, as calculated in accordance with GAAP and in a manner consistent with
the Financial Statements, shall be not less than $613,210.
8.02 Conditions Precedent to the Shareholders’ Obligation to Close. The Shareholders’
obligation to sell the Shares and to take the other actions required to be taken by the
Shareholders at the Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by the Shareholders, in whole or in part):
(a) Accuracy of Representations and Warranties. The representations and warranties of
RDSI set forth in this Agreement shall be true and correct in all material respects (except for
representations and warranties that contain qualifications as to materiality, which shall be true
and correct in all respects) as of the date of this Agreement and as of the Closing Date as though
such representations and warranties were also made as of the Closing Date, except that those
representations and warranties which by their terms speak as of a specific date shall be true and
correct as of such date; and the Shareholders shall have received a certificate, dated the Closing
Date, signed by the President or Chief Executive Officer of RDSI to such effect.
(b) Performance of Covenants and Obligations. RDSI shall have performed in all
material respects all of its covenants and obligations under this Agreement to be performed by it
on or prior to the Closing Date, including those relating to the Closing and the closing deliveries
required by Section 3.03; and the Shareholders shall have received a certificate, dated the Closing
Date, signed by the President or Chief Executive Officer of RDSI to such effect.
(c) Consents. Each of the Required Consents identified in Section 4.04(b)(ii) of the
RDSI Disclosure Schedule shall have been obtained and shall remain in full force and effect.
8.03 Mutual Conditions. The obligations of RDSI and the Shareholders under this Agreement
shall be subject to the satisfaction, at or prior to the Closing, of each of the following
conditions:
(a) Approvals of Governmental Authorities. All approvals of Governmental Authorities
required to consummate the Contemplated Transactions shall have been obtained and shall remain in
full force and effect, and all statutory waiting periods in respect thereof shall have expired, and
no such approvals or statute, rule or order shall contain any conditions, restrictions or
requirements that would reasonably be expected to have a material adverse effect after the
Effective Time on the present or prospective financial condition, business or operating results of
the Companies.
(b) No Restraining Order. No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Contemplated Transactions shall be in effect, and no
Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced,
deemed applicable or entered any statute, rule, regulation, judgment, decree, injunction or other
order prohibiting consummation of the Contemplated Transactions.
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ARTICLE IX
Indemnification; Remedies
Indemnification; Remedies
9.01 Survival. Subject to Section 9.04, all representations, warranties, covenants and
agreements set forth in this Agreement and any other instrument, certificate or document delivered
pursuant to this Agreement shall survive the Closing.
9.02 Indemnification and Payment of Damages by the Shareholders. The Shareholders will,
jointly and severally (subject to Section 9.11), indemnify and hold harmless RDSI, the Companies,
and their respective Representatives, shareholders, controlling persons and affiliates
(collectively, the “Indemnified Persons”) for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage, expense (including costs of investigation and defense and
reasonable attorneys’ fees) or diminution of value, whether or not involving a third-party claim
(collectively, “Damages”), arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by the Shareholders in this Agreement,
in any Shareholder Ancillary Agreement, or in any other instrument, certificate or document
delivered by the Shareholders pursuant to this Agreement;
(b) any breach by the Shareholders of any covenant or obligation of the Shareholders in this
Agreement or in any Shareholder Ancillary Agreement;
(c) any Liability for Taxes for which the Shareholders are responsible pursuant to Section
7.02; or
(d) any claim by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any such Person with either
Shareholder or any of the Companies (or any Person acting on their behalf) in connection with any
of the Contemplated Transactions prior to the Closing Date.
9.03 Indemnification and Payment of Damages by RDSI. RDSI will
indemnify and hold harmless the Shareholders for, and will pay to the Shareholders the Damages
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by RDSI in this Agreement, in any
Shareholder Ancillary Agreement, or in any instrument, certificate or document delivered by RDSI
pursuant to this Agreement;
(b) any breach by RDSI of any covenant or obligation of RDSI in this Agreement or in
any Shareholder Ancillary Agreement; or
(c) any claim by any Person for brokerage or finder’s fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by such Person
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with
RDSI (or any Person acting on its behalf) in connection with any of the Contemplated Transactions
prior to the Closing Date.
9.04 Time Limitations. If the Closing occurs, the Shareholders will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other than those in
Sections 4.03(b)(i), (c), (j), (s) or (t), unless on or before the second anniversary of the
Closing RDSI notifies the Shareholders of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by RDSI; a claim with respect to Sections 4.03(b)(i),
(c), (j), (s) or (t) may be made at any time prior to the expiration of the applicable statute of
limitations period. If the Closing occurs, RDSI will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on or before the second anniversary
of the Closing the Shareholders notify RDSI of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Shareholders.
9.05 Limitations on Amount – the Shareholders. The Shareholders will have no liability (for
indemnification or otherwise) with respect to the matters described in Section 9.02(a) or (b) until
the total of all Damages with respect to such matters exceeds $17,500 (the “Indemnification
Basket”), whereupon the Shareholders shall be liable for all such Damages (including the first
$17,500 of Damages). The maximum, aggregate liability of the Shareholders to the Indemnified
Persons for Damages with respect to the matters described in Section 9.02(a) and (b) shall be
limited to the amount of $5,000,000 (the “Indemnification Ceiling”). Notwithstanding anything to
the contrary in this Agreement, the maximum, aggregate liability of Church for Damages under this
Agreement shall be limited to an amount equal to the product of: (i) his Pro Rata Share; and (ii)
the Indemnification Ceiling. Notwithstanding the foregoing, the Indemnification Basket and the
Indemnification Ceiling will not apply with respect to any of the matters described in Section
9.02(c) or (d), to any breach of any of the Shareholders’ representations and warranties of which
either Shareholder had Knowledge at any time prior to the date on which such representation and
warranty is made, or to any intentional breach by either Shareholder of any covenant or obligation,
and the Shareholders will be jointly and severally (subject to the limitation in the immediately
preceding sentence) liable for all Damages with respect to such breaches.
9.06 Limitations on Amount – RDSI. RDSI will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 9.03(a) or (b) until the total of all
Damages with respect to such matters exceeds $17,500, whereupon RDSI shall be liable for all such
Damages (including the first $17,500 of Damages). The maximum, aggregate liability of RDSI to the
Shareholders for Damages with respect to the matters described in Sections 9.03(a) and (b) shall be
limited to the amount of $3,500,000. However, this Section 9.06 will not apply with respect to any
of the matters described in Section 9.03(c), to any breach of any of RDSI’s representations and
warranties of which RDSI had Knowledge at any time prior to the date on which such representation
and warranty is made, or to any intentional breach by RDSI of any covenant or obligation, and RDSI
will be liable for all Damages with respect to such breaches.
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9.07
Procedure for Indemnification — Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 9.02 or 9.03 of notice of the
commencement of any Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is prejudiced by the
indemnifying party’s failure to give such notice.
(b) If any Proceeding referred to in Section 9.07(a) is brought against an indemnified party
and it gives notice to the indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding and, to the extent that it
wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified
party determines in good faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Article IX for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of such Proceeding,
other than reasonable costs of investigation. If the indemnifying party assumes the defense of a
Proceeding, (A) it will be conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject to indemnification; (B) no compromise
or settlement of such claims may be effected by the indemnifying party without the indemnified
party’s consent unless (1) there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (2) the sole relief provided is monetary damages that are paid
in full by the indemnifying party; and (C) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within fifteen (15) days after the indemnified party’s notice is given, give notice
to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there
is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than
as a result of monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying party
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will not be
bound by any determination of a Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(d) The Shareholders hereby consent to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any Indemnified Person for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on the Shareholders with respect to such a claim
anywhere in the world.
(e) Notwithstanding anything to the contrary contained in this Section 9.07, any claims
relating to Taxes described in Section 7.02 shall be subject to the procedures set forth in Section
7.02(e) and shall not be subject to this Section 9.07.
9.08
Procedure for Indemnification — Other Claims. A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice to the party from whom indemnification
is sought.
9.09 Other Rights and Remedies. The indemnification rights of the parties under this Article
IX are independent of and in addition to such other rights and remedies as the parties may have at
law or in equity or otherwise for any misrepresentation, breach of warranty or breach or failure to
fulfill any agreement or covenant hereunder on the part of any party hereto, including, without
limitation, the right to seek specific performance, an injunction, rescission or restitution, none
of which rights or remedies shall be affected or diminished hereby; provided,
however, that any claim by a party for monetary damages that is based solely upon another
party’s misrepresentation, breach of warranty or breach or failure to fulfill any agreement or
covenant hereunder shall be subject to the limitations set forth in Section 9.05 or 9.06, as
applicable.
9.10 Right of Set-Off; Escrow. Upon notice to the Shareholders specifying in reasonable
detail the basis therefor, RDSI may (a) set off any amount to which it may be entitled under this
Article IX against amounts otherwise payable to either of the Shareholders pursuant to the terms of
this Agreement (including pursuant
to Section 2.02(c)) or pursuant to the terms of the Referral Agreements or (b) give notice of
a claim in such amount under the Escrow Agreement. The exercise of such right of set-off by RDSI
in good faith, whether or not ultimately determined to be justified, will not constitute an event
of default under this Agreement or under the Referral Agreements. Neither the exercise of nor the
failure to exercise such right of set-off or to give notice of a claim under the Escrow Agreement
will constitute an election of remedies or limit RDSI in any manner in the enforcement of any other
remedies that may be available to it.
9.11 Joint and Several Liability of Shareholders. References in this Agreement to the joint
and several liability of Shareholders shall mean (i) the joint and several liability of the
Shareholders solely with respect to matters arising out of or associated with DCM Indiana; and (ii)
the several liability of Xxxxxxxx with respect to matters arising out of or associated with DCM
Michigan.
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ARTICLE X
Termination
Termination
10.01 Termination. This Agreement may be terminated, and the Contemplated Transactions may be
abandoned:
(a) Mutual Consent. At any time prior to the Closing, by the mutual written consent
of RDSI and the Shareholders.
(b) Breach. At any time prior to the Closing, by RDSI or the Shareholders in the
event of either: (i) a breach by the other party of any representation or warranty contained
herein, which breach cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach; or (ii) a breach by the other party of any of
the covenants or agreements contained herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party of such breach, provided
that such breach (whether under (i) or (ii)) would be reasonably likely, individually or in the
aggregate with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Closing, by RDSI or the Shareholders in the event
that the Closing has not occurred by September 30, 2006, except to the extent that the failure of
the Closing to occur by that date arises out of or results from the knowing action or inaction of
the party seeking to terminate pursuant to this Section 10.01(c).
(d) Regulatory Approval. At any time, by either RDSI or the Shareholders, in writing,
(i) if any application for prior approval of a Governmental Authority which is necessary to
consummate the Contemplated Transactions is denied, or withdrawn at the request or recommendation
of the Governmental Authority which must grant such approval, unless within the 25-day period
following any such denial or withdrawal, a petition for rehearing or an amended application has
been filed with the applicable Governmental Authority; provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section 10.01(d) if such denial or request
or recommendation for withdrawal shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and agreements of such
party set forth herein, or (ii) if any Governmental Authority of competent jurisdiction shall have
issued a final nonappealable order enjoining or otherwise prohibiting the consummation of the
Contemplated Transactions.
10.02 Effect of Termination and Abandonment; Enforcement of Agreement. In the event of
termination of this Agreement and the abandonment of the Contemplated Transactions pursuant to
Section 10.01, such termination will not relieve a breaching party from liability for any breach of
this Agreement. Notwithstanding anything contained herein to the contrary, the parties hereto
agree that irreparable damage will occur in the event that a party breaches any of its obligations,
duties, covenants and agreements contained herein. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement in any
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court of
the United States or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled by law or in equity.
ARTICLE XI
Miscellaneous
Miscellaneous
11.01 Press Releases. Neither RDSI nor the Shareholders shall make any press release or other
public announcement concerning the transactions contemplated by this Agreement without the consent
of the other party hereto as to the form and contents of such press release or public announcement,
except to the extent that such press release or public announcement may be required by law or the
rules of the Nasdaq Stock Market to be made before such consent can be obtained (in any or all of
which cases RSDI will use its reasonable best efforts to advise the Shareholders prior to making
the disclosure).
11.02 Waiver; Amendment; Remedies. Prior to the Effective Time, any provision of this
Agreement may be (a) waived in writing by the party benefited by the provision, or (b) amended or
modified at any time, by an agreement in writing among the parties hereto executed in the same
manner as this Agreement. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in exercising any right, power
or privilege under this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right, power or privilege or
the exercise of any other right, power or privilege.
11.03 Expenses. Except as otherwise expressly provided in this Agreement, the parties to this
Agreement will bear their respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions, including all fees
and expenses of its Representatives.
11.04 Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to constitute a duplicate original, but all of which taken together shall be deemed
to constitute a single instrument.
11.05 Governing Law. This Agreement shall be governed by, and interpreted in accordance with,
the laws of the State of Ohio applicable to contracts made and to be performed entirely within such
State (except to the extent that mandatory provisions of Federal law are applicable).
11.06 Notices. All notices, requests and other communications required or permitted to be
given hereunder to a party shall be given in writing and shall be deemed to have been given (a) on
the date of delivery if personally delivered or telecopied (with confirmation), (b) on the first
business day following the date of dispatch if delivered by a recognized next-day courier service,
or (c) on the third business day following the date of mailing if mailed by registered or certified
mail (return receipt requested), in each case to such party at such party’s address set
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forth below
or such other address as such party may specify by notice to the parties hereto in accordance with
this Section 11.06.
If to the Shareholders, to:
|
Mr. Xxxxx Xxxxxxxx | |
0000 Xxxxxxxxxx Xxxxxxxxx | ||
Xxxxx X | ||
Xxxxxxx, Xxxxxxxx 00000 | ||
FAX: (000) 000-0000 | ||
and | ||
Mr. Xxxxxx Xxxxxx | ||
000 Xxxx Xxxx | ||
Xxxxxxxxxx, Xxxxxxx 00000 | ||
FAX: (000) 000-0000 | ||
With a copy (which shall not
|
Xxxxx X. Xxxxxx, Esq. | |
constitute notice) to:
|
Bodman LLP | |
00xx Xxxxx | ||
Xxxxxxxxxxx Xxxxxx | ||
Xxxxxxx, XX 00000 | ||
FAX: (000) 000-0000 | ||
If to RDSI, to:
|
Xx. Xxxxxxx X. Xxxxx | |
Chairman and Chief Executive Officer | ||
Rurbanc Data Services, Inc. | ||
0000 XX 00X | ||
Xxxxxxxx, XX 00000 | ||
FAX: (000) 000-0000 | ||
With a copy (which shall not constitute notice) to: |
Xxxxxxx X. Xxxx, Esq. Vorys, Xxxxx, Xxxxxxx and Xxxxx LLP |
|
00 Xxxx Xxx Xxxxxx | ||
Xxxxxxxx, XX 00000 | ||
FAX: (000) 000-0000 |
11.07 Entire Understanding; Joint and Several Obligations; No Third Party Beneficiaries. This
Agreement (including the exhibits, documents and instruments referred to herein) and any separate
agreements entered into by the parties of even date herewith, represent the entire understanding of
the parties hereto with reference to the transactions contemplated hereby and thereby and this
Agreement supersedes any and all other oral or written agreements heretofore made (other than any
such separate agreements). Except as and to the extent set forth in Section 9.11, all of the
obligations of the Shareholders under this Agreement shall be joint and
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several obligations.
Nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than
the parties hereto or their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
11.08 Interpretation; Effect. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of, or Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and are not part of this Agreement. Whenever the words
“include”, “includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.”
11.09 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all
rights to a trial by jury in any legal proceeding arising out of or related to the Agreement.
11.10 Successors and Assigns. This Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns (including successive, as well as immediate, successors
and assigns) of the parties hereto. This Agreement may not be assigned by any party hereto with
the prior written consent of the other parties.
11.11 Severability. If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will remain in full
force and effect. Any provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or unenforceable.
11.12 Disclosure Schedules. In the event of any inconsistency between the statements in the
body of this Agreement and those in the
Shareholder Disclosure Schedule or the RDSI Disclosure Schedule (other than an exception
expressly set forth therein with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the
day and year first written above.
RDSI: RURBANC DATA SERVICES, INC. |
||||
By: | /s/ Xxxxxxx X. Xxxxx | |||
Xxxxxxx X. Xxxxx | ||||
Chairman and Chief Executive Officer | ||||
THE SHAREHOLDERS: |
||||
/s/ Xxxxx Xxxxxxxx | ||||
Xxxxx Xxxxxxxx | ||||
/s/ Xxxxxx Xxxxxx | ||||
Xxxxxx Xxxxxx | ||||
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LIST OF EXHIBITS
Exhibit No. | Description | |||
2.02 |
— | Purchase Price Allocation | ||
2.03 |
— | Form of Confidentiality Agreement | ||
3.02(b) |
— | Form of Shareholder Release | ||
3.02(c) |
— | Form of Referral Agreement | ||
3.02(d) |
— | Form of Noncompetition Agreement | ||
3.02(h) |
— | Form of Escrow Agreement | ||
3.02(i) |
— | Form of Legal Opinions of Counsel for the Shareholders | ||
3.02(j) |
— | FIRPTA Statement | ||
3.02(l) |
— | Disaster Recovery Agreement | ||
3.02(r) |
— | Form of Release and Termination of Phantom Stock Agreement | ||
3.03(g) |
— | Form of Legal Opinions of Counsel for RDSI |
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