Exhibit 10.2
FIRST AMENDMENT TO
ACQUISITION AND MERGER AGREEMENT
THIS FIRST AMENDMENT TO ACQUISITION AND MERGER AGREEMENT ("First
Amendment") dated as of the 16th day of October, 1995, is made and entered
into by and among: XXXX X. XXXXXXX COMPANY ("Buyer"); MARKETING PROFILES,
INC. (the "Company" or "Marketing Profiles" or "MPI"); XXXX X. XXXX, XX. ("
Xxxx"); and XXXXXXX X. XXXXXX ("Xxxxxx"; Xxxx and Xxxxxx each a "Controlling
Shareholder" and collectively the "Controlling Shareholders").
W I T N E S S E T H
WHEREAS, Buyer, MPI, the Controlling Shareholders, and JH Acquisition
Corporation, a wholly owned subsidiary of Buyer, entered into an Acquisition
and Merger Agreement dated as of the 7th day of January, 1994, (the "
Agreement"), whereby JH Acquisition Corporation was merged into MPI and JH
Acquisition Corporation ceased to exist; and
WHEREAS, Buyer, MPI, and the Controlling Shareholders desire to amend
the Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Section 2.2 of the Agreement is deleted in its entirety and in its
place is inserted the following:
Section 2.2. Earn-Out Amount
(a) As an additional component of the merger consideration as a
premium for the Controlling Shares and for the indemnities provided herein by
the Controlling Shareholders, there shall be an Earn-Out Amount comprised of
the following three components:
(i) Twenty-two Million Seven Hundred Thousand Dollars ($22,
700,000);
(ii) the 1995 Payment (as hereinafter defined); and
(iii) the 1996 Payment (as hereinafter defined).
(b) The 1995 Payment shall be determined as follows:
(i) If the "1995 Valuation" (as hereinafter defined) equals
Forty Million Seven Hundred Thousand Dollars ($40,700,000), then the 1995
Payment shall equal zero. The 1995 Valuation shall be determined by
multiplying "1995 Operating Income" (as hereinafter defined) by seven and
four-tenths (7.4).
(ii) If the 1995 Valuation is less than Forty Million Seven
Hundred Thousand Dollars ($40,700,000), then the 1995 Payment shall equal the
result of subtracting the 1995 Valuation from Forty Million Seven Hundred
Thousand Dollars ($40,700,000), and the 1995 Payment shall be payable to the
Buyer.
(iii) If the 1995 Valuation is greater than Forty Million
Seven Hundred Thousand Dollars ($40,700,000), then the 1995 Payment shall
equal the result of subtracting Forty Million Seven Hundred Thousand Dollars
($40,700,000) from the 1995 Valuation, and the 1995 Payment shall be payable
to Controlling Shareholders.
(c) The 1996 Payment shall be determined as follows:
(i) If the "1996 Valuation" (as hereinafter defined) is
greater than the 1995 Valuation, then the 1996 Payment shall equal the result
of subtracting the 1995 Valuation from the 1996 Valuation, and the 1996
Payment shall be payable to the Controlling Shareholders. The 1996 Valuation
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shall be determined by multiplying "1996 Operating Income" (as hereinafter
defined) by five and ninety-eight one hundredths (5.98).
(ii) If the 1996 Operating Income is less than the 1995
Operating Income, then the 1996 Payment shall be determined by multiplying (A)
five and ninety-eight one hundredths (5.98) by (B) the result of subtracting
1996 Operating Income from 1995 Operating Income, and the 1996 Payment shall
be payable to Buyer.
(iii) If both (A) the 1996 Operating Income equals or is
greater than the 1995 Operating Income and (B) the 1996 Valuation is equal to
or less than the 1995 Valuation, then the 1996 Payment shall equal zero.
(d) The term "Operating Income" for any year (i.e., 1995
Operating Income or 1996 Operating Income) shall mean the Company's earnings
from operations before interest and taxes for the twelve-month period ending
on December 31 of that particular year computed in accordance with generally
accepted accounting principles ("GAAP"), applied in a manner consistent with
the "Financial Statements" (as hereinafter defined); provided, however, that:
(i) Any charge or expense for the amortization of goodwill
or amortization of software or research and development arising out of the
fact the Buyer has purchased the stock of the Company, pursuant to this
Agreement or otherwise, or that the purchase price of the Company is in excess
of the net worth of the Company, shall be excluded from the computation.
(ii) If there is an election for the Company pursuant to
section 338 of the Internal Revenue Code of 1986, as amended, the computation
shall be made as though the election had not been made.
(iii) Any loss, charge or expense not related to or arising
out of the ordinary business operations of the Company ordered by the Buyer
shall be excluded from the computation unless the Controlling Shareholders
consent to the transaction giving rise to, or the payment or assumption of the
obligation to pay, the loss, charge or expense.
(iv) Any and all expenses paid or incurred by the Company
which would not have been so paid or incurred if not for the Merger shall be
excluded from the computation.
(v) No inter-corporate expenses or charges from Buyer or
any of its affiliates to the Company shall be included in the computation
unless such charges relate to services actually provided which are either (A)
approved in writing by the Controlling Shareholders or (B) the amounts
assessed do not exceed the lesser of (1) the fully allocated cost of Buyer in
providing such services or (2) the amount which the company historically
incurred in connection with such services.
(vi) In the event that the Controlling Shareholders cause
revenues to be deferred from the preceding fiscal year until that particular
fiscal year or accelerated into that particular fiscal year from the following
fiscal year outside of the ordinary and historical course of business of the
Company, as determined based on the operations of the Company, an adjustment
to the revenues and that particular fiscal year's Operating Income shall be
made to reflect the elimination of such revenues and that particular fiscal
year's Operating Income shall be made to reflect the elimination of such
revenues (the "Revenue Adjustment").
(e) During fiscal years 1994, 1995, and 1996, the Controlling
Shareholders shall have free and unrestricted access to the financial books
and records of the Company so long as the Controlling Shareholders are
employed by the Company and otherwise shall have full access during normal
business hours.
(f) During fiscal years 1994, 1995 and 1996, Buyer shall
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cooperate with the Company in maintaining and increasing the Company's
earnings from operations, and shall provide adequate working capital to the
Company.
(g) On or before April 15, 1996, Buyer shall prepare and provide
Controlling Shareholders with a statement determining the 1995 Operating
Income and calculating the 1995 Payment in accordance with the provisions of
this Section 2.2 (the "Preliminary Statement"). The Controlling Shareholders
shall have the right to request in writing on or before September 30, 1996,
that the Preliminary Statement be audited by the independent accounting firm
performing the annual audit for the Buyer. If such request is timely made,
the Preliminary Statement shall be so audited with the Controlling
Shareholders and the Buyer sharing equally the incremental expense of such
audit charged to the Buyer. Controlling Shareholders shall then be afforded
the opportunity to review the underlying financial records and work papers
pertaining to the Preliminary Statement. If the Controlling Shareholders
shall fail to object as specified herein to the determination and calculation
as set forth in the Preliminary Statement within twenty (20) business days of
receipt of such Preliminary Statement, then the determination of the 1995
Operating Income and the calculation of the 1995 Payment set forth on such
Preliminary Statement shall be deemed to be final, conclusive and binding for
the purposes of this Agreement. If the Controlling Shareholders shall provide
Buyer with a written notice of disagreement with any values set forth in the
Preliminary Statement within the aforementioned twenty (20) business days,
then Buyer and the Controlling Shareholders shall negotiate in good faith for
a period not to exceed five (5) business days to resolve such dispute. If,
at the expiration of such five-day negotiation period, Buyer and the
Controlling Shareholders are unable to resolve such disagreement, then Buyer
and the Controlling Shareholders shall jointly engage a nationally recognized
accounting firm mutually satisfactory to Buyer and the Controlling
Shareholders (the "Independent Accountant") and shall jointly instruct such
Independent Accountant to determine and resolve only those issues still in
dispute. The Independent Accountant shall issue its determination within
thirty (30) days of the submission of the dispute, which determination shall
be set forth in a written statement delivered to Controlling Shareholders and
Buyers and shall be final, conclusive and binding on Controlling Shareholders
and Buyer.
(h) On or before April 15, 1997, Buyer shall prepare and provide
Controlling Shareholders with a statement determining the 1996 Operating
Income and calculating the 1996 Payment in accordance with the provisions of
this Section 2.2 (the "Preliminary Statement"). The Controlling Shareholders
shall have the right to request in writing on or before September 30, 1997,
that the Preliminary Statement be audited by the independent accounting firm
performing the annual audit for the Buyer. If such request is timely made,
the Preliminary Statement shall be so audited with the Controlling
Shareholders and the Buyer sharing equally the incremental expense of such
audit charged to the Buyer. Controlling Shareholders shall then be afforded
the opportunity to review the underlying financial records and work papers
pertaining to the Preliminary Statement. If the Controlling Shareholders
shall fail to object as specified herein to the determination and calculation
as set forth in the Preliminary Statement within twenty (20) business days of
receipt of such Preliminary Statement, then the determination of the 1996
Operating Income and the calculation of the 1996 Payment set forth on such
Preliminary Statement shall be deemed to be final, conclusive and binding for
the purposes of this Agreement. If the Controlling Shareholders shall provide
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Buyer with a written notice of disagreement with any values set forth in the
Preliminary Statement within the aforementioned twenty (20) business days,
then Buyer and the Controlling Shareholders shall negotiate in good faith for
a period not to exceed five (5) business days to resolve such dispute. If,
at the expiration of such five-day negotiation period, Buyer and the
Controlling Shareholders are unable to resolve such disagreement, then Buyer
and the Controlling Shareholders shall jointly engage a nationally recognized
accounting firm mutually satisfactory to Buyer and the Controlling
Shareholders (the "Independent Accountant") and shall jointly instruct such
Independent Accountant to determine and resolve only those issues still in
dispute. The Independent Accountant shall issue its determination within
thirty (30) days of the submission of the dispute, which determination shall
be set forth in a written statement delivered to Controlling Shareholders and
Buyers and shall be final, conclusive and binding on Controlling Shareholders
and Buyer.
2. Paragraph (b) of Section 2.3 of the Agreement is deleted in its
entirety and in its place is inserted the following:
(b) The Earn-Out Amount shall be paid in three components:
(i) On or before October 31, 1995, Buyer shall pay Twenty-
two Million Seven Hundred Thousand Dollars ($22,700,000) to the Controlling
Shareholders.
(ii) Promptly after the determination of 1995 Operating
Income and the calculation of the 1995 Payment have been finally resolved in
accordance with the procedures set forth in Section 2.2, above, the 1995
Payment shall be paid as follows:
A. If the 1995 Payment equals zero, no payment shall
be made;
B. If the 1995 Payment is owed to the Controlling
Shareholders, Buyer shall pay the 1995 Payment to the Controlling
Shareholders; and
C. If the 1995 Payment is owed to the Buyer, the
Controlling Shareholders shall pay the 1995 Payment to the Buyer.
(iii) Promptly after the determination of 1996 Operating
Income and the calculation of the 1996 Payment have been finally resolved in
accordance with the procedures set forth in Section 2.2, above, the 1996
Payment be paid as follows:
A. If the 1996 Payment equals zero, no payment shall
be made.
B. If the 1996 Payment is owed to the Controlling
Shareholders, Buyer shall pay the 1996 Payment to the Controlling
Shareholders; and
C. If the 1996 Payment is owed to the Buyer, the
Controlling Shareholders shall pay the 1996 Payment to the Buyer.
(iv) Any component of the Earn-Out Amount owed by Buyer to
the Controlling Shareholders shall be paid by wire transfer of immediately
available funds to the accounts of the Controlling Shareholders or by Buyer's
delivering certified or cashier's checks payable to the order of each
Controlling Shareholder, in an amount equal to that component of the Earn-Out
Amount to be paid multiplied by the percentage set forth opposite such
Controlling Shareholder's name below:
Controlling Shareholder Percentage
Xxxx X. Xxxx 51.1756%
Xxxxxxx X. Xxxxxx 48.8244%
Each Controlling Shareholder hereby acknowledges that payment of any component
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of the Earn-Out Amount, if any, is subject to possible reduction through the
exercise of Buyer's right of offset as set forth in Section 5.5 herein.
(v) Any component of the Earn-Out Amount owed by the
Controlling Shareholders to the Buyer shall be paid by the Controlling
Shareholder's delivering certified or cashier's checks payable to the order of
Buyer in an amount equal to that component of the Earn-Out Amount to be paid.
3. Section 5.3 of the Agreement is amended by adding the following to
the end of Section 5.3:
The Controlling Shareholders' obligations to indemnify, defend,
save, and hold harmless the Buyer Indemnified Parties shall expire on January
6, 1997, except as to any specific matter as to which a specific claim is
submitted in writing to the Controlling Shareholders prior to January 6, 1997,
and identified as a claim for indemnification pursuant to this Agreement;
provided, however, any representations, warranties, covenants, and agreements
pertaining to local, state, and federal tax liabilities shall survive until
the expiration of the applicable statute of limitations and provided further
that the Controlling Shareholders' obligations to indemnify, defend, save, and
hold harmless the Buyer Indemnified Parties from claims arising from local,
state, and federal tax liabilities shall extend into the future without
limitation, but the Controlling Shareholders shall have no further obligation
to indemnify, defend, save, and hold harmless the Buyer Indemnified Parties
from claims arising from local, state, and federal tax liabilities once the
Controlling shareholders have paid Indemnifiable Damages relating to such
claims arising from local, state, and federal tax liabilities in the amount of
Five Hundred Thousand Dollars ($500,000).
IN WITNESS WHEREOF, this First Amendment to Acquisition and Merger
Agreement has been signed by or on behalf of each of the parties as of the
date first above written.
XXXX X. XXXX, XX.
XXXXXXX X. XXXXXX
XXXX X. XXXXXXX COMPANY
By: Xxxxxx X. Xxxxxxx
Title: Chairman, President & CEO
MARKETING PROFILES, INC.
By: Xxxx X. Xxxx
Title: Chief Executive Officer
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