<PAGE>
EXHIBIT 2.1
EXECUTION COPY
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
DAVID B. BECKER,
JOHN E. TAYLOR, AS TRUSTEE OF THE
DAVID B. BECKER FAMILY TRUST
AND
DAVID B. BECKER, AS TRUSTEE OF THE DAVID B. BECKER
CHARITABLE REMAINDER UNITRUST
AS SHAREHOLDERS OF
RE:MEMBER DATA SERVICES, INC.,
AND
RD ACQUISITION CORP.
CLOSING DATE AS OF JULY 8, 2004
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S>
<C>
1
DEFINITIONS.........................................................
1
2 SALE OF STOCK;
CLOSING.............................................. 6
2.1. Sale of
Stock................................................. 6
2.2.
Consideration.................................................
6
2.3. Net Current Assets Adjustment to
Purchase Price............... 7
2.4. Accounts Receivable Adjustment to
Purchase Price.............. 9
2.5. Capped
Liabilities............................................
9
2.6. Lease
Amount..................................................
10
2.7.
Closing.......................................................
11
2.8. Deliveries by Sellers at
Closing.............................. 11
2.9. Deliveries by Buyer at
Closing................................ 12
3 REPRESENTATIONS AND WARRANTIES OF
SELLER............................ 13
3.1.
Organization..................................................
13
3.2. Power and
Authorization....................................... 13
3.3. No
Conflict...................................................
13
3.4. Title to
Assets............................................... 13
3.5. Condition of
Assets........................................... 14
3.6. Financial
Statements.......................................... 14
3.7. Accounts Receivable;
Credits.................................. 14
3.8.
Pre-Bill......................................................
14
3.9.
Litigation....................................................
14
3.10. Compliance with
Law........................................... 14
3.11. Absence of Undisclosed
Liabilities............................ 15
3.12. Absence of Certain
Changes.................................... 15
3.13.
Contracts.....................................................
16
3.14. Intellectual
Property......................................... 16
3.15. Real
Property.................................................
18
3.16. Environmental
Matters......................................... 19
3.17. Labor;
ERISA..................................................
19
3.18.
Taxes.........................................................
21
3.19. Capitalization;
Relationships with Related Persons............ 22
3.20.
Brokers.......................................................
22
3.21.
Insurance.....................................................
22
3.22. Powers of
Attorney............................................ 23
3.23.
Debt..........................................................
23
3.24. Certain
Payments.............................................. 23
3.25. Statements not
Misleading..................................... 24
4 REPRESENTATIONS AND WARRANTIES OF
BUYER............................. 24
4.1. Organization and Power of
Buyer............................... 24
</TABLE>
-i-
<PAGE>
<TABLE>
<S>
<C>
4.2.
Authorization.................................................
24
4.3. No
Conflict...................................................
24
4.4. Investment
Intent............................................. 24
5
COVENANTS...........................................................
25
5.1. Further Assurances;
Cooperation............................... 25
5.2. Covenants not to
Compete...................................... 25
5.3. Expenses; Transfer
Taxes...................................... 27
5.4.
Taxes.........................................................
27
5.5. Employment
Matters............................................ 29
5.6. Transfer of Domain
Name....................................... 30
6
INDEMNIFICATION.....................................................
30
6.1. Indemnified
Losses............................................ 30
6.2. Indemnification by
Sellers.................................... 31
6.3. Indemnification By
Buyer...................................... 31
6.4. Third Party Claims Against The
Indemnified Parties............ 31
6.5 Third Party Claims Against
Seller............................. 32
6.6. Procedures; No Waiver;
Exclusivity............................ 32
6.7.
Set-Off.......................................................
33
6.8.
Survival......................................................
33
6.9. Limitations on Indemnification by
the Seller Parties.......... 33
6.10. Exclusive
Remedy.............................................. 34
7
MISCELLANEOUS.......................................................
34
7.1.
Notices.......................................................
34
7.2. Entire
Agreement..............................................
34
7.3.
Counterparts..................................................
35
7.4. Parties in Interest;
Assignment............................... 35
7.5. Governing
Law................................................. 35
7.6. Schedules and
Headings........................................ 35
7.7.
Amendment.....................................................
35
7.8.
Waiver........................................................
35
7.9. Joint and Several
Liability................................... 35
7.10 Press
Release.................................................
35
</TABLE>
-ii-
<PAGE>
EXHIBITS AND SCHEDULES
<TABLE>
<S>
<C> <C>
Exhibit A
-- Escrow
Agreement
Exhibit B
-- Opinion of
Counsel to Seller
Exhibit C
-- Buyer's
standard NDA/Invention Assignment Agreement
Exhibit D
-- Stock
Power
Schedule 1A --
Leases
Schedule 2.2 --
Bank
Debt
Schedule 2.3 --
Closing
Balance Sheet
Schedule 2.8(e) -- Liens to
be Released
Schedule 3.1 --
Foreign
Qualification Jurisdictions
Schedule 3.3 --
Consents,
Etc.
Schedule 3.4 --
Title to
Assets
Schedule 3.6 --
Reference
Date Balance Sheet
Schedule 3.12(c) -- Absence of
Certain Changes
Schedule 3.13 --
Contracts
Schedule 3.14 --
Intellectual Property
Schedule 3.15 -- Real
Property
Schedule 3.16 --
Permits
Schedule 3.17 -- Labor;
ERISA
Schedule 3.18 -- Tax
Returns
Schedule 3.19 -- Related
Party Transactions
Schedule 3.20 --
Brokers
Schedule 3.21 -- Insurance
Matters
Schedule 3.23 -- Debt
Schedule 5.5(b) --
Options
</TABLE>
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK
PURCHASE AGREEMENT (the "Agreement") is executed as of July 8,
2004, by and between David B. Becker, John
E. Taylor, as Trustee of The David B.
Becker Family Trust and David B. Becker, as
Trustee of The David B. Becker
Charitable Remainder Unitrust (each a
"Seller", collectively "Sellers"), as the
sole shareholders of RE:MEMBER DATA
SERVICES, INC., a corporation incorporated
under the laws of the State of Indiana (the
"Company") and RD ACQUISITION CORP.,
a corporation incorporated under the laws
of the State of Delaware ("Buyer")
(collectively, the "parties").
RECITALS
WHEREAS,
Buyer wishes to purchase from Sellers, and Sellers wish to sell
to Buyer, all of the outstanding capital
stock of the Company (the "Stock") upon
the terms and conditions of this
Agreement;
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For
purposes of this Agreement, the following terms shall have the
following meanings:
"Accountants" shall have the meaning assigned to it in Section
2.3.
"Accounts
Receivable" shall mean (a) all trade accounts receivable and
other rights to payment from customers of
the Company and the full benefit of
all security for such accounts or rights to
payment, including all trade
accounts receivable representing amounts
receivable in respect of goods shipped
or products sold or services rendered to
customers of the Company, (b) all other
accounts or notes receivable of the Company
and the full benefit of all security
for such accounts or notes, and (c) any
claim, remedy or other right related to
any of the foregoing.
"Adjustment Liabilities" shall mean the Capped Liabilities,
customer
deposits, the current portion of unearned
maintenance revenues and all other
liabilities classified as current
liabilities in accordance with GAAP, without
giving effect to the repayment of the
Shareholder Debt and Bank Debt by Buyer
pursuant to Section 2.2. For purposes of
determining the Adjustment Liabilities
as of June 30, 2004 and as of the Closing,
no amount shall be included for
accrued self insurance claims, as the
Company will not be responsible for such
claims after Closing (as further provided
in Section 5.5(c)). In addition, the
Adjustment Liabilities shall not include
any accrual for Sellers' Legal Fees or
Sellers' Accounting Fees for which the
Company is not be responsible.
<PAGE>
"Bank
Debt" shall have the meaning assigned to it in Section 2.2.
"Business"
shall mean the business of developing, marketing and providing
data processing services to banks and/or
credit unions, including, without
limitation, the licensing or provision of
the Company's Products.
"Buyer"
shall mean RD Acquisition Corp., a Delaware corporation.
"Cap"
shall have the meaning assigned to it in Section 6.9.
"Capped
Liabilities" shall mean all trade accounts payable, the current
portion of capital lease obligations, that
certain Debt shown as "line of credit
payable to bank" on the Reference Date
Balance Sheet, the long term portion of
capital lease obligations and the
Shareholder Debt, without giving effect to the
repayment of the Bank Debt and the
Shareholder Debt by Buyer pursuant to Section
2.2.
"Claimed
Set-Off" shall have the meaning assigned to it in Section 6.7.
"Closing"
shall mean the consummation of the purchase and sale
transaction
described herein.
"Closing
Date" shall mean the date on which the Closing occurs, as
specified in Section 2.7.
"Code"
shall mean the Internal Revenue Code of 1986 or any successor
law,
and regulations issued pursuant
thereto.
"Collection Period" shall have the meaning assigned to it in
Section 2.4.
"Company"
shall mean re:Member Data Services, Inc., an Indiana
corporation.
"Company
Software" shall have the meaning assigned to it in
Section 3.14.
"Company
Tax-Related Assets" shall mean all attributes (including, but
not
limited to, amount, character and
availability), rights and claims of any kind
relating to Taxes, of, relating to, or made
by or for the benefit of the
Company, whenever arising, whether choate
or inchoate, and whether or not
asserted, including, but not limited to,
Tax reserves, deposits, payments,
estimated payments, credits, allowances,
carryover and carryback amounts
(including, among other things, losses,
credits, deductions and similar items),
refunds, claims and all rights with respect
to any of the foregoing, including
any interest thereon, together with any
other Tax-related items which may be
reflected in or may otherwise affect or be
affected by the computation of any of
the foregoing or by the computation of the
amount of the Company's liability for
any Taxes.
"Competitive Activities" shall have the meaning assigned to it in
Section
5.2.
"Contracts" shall have the meaning assigned to it in Section
3.13.
-2-
<PAGE>
"Current
Assets" shall mean all assets classified as current assets in
accordance with GAAP.
"Debt", as
applied to any Person, means: (a) indebtedness or liability of
such Person for borrowed money, or with
respect to deposits or advances of any
kind, or for the deferred purchase price of
property or services; (b) all
obligations of such Person evidenced by
notes bonds, debentures or similar
instruments, (c) all obligations of such
Person under conditional sale or other
title retention agreements relating to
property or assets purchased by such
Person, (d) all obligations of such Person
for the deferred purchase price of
property or services; (e) all obligations
of such Person as lessee under capital
leases; (f) current liabilities of such
Person in respect of the present value
of unfunded vested benefits under any
employee benefit plan; (g) obligations of
such Person under letters of credit,
bankers acceptances, or comparable
arrangements; (h) obligations of such
Person arising under acceptance
facilities; (i) guaranties; endorsements
(other than for collection or deposit
in the ordinary course of business), and
other contingent obligations of such
Person to purchase, to provide funds for
payment, to supply funds to invest in
any Persons, or otherwise to assure a
creditor against loss; (j) all obligations
of such Person secured by any Lien on any
of such Person's assets or property,
whether or not the obligations have
assumed, and (k) all obligations of such
Person in respect of interest rate
protection agreements, foreign currency
exchange agreements or other interest or
exchange rate hedging arrangements.
"DOL"
shall mean the United States Department of Labor or any
successor
agency thereto.
"Environmental Laws" shall have the meaning assigned to it in
Section
3.16.
"ERISA"
shall mean the Employee Retirement Income Security Act of 1974
or
any successor law and any rules and
regulations issued pursuant thereto.
"Escrow
Agent" shall have the meaning assigned to it in Section 2.2(b).
"Escrow
Agreement" shall have the meaning assigned to it in Section
2.2(b).
"Escrow
Claim" shall have the meaning assigned to it in Section 6.7.
"Escrow
Funds" shall have the meaning assigned to it in Section 2.2(b).
"Estimated
Excess Capped Liability Adjustment" shall have the meaning
assigned to it in Section 2.5.
"Estimated
Net Current Asset Adjustment" shall have the meaning assigned
to it in Section 2.3.
"Excess
Capped Liability Amount" shall have the meaning assigned to it
in
Section 2.5.
"Final Net
Current Assets" shall have the meaning assigned to it in
Section 2.3.
-3-
<PAGE>
"Financial
Statements" shall have the meaning assigned to it in Section
3.6.
"GAAP"
shall mean United States generally accepted accounting
principles
consistently applied.
"Governmental Entity" shall mean any court, administrative
agency,
commission, state, municipality or other
governmental authority or
instrumentality, domestic or foreign,
national or international.
"Hazardous
Materials" shall have the meaning assigned to it in Section
3.16.
"Increase
in Capped Liabilities" shall have the meaning assigned to it in
Section 2.5.
"Indemnified Parties" shall have the meaning assigned to it in
Section
6.2.
"Indemnified Person" shall have the meaning assigned to it in
Section 6.6.
"Indemnifying Person" shall have the meaning assigned to it in
Section
6.6.
"IRS"
shall mean the Internal Revenue Service or any successor agency,
and
to the extent relevant, the United States
Department of Treasury.
"June 30
Balance Sheet" shall have the meaning assigned to it in Section
2.3.
"Lease
Amount" mean $326,000.
"Leases"
shall mean those certain Leases set forth on Schedule 1A.
"Liens"
shall mean all liabilities, claims, liens, charges, pledges,
security interests, options, restrictions
or other encumbrances of any kind.
"Losses"
shall have the meaning assigned to it in Section 6.1.
"Material
Adverse Effect" means any circumstance, change in, or effect
on,
the Business or the Company that,
individually or in the aggregate with any
other circumstances, changes in, or effects
on, the Company or the Business: (a)
is, or could be, materially adverse to the
operations, assets or liabilities
(including, without limitation, contingent
liabilities), employee relationships,
customer or supplier relationships, results
of operations or the condition
(financial or otherwise) of the Company or
the Business, or (b) could materially
adversely affect the ability of Buyer to
operate or conduct the Company or the
Business in the manner in which it is
currently operated or conducted, by the
Company, or (c) could impair the ability of
Sellers to consummate the
transactions contemplated by this
Agreement.
"Net
Current Assets" shall mean the Current Assets, plus any Excess
Capped
Liabilities Amount, minus the Adjustment
Liabilities.
"Non-Compete Period" shall have the meaning assigned to it in
Section 5.2.
-4-
<PAGE>
"Options"
shall have the meaning assigned to it in Section 5.5.
"Permits"
shall have the meaning assigned to it in Section 3.16.
"Permitted
Liens" shall have the meaning assigned to it in Section 3.4.
"Person"
shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited
liability company, an association, a joint
stock company, a trust, a joint venture, an
unincorporated organization or a
Governmental Entity (or any department,
agency or political subdivision
thereof).
"Plans"
shall have the meaning assigned to it in Section 3.17.
"Products"
shall have the meaning assigned to it in Section 3.14.
"Proprietary Rights" shall have the meaning assigned to it in
Section
3.14.
"Proprietary Rights Agreements" shall have the meaning assigned to
it in
Section 3.14.
"Purchase
Price" shall mean the aggregate amount to be paid by Buyer to
Sellers for the Stock and includes the cash
consideration payable pursuant to
Section 2.2(a) and the Escrow Funds payable
pursuant to Section 2.2(b).
"Receivable Shortfall" shall have the meaning assigned to it in
Section
2.4.
"Records"
shall mean all books of account, general, financial and
accounting records, files, invoices,
payment authorizations, correspondence to
and from customers, suppliers and payors,
and other data and information owned
by Seller.
"Reduction in Net
Current Assets" shall have the meaning assigned to it in
Section 2.3.
"Reference
Date" shall mean March 31, 2004.
"Reference
Date Balance Sheet" shall mean the audited balance sheet for
the Company as of the Reference Date.
"Related
Person" shall mean any officer, director, shareholder, employee
or consultant of the Company or any holder
of five percent (5%) or more of any
class of stock of the Company or any member
of the immediate family of any such
officer, director, shareholder, employee or
consultant or any entity controlled
by any such officer, director, shareholder,
employee or consultant or by a
family member of any such officer,
director, shareholder, employee or
consultant.
"Returns"
shall have the meaning assigned to it in Section 3.8.
-5-
<PAGE>
"Sellers"
shall mean David B. Becker, John E. Taylor, as Trustee of the
David B. Becker Family Trust and David B.
Becker, as Trustee of the David B.
Becker Charitable Unitrust.
"Sellers'
Legal Fees" shall mean all legal costs and expenses incurred by
the Company or Sellers in connection with
this Agreement and the transactions
contemplated hereby, which costs and
expenses total $100,000.
"Sellers'
Accounting Fees" shall mean all accounting costs and expenses
incurred by the Company or Sellers in
connection with this Agreement and the
transactions contemplated hereby, which
costs and expenses total $2,350.
"Shareholder Debt" shall mean all Debt owing by the Company to
Sellers
(which amounts are shown as "amounts due
shareholder" on the Reference Date
Balance Sheet).
"Stock"
shall mean 2,878,180 shares of common stock issued and
outstanding, which constitutes all of the
issued and outstanding capital stock
of the Company. For convenience, all share
numbers set forth in this Agreement
are without giving effect to the reverse
stock split effected with respect to
the Company's common stock on June 29,
2004.
"Tax
Audit" shall mean any Tax audit, investigation, inquiry or
proposed
assessment, adjustment or imposition of
Taxes by any Governmental Entity.
"Taxes"
(or "Tax" where the context requires) shall mean all federal,
state, county, city, local, foreign and
other taxes (including, without
limitation, premium, excise, value added,
sales, use, occupancy, gross receipts,
franchise, ad valorem, severance, capital
levy, production, transfer,
withholding, employment, unemployment
compensation, payroll-related and property
taxes, import duties and other governmental
charges and assessments), whether or
not measured in whole or in part by net
income, including deficiencies,
interest, additions to tax or interest or
penalties with respect thereto.
"Termination of Employment Agreement Payments" shall have the
meaning
assigned to it in Section 5.5.
"Territory" shall have the meaning assigned to it in Section
5.2.
"Threshold" shall have the meaning assigned to it in Section
6.9.
ARTICLE 2
SALE OF STOCK; CLOSING
SECTION
2.1. SALE OF STOCK. At the Closing, Sellers shall sell, assign,
transfer, convey and deliver to Buyer, free
and clear of all Liens, good and
marketable title to the Stock.
SECTION
2.2. CONSIDERATION. The Purchase Price shall be $20,000,000,
subject to the adjustments set forth in
this Agreement, including without
limitation in Sections 2.3, 2.4, 2.5 and
2.6 hereof. Buyer shall pay the
Purchase Price by delivery in the following
manner:
-6-
<PAGE>
(a)
$14,829,355,
calculated as follows: $18,000,000 less the Termination
of Employment Agreement Payments, less the
Estimated Net Current Asset
Adjustment, less the Estimated Excess
Capped Liability Adjustment, less Sellers'
Legal Fees, less Sellers' Accounting Fees
and less the Lease Amount, in cash by
wire transfer at Closing to Sellers in
proportion to their ownership of the
Stock; and
(b)
$2,326,000 (the
"Escrow Funds") in cash by wire transfer at Closing
to U.S. Bank National Association (the
"Escrow Agent"), to be held under an
escrow agreement in substantially the form
of Exhibit A (the "Escrow
Agreement"), said Escrow Funds to be paid
to Sellers on the one year anniversary
of the Closing Date in accordance with the
Escrow Agreement but subject to the
terms and conditions described in this
Agreement, including, without limitation,
in Sections 2.3, 2.4, 2.5, 2.6 and 6.7
hereof; and
(d)
$482,152 in cash
by wire transfer at Closing as payment by the
Company to Ike K. Eikelberner of the
portion of the Termination of Employment
Agreement Payments payable to him, net of
applicable payroll deductions;
(e)
$82,070 in cash
by wire transfer at Closing as payment by the
Company to James W. Hutchins of the portion
of the Termination of Employment
Agreement Payments payable to him, net of
applicable payroll deductions;
(f)
$226,073 cash by
wire transfer at Closing to the Company to fund the
payroll deductions from the Termination of
Employment Agreement Payments made
pursuant to Sections 2.2(c) and (d);
(g)
$100,000 in cash
by wire transfer to Sommer Barnard Ackerson for
Seller's Legal Fees; and
(h)
$2,350 in cash
by wire transfer to Crowe Chizek for Seller's
Accounting Fees.
In
addition, Buyer shall pay the following amounts at Closing, in
satisfaction of certain obligations
included in the Capped Liabilities: (1)
$1,926,330.82 in the aggregate by wire
transfer to the parties listed on
Schedule 2.2 in payment of the Debt owing
to them (the "Bank Debt"), pursuant to
pay-off letter(s) provided by Sellers to
Buyer, and (2) $1,894,594.83 in cash by
wire transfer at Closing to David B. Becker
as payment in full of the
Shareholder Debt, pursuant to a pay-off
letter provided by Sellers to Buyer.
SECTION
2.3. NET CURRENT ASSETS ADJUSTMENT TO PURCHASE PRICE.
(a)
Estimated Net
Current Asset Adjustment for Closing. Buyer and
Sellers agree that the Purchase Price
payable to Sellers shall be reduced to the
extent that the Net Current Assets as of
Closing represent a net liability of
greater than $3,322,000. For purposes of
estimating the Purchase Price
adjustment to be made pursuant to this
Section 2.3 (and pursuant to Section
2.5), Seller has prepared and provided to
Buyer prior to Closing a balance sheet
of the Company as of June 30, 2004 (a copy
of which is attached hereto as
Schedule 2.3) (the "June 30 Balance
Sheet"), together with a statement of the
Net Current Assets and Capped Liabilities
of the Company as of June 30, 2004.
The Net Current Assets as shown on the June
30 Balance
-7-
<PAGE>
Sheet reflect a net liability of $3,864,000
which is greater than the base line
net liability amount of $3,322,000. The
difference, in the amount of $542,000
(the "Estimated Net Current Asset
Adjustment") shall be deducted from the
Purchase Price at Closing, as provided in
Section 2.2.
(b)
Final Balance
Sheet, Final Net Current Assets and Final Capped
Liability Amount. Within sixty (60) days
following the Closing Date, Buyer will
prepare, or cause to have prepared, and
deliver to Seller a balance sheet of the
Company, with a statement of the Net
Current Assets and Capped Liabilities of
the Company as of the Closing. In the event
that such Net Current Assets as of
the Closing represent a net liability of
greater than $3,322,000, minus the
Estimated Net Current Asset Adjustment (the
difference is referred to as a
"Reduction in Net Current Assets"), Sellers
shall be jointly and severally
liable for such difference as an additional
reduction in the cash portion of the
Purchase Price. Buyer shall be entitled to
set-off the amount of such Reduction
in Net Current Assets from the Escrow Funds
in accordance with Section 6.7 of
this Agreement, and, to the extent the
Reduction in Net Current Assets exceeds
the amount of the Escrow Funds then
available under the Escrow Agreement,
Sellers shall pay the difference to Buyer
within (10) days after receipt of
written demand therefor. No demand shall be
made by Buyer for payment of any
Reduction in Net Current Assets after the
Closing Date until a final
determination of such amount is made in
accordance with Section 2.3(c).
(c)
Objection.
Buyer's statement of the Net Current Assets and the
Capped Liabilities as of Closing shall be
deemed accepted by Sellers and binding
unless at least one of the Sellers sends
Buyer a written objection thereto
within fifteen (15) days following Sellers'
receipt thereof. In the event that
Sellers deliver a timely written objection
as aforesaid, and Buyer and Sellers
are unable to resolve such objection within
fifteen (15) days after Buyer is
notified of Sellers' objection then, within
five (5) business days after such
failure to resolve the matters in dispute,
the matters in dispute shall be
submitted for final and binding
determination to independent certified public
accountants of national recognition and
standing jointly selected by Buyer and
Sellers (the "Accountants"). The
Accountants shall prepare their resolution
statement within forty-five (45) days of
appointment. In the event that the
parties are required to agree on the
identity of the Accountants but are unable
to do so, then the firm to be used shall be
selected by lot from among the "Big
4" accounting firms, other than those firms
which have had any relationship with
Buyer or Sellers. The Net Current Assets
and/or Capped Liabilities as of Closing
proposed by Buyer, as adjusted by agreement
of Sellers and Buyer or finally
determined by the Accountants, as
applicable, to reflect the resolution of any
timely objections made thereto by Seller in
accordance with this paragraph,
shall constitute the "Final Net Current
Assets" and/or the "Final Capped
Liability Amount", as applicable, and shall
be binding on the parties hereto.
Buyer and Sellers shall each pay their own
expenses of preparing and analyzing
the Final Net Current Assets, Final Capped
Liability Amount and resolving
objections thereto. The fees and expenses
of the Accountants used to resolve
objections will be borne equally by Buyer,
on the one hand, and Sellers, on the
other hand.
(d)
Access to
Information. Solely in connection with the preparation of
the statements of Net Current Assets, the
Receivable Shortfall and statements of
Capped Liabilities:
(i) Buyer shall
give Sellers and their accountants reasonable
access to
the books and records of the Company, and shall cause employees
of the
Company to
-8-
<PAGE>
cooperate
with them and provide them with all information reasonably
requested,
all after receiving reasonable notice from them of their
requirements and reaching agreement as to mutually convenient times
for
review;
and
(ii) Buyer and
Sellers, to the extent within their respective
control,
shall give to each other and their agents access to the books,
financial
records, work papers and other materials and documents used or
produced
in connection with the preparation or determination of the Net
Current
Assets, the Receivable Shortfall and the Capped Liabilities.
SECTION
2.4. ACCOUNTS RECEIVABLE ADJUSTMENT TO PURCHASE PRICE.
(a)
Receivable
Shortfall. Buyer and Sellers agree that the Purchase
Price payable to Sellers shall be reduced
to the extent that the Accounts
Receivable have not been collected by the
Company or Buyer within ninety (90)
days following the Closing Date (the
"Collection Period").
(b)
Adjustment to
Purchase Price. Within sixty (60) days following the
end of the Collection Period, Buyer shall
prepare and furnish to Sellers a
statement setting forth the Accounts
Receivable and all payments made thereon,
calculated as of the end of the Collection
Period, and the amount, if any, owing
from Sellers to Buyer pursuant to Section
2.4(a) (a "Receivable Shortfall").
Sellers shall be jointly and severally
liable for the Receivable Shortfall.
Buyer shall set-off the Receivable
Shortfall from the Escrow Funds in accordance
with Section 6.7 and, to the extent the
amount of the Receivable Shortfall
exceeds the amount of the Escrow Funds then
available under the Escrow
Agreement, Sellers shall pay the difference
to Buyer within (10) days after
receipt of written demand therefor. Upon
payment of any Accounts Receivable that
resulted in a Receivable Shortfall, Buyer
shall remit those funds to the Escrow
Agent to be included as Escrow Funds.
(c)
Collection of
Accounts Receivable. Between the Closing Date and the
end of the Collection Period, Buyer shall
use reasonable efforts consistent with
the Company's usual and customary
collection practices to cause the Company to
collect the Accounts Receivable, provided
that neither Buyer nor the Company
shall be obligated to resort to
litigation.
SECTION
2.5. CAPPED LIABILITIES.
(a)
Buyer and
Sellers agree that the Purchase Price payable to Sellers
shall be reduced to the extent that the
Capped Liabilities as of Closing exceed
$3,000,000 (an "Excess Capped Liability
Amount"). For purposes of estimating the
Purchase Price adjustment to be made
pursuant to this Section 2.5, Seller has
prepared and provided to Buyer the June 30
Balance Sheet, together with a
statement of the Net Current Assets and
Capped Liabilities of the Company as of
June 30, 2004, as provided in Section 2.3.
The Capped Liabilities as shown on
the June 30 Balance Sheet reflect an
estimated Excess Capped Liability Amount of
$1,410,000 (the "Estimated Capped Liability
Amount"), which amount shall be
deducted from the Purchase Price at
Closing, as provided in Section 2.2
(b)
Within sixty
(60) days following the Closing Date, the statement of
Capped Liabilities as of the Closing shall
be delivered to Seller by Buyer, as
set forth in 2.3(b). If the
-9-
<PAGE>
Final Excess Capped Liability Amount
exceeds $3,000,000, minus the Estimated
Excess Capped Liability Adjustment (the
difference is referred to as an
"Increase in Capped Liabilities"), Sellers
shall be jointly and severally liable
for such difference as a reduction in the
cash portion of the Purchase Price.
Buyer shall be entitled to set-off the
amount of such Increase in Capped
Liabilities from the Escrow Funds in
accordance with Section 6.7 of this
Agreement, and, to the extent the Increase
in Capped Liabilities exceeds the
amount of the Escrow Funds then available
under the Escrow Agreement, Sellers
shall pay the difference to Buyer within
(10) days after receipt of written
demand therefor. The provisions of Section
2.3(c) shall apply for purposes of
Sellers' objections to Buyer's statement of
the Excess Capped Liability Amount
and the resolution of any disputes with
respect thereto. No demand shall be made
by Buyer for payment of any Increase in
Capped Liabilities after the Closing
Date until a final determination of such
amount is made in accordance with
Section 2.3(c).
SECTION
2.6. LEASE AMOUNT. Sellers and Buyer intended that the lease
described in item 5 of Schedule 1A and all
related subleases (the "Leases to be
Assigned") be assigned to and assumed by an
affiliate of Sellers prior to
Closing, and that the Company be relieved
of all future obligations under the
Leases to be Assigned (the "Assignment and
Assumption"). Sellers have been
unable to obtain the written consent of the
Company's landlord to the Assignment
and Assumption. Sellers represent and
warrant that no consent is required for
the assignment of all related subleases.
Buyer is willing to consummate the
transactions contemplated by this Agreement
without the signed Assignment and
Assumption, subject to the following:
(a)
The Lease Amount
shall be deducted from the Purchase Price payable
to Sellers at Closing and shall be included
in the Escrow Funds and paid to the
escrow agent as provided in Section
2.2;
(b)
David B. Becker
agrees to use reasonable best efforts to obtain the
consent of the landlord to the Assignment
and Assumption within 30 days of
Closing, on terms that provide that it is
effective as of Closing and that do
not require any payment, guaranty or
continuing obligation of the Company, Buyer
or Buyer's affiliates with respect to
periods after the Closing;
(c)
The Company
shall continue to collect and retain all payments made
by subtenants, and shall pay rent to the
landlord, in each case until receipt of
an executed Assignment and Assumption,
provided that if the Assignment and
Assumption is executed as provided above,
the assignee shall pay to the Company
the difference between the rents collected
by the Company from subtenants and
the rent paid by the Company to the
landlord during the period between Closing
and the execution of the Assignment and
Assumption; and
(d)
In the event
that Buyer has not received the Assignment and
Assumption complying with the requirements
of this Section 2.6 within 30 days of
Closing, Buyer shall be entitled to a
permanent reduction in the Purchase Price
in an amount equal to $451,000 (being the
Lease Amount plus an additional
$125,000), and shall be entitled to recover
such amount from the Escrow Funds in
accordance with Section 6.7 of this
Agreement, and Sellers shall be jointly and
severally liable, and hereby agree to
indemnify the Company and Buyer for any
costs, losses or damages incurred by the
Company or Buyer in excess of $451,000
during the remaining term of the Leases to
be Assigned (including any payments
of rent actually made in
-10-
<PAGE>
excess of amounts actually collected
pursuant to subleases over the life of the
Leases to be Assigned).
(e)
In the event
that Buyer has received the Assignment and Assumption
in compliance with the requirements of this
Section 2.6 within 30 days of
Closing, Sellers and Buyer shall jointly
instruct the Escrow Agent, in
accordance with Section 2(c) of the Escrow
Agreement to immediately disburse the
Lease Amount from the Escrow Funds as
follows: (1) to Buyer, the amount payable
to Buyer pursuant to Section 2.6(c) for
periods after Closing, unless previously
paid to Buyer, and (2) to Sellers, pro
rata, the balance of the Lease Amount.
SECTION
2.7. CLOSING. The Closing shall take place (via facsimile,
telephone, mail and other mutually
acceptable means of communication and
delivery) simultaneously at the offices of
Buyer's counsel, Shipman & Goodwin
LLP in Hartford, Connecticut and Sellers'
counsel, Sommar Barnard Ackerson, P.C.
in Indianapolis, Indiana on the date hereof
or at such other time and location
as the parties hereto shall agree in
writing.
SECTION
2.8. DELIVERIES BY SELLERS AT CLOSING. At the Closing, Sellers
shall convey, transfer, assign and deliver
to Buyer the Stock, free and clear of
all Liens. Sellers shall deliver to
Buyer:
(a)
The Escrow
Agreement fully executed by Sellers;
(b)
An opinion of
the Sellers' counsel, dated the Closing Date, to the
effect and substantially in the form of
Exhibit B to this Agreement;
(c)
The Certificates
representing the Stock and duly executed Stock
Powers in the form of Exhibit D, and such
assignments and other instruments of
transfer as may be reasonably satisfactory
to Buyer's counsel, and with such
consents to the conveyance, transfer and
assignment thereof as may be necessary
to effect the conveyance, transfer,
assignment and delivery of the Stock;
(d)
The consents
listed on Schedule 3.3;
(e)
Releases of the
Liens listed on Schedule 2.8(e);
(f)
Good Standing
Certificates of recent date for Seller from the
Secretary of State of the States of Indiana
and Texas;
(g)
Written evidence
satisfactory to Buyer that Sellers are the sole
shareholders of the Company, that there are
no other holders of any capital
stock of the Company or of any options,
warrants or other rights to purchase the
capital stock of the Company, other than
the Options (which are to be treated as
provided in Section 2.8(i) and Section
5.5(b));
(h)
Written evidence
satisfactory to Buyer that the Company's 401(K)
plan, health plan(s), cafeteria plan,
dental plan(s), disability and accidental
death and dismemberment plans, life
insurance plans and other similar plans have
been modified to provide that (1) the
Company is no longer a sponsor, employer,
member of the employer group or holder, as
applicable, with
-11-
<PAGE>
respect to such plans, (2) that the
employees of the Company are no longer
eligible participants or members with
respect to such plans, and (3) that such
plans will continue to cover claims for
covered services received prior to
Closing, such that the Company is not
responsible after Closing to pay
deductibles, retentions or self-insured
obligations with respect to pre-Closing
periods and events;
(i)
Employment
letters or other documents related to the post-Closing
employment of James W. Hutchins by the
Company (or Buyer, or an affiliate of
Buyer), in form and substance satisfactory
to Buyer;
(j)
A Transition
Services Agreement in a form mutually agreeable to
Sellers and Buyer with respect to the
temporary, continued use of certain of the
Company systems or other assets by
affiliates of Sellers;
(k)
Evidence
satisfactory to Buyer that no Person other than the Company
is continuing to use, or has access or
rights to the Company's payroll and
accounting systems and databases;
(l)
A new Lease
Agreement, or a lease amendment, between the Company and
Duke-Weeks Realty Limited Partnership with
regard to office space located at
Woodland Corporate Park IV, 7820 Innovation
Boulevard, Indianapolis, Indiana, in
form and substance satisfactory to Buyer,
which lease or amendment shall
re-define the space leased by the Company
as the first and third floors of such
building;
(m)
Written
evidence, satisfactory to Buyer, that all customer
agreements and other accounts currently in
the name of re:Member Data Services
International, Inc. have been assigned and
transferred to the Company, together
with evidence of any required third party
consents to such assignment and
transfer;
(n) Written evidence that any
agreements that relate to the Business but
that were entered into by Americard
Services, Inc. rather than the Company have
been properly assigned to the Company;
(o)
Evidence of the
termination of existing employment agreements with
James W. Hutchins and Ike K. Eikelberner,
as further provided in Section 5.5(a);
and
(p)
A Secretary's
Certificate in form and substance satisfactory to
Buyer.
SECTION
2.9. DELIVERIES BY BUYER AT CLOSING. At the Closing, Buyer
shall
deliver to Seller the Escrow Agreement
fully executed by Buyer and Escrow Agent,
and shall make the payments required by
Section 2.2.
-12-
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Sellers
hereby jointly and severally represent and warrant to Buyer as
follows:
SECTION
3.1. ORGANIZATION. The Company is a corporation duly organized,
and validly existing under the laws of the
State of Indiana and is duly
qualified to do business as a foreign
corporation and is in good standing in
each jurisdiction in which the ownership or
the use of its properties or the
nature of the Business requires such
qualification, which jurisdictions are
listed on Schedule 3.1. The Company has
full power and authority to own its
properties and conduct the business
presently being conducted by it. The Company
has no subsidiaries and has no equity
interest in any other Person.
SECTION
3.2. POWER AND AUTHORIZATION. Each Seller has full legal power,
authority and capacity to execute this
Agreement and to consummate the
transactions contemplated by this
Agreement. This Agreement constitutes the
valid and binding obligation of each Seller
and is enforceable against each
Seller in accordance with its terms, except
as such enforceability may be
limited by bankruptcy, insolvency,
reorganization, moratorium, and other similar
laws relating to or limiting creditors'
rights generally and by equitable
principles.
SECTION
3.3. NO CONFLICT. The execution and delivery of this Agreement
do
not, and the consummation of the
transactions contemplated hereby and the
compliance with the terms hereof will not
(a) violate any law, judgment, order,
decree, statute, ordinance, rule or
regulation applicable to either Seller or
the Company, or any permit, license or
approval of any Governmental Entity, (b)
conflict with any provision of the
Company's Articles of Incorporation or
By-laws or any resolution of the board of
directors or shareholders of the
Company, (c) except as set forth on
Schedule 3.3(c), result in any violation of,
and will not conflict with, or result in a
breach of any terms of, or constitute
a default under, any mortgage, license,
instrument or agreement to which either
Seller or the Company is a party or by
which either Seller or the Company is
bound or create any Lien upon any of the
assets of the Company, or (d) except as
set forth on Schedule 3.3, require any
notice to, or consent, approval, order or
authorization of, or the registration,
declaration or filing with, any
Governmental Entity or other Person,
including, without limitation, under any
Contract.
SECTION
3.4. TITLE TO ASSETS. The Company has good, valid and
marketable
title to all of its assets, free and clear
of all Liens, except those Liens set
forth on Schedule 3.4 ("Permitted Liens").
No other party has any rights or
claims to possession of any of the
Company's assets. The assets of the Company
constitute all assets, rights and
properties used by the Company to operate, or
necessary to operate the Business as
operated by the Company prior to Closing.
Except as disclosed on Schedule 3.4,
neither Sellers nor any other Related
Person of the Company owns, leases or
licenses assets, properties or other
rights used in the conduct of the Business.
All employees engaged in conducting
the Business are employees of the
Company.
-13-
<PAGE>
SECTION
3.5. CONDITION OF ASSETS. All of the tangible property of the
Company is in good operating condition and
repair, ordinary wear and tear
excepted, and in the state of maintenance,
repair and operating condition
required for the proper operation and use
thereof in the ordinary and usual
course of business by the Company.
SECTION
3.6. FINANCIAL STATEMENTS. Sellers have delivered to Buyer
financial information respecting the
Company (the "Financial Statements"), as
follows: (i) the Reference Date Balance
Sheet, a copy of which is attached
hereto as Schedule 3.6; (ii) audited
statements of income, cash flows and
changes in shareholders' equity of the
Company for the fiscal year ended as of
the Reference Date; (iii) unaudited balance
sheet for the Company as of May 31,
2004; and (iv) unaudited statements of
income, cash flows and changes in
shareholders' equity for the Company for
the two (2) months ended May 31, 2004.
The Financial Statements fairly present the
financial position and results of
operations of the Company for the periods
then ended and the financial position
of the Company at the dates thereof and
were prepared in accordance with GAAP;
provided, however, the unaudited Financial
Statements (i) are subject to normal
recurring year-end adjustments and (ii) do
not contain all footnote disclosures
required by GAAP. The Company's books of
account are and, during the period
covered by the Financial Statements were,
correct and complete in all material
respects, fairly and accurately reflect or
reflected the income, expenses,
assets and liabilities of the Company,
including the nature thereof and the
transactions giving rise thereto, and
provide or provided a fair and accurate
basis for the preparation of the Financial
Statements and have been maintained
in accordance with sound business
practice.
SECTION
3.7. ACCOUNTS RECEIVABLE; CREDITS. The Accounts Receivable
recorded on the books of the Company, less
a bad debt reserve in the amount of
$0.00 (which was determined by the Company
in accordance with GAAP applied on a
basis consistent with the Company's prior
accounting practices) are bona fide
and good, and are collectible in the
amounts shown on the books of account of
the Company. No Account Receivable has been
released by the Company, in whole or
in part, so as to reduce its value. There
are no outstanding customer credits or
allowances (including allowances for bad
debts) which have been authorized by
the Company prior to the Closing Date.
SECTION
3.8. PRE-BILL. The Company has not pre-billed or received
prepayment for products to be sold,
services to be rendered, or expenses to be
incurred subsequent to the Closing Date,
except in the ordinary course of
business and consistent with the Company's
prior practices, with a corresponding
current liability included on the Reference
Date Balance Sheet.
SECTION
3.9. LITIGATION. There is no suit, action or proceeding pending
against or affecting either Seller or the
Company or to the knowledge of Sellers
the employees of the Company relating to
the Business or the transactions or the
transactions contemplated hereby, nor to
the knowledge of Sellers is there any
such suit, action or proceeding threatened
against either Seller or the Company
or any of the employees of the Company.
Neither Seller nor the Company is
subject to any order of a Governmental
Entity.
SECTION
3.10. COMPLIANCE WITH LAW. The Company has all necessary
licenses,
permits and other approvals of Governmental
Entities necessary to operate the
Business as now
-14-
<PAGE>
conducted, each of which is in good
standing, and the Company has conducted the
Business and properly filed all necessary
reports in accordance with applicable
laws and regulations.
SECTION
3.11. ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not
have any liabilities or obligations, either
accrued, contingent or otherwise,
which are not reflected
