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EXHIBIT 10.26
AGREEMENT AND PLAN OF MERGER
AMONG
TYLER CORPORATION,
T2 ACQUISITION CORPORATION,
THE SOFTWARE GROUP, INC.
XXXXX X. XXXXX
AND
XXXXX X. XXXXX
DATED
OCTOBER 8, 1997
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TABLE OF CONTENTS
ARTICLE 1
THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
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1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 2
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1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . 2
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1.5 Articles of Incorporation; Bylaws . . . . . . . . . . . . . 2
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1.6 Directors and Officers . . . . . . . . . . . . . . . . . . . 2
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1.7 Conversion of Securities; Exchange; Fractional Shares. . . . 2
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1.8 Adjustments to Prevent Dilution . . . . . . . . . . . . . . 4
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1.9 Taking of Necessary Action; Further Action . . . . . . . . . 5
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
2.1 Organization and Good Standing of Company . . . . . . . . . 5
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2.2 No Company Subsidiaries . . . . . . . . . . . . . . . . . . 5
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2.3 No Other Investments . . . . . . . . . . . . . . . . . . . . 5
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2.4 Foreign Qualification . . . . . . . . . . . . . . . . . . . 5
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2.5 Power and Authority to Conduct Business . . . . . . . . . . 5
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2.6 Authority to Consummate Merger . . . . . . . . . . . . . . . 5
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2.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 6
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2.8 Compliance with Other Instruments . . . . . . . . . . . . . 6
---------------------------------
2.9 Capitalization of Company . . . . . . . . . . . . . . . . . 7
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2.10 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . 7
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2.11 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . 7
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2.12 Company Financial Statements. . . . . . . . . . . . . . . . 7
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2.13 Absence of Certain Changes . . . . . . . . . . . . . . . . . 8
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2.14 No Material Undisclosed Liabilities . . . . . . . . . . . . 10
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2.15 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . 10
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2.16 Title to Properties . . . . . . . . . . . . . . . . . . . . 11
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2.17 Condition of Tangible Assets . . . . . . . . . . . . . . . . 13
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2.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 13
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2.19 Inventories . . . . . . . . . . . . . . . . . . . . . . . . 13
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2.20 Patents, Trademarks, and Copyrights . . . . . . . . . . . . 13
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2.21 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.22 Litigation and Claims . . . . . . . . . . . . . . . . . . . 15
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2.23 Judgments, Decrees, and Orders in Restraint of Business . . 16
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2.24 No Violation of Any Instrument . . . . . . . . . . . . . . . 16
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2.25 Compliance With Laws . . . . . . . . . . . . . . . . . . . 16
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2.26 Compensation and Benefit Plans . . . . . . . . . . . . . . . 16
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2.27 Labor Relations . . . . . . . . . . . . . . . . . . . . . . 18
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2.28 Adequate Insurance . . . . . . . . . . . . . . . . . . . . . 19
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2.29 Contracts with Affiliates and Others . . . . . . . . . . . . 19
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2.30 Revenue Recognition . . . . . . . . . . . . . . . . . . . . 19
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2.31 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . 19
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2.32 Environmental Matters . . . . . . . . . . . . . . . . . . . 19
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2.33 Accuracy of Information Furnished . . . . . . . . . . . . . 20
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TYLER
3.1 Organization and Good Standing of Tyler . . . . . . . . . . 20
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3.2 Foreign Qualification . . . . . . . . . . . . . . . . . . . 20
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3.3 Power and Authority to Conduct Business 21
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3.4 Authority to Consummate Merger . . . . . . . . . . . . . . . 21
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3.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 21
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3.6 Compliance with Other Instruments . . . . . . . . . . . . . 21
---------------------------------
3.7 Capitalization of Tyler . . . . . . . . . . . . . . . . . . 22
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3.8 Commission Filings; Financial Statements . . . . . . . . . . 22
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3.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . 23
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3.10 No Material Undisclosed Liabilities . . . . . . . . . . . . 24
-----------------------------------
3.11 Litigation and Government Claims . . . . . . . . . . . . . . 24
--------------------------------
3.12 No Violation of Any Instrument . . . . . . . . . . . . . . . 24
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3.13 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . 25
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3.14 No Interim Operations of Sub . . . . . . . . . . . . . . . . 25
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3.15 Accuracy of Information Furnished . . . . . . . . . . . . . 25
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ARTICLE 4
JOINT COVENANTS OF THE COMPANY, THE SHAREHOLDERS AND TYLER
4.1 Access; Confidentiality . . . . . . . . . . . . . . . . . . 25
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4.2 Notice of any Material Change . . . . . . . . . . . . . . . 26
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4.3 Monthly Financial Statements . . . . . . . . . . . . . . . . 26
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4.4 Antitrust Notification . . . . . . . . . . . . . . . . . . . 27
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4.5 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 27
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4.6 Cooperation Pending Closing . . . . . . . . . . . . . . . . 30
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ARTICLE 5
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 Conduct of Business Prior to Closing Date . . . . . . . . . 30
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5.2 Employment Agreement . . . . . . . . . . . . . . . . . . . 31
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5.3 Noncompetition Agreements . . . . . . . . . . . . . . . . . 31
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5.4 Agreement Not to Negotiate . . . . . . . . . . . . . . . . . 31
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5.5 Accuracy of Information Furnished . . . . . . . . . . . . . 31
---------------------------------
5.6 Regulation S-X Financial Statements . . . . . . . . . . . . 32
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5.7 Termination of Shareholders Agreement . . . . . . . . . . . 32
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ARTICLE 6
COVENANTS OF TYLER
6.1 Conduct Prior to Closing Date . . . . . . . . . . . . . . . 32
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6.2 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . 32
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6.3 Meetings of Stockholders . . . . . . . . . . . . . . . . . . 33
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6.4 Stock Exchange Listing . . . . . . . . . . . . . . . . . . . 33
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6.5 Guaranties of Company Obligations . . . . . . . . . . . . . 33
---------------------------------
6.6 Other Tyler Obligations . . . . . . . . . . . . . . . . . . 34
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6.7 Company Indemnification Obligations . . . . . . . . . . . . 34
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ARTICLE 7
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
7.1 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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7.2 Absence of Litigation . . . . . . . . . . . . . . . . . . . 35
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ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SHAREHOLDERS
8.1 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 36
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8.2 Representations and Warranties . . . . . . . . . . . . . . . 36
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8.3 Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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8.4 No Material Adverse Change . . . . . . . . . . . . . . . . . 36
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8.5 Financing 36
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8.6 Certificates . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLER
9.1 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 37
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9.2 Representations and Warranties . . . . . . . . . . . . . . . 37
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9.3 Securities Law Compliance . . . . . . . . . . . . . . . . . 37
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9.4 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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9.5 No Material Adverse Change . . . . . . . . . . . . . . . . . 37
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9.6 Consents to Transaction . . . . . . . . . . . . . . . . . . 38
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9.8 Noncompetition Agreements . . . . . . . . . . . . . . . . . 38
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9.11 Certificates . . . . . . . . . . . . . . . . . . . . . . . . 38
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ARTICLE 10
SECURITIES LAW REGISTRATION AND COMPLIANCE
10.1 Securities Law Compliance; Restrictions on Shares. . . . . . 38
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10.2 Piggyback Registration. . . . . . . . . . . . . . . . . . . 39
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10.3 Registration Procedures. . . . . . . . . . . . . . . . . . . 40
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10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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10.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . 40
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10.6 No Transferability of Registration Rights . . . . . . . . . 43
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ARTICLE 11
INDEMNIFICATION AND REMEDIES
11.1 Indemnification by the Shareholders Based on Agreement . . . 43
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11.2 Indemnification by Tyler Based on Agreement . . . . . . . . 43
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11.3 Customer Claims . . . . . . . . . . . . . . . . . . . . . . 44
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11.4 Claims Limitations . . . . . . . . . . . . . . . . . . . . . 45
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11.5 Maximum Liability . . . . . . . . . . . . . . . . . . . . . 45
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11.6 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . 46
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11.7 Remedies of the Surviving Corporation . . . . . . . . . . . 46
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11.8 Costs of Defense. . . . . . . . . . . . . . . . . . . . . . 46
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ARTICLE 12
MISCELLANEOUS
12.1 Breach Discovered Prior to Closing . . . . . . . . . . . . . 47
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12.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . 47
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12.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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12.4 Disclosure Schedules . . . . . . . . . . . . . . . . . . . . 48
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12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 48
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12.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 49
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12.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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12.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . 50
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12.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 50
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12.11 Waiver and Other Action . . . . . . . . . . . . . . . . . . 50
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12.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 51
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12.13 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . 51
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ANNEX I Shareholders and Optionholders
EXHIBITS
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Exhibit A Surviving Corporation Directors and Officers
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Exhibit B Employment and Noncompetition Agreement (Shareholders)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT, made as of the 8th day of October, 1997, is entered
into by and among Tyler Corporation, a Delaware corporation ("Tyler"), T2
Acquisition Corporation, a Texas corporation and wholly-owned subsidiary of
Tyler ("Sub"), The Software Group, Inc., a Texas corporation, (the "Company"),
Xxxxx X. Xxxxx and Xxxxx Xxxxx (each, a "Shareholder" and collectively, the
"Shareholders").
WITNESSETH:
WHEREAS, subject to and in accordance with the terms and conditions of
this Agreement, the respective Boards of Directors of Tyler, Sub and the
Company, and Tyler as sole shareholder of Sub, have approved the merger of Sub
with and into the Company (the "Merger"), whereby all the issued and
outstanding shares of common stock, without par value, of the Company (the
"Company Common Stock") not owned directly or indirectly by the Company will be
converted into the right to receive in the aggregate $12,000,000 in cash and
2,000,000 shares of common stock, par value $0.01 per share, of Tyler ("Tyler
Common Stock"), as provided herein;
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the Texas Business
Corporation Act (the "TBCA"), at the Effective Time (as defined in Section 1.3)
Sub shall be merged with and into Company. As a result of the Merger, the
separate corporate existence of the Sub shall cease and Company shall continue
as the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") and shall succeed to and assume all of the rights and obligations
of the Company in accordance with the TBCA.
1.2 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Liddell, Sapp, Zivley, Hill & XxXxxx, L.L.P., 0000 Xxxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 as soon as practicable after the
satisfaction or waiver of the conditions set forth in Article V or at such
other time and place and on such other date as Tyler and the Company shall
agree; provided, that the closing conditions set forth in Article V shall have
been satisfied or waived at or prior to such time. The date on which the
Closing occurs is herein referred to as the "Closing Date."
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1.3 Effective Time. On the Closing Date, or as soon as practicable
thereafter, the Company and Sub will cause Articles of Merger (the "Articles of
Merger") to be filed with the Secretary of State of the State of Texas as
provided in Article 5.04 of the TBCA. The Merger will become effective at the
time that the Articles of Merger have been filed with the Secretary of State of
the State of Texas or at such other time specified in the Articles of Merger as
the effective time (the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the TBCA.
1.5 Articles of Incorporation; Bylaws. The Articles of
Incorporation (the "Articles") and Bylaws (the "Bylaws") of the Company, as in
effect immediately prior to the Effective Time, shall be the articles of
incorporation and bylaws of the Surviving Corporation and thereafter shall
continue to be its articles of incorporation and bylaws until amended as
provided therein and under the TBCA.
1.6 Directors and Officers. The persons specified as directors on
Exhibit A hereto shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles and Bylaws, and the persons
specified as officers on Exhibit A hereto shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified in accordance with the Articles and Bylaws.
1.7 Conversion of Securities; Exchange; Fractional Shares. Subject
to the terms and conditions of this Agreement, at the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Sub or their
Shareholder:
(a) Each share of the Company Common Stock issued and
outstanding immediately prior to the Effective Time, other than any shares of
the Company Common Stock to be canceled pursuant to Section 1.7(b), shall be
converted, subject to the provisions of this Section 1.7, into the right to
receive, without interest, $5.7943 in cash and 0.965717 shares of Tyler Common
Stock (collectively, the "Merger Consideration"); provided that no fractional
shares of Tyler Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made in accordance with the procedure set forth in Section
1.7(h) hereof.
(b) Each share of Company Common Stock held in the
treasury of the Company and each share of Company Common Stock held by Sub,
Tyler or any direct or indirect wholly-owned subsidiary of Tyler, or the
Company immediately prior to the Effective Time shall be canceled and
extinguished at the Effective Time without any conversion thereof and no
payment shall be made with respect thereto.
(c) Each option outstanding at the Effective Time to
purchase shares of Company Common Stock (a "Stock Option") granted under (i)
the 1988 Stock Option Plan for Software
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Group, Inc., as amended (the "Company Stock Option Plan"), or (ii) any other
stock plan or agreement of the Company, which by its terms is not extinguished
in the Merger, shall be exercised prior to the Closing and the holders of any
such Stock Options agree to exercise such Stock Options at or prior to the
Closing.
(d) Each share of common stock, par value $1.00 per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall at the Effective Time be converted into one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
(e) At the Effective Time, each holder of an outstanding
certificate that prior thereto represented shares of Company Common Stock shall
be entitled to receive, upon surrender to the Surviving Corporation of such
certificate or certificates for cancellation and subject to any required
withholding of taxes, a certificate or certificates representing the number of
whole shares of Tyler Common Stock (of such denominations and registered in
such names as such holder may request) into which the shares of Company Common
Stock so surrendered shall have been converted. Each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share
of Tyler Common Stock shall, upon surrender to the Surviving Corporation of the
certificates representing shares of Company Common Stock held by such holder,
be paid an amount in cash in accordance with the provisions of Section 1.7(h).
Until so surrendered, each outstanding certificate that prior to the Effective
Time represented shares of Company Common Stock shall be deemed from and after
the Effective Time to evidence the right to receive that amount of cash and
that number of full shares of Tyler Common Stock into which such shares of
Company Common Stock shall have been converted pursuant to this Section 1.7,
and any cash in lieu of fractional shares of Tyler Common Stock, subject to any
of required withholding of taxes. No interest shall be paid on the cash payable
upon surrender of the certificate or certificates evidencing shares of Company
Common Stock. Unless and until any such outstanding certificates representing
shares of Company Common Stock shall be surrendered, no dividends or other
distributions declared and payable to the holders of Tyler Common Stock on or
after the Effective Time shall be paid to the holders of such outstanding
certificates which prior to the Effective Time represented shares of Company
Common Stock; provided, however, that, upon surrender and exchange of such
outstanding certificates, there shall be paid to the record holders of the
certificates issued and exchanged therefor the amount, without interest
thereon, of dividends and other distributions, if any, that theretofore were
declared and became payable since the Effective Time with respect to the number
of full shares of Tyler Common Stock issued to such holders.
(f) The cash and shares of Tyler Common Stock into which
the shares of Company Common Stock shall have been converted pursuant to this
Section 1.7 shall be issued in full satisfaction of all rights pertaining to
such converted shares of Company Common Stock.
(g) If any certificate for shares of Tyler Common Stock
is to be issued in a name other than that in which the certificate surrendered
in exchange therefor is registered, it shall be a
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condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall have paid to Tyler or the Surviving Corporation
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Tyler Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Tyler or its transfer agent that such tax has been paid or is not payable.
(h) No fraction of a share of Tyler Common Stock shall be
issued, but in lieu thereof each holder of shares of Company Common Stock who
would otherwise be entitled to a fraction of a share of Tyler Common Stock
shall, upon surrender to the Surviving Corporation of the certificate or
certificates representing the shares of Company Common Stock held by such
holder, be paid an amount in cash equal to the value of such fraction of a
share of Tyler Common Stock based upon the closing price of one share of Tyler
Common Stock on the New York Stock Exchange, Inc. ("NYSE") on the last trading
day prior to the Effective Time. No interest shall be paid on such amount. All
shares of Company Common Stock held by a record holder shall be aggregated for
purposes of computing the number of shares of Tyler Common Stock to be issued
pursuant to this Section 1.7.
(i) At the Closing, Tyler shall provide each holder of
certificates which prior to the Effective Time represented shares of Company
Common Stock a letter of transmittal and other documentation enabling such
holder to effect the exchange of stock certificates as contemplated by Article
1 of this Agreement.
(j) Neither Tyler, the Surviving Corporation, nor any
other person shall be liable to any former holder of shares of Company Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(k) In the event any certificate formerly representing
shares of the Company Common Stock shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed and, if required by Tyler or the
Surviving Corporation, the posting by such person of a bond in customary amount
as indemnity against any claim that may be made against Tyler or the Surviving
Corporation with respect to such certificate, the Surviving Corporation shall
deliver in exchange for such lost, stolen or destroyed certificate the cash and
shares of Tyler Common Stock that would be deliverable pursuant to this Article
1 upon due surrender of the shares of Company Common Stock represented by such
lost, stolen or destroyed certificate.
1.8 Adjustments to Prevent Dilution. In the event that the Company
changes the number of shares of the Company Common Stock or securities
convertible or exchangeable into or exercisable for shares of the Company
Common Stock, or Tyler changes the number of shares of Tyler Common Stock or
securities convertible or exchangeable into or exercisable for shares of Tyler
Common Stock, issued and outstanding prior to the Effective Time as a result of
a
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reclassification, stock split (including a reverse split or combination), stock
dividend or distribution, recapitalization, subdivision, or other similar
transaction, the Merger Consideration shall be correspondingly adjusted.
1.9 Taking of Necessary Action; Further Action. The parties hereto
shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company or Sub, such
corporations shall direct their respective officers and directors to take, and
the Shareholders shall take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders jointly and severally represent and
warrant to Tyler and Sub as follows:
2.1 Organization and Good Standing of Company. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas.
2.2 No Company Subsidiaries. The Company is not, and has never
been, the record or beneficial owner, directly or indirectly, of 50% or more of
the capital stock of any corporation.
2.3 No Other Investments. The Company does not own, and has never
owned, any capital stock of any other corporation or any equity, profit
sharing, participation, or other interest of any type in any partnership, joint
venture, and other entity.
2.4 Foreign Qualification. The Company is duly qualified or
licensed to do business as a foreign corporation and in good standing in those
jurisdictions set forth in Section 2.4 of the schedule delivered by the Company
concurrently with the execution of this Agreement (the "Company Disclosure
Schedule"). The Company is duly qualified or licensed to do business as a
foreign corporation in every jurisdiction where the failure so to qualify could
have a material adverse effect on the businesses, operations, assets or
financial condition of the Company. For purposes of this Section 2.4, no
material adverse effect shall be deemed to have occurred as a result of non-
payment of state or local franchise taxes not exceeding $37,500 in the
aggregate.
2.5 Power and Authority to Conduct Business. The Company has the
corporate power and authority, and possesses all licenses and permits required
by governmental authorities, to own, lease, and operate their properties and
assets and to carry on its business as currently being
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conducted, except where the failure to possess such license or permit would not
have a material adverse effect on the businesses, operations, assets or
financial condition of the Company.
2.6 Authority to Consummate Merger. The Company has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the other agreements or documents executed or required to be
executed by the Company in connection with this Agreement, and the execution,
delivery, and performance by the Company of this Agreement and the other
documents executed or required to be executed by the Company in connection with
this Agreement have been duly authorized by all necessary corporate action.
Each Shareholder has the capacity and authority to execute, deliver and perform
his obligations under this Agreement, and the other agreements or documents
executed or required to be executed by him in connection herewith.
2.7 Binding Effect. This Agreement and the other agreements and
documents executed or required to be executed by the Company or the
Shareholders in connection with this Agreement have been or will have been duly
executed and delivered by the Company or the Shareholders, as appropriate, and
are or will be, when executed and delivered, the legal, valid, and binding
obligations of the Company or the Shareholders executing the same, enforceable
in accordance with their terms, except that:
(a) enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be
limited by equitable principles of general applicability; and
(c) rights to indemnification under Section 10.5 may be
limited by considerations of public policy.
2.8 Compliance with Other Instruments. Except as disclosed in
Section 2.8 of the Company Disclosure Schedule, neither the execution and
delivery by the Company or the Shareholders of this Agreement, or the other
agreements or documents executed or required to be executed by the Company or
the Shareholders in connection herewith, nor the consummation by the Company or
the Shareholders of the transactions contemplated hereby and thereby, will (i)
conflict with the articles of incorporation or bylaws of the Company; (ii)
assuming satisfaction of the requirements set forth in clause (iii) below,
violate any provision of law applicable to the Company; (iii) except for (A)
requirements arising out of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
0000 (xxx "XXX Xxx"), and (B) the filing of articles of merger in accordance
with the TBCA, require any consent, authorization, permit, license or approval
of, or declaration, registration or filing with or notice to, any person or
governmental body or authority, domestic or foreign, under any provision of law
applicable to the Company; or (iv) require any consent, approval or notice
under, violate, breach, be in conflict with, or constitute a default (or an
event that, with notice or
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lapse of time or both, would constitute a default) under, or permit the
termination or the acceleration of maturity of, or result in the imposition of
any lien, claim, or encumbrance upon any property or asset of the Company or
either Shareholder, pursuant to any note, bond, indenture, mortgage, deed of
trust, evidence of indebtedness, loan or lease agreement, or other agreement or
instrument (including with customers) listed or required to be listed in
Section 2.21 of the Company Disclosure Schedule, or any judgment, order,
injunction, or decree by which the Company or either Shareholder is bound, to
which any of them is a party, or to which any of their assets is subject, where
any such failure to obtain any consent, approval or notice, or violation,
breach, conflict or default would result in a material adverse effect on the
businesses, operations, assets or financial condition of the Company.
2.9 Capitalization of Company.
(a) The authorized capital stock of the Company is
5,000,000 shares of Company Common Stock, of which 1,921,000 shares of Company
Common Stock are issued and outstanding at the date hereof and 150,000 shares
are subject to Stock Options. All of the issued and outstanding shares of
Company Common Stock have been duly authorized and are validly issued, fully
paid and nonassessable. There are and at the Closing will be no shares of the
capital stock of the Company held in its treasury or in the treasury.
(b) At the Closing, each Shareholder will be the lawful
record and beneficial owner of the shares of the Company Common Stock, set
forth opposite such Shareholder's name on Annex I, free and clear of all liens,
encumbrances, and claims of every kind, and the shares so owned by the
Shareholders will constitute 93% of the issued and outstanding shares of the
Company capital stock. Set forth on Annex I are the number of shares of Company
Common Stock outstanding and Company Common Stock subject to options. Each
Shareholder has the right to vote or direct the vote of his shares at his
discretion on any matter submitted to a vote of the Company shareholders.
(c) Except as disclosed in Section 2.9 of the Company
Disclosure Schedule, there are no voting trusts, shareholder agreements, or
other voting arrangements among the shareholders of the Company.
(d) Except as described in Section 2.9 of the Company
Disclosure Schedule , there presently is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call, or other right
obligating the Company or any Shareholder to issue, sell, exchange, or
otherwise dispose of, or to purchase, redeem, or otherwise acquire, shares of,
or securities convertible into or exchangeable for, capital stock of the
Company; no such rights disclosed in Section 2.9 of the Company Disclosure
Schedule will remain outstanding at the Closing. No shareholder of the Company
is entitled to any preemptive right.
2.10 [Intentionally Omitted].
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2.11 [Intentionally Omitted].
2.12 Company Financial Statements.
(a) The Company has delivered to Tyler true, correct,
and complete copies of the following financial statements of the Company (the
"Company Financial Statements"), which are attached to Section 2.12 of the
Company Disclosure Schedule:
(i) the audited balance sheets of the
Company as of October 31, 1996, 1995 and 1994 and the related audited
statements of operations, stockholder's equity, and cash flows for the years
then ended, with notes thereto, prepared in accordance with United States
generally accepted accounting principles, except as disclosed in the notes
thereto; and
(ii) the unaudited balance sheet of the
Company as of August 31, 1997 (the "Company Balance Sheet"), and the related
unaudited statements of operations, stockholder's equity, and cash flows for
the ten months then ended, with notes thereto, prepared in accordance with
United States generally accepted accounting principles, except as disclosed in
the notes thereto.
The Company Financial Statements present fairly, in all material respects, the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended, in conformity with
generally accepted accounting principles applied, except as may be set forth in
the notes thereto, on a consistent basis throughout such periods.
(b) Since August 31, 1997, there has been no change in
accounting principles applicable to, or methods of accounting utilized by the
Company, and the books and records of Company have been and are being
maintained in accordance with all applicable legal and accounting requirements
and what the Shareholders believe in good faith to be good business practice,
reflect only valid transactions, are complete and correct in all material
respects, and accurately reflect in all material respects the basis for the
financial position and results of operations and cash flows of the Company set
forth in the Company Financial Statements.
2.13 Absence of Certain Changes. Since August 31, 1997 (or other
date indicated below), the Company has not (except as may be contemplated by
this Agreement or as may result from the transactions contemplated by this
Agreement):
(a) except as disclosed in Section 2.13 of the Company
Disclosure Schedule, suffered any change in its businesses, results of
operations, working capital, assets, liabilities, or financial condition or the
manner of conducting its business other than changes that, individually or in
the aggregate, have not had a material adverse effect on the businesses,
operations, assets or condition (financial or otherwise) of the Company;
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15
(b) experienced a decline in the shareholder's equity of
the Company from its shareholder's equity shown on the Company Balance Sheet at
August 31, 1997, determined using the same accounting principles applied in the
preparation of the Company Financial Statements;
(c) except as disclosed in Section 2.13 of the Company
Disclosure Schedule, suffered any damage or destruction to or loss of its
assets not covered by insurance, or any loss of customers or suppliers, or
terminated or lost the services of any key employee (including any employee who
had agreed with the Company to maintain the confidentiality of proprietary or
technical information or know-how or to assign inventions, patents, or
copyrights) that has had, or in the good faith belief of the Shareholders is
likely to have, a material adverse effect on the businesses, operations,
assets, financial condition, or prospects of the Company;
(d) acquired or disposed of any material asset, or
incurred, assumed, guaranteed, endorsed, paid, or discharged any material
indebtedness, liability, or obligation, or subjected or permitted to be
subjected any material amount of assets to any lien, claim, or encumbrance of
any kind, except in the ordinary course of business or pursuant to agreements
in force at the date of this Agreement;
(e) forgiven, compromised, canceled, released, waived, or
permitted to lapse any material rights or claims, except as disclosed in
Section 2.13 of the Company Disclosure Schedule;
(f) entered into or terminated any material agreement or
commitment, or agreed or made any changes in material leases or agreements,
other than renewals or extensions thereof and leases, agreements, and
commitments entered into, terminated, or modified in the ordinary course of
business;
(g) written up, written down, or written off the book
value of any material amount of assets, except as disclosed in Section 2.13 of
the Company Disclosure Schedule;
(h) declared, paid, or set aside for payment any
dividend or distribution with respect to its capital stock;
(i) except as set forth in Section 2.13 of the Company
Disclosure Schedule, redeemed, purchased, or otherwise acquired, or sold,
granted, or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to changes in the terms and conditions of any such rights;
(j) except as set forth in Section 2.13 of the Company
Disclosure Schedule, paid compensation , fees, bonuses or other payments to any
Shareholder or his family members or any of his affiliates, or otherwise paid
or transferred any cash, property or assets to any Shareholder, his family
members or any of his affiliates, other than the base salary of each
Shareholder; or materially increased the compensation of or paid any bonus to
any other employee or contributed to any
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employee benefit plan other than in accordance with policies, practices or
requirements established and in effect on October 31, 1996;
(k) Entered into any employment, compensation, or
collective bargaining agreement with any person or group or consulting
agreement not identified in Section 2.13 of the Company Disclosure Schedule,
other than in the ordinary course of business;
(l) Entered into, adopted, or materially amended any
employee benefit plan; or
(m) Entered into any other material commitment or
transaction not disclosed elsewhere herein or in the Company Disclosure
Schedule, other than in the ordinary course of business.
2.14 No Material Undisclosed Liabilities. To the knowledge of the
Company or the Shareholders, there is no liability or obligation of the Company
of any nature, whether absolute, accrued, contingent, or otherwise, other than:
(a) the liabilities and obligations that are fully
reflected, accrued, or reserved against on the Company Balance Sheet, for which
the reserves are appropriate and reasonable, or incurred in the ordinary course
of business and consistent with past practices since August 31, 1997;
(b) the loss contingencies set forth in Section 2.14 of
the Company Disclosure Schedule;
(c) contractual liabilities or obligations of a nature
not required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles, but which, if material, are disclosed
in Section 2.14 of the Company Disclosure Schedule; and
(d) other liabilities and loss contingencies which are
not material in the aggregate to the business, operations, assets or condition
(financial or otherwise) of the Company.
The Company is not a signatory to, and is not in any manner a
guarantor, endorser, assumptor or otherwise primarily or secondarily liable for
or responsible for the payment of, any notes payable other than those set forth
in Section 2.21 of the Company Disclosure Schedule.
2.15 Tax Liabilities. The Company has filed all material federal,
state, county, local, and foreign tax returns and reports required to be filed
by them, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise, use and sales
taxes, and has either paid in full all taxes that have become due as reflected
on any such return or report and any interest and penalties with respect
thereto or, as of August 31, 1997, it has fully accrued on its books or has
established adequate reserves for all taxes payable but not yet due, except
that at August 31, 1997 the unrecorded contingent liability of the Company with
respect to payroll,
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17
withholding, social security, unemployment, franchise, property, sales, use and
excise taxes did not exceed $37,500 in the aggregate for all such taxes. The
total of all payments made in 1996 and in 1997 for taxes, interest and
penalties of the Company for periods ended prior to November 1, 1996 have not
exceeded the accrued liability for such items shown on the Company Financial
Statements as of August 31, 1997 for periods ended October 31, 1996; the
Company has not, subsequent to October 31, 1996, accrued or set aside any
reserves on its books and records for any taxes, interest or penalties for any
period ended prior to November 1, 1996 nor has the Company made any payments in
1996 or 1997 of taxes, interest or penalties for periods ended prior to
November 1, 1996 that were not reflected in the accrued liability therefor
(including deferred taxes) shown on the Company Financial Statements as of
August 31, 1997 for periods ended October 31, 1996. There are no reserves
(other than for deferred taxes) reflected in the Company Financial Statements
as of August 31, 1997 for periods ended October 31, 1996 for taxes, interest or
penalties in excess of those shown to be due on any tax returns that have been
filed for any periods then ended. Except as disclosed on Section 2.15 of the
Company Disclosure Schedule, neither the Internal Revenue Service nor any other
taxing authority has audited or is in the process of auditing the tax returns
and reports of the Company, and no claim for additional taxes, interest, or
penalties for any fiscal year is pending. The Company has delivered to Tyler
true, complete and correct copies of (i) all federal and state income or
franchise tax returns for the Company for all periods ending on and after
October 31, 1994 and (ii) relevant portions of income and franchise tax
examination reports, statements of deficiencies, closing or other agreements
received by, assessed against or agreed to by the Company, relating to such
taxes, since October 31, 1994, if any. No extension or waiver of any statute of
limitations has been requested of or granted by the Company with respect to any
tax year, and no extension or waiver of time within which to file any tax
return has been requested by or granted to the Company except with respect to
tax returns not yet filed but otherwise due. No unsatisfied deficiency,
delinquency, or default for any tax, assessment, or governmental charge has
been claimed or assessed, or to the knowledge of the Company or the
Shareholders, proposed against the Company, nor has the Company received notice
of any such deficiency, delinquency, or default, for any tax period. Neither
the Company nor either Shareholder has any reason to believe that the Company
has any material contingent income tax liabilities other than those reflected
on the Company Balance Sheet and those arising in the ordinary course of
business since the date thereof, and those arising as a result of the
transactions contemplated hereby. The Company has not filed a consent under
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
concerning collapsible corporations. The Company has not made any material
payments, is not obligated to make any material payments, and is not a party to
any agreement that under certain circumstances could obligate it to make any
material payments that will not be deductible under Code Section 280G. The
Company is not a party to any tax allocation or sharing agreement. The Company
(i) has not been a member of an affiliated group filing a consolidated federal
income tax return and (ii) does not have any liability for the taxes of any
person under Treasury Reg. Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor, by contract, or otherwise.
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2.16 Title to Properties.
(a) The Company owns no real property.
(b) Except as disclosed in Section 2.16(b) of the Company
Disclosure Schedule and except as they have since been affected subsequent to
August 31, 1997 by transactions in the ordinary course of business and
consistent with past practices, and except for assets subject to financing
leases required to be capitalized under generally accepted accounting
principles which are reflected in the Company Balance Sheet or notes thereto,
the Company has good and marketable title to the assets reflected in the
Company Balance Sheet or otherwise on their books and records as being owned as
of August 31, 1997, or purchased by it since August 31, 1997, and to the assets
described in Section 2.20 below and to the following assets whether or not
reflected in the Company Balance Sheet or on such books and records:
The computer programs and applications software, in both object code
and source code form, and all documentation therefor (excluding operating
systems software leased by or licensed to the Company) utilized by the Company
in its business.
(c) The assets identified in subsection (b) above and the
assets described in Section 2.20 below are owned by or licensed to the Company
free and clear of any lien, claim or encumbrance except those disclosed in the
Company Balance Sheet or notes thereto or in Section 2.16(c) of the Company
Disclosure Schedule and except for:
(i) Liens for taxes, assessments, or
other governmental charges not yet delinquent, or the validity of which are
being contested in good faith by appropriate proceedings listed in Section
2.16(c) of the Company Disclosure Schedule;
(ii) Statutory liens incurred in the
ordinary course of business that are not yet delinquent, or the validity of
which are being contested in good faith by appropriate proceedings described in
Section 2.16(c) of the Company Disclosure Schedule;
(iii) The rights of customers of the
Company with respect to inventory or work in progress under purchase orders or
contracts entered into by the Company in the ordinary course of business;
(iv) Liens, claims, or encumbrances
consisting of leases of equipment to customers entered into in the ordinary
course of business;
(v) Liens, claims, or encumbrances
described in real estate title insurance binders or commitments, or abstracts
of title to real estate, furnished or to be furnished to Tyler in connection
with the transactions contemplated hereby, unless Tyler objects to the same in
writing within five business days after receipt of such title documents;
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(vi) Restrictions and constraints set
forth in the license agreements described in Section 2.20 of the Company
Disclosure Schedule; and
(vii) Other liens, claims, or encumbrances
that, in the aggregate, do not materially detract from the value of, or
materially interfere with the present use of, such assets.
(d) Except for those assets acquired since the date of
the Company Balance Sheet, all tangible properties and assets material to the
present operations of the Company are reflected on the Company Balance Sheet
and notes thereto in the manner and to the extent required by generally
accepted accounting principles. Immediately after the Closing, the Company will
own or lease or otherwise possess the rights to use all assets necessary to the
conduct of the business conducted by the Company immediately before the
Closing.
2.17 Condition of Tangible Assets. Except as set forth in Section
2.17 of the Company Disclosure Schedule, the tangible assets of the Company
which are material to the business, operations, assets or financial condition
of the Company, are in good condition and repair and, in the good faith belief
of each Shareholder, are adequate for the uses to which they are being put in
the ordinary course of their respective businesses.
2.18 Accounts Receivable. To the knowledge of the Company or the
Shareholders, all accounts receivable reflected in the Company Balance Sheet or
arising since August 31, 1997 either have been collected or are enforceable and
collectible claims not subject to any valid defense, offset, or credit, except
to the extent of any reserves established for doubtful accounts in a manner
consistent with such practices in prior periods and except as set forth in
Section 2.18 of the Company Disclosure Schedule.
2.19 Inventories. The Company has no inventories.
2.20 Patents, Trademarks, and Copyrights. Set forth in Section 2.20
of the Company Disclosure Schedule is a true and correct description of:
(a) all material trademarks, trade names, service marks,
patents, copyrights, and applications therefor and all license, royalty,
assignment, and other similar agreements relating to the foregoing currently
owned, in whole or in part, by the Company;
(b) all material agreements relating to technology, know-
how, or processes that the Company is licensed or authorized to use by others
or licenses or authorizes others to use; and
(c) all material trademarks, trade names, service marks,
patents, copyrights, and applications therefor and other similar and intangible
intellectual property and all license, royalty, assignment, and other similar
agreements relating to the foregoing and all material agreements
13
20
relating to technology, know-how, or processes used in connection with the
business of the Company.
Except to the extent set forth in Section 2.20 of the Company Disclosure
Schedule, the Company has, to the knowledge of the Company and each
Shareholder, the sole and exclusive right to use the patents, trademarks, trade
names, copyrights, service marks, technology, know-how, and processes
identified in such Section 2.20 without infringing or violating the rights of
any other person, and to the knowledge of the Company and each Shareholder no
consent of third parties will be required for the use thereof by the Company
upon consummation of the Merger and there are no past due or delinquent license
fees, rents, royalties, or other charges that the Company is required or
obligated to pay with respect to any of the foregoing. Except as disclosed in
Section 2.20 of the Company Disclosure Schedule, no claim has been asserted by
any person to the ownership of or right to use any such patent, trademark,
trade name, copyright, service xxxx, technology, know-how, or process or
challenging or questioning the validity or effectiveness of any such license or
agreement, and the Company knows of no valid basis for any such claim. To the
knowledge of the Company and each Shareholder, except as disclosed in Section
2.20 of the Company Disclosure Schedule, each of the foregoing is valid and
subsisting, has not been canceled, abandoned, or otherwise terminated, and, if
applicable, has been duly issued or filed.
2.21 Contracts. Set forth in Section 2.21 of the Company Disclosure
Schedule are complete and accurate lists of the following contracts and
commitments (including summaries of oral contracts) to which the Company is a
party or bound:
(a) Contracts with any labor union;
(b) Employee benefit plans or contracts;
(c) Employment or similar contracts, including
confidentiality agreements and agreements to assign inventions, patents and
copyrights, and consulting agreements (other than those entered into in the
ordinary course of business);
(d) Leases, whether as lessor or lessee, involving annual
rental payments in excess of $7,500, that are not terminable at will or upon
notice of 30 days or less by the Company;
(e) Loan agreements, mortgages, indentures, instruments
of indebtedness or commitments involving indebtedness for borrowed money or
money loaned to others in excess of $7,500, but excluding intercompany items;
(f) Guaranty or suretyship, performance bond,
indemnification, or contribution agreements involving obligations in excess of
$7,500, but excluding intercompany items;
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(g) Contracts with customers or suppliers that involve
aggregate payments to or by the Company of more than $15,000, and that are not
terminable at will or upon notice of 90 days or less by the Company;
(h) Distribution, marketing, dealership, sales, or agency
agreements material to the Company that are not terminable at will or upon
notice of 30 days or less by the Company;
(i) Joint venture, partnership, or other agreements
evidencing an ownership interest or a participation in or sharing of profits;
(j) Contracts containing noncompetition covenants,
covenants to register securities, or negative or restrictive financial
covenants that are not terminable at will or upon notice of 30 days or less by
the Company;
(k) Voting agreements relating to securities of the
Company (whether or not the Company is a party thereto);
(l) Insurance policies involving annual premium payments
of more than $750;
(m) Powers of attorney; and
(n) Contracts between the Company and any of the
Shareholders, their spouses or any affiliates or relatives thereof; and
(o) Other contracts not made in the ordinary course of
business or that, in the reasonable judgment of the Shareholders, are material
to the businesses, operations, assets, or financial condition of the Company.
No contract or commitment listed in Section 2.21 of the Company Disclosure
Schedule has been amended or modified or the rights and obligations evidenced
thereby otherwise affected in a manner materially adverse to the Company,
except by an instrument which is also included in such listing, and each
contract or commitment, as so amended, modified or affected, contains all
material provisions with respect to the subject matter thereof. The Company and
the Shareholders have furnished or made available to Tyler accurate and
complete copies of all of the contracts, commitments or instruments listed in
Section 2.21 of the Company Disclosure Schedule. Except as set forth in Section
2.21 of the Company Disclosure Schedule or with respect to contracts not
material to the businesses, operations, assets or financial condition of the
Company, (i) to the knowledge of the Company and the Shareholders, all such
contracts are valid, binding, subsisting, and enforceable in all material
respects; (ii) to the knowledge of the Company and the Shareholders and in
their good faith belief the Merger will not affect the continuance in full
force and effect of such contracts; and (iii) there is no material dispute
among the parties to any such contract and no material penalty has been
incurred with respect thereto. Neither the Company nor any Shareholder
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has received notice of any plan or intention of any other party to any such
contract or agreement to exercise any right to cancel or terminate any such
contract or agreement, and neither the Company nor any Shareholder knows of any
fact that would justify the exercise of such right. Neither the Company nor any
Shareholder currently contemplates, or has any reason to believe any other
person or entity currently contemplates, any amendment or change to any of the
contracts or agreements referred to in Section 2.21 of the Company Disclosure
Schedule. Except as disclosed in Section 2.21 of the Company Disclosure
Schedule, none of the Company's customers or suppliers, that during the fiscal
year ended October 31, 1996 accounted for as much as 2% of consolidated sales
or purchases of the Company, has refused, or communicated that it will or may
refuse, to purchase or supply goods or services, as the case may be, or has
communicated that it will or may substantially reduce the amount of goods or
services that it is willing to purchase from, or sell to, the Company after the
date hereof.
2.22 Litigation and Claims. Except as described in Section 2.22 of
the Company Disclosure Schedule, neither the Company nor any Shareholder is a
party to, and the businesses or assets of the Company are not the subject of or
affected by, any pending or to the knowledge of the Company or any Shareholder,
threatened suit, claim, action, or litigation with any party or any
administrative, arbitration, or other governmental proceeding, investigation,
or inquiry, or any pending change in any regulations, statutes or ordinances,
which would, severally or in the aggregate, have a material adverse effect on
the businesses, results of operations, assets, or the condition (financial or
otherwise) of the Company. Except as described in Section 2.22 of the Company
Disclosure Schedule, to the knowledge of the Company or any Shareholder, no
suit, claim, action or demand is currently pending, has been made or filed, or
is or has been threatened or contemplated by any person or entity, and there
exists no judgment or order (whether or not the Company is a party to any of
the foregoing) regarding or affecting the ownership, disclosure, copying,
possession or utilization by the Company of the assets reflected in the books
and records of the Company.
2.23 Judgments, Decrees, and Orders in Restraint of Business. The
Company is not a party to or subject to any judgment, order, or decree entered
in any suit or proceeding brought by any governmental agency or by any other
person enjoining it in respect of any business practice or the acquisition of
any property or the conduct of its business.
2.24 No Violation of Any Instrument. Except as disclosed in Section
2.24 of the Company Disclosure Schedule, the Company is not in violation of or
default under nor, to the knowledge of the Company or any Shareholder, has any
event occurred that, with or without the giving of notice, lapse of time or the
occurrence of any other event, would constitute a violation of or default
under, or permit the termination or the acceleration of maturity of, or result
in the imposition of a lien, claim, or encumbrance upon any property or asset
of the Company pursuant to, the articles or certificate of incorporation or
bylaws of the Company or any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, loan or lease agreement, or other agreement or
instrument (including with customers) listed or required to be listed in
Section 2.21
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of the Company Disclosure Schedule, or any judgment, order, injunction, or
decree, to which it is a party, by which it is bound, or to which any of its
assets is subject, which would have a material adverse effect on the
businesses, operations, assets or financial condition of the Company.
2.25 Compliance With Laws. The Company is substantially in
compliance with all laws applicable to their businesses, where failure so to
comply would have a material adverse effect on the businesses, operations,
assets, prospects, or financial condition of the Company.
2.26 Compensation and Benefit Plans.
(a) Section 2.26 of the Company Disclosure Schedule
includes a complete and accurate list of all pension, profit sharing, Section
401(k), thrift-savings, simplified employee pension, excess benefit plan,
deferred compensation, incentive compensation, stock bonus, stock option,
restricted stock, cash bonus, employee stock ownership, severance pay, golden
parachute, cafeteria, flexible compensation, life insurance, medical, dental,
disability, welfare, or vacation plans or arrangements of any kind and any
other Employee Pension Benefit Plan or Employee Welfare Benefit Plan (as such
terms are defined in the Employee Retirement Income Security Act of 1974, as
amended "ERISA") in which employees or former employees of the Company
participate (collectively, the "Benefit Plans").
(b) The Company does not participate currently in and has
never participated in, and is not required currently to and has never been
required to contribute to or otherwise participate in, any "multi-employer
plan," as defined in Sections 3(37)(A) and 4001(a)(3) of ERISA and Section
414(f) of the Code. The Company does not participate currently in and has never
participated in, and is not required currently to and has never been required
to contribute to or otherwise participate in, any plan, program or arrangement
subject to Title IV of ERISA.
(c) No former employee of the Company is entitled, and
no current employee will be entitled after termination of employment, to
participate in any Employee Welfare Benefit Plan as defined in ERISA, other
than participation required to be permitted by the Company under Section 4980B
of the Code and Sections 601 to 609 of ERISA.
(d) The Company and the Shareholders have delivered to
Tyler true, correct and complete copies of the Benefit Plans and each
applicable summary plan description and the most recent Form 5500s applicable
to such Benefit Plans. Section 2.26 of the Company Disclosure Schedule sets
forth the costs attributable to each Benefit Plan determined on an annual
basis. Except as reflected or reserved against on the Company Balance Sheet,
there is no unfunded liability with respect to any Benefit Plan. None of the
assets of the Company's Benefit Plans are invested in any property constituting
employer real property or employer security within the meaning of Section
407(d) of ERISA.
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(e) Each Employee Pension Benefit Plan sponsored,
maintained or contributed to by the Company is qualified under Section 401(a)
of the Code; all related trusts are exempt from federal income tax under
Section 501(a) of the Code; each such plan has received a determination letter
from the IRS stating that the plan is qualified under Section 401(a) of the
Code and all related trusts are exempt from federal income tax under Section
501(a) of the Code (which determination letter includes all statutory and
regulatory provisions of the Tax Reform Act of 1986 and subsequent legislation
for which a determination letter may be obtained); and to the knowledge of the
Company, nothing has occurred since the date of the last such determination
which resulted in, or is likely to result in, the revocation of such
determination. A copy of the latest determination letter applicable to any
Employee Pension Benefit Plan has been delivered to Tyler.
(f) Each of the Benefit Plans has been administered in
material compliance with its underlying documentation, the requirements of
ERISA, the Code and all other applicable laws. All returns required to be made
under ERISA and the Code with respect to the Benefit Plans have been timely
filed and the Company has made all contributions required under the terms of
any Benefit Plan (including, but in no way limited to, employer matching
contributions and non-elective contributions and the deposit of elective
deferrals as such terms are defined in the Code) for all periods through and
including the date hereof.
(g) To the knowledge of the Company, there are not now,
nor have there ever been, any transactions involving the Benefit Plans or any
fiduciary or administrator thereof which are prohibited under ERISA or the Code
or for which an individual, class or statutory exemption is not available.
(h) There are no pending or, to the knowledge of the
Company, any threatened claims by or on behalf of the Benefit Plans, the United
States Department of Labor, the Internal Revenue Service, or any current or
former employee of the Company or beneficiary of such current or former
employee alleging a breach of any fiduciary duties or a violation of applicable
state or federal law which could result in liability on the part of the
Company, or a Benefit Plan under ERISA or any other law, nor, to the knowledge
of the Company, is there any basis for such a claim and neither the Company,
nor, to the knowledge of the Company, any administrator or fiduciary of any
Benefit Plan (or agent of the foregoing) has engaged in any transaction or
acted or failed to act in any manner which would subject the Company to any
liability for a breach of fiduciary duty under ERISA. The transactions
contemplated by this Agreement (either alone or together with any other event)
will not (i) terminate or modify the provisions of any Benefit Plan or (ii)
trigger an event under any Benefit Plan or employer benefit arrangement or law
that will result in any payment (whether of severance pay or otherwise)
becoming due from the Company.
2.27 Labor Relations.
(a) To the knowledge of the Company or the Shareholders,
the Company (i) is in substantial compliance with all applicable laws
respecting employment and employment
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practices, terms and conditions of employment (including occupational health
and safety), nondiscrimination, and wages and hours and (ii) are not engaged in
any unfair labor practice, that in any such case would have a material adverse
effect on the businesses, operations, assets or financial condition of the
Company.
(b) Except as disclosed in Section 2.27 of the Company
Disclosure Schedule, there is no unfair labor practice complaint against
Company pending or, to the knowledge of the Company or any Shareholder,
threatened before the National Labor Relations Board.
(c) There is no strike, labor dispute, slowdown,
stoppage, or other material interference with or impairment by labor of the
business of the Company actually pending or, to the knowledge of the Company or
any Shareholder, threatened or contemplated against or directly affecting the
Company.
(d) To the knowledge of the Company or the Shareholders,
no question of union representation exists respecting the employees of the
Company and no union organizing activities are taking place.
(e) Since August 31, 1997, no key employees of the
Company have been terminated or have resigned their employment.
2.28 Adequate Insurance. The Company maintains insurance coverage
that the Company and the Shareholders believe is reasonably adequate to protect
the assets and operations of the Company, and is sufficient for material
compliance with all requirements of law and all agreements to which the Company
is a party. No notice of any termination or threatened termination of such
policies has been received by the Company and, to the knowledge of the Company
or the Shareholders, such policies are valid, binding, and enforceable.
2.29 Contracts with Affiliates and Others. Except as set forth in
Section 2.29 of the Company Disclosure Schedule, no director or officer of the
Company, nor any person who is a spouse or descendant of such director or
officer, has any direct or indirect relationship with any customer or supplier
of, or other contracting party with, the Company (other than as a director,
officer, or shareholder of the Company) that would be required to be disclosed
in a proxy statement relating to the election of directors filed under the
Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx").
2.30 Revenue Recognition. The Company has not recognized and does
not recognize revenues from customers in advance of performing the services or
furnishing the products for which the revenues were or are received.
2.31 Certain Fees. Except as disclosed in Section 2.31 of the
Company Disclosure Schedule, neither the Company nor any officer, director, or
employee of the Company has employed
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any broker or finder or incurred any liability for any brokerage fees,
commissions, or finders' fees in connection with the transactions contemplated
hereby. Tyler recognizes and acknowledges that, subject to the Company's
satisfaction of the representation and warranty in Section 2.13(b) hereof, the
fees shown in Section 2.31 of the Company Disclosure Schedule shall be paid by
the Company at Closing.
2.32 Environmental Matters. To the knowledge of the Company or the
Shareholders:
The Company and its property (whether real, personal, owned, leased, managed or
operated) (collectively, "Business Facilities") are in compliance with
applicable laws, rules, regulations, ordinances, orders or guidance documents
now in effect of any applicable governmental authority or any judicial or
administrative decision relating thereto that relate in any manner to health,
Materials of Environmental Concern, the environment, or a community's right to
know (collectively, Environmental Laws"). There are no Materials of
Environmental Concern on any Business Facility in any quantity or concentration
exceeding any limitation or standard established pursuant to Environmental
Laws. There are no actual or threatened claims, demands, allegations, actions,
suits, investigations, notices, or proceedings against or relating to the
Company or any of its Business Facilities relating to or arising out of the
use, presence, or handling of Materials of Environmental Concern or compliance
with Environmental Laws (collectively, "Environmental Claims"), and there is no
basis for any such Environmental Claims. There are no events, conditions,
circumstances, facts, activities, practices, incidents or plans relating to or
arising out of the operations of the Company which will prevent or interfere
with compliance with Environmental Laws by Tyler after the Closing, or which
may give rise to any common law or statutory liability under Environmental Laws
or form the basis of an Environmental Claim against the Company, or any of
their respective Business Facilities.
"Materials of Environmental Concern" means: (i) those
substances included within the statutory and/or regulatory definitions of
"hazardous substance," "hazardous waste," "extremely hazardous substance,"
"regulated substance," "hazardous materials," or "toxic substances," under any
Environmental Law; (ii) any material, waste or substance which is or contains:
(A) petroleum, oil or a fraction or constituent thereof, (B) asbestos, (C)
polychlorinated biphenyls, (D) formaldehyde, (E) explosives, or (F) radioactive
materials (including NORM); (iii) solid wastes (as defined under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., and its
implementing regulations) that post imminent and substantial endangerment to
health or the environment; (iv) any material, waste or substance designated
classified or regulated as a "Class I" or "Class II" waste under Title 30 of
the Texas Administrative Code; and (v) such other substances, materials, or
wastes that are or become classified or regulated as hazardous or toxic under
any applicable federal, state or local law or regulation. To the extent that
the laws or regulations of any applicable state or local jurisdiction establish
a meaning for any term defined herein through reference to federal
Environmental Laws which is broader than the meaning under such federal
Environmental Laws, such broader meaning shall apply.
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2.33 Accuracy of Information Furnished. No representation or
warranty by the Company or the Shareholders in this Agreement (including the
Company Disclosure Schedule) or any other agreement or document executed or to
be executed by the Company or the Shareholders in connection herewith contains
or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary to make the statements herein or therein,
in light of the circumstances under which they were made, not false or
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF XXXXX
Xxxxx and Sub jointly and severally represent and warrant to the
Company and the Shareholders as follows:
3.1 Organization and Good Standing of Tyler. Tyler is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas.
3.2 Foreign Qualification. Tyler is duly qualified or licensed to
do business as a foreign corporation and in good standing in those
jurisdictions set forth in Section 3.2 of the schedule delivered by Tyler
concurrently with the execution of this Agreement (the "Tyler Disclosure
Schedule"). Tyler is duly qualified or licensed to do business as a foreign
corporation in every jurisdiction where the failure so to qualify would have a
material adverse effect on the businesses, operations, assets, or financial
condition of Tyler and the Tyler Subsidiaries (as defined in Section 3.7),
taken as a whole. For purposes of this Section 3.2, no material adverse affect
shall be deemed to have occurred as a result of non-payment of state or local
franchise taxes not exceeding $37,500 in the aggregate.
3.3 Power and Authority to Conduct Business. Each of Tyler and Sub
has the corporate power and authority, and possess all licenses and permits,
required by governmental authorities to own, lease, and operate its properties
and assets and to carry on its business as currently being conducted, except
where the failure to possess such license or permit does not and would not have
a material adverse effect on the business, operations, assets or financial
condition of Tyler and the Tyler Subsidiaries, taken as a whole.
3.4 Authority to Consummate Merger. Each of Tyler and Sub has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the other agreements or documents executed or required
to be executed by it in connection with this Agreement and, subject to
obtaining the approval of the stockholders of Tyler, the execution, delivery
and performance by each of Tyler and Sub of this Agreement and the other
documents executed or to be executed by it in connection with this Agreement
have been duly authorized by all necessary corporate action.
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3.5 Binding Effect. This Agreement and the other documents
executed or required to be executed by Tyler or Sub in connection with this
Agreement have been or will have been duly executed and delivered by Tyler or
Sub and are or will be, when executed and delivered, the legal, valid, and
binding obligations of Tyler or Sub executing the same, enforceable in
accordance with their terms except that:
(a) enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be
limited by equitable principles of general applicability; and
(c) rights to indemnification under Section 10.5 may be
limited by considerations of public policy.
3.6 Compliance with Other Instruments. Subject to obtaining the
approval of the stockholders of Tyler and except as disclosed in Section 3.6 of
the Tyler Disclosure Schedule, neither the execution and delivery by Tyler or
Sub of this Agreement or the other agreements or documents executed or required
to be executed by Tyler or Sub in connection herewith, nor the consummation by
Tyler or Sub of the transactions contemplated hereby and thereby will (i)
conflict with the articles of incorporation or bylaws of Tyler or Sub, (ii)
assuming satisfaction of the requirements set forth in clause (iii) below,
violate any provision of law applicable to Tyler or any of the Tyler
Subsidiaries; (iii) except for (A) requirements arising out of the HSR Act, (B)
requirements of federal and state securities laws, and (C) the filing of
articles of merger in accordance with the TBCA, require any consent,
authorization, permit, license or approval of, or declaration, registration or
filing with or notice to, any person or governmental body or authority,
domestic or foreign, under any provision of law applicable to Tyler or any of
the Tyler Subsidiaries; or (iv) require any consent, approval or notice under,
violate, breach, be in conflict with, or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under,
or permit the termination or the acceleration of maturity of, or result in the
imposition of any lien, claim, or encumbrance upon any property or asset of
Tyler or any Tyler Subsidiary pursuant to any note, bond, indenture, mortgage,
deed of trust, evidence of indebtedness, loan or lease agreement, other
agreement or instrument or any judgment, order, injunction, or decree by which
Tyler or any Tyler Subsidiary is bound, to which any of them is a party, or to
which any of their assets is subject, except for those violations and breaches
that would not have a material adverse effect on the businesses, operations,
assets or financial condition of Tyler and the Tyler Subsidiaries, taken as a
whole.
3.7 Capitalization of Tyler.
(a) The authorized capital stock of Tyler consists of
50,000,000 shares of Tyler Common Stock, and 1,000,000 shares of preferred
stock, par value $10.00 per share ("Tyler
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Preferred Stock"), of which 22,007,921 shares of Tyler Common Stock and no
shares of Tyler Preferred Stock were issued and outstanding as of September 30,
1997 and 1,301,356 shares of Common Stock were held in treasury. All of the
issued and outstanding shares of Tyler Common Stock have been duly authorized
and are validly issued and are fully paid and nonassessable. There are no
shares of the capital stock of Tyler held in its treasury or in the treasury of
any corporation of which Tyler is the record or beneficial owner, directly or
indirectly, of 50% or more of the capital stock (each such corporation being
referred to as a "Tyler Subsidiary"). The shares of Tyler Common Stock to be
issued in the Merger, when issued and delivered, will be duly authorized,
validly issued, fully paid, and nonassessable.
(b) As of the date hereof, the authorized capital stock
of Sub consists of 1,000 shares of common stock, par value $0.01 per share, all
of which are validly issued, fully paid and nonassessable and are owned by
Tyler.
(c) Except as described in Section 3.7 of the Tyler
Disclosure Schedule and in the Tyler Financial Statements (as hereinafter
defined), there is no outstanding subscription, contract, convertible or
exchangeable security, option, warrant, call, or other right obligating Tyler
or any Tyler Subsidiary to issue, sell, exchange, or otherwise dispose of, or
to purchase, redeem, or otherwise acquire shares of, or securities convertible
into or exchangeable for, capital stock of Tyler.
3.8 Commission Filings; Financial Statements. Section 3.8 of the
Tyler Disclosure Schedule lists all reports, registration statements and other
filings, together with any amendments required to be made with respect thereto,
that Tyler has filed with the Securities and Exchange Commission (the
"Commission")under the Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act since October 1, 1995. All reports, registration
statements and other filings filed by Tyler with the Commission since October
1, 1995 through the date of this Agreement, together with any amendments
thereto, are sometimes collectively referred to as the "Tyler Commission
Filings." Tyler has heretofore provided the Company and the Shareholders true,
correct and complete copies of the Tyler Commission Filings. As of the
respective dates of their filing with the Commission, the Tyler Commission
Filings complied in all material respects with the Securities Act, the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
Each of the consolidated financial statements (including any related
notes or schedules) included in or incorporated by reference into the Tyler
Commission Filings ("Tyler Financial Statements") was, and each of the
consolidated financial statements to be included in the Proxy Statement (as
defined in Section 6.2) (except for those financial statements of the Company
furnished by or on behalf of the Company or the Shareholder to Tyler
specifically for use therein) will be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
noted therein or in the notes or schedules thereto), and fairly
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present or will fairly present, as the case may be, the consolidated financial
position of Tyler and its consolidated subsidiaries as of the dates thereof and
the results of operations, cash flows and changes in stockholders' equity for
the periods then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments). Since December 31, 1996,
there has been no change in accounting principles applicable to, or methods of
accounting utilized by, Tyler and the books and records of Tyler and the Tyler
Subsidiaries have been and are being maintained in accordance with all
applicable legal and accounting requirements and good business practice,
reflect only valid transactions, are complete and correct in all material
respects, and accurately reflect in all material respects the basis for the
consolidated financial position and consolidated results of operations and cash
flows of Tyler and its consolidated subsidiaries set forth in the Tyler
Financial Statements.
3.9 Absence of Certain Changes. Since June 30, 1997, Tyler has not
(except as contemplated by this Agreement or as may result from the
transactions contemplated by this Agreement or as described in the Tyler
Disclosure Schedule):
(a) suffered any change in its business, results of
operations, working capital, assets, liabilities, or financial condition or the
manner of conducting its business other than changes that, individually or in
the aggregate, have not had a material adverse effect on the businesses,
operations, assets or financial condition of Tyler and the Tyler Subsidiaries,
taken as a whole;
(b) entered into any material commitment or transaction
other than in the ordinary course of business;
(c) written up, written down, or written off the book
value of any material amount of assets;
(d) declared, paid, or set aside for payment any
dividend or distribution with respect to the capital stock of Tyler; or
(e) redeemed, purchased, or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of the capital
stock or securities of Tyler or any rights to acquire such capital stock or
securities, other than normal or periodic purchases, sales and grants under
provisions of existing employee benefit plans and programs of Tyler.
3.10 No Material Undisclosed Liabilities. To the knowledge of
Tyler, there is no liability or obligation of Tyler and the Tyler Subsidiaries
of any nature, whether absolute, accrued, contingent, or otherwise, other than:
(a) the liabilities and obligations that are fully
reflected, accrued, or reserved against in the unaudited consolidated balance
sheet of Tyler and its consolidated subsidiaries as of
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June 30, 1997, for which the reserves are appropriate and reasonable, or
incurred in the ordinary course of business and consistent with past practices
since June 30, 1997;
(b) the loss contingencies set forth in Section 3.10 of
the Tyler Disclosure Schedule;
(c) contractual liabilities or obligations of a nature
not required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles; and
(d) other liabilities and loss contingencies which are
not material in the aggregate to the business, operations, assets or financial
condition of Tyler and the Tyler Subsidiaries, taken as a whole.
3.11 Litigation and Government Claims. Except as described in
Section 3.11 of the Tyler Disclosure Schedule, neither Tyler nor any Tyler
Subsidiary is a party to, and the business or assets of Tyler and the Tyler
Subsidiaries are not the subject of, any pending or, to the knowledge of Tyler,
threatened suit, claim, action, or litigation with any party, or any
administrative, arbitration, or other governmental proceeding, investigation,
or inquiry, in which the amount involved and not covered by insurance exceeds
$250,000. In the opinion of Tyler and its management, none of such pending or
threatened matters would, severally or in the aggregate, have a material
adverse effect on the business, operations, assets or financial condition of
Tyler and the Tyler Subsidiaries, taken as a whole.
3.12 No Violation of Any Instrument. Except as disclosed in Section
3.12 of the Tyler Disclosure Schedule, neither Tyler nor any Tyler Subsidiary
is in violation of or default under nor, to the knowledge of Tyler, has any
event occurred that, with the lapse of time or the giving of notice or both,
would constitute a violation of or default under, or permit the termination or
the acceleration of maturity of, or result in the imposition of a lien, claim,
or encumbrance upon any property or asset of Tyler or any Tyler Subsidiary
pursuant to the articles or certificate of incorporation or bylaws of Tyler or
any Tyler Subsidiary or any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, loan or lease agreement, or other agreement or
instrument or any judgment, order, injunction, or decree to which it is a
party, by which it is bound, or to which any of its assets is subject, which
would have a material adverse effect on the business, operations, assets or
financial condition of Tyler and the Tyler Subsidiaries, taken as a whole.
3.13 Certain Fees. Neither Tyler nor any officer, director, or
employee of Tyler has employed any broker or finder or incurred any liability
for any brokerage fees, commissions, or finders' fees in connection with the
transactions contemplated hereby.
3.14 No Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
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3.15 Accuracy of Information Furnished. No representation or
warranty by Tyler or Sub in this Agreement (including the Tyler Disclosure
Schedule) or any other agreement or document executed or to be executed by
Tyler or Sub in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not false or misleading.
ARTICLE 4
JOINT COVENANTS OF THE COMPANY, THE SHAREHOLDERS AND TYLER
4.1 Access; Confidentiality.
(a) During the period pending the Closing Date, the
Company shall afford to Tyler and its officers, employees, accountants,
counsel, and other authorized representatives, full access to and the right to
review and make copies of the Company's assets, properties, books, contracts,
commitments, and records, view their physical properties, and communicate with
the key employees of the Company on a basis reasonably satisfactory to the
Company, and will furnish and cause representatives to furnish promptly to
Tyler such additional financial and operating data and other documents and
information (certified if requested and reasonably susceptible to
certification) relating to the Company's businesses and properties as Tyler or
its duly authorized representatives may from time to time reasonably request.
(b) During the period pending the Closing Date, Tyler
shall afford to the Company and the Shareholders and their accountants, counsel
and other authorized representatives the same rights of access to and
inspection of the books, records, properties, contracts and personnel of Tyler
as those afforded to Tyler and its representatives in Section 4.1(a) above.
(c) Notwithstanding any such investigation by Tyler, the
Company, or the Shareholders, or any information obtained pursuant thereto, it
or he shall be entitled to rely in full upon the accuracy of the
representations and warranties of the other party or parties contained in this
Agreement and upon its or his representations at Closing as to compliance with
or performance of any covenants made by it or him in this Agreement. Tyler, the
Company, or the Shareholders shall have no obligation to investigate any such
matters and, if any such matters are investigated, shall have no obligation to
the other party or parties with respect to information obtained thereby except
as provided in Section 12.1 of this Agreement.
(d) The rights and obligations of the Shareholders, the
Company and Tyler pursuant to the Confidentiality Agreement (the
"Confidentiality Agreement") dated September 17, 1997 by and among the
Shareholders, the Company and Tyler will survive the execution and delivery of
this Agreement, and all information obtained by the Shareholders, the Company
and
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Tyler or any of their respective Representatives (as defined in the
Confidentiality Agreement) pursuant hereto shall be deemed "Information" as
that term is defined in the Confidentiality Agreement, and shall be subject to
the provisions of the Confidentiality Agreement, except to the extent that
Tyler is advised by counsel that disclosure of any such Information, including
the existence of the Confidentiality Agreement, is required by law in
connection with the Merger.
4.2 Notice of any Material Change. Each of the Company and Tyler
shall, promptly after the first notice or occurrence or failure to occur
thereof but not later than the Closing Date, supplement or amend its Disclosure
Schedule to disclose the occurrence of any event or the existence of any state
of facts that would:
(a) make any of its representations and warranties in
this Agreement untrue in any material respect or constitute a material failure
of such party to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder;
(b) make it necessary to amend the Proxy Statement in
order to render the statements therein not misleading or to comply with
applicable law; or
(c) otherwise constitute a material adverse change in the
respective businesses, results of operations, working capital, assets,
liabilities or condition (financial or otherwise) of Tyler and the Tyler
Subsidiaries, taken as a whole, or the Company. Subject to the provisions of
Section 12.1 of this Agreement, no supplement or amendment to any Disclosure
Schedule shall have any effect for the purpose of determining the satisfaction
of or compliance with the conditions to the obligations of the parties set
forth elsewhere in this Agreement.
4.3 Monthly Financial Statements. During the period pending the
Closing Date, each of Tyler and the Company shall furnish to the other its
unaudited consolidated balance sheet and related statements of operations,
stockholders' equity, and cash flows and any supporting schedules for the
accounting periods ending on or about the last day of each such month, promptly
after they are available, but not later than 30 days after the close of such
accounting period.
4.4 Antitrust Notification. Within 10 days after the date hereof,
Tyler and the Company shall each file with the Federal Trade Commission ("FTC")
and the Antitrust Division of the U.S. Department of Justice ("DOJ") any
Notification and Report Form required to be filed pursuant to the HSR Act, and
shall timely supply any supplemental information that may be reasonably
requested by the FTC or DOJ in connection therewith. The Company and Tyler
shall furnish to each other such necessary information and reasonable
assistance as the other party may request in connection with the preparation of
its respective necessary submissions under the HSR Act. The Company and Tyler
shall furnish to each other copies of all correspondence, filings, or
communications (or memoranda setting forth the substance thereof), between them
or their representatives and the FTC or DOJ.
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4.5 Tax Matters.
(a) Each Shareholder and the Company shall prepare and
timely file all tax returns and amendments thereto required to be filed by the
Company on or before the Closing Date. Tyler shall have a reasonable
opportunity to review all such tax returns of the Company and amendments
thereto.
(b) Tyler or the Surviving Corporation, as appropriate,
shall prepare and file all tax returns of the Company that are due to be filed
after the Closing Date and relate to tax periods of the Company ending on or
before the Closing Date and shall pay all income taxes shown on such returns as
due and owing. The Shareholders shall reimburse Tyler for taxes of the Company
with respect to such periods within fifteen (15) days after payment by Tyler or
the Company of such taxes to the extent such taxes are not reflected in the
reserve for tax liability (other than any reserve for deferred taxes
established to reflect timing differences between book and tax income) shown on
the face of the Company Balance Sheet at Closing.
(c) Each Shareholder covenants and agrees that he will be
fully responsible for, and indemnifies and holds harmless Tyler and the Company
from and against, any and all claims, demands, losses, obligations and
liabilities for income taxes of the Company, any penalties and interest with
respect thereto, and any costs and expenses (including reasonable attorneys'
and accountants' fees) of Tyler or the Company incurred as an incident thereto,
relating to tax periods of the Company ending on or before the Closing Date.
Tyler agrees that each Shareholder shall have the sole right to contest,
resolve and defend, at his cost, against any assessment for additional income
taxes, notice of income tax deficiency or other adjustment of income taxes of
the Company made or proposed by any taxing authority for such periods. Each
Shareholder shall be entitled to retain such tax representatives, subject to
the consent of Tyler (which shall not be unreasonably withheld), as he selects
to represent him in resolving any such income tax controversies or disputes for
tax periods ending on or before the Closing Date, and Tyler or the Company, as
appropriate, shall execute and deliver powers of attorney, limited to such tax
periods, in favor of each Shareholder or his tax representatives as necessary
to effectuate the provisions of this Section 4.5.
(d) Subject to Closing, and specifically reserving any
rights or remedies Tyler or the Surviving Corporation may have for breach of
the representations and warranties of Shareholders contained in Article 2 of
this Agreement, Tyler covenants and agrees that either it or the Surviving
Corporation, as appropriate, will be fully responsible for, and Tyler
indemnifies and holds harmless each Shareholder from and against, any and all
claims, demands, losses, obligations and liabilities for income taxes of the
Surviving Corporation, any penalties and interest with respect thereto, and any
costs and expenses (including reasonable attorneys' and accountants' fees) of
each Shareholder incurred as an incident thereto, relating to tax periods of
the Surviving Corporation ending after the Closing Date; such responsibility of
and indemnity by Tyler shall include the amounts of any and all tax
consequences or liabilities attributable to any election by Tyler or the
Surviving Corporation after the Closing to change the tax accounting methods
utilized by the
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Company applicable to tax periods ending after the Closing Date. Each
Shareholder agrees that Tyler or the Surviving Corporation, as appropriate,
shall have the sole right to contest, resolve and defend, at its cost, against
any assessment for additional income taxes, notice of income tax deficiency or
other adjustments of income taxes of the Surviving Corporation made or proposed
by any taxing authority for tax periods ending after the Closing Date.
(e) All parties hereto agree if requested to reasonably
cooperate with one another and assist in the settlement, compromise, defense or
other disposition of any assessments for additional taxes, notices of
deficiency, proposed adjustments or other income tax disputes or controversies
by or with taxing authorities relating to the Company. Tyler or the Surviving
Corporation, as appropriate, will provide to each Shareholder or his tax
representatives prompt written notification and copies of any communications
from or to any taxing authority received or made by either of them relating to
income tax liabilities of the Company for any tax periods ended on or before
the Closing Date. Each Shareholder or his tax representatives will provide to
Tyler prompt written notification and copies of any communications from or to
any taxing authority received or made by either of them relating to income tax
liabilities of the Company. Subsequent to any such notice, Tyler and each
Shareholder shall keep the other fully advised of the status and developments
with respect to such proposed or asserted income tax liability, and of the
terms of any settlement or other final resolution thereof. Failure by any party
to notify any other party, as provided herein, shall not relieve the party
otherwise entitled to such notice from its obligations contained in this
Section 4.5 of this Agreement; provided, however, that the party entitled to
such notice may pursue other remedies available to it at law or in equity for
breach, if any, of the covenant to notify contained herein.
(f) No Shareholder shall, in any capacity, agree to any
audit adjustments by a taxing authority, or settle, compromise or otherwise
agree to a resolution of any dispute or controversy, with respect to the income
tax liability of the Company if the effect of the adjustment or the terms of
the settlement increases the income tax liabilities (including loss of carry
forwards) of the Company:
(i) for the taxable period commencing on
November 1, 1996 and ending on the Closing Date to an amount that, when added
to the income taxes paid for such period by Tyler or the Company in accordance
with Section 4.5(b) above (excluding the amount of any such income tax
liability attributable to any election by Tyler or the Company after the
Closing to change tax accounting methods utilized by the Company applicable to
tax periods ending on or after November 1, 1996) exceeds the tax liability
(excluding deferred taxes) accrued on the books and records of the Company for
the period commencing November 1, 1996 and ending on the Closing Date; or
(ii) for taxable periods commencing after
the Closing Date (but including the amount of any such income tax liability
attributable to any election by Tyler or the Company after the Closing to
change tax accounting methods utilized by the Company applicable
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to tax periods ending on or after November 1, 1996), unless the Shareholder or
his tax representatives shall have in advance thereof consulted with Tyler and
shall have agreed on mutually acceptable terms to pay to Tyler or the Surviving
Corporation, as appropriate, the additional income taxes (subject to the
limitation set forth in Subsection (i) above) that would be owed by Tyler or
the Company for all periods subsequent to October 31, 1996 as a result of such
settlement. In any event, each Shareholder shall pay to Tyler or the Surviving
Corporation, as appropriate, the amount of any increase in income tax
liabilities (including loss of carry forwards) of the Company for all tax
periods ending on or after the Closing Date (subject to the limitation set
forth in subsection (i) above) that results from a final administrative or
judicial determination adjusting the income tax liabilities of the Company for
any period ending on or before the Closing Date, and such payment or payments
shall be made at the time Tyler or the Surviving Corporation files an income
tax return with a taxing authority covering a tax period that is affected by
such increase in income tax liability.
(g) Each Shareholder agrees that, all proceeds received
from any refund of taxes arising out of any carry back to prior tax periods of
any net operating loss of the Company for tax periods ending on or after the
Closing Date, including any benefits derived from such carry backs to otherwise
reduce an income tax liability for such prior periods, shall belong to Tyler or
the Company. At the request of Tyler or the Company and at their expense, each
Shareholder shall promptly file any and all necessary documents or prosecute
all other necessary proceedings to claim and recover such refunds.
(h) At the request of any Shareholder, Tyler or the
Company, as appropriate, shall submit for filing with the Internal Revenue
Service a Request for Prompt Assessment of Income Taxes pursuant to Section
6501(d) of the Internal Revenue Code for all open tax periods through the
Closing Date for which a federal income tax return or returns or amended return
or returns have been filed by the Company.
(i) From and after the Closing Date, no Shareholder will
(a) extend the statute of limitations; (b) make or change any elections
affecting the Company; (c) change a method of accounting, in each instance with
respect to tax liabilities of the Company relating to periods ending on or
prior to the Closing Date, without the prior written consent of Tyler (which
consent shall not be unreasonably withheld).
(j) To the extent the provisions of this Section 4.5 and
the provisions of Article 11 of this Agreement are inconsistent or conflict,
the provisions of this Section 4.5 shall be determinative of the rights and
obligations of the parties hereto.
(k) All tax sharing agreements or similar agreements with
respect to or involving the Company shall be terminated as of the Closing Date
and, after the Closing Date and the Company shall not be bound thereby or have
any liability thereunder.
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4.6 Cooperation Pending Closing. Each of the parties hereto shall
use its reasonable best efforts to:
(a) proceed promptly to make or give the necessary
applications, notices, requests, and filings in an effort to obtain at the
earliest practicable date and, in any event, before the Closing Date, the
approvals, authorizations, and consents of third parties necessary to
consummate the transactions contemplated by this Agreement;
(b) cooperate with and keep the other informed in
connection with this Agreement; and
(c) take such actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and use
its reasonable best efforts and diligently attempt to satisfy, to the extent
within its control, all conditions precedent to the obligations to close this
Agreement.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 Conduct of Business Prior to Closing Date. During the period
pending the Closing Date (or other indicated date), the Company and the
Shareholders.
(a) shall use its reasonable best efforts to conduct the
operations of the Company in the ordinary and usual course of business
consistent with past and current practices, and to maintain marketing
organizations intact and to preserve the goodwill of their employees,
representatives, suppliers, and customers;
(b) shall confer upon request of Tyler with one or more
representatives of Tyler to report material operational matters and the general
status of ongoing operations;
(c) shall notify Tyler of any emergency or other change
in the normal course of the Company's businesses and of any governmental
complaints, investigations, or hearings that are pending (or that the same may
be contemplated) if such emergency, complaint, investigation, or hearing would
be material to the Company's businesses or properties;
(d) shall take no action that, and shall not fail to use
reasonable best efforts to take (without material cost) any action the failure
to take which, would cause or permit their representations and warranties
contained in this Agreement to be untrue in any material respect on the Closing
Date; and
(e) except as may be permitted or required by this
Agreement, shall not directly or indirectly do any of the following: (i) issue,
sell, pledge, dispose of or encumber, (A) any capital
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stock of the Company or (B) other than in the ordinary course of business and
consistent with past practice, any assets of the Company; (ii) amend or propose
to amend the respective charters or bylaws of the Company; (iii) split, combine
or reclassify any outstanding capital stock, or, except as provided in Section
5.6 hereof, declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise with respect to its capital stock whether
now or hereafter outstanding; (iv) redeem, purchase or acquire or offer to
acquire any of the Company's capital stock; or (v) enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 5.1(e).
5.2 Employment Agreement. At or before the Closing each of the
Shareholders and the Company shall execute and deliver an Employment and
Noncompetition Agreement in substantially the form of Exhibit B hereto, with
such changes therein prior to execution as may be mutually approved by Tyler
and each Shareholder (the "Employment Agreements"), and providing for the
employment of the Shareholders by the Surviving Corporation after the Closing,
covenants by the Shareholders not to compete with the Surviving Corporation,
and compensation, all as provided therein.
5.3 Noncompetition Agreements. Each Shareholder agrees to use his
best efforts to cause the key management and other employees of the Company
identified by Tyler in Section 5.3 of the Tyler Disclosure Schedule (the
"Employees") to execute and deliver employment, confidentiality and
noncompetition agreements with the Company in a form acceptable to Tyler (the
"Noncompetition Agreements").
5.4 Agreement Not to Negotiate. Pending the Closing, and through
the period ending December 31, 1997 if this Agreement is terminated without
closing by the Company or the Shareholders the Company and the Shareholders
shall not, either directly or indirectly through an agent, representative or
other person, solicit or authorize any person to solicit, or initiate or
encourage, directly or indirectly, any proposal for the acquisition of all or
any material part of the capital stock, assets, or business of the Company, or
for the merger, consolidation, or other combination of the Company with any
other person or entity, or enter into any discussions or negotiations for any
such proposal, or provide any person with information or assistance in
furtherance of any such proposal, and shall promptly notify Tyler in writing of
all proposals received with respect to such matters.
5.5 Accuracy of Information Furnished. The information supplied by
each Shareholder to Tyler in writing expressly for inclusion in any documents
(including the Proxy Statement) filed with the Commission in connection with or
as a result of the transactions contemplated hereby, will, at the respective
times such documents are filed with the Commission, not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not false or misleading.
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5.6 Regulation S-X Financial Statements. Not later than October
10, 1997, the Company shall cause to be prepared and shall deliver to Tyler
audited balance sheets of the Company as of October 31, 1996, 1995 and 1994 and
the related audited statements of operations, stockholder's equity, and cash
flows for the years then ended, with notes thereto, prepared in accordance with
United States generally accepted accounting principles and Regulation S-X
("Regulation S-X") promulgated by the Securities and Exchange Commission,
reported upon without exception or qualification by Xxxxx Xxxxxx Xxxxxx Xxxx &
Xxxxxxx; and the unaudited balance sheet of the Company as of August 31, 1997,
and the related unaudited statements of operations, stockholder's equity, and
cash flows for the ten months then ended, with notes thereto, prepared in
accordance with United States generally accepted accounting principles and
Regulation S-X, reviewed by Xxxxx Xxxxxx Xxxxxx Xxxx & Xxxxxxx.
5.7 Termination of Shareholders Agreement. The Shareholders agree
to cause that certain Shareholders Agreement among Xxxxx X. Xxxxx, Xxxxx X.
Xxxxx, Xxxxx Xxxxx and the Company to be terminated at or before the Closing.
The Shareholders hereby consent to, and waive any transfer restrictions under
the Shareholders Agreement that would limit, the transfer of all the
outstanding capital stock of the Company to Tyler pursuant to the Merger.
ARTICLE 6
COVENANTS OF XXXXX
Xxxxx covenants and agrees with the Company and the Shareholders as
follows:
6.1 Conduct Prior to Closing Date. Pending the Closing, Tyler
shall:
(a) confer upon request of the Shareholders with one or
more representatives of the Shareholders to report material operational matters
and the general status of ongoing operations of Tyler and the Tyler
Subsidiaries; and
(b) take no action that, and shall not fail to use
reasonable best efforts to take (without material cost) any action the failure
to take which, would cause or permit its representations and warranties
contained in this Agreement to be untrue in any material respect at the
Closing.
6.2 Proxy Statement. As promptly as practicable after the
execution of this Agreement, Tyler shall prepare and file with the Commission a
proxy statement (the "Proxy Statement") pursuant to the Exchange Act. Subject
to the fiduciary obligations of the Board of Directors of Tyler under
applicable law, the Proxy Statement shall contain the recommendation of the
Board of Directors of Tyler that the stockholders of Tyler vote to approve the
Merger and this Agreement. Except to the extent required by law (and in any
such case only after three business days' prior notice to the Shareholders),
Tyler shall not include in the Proxy Statement or otherwise make public the
amount of compensation payable to any Shareholder.
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6.3 Meetings of Stockholders. Tyler shall promptly take all action
reasonably necessary in accordance with the Delaware General Corporation Law,
the rules of the NYSE and its articles of incorporation and bylaws to convene a
meeting of its stockholders to consider and vote upon the adoption and approval
of the Merger and this Agreement (the "Tyler Stockholders Meeting"). Subject to
its fiduciary obligations under applicable law and in accordance with the
provisions of this Agreement, the Board of Directors of Tyler (i) shall
recommend at such meeting that the stockholders of Tyler vote to adopt and
approve the Merger and this Agreement; (ii) shall use its reasonable efforts to
solicit from stockholders of Tyler proxies in favor of such adoption and
approval; and (iii) shall take all other action reasonably necessary to secure
a vote of its stockholders in favor of the adoption and approval of the Merger
and this Agreement.
6.4 Stock Exchange Listing. Tyler shall use its reasonable best
efforts to cause the shares of Tyler Common Stock to be issued upon
consummation of the Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
6.5 Guaranties of Company Obligations.
(a) From and after the Closing, Tyler guarantees to each
Shareholder, respectively, and his heirs, successors and assigns, the full and
prompt payment by the Company of all amounts that become due and payable to
them under or pursuant to the terms of any Employment Agreement, to be entered
into between the Company and the Shareholder as provided in Section 5.2 of this
Agreement, and the timely performance by the Company of all of the terms,
conditions, covenants and agreements to be performed by the Company under or
pursuant to the terms of said Employment Agreement.
(b) The obligation of Tyler to make any payments or
render performance under this guaranty shall be coextensive with the obligation
of the Company to make payment or render performance under any Employment
Agreement, and Tyler shall be entitled to assert as a defense to or excuse for
or delay in any payment or performance by it the same defenses or excuses for
payment or performance as would be available to the Company. Subject to the
foregoing, the guaranty by Tyler contained herein is absolute and
unconditional.
(c) Tyler waives notice of acceptance of this agreement
of guaranty, and waives diligence or presentment on the part of any Shareholder
in the enforcement of any liability, obligation or duty guaranteed hereby.
(d) Tyler agrees that the validity of this agreement of
guaranty shall not in any way be terminated, affected or impaired by reason of
any waiver of or failure to enforce any of the rights or remedies of any
Shareholder contained in any Employment Agreement, or by reason of any
extension of time or other forbearance granted to the Company by any
Shareholder.
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(e) Tyler agrees that, at the option of any Shareholder,
it may be joined in any action or proceedings commenced against the Company in
connection with and based upon any provisions of the Employment Agreement, and
that recovery may be had against Tyler in such action or proceedings, or in any
independent action or proceedings against Tyler, without requirement that any
Shareholder or his successors or assigns, first assert, prosecute, or exhaust
any remedy or claim against the Company.
(f) In the event of any bankruptcy, reorganization,
winding up, or similar proceedings with respect to the Company, no limitation
on its liability under the Employment Agreement which may now or hereafter be
imposed or permitted by any federal, state, or other statute, law regulation,
or judicial or administrative determination applicable to such proceedings,
shall in any way limit Tyler's obligations hereunder.
6.6 Other Tyler Obligations. At the Closing, if not theretofore
accomplished, Tyler will cause the Company to execute and deliver to the
Shareholders the Employment Agreements, against execution and delivery by the
Shareholders.
6.7 Company Indemnification Obligations. (a) Tyler and Sub agree
that all rights to indemnification existing in favor of the present or former
directors, officers, employees, fiduciaries and agents of the Company
(collectively, the "D&O Indemnified Parties") as provided in the Company's
Articles of Incorporation, Bylaws, or other organizational documents as in
effect as of the date hereof, shall survive the Merger and shall continue in
full force and effect for six years after the Effective Time (without
modification or amendment, except as required by applicable law), to the
fullest extent permitted by law, and shall be enforceable by the D&O
Indemnified Parties against the Surviving Corporation; provided that in any
event Tyler and the Surviving Corporation shall pay and reimburse expenses in
advance of the final disposition of any action or proceeding to each D&O
Indemnified Party to the fullest extent permitted by law.
(b) The provisions of this Section 6.7 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
D&O Indemnified Parties. Each of the D&O Indemnified Parties shall be entitled
to enforce the covenants contained herein.
(c) If the Surviving Corporation, or any of its
successors or assigns (i) reorganizes, amalgamates or consolidates with or
merges into any other person and is not the esulting, continuing or surviving
corporation or entity of such reorganization, amalgamation, consolidation or
merger, or (ii) liquidates, dissolves or transfers all or substantially all of
its properties and assets to any person or persons, then, and in such case,
proper provision will be made so that the successors or assigns of the
Surviving Corporation assume all of the obligations of the Surviving
Corporation set forth in this Section 6.7.
6.8 Agreements Regarding Stock Options. Tyler agrees to grant
options, conditioned on the consummation of the transactions contemplated
hereby and Tyler stockholder approval of any required increase in the number of
shares of Tyler Common Stock which may be issued pursuant to the Tyler Stock
Option Plan, to purchase an aggregate of 200,000 shares of Tyler Common Stock
to employees of the Company designated by the Shareholders. The selection by
the
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Shareholders of such employees and the number of option shares to be granted to
each shall be subject to the reasonable approval of Tyler. The exercise price
of such options shall be the greater of (i) the average of the closing prices
of the Tyler Common Stock for the five consecutive trading days beginning two
trading days prior to public announcement by Tyler of the transactions
contemplated by this Agreement or (ii) the reported closing price of the Tyler
Common Stock on the New York Stock Exchange on the date of grant. The options
shall have a term of 10 years from the date of grant and shall vest on each of
the first five anniversary dates at the rate of 20% of the original number of
option shares granted. The options shall be incentive stock options pursuant to
the Tyler Stock Option Plan, as amended, shall contain such other terms as are
customary for options granted under that plan, and shall be evidenced by option
agreements incorporating all of such terms.
6.9 Release of Shareholder Guaranties. At or prior to the Closing,
Tyler shall obtain and provide to the Shareholders an absolute and
unconditional release, executed by the holders of the indebtedness of the
Company identified in Section 2.21 of the Company Disclosure Schedule as
guaranteed by the Shareholders and by the surety companies that issued the
performance bonds identified in such Section 2.21, from any liability with
respect to such indebtedness or performance bonds whether as maker, endorser,
surety, obligor, guarantor or otherwise, or shall provide to the Shareholders
the agreement of Tyler to indemnify the Shareholders against any such
liability, which indemnification agreement shall be reasonably acceptable to
the Shareholders.
ARTICLE 7
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
Except as may be waived by both Tyler and the Shareholders, the
obligations of the Company, the Shareholders, Tyler and Sub to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions:
7.1 HSR Act. All filings required under the HSR Act shall have
been made, and all waiting periods, including any extension thereof, that may
be applicable to the transactions contemplated by this Agreement under the
provisions of the HSR Act shall have expired or been waived or otherwise
terminated.
7.2 Absence of Litigation. No governmental agency or authority
shall have instituted, or threatened in writing to institute, any action or
proceeding seeking to delay, restrain, enjoin, or prohibit the consummation of
the transactions contemplated by this Agreement, and no order, judgment, or
decree by any court or governmental agency or authority shall be in effect that
enjoins, restrains, or prohibits the same or, in the reasonable judgment of
Tyler, otherwise would materially interfere with the operation of the assets
and business of Tyler and the Tyler Subsidiaries or the Company after the
Closing Date.
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ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SHAREHOLDERS
Except as may be waived by the Company and the Shareholders, the
obligations of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on or
before the Closing Date of each of the following conditions:
8.1 Compliance. Tyler shall have, or shall have caused to be,
satisfied or complied with and performed in all material respects all terms,
covenants, and conditions of this Agreement to be complied with or performed by
Tyler on or before the Closing Date.
8.2 Representations and Warranties. All of the representations and
warranties made by Tyler in this Agreement, the Tyler Disclosure Schedule
(prior to supplementation or amendment thereto pursuant to Section 4.2 of this
Agreement), the Employment Agreements, and in all certificates and other
agreements delivered by Tyler to the Shareholders pursuant hereto or in
connection with the transactions contemplated hereby, shall have been true and
correct in all material respects as of the date hereof, and shall be true and
correct in all material respects at the Closing Date with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.3 Opinion. The Company and the Shareholders shall have received
an opinion of Liddell, Sapp, Zivley, Hill & XxXxxx, L.L.P. ("Liddell, Xxxx"),
counsel for Tyler, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, the Shareholders and their counsel, relating to
the matters set forth in the following Sections of this Agreement:
3.1;
3.4; and
3.5 (except the opinion as to enforceability may exclude
the Employment Agreements and the Noncompetition Agreements).
8.4 No Material Adverse Change. There shall have occurred no
material adverse change in the businesses, properties, assets, liabilities,
results of operations or condition (financial or otherwise) of Tyler and the
Tyler Subsidiaries, taken as a whole.
8.5 Financing. On or before thirty days after the date hereof
Tyler shall have obtained financing for the transactions contemplated hereby
acceptable to Tyler.
8.6 Certificates. The Company and the Shareholders shall have
received a certificate or certificates, executed on behalf of Tyler by the
President or any Vice President of Tyler, to the effect that the conditions
contained in Sections 7.1 and 7.2 hereof with respect to matters therein
relating to Tyler, and in Sections 8.1, 8.2, and 8.4 hereof, have been
satisfied.
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ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLER
Except as may be waived by Tyler, the obligations of Tyler and Sub to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions:
9.1 Compliance. The Company and each Shareholder shall have, or
shall have caused to be, satisfied or complied with and performed in all
material respects all terms, covenants, and conditions of this Agreement to be
complied with or performed by any of them on or before the Closing Date.
9.2 Representations and Warranties. All of the representations and
warranties made by the Company and the Shareholders in this Agreement, the
Company Disclosure Schedule (prior to any supplementation or amendment pursuant
to Section 4.2 of this Agreement), and in all certificates and other documents
delivered by the Company and the Shareholders pursuant hereto or in connection
with the transactions contemplated hereby, shall have been true and correct in
all material respects as of the date hereof, and shall be true and correct in
all material respects at the Closing Date with the same force and effect as if
such representations and warranties had been made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
9.3 Securities Law Compliance. The issuance and delivery of shares
of Tyler Common Stock in the Merger shall have been registered or qualified
under the Securities Act and all applicable state securities laws or counsel
for Tyler shall be satisfied that an exemption from such registration or
qualification is available; no stop order suspending the effectiveness of any
such registration or qualification shall be in effect; and no proceeding for
such purpose shall be pending before any agency or authority having
jurisdiction thereof.
9.4 Opinions. Tyler shall have received the opinion of Xxxxxxx &
Xxxxx, counsel for the Company and the Shareholder, dated as of the Closing
Date, in form and substance satisfactory to Tyler and its counsel, relating to
the matters set forth in the following Sections of this Agreement:
2.1 ;
2.6; and
2.7 (except the opinion as to enforceability may exclude
the Employment Agreements and the Noncompetition Agreements).
9.5 No Material Adverse Change. There shall have occurred no
material adverse change in the businesses, properties, assets, liabilities,
results of operations, or condition (financial or otherwise), of the Company.
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9.6 Consents to Transaction. Tyler and the Company shall have
received all consents or approvals, and made all applications, requests,
notices, and filings with, any person, governmental authority, or governmental
agency required to be obtained or made in connection with the consummation of
the transactions contemplated by this Agreement, excluding actions required
under the HSR Act (which are conditions precedent to closing under Section
7.1), but including the consents of the lenders and third parties set forth in
the Company Disclosure Schedule and the Tyler Disclosure Schedule.
9.7 Financing. On or before thirty days after the date hereof,
Tyler shall have obtained financing for the transactions contemplated hereby
acceptable to Tyler.
9.8 Noncompetition Agreements. Each of the Employees shall have
duly entered into Noncompetition Agreements with the Company acceptable to
Tyler.
9.9 Business Resources Corporation. Tyler or a subsidiary of Tyler
shall have acquired all or substantially all of the outstanding capital stock
or assets of Business Resources Corporation ("BRC") pursuant to that certain
Agreement and Plan of Merger dated of even date herewith among Tyler, T1
Acquisition Corporation, BRC, and Xxxxxxx X. Xxxxx (the "BRC Merger
Agreement").
9.10 Stockholder Approval. The stockholders of Tyler shall have
approved the Merger and this Agreement.
9.11 Certificates. Tyler shall have received a certificate or
certificates, executed on behalf of the Company by the President of the
Company, and by each Shareholder in his individual capacity, to the effect that
the conditions in Sections 7.1 and 7.2 hereof with respect to matters therein
relating to the Company, and Sections 9.1, 9.2, and 9.5 hereof, have been
satisfied.
ARTICLE 10
SECURITIES LAW REGISTRATION AND COMPLIANCE
10.1 Securities Law Compliance; Restrictions on Shares. Each
Shareholder and each other holder of Stock Options or Company Common Stock
acknowledges receipt of the Tyler Commission Filing, this Agreement and the
Tyler Disclosure Schedule and the opportunity to ask questions of and receive
answers from representatives of the management of Tyler concerning the terms
and conditions of the transactions contemplated hereby and to obtain all
additional information that Tyler possesses or could acquire without
unreasonable expense that is necessary to verify the accuracy of information
furnished to him, and acknowledges and agrees:
(a) The shares of Tyler Common Stock to be received by
him as a result of the Merger have not been registered under the Securities Act
or any applicable state securities law;
(b) He is acquiring the shares so to be received in the
Merger for his own account and not with a view to the distribution or resale
thereof and will not sell, pledge, hypothecate, or
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otherwise transfer the shares unless they are registered under the Securities
Act and applicable state securities laws unless, prior thereto, he shall have
delivered to Tyler an opinion, in form and substance reasonably satisfactory to
Tyler, of counsel experienced and competent in federal securities laws and
acceptable to Tyler, to the effect that an exemption from registration is
available therefor;
(c) Except as otherwise provided in this Agreement, Tyler
has no obligation to register any sales or transfers of the shares so received
by him;
(d) During the year after the Merger, he will not be able
to sell, transfer, or otherwise dispose of the shares so received unless, prior
thereto, the Shareholder shall have delivered to Tyler an opinion, in form and
substance reasonably satisfactory to Tyler, of counsel experienced and
competent in federal securities laws and acceptable to Tyler, to the effect
that an exemption from registration under the Securities Act and applicable
state securities laws is at the time available (unless registered as elsewhere
provided in this Agreement), and thereafter any sales, transfers, or other
dispositions may be limited by the provisions of Rule 144 under the Securities
Act (or by other rules then in effect);
(e) In view of the foregoing, he understands that he is
at economic risk with respect to his investment in the shares so received in
the Merger;
(f) Tyler may place an appropriate legend on the
certificate representing the shares so to be received restricting their
transfer, and stop-transfer instructions will be given to the transfer agent
for the Tyler Common Stock with respect to such certificates; and
(g) To provide such information as may be requested by
Tyler in order for Tyler to determine if he is an accredited purchaser under
Regulation D of the Commission or otherwise can be qualified as a purchaser
under Rule 506 of such Regulation D.
10.2 Piggyback Registration. If within one year after the Closing
Date Tyler proposes (whether or not for its own account) to register any of its
securities under the Securities Act for sale in a firm commitment underwritten
public offering, Tyler shall give written notice to the Shareholders of its
intention to effect such a registration not later than 15 days prior to the
anticipated date of filing with the Commission of a registration statement,
which notice shall offer each Shareholder the opportunity to include in such
registration statement any of the shares of Tyler Common Stock received in the
Merger and held by such Shareholder ("Shares") that such Shareholder may
request (a "Piggyback Registration"). Tyler's obligation under this Section
10.2 shall be limited to registrations as to which a registration statement is
to be filed on or before one year after the date hereof. Subject to the
provisions of this Agreement, Tyler will use its reasonable efforts to cause
all the Shares for which the Shareholders have requested registration to be
registered under the Securities Act to the extent required to permit the sale
by the Shareholders of such Shares; provided, that if the registration relates
to an underwritten public offering and the managing underwriter or underwriters
believe that the inclusion of all shares requested to be included in the
proposed registration would adversely affect the marketing of such shares,
Tyler may first include
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in such registration all securities Tyler proposes to sell, and the
Shareholders shall accept a reduction (including a total elimination) in the
number of shares to be included in such registration, pro rata with the other
holders of Tyler Common Stock making requests for registration, on the basis of
the number of shares of Tyler Common Stock so requested to be included by the
Shareholders and the other selling shareholders. Nothing in this section shall
limit Tyler's ability to withdraw a registration statement it has filed either
before or after effectiveness.
10.3 Registration Procedures.
(a) In connection with any registration hereunder, each
Shareholder will furnish promptly to Tyler in writing such information
(together with such supplements as may be necessary from time to time) with
respect to itself and the proposed distribution by it as shall be reasonably
necessary in order to ensure compliance with federal and applicable state
securities laws. Such information shall not, at the time the registration
statement is filed or becomes effective, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not false or
misleading.
(b) In any registration relating to an underwritten public
offering of Tyler Common Stock or other securities of Tyler entitled generally
to vote in the election of directors (or any securities convertible into or
exchangeable for or exercisable for the purchase of securities so entitled
generally to vote in the election of directors) (collectively, the "Voting
Securities"), whether or not a Shareholder is participating in such registered
underwritten public offering, at the request of the managing underwriter or
underwriters, each Shareholder will agree not to effect any sale or
distribution, including any sale pursuant to Rule 144 (or any successor
provision) promulgated under the Securities Act of any Shares, and not to
effect any such sale or distribution of any other Tyler Common Stock or Voting
Securities (in each case, other than as part of such registration) for such
period of time as reasonably required by such managing underwriter or
underwriters ("Lockup Period"), but in no event shall the Shareholder be
required to agree to a Lockup Period longer than the Lockup Period to which any
other selling shareholder is subject.
10.4 Expenses. In connection with any proposed registration of
securities by Tyler, whether or not effected or consummated, Tyler, each
Shareholder, and any other selling shareholders shall each pay their pro rata
share of Tyler's out of pocket expenses incurred in connection with a proposed
registration under Section 10.2 in which Tyler is not selling any securities
for its own account, including, without limitation, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and accountants
for Tyler. Each Shareholder shall pay all of his expenses, including his
attorney's fees, and including the underwriting discount, selling commissions
and all expenses of the underwriters relating to his Shares incurred in
connection with each registration pursuant to Section 10.2.
10.5 Indemnification.
(a) In the event of a registration of any of the Shares
under the Securities Act pursuant to Section 10.2, Tyler shall indemnify and
hold harmless each Shareholder and each
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underwriter of Shares thereunder and each person who controls the Shareholder
or underwriter within the meaning of the Securities Act and the Exchange Act
against any losses, claims, damages or liabilities (including reasonable
attorneys' fees), joint or several, to which the Shareholder or underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) or arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement under which such Shares were registered under the
Securities Act pursuant to Section 10.2, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such Shareholder, underwriter
and controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that Tyler will not be liable
in any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by the Shareholder, underwriter or controlling person for
use in such registration statement or prospectus; provided, further, that Tyler
will not be liable hereunder to any underwriter or any person who controls any
underwriter within the meaning of the Securities Act and the Exchange Act for
any loss, claim, damage or liability that arises out of, or is based upon, any
untrue statement or alleged untrue statement or any omission or alleged
omission contained in any preliminary prospectus that was corrected by any
subsequent prospectus, and the underwriter was required to deliver but failed
to deliver such prospectus as required by the Securities Act.
(b) In the event of a registration of any of the Shares
under the Securities Act pursuant to Section 10.2, the Shareholder shall
indemnify and hold harmless Tyler and each person who controls Tyler within the
meaning of the Securities Act and the Exchange Act, each officer of Tyler who
signs the registration statement, each director of Tyler, each underwriter and
each person who controls any underwriter within the meaning of the Securities
Act and the Exchange Act against all losses, claims, damages or liabilities,
joint or several, to which Tyler or such officer or director or underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Shares were registered under the Securities Act
pursuant to Section 10.2, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein not misleading, and will reimburse Tyler and
each such officer, director, underwriter and controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Shareholder will be liable hereunder in any such case if and
only to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission relating to the Shareholder made in reliance upon and in
conformity with information pertaining to the Shareholder, as such, furnished
in writing to Tyler by the Shareholder for use in
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such registration statement or prospectus ("Shareholder Information");
provided, further, that the Shareholder will not be liable hereunder to any
underwriter or any person who controls an underwriter within the meaning of the
Securities Act and the Exchange Act for any loss, claim, damage or liability
that arises out of, or is based upon, any untrue statement or alleged untrue
statement or any omission or alleged omission in any Shareholder Information
contained in any preliminary prospectus that was corrected by any subsequent
prospectus, and the underwriter was required to deliver but failed to deliver
such prospectus as required by the Securities Act.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party other than under this
Section 10.5. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 10.5 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that (i) if the indemnifying party has
failed to assume the defense and employ counsel or (ii) if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it that are different from or additional to
those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, then the indemnified party shall have the right to
select a separate counsel and to assume such legal defense and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) If the indemnification provided for in this Section
10.5 is unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities or actions in respect
thereof, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or actions in
such proportion as is appropriate to reflect the relative fault of Tyler, on
the one hand, and the Shareholder, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable considerations,
including the failure to give any required notice. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by Tyler, on the one
hand, or the Shareholder, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Tyler and the Shareholder agree that it would not be
just and
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equitable if contribution pursuant to this Section 10.5(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
10.5(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or actions in respect thereof referred to
above in this Section 10.5(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty or
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
10.6 No Transferability of Registration Rights. Except with the
prior written consent of Tyler, the Shareholders' registration rights under
Section 10.2 shall not inure to the benefit of any person to whom any Shares
are transferred, other than a spouse or descendant of a Shareholder
("Relative"), a trust solely for the benefit of a Shareholder or Relative, or a
partnership all of the equity interests in which are directly or indirectly
owned by a Shareholder or Relative.
ARTICLE 11
INDEMNIFICATION AND REMEDIES
11.1 Indemnification by the Shareholders Based on Agreement. Each
Shareholder agrees jointly and severally to indemnify and hold harmless Tyler
(and if the transactions contemplated hereby are consummated, the Surviving
Corporation), from and against any and all claims, losses, obligations,
damages, demands, and liabilities (after giving effect to and reducing the same
by (i) any net tax benefits realized by Tyler or the Surviving Corporation as a
result of such event, and (ii) the net amount of any insurance proceeds
received by Tyler or the Surviving Corporation as a result of such event),
including, without limitation, costs and expenses of litigation (including
reasonable attorneys' and accountants' fees) (collectively, "Tyler Indemnified
Losses"), based on, relating to, or arising out of, or any allegation by any
third party of, any facts or circumstances that would constitute a breach by
the Shareholders of any representation, warranty, or covenant contained herein
or in any agreement executed pursuant hereto, but excluding from this covenant
to indemnify any claims or liabilities separately covered by Section 10.5
hereof or any Customer Claims (hereinafter defined) to the extent and only
while covered by the provisions of Section 11.3 hereof.
11.2 Indemnification by Tyler Based on Agreement. Tyler (and if the
transactions contemplated hereby are consummated, the Surviving Corporation)
agrees to indemnify and hold harmless the Shareholders from and against any and
all claims, losses, expenses, obligations, demands and liabilities (after
giving effect to and reducing the same by (i) any net tax benefits realized by
the Shareholders as a result of such event, and (ii) the net amount of any
insurance proceeds received by the Shareholders as a result of such event),
including, without limitation, costs and expenses of litigation and including
reasonable attorneys' and accountants' fees (collectively, "Shareholder
Indemnified Losses"), based on, relating to, or arising out of, or any
allegation by any third party of, any facts or circumstances that would
constitute a breach by Tyler of any representation, warranty, or covenant
contained herein or in any agreement executed pursuant
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hereto, but excluding from this covenant to indemnify any claims or liabilities
separately covered by the provisions of Section 10.5 hereof.
11.3 Customer Claims. If any claim, demand, or cause of action of
the type referred to in Section 11.1 is asserted by a customer of the Company
("Customer Claim"), the following provisions shall be applicable until such
time as the Customer Claim results in a filed and pending lawsuit or other
judicial proceeding (at which time the provisions of Section 11.1 shall be
applicable):
(a) Tyler or the Surviving Corporation shall promptly
notify the Shareholders in writing that a Customer Claim has been made,
describing the nature of the Customer Claim to the extent then known.
(b) After receipt of Tyler's or the Surviving
Corporation's written notice, the parties hereto will fully cooperate with each
other to investigate the Customer Claim and determine whether the parties can
agree that the Customer Claim is an obligation or liability for which the
Shareholders are responsible. The investigation shall be conducted
expeditiously and with all reasonable due diligence, considering the
circumstances surrounding the Customer Claim.
(c) If, after an investigation, Tyler or the Surviving
Corporation and the Shareholders agree in writing that the Customer Claim is an
obligation or liability for which the Shareholders are responsible, the
Shareholders and Tyler or the Surviving Corporation agree to use their
reasonable best efforts to reach an agreement with the customer as to the terms
and conditions of settlement, compromise or satisfaction of the Customer Claim,
including, but not limited to, the amount that the Shareholders shall pay to
the customer for the damages, losses, costs or expenses incurred by it.
(d) If the provisions of this Section 11.3 are
applicable, Tyler or the Surviving Corporation shall conduct all communications
and settlement negotiations with the customer and shall convey to the customer
any offers of settlement or compromise by the Shareholders. Any amounts that
the Shareholders agree so to pay in settlement of the Customer Claim shall be
paid by them to Tyler or the Surviving Corporation, as the case may be, in
trust for payment over to the customer. If Tyler or the Surviving Corporation
agrees to pay the customer an amount in excess of that offered for settlement
purposes by the Shareholders, the excess shall be paid by Tyler or the
Surviving Corporation, as the case may be, without any right to indemnification
therefor from the Shareholders. If the amounts so paid and entrusted to Tyler
or the Surviving Corporation are paid over to the customer, the payment over
shall be deemed to be a release by Tyler or the Surviving Corporation of any
further claim with respect to that Customer Claim against the Shareholders and
Tyler and the Surviving Corporation shall indemnify and hold harmless the
Shareholders from any further liability with respect thereto.
(e) In the absence of an agreement among the parties as
to the settlement of any Customer Claim not involving litigation, Tyler or the
Surviving Corporation may take such action with respect to the Customer Claim
as Tyler in its sole judgment may deem necessary or advisable
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under the circumstances to settle, compromise or satisfy the Customer Claims
provided; however, neither Tyler nor the Surviving Corporation shall in any
such event be considered to have waived its right to pursue a judicial action
to determine its right against the Shareholders.
(f) An indemnified party shall give notice to the
indemnifying party or parties within 15 business days after actual receipt of
service or summons to appear in any action begun in respect of which indemnity
may be sought hereunder, or actual notice of assertion of a claim with respect
to which it seeks indemnification. Except as provided in Section 4.5, failure
so to notify the indemnifying party or parties shall cause the indemnified
party to lose its right to indemnification under this Article 11, but failure
so to notify the indemnifying party or parties shall not relieve the
indemnifying party or parties from any liability that they may have other than
on account of this Article 11. The indemnifying party or parties may
participate at their own expense and with their counsel in the defense of such
action.
Except as otherwise provided in Section 11.3(d), if the
indemnifying party or parties so elect within a reasonable time after receipt
of such notice they may assume the defense of such action with counsel chosen
by the indemnifying party or parties and approved by the indemnified party in
such action, unless the indemnified party reasonably objects to such assumption
on the ground that its counsel has advised it that there may be legal defenses
available to it that are different from or in addition to those available to
the indemnifying party or parties and counsel for the indemnifying party
concurs in such advice, in which case the indemnified party shall have the
right to employ counsel approved by the indemnifying party or parties. If the
indemnifying party or parties assume the defense of such action, the
indemnifying party or parties shall not be liable for fees and expenses of
counsel for the indemnified party incurred thereafter in connection with such
action. In no event shall the indemnifying party or parties be liable for the
fees and expenses of more than one counsel for the indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances unless, in the reasonable opinion of such counsel, there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more indemnified parties.
11.4 Claims Limitations. Notwithstanding anything otherwise
contained in this Agreement, no party hereto shall assert any single claim or
claims against any other party hereto, unless the single claim (after giving
effect to and reducing the same by (i) any net tax benefits realized by the
indemnified party as a result of such event, and (ii) the net amount of any
insurance proceeds received by the indemnified party as a result of such event)
exceeds the sum of $18,750, and the sum of all such single claims in the
aggregate exceeds $150,000; provided, that claims made by Tyler or the
Surviving Corporation pursuant to Section 2.9 or 4.5 of this Agreement, or for
breach of the Employment Agreement or the Confidentiality Agreement shall not
be subject to the foregoing limitations; and provided further, that claims made
by the Shareholders pursuant to Section 3.7 or 4.5 of this Agreement, or for
breach of the Employment Agreement or the Confidentiality Agreement shall not
be subject to the foregoing limitations.
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11.5 Maximum Liability. The maximum aggregate liability of the
Shareholders to Tyler or the Surviving Corporation for all claims made by Tyler
or the Company pursuant to this Agreement is $3,000,000; provided, that claims
made by Tyler or the Surviving Corporation pursuant to Sections 2.9 or 4.5 of
this Agreement, or for breach of the Employment Agreement or the
Confidentiality Agreement, shall not be subject to the foregoing limitation.
The maximum aggregate liability of Tyler or the Surviving Corporation to the
Shareholders for all claims made by the Shareholders pursuant to this Agreement
is $3,000,000; provided, that claims made by the Shareholders pursuant to
Section 3.7 or 4.5 of this Agreement, or for breach of the Employment Agreement
or the Confidentiality Agreement, shall not be subject to the foregoing
limitation. Any claim based upon facts and circumstances that would, if true,
constitute a breach of any representation, warranty or covenant contained in
this Agreement shall be subject to the limitations contained herein,
notwithstanding the fact that such claim is asserted by a cause of action or
legal theory other than breach of contract. When calculating the amount of
liability in a claim for damages for purposes of this Section 11.5 (whether
such calculation is through agreement of the parties, litigation or otherwise)
and the claim relates to the breach of a representation as to the income of the
Company for any period or periods prior to the Closing Date, all of the parties
hereto agree that, in determining the amount involved in the claim, the damages
shall be actual damages incurred and proven and such actual damages shall not
be computed by using a multiplier or capitalization rate.
11.6 Equitable Remedies. The parties hereto acknowledge that a
refusal by a party to consummate the transactions contemplated hereby will
cause irreparable harm to the other parties, for which there may be no adequate
remedy at law. A party not in default at the time of such refusal shall be
entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that refused to consummate the
transactions contemplated hereby.
11.7 Remedies of the Surviving Corporation. After the Closing, the
Surviving Corporation shall have the same rights and benefits under this
Agreement as does Tyler with respect to the representations, warranties and
covenants of the Shareholders contained herein, as fully as if such
representations, warranties and covenants had been made to the Surviving
Corporation in lieu or in place of Tyler or Sub. In any proceeding by the
Surviving Corporation to assert or prosecute any claims under, or to otherwise
enforce, this Agreement on behalf of itself or Tyler, each Shareholder agrees
that he shall not assert as a defense or bar to recovery by the Surviving
Corporation, and hereby waives any right to so assert such defense or bar such
recovery, that (a) prior to Closing, the Company shall have had knowledge of
the circumstances giving rise to the claim being pursued by it; (b) prior to
Closing, the Company engaged in conduct or took action that caused or brought
about the circumstances giving rise to its claim, or otherwise contributed
thereto; (c) the Company is estopped from asserting or recovering upon its
claim by reason of having joined in the representations, warranties and
covenants made by the Shareholders in this Agreement; or (d) the Shareholder
has a right of contribution from the Surviving Corporation to the extent that
there is any recovery against him.
11.8 Costs of Defense. If any claim for which an indemnified party
seeks indemnification under this Article 11 results in a judgment that no
damages are due the claimant on a basis for which
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the indemnifying party is responsible hereunder, then, as between the
indemnifying and indemnified parties, the indemnified parties shall be liable
for any damages awarded and the costs (including attorneys' fees) of defending
such claim.
ARTICLE 12
MISCELLANEOUS
12.1 Breach Discovered Prior to Closing.
(a) If, prior to the Time of Closing, Tyler has actual
and certain knowledge (as opposed to an opinion or belief) of any facts or
circumstances that it determines would constitute a failure to satisfy the
conditions to the obligations of Tyler to close this Agreement contained in
Sections 9.1, 9.2 or 9.5 hereof, Tyler shall promptly give written notice to
the Shareholders. If the Shareholders fail to cure any such alleged defect
within 15 days from the date of notice, Tyler shall have the right either to
(i) terminate this Agreement pursuant to Section 12.2 below, in which case
Tyler, shall, if not then in default under this Agreement, be entitled to
recover from the Company and the Shareholders as liquidated damages the actual
legal, accounting and other out-of-pocket expenses incurred by it in connection
with the negotiation, preparation and execution of this Agreement and the other
agreements and instruments referred to herein, its investigation and
examination of the affairs of the Company, and other actions taken preparatory
to consummating the transactions contemplated hereby, or (ii) waive such defect
as a condition to closing this Agreement, in which case Tyler shall not be
entitled to make any claims against the Shareholders pursuant to this Agreement
or to exercise any other remedial rights with respect to such alleged defect.
(b) If, prior to the Time of Closing, the Shareholders
have actual and certain knowledge (as opposed to an opinion or belief) of any
facts or circumstances that the Shareholders determine would constitute a
failure to satisfy the conditions to the obligations of the Company and the
Shareholders to close this Agreement contained in Sections 8.1, 8.2 and 8.4
hereof, the Company and the Shareholders shall promptly give written notice to
Tyler. If Tyler fails to cure any such alleged defect, the Company and the
Shareholders shall have the right either to (i) terminate this Agreement
pursuant to Section 12.2 below, in which case the Company and the Shareholders
shall, if not then in default under this Agreement, be entitled to recover from
Tyler as liquidated damages the actual legal, accounting and other out-of-
pocket expenses incurred by them (but not including such expenses incurred to
appropriately document the corporate records and transactions of the Company
and the Shareholders) in connection with the negotiation, preparation and
execution of this Agreement and the other agreements and instruments referred
to herein, their investigation and examination of the affairs of Tyler, and
other actions taken preparatory to consummating the transactions contemplated
hereby, or (ii) waive such defect as a condition to closing this Agreement, in
which case the Shareholders shall not be entitled to make any claims against
Tyler or the Surviving Corporation pursuant to this Agreement or to exercise
any other remedial rights with respect to such alleged defect.
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12.2 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time on or before the Closing Date:
(a) by mutual consent of Tyler and the Shareholders;
(b) by Tyler if there has been a material
misrepresentation or breach of warranty in the representations and warranties
of the Company and the Shareholders set forth herein or if there has been any
material failure on the part of the Company or the Shareholders to comply with
their obligations hereunder;
(c) by the Shareholders if there has been a material
misrepresentation or breach of warranty in the representations and warranties
of Tyler set forth herein or if there has been any material failure on the part
of Tyler to comply with its obligations hereunder;
(d) by either Tyler or the Shareholders if the
transactions contemplated by this Agreement have not been consummated by
February 28, 1998, unless such failure of consummation is due to the failure of
the terminating party to perform or observe the covenants, agreements, and
conditions hereof to be performed or observed by it at or before the Closing
Date;
(e) by either Tyler or the Shareholders if the conditions
precedent to its or their obligations to close this Agreement have not been
satisfied or waived by it or them at or before the Closing Date; and
(f) by either the Shareholders or Tyler if the
transactions contemplated hereby violate any non-appealable final order,
decree, or judgment of any court or governmental body or agency having
competent jurisdiction.
12.3 Expenses. If the transactions contemplated by this Agreement
are not consummated, each party hereto shall pay its own expenses incurred in
connection with this Agreement and the transactions contemplated hereby, except
as otherwise provided in Section 12.1; provided, however, that if the
transactions contemplated hereby are not consummated because of the failure of
either of the conditions in Section 9.7 or 9.9 to be satisfied, Tyler shall
reimburse the Shareholders for their reasonable out-of-pocket expenses incurred
in connection with this Agreement and the transactions contemplated hereby, not
to exceed $30,000.
12.4 Disclosure Schedules. The Company Disclosure Schedule and the
Tyler Disclosure Schedule are incorporated herein by reference.
12.5 Entire Agreement. This Agreement and the Exhibits and
Disclosure Schedules hereto, the Confidentiality Agreement and the other
agreements and documents contemplated hereby, contain the complete agreement
among the parties with respect to the transactions contemplated hereby and
supersede all prior agreements and understandings among the parties with
respect to such transactions. Section and other headings, the table of contents
and indexes to the Disclosure Schedules are for reference purposes only and
shall not affect the interpretation or
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construction of this Agreement. The parties hereto have not made any
representation or warranty except as expressly set forth in this Agreement, the
Employment Agreement, the Confidentiality Agreement, and the Noncompetition
Agreements, the Company Disclosure Schedule, the Tyler Disclosure Schedule or
in any agreement, certificate or other document delivered pursuant hereto or
thereto. The obligations of any party under any agreement executed pursuant to
this Agreement shall not be affected by this Section.
12.6 Survival. All representations and warranties (except those
contained in Sections 2.9 and 2.15) of Tyler, Sub, the Company or the
Shareholders contained herein, in the Tyler Disclosure Schedule, in the Company
Disclosure Schedule, or in any exhibit, certificate, document or instrument
delivered pursuant to this Agreement shall survive the Closing and shall
continue in full force and effect for two years after the date of Closing. All
representations and warranties of the Shareholders contained in Section 2.9(b)
above shall survive the Closing and shall continue in full force and effect
after the Closing without time limitation. All representations and warranties
of the Shareholders contained in Sections 2.9(a), (c) and (d) above shall
survive the Closing and shall continue in full force and effect after the
Closing until expiration, in accordance with the laws of Texas, of the
applicable time period in which claims may be judicially asserted for breach of
a written contract. All representations and warranties of the Shareholders
contained in Section 2.15 above shall survive the Closing and shall continue in
full force and effect after the Closing until expiration, in accordance with
applicable law, of the applicable time periods in which the taxing authority
having jurisdiction may assert a claim for failure of or deficiency in the
payment of taxes. The representations and warranties of the Company shall not
survive the Closing.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
12.8 Notices. All notices, demands, requests, or other
communications that may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in writing and
shall be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery, telegram, or
telecopy, addressed as follows:
(i) If to the Company or the Shareholders:
The Software Group, Inc.
Jupiter North Technology Park
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxx
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, III
Telecopy No.: (000) 000-0000
(ii) If to Tyler:
Tyler Corporation
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chairman of the Board
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Liddell, Sapp, Zivley, Hill & XxXxxx, L.L.P.
0000 Xxxxx Xxxxxxxx Tower
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Each party may designate by notice in writing a new address to which
any notice, demand, request, or communication may thereafter be so given,
served, or sent. Each notice, demand, request, or communication that is mailed,
delivered, or transmitted in the manner described above shall be deemed
sufficiently given, served, sent and received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of messenger, or (with respect to a telecopy) the
confirmation being deemed conclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
12.9 Successors and Assigns. This Agreement and the rights,
interests, and obligations hereunder shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
12.10 Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Texas (except the choice of law
rules thereof).
12.11 Waiver and Other Action. This Agreement may be amended,
modified, or supplemented only by a written instrument executed by the parties
against which enforcement of the amendment, modification, or supplement is
sought.
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12.12 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance (except to the
extent such remaining provisions constitute obligations of another party to
this Agreement corresponding to the unenforceable provision); and in lieu of
such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
12.13 Knowledge. At any time there is a reference in a
representation, covenant or warranty of a party to this Agreement that is
qualified by the knowledge of such party, the terms "knowledge" or "knows" or
"known", or "belief" or "believes" shall mean (i) as to the Company and the
Shareholders, the knowledge or belief of any Shareholder, and (ii) as to Tyler,
the knowledge or belief of its Chairman of the Board, Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer, Xxxxx X. Xxxxxx, or Xxxxx X.
Xxxxxxx.
[The following page is the signature page.]
52
59
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TYLER CORPORATION
By: /s/ C.A. XXXXXXX, JR.
-------------------------------------
C. A. Xxxxxxx, Jr., President and
Chief Executive Officer
T2 ACQUISITION CORPORATION
By: /s/ C.A. XXXXXXX, JR.
-------------------------------------
C.A. Xxxxxxx, Jr., President
THE SOFTWARE GROUP, INC.
By: /s/ XXXXX X. XXXXX
-------------------------------------
Xxxxx X. Xxxxx, President
/s/ XXXXX X. XXXXX
-------------------------------------
XXXXX X. XXXXX, Individually
/s/ XXXXX X. XXXXX
-------------------------------------
XXXXX X. XXXXX, Individually
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60
The undersigned execute this Agreement solely to indicate their agreement to
Sections 1.7(c) and 10.1 hereof:
/s/ XXXXX XXXXX
----------------------------------------------
XXXXX XXXXX
/s/ XXXX XXXX
----------------------------------------------
XXXX XXXX
/s/ XXXXX XXXXXXXX
----------------------------------------------
XXXXX XXXXXXXX
54
61
ANNEX I
Shareholders Shares
------------ ------
Xxxxx X. Xxxxx 824,025
Xxxxx Xxxxx 136,475
Xxxxx X. Xxxxx 960,500
Shares Subject to
Optionholders Options
------------- -------
Xxxx Xxxx 75,000
Xxxxx Xxxxxxxx 75,000
55
62
EXHIBIT A
Directors
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
C.A. Xxxxxxx, Jr.
Xxxxx X. Xxxxx
Xxxxx X. Xxxxxx
Officers
Xxxxx X. Xxxxx President and Assistant Secretary
Xxxxx X. Xxxxx Vice President and Secretary
Xxxxx X. Xxxxxxxx Chief Financial Officer
63
EXHIBIT B
EMPLOYMENT AND
NONCOMPETITION AGREEMENT
This Agreement, made as of October ___, 1997, is among Tyler
Corporation, a Delaware corporation ("Tyler"), The Software Group, Inc., a
Texas corporation (the "Company"), and ______________________________ (the
"Shareholder").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Merger dated October
____, 1997 among Tyler, T2 Acquisition Corporation ("Sub"), the Company, and
certain shareholders of the Company (the "Merger Agreement"), Tyler has agreed
to acquire the Company through the merger of a wholly-owned subsidiary of Tyler
into the Company; and
WHEREAS, pursuant to the Merger Agreement the Shareholder is receiving
consideration of $__________ cash and __________ shares of Tyler common stock,
which consideration would not be paid to the Shareholder unless the Shareholder
executed and delivered this Agreement to Tyler,
WHEREAS the Shareholder is now an employee of the Company and
possesses information that is confidential and proprietary to its businesses;
and
WHEREAS, pursuant to the Merger Agreement and as a further inducement
to, and as further consideration for, Tyler to consummate the acquisition of
the Company, the Shareholder is executing this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Effective Date. This Agreement shall be effective upon, and
shall not be effective until, the consummation of the transactions contemplated
by the Merger Agreement (the "Closing").
2. Employment.
(a) The Company hereby agrees to employ the Shareholder,
and the Shareholder hereby agrees to remain an employee of the Company, for a
minimum period of five years after the effective date of this Agreement.
(b) During his employment by the Company, the Shareholder
will serve as ____________ of the Company, or in such other executive
capacities commensurate with his talents
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and abilities as may be assigned to him from time to time by the Board of
Directors of the Company, provided that no duties so assigned shall require the
Shareholder to establish permanent residence in a county other than Collin
County, Texas.
(c) The Shareholder agrees that he will serve the Company
faithfully, diligently and to the best of his ability during the period of his
employment with the Company, and that he will devote his full time and efforts
during business hours to the business of the Company, reasonable vacations and
sick leaves in accordance with the Company's policies excluded.
(d) As compensation for his employment services with the
Company, the Shareholder shall receive an annual salary of $200,000 per year,
and shall participate in performance bonus or incentive compensation plans made
available to other comparable level employees of the Company from time to time.
The Company shall reimburse the Shareholder for all reasonable and necessary
expenses incurred by him in the performance of his duties to the Company,
provided that the Shareholder presents to the Company written accounts thereof
and appropriate evidence of payment in accordance with the Company's normal
policies.
(e) The Company shall make available to the Shareholder a
suitable automobile during the term of his employment by the Company. In
addition, the Company agrees to use commercially reasonable efforts to maintain
in full force and effect during the term of the Shareholder's employment by the
Company the Company's current disability insurance policy relating to the
Shareholder (or if such disability insurance policy ceases to remain available,
a comparable disability insurance policy). The Company shall also make
available to the Shareholder all employee fringe benefits and perquisites
normally offered by the Company to its executive employees, including vacations
and sick leave in accordance with the Company policies and health insurance
benefits.
(f) After expiration of the initial five-year term of
this Agreement, either the Company or the Shareholder may terminate the
Shareholder's employment by the Company at will and without any cause
whatsoever by giving 30 days' prior written notice to the other party of the
intention to terminate such employment. The Company may at any time terminate
the employment of the Shareholder for "just cause", as defined in Section 7
hereof.
3. Confidentiality. The Shareholder acknowledges that the nature
of his employment with the Company and the Company Subsidiaries has necessarily
involved the creation of, transmittal of, handling of, and access to
confidential information of a proprietary nature and that the Shareholder has
had and will have access to and has become and will become familiar with
various trade secrets, including scientific, engineering and technical know-
how, processes, computer programs, compilations of information, records, sales
procedures, customer requirements, pricing and bidding techniques, customer
lists, employees' compensation, methods of doing business and other
confidential information (all of which are referred to as "Proprietary
Information"), that are owned by the Company and will be owned by the Company
or any corporation or other entity of which the Company is the record or
beneficial owner, directly or indirectly, of 50% or more of the capital stock
or other voting or equity interests of such entity (collectively, the "Company
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65
Subsidiaries") and will be regularly used in the operation of the business of
the Company and the Company Subsidiaries. The Shareholder acknowledges and
agrees that all items of such Proprietary Information are valuable, special and
unique assets the disclosure of which would cause substantial injury and loss
of profits and goodwill to the Company and the Company Subsidiaries, and in
which the Company and the Company Subsidiaries will retain on their own account
and that of their clients a proprietary interest that persists beyond any
termination of the Shareholder's employment with the Company and the Company
Subsidiaries. The Shareholder further acknowledges that the preservation and
protection of the Proprietary Information is an essential part of the duties of
the Shareholder's employment. Therefore, the Shareholder agrees that he will
take all steps necessary to safeguard all Proprietary Information, whether such
information derives from the Shareholder, other employees of the Company or the
Company Subsidiaries, or the customers of the Company and the Company
Subsidiaries as defined in Section 7(c) of this Agreement, and that he will
not, directly or indirectly, use, disclose, or disseminate to any other person
or other entity, lecture upon, publish articles concerning, or otherwise employ
any such Proprietary Information, except as required in the course of his
employment by the Company and the Company Subsidiaries. All files,
specifications, drawings, blueprints, reproductions, records, documents,
information, data, and similar items relating to the business of the Company
and the Company Subsidiaries (the "Documents"), whether prepared or compiled by
the Shareholder or otherwise coming into his possession, shall remain the
exclusive property of the Company and the Company Subsidiaries and shall not be
removed from the premises of the Company and the Company Subsidiaries under any
circumstances without the prior written consent of the board of directors of
the Company (except in the ordinary course of business during the period of the
Shareholder's active employment) and in any event shall be promptly delivered
to the Company upon termination of his employment.
4. Assignment Agreement.
(a) Discovery or Invention. If, during his employment or
within six (6) months after termination for any reason of his employment with
the Company or any Company Subsidiary, the Shareholder conceives or makes any
discovery, invention, or improvement that relates to the art or business of the
Company and the Company Subsidiaries, as then conducted, whether or not such
discovery, invention, or improvement is conceived or made alone or with others
or at the request or suggestion of the Company or any Company Subsidiary,
during regular work hours or otherwise or in or outside of the facilities of
the Company or the Company Subsidiaries, then the Shareholder's rights in such
discovery, invention, or improvement shall be the exclusive property of the
Company. The term "art or business," as used in this Agreement, pertains to
goods, materials, machinery, or equipment manufactured, sold, or used, or to
services provided, by the Company or any of the Company Subsidiaries during the
Shareholder's employment with the Company or any of the Company Subsidiaries or
proposed (and not subsequently rejected by management of the Company) during
his employment with the Company or any of the Company Subsidiaries to be
manufactured, sold, used, or provided by the Company or any of the Company
Subsidiaries, or to formulas, designs, patterns, processes, programs, systems,
software or methods concerned with the production or design of goods,
materials, machinery, or equipment manufactured, sold, or used, or with
services provided, by the Company or any of the Company Subsidiaries during his
employment with the Company or any of the Company Subsidiaries or proposed (and
not subsequently rejected by
B-3
66
management of the Company) during his employment with the Company or any of the
Company Subsidiaries to be manufactured, sold, used, or provided by the Company
or any of the Company Subsidiaries. The term "discovery, invention, or
improvement" includes any new and novel art, machine, method, software,
process, use, apparatus, composition of matter, design, or configuration of any
kind or improvements thereon.
(b) Disclosure and Cooperation. Immediately upon making
any such discovery, invention, or improvement, the Shareholder shall disclose
it to the officers of the Company, but to no one else, and the Shareholder
hereby assigns and agrees to assign to the Company his full and exclusive right
to any such discovery, invention, or improvement and agrees to execute all
documents and instruments the Company deems necessary to vest title to such
discovery, invention, or improvement in the Company or any Company Subsidiary
or its nominee and, if such discovery, invention, or improvement be patentable
or copyrightable, to any application for copyrights or letters patent that may
be filed on and copyrights or letters patent that may be obtained or issued on
such discovery, invention, or improvement. The Shareholder shall cooperate in
all respects with the Company in prosecuting applications for copyrights or
letters patent on any such discovery, invention, or improvement and procuring
and maintaining copyrights and patents and in obtaining or registering any
trademarks or service marks that he may originate. In connection therewith the
Shareholder shall:
(i) sign all instruments the Company
deems necessary or desirable for the filing and prosecution of
applications for copyrights or letters patent of the United States or
of any foreign country that the Shareholder may desire to file upon
such discovery, invention, or improvement;
(ii) sign all instruments the Company
deems necessary or desirable for filing and prosecuting divisional
applications that may be required upon such patent applications;
(iii) sign all instruments the Company deems
necessary or desirable for reviving or renewing any of such
applications if revival or renewal of such applications becomes
necessary or desirable; and
(iv) sign all instruments the Company
deems necessary or desirable to file and prosecute continued
applications or reissue applications that subsequently appear to the
Company to be necessary or desirable to render such discovery,
invention, or improvement effective and fully useful for the purposes
of the Company.
5. Solicitation of Employees. Until the later of (i) the fifth
anniversary of the date of the Closing or (ii) the second anniversary of the
termination or cessation for any reason of the Shareholder's employment with
the Company and all of its affiliates, the Shareholder shall not, on his own
behalf or on behalf of any other person, partnership, entity, association, or
corporation, either hire, solicit or seek to hire any employee of the Company
or any of its affiliates who is party to a confidentiality agreement with the
Company or has covenanted not to compete with the
B-4
67
Company or any of its affiliates, or in any other manner attempt directly or
indirectly to influence, induce, or encourage any such employee of the Company
or any of its affiliates to leave the employment of the Company or such
affiliate, nor shall he use or disclose to any person, partnership, entity,
association, or corporation any information concerning the names and addresses
of any of the employees of the Company or its affiliates.
6. Noncompetition Agreement. The Shareholder acknowledges and
agrees that the information he has acquired and will acquire while an employee
and a shareholder of the Company or the Company Subsidiaries regarding the
Proprietary Information of the Company and the Company Subsidiaries will enable
him to injure the Company and the Company Subsidiaries and diminish the value
of the investment by Tyler in the Company and the Company Subsidiaries if he
should engage in any business that is competitive with the business conducted
by the Company and the Company Subsidiaries. Therefore, the Shareholder hereby
agrees to the following:
(a) The Shareholder will not directly or indirectly
engage in any art or business that relates to or offers the same or similar
products or services as the Company's art or business, as defined in Subsection
4(a) hereof, as conducted or proposed to be conducted by the Company or any of
its affiliates at any time prior to the later of the fifth anniversary of the
Closing Date or the termination or cessation for any reason of the
Shareholder's employment with the Company and all its affiliates, or any
products or services directly or indirectly related thereto:
(i) in any state in the United States in which
such products or services are being or were provided by the Company or
any its affiliates as of the Closing;
(ii) in any state in the United States in which
such products or services are being or were provided by the Company or
any of its affiliates during the course of the Shareholder's
employment by the Company or any of its affiliates; or
(iii) to any person or entity that is or was a
customer or affiliate of a customer of the Company or any of the
Company's affiliates at any time during the course of the
Shareholder's employment by the Company or any of its affiliates.
(b) The agreements contained in this Section 6 shall
terminate on the later of (i) the fifth anniversary of the date of the Closing
or (ii) the second anniversary of the termination or cessation for any reason
of the Shareholder's employment with the Company and all of its affiliates.
7. Definitions. For purposes of this Agreement:
(a) The term "indirectly" means the performance of
services by any business or entity in which the Shareholder either owns or
possesses more than a 10% interest in profits, losses, or capital, or is an
officer, director, partner or employee, or for which the Shareholder acts as an
agent or representative, or to which the Shareholder provides consulting or
advisory services.
B-5
68
(b) The term "affiliate" means the Company, the Company
Subsidiaries and any other business or entity that the Company directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, including Tyler, Tyler's subsidiary
corporations as they existed immediately prior to the Closing, and Tyler's
subsidiary corporations as they may be acquired or organized after the Closing.
(c) The term "customer" includes any person or entity
with respect to which, the Company or any of its affiliates has an outstanding
bid, offer or agreement to perform services or, to the knowledge of the
Shareholder at the date of termination, the Company or any of its affiliates is
preparing or contemplating preparation of such a bid, offer or agreement.
(d) The term "just cause" means (i) conviction by a
criminal court of fraud, embezzlement, theft, bribery, or conviction by a
criminal court of other conduct or acts constituting a crime under federal law
or a felony under applicable state law (a conviction under this subsection
7(d)(i) shall mean only those convictions which stand after all non-
discretionary appeals which a criminal defendant must receive have been
exhausted), or (ii) the commission of any act or acts or any course of conduct
that constitutes a material breach of any of the terms of this Agreement and
which breach has not been cured after notice and opportunity to do so in
accordance with the provisions of Section 10 hereof.
8. Breach, Notice and Right to Cure. If at any time during the
term of this Agreement, the Company deems the Shareholder to be in breach of
any of the covenants made by him herein, the Company will notify the
Shareholder of such breach in writing and the Shareholder shall have 30 days
after receipt of such notice to cure the breach to the satisfaction of the
Company.
If the Shareholder fails to cure the alleged breach for any
reason within 30 days after notice and the breach has occurred during the first
five calendar years after the date of Closing:
(i) The Shareholder shall not be entitled to
receive and the Company shall be deemed relieved of any obligation
hereunder to pay any amount that at the time is otherwise due, if any,
pursuant to Section 3 hereof or any future annual amounts at the times
they otherwise would have become due, and the Shareholder's covenants
and agreements herein shall remain in full force and effect, or in the
alternative,
(ii) On or before such 30th day, the Shareholder
shall cease the activity deemed by the Company to be a breach of the
Shareholder's covenant or covenants herein and, if requested by the
Company, shall agree to the entry of an order by an appropriate court
of law or judicial or administrative tribunal, as determined solely by
the Company, restraining the Shareholder from continuing such activity
until final judicial or administrative determination of the issue of
reach. Upon entry of the agreed restraining order, the Company shall
pay the Shareholder any sums which would have been paid to the
Shareholder hereunder had the alleged breach not occurred and the
Company shall resume payments hereunder pending final judicial or
administrative determination of the issue of breach.
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69
The release of the Company's obligation to make payments under
Section 3 is specifically agreed by the parties to be in addition to, and not
in limitation of, any damages or other remedies to which the Company may be
entitled at law or in equity for a breach by the Shareholder of this Agreement.
If at any time during the term of this Agreement, the Company
fails to notify the Shareholder of a deemed breach of this Agreement by the
Shareholder and fails to make a payment due hereunder, the Shareholder shall
notify the Company of such failure to pay pursuant to this Section 8. If the
Company does not cure the failure to pay within 10 days after receipt of such
notice, then the Company shall be deemed to be in breach of this Agreement.
9. Severability.
(a) The Shareholder agrees and acknowledges that each
agreement and covenant set forth herein constitutes a separate agreement
independently supported by good and adequate consideration and that each such
agreement shall be severable from the other provisions of this Agreement and
shall survive this Agreement. The existence of any claim or cause of action of
the Shareholder against the Company or Tyler, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
the Company or Tyler of the covenants and agreements of the Shareholder
contained herein or in those separate agreements.
(b) The parties hereto intend all provisions of this
Agreement to be enforced to the fullest extent permitted by law. Accordingly,
should a court of competent jurisdiction determine that the scope of any
provision is too broad to be enforced as written, the parties intend that the
court should reform the provision to such narrower scope as it determines to be
enforceable. If any provision of this Agreement is held to be illegal, invalid,
or unenforceable under present or future law, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof; and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable provision
or by its severance, except to the extent such remaining provisions constitute
obligations of another party to this Agreement corresponding to the
unenforceable provision. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable.
10. Remedies. The Shareholder acknowledges and agrees that the
ascertainment of damages in the event of his breach of any provision of this
Agreement would be difficult, and the Shareholder agrees that the Company, in
addition to all other remedies it may have (including, without limitation,
those described in Section 8 hereof), shall have the right to injunctive relief
if there is such a breach.
11. Acknowledgments. The Shareholder recognizes and agrees that
the enforcement of this Agreement is necessary and essential to ensure the
preservation and continuity of the business
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70
and good will of the Company and its affiliates and to realize and derive all
of the benefits, rights, and expectations of conducting such business. The
Shareholder agrees that, due to the nature of the Company's business, the scope
and the duration of the covenants set forth in this Agreement are in all
respects reasonable.
12. Notices. All notices, demands, requests, or other
communications that may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in writing and
shall be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery or telegram,
addressed as follows:
(i) If to Tyler or the Company:
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chairman of the Board
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Liddell, Sapp, Zivley, Hill & XxXxxx, L.L.P.
3400 Texas Commerce Tower
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx
(ii) If to the Shareholder:
---------------------------------
The Software Group, Inc.
Jupiter North Technology Park
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxx
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx, III
Telecopy No.: (000) 000-0000
Each party may designate by notice in writing a new address to which
any notice, demand, request, or communication may thereafter be so given,
served, or sent. Each notice, demand,
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71
request, or communication that is mailed, delivered, or transmitted in the
manner described above shall be deemed sufficiently given, served, sent, and
received for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, the affidavit of messenger, or
(with respect to a telecopy) the answer-back being deemed conclusive evidence
of such delivery) or at such time as delivery is refused by the addressee upon
presentation.
13. Successors and Assigns. This Agreement and the rights,
interests, and obligations hereunder shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
14. Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Texas (except the choice of law
rules thereof).
15. Waiver and Other Action. This Agreement may be amended,
modified, or supplemented only by a written instrument executed by the parties
against which enforcement of the amendment, modification, or supplement is
sought.
16. Suspension of Term. The running of the time periods applicable
to any covenant not to compete contained herein shall be suspended during the
period of any violation by the Shareholder of such covenant.
17. Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to receive from the nonprevailing party reasonable attorneys' fees,
court costs and necessary disbursements in addition to all other relief to
which he or it may be entitled.
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EXECUTED as of the date first above written.
TYLER CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE SOFTWARE GROUP, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
--------------------------------------
-----------------------------
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