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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 24, 1997 (July 10, 1997)
SCB COMPUTER TECHNOLOGY, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Tennessee 0-27694 62-1201561
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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1365 West Brierbrook Road, Memphis, Tennessee 38138
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 754-6577
Not Applicable
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
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On July 10, 1997, SCB Computer Technology, Inc. (the "Registrant")
purchased all of the issued and outstanding capital stock of Partners Resources,
Inc. ("PRI"), pursuant to a Stock Purchase Agreement (the "PRI Stock Purchase
Agreement") by and among the Registrant and Michael L. Hirshey, Barry L. Fulton,
Kenneth L. Spencer, and Russell J. Young, the former shareholders of PRI (the
"PRI Shareholders"). The purchase price was $9,600,000, $8,640,000 of which was
paid in cash to the PRI Shareholders at closing. Pursuant to an Indemnity and
Escrow Agreement between the Registrant and the PRI Shareholders, $960,000 of
the purchase price was delivered by the Registrant to SunTrust Bank, Nashville,
N.A. ("SunTrust"), as escrow agent, which amount will be escrowed for one year
in connection with potential indemnification claims by the Registrant for any
breaches of representations and warranties made in the PRI Stock Purchase
Agreement. As additional purchase price, an amount equal to 14 times PRI's net
income for the year ending December 31, 1997, as determined in accordance with
the terms of the PRI Stock Purchase Agreement, will, subject to certain
conditions, be paid to the PRI Shareholders on or before May 1, 1998 in cash or
shares of common stock of the Registrant, at the Registrant's option.
On July 10, 1997, the Registrant also purchased all of the issued and
outstanding capital stock of Partners Capital Group ("PCG"), pursuant to a Stock
Purchase Agreement (the "PCG Stock Purchase Agreement") by and among the
Registrant and the former shareholders of PCG (the "PCG Shareholders"), who are
the same persons as the PRI Shareholders. The purchase price was $6,400,000,
$5,760,000 of which was paid in cash to the PCG Shareholders at closing.
Pursuant to an Indemnity and Escrow Agreement between the Registrant and the PCG
Shareholders, $640,000 of the purchase price was delivered by the Registrant to
SunTrust, as escrow agent, which amount will be escrowed for one year in
connection with potential indemnification claims by the Registrant for any
breaches of representations and warranties made in the PCG Stock Purchase
Agreement.
PRI and PCG have historically operated as affiliated companies. PRI is
an information technology services company specializing in outsourcing projects.
PCG is a computer equipment leasing company. PRI's and PCG's combined revenues
for the year ended December 31, 1996 were approximately $21 million. The
Registrant intends to continue the existing businesses of PRI and PCG. For
accounting purposes, both acquisitions will be treated as having occurred at the
close of business on June 30, 1997.
The sources of funds for the foregoing acquisitions were cash on hand
and approximately $10.0 million in borrowings under a credit facility entered
into between NationsBank of Tennessee, N.A. ("NationsBank") and the Registrant
on July 10, 1997 (the "Credit Facility"). The Credit Facility provides for
borrowings in excess of the initial $10.0 million up to $16.0
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million (assuming certain conditions are satisfied, including certain conditions
relating to the lender's due diligence concerning the acquisition of PRI and PCG
or, alternatively, a pledge of marketable securities), bears interest, payable
monthly, at LIBOR plus a spread over LIBOR, which varies based on certain
financial ratios. At July 10, 1997, the interest rate on borrowings under the
Credit Facility was 7.2%. The Registrant's existing subsidiaries are
co-borrowers under the Credit Facility and their stock is pledged to secure the
indebtedness thereunder. In addition, PRI and PCG have executed guarantees in
favor of NationsBank. All borrowings under the Credit Facility mature on August
1, 2000.
In connection with and as a condition to the acquisitions, Michael L.
Hirschey, a PRI and PCG Shareholder, entered into a three-year employment
agreement with the Registrant. The employment agreement contains covenants not
to compete with the Registrant and its subsidiaries for two years following the
termination of employment. The Registrant continues to employ Barry L. Fulton,
Kenneth L. Spencer, and Russell J. Young, each a PRI and PCG Shareholder, who,
in connection with the acquisitions, entered into non-competition agreements
with the Registrant which contain covenants not to compete with the Registrant
and its subsidiaries for a period of three years.
The consideration paid by the Registrant in the acquisitions was
determined by arm's-length negotiations among the parties with regard to PCG's
and PRI's earnings history and the estimated future profitability. Except as set
forth herein, there is no material relationship between the PCG and PRI
Shareholders, on the one hand, and the Registrant or its affiliates, any
director or officer of the Registrant, or any associate of any director or
officer, on the other hand.
Item 7. Financial Statements and Exhibits
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(a) Financial Statements of Businesses Acquired and Pro Forma Financial
Information.
To be filed by amendment. The Registrant believes that (i) it is
impracticable prior to the filing of this Form 8-K to complete preparation of
the financial statements required to be filed pursuant to Rule 3-05 of
Regulation S-X and the pro forma financial information required to be filed
pursuant to Article 11 of Regulation S-X, and (ii) such information will be
available, and will be filed by the Registrant with the Securities and Exchange
Commission as promptly as practicable, within 60 days after this Form 8-K is
required to be filed.
(c) Exhibits. See Exhibit Index following signature page.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCB COMPUTER TECHNOLOGY, INC.
Date: July 24, 1997 By: /s/ Gordon L. Bateman
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Gordon L. Bateman
Executive Vice President of
Finance and Administration and
Chief Financial Officer
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EXHIBIT INDEX
No. Exhibit
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2.1 Stock Purchase Agreement by and among SCB Computer Technology,
Inc. and the shareholders of Partners Capital Group, dated as
of June 30, 1997. (Schedules and other exhibits are omitted from
this filing. The Registrant will furnish, as supplementary
information, copies of the omitted materials to the
Securities and Exchange Commission upon request.)
2.2 Stock Purchase Agreement by and among SCB Computer Technology,
Inc. and the shareholders of Partners Resources, Inc., dated
as of June 30, 1997. (Schedules and other exhibits are omitted
from this filing. The Registrant will furnish, as supplementary
information, copies of the omitted materials to the
Securities and Exchange Commission upon request.)
10.1 Loan Agreement by and among SCB Computer Technology, Inc.,
Delta Software Systems, Inc., TMR Acquisition, Inc., and
NationsBank of Tennessee, N.A., dated July 10, 1997.
10.2 Promissory Note in favor of NationsBank of Tennessee,
N.A., dated July 10, 1997.
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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
SCB COMPUTER TECHNOLOGY, INC.
AND
THE SHAREHOLDERS OF
PARTNERS CAPITAL GROUP, INC.
DATED TO BE EFFECTIVE AS OF JUNE 30, 1997
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), is dated to be
effective as of June 30, 1997 (the "Effective Date"), by and among SCB Computer
Technology, Inc., a Tennessee corporation ("SCB"), and each of the shareholders
of Partners Capital Group, Inc., a California corporation ("PCG"), as
identified on the signature pages hereto (individually, a "PCG Shareholder,"
and, collectively, the "PCG Shareholders").
The PCG Shareholders own all of the issued and outstanding shares of
common stock, no par value, of PCG (the "PCG Common Stock"). Simultaneously
with the transactions contemplated hereby, SCB and PCG are entering into a
Stock Purchase Agreement (the "PRI Agreement") relating to the purchase by SCB
from the PCG Shareholders of all of the outstanding capital stock of Partners
Resources, Inc. ("PRI"). The PCG Shareholders desire to sell to SCB, and SCB
desires to purchase from the PCG Shareholders, the PCG Common Stock on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants, and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1.
TRANSFER OF SHARES AND PURCHASE PRICE
1.1 Transfer of Shares. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined) the PCG Shareholders
will sell, and SCB will buy, all of the PCG Common Stock.
1.2 Purchase Price. The purchase price (the "Purchase Price") for
the PCG Common Stock of $6,400,000 in cash will be payable by SCB to the PCG
Shareholders at Closing. An aggregate of $5,760,000 of the Purchase Price will
be payable to the PCG Shareholders in the amounts identified on Exhibit A, by
wire transfer of immediately available funds, pursuant to the wire transfer
instructions set forth on Exhibit A, and an aggregate of $640,000 (the "Escrow
Amount") of the Purchase Price will be deposited in an escrow account to be
established at SunTrust Bank, Nashville, N.A., in Nashville, Tennessee, as
escrow agent (the "Escrow Agent"), which Escrow Amount will be held for one
year following the effective date hereof in connection with potential
indemnification claims under Article 5 hereof and pursuant to the terms of an
Escrow Agreement (the "Escrow Agreement") substantially in the form of Exhibit
B attached hereto.
1.3 The Closing. Subject to the terms and conditions of this
Agreement, the closing under this Agreement (the "Closing") will take place
simultaneous with the execution hereof at the offices of PCG in Scottsdale,
Arizona, to be effective for accounting purposes as of 11:59 p.m. on June 30,
1997, or at such other time, date, or place as SCB and the PCG Shareholders may
agree. The date on which the Closing occurs is referred to herein as the
"Closing Date."
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1.4 Determination of Net Income.
(a) As soon as reasonably practicable following December
31, 1997, SCB shall prepare an income statement for PCG for the
calendar year ending December 31, 1997 (the "1997 PCG Income
Statement"), and shall, at SCB's expense, which shall not be an
expense for purposes of the 1997 PCG Income Statement, cause SCB's
independent accountants to audit such income statement to ensure
compliance with this Section 1.4. Except as set forth herein, the
1997 PCG Income Statement will be prepared in accordance with
generally accepted accounting principles, consistently applied. In
the preparation of the 1997 PCG Income Statement, (i) there will be no
charge to PCG's net income for the amortization of goodwill or other
intangible or depreciation of property (or credit for any
corresponding tax benefits related to such amortization or
depreciation, arising as a result of the transactions contemplated
hereby; (ii) shared expenses between, and other expenses of, PRI and
PCG will be accounted for in a manner consistent with the policies and
practices used in the preparation of PRI's and PCG's audited financial
statements for the year ended December 31, 1996; and (iii) computer
equipment will be depreciated and expenses associated with software
licenses with no specified terms will be depreciated or amortized, as
applicable, on a straight-line basis over five years. SCB shall cause
to be delivered promptly following preparation, but in no event later
than March 31, 1998, to the PCG Shareholders a copy of the 1997 PCG
Income Statement together with a calculation of the net income. SCB
shall also make available to the PCG Shareholders and their advisors
all underlying financial data, books, and records (whether written or
in electronic media) reasonably requested by the PCG Shareholders that
are relevant to the calculation of the net income. The PCG
Shareholders shall have 20 days from the delivery of the 1997 PCG
Income Statement to accept or reject in writing SCB's calculations
regarding the net income. If the PCG Shareholders reject SCB's
calculations regarding the net income, such rejection must be
accompanied by a written statement of the reasons therefor and, if the
parties are unable to reach a compromise within five business days of
the date of such rejection, the dispute shall be submitted to
arbitration in New Orleans, Louisiana, such arbitration to be
conducted in accordance with the rules of the American Arbitration
Association ("AAA") before a single arbitrator selected from a panel
of arbitrators of the AAA in accordance with its rules for commercial
arbitration. The filing fee for the arbitration will be paid one-half
by SCB and one-half by the PCG Shareholders and each party shall bear
its own costs and expenses related to the arbitration.
(b) If PCG's net income for the calendar year ending
December 31, 1997, calculated as set forth above, does not equal or
exceed $1,177,000, then the Escrow Amount, if any, shall be reduced by
an amount equal to the difference between $1,177,000 and PCG's actual
net income (the "Net Income Deficit"). If the Escrow Amount is less
than the Net Income Deficit, then the amount by which the Net Income
Deficit exceeds the Escrow Amount may be offset, dollar-for-dollar,
first against the escrow amount established under the PRI Agreement
and, to the extent still unsatisfied, then against the Earnout
Consideration (as defined in the PRI Agreement).
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1.5 No Section 338(h)(10) Election. Neither SCB nor the PCG
Shareholders shall make an election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any comparable or analogous
election under state, local, or foreign tax law.
1.6 Parties' Obligations at Closing.
(a) At the Closing, SCB will deliver to the PCG
Shareholders:
(i) $5,760,000 in cash by wire transfer of
immediately available funds allocated among the PCG
Shareholders in accordance with Exhibit A attached hereto,
together with a copy of the Escrow Agreement duly executed by
SCB and the Escrow Agent and evidence, reasonably satisfactory
to the PCG Shareholders and their counsel, that the Escrow
Amount has been duly delivered to the Escrow Agent;
(ii) a copy of the resolutions of the Board of
Directors of SCB, certified by the corporate secretary,
authorizing the execution, delivery, and performance of this
Agreement and the other documents referenced herein and the
consummation of the transactions contemplated hereby;
(iii) an opinion of Bass, Berry & Sims PLC, legal
counsel to SCB, substantially in the form of Exhibit C
attached hereto;
(iv) a copy of the PRI Agreement duly executed by
SCB; and
(v) such other certificates and documents as the
PCG Shareholders or their counsel may reasonably request,
including a receipt from SCB acknowledging that it has
received the PCG Disclosure Letter.
(b) At the Closing, the PCG Shareholders will deliver to
SCB:
(i) a copy of the Escrow Agreement duly executed
by the PCG Shareholders;
(ii) an opinion of Peskind Hymson & Goldstein,
P.C., and Sellar, Hazard, Snyder, Fitzgerald, McNeely & Alm
(with respect to California law matters only), legal counsel
to the PCG Shareholders, substantially to the effect of
Exhibit D attached hereto;
(iii) certificates representing all of the issued
and outstanding PCG Common Stock, together with stock
powers duly endorsed in blank by each of the PCG
Shareholders and spousal consents or waivers with respect to
the sale of the PCG Common Stock;
(iv) any required consent or approval of a
creditor, contract party, or public or governmental authority
to the transaction contemplated hereby;
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(v) non-competition agreements (the
"Non-Competition Agreements") substantially in the form of
Exhibit E attached hereto, duly executed by PCG and the PCG
Shareholders other than Michael L. Hirschey;
(vi) duly executed resignations as directors and
officers of PCG of all directors and officers of PCG;
(vii) [intentionally omitted]
(viii) such other certificates or documents as SCB
or its counsel may reasonably request.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF
THE PCG SHAREHOLDERS
Except as set forth in the disclosure letter delivered prior to the
execution hereof to SCB (the "PCG Disclosure Letter"), the PCG Shareholders,
jointly and severally, represent, warrant, and agree as follows:
2.1 Existence; Good Standing; Corporate Power and Authority. PCG
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of California. PCG is qualified to do business as a
foreign corporation and is in good standing under the laws of any state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business, results of operations, financial
condition, or prospects of PCG (a "PCG Material Adverse Effect"). PCG has all
requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business as now conducted. PCG has provided to
SCB complete and correct copies of its articles of incorporation and bylaws,
each of which is in full force and effect.
2.2 Authorization, Validity, and Effect of Agreements. The PCG
Shareholders have the full power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. This Agreement
constitutes, and all agreements and documents contemplated hereby (when
executed and delivered pursuant hereto) will constitute, the valid and legally
binding obligations of the PCG Shareholders, enforceable in accordance with
their respective terms.
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2.3 Capitalization. The authorized capital stock of PCG consists
of 100,000 shares of common stock, no par value, of which 12,000 shares are
issued and outstanding as of the date of this Agreement and owned beneficially
and of record by the PCG Shareholders as set forth in the PCG Disclosure
Letter. PCG has no outstanding capital stock, bonds, debentures, notes, or
other obligations as to which the holders have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the shareholders of PCG on any matter. All issued and outstanding shares of
PCG Common Stock are duly authorized, validly issued, fully paid,
nonassessable, and free of, or in compliance with, preemptive rights. There
are no options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements, or commitments that obligate PCG to issue, transfer,
or sell any shares of its capital stock. None of the outstanding shares of PCG
Common Stock are subject to any voting trust agreement, lien, encumbrance,
security interest, restriction, or claim.
2.4 Other Interests. PCG does not own, directly or indirectly, or
have any obligation to acquire any interest or investment in, any corporation,
partnership, joint venture, business, trust, or other entity.
2.5 No Violation. Neither the execution and delivery by the PCG
Shareholders of this Agreement nor the consummation by the PCG Shareholders of
the transactions contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the articles of
incorporation or bylaws of PCG; (ii) conflict with, result in a breach of any
provision of or the modification or termination of, constitute a default under,
or result in the creation or imposition of any lien, security interest, charge,
or encumbrance upon any of the assets of PCG or any PCG Shareholder by virtue
of the application of any provisions contained in, any material commitment,
lease, contract, or other material agreement or instrument to which PCG or any
PCG Shareholder is a party (including any Material Contract, as hereinafter
defined); or (iii) violate or result in a change in any rights or obligations
under any governmental permit or license or any order, arbitration award,
judgment, writ, injunction, decree, statute, rule, or regulation applicable to
PCG or any PCG Shareholder.
2.6 Regulatory Consents. No consent, approval, order, or
authorization of, or registration, declaration, or filing with, any
governmental entity, is required by or with respect to PCG or any PCG
Shareholder in connection with the execution and delivery of this Agreement by
any PCG Shareholder, or the consummation by any PCG Shareholder of the
transactions contemplated hereby, which has not been made or obtained and the
failure to make or obtain would have a PCG Material Adverse Effect.
2.7 Material Contracts. The PCG Disclosure Letter contains a
complete and accurate list of all contracts and agreements for the performance
of services or the purchase or leasing of property by PCG of an amount or value
in excess of $100,000 ("Material Contracts"). Each of the Material Contracts
is in full force and effect and is valid and enforceable in accordance with its
terms, and PCG is in full compliance with all applicable terms and requirements
thereof. No event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give any person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel,
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terminate, or modify, any Material Contract. To the knowledge of PRI and
and each of the PCG Shareholders, there are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate (other than with respect to
renewals in accordance with contract terms), any amounts paid or payable under
any Material Contract with any person.
2.8 Financial Statements; Undisclosed Liabilities. Prior to the
Closing Date, PCG has delivered to SCB true and complete copies of (a) the
audited financial statements of PCG as of and for the year ended December 31,
1996 and (b) the unaudited financial statements of PCG as of and for the
quarter ended March 31, 1997. The balance sheets provided to SCB by PCG
(including the related notes and schedules) fairly present the financial
position of PCG as of their respective dates and the statements of income,
stockholders' equity, and cash flows provided to SCB by PCG (including any
related notes and schedules) fairly present the results of operations,
stockholders' equity, and cash flows of PCG for the periods set forth therein,
in each case in accordance with generally accepted accounting principles
consistently applied, except as may be noted therein. Such financial
statements have been prepared from the books and records of PCG which
accurately and fairly reflect the transactions and the acquisitions and
dispositions of the assets of PCG. As of the Closing Date, PCG did not have
any liabilities, contingent or otherwise, whether due or to become due, known
or unknown, other than as indicated or reserved against on the balance sheet
dated December 31, 1996, except for current liabilities incurred in the
ordinary course of business since such date.
2.9 No Material Adverse Changes. Since December 31, 1996, there
has not been (i) any material adverse change in the financial condition,
results of operations, business, assets, or liabilities (contingent or
otherwise, whether due or to become due, known or unknown) of PCG; (ii) any
dividend declared or paid or distribution made on the capital stock of PCG, or
any capital stock thereof redeemed or repurchased; (iii) any incurrence by PCG
of long-term debt; (iv) any increases in salary, bonus, or other compensation
(including pursuant to any employee benefit plan) to any officers, employees,
or agents of PCG; (v) any pending or threatened labor disputes or other labor
problems against or potentially affecting PCG; (vi) the termination, or receipt
of notice of termination, of any Material Contract; or (vii) any other
transaction entered into by PCG, except in the ordinary course of business and
consistent with past practice.
2.10 Tax Matters.
(a) For purposes of this Agreement, (i) "Tax" means any
federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
value-added, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, and (ii) "Tax Return" means any
return, report, information return, or other document (including any
related or supporting information) filed or required to be filed with
any taxing authority in connection with its determination, assessment,
collection, administration, or imposition of any Tax.
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(b) PCG has duly and timely filed all Tax Returns
required to be filed by it (or duly and timely filed an appropriate
request for extension) and has duly and timely paid all Taxes and
other charges (whether or not shown on any Tax Return) due or claimed
to be due from it by federal, foreign, state, or local taxing
authorities or has set up an adequate reserve for all Taxes payable by
PCG. True and correct copies of all Tax Returns relating to federal
and state taxes and sales taxes and other charges for the period from
organization through December 31, 1995 (and a request for extension
for the calendar year ended December 31, 1996) have been heretofore
delivered to SCB. The accruals and reserves for Taxes contained in
the financial statements and carried on the books of PCG (other than
any reserve for deferred taxes established to reflect timing
differences between book and tax income) are adequate to cover all Tax
liabilities. Since December 31, 1996, PCG has not incurred any Tax
liabilities other than in the ordinary course of business. There are
no recorded Tax liens upon any properties or assets of PCG (whether
real, personal, or mixed, tangible or intangible), and, except as
reflected in the financial statements, there are no pending or, to the
PCG Shareholders' knowledge, threatened audits or examinations
relating to, or claims asserted for, Taxes or assessments against PCG,
and the PCG Shareholders are aware of no substantial basis for any
such claims. PCG has not granted or been requested to grant any
extension of the limitation period applicable to any claim for Taxes
or assessments with respect to Taxes. PCG is not a party to any Tax
allocation or sharing agreement. PCG has no liability for the Taxes
of any Affiliated Group under Treasury Regulation 1.1502-6 (or any
similar provision of state, local, or foreign law). PCG has withheld
and paid all Taxes required to have been withheld and paid when due in
connection with amounts paid or owing to any employee, independent
contractor, creditor, or shareholder, where failure to do so would
have a PCG Material Adverse Effect.
(c) The PCG Disclosure Letter lists each jurisdiction in
which PCG files Tax Returns for each period or portion thereof ending
on or before the date hereof. Except as set forth in the PCG
Disclosure Letter, there is no claim outstanding against PCG by any
taxing authority in a jurisdiction where PCG does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
(d) All material elections with respect to Taxes
affecting PCG as of the date hereof are set forth in the PCG
Disclosure Letter.
(e) All joint ventures, partnerships, or other
arrangements or contracts to which PCG is a party and that could be
treated as a partnership for federal income tax purposes are set forth
in the PCG Disclosure Letter.
(f) PCG (i) has not filed a consent pursuant to Section
341(f) of the Code nor agreed to have Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f) of the Code) owned by PCG; (ii) has not agreed, and is
not required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise that will
affect the liability of PCG for Taxes; (iii) has not made an election,
and is not required, to treat any asset of PCG as owned by another
person pursuant to the provisions of former Section 168(f)(8) of the
Code or as tax-exempt bond-
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financed property or tax-exempt use property within the meaning of
Section 168 of the Code; and (iv) has not made any of the foregoing
elections and is not required to apply any of the foregoing rules
under any comparable state or local tax provision.
(g) As soon as practicable following the date hereof, the
PCG Shareholders shall, on behalf of PCG, timely file all Tax Returns
for, and pay all Taxes due with respect to, the short period beginning
January 1, 1997, and ending on the Closing Date. The PCG Shareholders
shall close PCG's books on the Closing Date and shall report on PCG's
federal corporate income Tax Return for the short period ending on the
Closing Date hereof all items of income, loss, deduction, and credit
arising during the short period under PCG's accrual method of
accounting for tax purposes.
2.11 Employees and Fringe Benefit Plans.
(a) The PCG Disclosure Letter sets forth the names, ages,
and titles of all members of the Board of Directors and officers of
PCG and all employees of PCG earning in excess of $50,000 per year,
and the annual rate of compensation (including bonuses) being paid to
each such officer and employee as of the most recent practicable date.
(b) The PCG Disclosure Letter lists each employment,
bonus, deferred compensation, pension, stock option, stock
appreciation right, profit-sharing, or retirement plan, arrangement,
or practice, each medical, vacation, retiree medical, severance pay
plan, and each other agreement or fringe benefit plan, arrangement, or
practice, of PCG, whether legally binding or not, that affects one or
more of PCG's employees, including all "employee benefit plans" as
defined by Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") (collectively, the "Plans"). PCG
neither has nor sponsors, nor participates in any Plan that is subject
to Title IV of ERISA or the minimum funding standards of Section 412
of the Code.
(c) For each Plan that is an "employee benefit plan"
under Section 3(3) of ERISA, PCG has delivered to SCB correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and funding agreements
that implement each such Plan.
(d) PCG has no commitment, whether formal or informal and
whether or not legally binding, (i) to create any additional Plan;
(ii) to modify or change any Plan; or (iii) to maintain for any period
of time any Plan. The PCG Disclosure Letter contains an accurate and
complete description of the funding policies (and commitments, if any)
with respect to each existing Plan.
(e) PCG has no unfunded past service liability in respect
of any of its Plans; neither PCG, nor any Plan nor any trustee,
administrator, fiduciary, or sponsor of any Plan has engaged in any
prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code for which there is no statutory exemption in Section
408 of ERISA or
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Section 4975 of the Code; all filings, reports, and descriptions as to
such Plans (including Form 5500 Annual Reports, summary plan
descriptions, and summary annual reports) required to have been made
or distributed to participants, the Internal Revenue Service, the
United States Department of Labor, and other governmental agencies
have been made in a timely manner; there is no material litigation,
disputed claim, governmental proceeding, or investigation pending or
threatened with respect to any of the Plans, the related trusts, or
any fiduciary, trustee, administrator, or sponsor of the Plans; the
Plans have been established, maintained, and administered in all
material respects in accordance with their governing documents and
applicable provisions of ERISA and the Code and Treasury Regulations
promulgated thereunder; and each Plan that is intended to be a
qualified plan under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to the current terms of the Plan.
(f) Except where failure to do so would not have a PCG
Material Adverse Effect, PCG has complied in all respects with all
applicable federal, state, and local laws, rules, and regulations
relating to employees' employment and employment relationships,
including, without limitation, wage related laws, anti-discrimination
laws, employee safety laws, and COBRA (defined herein to mean the
requirements of Code Section 4980B, Proposed Treasury Regulation
Section 1.162-26 and Part 6 of Subtitle B of Title I of ERISA).
(g) The consummation of the transactions contemplated by
this Agreement will not (i) result in the payment or series of
payments by PCG to any employee or other person of an "excess
parachute payment" within the meaning of Section 280G of the Code;
(ii) entitle any employee or former employee of PCG to severance pay,
unemployment compensation, or any other payment; or (iii) accelerate
the time of payment or vesting of any stock option, stock appreciation
right, deferred compensation, or other employee benefits under any
Plan (including vacation and sick pay).
(h) None of the Plans that are "welfare benefit plans,"
within the meaning of Section 3(1) of ERISA, provide for continuing
benefits or coverage after termination or retirement from employment,
except for COBRA rights under a "group health plan" as defined in Code
Section 4980B(g) and ERISA Section 607.
(i) Neither PCG nor any member in a "controlled group"
with PCG (as defined in ERISA) has ever contributed to, participated
in, or withdrawn from a multi-employer plan as defined in Section
4001(a)(3) of Title IV of ERISA, and PCG has not incurred and does not
owe any liability as a result of any partial or complete withdrawal by
any employer from such a multi-employer plan as described under
Section 4201, 4203, or 4205 of ERISA.
2.12 Assets. PCG owns the assets reflected in the December 31,
1996, balance sheet and the assets it purports to own that were acquired in the
ordinary course of business since the date thereof (except for assets sold,
transferred, or conveyed in the ordinary course of business), including the
leasehold estates, with good and marketable title, free and clear of any and
all claims, liens, mortgages, security interests, or encumbrances whatsoever,
and free and clear of any rights or privileges capable of becoming claims,
liens, mortgages, securities interests, or encumbrances. The
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buildings, plants, structures, and equipment owned or leased by PCG are in good
operating condition and repair, and are adequate for the uses for which they
are being put, and none of such buildings, plants, structures, or equipment is
in need of maintenance or repairs except for ordinary and routine maintenance
and repairs that are not material in nature or cost.
2.13 Accounts Receivable. All accounts receivable of PCG that are
reflected on the accounting records of PCG as of the date hereof (collectively,
the "Accounts Receivable"), represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of
business. The Accounts Receivable are current and collectible net of the
respective reserves shown on the accounting records of PCG as of the date
hereof (which reserves are adequate and calculated consistent with past
practice and do not represent a greater percentage of the Accounts Receivable
as of the date hereof than the reserve reflected in the balance sheet dated
December 31, 1996, and do not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within one hundred twenty (120) days after the
day on which it first becomes due and payable. The PCG Shareholders are not
aware of any contest, claim, or right of set-off with any maker of an Account
Receivable relating to the amount or validity of such Account Receivable.
2.14 Lawful Operations. PCG has been and currently is conducting
its business, and each of the premises leased or owned by PCG have been and now
are being used and operated, in compliance with all statutes, regulations,
orders, covenants, restrictions, and plans of federal, state, regional, county,
or municipal authorities, agencies, or boards applicable to the same, except
where the failure to so comply would not have a PCG Material Adverse Effect.
2.15 Litigation. There is no suit, action, or proceeding pending
or, to the knowledge of any of the PCG Shareholders, threatened against or
affecting PCG, which, if adversely determined, could have a PCG Material
Adverse Effect. PCG is not subject to any currently existing order, writ,
injunction, or decree relating to its operations.
2.16 Corporate Records; Other Information. The minute books of
PCG, copies of which have been provided to SCB, reflect all meetings of the
boards of directors, committees of the boards of directors, and the
shareholders thereof prior to the date hereof. All documents and other written
information as to existing facts relating to PCG and its assets and liabilities
which have been provided to SCB in connection with this Agreement are true,
correct, and complete in all material respects except to the extent that any
such documents or other written information were later specifically
supplemented or corrected prior to the Closing Date with additional documents
or written information that were provided to SCB by authorized agents of PCG,
including the PCG Disclosure Letter.
2.17 Intellectual Property Rights. PCG owns or possesses the right
to use or is licensed to use all trademarks, service marks, trade names,
slogans, copyrights in published and unpublished works, patents, patent
applications, inventions, and discoveries that may be patentable, rights in
mask works, and all trade secrets including, but not limited to, customer
lists, software, and technical information, it currently uses without any
conflict or alleged conflict with the rights of others, except
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where any such conflict would not have a PCG Material Adverse Effect. No
copyright registered in the name of or owned by PCG is infringed or has been
challenged or threatened in any way or, to the knowledge of the PCG
Shareholders, is infringed. None of the subject matter of any such copyright
infringes or is alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party for which PCG lacks a
license to use that third party's work. All works encompassed by a copyright
registered in the name of or owned or licensed by PCG have been marked with the
proper copyright notice.
2.18 Hazardous Substances.
(a) PCG has not authorized or conducted or has knowledge
of the generation, transportation, storage, presence, use, treatment, disposal,
release, or handling of (in an amount or of a type that has been or must be
reported to any governmental agency, violates any Environmental Law (as defined
below), or has required or could require remediation expenditures) any
hazardous substance, asbestos, radon, polychlorinated biphenyls ("PCBs"),
petroleum product, or waste (including crude oil or any fraction thereof),
natural gas, liquefied gas, synthetic gas, or other material defined,
regulated, controlled, or potentially subject to any remediation requirement
under any environmental law (collectively, "Hazardous Materials"), on, in, or
under any real property owned, leased, or by any means controlled by it;
(b) PCG is in compliance with all federal, state, and
local laws, ordinances, rules, regulations, and other governmental requirements
relating to pollution, control of chemicals, management of waste, discharges of
materials into the environment, health, safety, natural resources, and the
environment (collectively, "Environmental Laws");
(c) PCG has, and is in compliance with, all licenses,
permits, registrations, and government authorizations necessary to operate
under all applicable Environmental Laws;
(d) PCG has not received any written or oral notice from
any governmental entity or any other person, and there is no pending or, to any
PCG Shareholder's knowledge, threatened claim, litigation, or any
administrative agency proceeding that: alleges a violation of any
Environmental Law by PCG; alleges PCG is a liable party or a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601, et seq., or any state superfund
law; has resulted in or could result in the attachment of an environmental lien
on any real property owned, leased, or controlled by PCG; or alleges the
occurrence of contamination of any of such real property, damage to natural
resources, property damage, or personal injury based on its activities or the
activities of PCG's predecessors or third parties (whether at the real property
or elsewhere) involving Hazardous Materials, whether arising under the
Environmental Laws, common law principles, or other legal standards.
2.19 Certain Business Practices and Regulations. Neither PCG, nor
to any of the PCG Shareholder's knowledge, any of its executive officers,
directors, or employees, has (i) made or agreed to make any contribution,
payment, or gift to any customer, supplier, landlord, political candidate,
governmental official, employee, or agent where either the contribution,
payment, or gift or the purpose thereof was illegal under any law or
regulation; (ii) established or maintained any
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unrecorded fund or asset for any purpose or made any false entries on its
respective books and records for any reason; (iii) made or agreed to make any
contribution, or reimbursed any political gift or contribution made by any
other person, to any candidate for federal, state, or local public office in
violation of any law or regulation; or (iv) submitted any claim for services
rendered or reimbursement for expenses to any person where the services were
not actually rendered or the expenses were not actually incurred.
2.20 Insurance. All policies and binders of insurance for
professional liability, directors and officers, fire, liability, workers'
compensation, and other customary matters held by or on behalf of PCG
("Insurance Policies") are described in the PCG Disclosure Letter and have been
made available to SCB. The Insurance Policies are in full force and effect.
PCG is not in default with respect to any material provision contained in any
Insurance Policy.
2.21 No Brokers. PCG has not entered into any contract,
arrangement, or understanding with any person or firm that may result in the
obligation of PCG or SCB to pay any finder's fees, brokerage or agent's
commissions, or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
2.22 Affiliated Transactions and Persons. No PCG Shareholder or
member of his "immediate family" (as defined by the rules and regulations
adopted under the Exchange Act) has any interest in any property (whether real,
personal, or mixed, and whether tangible or intangible) used in or pertaining
to the business of PCG. No PCG Shareholder or member of his immediate family
owns, of record or beneficially, an equity interest or any other financial or
profit interest in any person or entity that has had business dealings with PCG
or engaged in competition with PCG.
2.23 Full Disclosure. All of the information provided by the PCG
Shareholders and their representatives herein or in the PCG Disclosure Letter
is true, correct, and complete in all material respects, and no representation,
warranty, or statement made by the PCG Shareholders in or pursuant to this
Agreement or the PCG Disclosure Letter contains any untrue statement of a
material fact or omits or will omit to state any material fact necessary to
make such representation, warranty, or statement not misleading.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SCB
Except as set forth in the disclosure letter delivered at or prior to
the execution hereof to the PCG Shareholders (the "SCB Disclosure Letter"), SCB
represents, warrants, and agrees as follows:
3.1 Existence; Good Standing; Corporate Authority. SCB is duly
incorporated, validly existing, and in good standing under the laws of the
State of Tennessee. SCB is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other state
of the United States in which the character of the properties owned or leased
by it therein or in which the transaction of its business therein makes such
qualification necessary, except where the
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failure to be so qualified would not have a material adverse effect on the
business, results of operations, or financial condition of SCB (an "SCB
Material Adverse Effect"). SCB has all requisite corporate power and authority
to own, operate, and lease its properties and carry on its business as now
conducted.
3.2 Authorization, Validity, and Effect of Agreements. SCB has
the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The
consummation by SCB of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
SCB, enforceable in accordance with their respective terms.
3.3 Capitalization. The authorized capital stock of SCB consists
of 1,000,000 shares of preferred stock, none of which is issued and
outstanding, and 20,000,000 shares of SCB Common Stock, of which 7,481,369
shares are issued and outstanding as of the date hereof, approximately
3,693,944 of which outstanding shares are owned by "affiliates" (as such term
is defined under federal securities laws) by SCB. SCB has no outstanding
bonds, debentures, notes, or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the shareholders of SCB on any matter. All
issued and outstanding shares of SCB Common Stock are duly authorized, validly
issued, fully paid, nonassessable, and free of preemptive rights. Other than
pursuant to this Agreement, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements, or
commitments that obligate SCB to issue, transfer, or sell any shares of capital
stock of SCB.
3.4 Subsidiaries. The SCB Disclosure Letter sets forth the
outstanding capital stock and each corporation, partnership, or other entity of
which at least a majority of the voting interest is owned directly or
indirectly by SCB (an "SCB Subsidiary").
3.5 Other Interests. SCB does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust, or other entity, except for the
SCB Subsidiaries.
3.6 No Violation. Neither the execution and delivery by SCB of
this Agreement, nor the consummation by SCB of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of the charter or bylaws of SCB; (ii) conflict
with, result in a breach of any provision of or the modification or termination
of, constitute a default under, or result in the creation or imposition of any
lien, security interest, charge, or encumbrance upon any of the assets of SCB
by virtue of the application of any provision contained in, any material
commitment, lease, contract, or other material agreement or instrument to which
SCB is a party; or (iii) violate or result in a change in any rights or
obligations, under any governmental permit or license or any order, arbitration
award, judgment, writ, injunction, decree, statute, rule, or regulation
applicable to SCB.
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3.7 Litigation. As of the date of this Agreement, there is no
action, suit, or proceeding pending against SCB or any SCB Subsidiary or, to
the knowledge of SCB or any SCB Subsidiary, threatened against or affecting SCB
or any SCB Subsidiary, at law or in equity, or before or by any federal or
state commission, board, bureau, agency, or instrumentality, that is reasonably
likely to have an SCB Material Adverse Effect.
3.8 Absence of Certain Changes. Since January 31, 1997, there has
not been any material adverse change in the financial condition, results of
operations, business, assets or liabilities (contingent or otherwise, whether
due or to become due, known or unknown), of SCB, except for changes in the
ordinary course of business.
3.9 No Brokers. SCB has not entered into any contract,
arrangement, or understanding with any person or firm that may result in the
obligation of SCB to pay any finder's fees, brokerage or agent's commissions,
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that SCB has retained Mercer Capital as its financial advisor (the fees and
expenses of which shall be the sole responsibility of SCB). Other than the
foregoing arrangement, SCB is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions, or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
ARTICLE 4.
COVENANTS
4.1 Further Assurances. SCB, from time to time after the Closing
and at the PCG Shareholders' reasonable request, and the PCG Shareholders from
time to time after the Closing and at SCB's reasonable request, will execute,
acknowledge, and deliver to the PCG Shareholders or SCB, as the case may be,
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications, and
further assurances as the PCG Shareholders or SCB, as the case may be, may
reasonably require in order to better enable the other party to complete,
perform, or discharge any of the liabilities or obligations assumed hereunder.
Each of the parties hereto will cooperate with the other and execute and
deliver to the other parties hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the
intended purposes of this Agreement. Without limiting the generality of the
foregoing, SCB will cause PCG to, and the PCG Shareholders will, within 30 days
of the Closing Date, use their best efforts to agree to lease the properties
identified on Schedule 4.2 hereto, with such terms as may be mutually agreeable
to the parties, including fair market rental rates.
4.2 Covenants of SCB. SCB will not, without the prior written
consent of the PCG Shareholders, prior to December 31, 1997:
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(i) merge or consolidate the business of PCG into
or with any other entity, sell or permit the sale of any
material amount of assets of PCG otherwise than in the
ordinary course of business, or permit PCG to be otherwise
dissolved and liquidated;
(ii) require the employees of PCG to devote more
than an inconsequential amount of their working time (which
for purposes of this Agreement shall mean an amount not in
excess of 10% of their working time and which will otherwise
not materially adversely affect the business of PCG) to
matters other than the conduct of the business of PCG;
(iii) sell or provide any goods or services to PCG,
except those which are reasonably necessary to the conduct of
PCG's business and on terms and conditions no less favorable
to PCG than it could obtain from unrelated third parties;
(iv) materially change the financial or
operational business practices of PCG including materially
increasing expenses associated with the business without a
corresponding increase in the revenues associated with the
business; and
(v) change the method of allocating expenses
between PRI and PCG in a manner inconsistent with prior
policies and practices.
ARTICLE 5.
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
5.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in Articles 2 and 3 of
this Agreement, and the parties' rights to pursue any claim under this Article
5, shall survive for a period of one year from the Effective Date (regardless
of any investigation conducted by the parties with respect thereto) and no
claim for a misrepresentation or breach of warranty, including, without
limitation, any claim for indemnification arising from an alleged
misrepresentation or breach of warranty, may be made hereunder by either party
unless such party has given the other party written notice of the claim on or
before July 31, 1998.
5.2 Indemnification by the PCG Shareholders. Subject to the
provisions of this Article 5 and the Escrow Agreement, the PCG Shareholders,
jointly and severally, in accordance with the Escrow Agreement, agree to
indemnify and hold harmless SCB and PRI and PCG following the Effective Date
(each being an "SCB Indemnified Party"), from and against, and will reimburse
any SCB Indemnified Party for any and all claims, losses, damages, liabilities,
and expenses (including, without limitation, settlement costs and any
reasonable legal or other fees or expenses for investigating or defending any
actions or threatened actions), or diminution in value (in excess of $100,000
on a cumulative aggregate basis), whether or not involving a third-party claim,
arising from or in connection with each and all of the following:
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(a) any misrepresentation or breach of any warranty made
by the PCG Shareholders in this Agreement;
(b) the nonfulfillment or breach of any covenant,
agreement, or obligation of the PCG Shareholders contained in by this
Agreement;
(c) any misrepresentation or breach of any warranty
contained in any written statement, certificate, or other document
furnished by the PCG Shareholders pursuant to this Agreement or in
connection with the transaction contemplated by this Agreement; and
(d) any amounts paid to any of Messrs. Dunne, Linklater,
Causse, Hamel, or Lawson pursuant to any employment or consulting
contract entered into prior to the Closing Date in excess of such
person's base salary as of the Closing Date as reflected in the books
and records of PRI or PCG;
(e) any attempt (whether or not successful) by any person
to cause or require such SCB Indemnified Party to pay or discharge any
debt, obligation, liability, or commitment, the existence of which
would entitle such SCB Indemnified Party to indemnification pursuant
to clauses (a) through (d) of this Section 5.2.
5.3 Indemnification by SCB. Subject to the provisions of this
Article 5, SCB shall indemnify, defend, and hold harmless, the PCG Shareholders
and their respective estates (each being a "Seller Indemnified Party"), and
will reimburse any Seller Indemnified Party for any and all claims, losses,
damages, liabilities, and expenses (including, without limitation, settlement
costs and any legal or other fees or expenses for investigating or defending
any actions or threatened actions) arising from or in connection with each and
all of the following:
(a) any misrepresentation or breach of any warranty made
by SCB in this Agreement;
(b) the nonfulfillment or breach of any covenant,
agreement, or obligation of SCB contained in this Agreement;
(c) any misrepresentation or breach of any warranty
contained in any statement, certificate, or other document furnished
by SCB pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement;
(d) any attempt (whether or not successful) by any person
to cause or require such Seller Indemnified Party to pay or discharge
any debt, obligation, liability, or commitment, the existence of which
would entitle such Seller Indemnified Party to indemnification
pursuant to clauses (a) through (c) of this Section 5.3; and
(e) a loss by a PCG Shareholder (up to an aggregate of
$1,800,000 for all PCG Shareholders) pursuant to a guarantee by such
PCG Shareholder of an obligation of PCG, provided that such guarantee
has been disclosed to SCB prior to the Closing Date.
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5.4 Indemnification Procedure. Subject to the differing
provisions of the Escrow Agreement governing procedures for indemnification if
the Escrow Agreement is still in effect, an indemnified party shall promptly
notify the indemnifying party of any claim, demand, action, or proceeding for
which indemnification will be sought under Section 5.2 or 5.3 of this
Agreement, and, if such claim, demand, action, or proceeding is a third-party
claim, demand, action, or proceeding, then the indemnifying party will have the
right at its expense to assume the defense thereof using counsel reasonably
acceptable to the indemnified party. The indemnified party shall have the
right to participate, at its own expense, with respect to any such third-party
claim, demand, action, or proceeding. In connection with any such third-party
claim, demand, action, or proceeding, SCB and the PCG Shareholders shall
cooperate with each other and provide each other with access to relevant books
and records in their possession. No such third-party claim, demand, action,
or proceeding shall be settled without the prior written consent of the
indemnified party. If a firm written offer is made to settle any such
third-party claim, demand, action, or proceeding and the indemnifying party
proposes to accept such settlement, and the indemnified party refuses to
consent to such settlement, then: (i) the indemnifying party shall be excused
from, and the indemnified party shall be solely responsible for, all further
defense of such third-party claim, demand, action, or proceeding; and (ii) the
maximum liability of the indemnifying party relating to such third-party claim,
demand, action, or proceeding shall be the amount of the proposed settlement if
the amount thereafter recovered from the indemnified party on such third-party
claim, demand, action, or proceeding is greater than the amount of the proposed
settlement.
5.5 Right of Set-Off. SCB shall have a right of set-off, subject
to and in accordance with the provisions of and the procedures described in the
Escrow Agreement, and against any and all amounts due and owing the PCG
Shareholders pursuant to that certain Stock Purchase Agreement by and among SCB
and the shareholders of Partners Resources, Inc. (which shareholders are also
the shareholders of PCG) of even date herewith (the exercise of which set-off
in good faith, whether or not ultimately determined to be justified, will not
constitute a breach of Article I of such Stock Purchase Agreement), to satisfy
any indemnification right of SCB hereunder or any obligation or agreement of
the PCG Shareholders hereunder.
ARTICLE 6.
GENERAL PROVISIONS
6.1 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, by courier service (with proof of service), hand
delivery, or certified or registered mail (return receipt requested and first-
class postage prepaid), addressed as follows:
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If to SCB: If to the PCG Shareholders:
Ben C. Bryant, Jr. At their addressed identified
President and Chief on the signature page hereto
Executive Officer
SCB Computer Technology, Inc.
1365 West Brierbrook Road
Memphis, Tennessee 38138
with a copy to: with a copy to:
J. Gentry Barden Irving Hymson
Bass, Berry & Sims PLC Peskind Hymson & Goldstein, P.C.
2700 First American Center 14595 N. Scottsdale Road
Nashville, Tennessee 38238 Scottsdale, Arizona 85254-3498
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
personally delivered or mailed.
6.2 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, at each such party's sole
discretion. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
6.3 Entire Agreement. This Agreement, the Exhibits, the PCG
Disclosure Letter, the SCB Disclosure Letter, and any documents delivered by
the parties in connection herewith, constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement
shall be binding upon any party hereto unless made in writing and signed by all
parties hereto.
6.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.5 Governing Law. The validity of this Agreement, the
construction of its terms, and the determination of the rights and duties of
the parties hereto shall be governed by and construed in accordance with the
laws of the State of Tennessee applicable to contracts made and to be performed
wholly within such state.
6.6 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
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6.7 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants, or agreements contained in this Agreement. The waiver
by any party hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
6.8 Incorporation of Exhibits. The PCG Disclosure Letter, the SCB
Disclosure Letter, and the Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
6.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
6.10 Expenses. Each party to this Agreement shall bear its own
expenses in connection with the transactions contemplated hereby; provided,
however, that all expenses of PCG in connection herewith shall be borne by the
PCG Shareholders.
6.11 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which
they are entitled by contract, at law, or in equity.
19
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf to be effective on the day
and year first written above.
SCB COMPUTER TECHNOLOGY, INC.
By: /s/ Gary E. McCarter
-----------------------------------
Title: Senior Vice President
--------------------------------
THE PCG SHAREHOLDERS:
/s/ Michael L. Hirschey
---------------------------------------
Michael L. Hirschey
Address: 14746 N. 78th Way
-------------------------------
Scottsdale, AZ 85260
---------------------------------------
---------------------------------------
/s/ Kenneth L. Spencer
---------------------------------------
Kenneth L. Spencer
Address: 8049 Bellflower Ct.
-------------------------------
Nevet, CO 80503
---------------------------------------
---------------------------------------
/s/ Russell J. Young by Kenneth L.
Spencer as attorney in fact
---------------------------------------
Russell J. Young
Address:
-------------------------------
---------------------------------------
---------------------------------------
/s/ Barry L. Fulton
---------------------------------------
Barry L. Fulton
Address: 1124 Miramar
-------------------------------
Laguna Beach, CA 92651
---------------------------------------
---------------------------------------
20
<PAGE> 22
ATTACHMENTS AND EXHIBITS
PCG Disclosure Letter
SCB Disclosure Letter
Exhibit A -- PCG Shareholder Allocations and Wire Transfer Instructions
Exhibit B -- Indemnity and Escrow Agreement
Exhibit C -- Form of SCB Counsel Legal Opinion
Exhibit D -- Form of PCG Counsel Legal Opinion
Exhibit E -- Form of Non-Competition Agreement
21
<PAGE> 1
EXHIBIT 2.2
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
SCB COMPUTER TECHNOLOGY, INC.
AND
THE SHAREHOLDERS OF
PARTNERS RESOURCES, INC.
DATED TO BE EFFECTIVE AS OF JUNE 30, 1997
================================================================================
<PAGE> 2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), is dated to be
effective as of June 30, 1997 (the "Effective Date"), by and among SCB Computer
Technology, Inc., a Tennessee corporation ("SCB"), and each of the shareholders
of Partners Resources, Inc., an Arizona corporation ("PRI"), as identified on
the signature pages hereto (individually, a "PRI Shareholder," and,
collectively, the "PRI Shareholders").
The PRI Shareholders own all of the issued and outstanding shares of
common stock, no par value, of PRI (the "PRI Common Stock"). Simultaneously
with the transactions contemplated hereby, SCB and PRI are entering into a
Stock Purchase Agreement (the "PCG Agreement") relating to the purchase by SCB
from the PRI Shareholders of all of the outstanding capital stock of Partners
Capital Group, Inc. ("PCG"). The PRI Shareholders desire to sell to SCB, and
SCB desires to purchase from the PRI Shareholders, the PRI Common Stock on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants, and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1.
TRANSFER OF SHARES AND PURCHASE PRICE
1.1 Transfer of Shares. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined) the PRI Shareholders
will sell, and SCB will buy, all of the PRI Common Stock.
1.2 Purchase Price. The purchase price (the "Purchase Price") for
the PRI Common Stock of $9,600,000 in cash, subject to adjustment pursuant to
Section 1.3 hereof, will be payable by SCB to the PRI Shareholders at Closing.
An aggregate of $8,640,000 of the Purchase Price will be payable to the PRI
Shareholders in the amounts identified on Exhibit A, by wire transfer of
immediately available funds, pursuant to the wire transfer instructions set
forth on Exhibit A, and an aggregate of $960,000 (the "Escrow Amount") of the
Purchase Price will be deposited in an escrow account to be established at
SunTrust Bank, Nashville, N.A., in Nashville, Tennessee, as escrow agent (the
"Escrow Agent"), which Escrow Amount will be held for one year following the
effective date hereof in connection with potential Purchase Price adjustments
pursuant to Section 1.3 hereof and potential indemnification claims under
Article 5 hereof, and pursuant to the terms of an Escrow Agreement (the "Escrow
Agreement"), substantially in the form of Exhibit B attached hereto.
1.3 Earnout.
(a) Subject to adjustment as set forth in this Agreement,
and subject to the provisions of Section 1.3(f), the PRI Shareholders
will be entitled to receive on May 1, 1998,
<PAGE> 3
as additional purchase price, in cash and/or, at SCB's sole option
(subject to Section 1.3(c)) in shares of Common Stock of SCB, par
value $.01 per share (the "SCB Common Stock"), an amount equal to 14
times PRI's net income for the calendar year ended December 31, 1997
calculated in accordance with Section 1.3(b) (as so calculated, the
"Earnout Consideration").
(b) As soon as reasonably practicable following December
31, 1997, SCB shall prepare an income statement for PRI for the
calendar year ending December 31, 1997 (the "1997 PRI Income
Statement"), and shall, at SCB's expense, which shall not be an
expense for purposes of the 1997 PRI Income Statement, cause SCB's
independent accountants to audit such income statement to ensure
compliance with this Section 1.3. Except as set forth herein, the
1997 PRI Income Statement will be prepared in accordance with
generally accepted accounting principles, consistently applied. In
the preparation of the 1997 PRI Income Statement, (i) PRI's net income
will be adjusted to take into account taxes associated with the
operation of PRI as if PRI were a corporation taxable under subchapter
C of the Internal Revenue Code of 1986, as amended (the "Code"), for
the full calendar year at an assumed tax rate of 40%; (ii) shared
expenses between, and other expenses of, PRI and PCG accounted for in
a manner consistent with the policies and practices used in the
preparation of PRI's and PCG's audited financial statements for the
year ended December 31, 1996; (iii) there will be no charge to PRI's
net income for the amortization of goodwill or other intangible, or
depreciation of property (or credit for any corresponding tax benefits
related to such amortization or depreciation) arising as a result of
the transactions contemplated hereby; (iv) computer equipment will be
depreciated and expenses associated with software licenses with no
specified terms will be depreciated or amortized, as applicable, on a
straight-line basis over five years; (v) the amortization and
depreciation related to PRI's Louisiana operations will be reflected
in the calculation of net income for the year ended December 31, 1997
without regard to the write- down of related assets in 1996 (i.e.,
will continue to be expensed in 1997 on the same basis as in 1996);
and (vi) in the event the results of operations associated with PRI's
Baan project for the year ended December 31, 1997 are a net loss, such
net loss will not be deducted from the calculation of PRI's net
income; and (vii) immediately prior to the Effective Date, PRI shall
book a reserve in the amount of $350,000 (the "Westchester Reserve")
to cover potential reimbursement obligations with respect to the
Westchester Contract (as defined herein), the remaining amount of
which Westchester Reserve as of December 31, 1997 after satisfaction
of any such reimbursement obligations will be credited to PRI's net
income for the year ended December 31, 1997. SCB shall cause to be
delivered promptly following preparation, but in no event later than
March 31, 1998, to the PRI Shareholders a copy of the 1997 PRI Income
Statement together with a calculation of the net income and a
determination as to the amount of Earnout Consideration. SCB shall
also make available to the PRI Shareholders and their advisors all
underlying financial data, books, and records (whether written or in
electronic media) reasonably requested by the PRI Shareholders that
are relevant to the determination of the Earnout Consideration. The
PRI Shareholders shall have 20 days from delivery of the 1997 PRI
Income Statement to accept or reject in writing SCB's calculations
regarding the Earnout Consideration. If the PRI Shareholders reject
SCB's calculations regarding the Earnout Consideration, such rejection
must be accompanied by a written statement of the reasons therefor
and, if the parties are
2
<PAGE> 4
unable to reach a compromise within five business days of the date of
such rejection, the dispute shall be submitted to arbitration in New
Orleans, Louisiana, such arbitration to be conducted in accordance
with the rules of the American Arbitration Association ("AAA") before
a single arbitrator selected from a panel of arbitrators of the AAA in
accordance with its rules for commercial arbitration. The filing fee
for the arbitration will be paid one-half by SCB and one-half by the
PRI Shareholders and each party shall bear its own costs and expenses
related to the arbitration.
(c) If SCB elects to pay any portion of the Earnout
Consideration, if any, in shares of SCB Common Stock, SCB shall
deliver to the PRI Shareholders, allocated pro rata as their interests
appear on Exhibit A, certificates representing, in the aggregate, the
number of shares of SCB Common Stock (the "Earnout Shares") determined
by dividing the amount of the Earnout Consideration to be paid in
shares of SCB Common Stock by the average of the closing sales prices
of SCB Common Stock as reported on The Nasdaq Stock Market's National
Market ("Nasdaq") (or such other exchange or quotation system on which
the SCB Common Stock is then traded) for the twenty trading days
ending on December 31, 1997 (the "Average Price"). The foregoing
notwithstanding, SCB shall not be entitled to pay any portion of the
Earnout Consideration in SCB Common Stock if, on May 1, 1998, (i) the
SCB Common Stock is not authorized for quotation on Nasdaq or listed
for trading on a national securities exchange; (ii) the average
closing sales prices of SCB Common Stock for the twenty trading days
ending on April 30, 1997 is less than $10.00 per share (as adjusted to
take into account stock splits and stock dividends); or (iii) SCB
shall have filed, or have filed against it, a petition or other form
of request for relief under the federal bankruptcy laws, or an
application, petition, or request for the appointment of a receiver
under any state insolvency laws.
(d) In lieu of the issuance of fractional shares of SCB
Common Stock pursuant to Section 1.3(c) above, the PRI Shareholders
will be entitled to receive a cash payment (without interest) equal to
the fair market value of any fraction of a share of SCB Common Stock
to which such PRI Shareholder would be entitled but for this
provision. For purposes of calculating such payment, the fair market
value of a fraction of a share of SCB Common Stock shall be such
fraction multiplied by the Average Price.
(e) Notwithstanding the foregoing, if PCG's net income
for calendar year ending December 31, 1997, calculated in accordance
with Section 1.4(a) of the PCG Agreement, does not equal or exceed
$1,177,000 and the amount equal to the difference between $1,177,000
and PCG's actual net income (the "Net Income Deficit") is greater than
the remaining escrow amount established under the PCG Agreement, then
such portions of the Net Income Deficit may, at SCB's discretion, be
offset, dollar-for-dollar, first against the Escrow Amount and, to the
extent still unsatisfied, then against the Earnout Consideration.
(f) Anything herein to the contrary notwithstanding, but
subject to the last sentence of this Section 1.3(f), no Earnout
Consideration will be payable by SCB to the PRI Shareholders unless,
on May 1, 1998,
3
<PAGE> 5
(i) that certain Statement of Work between IBM Global
Services ("IBM") and PRI dated March 31, 1997 related to
Outsourcing Information Technology Services for the
Westchester County Data Center (the "Westchester Contract")
shall be in full force and effect and not subject to
litigation or order that could aversely affect the rights of
PRI or, if the Westchester Contract has been amended since the
Closing Date, then such amendment shall not have diminished
any amounts payable to PRI thereunder; or
(ii) if the Westchester Contract is no longer in
effect, or has been amended in a manner adversely affecting
the rights of PRI, or if the litigation related thereto has
not been finally judicially determined or settled in full, PRI
has, since the Closing Date, entered into and is performing
contracts for outsourcing services (the "Substitute
Contracts," which, for purposes of this Section 1.3(f) shall
be deemed to include the Westchester Contract, as amended,
modified, or superseded, and that certain First Amendment to
the HP Outsourcing Services Statement of Work, that certain
Service Change Request Form, dated March 31, 1997, and that
certain Amendment No. 1 to that Outsourcing Services Agreement
(Fiberite), dated to be effective as of June 18, 1997, despite
such amendments having been signed prior to the Closing Date),
the revenues associated with which are reasonably projected to
equal or exceed 85% of the revenues projected to be associated
with the Westchester Contract. If the revenues associated for
the Substitute Contracts are reasonably projected to equal or
exceed 85% (but are less than 100%) of the revenues projected
to be associated with the Westchester Contract, SCB will pay
to the PRI Shareholders 85% of the Earnout Consideration
otherwise payable pursuant to this Section 1.3.
1.4 Section 338(h)(10) Election; Allocation of Consideration.
(a) In the time period required by applicable law, SCB
and the PRI Shareholders shall make an election under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"Code") (and any comparable election under state, local, or foreign
tax law), with respect to the sale of the PRI Common Stock by the PRI
Shareholders. In this regard, SCB and each of the PRI Shareholders
shall, within 30 days of the Closing Date, jointly execute necessary
copies of Internal Revenue Service Form 8023-A ("Form 8023-A") and all
attachments required to be filed therewith and take such further
actions and execute such further documents as may be necessary in
order for SCB and the PRI Shareholders to make an election under
Section 338(h)(10) of the Code (and any comparable election under
state, local, or foreign tax law).
(b) The PRI Shareholders will pay any Taxes (as
hereinafter defined) attributable to the making of the Section
338(h)(10) election and will indemnify SCB and PRI against any claims
arising out of any failure to pay such Taxes, without offset for any
tax benefit that SCB or PRI may receive as a result of the 338(h)(10)
election during periods ending after the Closing Date.
4
<PAGE> 6
(c) The Purchase Price will be allocated among PRI's
assets for federal and state income tax purposes as set forth on
Exhibit C hereto, which Exhibit C will be finalized by mutual
agreement of the parties within 15 days of the Closing Date and, upon
such finalization, will be deemed to be a part of this Agreement as if
attached hereto on the Closing Date. Such allocation will be
determined by arm's-length negotiations of the parties. None of the
parties hereto will take a position on any income tax return, before
any governmental agency charged with collections of any income tax, or
in any judicial proceeding, that is inconsistent with such allocation
or with the positions taken on Form 8023-A or the attachments required
to be filed therewith.
1.5 The Closing. Subject to the terms and conditions of this
Agreement, the closing under this Agreement (the "Closing") will take place
simultaneous with the execution hereof at the offices of PRI in Scottsdale,
Arizona, to be effective for accounting purposes as of 11:59 p.m. on June 30,
1997, or at such other time, date, or place as SCB and the PRI Shareholders may
agree. The date on which the Closing occurs is referred to herein as the
"Closing Date."
1.6 Parties' Obligations at Closing.
(a) At the Closing, SCB will deliver to the PRI
Shareholders:
(i) $8,640,000 in cash by wire transfer of
immediately available funds, allocated among the PRI
Shareholders in accordance with Exhibit A attached hereto,
together with a copy of the Escrow Agreement duly executed by
SCB and the Escrow Agent and evidence, reasonably satisfactory
to the PRI Shareholders and their counsel, that the Escrow
Amount has been duly delivered to the Escrow Agent;
(ii) a copy of the resolutions of the Board of
Directors of SCB, certified by the corporate secretary,
authorizing the execution, delivery, and performance of this
Agreement and the other documents referenced herein and the
consummation of the transactions contemplated hereby;
(iii) an opinion of Bass, Berry & Sims PLC, legal
counsel to SCB, substantially in the form of Exhibit D
attached hereto;
(iv) an employment agreement (the "Employment
Agreement") between PRI and Michael L. Hirschey,
substantially in the form of Exhibit E attached hereto, duly
executed by SCB and PRI;
(v) a copy of the PCG Agreement, duly executed
by SCB; and
(vi) such other certificates and documents as the
PRI Shareholders or their counsel may reasonably request,
including a receipt from SCB acknowledging that it has
received the PRI Disclosure Letter.
(b) At the Closing, the PRI Shareholders will deliver to
SCB:
5
<PAGE> 7
(i) a copy of the Escrow Agreement duly executed
by the PRI Shareholders;
(ii) an opinion of Peskind Hymson & Goldstein,
P.C., legal counsel to the PRI Shareholders, substantially in
the form of Exhibit F attached hereto;
(iii) the Employment Agreement, duly executed by
Michael L. Hirschey;
(iv) certificates representing all of the issued
and outstanding PRI Common Stock, together with stock powers
duly endorsed in blank by each of the PRI Shareholders and
spousal consents or waivers with respect to the sale of the
PRI Common Stock;
(v) any required consent or approval of a
creditor, contract party, or public or governmental authority
to the transaction contemplated hereby;
(vi) non-competition agreements (the
"Non-Competition Agreements") substantially in the form of
Exhibit G hereto duly executed by PRI and the PRI Shareholders
other than Michael L. Hirschey;
(vii) [intentionally omitted]
(viii) duly executed resignations as directors and
officers of PRI of all directors and officers of PRI;
(ix) an Assignment and Assumption Agreement,
substantially in the form of Exhibit I hereto, duly executed
by PRI and On-Guard Disaster Recovery, Inc. ("On-Guard") and
evidence, reasonably satisfactory to SCB, that On-Guard has
taken irrevocable action to dissolve and wind-up its affairs;
(x) the PCG Agreement, duly executed by PCG and
the PRI Shareholders; and
(xi) such other certificates or documents as SCB
or its counsel may reasonably request.
6
<PAGE> 8
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF
THE PRI SHAREHOLDERS
Except as set forth in the disclosure letter delivered prior to the
execution hereof to SCB (the "PRI Disclosure Letter"), the PRI Shareholders,
jointly and severally (except as set forth in Section 2.22(c)), represent,
warrant, and agree as follows:
2.1 Existence; Good Standing; Corporate Power and Authority. PRI
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Arizona. PRI is qualified to do business as a foreign
corporation and is in good standing under the laws of any state of the United
States in which the character of the properties owned or leased by it therein
or in which the transaction of business makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the business, results of operations, financial condition, or
prospects of PRI (a "PRI Material Adverse Effect"). PRI has all requisite
corporate power and authority to own, operate, and lease its properties and to
carry on its business as now conducted. PRI has provided to SCB complete and
correct copies of its articles of incorporation and bylaws, each of which is in
full force and effect.
2.2 Authorization, Validity, and Effect of Agreements. The PRI
Shareholders have the full power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. This Agreement
constitutes, and all agreements and documents contemplated hereby (when
executed and delivered pursuant hereto) will constitute, the valid and legally
binding obligations of the PRI Shareholders, enforceable in accordance with
their respective terms.
2.3 Capitalization. The authorized capital stock of PRI consists
of 1,000,000 shares of common stock, no par value, of which 4,000 shares are
issued and outstanding as of the date of this Agreement and owned beneficially
and of record by the PRI Shareholders as set forth in the PRI Disclosure
Letter. PRI has no outstanding capital stock, bonds, debentures, notes, or
other obligations as to which the holders have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the shareholders of PRI on any matter. All issued and outstanding shares of
PRI Common Stock are duly authorized, validly issued, fully paid,
nonassessable, and free of, or in compliance with, preemptive rights. There
are no options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements, or commitments that obligate PRI to issue, transfer,
or sell any shares of its capital stock. None of the outstanding shares of PRI
Common Stock are subject to any voting trust agreement, lien, encumbrance,
security interest, restriction, or claim.
2.4 Other Interests. PRI does not own, directly or indirectly, or
have any obligation to acquire any interest or investment in, any corporation,
partnership, joint venture, business, trust, or other entity.
2.5 No Violation. Neither the execution and delivery by the PRI
Shareholders of this Agreement nor the consummation by the PRI Shareholders of
the transactions contemplated hereby
7
<PAGE> 9
in accordance with the terms hereof, will: (i) conflict with or result in a
breach of any provisions of the articles of incorporation or bylaws of PRI;
(ii) conflict with, result in a breach of any provision of or the modification
or termination of, constitute a default under, or result in the creation or
imposition of any lien, security interest, charge, or encumbrance upon any of
the assets of PRI or any PRI Shareholder by virtue of the application of any
provisions contained in, any material commitment, lease, contract, or other
material agreement or instrument to which PRI or any PRI Shareholder is a party
(including any Material Contract, as hereinafter defined); or (iii) violate or
result in a change in any rights or obligations under any governmental permit
or license or any order, arbitration award, judgment, writ, injunction, decree,
statute, rule, or regulation applicable to PRI or any PRI Shareholder.
2.6 Regulatory Consents. No consent, approval, order, or
authorization of, or registration, declaration, or filing with, any
governmental entity, is required by or with respect to PRI or any PRI
Shareholder in connection with the execution and delivery of this Agreement by
any PRI Shareholder, or the consummation by any PRI Shareholder of the
transactions contemplated hereby, which has not been made or obtained and the
failure to make or obtain would have a PRI Material Adverse Effect.
2.7 Material Contracts. The PRI Disclosure Letter contains a
complete and accurate list of all contracts and agreements for the performance
of services or the purchase or leasing of property by PRI of an amount or value
in excess of $100,000 ("Material Contracts"). Each of the Material Contracts
is in full force and effect and is valid and enforceable in accordance with its
terms, and PRI is in full compliance with all applicable terms and requirements
thereof. No event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give any person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Material Contract. To the knowledge of
PRI and each of the PRI Shareholders, there are no renegotiations of, attempts
to renegotiate, or outstanding rights to renegotiate (other than with respect
to renewals in accordance with contract terms) any amounts paid or payable
under any Material Contract with any person.
2.8 Financial Statements; Undisclosed Liabilities. Prior to the
Closing Date, PRI has delivered to SCB true and complete copies of (a) the
audited financial statements of PRI as of and for the year ended December 31,
1996 and (b) the unaudited financial statements of PRI as of and for the
quarter ended March 31, 1997. The balance sheets provided to SCB by PRI
(including the related notes and schedules) fairly present the financial
position of PRI as of their respective dates and the statements of income,
stockholders' equity, and cash flows provided to SCB by PRI (including any
related notes and schedules) fairly present the results of operations,
stockholders' equity, and cash flows of PRI for the periods set forth therein,
in each case in accordance with generally accepted accounting principles
consistently applied, except as may be noted therein. Such financial
statements have been prepared from the books and records of PRI which
accurately and fairly reflect the transactions and the acquisitions and
dispositions of the assets of PRI. As of the Closing Date, PRI did not have
any liabilities, contingent or otherwise, whether due or to become due, known
or unknown, other than as indicated or reserved against on the balance sheet
dated
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<PAGE> 10
December 31, 1996, except for current liabilities incurred in the ordinary
course of business since such date.
2.9 No Material Adverse Changes. Since December 31, 1996, there
has not been (i) any material adverse change in the financial condition,
results of operations, business, assets, or liabilities (contingent or
otherwise, whether due or to become due, known or unknown) of PRI; (ii) any
dividend declared or paid or distribution made on the capital stock of PRI, or
any capital stock thereof redeemed or repurchased; (iii) any incurrence by PRI
of long-term debt; (iv) any increases in salary, bonus, or other compensation
(including pursuant to any employee benefit plan) to any officers, employees,
or agents of PRI; (v) any pending or threatened labor disputes or other labor
problems against or potentially affecting PRI; (vi) the termination, or receipt
of notice of termination, of any Material Contract; or (vii) any other
transaction entered into by PRI, except in the ordinary course of business and
consistent with past practice.
2.10 Tax Matters.
(a) For purposes of this Agreement, (i) "Tax" means any
federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
value-added, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, and (ii) "Tax Return" means any
return, report, information return, or other document (including any
related or supporting information) filed or required to be filed with
any taxing authority in connection with its determination, assessment,
collection, administration, or imposition of any Tax.
(b) PRI has been since its inception and is a corporation
taxable for federal and state income tax purposes under subchapter S
of the Code. PRI has duly and timely filed all Tax Returns required
to be filed by it (or duly and timely filed an appropriate request for
extension) and has duly and timely paid all Taxes and other charges
(whether or not shown on any Tax Return) due or claimed to be due from
it by federal, foreign, state, or local taxing authorities or has set
up an adequate reserve for all Taxes payable by PRI. True and correct
copies of all Tax Returns relating to federal and state taxes and
sales taxes and other charges for the period from organization through
December 31, 1995 (and a request for extension for the calendar year
ended December 31, 1996) have been heretofore delivered to SCB. The
accruals and reserves for Taxes contained in the financial statements
and carried on the books of PRI (other than any reserve for deferred
taxes established to reflect timing differences between book and tax
income) are adequate to cover all Tax liabilities. Since December 31,
1996, PRI has not incurred any Tax liabilities other than in the
ordinary course of business. There are no recorded Tax liens upon any
properties or assets of PRI (whether real, personal, or mixed,
tangible or intangible), and, except as reflected in the financial
statements, there are no pending or, to the PRI Shareholders'
knowledge, threatened audits or examinations relating to, or claims
asserted for, Taxes or assessments against PRI, and the PRI
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<PAGE> 11
Shareholders are aware of no substantial basis for any such claims.
PRI has not granted or been requested to grant any extension of the
limitation period applicable to any claim for Taxes or assessments
with respect to Taxes. PRI is not a party to any Tax allocation or
sharing agreement. PRI has no liability for the Taxes of any
Affiliated Group under Treasury Regulation 1.1502-6 (or any similar
provision of state, local, or foreign law). PRI has withheld and paid
all Taxes required to have been withheld and paid when due in
connection with amounts paid or owing to any employee, independent
contractor, creditor, or shareholder, where failure to do so would
have a PRI Material Adverse Effect.
(c) The PRI Disclosure Letter lists each jurisdiction in
which PRI files Tax Returns for each period or portion thereof ending
on or before the date hereof. Except as set forth in the PRI
Disclosure Letter, there is no claim outstanding against PRI by any
taxing authority in a jurisdiction where PRI does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
(d) All material elections with respect to Taxes
affecting PRI as of the date hereof are set forth in the PRI
Disclosure Letter.
(e) All joint ventures, partnerships, or other
arrangements or contracts to which PRI is a party and that could be
treated as a partnership for federal income tax purposes are set forth
in the PRI Disclosure Letter.
(f) PRI (i) has not filed a consent pursuant to Section
341(f) of the Code nor agreed to have Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f) of the Code) owned by PRI; (ii) has not agreed, and is
not required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise that will
affect the liability of PRI for Taxes; (iii) has not made an election,
and is not required, to treat any asset of PRI as owned by another
person pursuant to the provisions of former Section 168(f)(8) of the
Code or as tax-exempt bond- financed property or tax-exempt use
property within the meaning of Section 168 of the Code; and (iv) has
not made any of the foregoing elections and is not required to apply
any of the foregoing rules under any comparable state or local tax
provision.
(g) PRI holds no asset (i) that it acquired within the
ten years preceding the Closing Date, and (ii) where PRI's adjusted
basis in such asset is determined (in whole or in part) by reference
to the basis of such asset (or any other property) in the hands of a C
corporation (as defined in the Code).
(h) As soon as practicable following the date hereof, the
PRI Shareholders shall, on behalf of PRI, timely file all Tax Returns
for, and pay all Taxes due with respect to, the short period beginning
January 1, 1997, and ending on the Closing Date. The PRI Shareholders
shall close PRI's books on the Closing Date and shall report on PRI's
federal corporate income Tax Return for the short period ending on the
Closing Date hereof all items of income, loss, deduction, and credit
arising during the short period under PRI's accrual method of
accounting for tax purposes.
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2.11 Employees and Fringe Benefit Plans.
(a) The PRI Disclosure Letter sets forth the names, ages,
and titles of all members of the Board of Directors and officers of
PRI and all employees of PRI earning in excess of $50,000 per year,
and the annual rate of compensation (including bonuses) being paid to
each such officer and employee as of the most recent practicable date.
(b) The PRI Disclosure Letter lists each employment,
bonus, deferred compensation, pension, stock option, stock
appreciation right, profit-sharing, or retirement plan, arrangement,
or practice, each medical, vacation, retiree medical, severance pay
plan, and each other agreement or fringe benefit plan, arrangement, or
practice, of PRI, whether legally binding or not, that affects one or
more of PRI's employees, including all "employee benefit plans" as
defined by Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") (collectively, the "Plans"). PRI
neither has nor sponsors, nor participates in any Plan that is subject
to Title IV of ERISA or the minimum funding standards of Section 412
of the Code.
(c) For each Plan that is an "employee benefit plan"
under Section 3(3) of ERISA, PRI has delivered to SCB correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and funding agreements
that implement each such Plan.
(d) PRI has no commitment, whether formal or informal and
whether or not legally binding, (i) to create any additional Plan;
(ii) to modify or change any Plan; or (iii) to maintain for any period
of time any Plan. The PRI Disclosure Letter contains an accurate and
complete description of the funding policies (and commitments, if any)
with respect to each existing Plan.
(e) PRI has no unfunded past service liability in respect
of any of its Plans; neither PRI, nor any Plan nor any trustee,
administrator, fiduciary, or sponsor of any Plan has engaged in any
prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code for which there is no statutory exemption in Section
408 of ERISA or Section 4975 of the Code; all filings, reports, and
descriptions as to such Plans (including Form 5500 Annual Reports,
summary plan descriptions, and summary annual reports) required to
have been made or distributed to participants, the Internal Revenue
Service, the United States Department of Labor, and other governmental
agencies have been made in a timely manner; there is no material
litigation, disputed claim, governmental proceeding, or investigation
pending or threatened with respect to any of the Plans, the related
trusts, or any fiduciary, trustee, administrator, or sponsor of the
Plans; the Plans have been established, maintained, and administered
in all material respects in accordance with their governing documents
and applicable provisions of ERISA and the Code and Treasury
Regulations promulgated thereunder; and each Plan that is intended to
be a qualified plan under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to the current terms of the Plan.
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(f) Except where failure to do so would not have a PRI
Material Adverse Effect, PRI has complied in all respects with all
applicable federal, state, and local laws, rules, and regulations
relating to employees' employment and employment relationships,
including, without limitation, wage related laws, anti-discrimination
laws, employee safety laws, and COBRA (defined herein to mean the
requirements of Code Section 4980B, Proposed Treasury Regulation
Section 1.162-26 and Part 6 of Subtitle B of Title I of ERISA).
(g) The consummation of the transactions contemplated by
this Agreement will not (i) result in the payment or series of
payments by PRI to any employee or other person of an "excess
parachute payment" within the meaning of Section 280G of the Code;
(ii) entitle any employee or former employee of PRI to severance pay,
unemployment compensation, or any other payment; or (iii) accelerate
the time of payment or vesting of any stock option, stock appreciation
right, deferred compensation, or other employee benefits under any
Plan (including vacation and sick pay).
(h) None of the Plans that are "welfare benefit plans,"
within the meaning of Section 3(1) of ERISA, provide for continuing
benefits or coverage after termination or retirement from employment,
except for COBRA rights under a "group health plan" as defined in Code
Section 4980B(g) and ERISA Section 607.
(i) Neither PRI nor any member in a "controlled group"
with PRI (as defined in ERISA) has ever contributed to, participated
in, or withdrawn from a multi-employer plan as defined in Section
4001(a)(3) of Title IV of ERISA, and PRI has not incurred and does not
owe any liability as a result of any partial or complete withdrawal by
any employer from such a multi-employer plan as described under
Section 4201, 4203, or 4205 of ERISA.
2.12 Assets. PRI owns the assets reflected in the December 31,
1996, balance sheet and the assets it purports to own that were acquired in the
ordinary course of business since the date thereof (except for assets sold,
transferred, or conveyed in the ordinary cause of business), including the
leasehold estates, with good and marketable title, free and clear of any and
all claims, liens, mortgages, security interests, or encumbrances whatsoever,
and free and clear of any rights or privileges capable of becoming claims,
liens, mortgages, securities interests, or encumbrances. The buildings,
plants, structures, and equipment owned or leased by PRI are in good operating
condition and repair, and are adequate for the uses for which they are being
put, and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary and routine maintenance and repairs
that are not material in nature or cost.
2.13 Accounts Receivable. All accounts receivable of PRI that are
reflected on the accounting records of PRI as of the date hereof (collectively,
the "Accounts Receivable"), represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of
business. The Accounts Receivable are current and collectible net of the
respective reserves shown on the accounting records of PRI as of the date
hereof (which reserves are adequate and calculated consistent with past
practice and do not represent a greater percentage of the Accounts Receivable
as of the date hereof than the reserve reflected in the balance sheet dated
December 31, 1996, and do not represent a material adverse change in the
composition of such Accounts
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Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within one hundred twenty (120) days after the day on which it first becomes
due and payable. The PRI Shareholders are not aware of any contest, claim, or
right of set-off with any maker of an Account Receivable relating to the amount
or validity of such Account Receivable.
2.14 Lawful Operations. PRI has been and currently is conducting
its business, and each of the premises leased or owned by PRI have been and now
are being used and operated, in compliance with all statutes, regulations,
orders, covenants, restrictions, and plans of federal, state, regional, county,
or municipal authorities, agencies, or boards applicable to the same, except
where the failure to so comply would not have a PRI Material Adverse Effect.
2.15 Litigation. There is no suit, action, or proceeding pending
or, to the knowledge of any of the PRI Shareholders, threatened against or
affecting PRI, which, if adversely determined, could have a PRI Material
Adverse Effect. PRI is not subject to any currently existing order, writ,
injunction, or decree relating to its operations.
2.16 Corporate Records; Other Information. The minute books of
PRI, copies of which have been provided to SCB, reflect all meetings of the
boards of directors, committees of the boards of directors, and the
shareholders thereof prior to the date hereof. All documents and other written
information as to existing facts relating to PRI and its assets and liabilities
which have been provided to SCB in connection with this Agreement are true,
correct, and complete in all material respects except to the extent that any
such documents or other written information were later specifically
supplemented or corrected prior to the Closing Date with additional documents
or written information that were provided to SCB by authorized agents of PRI,
including the PRI Disclosure Letter.
2.17 Intellectual Property Rights. PRI owns or possesses the right
to use or is licensed to use all trademarks, service marks, trade names,
slogans, copyrights in published and unpublished works, patents, patent
applications, inventions, and discoveries that may be patentable, rights in
mask works, and all trade secrets including, but not limited to, customer
lists, software, and technical information, it currently uses without any
conflict or alleged conflict with the rights of others, except where any such
conflict would not have a PRI Material Adverse Effect. No copyright registered
in the name of or owned by PRI is infringed or has been challenged or
threatened in any way or, to the knowledge of the PRI Shareholders, is
infringed. None of the subject matter of any such copyright infringes or is
alleged to infringe any copyright of any third party or is a derivative work
based on the work of a third party for which PRI lacks a license to use that
third party's work. All works encompassed by a copyright registered in the
name of or owned or licensed by PRI have been marked with the proper copyright
notice.
2.18 Hazardous Substances.
(a) PRI has not authorized or conducted or has knowledge
of the generation, transportation, storage, presence, use, treatment, disposal,
release, or handling of (in an amount or of a type that has been or must be
reported to any governmental agency, violates any Environmental
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Law (as defined below), or has required or could require remediation
expenditures) any hazardous substance, asbestos, radon, polychlorinated
biphenyls ("PCBs"), petroleum product, or waste (including crude oil or any
fraction thereof), natural gas, liquefied gas, synthetic gas, or other material
defined, regulated, controlled, or potentially subject to any remediation
requirement under any environmental law (collectively, "Hazardous Materials"),
on, in, or under any real property owned, leased, or by any means controlled by
it;
(b) PRI is in compliance with all federal, state, and
local laws, ordinances, rules, regulations, and other governmental requirements
relating to pollution, control of chemicals, management of waste, discharges of
materials into the environment, health, safety, natural resources, and the
environment (collectively, "Environmental Laws");
(c) PRI has, and is in compliance with, all licenses,
permits, registrations, and government authorizations necessary to operate
under all applicable Environmental Laws;
(d) PRI has not received any written or oral notice from
any governmental entity or any other person, and there is no pending or, to any
PRI Shareholder's knowledge, threatened claim, litigation, or any
administrative agency proceeding that: alleges a violation of any
Environmental Law by PRI; alleges PRI is a liable party or a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601, et seq., or any state superfund
law; has resulted in or could result in the attachment of an environmental lien
on any real property owned, leased, or controlled by PRI; or alleges the
occurrence of contamination of any of such real property, damage to natural
resources, property damage, or personal injury based on its activities or the
activities of PRI's predecessors or third parties (whether at the real property
or elsewhere) involving Hazardous Materials, whether arising under the
Environmental Laws, common law principles, or other legal standards.
2.19 Certain Business Practices and Regulations. Neither PRI, nor
to any of the PRI Shareholder's knowledge, any of its executive officers,
directors, or employees, has (i) made or agreed to make any contribution,
payment, or gift to any customer, supplier, landlord, political candidate,
governmental official, employee, or agent where either the contribution,
payment, or gift or the purpose thereof was illegal under any law or
regulation; (ii) established or maintained any unrecorded fund or asset for any
purpose or made any false entries on its respective books and records for any
reason; (iii) made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any candidate for
federal, state, or local public office in violation of any law or regulation;
or (iv) submitted any claim for services rendered or reimbursement for expenses
to any person where the services were not actually rendered or the expenses
were not actually incurred.
2.20 Insurance. All policies and binders of insurance for
professional liability, directors and officers, fire, liability, workers'
compensation, and other customary matters held by or on behalf of PRI
("Insurance Policies") are described in the PRI Disclosure Letter and have been
made available to SCB. The Insurance Policies are in full force and effect.
PRI is not in default with respect to any material provision contained in any
Insurance Policy.
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2.21 No Brokers. PRI has not entered into any contract,
arrangement, or understanding with any person or firm that may result in the
obligation of PRI or SCB to pay any finder's fees, brokerage or agent's
commissions, or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
2.22 SCB Stock Ownership; Investment Intent.
(a) Neither PRI nor any of the PRI Shareholders owns, beneficially
or otherwise, any shares of SCB Common Stock.
(b) The shares of SCB Common Stock, if any, issuable pursuant to
this Agreement are being acquired by the PRI Shareholders subject to the terms
of this Agreement for investment and not with a view to the distribution
thereof, and each of the PRI Shareholders acknowledges and understands that the
certificate(s) representing such shares of SCB Common Stock will bear a legend
in substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES ACT AND CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER SUCH ACTS OR UNLESS EXEMPTIONS
FROM REGISTRATION ARE AVAILABLE.
THE COMPANY WILL FURNISH THE HOLDER HEREOF INFORMATION REGARDING THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, AND LIMITATIONS APPLICABLE
TO EACH CLASS AND THE VARIATIONS AND RIGHTS, PREFERENCES, AND
LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK ISSUED BY THE COMPANY
(AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS
FOR FUTURE SERIES) UPON REQUEST IN WRITING AND WITHOUT CHARGE.
(c) Each PRI Shareholder, severally and not jointly, represents
and warrants as follows:
(i) Each of the PRI Shareholders is an "accredited
investor" as defined under Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
(ii) Each of the PRI Shareholders has received and
reviewed copies of SCB's Annual Report on Form 10-K for the fiscal year ended
April 30, 1996, SCB's Quarterly Reports on Form 10-Q for the fiscal quarters
ended July 31, 1996, October 31, 1996, and January 31, 1997, SCB's Current
Report on Form 8-K, dated October 8, 1996, as amended on December 4, 1996,
relating to the combination with Delta Software Systems, Inc., and SCB's
Current Report on Form 8-K, dated March 14, 1997, as amended on May 14, 1997,
relating to the acquisition of substantially all of the assets of Technology
Management Resources, Inc. (collectively, the "SEC Reports"). Each
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of the PRI Shareholders confirms that SCB has made available to him or to his
representatives the opportunity to ask questions of SCB's officers and
directors and to acquire such information about the shares of SCB Common Stock
and the business and financial condition of SCB as the PRI Shareholders have
requested, which additional information has been received.
(iii) In deciding to acquire shares of SCB Common Stock
pursuant to this Agreement, the PRI Shareholders have consulted with their
legal, financial, and tax advisers with respect to the transaction contemplated
hereby and the nature of the investment, together with additional information
concerning SCB set forth in the SEC Reports and any additional information
provided under subsection (ii) above.
(iv) Each PRI Shareholder has adequate means of providing
for his current needs and personal contingencies and has no need for liquidity
in his investment in SCB. Each of the PRI Shareholders, either alone or with
his representatives, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in SCB.
2.23 Affiliated Transactions and Persons. No PRI Shareholder or
member of his "immediate family" (as defined by the rules and regulations
adopted under the Exchange Act) has any interest in any property (whether real,
personal, or mixed, and whether tangible or intangible) used in or pertaining
to the business of PRI. No PRI Shareholder or member of his immediate family
owns, of record or beneficially, an equity interest or any other financial or
profit interest in any person or entity that has had business dealings with PRI
or engaged in competition with PRI.
2.24 Full Disclosure. All of the information provided by the PRI
Shareholders and their representatives herein or in the PRI Disclosure Letter
is true, correct, and complete in all material respects, and no representation,
warranty, or statement made by the PRI Shareholders in or pursuant to this
Agreement or the PRI Disclosure Letter contains any untrue statement of a
material fact or omits or will omit to state any material fact necessary to
make such representation, warranty, or statement not misleading.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SCB
Except as set forth in the disclosure letter delivered at or prior to
the execution hereof to the PRI Shareholders (the "SCB Disclosure Letter"), SCB
represents, warrants, and agrees as follows:
3.1 Existence; Good Standing; Corporate Authority. SCB is duly
incorporated, validly existing, and in good standing under the laws of the
State of Tennessee. SCB is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other state
of the United States in which the character of the properties owned or leased
by it therein or in which the transaction of its business therein makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of
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operations, or financial condition of SCB (an "SCB Material Adverse Effect").
SCB has all requisite corporate power and authority to own, operate, and lease
its properties and carry on its business as now conducted.
3.2 Authorization, Validity, and Effect of Agreements. SCB has
the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The
consummation by SCB of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
SCB, enforceable in accordance with their respective terms. The issuance and
delivery by SCB of shares of SCB Common Stock pursuant to this Agreement have
been duly and validly authorized by all necessary corporate action on the part
of SCB. The shares of SCB Common Stock to be issued pursuant to this
Agreement, if and when issued in accordance with the terms of this Agreement,
will be validly issued, fully paid, and nonassessable.
3.3 Capitalization. The authorized capital stock of SCB consists
of 1,000,000 shares of preferred stock, none of which is issued and
outstanding, and 20,000,000 shares of SCB Common Stock, of which 7,481,369
shares are issued and outstanding as of the date hereof, approximately
3,693,944 of which outstanding shares are owned by "affiliates" (as such term
is defined under federal securities laws) by SCB. SCB has no outstanding
bonds, debentures, notes, or other obligations, the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the shareholders of SCB on any matter. All
issued and outstanding shares of SCB Common Stock are duly authorized, validly
issued, fully paid, nonassessable, and free of preemptive rights. Other than
pursuant to this Agreement, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements, or
commitments that obligate SCB to issue, transfer, or sell any shares of capital
stock of SCB.
3.4 Subsidiaries. The SCB Disclosure Letter sets forth the
outstanding capital stock and each corporation, partnership, or other entity of
which at least a majority of the voting interest is owned directly or
indirectly by SCB (an "SCB Subsidiary").
3.5 Other Interests. SCB does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust, or other entity, except for the
SCB Subsidiaries.
3.6 No Violation. Neither the execution and delivery by SCB of
this Agreement, nor the consummation by SCB of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of the charter or bylaws of SCB; (ii) conflict
with, result in a breach of any provision of or the modification or termination
of, constitute a default under, or result in the creation or imposition of any
lien, security interest, charge, or encumbrance upon any of the assets of SCB
by virtue of the application of any provision contained in, any material
commitment, lease, contract, or other material agreement or instrument to which
SCB is a party; or (iii) violate or result in a change in any rights or
obligations, under any
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governmental permit or license or any order, arbitration award, judgment, writ,
injunction, decree, statute, rule, or regulation applicable to SCB.
3.7 SEC Documents. Prior to the date hereof, SCB has delivered to
the PRI Shareholders copies of the SEC Reports. The SEC Reports (i) were
prepared in all material respects in accordance with the applicable
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder, and (ii) as of
their respective dates, 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 the light of the circumstances under which
they were made, not misleading. The consolidated balance sheets included in
the SEC Reports (including the related notes and schedules) fairly present, in
all material respects, the consolidated financial position of SCB as of their
respective dates and each of the consolidated statements of income,
shareholders' equity, and cash flows included in the SEC Reports (including any
related notes and schedules) fairly present, in all material respects, the
results of operations, shareholders' equity, and cash flows of SCB for the
periods set forth therein, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein.
3.8 Litigation. As of the date of this Agreement, there is no
action, suit, or proceeding pending against SCB or any SCB Subsidiary or, to
the knowledge of SCB or any SCB Subsidiary, threatened against or affecting SCB
or any SCB Subsidiary, at law or in equity, or before or by any federal or
state commission, board, bureau, agency, or instrumentality, that is reasonably
likely to have an SCB Material Adverse Effect.
3.9 Absence of Certain Changes. Since January 31, 1997, there has
not been any material adverse change in the financial condition, results of
operations, business, assets or liabilities (contingent or otherwise, whether
due or to become due, known or unknown), of SCB, except for changes in the
ordinary course of business.
3.10 No Brokers. SCB has not entered into any contract,
arrangement, or understanding with any person or firm that may result in the
obligation of SCB to pay any finder's fees, brokerage or agent's commissions,
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that SCB has retained Mercer Capital as its financial advisor (the fees and
expenses of which shall be the sole responsibility of SCB). Other than the
foregoing arrangement, SCB is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions, or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
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ARTICLE 4.
COVENANTS
4.1 Covenants of SCB. SCB covenants and agrees as follows:
(a) in the event any Earnout Shares are issuable, SCB
will, prior to May 1, 1998, prepare and submit to Nasdaq (or such
other exchange or quotation system on which SCB Common Stock is then
traded) a notification for listing additional shares covering such
Earnout Shares, and shall use its best efforts to obtain approval for
the listing of such SCB Common Stock, subject, if applicable, to
official notice of issuance.
(b) in order to ensure that determination of the Earnout
Consideration, if any, is on a basis consistent with and comparable to
the operations of PRI prior to the date hereof, SCB will not, without
the prior written consent of the PRI Shareholders, prior to December
31, 1997:
(i) merge or consolidate the business of PRI into
or with any other entity, sell or permit the sale of any
material amount of assets of PRI otherwise than in the
ordinary course of business, or permit PRI to be otherwise
dissolved and liquidated;
(ii) require the employees of PRI to devote more
than an inconsequential amount of their working time (which
for purposes of this Agreement shall mean an amount not in
excess of 10% of their working time and which will otherwise
not materially adversely affect the business of PRI) to
matters other than the conduct of the business of PRI;
(iii) sell or provide any goods or services to PRI,
except those which are reasonably necessary to the conduct of
PRI's business and on terms and conditions no less favorable
to PRI than it could obtain from unrelated third parties;
(iv) materially change the financial or
operational business practices of PRI including materially
increasing expenses associated with the business without a
corresponding increase in the revenues associated with the
business;
(v) change the method of allocating expenses
between PRI and PCG in a manner inconsistent with prior
policies and practices; and
(vi) direct to SCB or any of its affiliates other
than PRI any corporate opportunity of PRI relating to
outsourcing of Unisys-based systems.
4.2 Further Assurances. SCB, from time to time after the Closing
and at the PRI Shareholders' reasonable request, and the PRI Shareholders from
time to time after the Closing and at SCB's reasonable request, will execute,
acknowledge, and deliver to the PRI Shareholders or SCB, as the case may be,
such other instruments of conveyance and transfer and will take such other
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actions and execute and deliver such other documents, certifications, and
further assurances as the PRI Shareholders or SCB, as the case may be, may
reasonably require in order to better enable the other party to complete,
perform, or discharge any of the liabilities or obligations assumed hereunder.
Each of the parties hereto will cooperate with the other and execute and
deliver to the other parties hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the
intended purposes of this Agreement. Without limiting the generality of the
foregoing, SCB will cause PRI to, and the PRI Shareholders will, within 30 days
of the Closing Date, use their best efforts to agree to leases for properties
identified on Schedule 4.2 hereto, with such terms as may be mutually agreeable
to the parties, including fair market value rental rates.
ARTICLE 5.
REGISTRATION RIGHTS AND SALE OF EARNOUT SHARES
5.1 Registration Rights.
(a) If, at any time on or after Earnout Shares, if any, have been
issued to the PRI Shareholders SCB proposes to file a registration statement
under the Securities Act with respect to an underwritten offering for cash by
SCB of its equity securities on a form that would also permit the registration
of the Earnout Shares, SCB will give written notice of such proposal to the PRI
Shareholders; provided, however, that, if there is an effective registration
statement covering the Earnout Shares, no such notice pursuant to this Section
5.1(a) shall be required. In such event, the PRI Shareholders may, by written
request given within five business days after receipt by the PRI Shareholders
of any such notice by SCB, require SCB to cause such number of the Earnout
Shares as requested by the PRI Shareholders to be included in such registration
statement. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering, if any, advise SCB that inclusion of the PRI
Shareholders' shares would (i) make it impracticable to conduct an underwritten
offering of the SCB Common Stock being registered at the price at which such
SCB Common Stock could be sold without such inclusion, or (ii) materially
interfere with the success of the offering by SCB, then the number of the
shares requested to be included in the registration by the PRI Shareholders
may be reduced or eliminated. Notwithstanding anything to the contrary in this
Section 5.1(a), SCB may, in its sole discretion and without the consent of the
PRI Shareholders postpone the filing or effectiveness of such registration
statement or withdraw any such registration statement and abandon any proposed
offering.
(b) Notwithstanding the foregoing, SCB shall have no obligation to
register the resale of any Earnout Shares on behalf of the PRI Shareholders or
to keep any previously filed registration statement effective pursuant to this
Article 5 in the event such shares could be sold by the PRI Shareholders
pursuant to and in compliance with Rule 144(k) (or any successor or similar
rule) promulgated pursuant to the Securities Act.
5.2 Expenses. The PRI Shareholders shall bear all brokerage fees,
underwriting discounts, and commissions, if any, applicable to the sale of the
Earnout Shares and the related fees
20
<PAGE> 22
and disbursements of their legal counsel and accountants. SCB shall bear all
other expenses in connection with any registration of the Earnout Shares
pursuant to this Article 5.
5.3 SCB Indemnification. In the case of a registration effected
by or pursuant to this Article 5, SCB agrees to indemnify and hold harmless the
PRI Shareholders against any and all losses, claims, damages, or liabilities to
which the PRI Shareholders may become subject under the Securities Act or any
other statute or common law, and to reimburse the PRI Shareholders for any
reasonable legal or other expense actually and reasonably incurred by any of
them in connection with investigating any claim and defending any action,
insofar as such losses, claims, damages, liabilities, or actions arise out of
or are based upon: (i) any untrue statement, or alleged untrue statement, of a
material fact contained in the registration statement or any post-effective
amendment thereof, or 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; (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus, if used prior to
the effective date of the registration statement, or contained in the
prospectus (as amended or supplemented if SCB shall have filed with the
Securities and Exchange Commission any amendment thereof or supplement
thereto), if used within the period during which SCB is required to keep the
registration statement in which such prospectus is contained current pursuant
to the terms of this Article 5, or the omission or alleged omission to state
therein a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the indemnification agreement contained in
this Section 5.3 shall not apply to such losses, claims, damages, liabilities,
or actions arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement
or omission was made in reliance upon and in conformity with written
information furnished to SCB by the PRI Shareholders or on behalf of the PRI
Shareholders by a person authorized to make such disclosures specifically for
use in connection with the preparation of the registration statement or any
preliminary prospectus contained in the registration statement or any such
amendment thereof or supplement thereto.
5.4 PRI Shareholders Indemnification. In the case of a
registration effected pursuant to this Article 5, each of the PRI Shareholders,
severally and not jointly, agrees to indemnify and hold harmless SCB and each
person, if any, who controls SCB within the meaning of Section 15 of the
Securities Act, its directors, and those officers of SCB who shall have signed
the registration statement or any post-effective amendment thereof or any
preliminary prospectus or prospectus (as amended or as supplemented, if amended
or supplemented as aforesaid) contained in the registration statement against
losses, claims, damages, liabilities, or actions which arise out of or are
based upon: (i) any untrue statement, or alleged untrue statement, of a
material fact contained in the registration statement or any post-effective
amendment thereof, or 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; (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus, if used prior to
the effective date of the registration statement, or contained in the
prospectus (as amended or supplemented if SCB shall have filed with the
Securities and Exchange Commission any amendment thereof or supplement
thereto), if used within the period during which SCB is required to keep the
registration statement in which such prospectus is contained current pursuant
to the terms of this Article 5, or the omission or alleged omission to state
21
<PAGE> 23
therein a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, if such statement or omission was made in reliance upon and in
conformity with information furnished to SCB by the PRI Shareholders or on
behalf of the PRI Shareholders by a person authorized to make such disclosures
in writing specifically for use in connection with the preparation of the
registration statement or any such amendment thereof or supplement thereto.
5.5 Indemnification Procedure. Each indemnified party shall
promptly after the receipt of notice of the commencement of any action against
such indemnified party in respect of which indemnity may be sought from an
indemnifying party on account of an indemnity agreement contained in this
Article 5, notify the indemnifying party in writing of the commencement
thereof; provided, however, that the omission to so notify the indemnifying
party shall not relieve the indemnifying party from any other liability which
it may have to such indemnified party. In case any such action shall be
brought against any indemnified party and it shall notify any indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may wish, jointly and with any
other indemnifying party similarly notified, to assume 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 the defense thereof, the indemnifying party shall be responsible for
any reasonable legal or other expenses subsequently actually incurred by the
indemnifying party in connection with the defense thereof; provided further,
that if any indemnified party shall have reasonably concluded that there may be
one or more legal defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party, or
that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Article 5, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, and such indemnifying party shall
be required to reimburse such indemnified party and any person controlling such
indemnified party for the reasonable fees and expenses of any counsel retained
by the indemnified party, but not for matters that are beyond the scope of the
indemnity agreement provided in this Article 5; and provided further, that no
such action shall be settled without the consent of the indemnifying party and
the indemnified party, which consent neither party shall unreasonably withhold.
5.6 Contribution. If the indemnification provided for in this
Article 5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
22
<PAGE> 24
5.7 Orderly Disposition of Shares. Unless otherwise agreed in
writing in advance by SCB, the PRI Shareholders may not, during any 30-day
period, sell in the aggregate, whether through an effective registration
statement or otherwise, more than one-quarter of the total number of Earnout
Shares then currently owned by the PRI Shareholders. All sales of the Earnout
Shares shall be effected by one or more brokers who are mutually agreeable to
SCB and the PRI Shareholders. This Section 5.7 may be enforced by the delivery
of "stop transfer" instructions by SCB to the transfer agent for the SCB Common
Stock. When and as the Earnout Shares are sold pursuant to a registration
statement or otherwise, the PRI Shareholders shall provide SCB with
confirmations or other evidence of the sale thereof and the price therefor.
5.8 PRI Shareholder Information. Each of the PRI Shareholders
shall promptly furnish SCB, upon request, with all information as may be
reasonably required for inclusion in the registration statement, or any
amendment or supplement thereto. Such information shall be furnished during
the period within which SCB is required to effect such registration pursuant to
this Article 5 and shall include, without limitation, a description of the
nature and method of the proposed offer and sale of the shares.
5.9 No Injunction. None of the PRI Shareholders shall have any
right to take any action to restrain, enjoin, or otherwise delay any
registration as a result of any controversy that might arise with respect to
the interpretation or implementation of this Article 5.
5.10 Nonassignable. The rights of the PRI Shareholders pursuant to
this Article 5 are not transferable or assignable to any person.
5.11 Nonexclusivity. Nothing in this Article 5 shall prohibit SCB
from including in the registration statement subject to this Article 5 any
shares of SCB Common Stock it chooses to register on behalf of SCB or any
holders other than the PRI Shareholders, on substantially the same terms and
conditions.
ARTICLE 6.
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
6.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in Articles 2 and 3 of
this Agreement, and the parties' rights to pursue any claim under this Article
6, shall survive for a period of one year from the Effective Date (regardless
of any investigation conducted by the parties with respect thereto) and no
claim for a misrepresentation or breach of warranty, including, without
limitation, any claim for indemnification arising from an alleged
misrepresentation or breach of warranty, may be made hereunder by either party
unless such party has given the other party written notice of the claim on or
before July 31, 1998.
6.2 Indemnification by the PRI Shareholders. Subject to the
provisions of this Article 5 and the Escrow Agreement, the PRI Shareholders,
jointly and severally, in accordance with the
23
<PAGE> 25
Escrow Agreement, agree to indemnify and hold harmless SCB and PRI and PCG
following the Effective Date (each being an "SCB Indemnified Party"), from and
against, and will reimburse any SCB Indemnified Party for, any and all claims,
losses, damages, liabilities, and expenses (including, without limitation,
settlement costs and any reasonable legal or other fees or expenses for
investigating or defending any actions or threatened actions), or diminution in
value (in excess of $100,000 on a cumulative aggregate basis), whether or not
involving a third-party claim, arising from or in connection with each and all
of the following:
(a) any misrepresentation or breach of any warranty made
by the PRI Shareholders in this Agreement;
(b) the nonfulfillment or breach of any covenant,
agreement, or obligation of the PRI Shareholders contained in this
Agreement;
(c) any misrepresentation or breach of any warranty
contained in any written statement, certificate, or other document
furnished by the PRI Shareholders pursuant to this Agreement or in
connection with the transaction contemplated by this Agreement;
(d) amounts in excess of the Westchester Reserve properly
reimbursed to IBM or any other person in accordance with or pursuant
to the terms of the Westchester Contract, which amounts arise out of
or relate to the termination, amendment, or modification of the
Westchester Contract by IBM or at the direction of any judicial or
regulatory authority;
(e) any amounts paid to any of Messrs. Dunne, Linklater,
Causse, Hamel, or Lawson pursuant to any employment or consulting
contract entered into prior to the Closing Date in excess of such
person's base salary as of the Closing Date as reflected in the books
and records of PRI or PCG;
(f) any attempt (whether or not successful) by any person
to cause or require such SCB Indemnified Party to pay or discharge any
debt, obligation, liability, or commitment, the existence of which
would entitle such SCB Indemnified Party to indemnification pursuant
to clauses (a) through (e) of this Section 6.2.
6.3 Indemnification by SCB. Subject to the provisions of this
Article 6, SCB shall indemnify, defend, and hold harmless, the PRI Shareholders
and their respective estates (each being a "Seller Indemnified Party"), and
will reimburse any Seller Indemnified Party for any and all claims, losses,
damages, liabilities, and expenses (including, without limitation, settlement
costs and any legal or other fees or expenses for investigating or defending
any actions or threatened actions) arising from or in connection with each and
all of the following:
(a) any misrepresentation or breach of any warranty made
by SCB in this Agreement;
(b) the nonfulfillment or breach of any covenant,
agreement, or obligation of SCB contained in this Agreement;
24
<PAGE> 26
(c) any misrepresentation or breach of any warranty
contained in any statement, certificate, or other document furnished
by SCB pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement;
(d) any attempt (whether or not successful) by any person
to cause or require such Seller Indemnified Party to pay or discharge
any debt, obligation, liability, or commitment, the existence of which
would entitle such Seller Indemnified Party to indemnification
pursuant to clauses (a) through (c) of this Section 6.3; and
(e) a loss by a PRI Shareholder (up to an aggregate of
$5,400,000 for all PRI Shareholders) pursuant to a guarantee by such
PRI Shareholder of an obligation of PRI, provided that such guarantee
has been disclosed to SCB prior to the Closing Date.
6.4 Indemnification Procedure. Subject to the differing
provisions of the Escrow Agreement governing procedures for indemnification if
the Escrow Agreement is still in effect, an indemnified party shall promptly
notify the indemnifying party of any claim, demand, action, or proceeding for
which indemnification will be sought under Section 6.2 or 6.3 of this
Agreement, and, if such claim, demand, action, or proceeding is a third party
claim, demand, action, or proceeding, the indemnifying party will have the
right at its expense to assume the defense thereof using counsel reasonably
acceptable to the indemnified party. The indemnified party shall have the
right to participate, at its own expense, with respect to any such third party
claim, demand, action, or proceeding. In connection with any such third party
claim, demand, action, or proceeding, SCB and the PRI Shareholders shall
cooperate with each other and provide each other with access to relevant books
and records in their possession. No such third party claim, demand, action, or
proceeding shall be settled without the prior written consent of the
indemnified party. If a firm written offer is made to settle any such third
party claim, demand, action, or proceeding and the indemnifying party proposes
to accept such settlement, and the indemnified party refuses to consent to such
settlement, then: (i) the indemnifying party shall be excused from, and the
indemnified party shall be solely responsible for, all further defense of such
third party claim, demand, action, or proceeding; and (ii) the maximum
liability of the indemnifying party relating to such third party claim, demand,
action, or proceeding shall be the amount of the proposed settlement if the
amount thereafter recovered from the indemnified party on such third party
claim, demand, action, or proceeding is greater than the amount of the proposed
settlement.
6.5 Right of Set-Off. SCB shall have a right of set-off against
the Escrow Amount, subject to and in accordance with the provisions of and the
procedures described in the Escrow Agreement, and against any and all amounts
due and owing the PRI Shareholders as Earnout Consideration, if any, pursuant
to this Agreement (the exercise of which set-off in good faith, whether or not
ultimately determined to be justified, will not constitute a breach of Article
I hereof) to satisfy any indemnification right of SCB hereunder or any
obligation or agreement of the PRI Shareholders hereunder.
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<PAGE> 27
ARTICLE 7.
GENERAL PROVISIONS
7.1 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to SCB: If to the PRI
Shareholders:
Ben C. Bryant, Jr. At their addresses identified
President and Chief on the signature page hereto
Executive Officer
SCB Computer Technology, Inc.
1365 West Brierbrook Road
Memphis, Tennessee 38138
with a copy to: with a copy to:
J. Gentry Barden Irving Hymson
Bass, Berry & Sims PLC Peskind Hymson & Goldstein, P.C.
2700 First American Center 14595 N. Scottsdale Road
Nashville, Tennessee 38238 Scottsdale, Arizona 85254-3498
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
personally delivered or mailed.
7.2 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, at each such party's sole
discretion. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
7.3 Entire Agreement. This Agreement, the Exhibits, the PRI
Disclosure Letter, the SCB Disclosure Letter, and any documents delivered by
the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement
shall be binding upon any party hereto unless made in writing and signed by all
parties hereto.
7.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
7.5 Governing Law. The validity of this Agreement, the
construction of its terms and the determination of the rights and duties of the
parties hereto shall be governed by and construed in
26
<PAGE> 28
accordance with the laws of the State of Tennessee applicable to contracts made
and to be performed wholly within such state.
7.6 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
7.7 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants, or agreements contained in this Agreement. The waiver
by any party hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
7.8 Incorporation of Exhibits. The PRI Disclosure Letter, the SCB
Disclosure Letter, and the Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
7.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
7.10 Expenses. Each party to this Agreement shall bear its own
expenses in connection with the transactions contemplated hereby; provided,
however, that all expenses of PRI in connection herewith shall be borne by the
PRI Shareholders.
7.11 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which
they are entitled by contract, at law, or in equity.
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<PAGE> 29
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf to be effective on the day
and year first written above.
SCB COMPUTER TECHNOLOGY, INC.
By: /s/ Gary E. McCarter
-------------------------------------
Title: Senior Vice President
----------------------------------
THE PRI SHAREHOLDERS:
/s/ Michael L. Hirschey
----------------------------------------
Michael L. Hirschey
Address: 14746 N. 78th Way
--------------------------------
Scottsdale, AZ 85260
----------------------------------------
----------------------------------------
/s/ Kenneth L. Spencer
----------------------------------------
Kenneth L. Spencer
Address: 8049 Bellflower Ct.
--------------------------------
Neuet, CO 80503
----------------------------------------
----------------------------------------
/s/ Russell J. Young by Kenneth L.
Spencer as attorney in fact
----------------------------------------
Russell J. Young
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ Barry L. Fulton
----------------------------------------
Barry L. Fulton
Address: 1124 Miramar
--------------------------------
Laguna Beach, CA 92651
----------------------------------------
----------------------------------------
28
<PAGE> 30
ATTACHMENTS AND EXHIBITS
PRI Disclosure Letter
SCB Disclosure Letter
Exhibit A -- PRI Shareholder Allocations and Wire Transfer Instructions
Exhibit B -- Indemnity and Escrow Agreement
Exhibit C -- Purchase Price Allocations
Exhibit D -- Form of SCB Counsel Legal Opinion
Exhibit E -- Form of Employment Agreement
Exhibit F -- Form of PRI Counsel Legal Opinion
Exhibit G -- Form of Non-Competition Agreement
Exhibit I -- Assignment and Assumption Agreement
29
<PAGE> 1
EXHIBIT 10.1
NATIONSBANK OF TENNESSEE, N.A.
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of July 10, 1997,
by and between NATIONSBANK OF TENNESSEE, N.A. a national banking association
("Bank") and SCB COMPUTER TECHNOLOGY, INC., a Tennessee corporation, DELTA
SOFTWARE SYSTEMS, INC., a Tennessee corporation, and TMR ACQUISITION, INC., a
Tennessee corporation (collectively "Borrower").
RECITALS:
A. Borrower has applied to Bank for a revolving term
loan facility (the "Loan") in the principal amount of $16,000,000.
B. One of the conditions of the Loan from Bank to
Borrower is the execution of this Agreement setting forth the terms and
conditions of the Loan.
NOW THEREFORE, in consideration of the Loan described below and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, Bank and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other
terms defined herein, the following terms shall have the meaning set forth with
respect thereto:
A. ACCOUNT DEBTOR: Account Debtor means any Person (as
herein defined) which is now or hereafter obligated or indebted to Borrower or
Partners (as herein defined) on any Account Receivable.
B. ACCOUNTS RECEIVABLE: Accounts Receivable means all
amounts owed to Borrower and Partners on account of sales, leases or rentals of
goods or services rendered in the ordinary course of trade or business to or on
behalf of any Person (as herein defined) which is now or hereafter obligated or
indebted to Borrower (i) which arise from goods theretofore sold and delivered
or services or rentals theretofore rendered or made, as the case may be, to an
Account Debtor (as herein defined); (ii) with respect to which no setoffs,
counterclaims or defenses are claimed by the Account Debtor; (iii) which
constitute the binding obligation of an Account Debtor which Bank deems, in the
exercise of its reasonable business judgment, to be solvent, to be financially
able to pay its debts and obligations as they become due and to be paying its
debts and obligations as they become due; (iv) which, in the case of "dated
invoices" which specify a due date for the payment thereof, do not remain
unpaid more than ninety (90) days after the end of the month in which such due
date falls, and in the case of all other invoices, do not remain unpaid more
than ninety (90) days after the date of such invoice; (v) with respect to which
the Account Debtor is not an officer, director, agent or employee of Borrower
(vi) which do not arise from a "sale on approval," "sale or return,"
"guaranteed sale" or "consignment"; and (viii) which are unencumbered or
pledged as collateral for any other indebtedness of Borrower.
<PAGE> 2
C. BORROWER: SCB Computer Technology, Inc., a
Tennessee corporation, Delta Software Systems, Inc., a Tennessee Corporation,
and TMR Acquisition, Inc., collectively.
D. BORROWER'S ADDRESS:
1365 Brierbrook Road
Germantown, Tennessee 38138
E. CURRENT LIABILITIES: Current Liabilities means the
aggregate amount of all current liabilities as determined in accordance with
GAAP, but in any event shall include all liabilities except those having a
maturity date which is more than one year from the date as of which such
computation is being made.
F. EBITDA: EBITDA means, without duplication for any
period, the following, each calculated for the trailing twelve (12) months of
such period: (a) Net Income; plus (b) any provision for (or minus any benefit
from) income or franchise taxes included in the determination of Net Income;
plus (c) interest expense (excluding that which is associated with any lease
expense whereby the contract is assigned to a non-recourse lender) deducted in
the determination of Net Income (excluding that which is associated with any
lease expense whereby the contract is assigned to a non-recourse lender); plus
(d) amortization and depreciation (excluding that which is associated with any
lease expense whereby the contract is assigned to a non-recourse lender)
deducted in the determination of Net Income (excluding that which is associated
with any lease expense whereby the contract is assigned to a non-recourse
lender); plus (e) losses from (or minus gains from) non-cash items (excluding
sales, expenses or losses related to current assets) included in the
determination of Net Income; minus (f) after tax extraordinary gains (or plus
after tax extraordinary losses) (in each case as defined under GAAP) included
in the determination of Net Income.
G. FUNDED DEBT: Funded Debt means the total
indebtedness outstanding under all recourse notes payable of Borrower, plus
funded or unfunded letters of credit issued pursuant to Borrower's application
therefor, plus capital leases of Borrower.
H. HAZARDOUS MATERIALS: Hazardous Materials include all
materials defined as hazardous materials or substances under any local, state
or federal environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
I. LOAN: Any loan described in Section 2 hereof and any
subsequent loan which states that it is subject to this Loan Agreement.
J. LOAN DOCUMENTS: Loan Documents means this Loan
Agreement and any and all promissory notes executed by Borrower in favor of
Bank and all other documents, instruments, guarantees, certificates and
agreements executed and/or delivered by Borrower, any guarantor or third party
in connection with any Loan.
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<PAGE> 3
K. NET INCOME: Net Income means for any period, the net
income (or loss) of Borrower and its Subsidiaries after provision for or
benefit from income and franchise taxes determined in accordance with GAAP, but
excluding: (i) the income (or loss) of any Person (other than a Subsidiary) in
which Borrower has an ownership interest unless received by Borrower in a cash
distribution; and (ii) the income (or loss) of any Person accrued prior to the
date it is merged into or consolidated with Borrower.
L. PARTNERS: Partners means collectively Partners
Capital Group, Inc., a California corporation, and Partners Resources, Inc., an
Arizona corporation, both of which are being acquired by SCB Computer
Technology, Inc.
M. PERSON: Person means any individual, partnership,
corporation, trust, unincorporated organization, lender liability company,
association, joint venture or other legally recognized entity having the
capacity to contract in its own name.
N. SUBSIDIARIES: Subsidiaries means those corporations
now or hereafter owned by SCB Computer Technology, Inc., including at the
present time, those identified on Exhibit "A" attached hereto, as such list may
be amended or restated from time to time.
O. TANGIBLE NET WORTH. Tangible Net Worth means the
amount by which total assets exceed total liabilities in accordance with GAAP.
P. ACCOUNTING TERMS. All accounting terms not
specifically defined or specified herein shall have the meanings generally
attributed to such terms under generally accepted accounting principles
("GAAP"), as in effect from time to time, consistently applied, with respect to
the financial statements referenced in Section 3.H. hereof.
2. LOANS. Bank hereby agrees to make one or more loans to
Borrower in the aggregate principal face amount of Sixteen Million and No/100
Dollars ($16,000,000.00). The obligation to repay the loans is evidenced by a
promissory note or notes dated July 10, 1997, (the promissory note or notes
together with any and all renewals, extensions or rearrangements thereof being
hereafter collectively referred to as the "Note") having a maturity date,
repayment terms and interest rate as set forth in the Note.
A. REVOLVING TERM LOAN FEATURE. The Loan shall consist
of a revolving term loan facility (the "Loan") under which Borrower may from
time to time, borrow, repay and re-borrow funds. The Loan shall be repaid as
set forth in the Note with a maturity date of August 1, 2000, at which time the
entire outstanding principal balance, plus all accrued and unpaid interest,
shall be due and payable in full. Interest shall be paid monthly as more fully
provided in the Note.
B. ACQUISITION/STRUCTURING FEE. Borrower will pay an
acquisition/structuring fee of Forty-Eight Thousand and No/100 Dollars
($48,000.00) at the closing of the Loan.
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<PAGE> 4
C. UNUSED CREDIT FEE. Borrower will pay hereafter on
August 1, 1997, and on the same day of each month thereafter for the period
from and including the date the Loan was established to and including the
maturity date of the Loan, an unused credit fee at a rate per annum equal to
(i) .20%, (if the Funded Debt/EBITDA ratio is less than 1.0 to 1.0), (ii) .25%
(if such ratio is equal to or less than 1.50 to 1.0), or (iii) .30% (if such
ratio is greater than 1.5 to 1.0), times the average daily unused portion of
the Loan during the preceding month. The Borrower may at any time upon written
notice to the Bank permanently reduce the amount of the Loan at which time the
obligation of the Borrower to pay such unused credit fee shall thereupon
correspondingly be reduced.
D. PURPOSE. Ten Million and No/100 Dollars
($10,000,000.00) of the Loan shall initially be used to acquire Partners. The
remainder of the Loan shall be available to Borrower for other general
corporate purposes (including, without limitation, additional acquisitions made
in accordance with the terms hereof) or for reimbursement to Borrower for
additional funds out of Borrower's available cash used to purchase Partners,
provided all due diligence has been completed to Bank's reasonable
satisfaction, such due diligence including, without limitation, (i) UCC-11
searches for Borrower and Partners revealing no liens, liabilities or
obligations reasonably unacceptable to Bank, (ii) satisfactory review of all
material lease contracts securing non-recourse debt of Borrower or Partners,
(iii) proof reasonably satisfactory to Bank that Borrower has incurred no
contractual liability as a result of the acquisition of Partners which is
unacceptable to Bank in its reasonable discretion including, without
limitation, acceptable opinion letters from Borrower's counsel opining to such
matters as Bank may reasonably require including, without limitation, counsel
opinion that Borrower has incurred no contractual liability as a result of the
acquisition of Partners, other than as set forth in the relevant stock purchase
agreements, copies of which will be provided to Bank, and (iv) proof that no
other funds in excess of One Million and No/100 Dollars have been used by
Borrower for the use or benefit of Partners, or either of them. Borrower
agrees to provide Bank with guaranty agreements in form and substance prepared
by and acceptable to Bank executed by the Partners within ten (10) days of the
date hereof. Notwithstanding the initial draw limitation of Ten Million and
No/100 Dollars ($10,000,000.00) as set forth above and the other conditions to
further advances hereunder, Borrower may also draw an additional Six Million
and No/100 Dollars ($6,000,000.00) on the date hereof provided (i) marketable
securities reasonably acceptable to Bank are pledged (in form and substance
prepared by Bank) by Borrower to Bank on the date hereof to fully secure such
sum, and (ii) Borrower agrees to repay such sum within ten (10) days of the
date hereof, at which time Bank agrees to fully release such marketable
securities. Failure to so repay shall constitute a default hereunder.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to Bank as follows:
A. GOOD STANDING. Each of the Persons composing
Borrower and Partners is a corporation, duly organized, validly existing and in
good standing under the laws of the state of its formation and has the power
and authority to own its property and to carry on its business as currently
conducted.
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<PAGE> 5
B. AUTHORITY AND COMPLIANCE. Borrower has full power
and authority to execute and deliver the Loan Documents and to incur and
perform the obligations provided for therein, all of which have been duly
authorized by all proper and necessary action of the appropriate governing body
of Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and each
Person composing Borrower and, to Borrower's knowledge, Partners, is in
material compliance with all laws and regulatory requirements to which each is
subject.
C. BINDING AGREEMENT. This Agreement and the other Loan
Documents executed by Borrower constitute valid and legally binding obligations
of Borrower, enforceable in accordance with their terms.
D. LITIGATION. There is no material proceeding
involving Borrower or to Borrower's knowledge, Partners, pending or, to the
knowledge of Borrower, threatened before any court or governmental authority,
agency or arbitration authority, except as disclosed to Bank in writing and
acknowledged by Bank prior to the date of this Agreement.
E. NO CONFLICTING AGREEMENTS. There is no charter,
bylaw, stock provision, partnership agreement or other document pertaining to
the organization, power or authority of Borrower or, to Borrower's knowledge,
Partners, and no provision of any existing material agreement, mortgage,
indenture or contract binding on Borrower or, to Borrower's knowledge,
Partners, or affecting its or their property, which would conflict with or in
any way prevent the execution, delivery or carrying out of the terms of this
Agreement and the other Loan Documents. Acquisition of Partners will not
constitute a default under any document to which Borrower, or, to Borrower's
knowledge, Partners, is a party, or result in the acceleration of any
indebtedness or obligations of Borrower or Partners.
F. OWNERSHIP OF ASSETS. Borrower and, to Borrower's
knowledge, Partners have good title to their respective assets, and their
assets are free and clear of liens, except limited liens involving non-recourse
lease related loans, and except for those granted to Bank and as disclosed to
Bank in writing prior to the date of this Agreement, or, with respect to
Partners, disclosed to Bank prior to the execution of the guaranty agreements
executed by Partners which are required to be furnished to Bank within ten (10)
days of the date hereof.
G. TAXES. All taxes and assessments due and payable by
Borrower, and to Borrower's knowledge, Partners, have been paid or are being
contested in good faith by appropriate proceedings and Borrower and to
Borrower's knowledge, Partners have filed all tax returns which they are
required to file.
H. FINANCIAL STATEMENTS. The financial statements of
Borrower heretofore delivered to Bank have been prepared in accordance with
GAAP applied on a consistent basis throughout the period involved and fairly
present Borrower's financial condition as of the date or dates thereof, and
there has been no material adverse change in Borrower's financial condition or
operations since January 31, 1997. All factual information furnished by
Borrower to Bank in connection with this Agreement and the other Loan
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<PAGE> 6
Documents is and will be accurate and complete in all material respects on the
date as of which such information is delivered to Bank and is not and will not
be incomplete by the omission of any material fact necessary to make such
information not misleading.
I. PLACE OF BUSINESS. Borrower's chief executive office
is located at 1365 Brierbrook Road Germantown,
Tennessee 38138
J. ENVIRONMENTAL. The conduct of Borrower's and to
Borrower's knowledge, Partners, business operations and the condition of
Borrower's and to Borrower's knowledge, Partners', respective properties does
not and will not violate any federal laws, rules or ordinances for
environmental protection, regulations of the Environmental Protection Agency,
any applicable local or state law, rule, regulation or rule of common law or
any judicial interpretation thereof relating primarily to the environment or
Hazardous Materials.
K. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of any advance
under the Loan.
L. SUBSIDIARIES. Other than as shown on Exhibit "A",
except for Partners and those Persons other than SCB Computer Technology, Inc.
composing Borrower, there are no other Subsidiaries.
4. AFFIRMATIVE COVENANTS. Until full payment and performance of
all obligations of Borrower under the Loan Documents, Borrower will, on a
consolidated basis together with Partners and any other Subsidiaries, now or
hereafter existing, unless Bank consents otherwise in writing (and without
limiting any requirement of any other Loan Document):
A. FINANCIAL CONDITION. Maintain at all times
Borrower's financial condition as follows and determined in accordance with
GAAP applied on a consistent basis throughout the period involved except to the
extent modified by the following:
i. Maintain thereafter a ratio of Funded Debt
to EBITDA of 2.25 to 1.0 or less; and on April 30, 1998, and thereafter,
maintain a ratio of Funded Debt to EBITDA of 2.0 to 1.0 or less.
ii. Maintain a ratio of Funded Debt to Tangible
Net Worth of 2.0 to 1.0 or less; and on April 30, 1998, and thereafter,
maintain a ratio of Funded Debt to Tangible Net worth of 1.5 to 1.0 or less.
iii. Beginning April 1, 1998, maintain a ratio of
cash plus Accounts Receivable to Current Liabilities plus unsecured Funded Debt
of 1.0 to 1.0 or greater.
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<PAGE> 7
B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain
a system of accounting satisfactory to Bank and in accordance with GAAP applied
on a consistent basis throughout the period involved, permit Bank's officers or
authorized representatives to visit and inspect Borrower's books of account and
other records at such reasonable times and as often as Bank may desire, and pay
the reasonable fees and disbursements of any accountants or other agents of
Bank selected by Bank for the foregoing purposes. Unless written notice of
another location is given to Bank, Borrower's books and records will be located
at Borrower's chief executive office set forth above. All financial statements
called for below shall be prepared in form and content acceptable to Bank and
by independent certified public accountants acceptable to Bank.
In addition, Borrower will:
i. Furnish to Bank audited financial statements
of Borrower for each fiscal year of Borrower, within one hundred twenty (120)
days after the close of each such fiscal year, prepared by a public accounting
firm acceptable to Bank.
ii. Furnish to Bank financial statements prepared
by Borrower (including a balance sheet and profit and loss statement) of
Borrower, for each quarter of each fiscal year of Borrower, within forty five
(45) days after the close of each such period, such financial statements to be
certified by the president, vice president or chief financial officer of
Borrower.
iii. Furnish to Bank a compliance certificate for
(and executed by an authorized representative of) Borrower in the form of
Exhibit "B" attached hereto, concurrently with and dated as of the date of
delivery of each of the financial statements as required in paragraphs i and ii
above, and at such other times as Bank may request, containing (a) a
certification that the financial statements of even date are true and correct
and that the Borrower is not in default under the terms of this Agreement, and
(b) computations and conclusions, in such detail as Bank may request, with
respect to compliance with this Agreement, and the other Loan Documents,
including computations of all quantitative covenants.
iv. Furnish to Bank promptly such additional
information, reports and statements respecting the business operations and
financial condition of Borrower, Partners and their Subsidiaries,
respectively, from time to time, as Bank may reasonably request.
C. INSURANCE. Maintain insurance with responsible
insurance companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance covering
all assets, business interruption insurance, workers compensation insurance and
liability insurance, all to be with such companies and in such amounts as are
satisfactory to Bank and providing for at least 30 days prior notice to Bank
of any cancellation thereof. Satisfactory evidence of such insurance will be
supplied to Bank prior to funding under the Loan(s) and 30 days prior to each
policy renewal.
D. EXISTENCE AND COMPLIANCE. Maintain its, as well as
that of its Subsidiaries,
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<PAGE> 8
existence, good standing and qualification to do business, where failure to do
so would have a material adverse effect on Borrower or its Subsidiaries, and
comply with all laws, regulations and governmental requirements including,
without limitation, applicable environmental laws or to any of its or their
property, business operations and transactions.
E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank
in writing of (i) any condition, event or act which comes to its attention that
would or might materially adversely affect Borrower's, Partners' or any
Subsidiary's financial condition or operations or Bank's rights under the Loan
Documents, (ii) any material litigation filed by or against Borrower or any
Subsidiary, (iii) any event that has occurred that would constitute an event of
default under any Loan Documents and (iv) any uninsured or partially uninsured
loss through fire, theft, liability or property damage in excess of an
aggregate of Five Hundred Thousand and No/100 Dollars ($500,000.00).
F. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes,
assessments and other obligations, including, but not limited to taxes, costs
or other expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
G. MAINTENANCE. Maintain all of its tangible property
in good condition and repair and make all necessary replacements thereof, and
preserve and maintain all licenses, trademarks, privileges, permits,
franchises, certificates and the like necessary for the operation of its
business.
H. ENVIRONMENTAL. Immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Borrower's or any Subsidiary's
business operations; and (ii) all claims made or threatened by any third party
against Borrower or any Subsidiary relating to damages, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous Materials.
Borrower shall immediately notify Bank of any remedial action taken by Borrower
with respect to Borrower's business operations. Borrower will not use or
permit any other party to use any Hazardous Materials at any of Borrower's
places of business or at any other property owned by Borrower except such
materials as are incidental to Borrower's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Borrower agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Borrower's places of business or any
other property of Borrower at any reasonable times upon three (3) days prior
notice for the purposes of conducting an environmental investigation and audit
(including taking physical samples) to insure that Borrower is complying with
this covenant and Borrower shall reimburse Bank on demand for the costs of any
such environmental investigation and audit. Borrower shall provide Bank, its
agents, contractors, employees and representatives with access to and copies of
any and all data and documents relating to or dealing with any Hazardous
Materials used, generated, manufactured, stored or disposed of by Borrower's
business operations within five (5) days of the request therefore.
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<PAGE> 9
5. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will not, without
the prior written consent of Bank (and without limiting any requirement of any
other Loan Documents):
A. CAPITAL EXPENDITURES. Make capital expenditures
during each fiscal year (including capitalized leases) exceeding in the
aggregate a number which is equal to twenty five percent (25%) of the previous
year's annual depreciation plus net profit.
B. LEASE EXPENDITURES. Incur new obligations for the
lease or hire of real or personal property requiring payments in any fiscal
year in excess of an aggregate of Five Hundred Thousand and No/100 Dollars
($500,000.00).
C. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign
or otherwise dispose of or transfer any assets, except in the normal course of
its business, or transfer control or ownership of any Subsidiary.
D. LIENS. Grant, suffer or permit any contractual or
noncontractual lien on or security interest in its assets (including, without
limitation, any of Borrower's intellectual property), except in favor of Bank
and except for limited liens involving non-recourse lease related loans, or
fail to promptly pay when due all lawful claims, whether for labor, materials
or otherwise.
E. EXTENSIONS OF CREDIT. Other than loans to
Subsidiaries, make or permit any Subsidiary to make, loans or advances in
excess of Five Hundred Thousand and No/100 Dollars ($500,000.00) in the
aggregate outstanding at any time, or make any capital contribution to, or
participate as a partner or joint venturer with any Person, except for
extensions of credit to employees in the normal course of Borrower's business,
and except for the purchase of direct obligations of the United States or any
agency thereof with maturities of less than one year, or obligations of Bank or
any subsidiary thereof.
F. BORROWINGS. Create, incur, assume or become liable
in any manner for any indebtedness (for borrowed money, deferred payment for
the purchase of assets, lease payments, as surety or guarantor for the debt for
another, or otherwise) other than to Bank, except for normal trade debts
incurred in the ordinary course of Borrower's business, non-recourse
indebtedness, and except for existing indebtedness disclosed to Bank in writing
and acknowledged by Bank prior to the date of this Agreement.
G. DIVIDENDS AND DISTRIBUTIONS. Make any distribution
(other than dividends payable in capital stock of Borrower) on any shares of
any class of its capital stock or apply any of its property or assets to the
purchase, redemption or other retirement of any shares of any class of capital
stock of Borrower exceeding in the aggregate a sum which is equal to twenty
five percent (25%) of net profit per fiscal year.
H. CHARACTER OF BUSINESS. Change the general character
of business as conducted at the date hereof, or engage in any type of business
not reasonably related to its business as presently
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<PAGE> 10
conducted.
I. MANAGEMENT CHANGE. Make any substantial change in
its present executive or management personnel.
J. NEGATIVE PLEDGE LIMITATION. Enter into any agreement
with any person other than Bank pursuant hereto which prohibits or limits the
ability of Borrower or any Subsidiary to create, incur, assume or suffer to
exist any lien upon any of the assets, rights, revenues or property, whether
real, personal or mixed, whether tangible or intangible, and whether now owned
or hereafter acquired.
K. ACQUISITIONS OR MERGERS. Acquire or enter into any
merger or consolidation, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, or otherwise invest in or acquire any
interest in any entity, except in regards to any acquisition that (i) has
positive EBITDA during the last two (2) fiscal years, (ii) the total
consideration therefor is less than Three Million and No/100 Dollars
($3,000,000.00) (unless the acquisition is 100% stock), and (iii) the total
consideration is less than six (6) times the acquisition EBITDA, provided,
however, in no event may Borrower enter into any acquisition if the results of
such acquisition on a proforma basis would cause a default hereunder.
L. FUNDING TO PARTNERS. During the interim period
between the date hereof and the date all due diligence has been completed to
Bank's satisfaction as set forth in Section 2 D. hereof, Borrower shall not
fund, loan, advance or make available to, in any manner, sums to Partners in
excess of One Million and No/100 Dollars ($1,000,000.00)
6. DEFAULT. Borrower shall be in default under this Agreement
and under each of the other Loan Documents if any of the following should
occur:
A. It shall default in the payment of any amounts due
and owing under the Loan within fifteen (15) days of the date when due or;
B. It should fail to timely and properly observe, keep
or perform any term, covenant, agreement or condition herein or in any other
Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust, deed to secure debt, mortgage, assignment or other
contract securing or evidencing payment of any indebtedness of Borrower to Bank
or any affiliate or subsidiary of NationsBank Corporation; or
C. There should occur any material adverse change in
Borrower's financial condition or business affairs from that shown on
Borrower's most recent financial statements provided to Bank, including,
without limitation, any legal proceedings commenced against Borrower or any
of its officers which Bank determines in its sole discretion could have a
material adverse effect on Borrower's financial condition or business affairs,
provided, however, that Bank agrees not to exercise its right to declare a
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<PAGE> 11
default as a result of any such material adverse change until forty five (45)
days after written notice from Bank to Borrower that Bank deems a material
adverse change to have occurred.
7. REMEDIES UPON DEFAULT. If any of the foregoing defaults shall
occur, Bank shall have all rights, powers and remedies available under each of
the Loan Documents as well as all rights and remedies available at law or in
equity.
8. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party at the following
address:
Borrower:
SCB Computer Technology, Inc.
1365 Brierbrook Road
Germantown, Tennessee 38138
Attn: Gordon Bateman
Fax. No. 901/754-8463
with a copy to:
Bass, Berry, & Sims PLC
2700 First America Center
Nashville, Tennessee 37238-2700
Attn: Gentry Barden
Fax No. 615/742-6298
Bank:
NationsBank of Tennessee, N.A.
6363 Poplar Avenue, Suite 230
Memphis, Tennessee 38119
Attention: Michael R. Frick
Fax No. 901/820-8062
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or
made as follows:
A. If sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class postage
prepaid;
B. If sent by any other means , upon delivery.
9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees
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<PAGE> 12
(to include outside counsel fees and all allocated costs of Bank's in-house
counsel if permitted by applicable law), incurred by Bank in connection with
(a) negotiation and preparation of this Agreement and each of the Loan
Documents, and (b) all other costs and attorneys' fees incurred by Bank for
which Borrower is obligated to reimburse Bank in accordance with the Terms of
the Loan Documents.
10. MISCELLANEOUS. Borrower and Bank further covenant and agree
as follows, without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every
right granted to Bank under any Loan Document, or allowed it by law or equity
shall be cumulative of each other and may be exercised in addition to any and
all other rights of Bank, and no delay in exercising any right shall operate as
a waiver thereof, nor shall any single or partial exercise by Bank of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
B. APPLICABLE LAW. This Loan Agreement and the rights
and obligations of the parties hereunder shall be governed by and interpreted
in accordance with the laws of the state of Tennessee and applicable United
States federal law.
C. AMENDMENT. No modification, consent, amendment or
waiver of any provision of this Loan Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by an officer of Bank, and then shall be effective only in the specified
instance and for the purpose for which given. This Loan Agreement is binding
upon Borrower, its successors and assigns, and inures to the benefit of Bank,
its successors and assigns; however, no assignment or other transfer of
Borrower's rights or obligations hereunder shall be made or be effective
without Bank's prior written consent, nor shall it relieve Borrower of any
obligations hereunder. There is no third party beneficiary of this Loan
Agreement.
D. DOCUMENTS. All documents, certificates and other
items required under this Loan Agreement to be executed and/or delivered to
Bank shall be in form and content satisfactory to Bank and its counsel.
E. PARTIAL INVALIDITY. The unenforceability or
invalidity of any provision of this Loan Agreement shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
F. INDEMNIFICATION. Notwithstanding anything to the
contrary contained in Section
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<PAGE> 13
10(G), except for gross negligence or willful misconduct, Borrower shall
indemnify, defend and hold Bank and its successors and assigns harmless from
and against any and all claims, demands, suits, losses, damages, assessments,
fines, penalties, costs or other expenses (including reasonable attorneys'
fees and court costs) arising from or in any way related to any of the
transactions contemplated hereby, including but not limited to actual or
threatened damage to the environment, agency costs of investigation, personal
injury or death, or property damage, due to a release or alleged release of
Hazardous Materials, arising from Borrower's business operations, any other
property owned by Borrower or in the surface or ground water arising from
Borrower's business operations, or gaseous emissions arising from Borrower's
business operations or any other condition existing or arising from Borrower's
business operations resulting from the use or existence of Hazardous Materials,
whether such claim proves to be true or false. Borrower further agrees that
its indemnity obligations shall include, but are not limited to, liability for
damages resulting from the personal injury or death of an employee of the
Borrower, regardless of whether the Borrower has paid the employee under the
workmen' s compensation laws of any state or other similar federal or state
legislation for the protection of employees. The term "property damage" as
used in this paragraph includes, but is not limited to, damage to any real or
personal property of the Borrower, the Bank, and of any third parties. The
Borrower's obligations under this paragraph shall survive the repayment of the
Loan and any deed in lieu of foreclosure or foreclosure of any Deed to Secure
Debt, Deed of Trust, Security Agreement or Mortgage securing the Loan.
G. SURVIVABILITY. All covenants, agreements,
representations and warranties made herein or in the other Loan Documents shall
survive the making of the Loan and shall continue in full force and effect so
long as the Loan is outstanding or the obligation of the Bank to make any
advances under the Loan shall not have expired.
11. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS, INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS
OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT,
SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS
INSTRUMENT,
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<PAGE> 14
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
ARBITRATION PROVISION; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW;
OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES
SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER
THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
12. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
- 14 -
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed under seal by their duly authorized representatives as of the
date first above written.
BORROWER: BANK:
SCB COMPUTER TECHNOLOGY, INC. NATIONSBANK OF TENNESSEE, N.A.
By: /s/ Gordon Bateman By: /s/ Michael R. Frick
---------------------------- ---------------------------
Name: Gordon Bateman Name: Michael R. Frick
-------------------------- -------------------------
Title: Chief Financial officer Title: Vice President
------------------------- ------------------------
[Corporate Seal]
Attest: /s/ Bobby P. Jackson
------------------------
Name: Bobby P. Jackson
-------------------------
Title: Controller
------------------------
DELTA SOFTWARE SYSTEMS, INC.
By: /s/ Gordon Bateman
----------------------------
Name: Gordon Bateman
--------------------------
Title: Secretary
-------------------------
[Corporate Seal]
Attest: Bobby P. Jackson
------------------------
Name: Bobby P. Jackson
--------------------------
Title: Controller
-------------------------
- 15 -
<PAGE> 16
TMR ACQUISITION, INC.
By: /s/ Gordon Bateman
----------------------------
Name: Gordon Bateman
--------------------------
Title: Secretary
-------------------------
[Corporate Seal]
Attest: Bobby P. Jackson
------------------------
Name: Bobby P. Jackson
-------------------------
Title: Controller
-------------------------
- 16 -
<PAGE> 17
EXHIBIT "A"
SUBSIDIARIES
1. Delta Software Systems, Inc.
2. TMR Acquisition, Inc.
3. Partners Capital Group, Inc.
4. Partners Resources, Inc.
5. SCB Software Services, Inc.
- 17 -
<PAGE> 18
Exhibit B
[GRAPHIC OMITTED] COMPLIANCE CERTIFICATE
- --------------------------------------------------------------------------------
STATUS AS OF ___________, 19____
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended Quarter ended 12 Mos. ended
31-Oct-96 31-Jan-97 30-Apr-97 31-Jul-97 31-Jul-97
<S> <C> <C> <C> <C> <C>
EBITDA 0
- ------
Net Income 0
Taxes 0
Interest Expense 0
less: Int. Exp paid on non-recourse 0
notes
Amortization and Depreciation Expense 0
less: A&D expense on non-recourse 0
notes
After tax extraordinary losses (gains) 0
----------------------------------------------------------------------
Total EBITDA 0 0 0 0 0
----------------------------------------------------------------------
FUNDED DEBT/ EBITDA
- -------------------
Recourse Notes Payable (Funded Debt)
EBITDA 0
--------------
Funded Debt/ EBITDA #DIV/01
--------------
Maximum 2.25x; 2.0 on/after 4/30/98
FUNDED DEBT/ TANGIBLE NET WORTH
- -------------------------------
Funded Debt 0
Tangible Net Worth
--------------
Funded Debt/ Tangible Net Worth #DIV/01
--------------
Maximum 2.0x; 1.5x on/after 4/30/98
ACCTS REC./ CURRENT LIAB. & F. DEBT
- -----------------------------------
Accounts Rec. (net of past dues, etc.)
Funded Debt 0
--------------
Accts Rec./ Current Liab. & F. Debt
--------------
Minimum 1.0x, beginning 4/30/98 #DIV/01
</TABLE>
CERTIFICATION
This Certificate is given by SCB Computer Technology, Inc. pursuant to
subsection 4.B.iii of the Loan Agreement ("Agreement") between Borrower and
NationsBank of Tennessee, N.A. ("Bank") dated July 10, 1997. The undersigned
does hereby certify, represent, and warrant to Bank that the information set
forth herein, financial statements and other attachments ("Attachments") hereto
are true, correct, accurate, and complete in all respects, without any material
deviations or omissions. Borrower certifies there is no default under the terms
of the Agreement.
SCB COMPUTER TECHNOLOGY, INC.
By:_____________________________________
Title:__________________________________
(must be CFO, VP or President)
Date:___________________________________
<PAGE> 1
EXHIBIT 10.2
NationsBank of Tennessee, N.A.
MASTER REVOLVING TERM LOAN
PROMISSORY NOTE
July 10, 1997 $16,000,000.00 Maturity Date: August 1, 2000
<TABLE>
<S> <C>
Bank: Borrower:
NationsBank of Tennessee, N.A. SCB Computer Technology, Inc.
6363 Poplar Avenue Delta Software Systems, Inc.
Memphis, TN 38119 TMR Acquisition, Inc.
1365 Brierbrook Road
Germantown, TN 38138
</TABLE>
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank,
the principal amount of Sixteen Million and No/100 Dollars ($16,000,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds as set forth in that certain Loan Agreement of even date herewith (the
"Loan Agreement"), together with interest computed daily on the outstanding
principal balance hereunder, at an annual interest rate, and in accordance with
the payment schedule, indicated below.
1. RATE. The unpaid principal balance of this Note from day to day
outstanding which is not past due shall bear interest at a rate per annum equal
to the lesser of (i) the Maximum Rate (hereinafter defined) or (ii) the Stated
Rate (hereinafter defined) fixed for periods of one (1) month each and computed
on the Annual Basis (hereinafter defined).
(a) The term "Stated Rate" means the LIBOR Funding Rate plus the
Applicable Margin (as hereinafter set forth).
(b) The term "LIBOR Funding Rate" means the thirty (30) day rate of
interest set by Bank as the LIBOR Funding Rate as of and at any time during the
second Business Day immediately preceding the first day of such Interest
Period, for a term comparable to such Interest Period, as adjusted from time to
time in Bank's sole discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs.
(c) The term "Business Day" shall mean a day on which Bank is open for
business and dealing in deposits in Memphis, Tennessee.
(d) The term "Interest Period" shall mean, with respect to any LIBOR
Borrowing (hereinafter defined), a period from the 15th of each month in which
the LIBOR Funding Rate shall become effective as to such LIBOR Borrowing to the
14th of the following month, subject however to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, the LIBOR Funding Rate shall be determined the immediately
preceding business day; and
(ii) no Interest Period shall extend beyond the final maturity date;
and
(e) The term " Applicable Margin" means the percentage added to the LIBOR
Funding Rate and shall be a function of the Funded Debt/EBITDA ratio as
follows:
1
<PAGE> 2
<TABLE>
<CAPTION>
Funded Debt/EBITDA LIBOR Applicable Margin
------------------ -----------------------
<S> <C>
(i) <1.00 x 0.75%
(ii) = or <1.50 x 1.00%
(iii) >1.50 x 1.50%
</TABLE>
(f) The term "LIBOR Borrowing" as used herein means a separate and
distinct portion of the indebtedness evidenced by the Note bearing interest at
a LIBOR Funding Rate.
The term "Maximum Rate" as used in this Note means the maximum nonusurious rate
of interest per annum permitted by whichever of applicable United States
federal law or the law of the state of Tennessee permits the higher interest
rate, including to the extent permitted by applicable law, any amendments
thereof hereafter or any new law hereafter coming into effect to the extent a
higher Maximum Rate is permitted thereby. The Maximum Rate shall be applied by
taking into account all amounts characterized by applicable law as interest on
the debt evidenced by this Note, so that the aggregate of all interest does not
exceed the maximum nonusurious amount permitted by applicable law.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges
in excess of the Maximum Rate; if any higher rate ceiling is lawful, then that
higher rate ceiling shall apply. Any payment in excess of such Maximum Rate
shall be refunded to Borrower or credited against principal, at the option of
Bank.
2. ANNUAL BASIS OR ACCRUAL METHOD. "Annual Basis" means computation of
interest at the Rate set forth above using a 365/360 day method (a daily amount
of interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder).
3. RATE CHANGE DATE. The Stated Rate will change on the 15th of each month.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied first
to the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
This Note evidences a reducing revolving term loan facility under which
Borrower may from time to time borrow, repay and re-borrow funds as provided in
the Loan Agreement. The loan shall be repaid as set forth hereinbelow and on
August 1, 2000 the entire outstanding principal balance, plus all accrued and
unpaid interest, shall be due and payable in full. Interest calculated at the
variable rate set forth above shall be paid monthly commencing on the 1st day
of August, 1997, and continuing on the same day of each and every month
thereafter until maturity.
Notwithstanding the original principal amount of this Note, the aggregate
principal amount of terms loans available and/or which may be outstanding
hereunder at any time shall reduce, and Borrower shall pay any outstanding sums
necessary to so reduce such aggregate balance, according to the following
schedule:
<TABLE>
<CAPTION>
Aggregate Outstanding
Date of Reduction Balance Allowed
----------------- ---------------------
<S> <C>
a. November 1, 1997 $15,333,333.00
b. February 1, 1998 14,666,667.00
c. May 1, 1998 14,000,000.00
d. August 1, 1998 13,333,333.00
e. November 1, 1998 12,666,667.00
f. February 1, 1999 12,000,000.00
g. May 1, 1999 11,333,333.00
h. August 1, 1999 10,666,667.00
i. November 1, 1999 10,000,000.00
j. February 1, 2000 9,333,333.00
k. May 1, 2000 8,666.667.00
</TABLE>
2
<PAGE> 3
5. REVOLVING FEATURE.
Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate outstanding balance allowed at any one time equal to the
principal balances shown in Section 4 above, provided that Borrower is not in
default under any provision of this Note, the Loan Agreement, (the "Loan
Agreement"), any other documents executed in connection with this Note, or any
other note or other loan documents now or hereafter executed in connection with
any other obligation of Borrower to Bank, and provided that the borrowings
hereunder do not exceed any borrowing base or other limitation on borrowings by
Borrower. Bank shall incur no liability for its refusal to advance funds based
upon its determination that any conditions of such further advances have not
been met. Bank records of the amounts borrowed from time to time shall be
conclusive proof thereof.
6. AUTOMATIC PAYMENT.
Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number 1800614826. This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on the due date thereof, or if Bank fails to debit the
account.
7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any
Obligor in connection with the delivery, acceptance, performance, default or
enforcement of this Note, any indorsement or guaranty of this Note, or any
other documents executed in connection with this Note or any other note or
other loan documents now or hereafter executed in connection with any
obligation of Borrower to Bank (the "Loan Documents"); (b) consent to all
delays, extensions, renewals or, in the case of any guarantor, other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors,
or release, substitution or exchange of any security for the payment hereof, or
the failure to act on the part of Bank, or any indulgence shown by Bank
(without notice to or further assent from any of Obligors), and agree that no
such action, failure to act or failure to exercise any right or remedy by Bank
shall in any way affect or impair the obligations of any Obligors or be
construed as a waiver by Bank of, or otherwise affect, any of Bank's rights
under this Note, under any indorsement or guaranty of this Note or under any of
the Loan Documents; and (c) agree to pay, on demand, all costs and expenses of
collection or defense of this Note or of any indorsement or guaranty hereof
and/or the enforcement or defense of Bank's rights with respect to, or the
administration, supervision, preservation, or protection of, or realization
upon, any property securing payment hereof, including, without limitation,
reasonable attorney's fees, including fees related to any suit, mediation or
arbitration proceeding, out of court payment agreement, trial, appeal,
bankruptcy proceedings or other proceeding, in such amount as may be determined
reasonable by any arbitrator or court, whichever is applicable.
8. PREPAYMENTS. Prepayments may be made in whole or in part at any time
without penalty.
9. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of any payment that
is more than fifteen (15) days late.
10. EVENTS OF DEFAULT. The following are events of default hereunder:
(a) the failure to pay or perform any obligation, liability or indebtedness of
any Obligor to Bank, or to any affiliate or subsidiary of NationsBank
Corporation, whether under this Note, the Loan Agreement, or any of the other
Loan Documents, within fifteen (15) days of the date when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other material obligation, liability or indebtedness of any Obligor to any
other party; (c) the commencement of a proceeding against any Obligor for
dissolution or liquidation, the voluntary or involuntary termination or
dissolution of any Obligor or the merger or consolidation of any Obligor with
or into another entity; (d) the insolvency of, the business failure of, the
appointment of a custodian, trustee, liquidator or receiver for or for any of
the property of, the assignment for the benefit of creditors by, or the filing
of a petition under bankruptcy, insolvency or debtor's relief law or the filing
of a petition for any adjustment of indebtedness, composition or extension by
or against any Obligor; (e) the determination by Bank that any representation
or warranty made to Bank by any Obligor in any Loan Documents or otherwise is
or was, when it was made, untrue or materially misleading; (f) the failure of
any Obligor to timely deliver such financial statements, including tax returns,
other statements of condition or other information, as Bank shall request from
time to time; or (g) the seizure or forfeiture of, or the issuance of any writ
of possession, garnishment or attachment, or any turnover order for any
property of any Obligor.
11. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor
to Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the Maximum Rate, or if none, 25% per
annum (the "Default Rate"). The provisions herein for a Default Rate shall not
be deemed to extend the time for any payment hereunder or to constitute a
"grace period" giving Obligors a right to cure any default. At Bank's option,
any accrued and unpaid interest, fees or charges may, for purposes of computing
and accruing interest on a daily basis after the due date of the Note or any
installment thereof, be deemed to be a part of the principal
3
<PAGE> 4
balance, and interest shall accrue on a daily compounded basis after such date
at the Default Rate provided in this Note until the entire outstanding balance
of principal and interest is paid in full. Upon a default under this Note,
Bank is hereby authorized at any time, at its option and without notice or
demand, to set off and charge against any deposit accounts of any Obligor, (as
well as any money, instruments, securities, documents, chattel paper, credits,
claims, demands, income and any other property, rights and interests of any
Obligor), which at any time shall come into the possession or custody or under
the control of Bank or any of its agents, affiliates or correspondents, any and
all obligations due hereunder. Additionally, Bank shall have all rights and
remedies available under each of the Loan Documents, as well as all rights and
remedies available at law or in equity.
12. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date.
All rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of
Bank's rights under this Note. No waiver of any of its rights hereunder, and
no modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligors to
Bank in any other respect at any other time.
13. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Tennessee. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of Tennessee or the
United States located within the State of Tennessee and expressly waive any
objections as to venue in any such courts. Nothing contained herein shall,
however, prevent Bank from bringing any action or exercising any rights within
any other state or jurisdiction or from obtaining personal jurisdiction by any
other means available under applicable law.
14. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of
this Note or of the Loan Documents to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.
15. BINDING EFFECT. This Note shall be binding upon and inure to the benefit
of Borrower, Obligors and Bank and their respective successors, assigns, heirs
and personal representatives, provided, however, that no obligations of
Borrower or Obligors hereunder can be assigned without prior written consent of
Bank.
16. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW.
IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT
UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION,
THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS
WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY
4
<PAGE> 5
WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A
WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A)
TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK
MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN
SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF
ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
BORROWER REPRESENTS TO BANK THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED
PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES. BORROWER
ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS
AND CONDITIONS OF THIS NOTE.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
5
<PAGE> 6
SCB COMPUTER TECHNOLOGY, INC.
By: /s/ Gordon Bateman
----------------------------------
Name: Gordon Bateman
--------------------------------
Title: Chief Financial Officer
-------------------------------
/s/ Bobby P. Jackson
-------------------------------------
Attest
[Corporate Seal]
DELTA SOFTWARE SYSTEMS, INC.
By: /s/ Gordon Bateman
----------------------------------
Name: Gordon Bateman
--------------------------------
Title: Secretary
-------------------------------
/s/ Bobby P. Jackson
-------------------------------------
Attest
[Corporate Seal]
TMR ACQUISITION, INC.
By: /s/ Gordon Bateman
----------------------------------
Name: Gordon Bateman
--------------------------------
Title: Secretary
-------------------------------
/s/ Bobby P. Jackson
-------------------------------------
Attest
[Corporate Seal]
6
