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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28536
___________
BILLING INFORMATION CONCEPTS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 74-2781950
incorporation or organization) (IRS Employer ID No.)
7411 JOHN SMITH DRIVE, SUITE 200
SAN ANTONIO, TEXAS 78229
(Address of principal executive offices) (Zip code)
(210) 949-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [x] Yes [ ] No
Indicated below is the number of shares outstanding of the registrant's
only class of common stock at August 7, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS OUTSTANDING
---------------------------- ----------------
<S> <C>
Common Stock, $.01 par value 16,108,186
</TABLE>
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<PAGE> 2
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - June 30, 1997 and September 30, 1996......... 3
Condensed Consolidated Statements of Operations - For the Three and Nine Months Ended
June 30, 1997 and 1996............................................................... 4
Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended
June 30, 1997 and 1996............................................................... 5
Notes to Interim Condensed Consolidated Financial Statements......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings.................................................................... 17
Item 6. Exhibits and Reports on Form 8-K..................................................... 17
SIGNATURE..................................................................................... 18
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
-------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 26,607 $ 34,135
Accounts receivable .............................................................. 29,780 17,707
Purchased receivables ............................................................ 84,570 70,920
Prepaids and other ............................................................... 2,422 883
-------- --------
Total current assets ........................................................... 143,379 123,645
Property and equipment, net ....................................................... 12,978 9,380
Equipment held under capital leases, net .......................................... 2,696 3,519
Other assets, net ................................................................. 7,617 1,238
-------- --------
Total assets ................................................................... $166,670 $137,782
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade ........................................................................... $16,085 $ 12,743
Billing customers ............................................................... 70,770 58,525
Accrued liabilities .............................................................. 19,452 18,338
Revolving line of credit for purchased receivables ............................... 10,449 19,010
Current portion of long-term debt ................................................ 1,407 603
Current portion of obligations under capital leases .............................. 914 896
-------- --------
Total current liabilities ...................................................... 119,077 110,115
Long-term debt, less current portion .............................................. 5,139 2,370
Obligations under capital leases, less current portion ............................ 1,424 2,666
Other liabilities ................................................................. 1,745 0
-------- --------
Total liabilities .............................................................. 127,385 115,151
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares issued or
outstanding at June 30 or September 30 ........................................... 0 0
Common stock, $0.01 par value, 60,000,000 shares authorized; 16,063,656 shares
issued and outstanding at June 30; 15,045,709 shares issued and outstanding
at September 30 .................................................................. 161 151
Additional paid-in capital ........................................................ 39,566 19,790
Retained earnings ................................................................. 136 2,690
Treasury stock .................................................................... (578) 0
-------- --------
Total stockholders' equity ..................................................... 39,285 22,631
-------- --------
Total liabilities and stockholders' equity ..................................... $166,670 $137,782
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenues ............................... $31,894 $25,729 $ 87,094 $ 76,030
Cost of revenues ................................. 19,896 16,640 54,790 48,785
--------- ------- -------- --------
Gross profit ..................................... 11,998 9,089 32,304 27,245
Selling, general and administrative expenses ..... 3,921 3,239 9,819 8,595
Advance funding program income ................... (1,960) (1,805) (5,444) (4,773)
Advance funding program expense .................. 163 222 652 820
Depreciation and amortization expense ............ 1,075 567 2,422 1,507
Special charges (Note 5) ......................... 21,252 0 21,252 0
--------- ------- -------- --------
Income (loss) from operations .................... (12,453) 6,866 3,603 21,096
Other income (expense):
Interest income .................................. 214 182 646 668
Interest expense ................................. (131) (70) (374) (224)
Other, net ....................................... 42 (16) 36 (112)
--------- ------- -------- --------
Total other income .............................. 125 96 308 332
--------- ------- -------- --------
Income (loss) before income taxes ................ (12,328) 6,962 3,911 21,428
Income tax expense ............................... (294) (2,645) (6,465) (8,142)
--------- ------- -------- --------
Net income (loss) ................................ $ (12,622) $ 4,317 $ (2,554) $ 13,286
========= ======= ======== ========
Net loss per common share ........................ $ (0.81) $ -- $ (0.16) $ --
Pro forma net income per common share (Note 2) ... $ -- $ 0.27 $ $ 0.87
Weighted average common shares ................... 15,572 -- 16,004
Pro forma weighted average common shares and
common share equivalents outstanding (Note 2) .. -- 15,715 -- 15,252
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................................ $ (2,554) $ 13,286
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization .............................................. 2,422 1,507
Deferred compensation ...................................................... 0 10
Gain on disposition of equipment ........................................... (73) 0
Special charges ............................................................ 21,252 0
Changes in operating assets and liabilities:
Increase in accounts receivable ........................................... (11,307) (267)
Increase in prepaids and other ............................................ (1,744) (229)
Increase in accounts payable .............................................. 3,311 3,550
Increase (decrease) in accrued liabilities ................................ (126) 348
Increase (decrease) in other liabilities .................................. 384 (21)
--------- --------
Net cash provided by operating activities .................................... 11,565 18,184
Cash flows from investing activities:
Purchases of property and equipment .......................................... (13,481) (4,250)
Purchase of software company, net of cash acquired ........................... (8,403) 0
Payments for purchased receivables from billing customers, net ............... (13,650) (11,464)
Collections of proceeds due (payments made) to billing customers, net ........ 12,245 (8,519)
Collections of sales taxes due on behalf of billing customers, net ........... 5,423 6,725
Proceeds from sale of equipment .............................................. 125 0
Other investing activities ................................................... (777) (204)
--------- --------
Net cash used in investing activities ........................................ (18,518) (17,712)
Cash flows from financing activities:
Draws (payments) on revolving line of credit for purchased receivables, net .. (8,561) 5,986
Proceeds from issuance of long-term debt ..................................... 4,091 0
Payments on long-term debt ................................................... (568) (240)
Payments on capital leases ................................................... (674) (283)
Proceeds from issuance of common stock ....................................... 5,137 0
Transfers to affiliates ...................................................... 0 (2,894)
--------- --------
Net cash provided by (used in) financing activities .......................... (575) 2,569
--------- --------
Net increase (decrease) in cash and cash equivalents ......................... (7,528) 3,041
Cash and cash equivalents, beginning of period ............................... 34,135 26,770
--------- --------
Cash and cash equivalents, end of period ..................................... $ 26,607 $ 29,811
========= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein
have been prepared by Billing Information Concepts Corp. ("Billing") and
subsidiaries (collectively referred to as the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company's management, the accompanying
interim condensed consolidated financial statements reflect all adjustments
that are necessary for a fair presentation of the Company's financial position,
results of operations and cash flows for such periods. All such adjustments are
of a normal recurring nature. It is recommended that these interim condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1996. Results of
operations for interim periods are not necessarily indicative of results that
may be expected for any other interim periods or the full fiscal year. Certain
prior period amounts have been reclassified for comparative purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. EARNINGS PER SHARE
On August 2, 1996, U.S. Long Distance Corp. ("USLD") distributed to its
stockholders all of the outstanding shares of common stock of Billing (the
"Distribution") with the result being that Billing became an independent,
publicly held company that owns and operates the billing clearinghouse and
information management services business previously owned by USLD. Since
Billing had no publicly held common shares outstanding prior to the
Distribution, net income per common share and weighted average common shares
outstanding for the quarter and nine months ended June 30, 1996 are presented
on a pro forma basis. The pro forma weighted average shares outstanding during
the quarter and nine months ended June 30, 1996, gives effect to the number of
shares assumed to be issued had the Distribution occurred at the beginning of
the period and differs from the number of shares assumed to be outstanding at
the end of the period due to the assumed conversions of options and warrants
that were assumed to be outstanding during the period. The unaudited pro forma
per share data is presented for informational purposes only and should not be
considered indicative of the operating results which the Company will achieve
in the future because, among other things, this data is based on historical
rather than prospective information and includes certain assumptions which are
subject to change.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," which establishes standards for computing and presenting earnings per
share ("EPS") for entities with publicly held common stock or potential common
stock. SFAS No. 128 simplifies the standards for computing EPS previously found
in Accounting Principles Board ("APB") Opinion No. 15, "Earnings per Share,"
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS, which excludes
dilution. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
SFAS No. 128 is effective for financial statements for periods ending after
December 15, 1997, and earlier application is not permitted. After the
effective date, SFAS No. 128 requires restatement of all prior period EPS data
presented.
6
<PAGE> 7
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. EARNINGS PER SHARE (CONTINUED)
The pro forma effect of adopting SFAS No. 128 on EPS data is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1997 1996 1997 1996
------- ----- ------ ------
<S> <C> <C> <C> <C>
Primary EPS as reported ........... $(0.81) $0.27 $(0.16) $0.87
Pro forma effect of SFAS No. 128 .. 0.00 0.02 0.00 0.05
------ ----- ------ -----
Basic EPS as restated ............. $(0.81) $0.29 $(0.16) $0.92
====== ===== ====== =====
Fully diluted EPS as reported ..... $(0.81) $0.27 $(0.16) $0.85
Pro forma effect of SFAS No. 128 .. 0.00 0.00 0.00 0.02
------ ----- ------ -----
Diluted EPS as restated ........... $(0.81) $0.27 $(0.16) $0.87
====== ===== ====== =====
</TABLE>
Basic earnings per share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share differs from basic earnings per share due to
the assumed conversions of options and warrants that were outstanding during
the period. For the three and nine months ended June 30, 1997, the options and
warrants have an antidilutive effect, and are therefore excluded from the
computations.
NOTE 3. STATEMENT OF CASH FLOWS
Cash payments and non-cash activities during the periods indicated were as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Cash payments for income taxes ....................................... $8,913 $4,999
Cash payments for interest ........................................... 1,178 1,086
Non-cash investing and financing activities:
Assets acquired in connection with acquisition .................... 20,512 0
Liabilities assumed in connection with acquisition. ............... 2,596 0
Common stock issued in connection with acquisition ................ 9,466 0
Treasury stock acquired in connection with warrant exercises ...... 578 0
Tax benefit recognized in connection with stock option exercises .. 4,606 0
</TABLE>
7
<PAGE> 8
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. ACQUISITIONS
Effective June 1, 1997, the Company acquired Computer Resources
Management, Inc. ("CRM"), a company that develops software systems for the
direct billing of telecommunications services. This acquisition has been
accounted for as a purchase, and accordingly, the results of operations for CRM
have been included in the Company's consolidated financial statements since the
date of acquisition. The following unaudited pro forma information gives effect
to the acquisition of CRM as if it had occurred at the beginning of the periods
presented. The unaudited pro forma information is based on the historical
information for the periods presented and includes adjustments to reflect the
special charge resulting from expensing acquired in-process research and
development costs (see Note 5) and the effect on depreciation and amortization
expense of recording the fair value of assets acquired. The number of weighted
average shares outstanding used in the calculation of the pro forma per share
data gives effect to the shares assumed to be issued had the acquisition
occurred at the beginning of each period presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
----------------------------
1997 1996
------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Operating revenues ................ $91,837 $79,152
Net income (loss) ................. $(1,996) $ 128
Net income (loss) per common share.. $ (0.12) $ 0.01
</TABLE>
The pro forma financial information should not be considered indicative of
the operating results that would have occurred had the acquisition actually
taken place at the beginning of the periods specified or that the Company will
achieve in the future because, among other things, this information is based on
historical rather than prospective information and includes certain assumptions
which are subject to change. The unaudited pro forma financial information
reflects, in management's opinion, all adjustments necessary to fairly state
the pro forma operating results for the periods presented to make the unaudited
pro forma financial information not misleading.
An aggregate of $8.5 million cash and 325,000 shares of the Company's
common stock were issued in connection with this purchase transaction. Of these
shares, 65,000 were deposited in an escrow account to satisfy certain
indemnification obligations. All of the shares related to the acquisition have
been included in the weighted average shares outstanding for purposes of the
earnings per share calculations. Total assets acquired and liabilities assumed
for CRM were approximately $18.4 million and $500,000, respectively. The excess
of the purchase price over the fair value of net tangible assets acquired was
determined through an independent appraisal and amounted to approximately $17.5
million, of which approximately $1.2 million was recorded as goodwill and is
being amortized on a straight-line basis over fifteen years. In addition, $13.0
million was recorded as in-process research and development expenses (see Note
5). The remaining balance was recorded as the purchase price for a customer
list and other intangibles, which are being amortized on a straight-line basis
over periods ranging from six to twelve years. The Company granted certain
registration rights to the person receiving its common stock in this
acquisition and entered into an employment agreement with the principal of CRM.
8
<PAGE> 9
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. SPECIAL CHARGES
During the third quarter of 1997, the Company recognized special charges
in the amount of $21.3 million. The $21.3 million charge included in-process
research and development costs of $13.0 million acquired in connection with the
acquisition of CRM (see Note 4). At the date of acquisition, the technological
feasibility of the acquired technology had not yet been established and the
technology had no future alternative uses. The remaining $8.3 million charge
represented accumulated costs associated with the development of a direct
billing system for a service bureau operation. This development was abandoned
by the Company.
NOTE 6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party will have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
The Company is obligated as a guarantor of USLD's equipment financing
agreements with certain lenders. The aggregate unpaid principal amount of
indebtedness under such agreements at June 30, 1997 was approximately $7.4
million, due in varying amounts through October 2000.
NOTE 7. RELATED PARTY TRANSACTIONS
The Company and USLD shared a common individual on their respective boards
of directors through June 2, 1997. Therefore, USLD was considered a related
party for purposes of financial disclosure through this date. The Company
provides billing and information management services for USLD and purchases
telecommunications services from USLD. Transactions under the agreements for
these services have been reflected in the accompanying consolidated financial
statements at market prices. Related party transactions between the Company and
USLD are summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
----------------------------
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Sales to USLD ........ $3,166 $3,914
Purchases from USLD .. 1,705 2,437
</TABLE>
In addition, at September 30, 1996, the Company's accounts receivable
balance included $998,000 and the billing customers accounts payable balance
included $1,337,000 related to billing services performed for USLD. The Company
also had $1,288,000 payable to USLD included in accrued liabilities and
$1,034,000 payable to USLD included in long-term debt at September 30, 1996.
From time to time, the Company has made advances to or was owed amounts
from certain officers of the Company. The highest aggregate amount outstanding
of advances to officers during the nine months ended June 30, 1997, was $1.7
million and the amount outstanding at June 30, 1997, was $300,000.
9
<PAGE> 10
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. REVOLVING LINE OF CREDIT
The Company obtained a $50.0 million revolving line of credit facility
with certain commercial lending institutions effective December 23, 1996, to
finance the purchase of accounts receivable under the Company's Advance Funding
Program and for general corporate purposes. The credit facility terminates on
December 20, 1999, and bears interest at a variable rate based on the prime
rate or federal funds rate as determined by a formula defined in the credit
agreement. The facility is secured by the related accounts receivable, the
stock of Billing's subsidiaries and various other assets of the Company. Under
the most restrictive terms of the credit agreement, the Company is prohibited
from paying dividends on its common stock, is required to comply with certain
financial covenants and is subject to certain limitations on the issuance of
additional secured debt. The Company was in compliance with all such covenants
at June 30, 1997. The amount borrowed by the Company and the amount available
for borrowing under this credit facility was $10.4 million and $39.6 million,
respectively, at June 30, 1997.
NOTE 9. NEW ACCOUNTING STANDARDS
In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective
Date of Certain Provisions of SFAS No. 125". SFAS No. 127 amends the effective
date for certain provisions of SFAS No. 125 to December 31, 1997. Management of
the Company does not anticipate the adoption of SFAS No.'s 125 and 127 will
have a material impact on the Company's financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in a full set of financial statements. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997, and requires
reclassification of comparative financial statements for earlier periods.
Management of the Company does not anticipate the adoption of SFAS No. 130 will
have a material impact on the Company's financial position or results of
operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which establishes standards for
reporting information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131
supersedes FASB No. 14, "Financial Reporting for Segments of a Business
Enterprise." Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier periods is to
be restated. Management of the Company does not anticipate the adoption of SFAS
No. 131 will have a material impact on the Company's financial position or
results of operations.
10
<PAGE> 11
ITEM 2.
This Quarterly Report on Form 10-Q contains certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 and information relating to the Company and its subsidiaries that
are based on the beliefs of the Company's management as well as assumptions
made by and information currently available to the Company's management. When
used in this report, the words "anticipate," "believe," "estimate," "expect"
and "intend" and words or phrases of similar import, as they relate to the
Company or its subsidiaries or Company management, are intended to identify
forward-looking statements. Such statements reflect the current risks,
uncertainties and assumptions related to certain factors including, without
limitations, competitive factors, general economic conditions, customer
relations, relationships with vendors, the interest rate environment,
governmental regulation and supervision, seasonality, distribution networks,
product introductions and acceptance, technological change, changes in industry
practices, onetime events and other factors described herein and in other
filings made by the Company with the Securities and Exchange Commission. Based
upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the quarter and nine months ended June
30, 1997 and 1996. It should be read in conjunction with the Interim Condensed
Consolidated Financial Statements of the Company, the notes thereto and other
financial information included elsewhere in this report, and the Company's
Annual Report on Form 10-K for the year ended September 30, 1996. For purposes
of the following discussion, references to year periods refer to the Company's
fiscal year ended September 30 and references to quarterly periods refer to the
Company's fiscal quarter ended June 30.
GENERAL
On August 2, 1996, U.S. Long Distance Corp. ("USLD") distributed to its
stockholders all of the outstanding shares of common stock of the Company (the
"Distribution") which, prior to the Distribution, was a wholly-owned subsidiary
of USLD. Upon the completion of the Distribution, Billing became an
independent, publicly held company that owns and operates the billing
clearinghouse and information management services business ("Billing Group
Business") previously owned by USLD (see "Effects of Spinoff of Billing Group
Business" below).
RESULTS OF OPERATIONS
The following table presents certain items in the Company's Condensed
Consolidated Statements of Operations as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1997 1996 1997 1996
------ ----- ----- -----
<S> <C> <C> <C> <C>
Operating revenues ............................ 100.0% 100.0% 100.0% 100.0%
Cost of revenues .............................. 62.4 64.7 62.9 64.2
------ ----- ----- -----
Gross profit .................................. 37.6 35.3 37.1 35.8
Selling, general and administrative expenses .. 12.3 12.6 11.3 11.3
Advance funding program income ................ (6.1) (7.0) (6.3) (6.3)
Advance funding program expense ............... 0.5 0.9 0.7 1.1
Depreciation and amortization expense ......... 3.4 2.2 2.8 2.0
Special charges ............................... 66.6 0.0 24.4 0.0
------ ----- ----- -----
Income (loss) from operations ................. (39.0) 26.7 4.1 27.7
Other income, net ............................. 0.4 0.4 0.4 0.4
------ ----- ----- -----
Income (loss) before income taxes ............. (38.7) 27.1 4.5 28.2
Income tax expense ............................ (0.9) (10.3) (7.4) (10.7)
------ ----- ----- -----
Net income (loss) ............................. (39.6)% 16.8% (2.9)% 17.5%
====== ===== ===== =====
</TABLE>
11
<PAGE> 12
Operating Revenues
The Company's revenues are primarily derived from providing billing
clearinghouse and information management services to direct dial long distance
carriers and operator services providers. Revenues are also derived from
enhanced billing services provided to companies that offer 900 services or
other non-regulated telecommunications equipment and services. In addition, the
Company also develops, licenses, sells and supports software systems for
telecommunications direct billing applications and provides direct billing
services. Fees charged by the Company include processing and customer service
inquiry fees. Processing fees are assessed to customers either as a fee charged
for each telephone call record or other transaction processed or as a
percentage of the customer's revenue that is submitted by the Company to local
telephone companies for billing and collection. Processing fees also include
any charges assessed to the Company by local telephone companies for billing
and collection services that are passed through to the customer. Customer
service inquiry fees are assessed to customers either as a fee charged for each
record processed by the Company or as a fee charged for each billing inquiry
made by end-users.
Total revenues for the quarter and nine months ended June 30, 1997 were
$31.9 million and $87.1 million, an increase of 24.0% and 14.6% from the
comparable prior year periods, respectively. Billing services revenues
increased 21.4% to $31.2 million in the third quarter of 1997, compared to
$25.7 million in the third quarter of 1996. Billing services revenues during
the first nine months of 1997 increased 13.7% to $86.4 million from $76.0
million during the comparable period of 1996. The remaining increase in
revenues from the prior periods was attributable to the software systems and
services revenues reported during the third quarter of 1997. The billing
services revenue increases are primarily attributable to an increase in the
number of telephone call records processed and billed on behalf of direct dial
long distance customers. Revenues derived from operator services customers in
the third quarter also increased from the comparable prior year quarter due to
an increase in the number of telephone call records processed. Telephone call
record volumes (exclusive of records processed for billing management
customers) were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Direct dial long distance services .. 131.3 98.4 372.7 289.4
Operator services ................... 34.8 32.7 92.8 96.7
Enhanced billing services ........... 3.1 1.8 6.8 6.9
</TABLE>
Revenue per record for billing management customers, who have their own
billing and collection agreements with the local telephone companies, is
significantly less than revenue per record for the Company's other customers,
and thus, the volume of records processed for billing management customers is
not presented in the table above.
Cost of Revenues
Cost of revenues includes billing and collection fees charged to the
Company by local telephone companies and related transmission costs, as well as
all costs associated with the customer service organization, including staffing
expenses and costs associated with telecommunications services. Billing and
collection fees charged by the local telephone companies include fees that are
assessed for each record submitted and for each bill rendered to its end-user
customers. The Company achieves discounted billing costs due to its aggregated
volumes and can pass these discounts on to its customers. Cost of revenues also
includes the costs of computer hardware and software sold.
The gross profit margin of 37.6% and 37.1% reported for the quarter and
nine months ended June 30, 1997, respectively, increased from 35.3% and 35.8%
in the comparable prior year periods. These increases were primarily
attributable to lower customer service and telecommunications services costs,
which were offset partially by higher transmission costs. The lower customer
service costs were partially attributable to decreased staffing levels
resulting from the implementation of an automated voice response system and the
lower telecommunications costs were attributable to a price decrease from the
Company's vendor as well as savings associated with the voice response system.
The Company's gross profit margin is expected to increase in subsequent periods
as a result of the addition of higher gross margin software systems and
services revenues.
12
<PAGE> 13
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses are comprised of all
selling, marketing and administrative costs incurred in direct support of the
business operations of the Company. Additionally, a portion of the expense of
certain USLD corporate functions, such as treasury, financial reporting,
investor relations, legal, payroll and management information systems has been
allocated to the Company and is reflected in its historical operating results
for the quarter and nine months ended June 30, 1996.
SG&A expenses for the third quarter of 1997 and 1996 were $3.9 million and
$3.2 million, representing 12.3% and 12.6% of revenues, respectively. SG&A
expenses for the first nine months of both 1997 and 1996 were 11.3% of
revenues. SG&A expenses as a percentage of revenues may increase in subsequent
periods due to costs incurred to support the expected growth of the Company's
operations and as a result of the company acquired during the third quarter of
1997 having higher SG&A expenses as a percentage of revenues than the Company
historically.
Advance Funding Program Income and Expense
Advance funding program income increased 8.6% to $2.0 million for the
third quarter of 1997 from $1.8 million for the third quarter of 1996. Advance
funding program income for the first nine months of 1997 increased 14.1% to
$5.4 million from $4.8 million in the first nine months of 1996. The increase
was primarily the result of financing a higher level of customer receivables
under the Company's advance funding program. The quarterly average balance of
purchased receivables was $74.5 million and $58.5 million for the nine months
ended June 30, 1997 and 1996, respectively. Advance funding program income may
decrease in subsequent periods due to several significant customers that are
expected to discontinue participating in the program.
Advance funding program expense decreased 26.6% to $163,000 for the third
quarter of 1997 from $222,000 for the third quarter of 1996. Advance funding
program expense for the first nine months of 1997 decreased 20.5% to $652,000
from $820,000 in the comparable period of 1996. In addition to declining from
period to period, advance funding program expense declined relative to advance
funding program income due to the Company financing a higher level of purchased
receivables with internally generated funds and cost savings realized from the
more favorable terms of its new credit facility.
Income (Loss) from Operations
The Company incurred a loss from operations in the third quarter of 1997
of $12.5 million compared to income from operations of $6.9 million in the
third quarter of 1996. Income from operations in the first nine months of 1997
decreased to $3.6 million from $21.1 million in the first nine months of 1996.
Income from operations decreased primarily due to special charges of $21.3
million in the third quarter of 1997. The $21.3 million charge includes
in-process research and development costs of $13.0 million acquired in
connection with the acquisition of a software development company. The
remaining $8.3 million represents accumulated costs associated with the
development of a direct billing system for a service bureau operation. The
Company abandoned this development during the third quarter of 1997. Income
from operations in the third quarter and first nine months of 1997, exclusive
of the special charges, would have been $8.8 million and $24.9 million,
respectively.
The Company's effective tax rate increased to 165% in the first nine
months of 1997, from 38% in the first nine months of 1996, due to certain
deductions taken for financial reporting purposes which are not deductible for
federal income tax purposes. The increase in the effective rate is primarily
due to nondeductible research and development costs and amortization expenses
related to the acquisition of a software development company during the third
quarter of 1997.
13
<PAGE> 14
EFFECTS OF SPINOFF OF BILLING GROUP BUSINESS
The unaudited Condensed Consolidated Statements of Income included in this
report reflect the operations of the Company for the quarters and nine months
ended June 30, 1997 and 1996. Included below is supplemental unaudited
consolidated pro forma financial information that management believes is
important to provide an understanding of the results of operations of the
Company on a stand-alone basis. Pro Forma Condensed Consolidated Statements of
Income are presented below on a quarterly and annual basis for 1996. These Pro
Forma Condensed Consolidated Statements of Income are based on the historical
statements of the periods presented adjusted to reflect the items discussed in
the accompanying notes to the pro forma financial statements. The Pro Forma
Condensed Consolidated Statements of Income give effect to the Distribution as
if it had occurred at the beginning of 1996. The number of weighted average
shares outstanding used in the calculation of the pro forma per share data
gives effect to the shares assumed to be issued had the Distribution occurred
at the beginning of each period presented.
The unaudited consolidated pro forma financial information is presented
for informational purposes only and should be read in conjunction with the
accompanying notes to the pro forma financial statements and with the Company's
historical financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" set forth herein
and in the Post Effective Amendment No. 2 to the Company's Registration
Statement on Form 10/A dated August 1, 1996, and the Company's Annual Report on
Form 10-K for the year ended September 30, 1996. The pro forma financial
statements should not be considered indicative of the operating results which
the Company will achieve in the future because, among other things, these
statements are based on historical rather than prospective information and
include certain assumptions which are subject to change.
The unaudited Pro Forma Condensed Consolidated Statements of Income
reflect, in management's opinion, all adjustments necessary to fairly state the
pro forma results of operations for the periods presented to make the unaudited
pro forma statements not misleading.
14
<PAGE> 15
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED YEAR ENDED
---------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, SEPT. 30,
1995 1996 1996 1996 1996
-------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Operating revenues.......................... $23,354 $26,947 $25,729 $27,854 $103,884
Cost of services............................ 15,306 16,839 16,640 18,083 66,868
------- ------- ------- -------- ---------
Gross profit............................... 8,048 10,108 9,089 9,771 37,016
Selling, general and administrative expenses 2,392 2,964 3,239 2,850 11,445
Advance funding program income.............. (1,324) (1,644) (1,805) (1,791) (6,564)
Advance funding program expense (A)......... 696 738 640 686 2,760
Depreciation and amortization expense....... 439 501 567 620 2,127
------- ------- ------- -------- ---------
Income from operations..................... 5,845 7,549 6,448 7,406 27,248
Other income (expense), net................. 104 132 96 (180) 152
------- ------- ------- -------- ---------
Income before income taxes.................. 5,949 7,681 6,544 7,226 27,400
Income tax expense (B)...................... (2,260) (2,919) (2,486) (2,746) (10,411)
------- ------- ------- -------- ---------
Net income.................................. $ 3,689 $ 4,762 $ 4,058 $ 4,480 $ 16,989
Net income per common share................. $ 0.25 $ 0.31 $ 0.26 $ 0.28 $ 1.10
Weighted average common shares and common
share equivalents outstanding............... 14,853 15,189 15,715 15,783 15,385
</TABLE>
Notes to unaudited pro forma condensed consolidated statements of income:
(A) Reflects an adjustment to increase interest expense for the assumed
borrowings for the cash transfer made to USLD of $11,713,000 in accordance
with the terms of the Distribution Agreement and cash payments for direct
costs incurred in connection with the Distribution of approximately
$9,200,000. Interest expense was calculated at a rate of 8.0% per annum.
(B) Reflects related income tax effect of the interest expense adjustment in
note (A).
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance decreased to $26.6 million at June 30, 1997
from $34.1 million at September 30, 1996. Large fluctuations in daily cash
balances are normal for the Company due to the timing of cash receipts,
payments and advanced funding program activity. The Company's working capital
position and current ratio increased to $24.3 million and 1.2:1 at June 30,
1997, from $13.5 million and 1.1:1 at September 30, 1996, respectively. Net
cash provided by operating activities was $11.6 million and $18.2 million in
the first nine months of 1997 and 1996, respectively.
In December 1996, the Company obtained a new $50 million revolving line of
credit facility with certain lenders to draw upon to advance funds to its
billing customers prior to collection of the funds from the local telephone
companies and for general corporate purposes. This new credit facility
terminates on December 20, 1999, and provides the Company with more favorable
terms than those of the Company's previous credit facility. Borrowings under
the credit facility are limited to a portion of the Company's eligible
receivables. Management believes that the capacity under the revolving credit
facility will be sufficient to fund advances to its billing customers for the
foreseeable future. The amount borrowed by the Company under its credit
facility to finance the advance funding program was $10.4 million and $19.0
million at June 30, 1997 and September 30, 1996, respectively. At June 30,
1997, the amount available under the Company's receivable financing facility
was $39.6 million.
In addition to the revolving line of credit facility described above, the
Company is obligated as a guarantor of USLD's equipment financing agreements
with certain lenders. The aggregate unpaid principal amount of indebtedness
under such agreements at June 30, 1997 was approximately $7.4 million, due in
varying amounts through October 2000. The Company is also obligated under its
own equipment financing agreements. Under certain of the credit agreements, the
Company is prohibited from paying dividends on its common stock, is required to
comply with certain financial covenants and is subject to certain limitations
on the issuance of additional secured debt. Cross-default provisions of certain
of the Company's equipment loans may place the Company in default of such loans
in the event that USLD defaults under the equipment finance agreements that the
Company has guaranteed. The Company was in compliance with all required
covenants at June 30, 1997 and September 30, 1996.
Capital expenditures amounted to approximately $13.5 million in the first
nine months of 1997 and related primarily to purchases of computer equipment
and software. During the first nine months of 1997, the Company financed
approximately $4.1 million of equipment through term debt agreements with
certain lenders. The Company anticipates spending approximately $15 million
over the next eighteen months, including expenditures in the areas of software
development and local telephone company agreements that will enable it to offer
"invoice ready" billing services and further enhance its convergent billing
software platform. In connection with this development effort, the Company is
currently discussing additional local telephone company agreements with the
local telephone companies for the implementation of "invoice ready" billing
services. The Company believes that it will be able to fund expenditures with
internally generated funds and borrowings, but there can be no assurance that
such funds will be available or expended.
Effective June 1, 1997, the Company acquired Computer Resources
Management, Inc. ("CRM"), a company that develops software systems for the
direct billing of telecommunications services. An aggregate of $8.5 million
cash and 325,000 shares of the Company's common stock were issued in connection
with this purchase transaction. Of these shares, 65,000 were deposited in an
escrow account to satisfy certain indemnification obligations. All of the
shares related to the acquisition have been included in the weighted average
shares outstanding for purposes of the earnings per share calculations. Total
assets acquired and liabilities assumed for CRM were approximately $18.4
million and $500,000, respectively. During the third quarter of 1997, the
Company expensed $13.0 million of in-process research and development costs
acquired from the acquisition. The Company granted certain registration rights
to the person receiving its common stock in this acquisition, and entered into
an employment agreement with the principal of CRM.
The Company's operating cash requirements consist principally of working
capital requirements, requirements under its advance funding program, scheduled
payments of principal on its outstanding indebtedness and capital expenditures.
The Company believes that it has the ability to continue to secure long-term
equipment financing and that this ability, combined with cash flows generated
from operations and periodic borrowings under its receivable financing
facility, will be sufficient to fund capital expenditures, advance funding
requirements, working capital needs and debt repayment requirements for the
foreseeable future.
16
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party would have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits listed below are filed as part of or incorporated by
reference in this report. Where such filing is made by incorporation
by reference to a previously filed document, such document is
identified in parentheses.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
2.1 Plan of Merger and Acquisition Agreement among the Company,
CRM Acquisition Corp., Computer Resources Management, Inc.,
and Michael A. Harrelson dated effective June 1, 1997
(filed herewith)
10.1 Put Option Agreement between the Company and Michael A.
Harrelson dated effective June 1, 1997 (filed herewith)
10.2 Employment Agreement between the Company and Michael A.
Harrelson dated June 4, 1997
(filed herewith)
11.1 Computation of Earning Per Share (filed herewith)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
(b) Current Reports on Form 8-K:
None.
ITEMS 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BILLING INFORMATION CONCEPTS CORP.
(Registrant)
Date: August 12, 1997 By: /s/ KELLY E. SIMMONS
-------------------------------------------------
Kelly E. Simmons
Senior Vice President
Chief Financial Officer
(Duly authorized and principal financial officer)
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 Plan of Merger and Acquisition Agreement among the Company,
CRM Acquisition Corp., Computer Resources Management, Inc.,
and Michael A. Harrelson dated effective June 1, 1997
(filed herewith)
10.1 Put Option Agreement between the Company and Michael A.
Harrelson dated effective June 1, 1997 (filed herewith)
10.2 Employment Agreement between the Company and Michael A.
Harrelson dated June 4, 1997
(filed herewith)
11.1 Computation of Earning Per Share (filed herewith)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
<PAGE> 1
EXHIBIT 2.1
PLAN OF MERGER AND ACQUISITION AGREEMENT
DATED EFFECTIVE JUNE 1, 1997
BY AND AMONG
BILLING INFORMATION CONCEPTS CORP.,
CRM ACQUISITION CORP.,
COMPUTER RESOURCES MANAGEMENT, INC.
AND
MICHAEL A. HARRELSON
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Accounts Receivable" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Article" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Associate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Authorization" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Balance Sheet Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Basket" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Best Knowledge" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 "BICC Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 "CERCLA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 "Contracts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 "Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 "Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 "Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 "Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 "Environmental Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "Escrow Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 "Financial Statements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 "Former Seller Shareholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 "Governmental Authority" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 "Governmental Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 "Holdback Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 "Indemnitee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.31 "Indemnitor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 "Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 "IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.35 "Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 "Merger Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 "PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 "Permitted Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.39 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.40 "Purchaser Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.41 "Put Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.42 "RCRA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.43 "Reference Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.44 "Reorganization" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45 "Schedule" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.46 "SEC" or "Commission" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.47 "SEC Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.48 "Section" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.49 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
1.50 "Seller Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.51 "Software" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.52 "Stock Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.53 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.54 "Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.55 "System Documentation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.56 "Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.57 "Tax Returns" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.58 "Third-Party Claims" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.59 "Third-Party Software" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.60 "Third-Party Software Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.61 "User Documentation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.62 "Waste Materials" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Conversion or Cancellation of Stock Upon Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.9 Interim Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. CLOSING; CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Share Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Events Since the Balance Sheet Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Competing Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Contracts and Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Effect of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.10 Properties, Assets and Leasehold Estates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.12 Suits, Actions and Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.13 Licenses and Permits; Compliance With Governmental Requirements. . . . . . . . . . . . . . . . . . . 19
4.14 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.15 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.16 Environmental Protection Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.17 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.18 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.19 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.20 Work Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.21 Customer List. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.22 No Royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.23 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.24 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.25 Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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4.26 Warranties and Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.27 Securities Laws Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.28 No Untrue Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5. REPRESENTATIONS AND WARRANTIES OF THE BICC PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Purchaser Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 BICC Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Authorization for Stock Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Events Since March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.10 No Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES, REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7. TAX TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8. BICC CLOSING DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Employment Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.3 Stock Pledge and Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Resolutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.5 Intellectual Property Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9. SELLER AND THE SHAREHOLDER CLOSING DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Put Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Employment Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.4 Resolutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Closing Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Intellectual Property Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Use of Name of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11. INDEMNITY BY THE SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.1 Indemnification by the Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 Environmental Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.3 Tax Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.4 Products Liability and Warranty Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.5 Subchapter S Earnings Distribution Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 32
11.6 Indemnification by the BICC Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.7 Limitation on Indemnification; Basket. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.8 Holdback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.9 Escrow; Prohibition on Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.10 Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.11 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.12 Adjustment of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.13 Failure to Pay Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.14 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.15 Indemnification if Negligence of Indemnitee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.16 Appointment of Successor Escrow Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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12. EMPLOYMENT AND CONSULTING ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13. NON-COMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.1 Non-Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.2 Judicial Reformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.3 Customer Lists; Non-Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.4 Covenants Independent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.5 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
16. REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
16.1 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
16.2 Registration Procedures and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
16.3 Agreement by the Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.4 Allocation of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
17. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.1 Governing Law; Interpretation; Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.6 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.7 Gender; Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.9 Telecopy Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.10 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.11 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
Schedules
1.18(a) - Form of Certificate of Merger
1.18(b) - Form of Articles of Merger
4.1 - Minute Books
4.3(a) - Seller's Financial Statements
4.3(b) - Liabilities and Obligations
4.5 - Competing Interests
4.6 - Tax Exceptions
4.7 - Employee Names and Compensation
4.8(a) - Contracts and Agreements
4.8(b) - Borrowings of Seller
4.9 - Effect of Agreement -- Seller
4.10(a) - Personal Property of Seller
4.10(b) - Personal Property Leased by Seller
4.10(d) - Real Property Leased by Seller
4.11(a) - Intellectual Property
4.11(b) - Third-Party Software Agreements
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4.11(c) - Third-Party Software
4.12 - Suits, Actions and Claims
4.13 - Licenses and Permits
4.15 - Books, Records and Minutes
4.16 - Environmental Compliance
4.17 - Accounts Receivable of Seller
4.18 - Brokers
4.19 - Deposits
4.21 - Customers
4.23 - Bank Accounts of Seller
4.24 - Insurance
4.25(a) - Employee Benefits
4.25(c) - Employee Benefits
4.25(d) - Employee Pension Plan
4.25(e) - Employee Benefits
4.26 - Warranties
8.1 - Cox & Smith Opinion
8.3 - Form of Escrow Agreement
9.1 - Form of Put Option Agreement
9.2 - Fulbright & Jaworski Opinion
10.2 - Intellectual Property Assignment
12.1 - Employment Agreements
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PLAN OF MERGER AND ACQUISITION AGREEMENT
THIS PLAN OF MERGER AND ACQUISITION AGREEMENT (this "Agreement") is
made and entered into this 4th day of June, 1997, to be effective June 1, 1997,
by and among (i) Computer Resources Management, Inc., a Texas corporation
("Seller"), (ii) Michael A. Harrelson, the owner of all of the capital stock of
Seller (the "Shareholder"), (iii) Billing Information Concepts Corp., a
Delaware corporation ("BICC"), and (iv) CRM Acquisition Corp., a Delaware
corporation ("Purchaser," and, together with BICC, the "BICC Parties").
W I T N E S S E T H :
WHEREAS, BICC is primarily in the business of providing billing
clearinghouse and information services; and
WHEREAS, in connection with the transactions contemplated by this
Agreement, BICC previously caused Purchaser to be organized and to issue to
BICC all of the issued and outstanding shares of capital stock of Purchaser;
and
WHEREAS, Seller is in the business of providing billing clearinghouse
and information services and various related businesses (the "Business"); and
WHEREAS, the Shareholder is the sole shareholder of Seller holding all
of the issued and outstanding shares of capital stock of Seller; and
WHEREAS, the respective boards of directors of Purchaser and Seller
have voted to approve the merger of Seller with and into Purchaser (the
"Merger") pursuant to the terms and subject to the conditions of this
Agreement; and
WHEREAS, this Agreement is intended to qualify under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that Seller shall be merged with and into
Purchaser and that the terms and conditions of the Merger, the method of
carrying the Merger into effect and certain other provisions relating thereto
shall be as hereinafter set forth:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
1.1 "Accounts Receivable" shall have the meaning assigned to it in
Section 4.17.
1.2 "Affiliate" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.3 "Article" shall mean the Article of this Agreement unless
otherwise stated.
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<PAGE> 8
1.4 "Assets" shall mean the assets, properties and rights of
Seller of every nature, kind and description, wherever located, tangible and
intangible, real, personal and mixed, whether or not reflected in the books and
records of Seller necessary or desirable to permit the Business to be carried
on in the manner as is presently conducted.
1.5 "Associate" shall have the meaning assigned to it in Section
4.5.
1.6 "Authorization" shall mean any consent, approval or
authorization of, expiration or termination of any waiting period requirement
(including pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended) by, or filing, registration, qualification, declaration or
designation with, any Governmental Authority.
1.7 "Balance Sheet Date" shall have the meaning assigned to it in
Section 4.3.
1.8 "Basket" shall have the meaning assigned to it in Section
11.7.
1.9 "Best Knowledge" shall mean both what a Person knew as well as
what the Person should have known had the person exercised reasonable
diligence. When used with respect to a Person other than a natural person, the
term "Best Knowledge" shall include, with respect to the BICC Parties, matters
that are known to the directors, officers and managers of the BICC Parties and,
with respect to Seller, matters that are known to the Shareholder, Sheila Bond,
Tim Daniels and Bryan Baxter.
1.10 "BICC Stock" shall mean the common stock, $.01 par value, of
BICC.
1.11 "Business Day" shall mean any day other than Saturday, Sunday
or other day on which federally chartered commercial banks in San Antonio,
Texas are authorized or required by law to close.
1.12 "CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
1.13 "Certificate" shall mean each stock certificate representing
shares of Seller Stock.
1.14 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.15 "Contracts" shall have the meaning assigned to it in Section
4.8.
1.16 "Control" and all derivations thereof shall mean the ability
to either (a) vote (or direct the vote of) 50% or more of the voting interests
in any Person or (b) direct the affairs of another, whether through voting
power, contract or otherwise.
1.17 "Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, punitive damages, loss of profits, refund obligations
(including, without limitation, interest and penalties thereon) claims of any
and every kind whatsoever, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating,
prosecuting and defending any claims or
2
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causes of action (including, without limitation, reasonable attorneys' fees and
reasonable expenses and all reasonable fees and reasonable expenses of
consultants and other professionals)).
1.17A "Deposits" shall have the meaning assigned to it in Section
4.19.
1.18 "Effective Time" shall mean the time at which a properly
executed certificate of merger in substantially the form attached to this
Agreement as Schedule 1.18(a) (together with other documents required by law to
effect the Merger) shall have been filed with the Secretary of State of
Delaware, properly executed Articles of Merger in substantially the form
attached to this Agreement as Schedule 1.18(b) (together with other documents
required by law to effect the Merger) shall have been filed with the Secretary
of State of Texas and such other documents and instruments shall have been
filed in any other jurisdiction where such a certificate or articles of merger
is required.
1.19 "Encumbrance" shall mean any security interest, mortgage,
pledge, trust, claim, lien, charge, option, defect, restriction, encumbrance or
other right or interest of any third Person of any nature whatsoever.
1.20 "Environmental Laws" shall mean any and all applicable laws,
statutes, ordinances, rules, regulations, orders, or determinations of any
Governmental Authority pertaining to the environment heretofore or currently in
effect in any and all jurisdictions in which Seller is conducting or at any
time has conducted business, or where any of the Assets are located, or where
any hazardous substances generated by or disposed of by Seller are located.
"Environmental Laws" shall include, but not be limited to, the Clean Air Act,
as amended, CERCLA, the Federal Water Pollution Control Act, as amended, RCRA,
the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and all other applicable laws, statutes, ordinances, rules,
regulations, orders and determinations of any Governmental Authority relating
to (a) the control of any potential pollutant or protection of the air, water
or land, (b) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation and (c) exposure to hazardous, toxic or
other substances alleged to be harmful. The terms "hazardous substance",
"release" and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA.
1.21 "Environmental Liabilities" shall mean any and all
liabilities, responsibilities, claims, suits, losses, costs (including
remediation, removal, response, abatement, clean-up, investigative or
monitoring costs and any other related costs and reasonable expenses), other
causes of action recognized as of the Effective Time, damages, settlements,
reasonable expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, reasonable attorneys' fees and other
reasonable legal fees (a) pursuant to any agreement, order, notice or
responsibility, directive embodied in Environmental Laws or relating to
environmental matters, injunction, judgment or similar documents (including
settlements) relating to environmental matters or (b) pursuant to any claim by
a Governmental Authority or other person for personal injury, property damage,
damage to natural resources, remediation or similar costs or expenses incurred
by such Governmental Authority or person pursuant to common law or statute.
1.22 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.23 "Escrow Agreement" shall have the meaning assigned to it in
Section 8.4.
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1.24 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.25 "Financial Statements" shall have the meaning assigned to it
in Section 4.3.
1.26 "Former Seller Shareholder" shall mean each Person who was,
immediately before the Effective Time, a holder of issued and outstanding
shares of Seller Stock.
1.27 "Governmental Authority" shall mean any and all foreign,
federal, state or local governments, governmental institutions, public
authorities and governmental entities of any nature whatsoever, and any
subdivisions or instrumentalities thereof, including, but not limited to,
departments, boards, bureaus, commissions, agencies, courts, administrations
and panels, and any divisions or instrumentalities thereof, whether permanent
or ad hoc and whether now or hereafter constituted or existing.
1.28 "Governmental Requirement" shall mean any and all applicable
laws (including, but not limited to, applicable common law principles),
statutes, ordinances, codes, rules, regulations, interpretations, guidelines,
directions, orders, judgments, writs, injunctions, decrees, decisions or
similar items or pronouncements, promulgated, issued, passed or set forth by
any Governmental Authority in effect as of the Effective Time.
1.29 "Holdback Shares" shall have the meaning assigned to it in
Section 2.6.
1.29A "Indemnification Event" shall have the meaning assigned to it
in Section 11.10.
1.30 "Indemnitee" shall mean the BICC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns, on the one
hand, and the Shareholder and his heirs, successors and assigns, on the other
hand, whether indemnified, or entitled, or claiming to be entitled to be
indemnified or receive property, pursuant to the provisions of Article 11
hereof.
1.31 "Indemnitor" shall mean the Person or Persons having the
obligation to indemnify or make payment pursuant to the provisions of Article
11 hereof.
1.32 "Intellectual Property" shall mean:
(a) the Software including (1) all inventions embodied
therein, if any, and whether or not patentable, and (2) all know-how and work
product embodied therein, regardless of form and whether tangible or
intangible.
(b) all of Seller's copyright interests regardless of
actual or potential registrability, including moral rights, rights of
publication and rights of attribution and integrity, and further including U.S.
copyright registrations Nos. 478,250 and 480,284, each filed June 24, 1991;
(c) all of Seller's trademark or service mark interests
used in Seller's Business, together with all of the goodwill of the business
associated therewith and represented thereby;
(d) all of Seller's trade secrets used in Seller's
Business; and
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(e) all other intellectual property and proprietary
technology of Seller, whether or not identifiable as of the date of execution
hereof, relating to, or used in connection with, the Business or the Assets now
or at any time in the future.
1.33 "IRS" shall mean the Internal Revenue Service.
1.34 "Losses" shall mean General Losses, Environmental Losses, Tax
Losses, Product Losses and Subchapter S Losses (each as defined in Article 11
hereof), as the case may be.
1.35 "Material Adverse Effect" shall mean a material adverse effect
on the Business, Assets, properties, operations, condition (financial or
otherwise) or results of operations of Seller, or BICC and its Subsidiaries,
taken as a whole, as applicable.
1.36 "Merger Consideration" shall have the meaning assigned to it
in Section 2.6.
1.37 "PBGC" shall have the meaning assigned to it in Section 4.25.
1.38 "Permitted Encumbrances" shall mean (a) Encumbrances for
current taxes and assessments not yet past due or which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves are reflected in the Financial Statements, (b) mechanics and
materialmen Encumbrances for construction in progress to the extent not
perfected by filing, recording, giving of notice or other appropriate action in
the relevant jurisdiction, (c) workmen, repairmen, warehousemen, carriers,
lessors and operators Encumbrances arising in the ordinary course of business
to the extent not perfected by filing, recording, giving of notice or other
appropriate action in the relevant jurisdiction and (d) easements, including
agreements and deeds of easement, and other minor imperfections of title which
would not have a Material Adverse Effect.
1.39 "Person" shall mean any natural person, any Governmental
Authority and any entity, the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.40 "Purchaser Stock" shall mean the common stock, $.01 par value,
of Purchaser.
1.41 "Put Option" shall have the meaning assigned to it in Section
9.1.
1.42 "RCRA" shall mean the Resource Conservation and Recovery Act
of 1976, as amended.
1.43 "Reference Balance Sheet" shall have the meaning assigned to
it in Section 4.3.
1.44 "Reorganization" shall have the meaning assigned to it in
Article 7.
1.45 "Schedule" shall mean the Schedules to this Agreement unless
otherwise stated. The Schedules to this Agreement may be attached to this
Agreement or may be set forth in a separate document denoted as the Schedules
to this Agreement, or both.
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1.46 "SEC" or "Commission" shall mean the United States Securities
and Exchange Commission.
1.47 "SEC Documents" shall have the meaning assigned to it in
Section 5.6.
1.48 "Section" shall mean the Section of this Agreement unless
otherwise stated.
1.49 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.50 "Seller Stock" shall mean the common stock, par value $1.00,
of Seller.
1.51 "Software" shall mean all of Seller's computer programs,
including (without limitation) the programs known as "CRM Systems" (versions
1.0, 2.0, 2.1 and 3.0) and "Retail Management System," whether in source code
or object code or other forms, and regardless of the format or medium in which
said code may be stored or embodied. Software further includes any and all
improvements, corrections, modifications, updates, enhancements or other
changes made thereto as of the Closing Date, whether or not included in the
most recent version thereof. Software further includes any separate media
objects or files embedded therein. Software further includes all System
Documentation and User Documentation relating to the Software.
1.52 "Stock Consideration" shall have the meaning assigned to it in
Section 2.6.
1.53 "Subsidiary" shall mean, with respect to any Person (the
"parent"), (a) any corporation, association, joint venture, partnership or
other business entity of which securities or other ownership interests
representing more than 50% of the ordinary voting power or beneficial interest
are, at the time as of which any determination is being made, owned or
controlled by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent and (b) any joint venture or
partnership of which the parent or any Subsidiary of the parent is a general
partner or has responsibility for its management.
1.54 "Surviving Corporation" shall mean the corporation existing at
and after the Effective Time as a result of the Merger.
1.55 "System Documentation" shall mean all documentation, whether
in tangible or electronic format, used in the development and updating of the
Software, including, but not limited to, design or development specifications,
error reports, and related correspondence and memoranda.
1.56 "Taxes" shall mean any foreign, federal, state or local tax,
assessment, levy, impost, duty, withholding, estimated payment or other similar
governmental charge, together with any penalties, additions to Tax, fines,
interest and similar charges thereon or related thereto.
1.57 "Tax Returns" shall mean all Tax returns and reports
(including, without limitation, income, franchise, sales and use, unemployment
compensation, excise, severance, property, gross receipts, profits, payroll and
withholding Tax returns and information returns).
1.58 "Third-Party Claims" shall have the meaning such term is given
in Section 11.10(b) hereof.
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1.59 "Third-Party Software" shall mean computer software not owned
by Seller but in which Seller has rights and/or obligations.
1.60 "Third-Party Software Agreements" shall mean the agreements
itemized on Schedule 4.8(a)(i)(A) through (I).
1.61 "User Documentation" shall mean all end-user instruction
manuals, whether in tangible or electronic format, that have accompanied the
Software instructing end users in the use thereof.
1.62 "Waste Materials" shall mean any toxic or hazardous materials
or substances, or solid wastes, including asbestos, buried contaminants,
chemicals, flammable or explosive materials, radioactive materials, petroleum
and petroleum products, and any other chemical, pollutant, contaminant,
substance or waste that is regulated by any Governmental Authority under any
Environmental Law.
2. MERGER.
2.1 The Merger. Subject to the terms and conditions of this
Agreement, Seller shall be merged with and into Purchaser in accordance with
all applicable laws, with Purchaser being the Surviving Corporation. Purchaser
and Seller shall cause a certificate of merger to be filed with the Secretary
of State of Delaware, Articles of Merger to be filed with the Secretary of
State of Texas and such other documents and instruments to be filed in any
other jurisdiction where such a certificate or articles of merger is required,
on the Closing Date (as hereinafter defined), unless legally prohibited from
doing so. The Merger shall be effective at the Effective Time.
2.2 Surviving Corporation. From and after the Effective Time, the
Surviving Corporation shall have the name "Computer Resources Management, Inc."
and shall possess all assets and property of every description, and every
interest in the assets and property, wherever located, and the rights,
privileges, immunities, powers, franchises and authority, of a public as well
as of a private nature, of each of Seller and Purchaser, and all debts and all
other things in action or belonging or due to each of Seller and Purchaser, all
of which shall be vested in the Surviving Corporation without further act or
deed, and title to any real estate or any interest in the real estate vested in
either Seller or Purchaser shall not revert or in any way be impaired.
2.3 Liabilities. The Surviving Corporation shall be liable for all
the debts, liabilities and duties of each of Seller and Purchaser; any action
or proceeding pending, by or against either Seller or Purchaser, may be
prosecuted to judgment, with right of appeal, as if the Merger had not taken
place, or the Surviving Corporation may be substituted in its place, and all
the rights of creditors of each of Seller and Purchaser shall be preserved
unimpaired, and all liens upon the property of each of Seller and Purchaser
shall be preserved unimpaired, on only the property affected by the liens
immediately prior to the Effective Time.
2.4 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
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2.5 Directors and Officers. The directors and officers of
Purchaser immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation until their successors are duly elected
or appointed and qualified in the manner provided in the bylaws of the
Surviving Corporation, or as otherwise provided by law.
2.6 Conversion or Cancellation of Stock Upon Merger. In
consideration for the Merger and the non- competition agreement in Article 13
hereof, as of the Effective Time, by virtue of the Merger and without any
action on the part of the holders of any shares of Seller Stock, or the holder
of the shares of Purchaser Stock, (a) Seller Stock outstanding immediately
before the Effective Time shall be converted into the right to receive, subject
to Section 2.7 below, (i) an aggregate of 325,000 shares of BICC Stock (the
"Stock Consideration"); provided, however, that 65,000 shares of the Stock
Consideration (the "Holdback Shares") shall be pledged by the Shareholder to
secure the indemnification obligations of the Shareholder pursuant to Article
11 hereof, and (ii) cash in the aggregate amount of $8,450,000 (the Stock
Consideration and such cash are collectively referred to herein as the "Merger
Consideration"), and (b) each share of Purchaser Stock outstanding immediately
before the Effective Time shall be converted into one share of common stock of
the Surviving Corporation. At the Closing, the Stock Consideration shall be
issued in the name of the Shareholder and the cash consideration shall be paid
by wire transfer of immediately available funds to an account designated by the
Shareholder.
2.7 Fractional Shares. Notwithstanding Section 2.6, no
certificates or scrip representing fractional shares of BICC Stock shall be
issued upon the surrender for exchange of certificates that prior to the
Effective Time represented shares of Seller Stock, no dividend or distribution
of BICC shall relate to any fractional share interest and no fractional share
interest shall entitle the owner thereof to vote or to exercise any rights of a
stockholder of BICC. In the event that any Former Seller Shareholder shall be
entitled to any fractional share interest then any fractional amount shall be
rounded down to the nearest whole share.
2.8 Exchange Procedures.
(a) After the Effective Time, each outstanding
Certificate shall, until duly surrendered to Purchaser as contemplated by this
Section 2.8, be deemed to represent only the right to receive the Merger
Consideration.
(b) After the Effective Time, there shall be no further
transfer on the records of Seller of Certificates, and each share of Seller
Stock presented or surrendered to Purchaser shall be canceled in exchange for
the Merger Consideration as contemplated by Section 2.6. Purchaser shall not be
obligated to deliver Merger Consideration to any holder of a Certificate until
such holder surrenders such Certificate as provided herein.
(c) Certificates representing the Holdback Shares shall
be held in escrow by Norwest Bank Texas South, N.A., San Antonio, Texas, or
other escrow agent selected by BICC and the Shareholder or any successor
thereto (the "Escrow Agent"), in accordance with the Escrow Agreement.
2.9 Interim Dividends. No dividends or other distributions
declared after the Effective Time on BICC Stock issuable pursuant to the Merger
and payable to the Former Seller Shareholder after the Effective Time shall be
paid to the holder of any unsurrendered certificates formerly
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representing shares of Seller Stock until the certificates shall be surrendered
as provided herein, provided, however, that (a) upon surrender there shall be
paid to the shareholder in whose name the certificates representing the shares
of BICC Stock shall be issued the amount of unpaid dividends with respect to
the holder's shares of BICC Stock and (b) at the appropriate payment date, or
as soon as practicable thereafter, there shall be paid to the shareholder the
amount of dividends declared with respect to whole shares of BICC Stock with a
record date on or after the Effective Time but before surrender and a payment
date subsequent to surrender, subject in any case to any applicable escheat
laws. No interest shall be payable with respect to the payment of dividends or
other distributions on surrender of outstanding certificates.
2.10 Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any further
assignments or assurances in law or otherwise are necessary or desirable to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation,
all rights, title and interests in all real estate and other property and all
privileges, powers and franchises of Seller and Purchaser, the Surviving
Corporation and its proper officers and directors, in the name and on behalf of
Seller and Purchaser, shall execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary and proper to
vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise to carry out the purpose of this Agreement, and the
proper officers and directors of the Surviving Corporation are fully authorized
in the name of Seller or otherwise to take any and all such action.
3. CLOSING; CLOSING DATE.
Subject to the terms and conditions herein contained, the consummation
of the transactions referenced above shall take place (the "Closing") on or
before June 6, 1997, at 10:00 a.m., local time, at the offices of Fulbright &
Jaworski L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas, or at such
other time, date and place as Purchaser and Seller shall in writing designate.
The date of the Closing is referred to herein as the "Closing Date".
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER.
Seller and the Shareholder hereby, jointly and severally, represent and warrant
to the BICC Parties as follows:
4.1 Incorporation. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, and is duly
authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as now
conducted and to own, operate and lease the Assets it now owns, operates or
holds under lease. There has not been any claim by any other jurisdiction to
the effect that Seller is required to qualify or otherwise be authorized to do
business as a foreign corporation therein in order to carry on any of its
businesses as now conducted or to own, lease or operate the Assets. Seller is
not qualified as a foreign corporation in any jurisdiction, and Seller is not
required to qualify or otherwise be authorized to do business as a foreign
corporation in any jurisdiction in order to carry on any of its businesses as
now conducted or to own, lease or operate the Assets. Complete and correct
copies of the Articles of Incorporation of Seller and all amendments thereto,
certified in each case by the Secretary of State of the State of Texas, and of
the Bylaws of Seller and all amendments thereto, certified by the Secretary of
Seller, heretofore have been delivered to BICC. Except as set forth in Schedule
4.1 hereto, the minute books of Seller previously made available to the BICC
Parties are materially complete and accurately reflect, in all material
respects, all material action
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taken prior to the date of this Agreement by its board of directors and
shareholders, in their capacities as such. Neither Seller nor the Shareholder
has, to their Best Knowledge, taken any action, or failed to take any action
which action or failure will preclude or prevent Seller's business from being
conducted in substantially the same manner in which Seller has heretofore
conducted the same. Seller has no Subsidiaries.
4.2 Share Capital. Seller's authorized capital stock consists of
10,000,000 shares of Seller Stock, of which 1,000 shares are issued and
outstanding and are owned of record and beneficially by the Shareholder, free
and clear of all liens, Encumbrances or other obligations. All of the
outstanding shares of Seller Stock have been duly authorized and validly issued
and are fully paid and non-assessable. There are no outstanding options,
warrants, convertible securities, calls, rights, commitments, preemptive
rights, agreements, arrangements or understandings of any character obligating
Seller (a) to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Seller or any securities or obligations
convertible into or exchangeable for such shares or (b) to grant, extend or
enter into any such option, warrant, convertible security, call, right,
commitment, preemptive right, agreement, arrangement or understanding described
in clause (a) above.
4.3 Financial Statements. Seller has delivered to Purchaser copies
of the following financial statements for Seller, all of which financial
statements are included in Schedule 4.3(a) hereto (collectively, the "Financial
Statements"):
(a) Unaudited Balance Sheet of Seller (the "Reference
Balance Sheet") as of May 31, 1997 (the "Balance Sheet Date") and Unaudited
Income Statement of Seller for the five-month period ended on the Balance Sheet
Date; and
(b) Unaudited Balance Sheets, Income Statements and
Statements of Changes in Financial Position for each of Seller's three most
recent fiscal years.
All financial statements supplied to Purchaser by Seller have been prepared on
a tax-basis of accounting on a consistent basis throughout the periods
indicated, with the exception of the balance sheets dated December 31, 1996 and
May 31, 1997, and the income statement for the five-month period ended on the
Balance Sheet Date, each of which reflects amounts which have been determined
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated other than property and
equipment and related depreciation which have been prepared on a tax-basis of
accounting, and present fairly the financial condition of Seller as of the
dates and for the periods indicated thereon. The Reference Balance Sheet
reflects, as of the Balance Sheet Date, all liabilities, debts and obligations
of any nature, kind or manner of Seller, whether direct, accrued, absolute,
contingent or otherwise, and whether due, or to become due which are required
to be reflected on such balance sheet under generally accepted accounting
principles consistently applied. Except as set forth in Schedule 4.3(b)
attached hereto and made a part hereof or on the Reference Balance Sheet, the
Seller does not have, and none of the Assets, properties or Business of the
Seller is subject to, any liabilities or obligations (accrued, absolute,
contingent or otherwise), whether or not such liabilities are normally shown or
reflected on a balance sheet prepared in a manner consistent with tax-basis or
generally accepted accounting principles, except for liabilities (i) incurred
in the ordinary course of Seller's business, or (ii) fully covered by Seller's
insurance policies, none of which have had a Material Adverse Effect, except
for those that may be incurred pursuant to Section 10.1 hereof.
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4.4 Events Since the Balance Sheet Date. Since the Balance Sheet
Date, there has not been:
(a) any change in the condition (financial or otherwise)
or in the properties, assets, liabilities, business or prospects of the
Business, except normal and usual changes in the ordinary course of business,
none of which has been adverse and all of which in the aggregate have not been
adverse; (b) any labor trouble, strike or any other occurrence, event or
condition affecting the employees of Seller that adversely affects the
condition (financial or otherwise) of the Assets or the Business; (c) any
breach or default by Seller or, to the Best Knowledge of Seller and the
Shareholder, by any other party, under any agreement or obligation included in
the Assets or by which any of the Assets are bound; (d) any damage, destruction
or loss (whether or not covered by insurance) adversely affecting the Assets or
the Business; (e) to the Best Knowledge of Seller and the Shareholder, any
legislative or regulatory change adversely affecting the Assets or the
Business; (f) any change in the types, nature or composition of the services of
the Business, any adverse change in the contributions of any of the service
lines of the Business to the revenues or net income of such Business, or any
adverse change in the sales, revenue or net income of the Business; (g) any
transaction related to or affecting the Assets or the Business other than
transactions in the ordinary course of business of Seller; (h) any other
occurrence, event or condition that has adversely affected (or can reasonably
be expected to adversely affect) the Assets or the Business; (i) any
declaration, setting aside or payment of any dividend (whether in cash, stock
or property) with respect to any of Seller's capital stock except as
contemplated by Section 10.1 hereof; (j) (i) any granting by Seller to any
executive officer of Seller of any increase in compensation, (ii) any granting
by Seller to any executive officer of any increase in severance or termination
pay, or (iii) any entry by Seller into any employment, severance or termination
agreement with any executive officer; (k) any change in accounting methods,
principles or practices by Seller materially affecting its assets, liabilities
or business, except insofar as may have been required by a change in tax-basis
or generally accepted accounting principles, and except as required by the BICC
Parties; (l) any condition, event or occurrence through the date hereof which,
individually or in the aggregate, could reasonably be expected to prevent,
hinder or delay in any material respect the ability of Seller to consummate the
transactions contemplated by this Agreement; or (m) any agreement, in writing
or otherwise, by Seller or any corporate action by Seller with respect to the
foregoing.
4.5 Competing Interests. Neither Seller nor the Shareholder, nor,
to the Best Knowledge of such parties, any director or officer of Seller, and
no Associate (as hereinafter defined) of Seller or the Shareholder:
(a) owns, directly or indirectly, any equity interests
in, or is a director, officer or employee of, or consultant to, any entity
which is a competitor, supplier or customer of the Business, or, to the Best
Knowledge of Seller and the Shareholder, a competitor, supplier or customer of
Purchaser or an Associate of Purchaser (except for ownership, if any, of less
than five percent of the outstanding capital stock of any corporation the
capital stock of which is traded on a nationally recognized securities exchange
or which has a class of securities registered pursuant to the Exchange Act), or
(b) except as set forth in Schedule 4.5, owns, directly
or indirectly, in whole or in part, any property, asset or right which is
associated with the Assets or the Business or which Seller is presently
operating or using in connection with or the use of which is necessary for or
material to the operation of the Business.
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For purposes of this Agreement, the term "Associate" shall mean:
(y) with respect to an individual:
(i) the spouse of the individual and all
ancestors and lineal descendants of the individual and the spouse,
(ii) any trust in which the individual or any
person described in (i) above has a pecuniary interest or any trustee
of such a trust, and
(iii) any business entity which is directly or
indirectly Controlled by any of the foregoing; and
(z) with respect to a Person other than a natural person,
any Person Controlling, Controlled by or under common Control with such Person,
and any director or officer of such Person and any Associate of any Person
described in this clause (z).
4.6 Taxes. Except as set forth in Schedule 4.6 hereto:
(a) all Tax Returns of or relating to any Taxes that are
required to be filed on or before the Effective Time, subject to any allowable
extension periods, for, by, on behalf of or with respect to Seller, including,
but not limited to, those relating to the income, business, operations or
property of Seller (whether on a separate, consolidated, affiliated, combined,
unitary or any other basis), have been timely filed with the appropriate
foreign, federal, state and local authorities, and all Taxes shown to be due
and payable on such Tax Returns or related to such Tax Returns have been paid
in full on or before the Effective Time except Taxes which have not yet accrued
or otherwise become due, all of which are reflected in the Reference Balance
Sheet;
(b) all such Tax Returns and the information and data
contained therein have been properly and accurately compiled and completed in
all material respects, fairly present the information purported to be shown
therein, and reflect, to the Best Knowledge of Seller and the Shareholder, all
liabilities for Taxes for the periods covered by such Tax Returns, net of any
applicable reserves;
(c) Seller has not received notice that any of such Tax
Returns are under audit or examination by any foreign, federal, state or local
authority and there are no agreements, waivers or other arrangements providing
for an extension of time with respect to the assessment or collection of any
Tax or deficiency of any nature against Seller or with respect to any such Tax
Return, or any suits or other actions, proceedings, investigations or claims
now pending or, to the Best Knowledge of Seller and the Shareholder, threatened
against Seller with respect to any Tax, or any matters under discussion with
any foreign, federal, state or local authority relating to any Tax, or any
claims for any additional Tax asserted by any such authority;
(d) all Taxes assessed and due and owing from or against
Seller on or before the Effective Time (including, but not limited to, ad
valorem Taxes relating to any property of Seller) have been timely paid in full
on or before the Effective Time;
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(e) all withholding Tax, Tax deposit and estimated Tax
payment requirements imposed on Seller for any and all periods ending on or
before the Effective Time, or through and including the Effective Time for
periods that have not ended on or before the Effective Time, have been
satisfied in full on or before the Effective Time or reserves adequate for the
payment of such withholding, deposit and estimated Taxes have been established
in the financial statements of Seller on or before the Effective Time; and
(f) the Financial Statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of any and
all Taxes payable with respect to any and all periods ending on or before the
respective dates thereof.
4.7 Employee Matters. Schedule 4.7 sets forth a true and complete
list of the names of, and current annual compensation paid by Seller to each
employee of Seller utilized in connection with the operation of the Business.
Seller is not a party to any collective bargaining or other union agreements.
Seller has not, within the last five years, had or been threatened with any
union activities, work stoppages or other labor trouble with respect to its
employees. There are no collective bargaining or other labor union agreements
to which Seller is a party or by which it is bound. At the date hereof, there
are no disputes with employees in general to which Seller is a party. At the
date hereof, there are no strikes, slowdowns or picketing against Seller (or,
to the Best Knowledge of Seller and the Shareholder, against any material
supplier of goods or services to Seller) pending or, to the Best Knowledge of
Seller and the Shareholder, threatened. At the date hereof, Seller has not
received notice from any union or employees setting forth demands for
representation, elections or for present or future changes in wages, terms of
employment or working conditions. Other than wage increases in the ordinary
course of business, since the Balance Sheet Date Seller has not made any
commitment or agreement to increase the wages or modify the conditions or terms
of employment of any of the employees of Seller used in connection with the
Business.
4.8 Contracts and Agreements. (a) Except as set forth in Schedule
4.8(a) or as contemplated by Section 10.1, Seller is not a party to or bound
by:
(i) any contracts, agreements or commitments in respect
of the sale of products or services or the purchase of raw materials, supplies
or other products;
(ii) any offers, tenders or the like outstanding and
capable of being converted into an obligation of Seller by the passage of time
or by an acceptance or other act of some other person or entity or both, except
for those incurred in the ordinary course of Seller's business, none of which
have had a Material Adverse Effect;
(iii) any sales, agency, distributorship agreements,
franchise agreements or legally enforceable commitments or obligations with
respect thereto;
(iv) any collective bargaining agreements, union
agreements, employment agreements, consulting agreements, management service
agreements, agreements providing for the services of an independent contractor
or any other similar type of contract or agreement;
(v) any profit-sharing, pension, stock option, severance
pay, retirement, bonus, deferred compensation, group life and health insurance
or other employee benefit plans, agreements,
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arrangements or commitments of a similar nature and all agreements with any
present or former officer, director or shareholder of Seller;
(vi) any loan or credit agreements, indentures, guarantees
(other than endorsements made for collection), mortgages, pledges, conditional
sales or other title retention agreements, and any equipment financing
obligations, lease and lease-purchase agreements;
(vii) any leases related to the Assets or the Business, and
any other contracts, agreements or legally enforceable commitments relating to
or affecting the Assets or the Business;
(viii) any performance bonds, bid bonds, surety bonds and
the like, any contracts and bids covered by such bonds, and any letters of
credit and guaranties;
(ix) any consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
(x) any contracts or agreements of any nature with the
Shareholder, or any Associate (as defined in Section 4.5) of the Shareholder or
Affiliate of the Shareholder;
(xi) any contracts, commitments and agreements entered
into outside the ordinary course of the operation of the Business;
(xii) any agreement, indenture or other instrument which
contains restrictions with respect to the payment of dividends or any other
distribution in respect of its capital stock or the purchase, redemption or
other acquisition of capital stock;
(xiii) other than expenditures regularly made in the
ordinary course of business of Seller for items that are not property, plant or
equipment, any agreement, contract or commitment relating to any expenditure or
a series of related expenditures in excess of $10,000;
(xiv) any outstanding loan or advance by Seller to, or
investment by Seller in, any Person, or any agreement, contract, commitment or
understanding relating to the making of any such loan, advance or investment
(excluding trade receivables);
(xv) any contract, agreement, indenture, note or other
instrument relating to (A) the borrowing of money by Seller or the granting of
any Encumbrance or (B) any guarantee or other contractual contingent liability
(identifying the primary contract or agreement to which such guarantee or
contractual contingent liability relates or the agreement pursuant to which
such guarantee was delivered) in respect of any indebtedness, commitment,
liability or obligation of any Person (other than the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business);
(xvi) any agreement, contract or commitment limiting the
freedom of Seller or any Affiliate of Seller to engage in any line of business,
to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any
Asset or to compete with any Person or to engage in any business or activity in
any geographic area;
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(xvii) any agreement, lease, contract or commitment or
series of related agreements, leases, contracts or commitments not entered into
in the ordinary course of business that is not cancelable under the terms of
such agreement, lease, contract or commitment without penalty to Seller within
30 days;
(xviii) any agreement, contract or commitment requiring the
payment for goods or services whether or not such goods or services are
actually provided or the provision of goods or services at a price less than
Seller's cost of producing such goods or providing such services;
(xix) any agreement or contract obligating Seller or that
would obligate or require any subsequent owner of the business currently
conducted by Seller or any of the Assets to provide for indemnification or
contribution with respect to any matter (other than customary indemnification
provisions in leases of property leased by Seller);
(xx) any license, royalty or similar agreement; or
(xxi) any agreement, contract or commitment that Seller
expects to have a Material Adverse Effect on Seller and/or Purchaser subsequent
to Closing.
Schedule 4.8(a) hereto sets forth with respect to each mortgage, security
agreement, letter of credit or guaranty, a cross-reference to the principal
agreement, instrument or document referred to in Schedule 4.8(a) pursuant to
which such mortgage, security agreement, letter of credit or guaranty was
executed or to which such mortgage, security agreement, letter of credit or
guaranty relates.
(b) Schedule 4.8(b) hereto sets forth (i) the aggregate
outstanding principal amount as of June 1, 1997, with respect to each loan,
credit or other agreement, instrument or document listed in Schedule 4.8(b)
hereto relating to the borrowing of money by Seller and (ii) the amount of
available borrowings as of June 1, 1997, with respect to each such loan, credit
or other agreement, instrument or document.
(c) All of such contracts, agreements, leases, licenses,
plans, arrangements, and commitments listed in Schedule 4.8(a) (collectively,
the "Contracts") are valid, binding and in full force and effect in accordance
with their terms and conditions except as enforceability thereof may be limited
by bankruptcy, insolvency, moratorium or other similar laws of general
application affecting the enforceability of creditors' rights or by general
principles of equity and there is no existing default thereunder or breach
thereof by Seller, or, to the Best Knowledge of Seller and the Shareholder, by
any other party to the Contracts, or any conditions which, with the passage of
time or the giving of notice or both, might reasonably constitute such a
default by Seller, or, to the Best Knowledge of Seller and the Shareholder, by
any other party to the Contracts, and the Contracts will not be breached by or
give any other party a right of termination as a result of the transactions
contemplated by this Agreement. There are no pending or, to the Best Knowledge
of Seller and the Shareholder, threatened disputes with respect to the
contracts, agreements, indentures, leases or instruments described in Schedule
4.8(a) hereto. Seller is not obligated to pay any liquidated damages under any
of the contracts, agreements, indentures, leases or other instruments described
in Schedule 4.8(a) hereto and neither Seller nor the Shareholder is aware of
any facts or circumstances that could reasonably be expected to result in an
obligation of Seller to pay any such liquidated damages. Copies of all of the
documents (or in the case of oral commitments, descriptions of the material
terms thereof) relevant to the Contracts listed in Schedule 4.8(a) have been
delivered
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by Seller to Purchaser, and such copies and/or descriptions are true, complete
and accurate and include all amendments, supplements or modifications thereto.
All of the Contracts will be fully vested in Purchaser at the Effective Time of
the Merger, without the approval or consent of any Person, or, if such approval
or consent is required, it will be obtained by Seller and delivered to
Purchaser at or prior to the Closing.
4.9 Effect of Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) violate any provision of the Articles of Incorporation or other charter
documents or bylaws of Seller; (b) result in any violation of any Governmental
Requirement applicable to Seller, the Assets or the Business; (c) conflict
with, or result in any breach of, or default or loss of any right under (or an
event or circumstance that, with notice or the lapse of time, or both, would
result in a default), or the creation of an Encumbrance pursuant to, or cause
or permit the acceleration prior to maturity or "put" right with respect to,
any obligation under, any contract, indenture, mortgage, deed of trust, lease,
loan agreement or other agreement or instrument to which Seller is a party or
to which any of the Assets are subject; (d) relieve any Person of any
obligation (whether contractual or otherwise) or enable any Person to
accelerate or terminate any such obligation or any right or benefit enjoyed by
Seller or to exercise any right under any agreement in respect of the Assets or
the Business; and (e) require notice to or the consent, authorization,
approval, clearance, waiver or order of any Person (except as may be
contemplated by the last sentence of Section 4.8). Except as set forth in
Schedule 4.9, to the Best Knowledge of Seller and the Shareholder, the business
relationships of clients, customers and suppliers of the Business will not be
adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Except as set forth on
Schedule 4.9 hereto, the execution, delivery and performance of this Agreement
by Seller will not result in the loss of any material governmental license,
franchise or permit possessed by Seller.
4.10 Properties, Assets and Leasehold Estates.
(a) There is set forth on Schedule 4.10(a) hereto a
description of each item of personal property, excluding inventory, owned by
Seller that had a book value as of the Balance Sheet Date greater than $10,000.
For purposes of this Section 4.10, "personal property" excludes Intellectual
Property. Seller has good title to all of its personal property that is
material to Seller's business, results of operations, financial condition or
Assets (including, without limitation, those items of personal property set
forth on Schedule 4.10(a) hereto), free and clear of all Encumbrances, except
for Permitted Encumbrances and those Encumbrances set forth on Schedule 4.10(a)
hereto.
(b) There is set forth on Schedule 4.10(b) hereto a
description of each item of personal property leased by Seller for which the
annual rent payable under the applicable lease or contract exceeds $10,000.
Seller has good title to all the leasehold estates pursuant to which the
personal property set forth on Schedule 4.10(b) hereto is leased, free and
clear of all Encumbrances, except for Permitted Encumbrances and those
Encumbrances set forth on Schedule 4.10(b). Seller has not breached any
provision of and is not in default (and no event or circumstance exists that
with notice, or the lapse of time or both, would constitute a default by
Seller) under the terms of any lease or other agreement pursuant to which the
personal property set forth on Schedule 4.10(b) hereto is leased. To the Best
Knowledge of Seller and the Shareholder, all of such leases or other agreements
are in full force and effect. There are no pending or, to the Best Knowledge of
Seller and the Shareholder, threatened disputes with respect to any lease or
other agreement pursuant to which the personal property set forth on Schedule
4.10(b) is leased and, to the Best Knowledge of Seller and
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the Shareholder, the lessor thereunder has not breached any provision of and is
not in default (and no event or circumstance exists that with notice, or the
lapse or time or both, would constitute a default by the lessor) under the
terms of any such lease or other agreement.
(c) Seller owns no real property.
(d) There is set forth on Schedule 4.10(d) hereto a list
of all leases of Seller with respect to real property leased by Seller for
which the annual rent payable under the applicable lease or contract exceeded
$10,000. Seller has good title to all the leasehold estates pursuant to which
the real property set forth on Schedule 4.10(d) hereto is leased, free and
clear of all Encumbrances, except for Permitted Encumbrances. Seller has not
breached any provision of and is not in default (and no event or circumstance
exists that with notice, or the lapse of time or both, would constitute a
default by Seller) under the terms of any lease or other agreement pursuant to
which the real property set forth on Schedule 4.10(d) hereto is leased. To the
Best Knowledge of Seller and the Shareholder, all of such leases or other
agreements are in full force and effect. There are no pending or, to the Best
Knowledge of Seller and the Shareholder, threatened disputes with respect to
any lease or other agreement pursuant to which the real property set forth on
Schedule 4.10(d) hereto is leased and, to the Best Knowledge of Seller and the
Shareholder, the lessor thereunder has not breached any provision of and is not
in default (and no event or circumstance exists that with notice, or the lapse
of time or both, would constitute a default by the lessor) under the terms of
any such lease or other agreement.
(e) To the Best Knowledge of Seller and the Shareholder,
there is no (i) change except as described on Schedule 4.10(a) which Seller or
the Shareholder have Best Knowledge of contemplated in any applicable law,
statute, ordinance, rule, regulation, order or determination of any
Governmental Authority, (ii) except as described on Schedule 4.10(a),
applicable law, statute, ordinance, rule, regulation, order or determination of
any Governmental Authority or any restrictive covenant or deed restriction
affecting the real property described in Section 4.10(c) and (d) hereof,
including without limitation any zoning ordinances, building codes, flood
disaster laws, wetlands regulations, health laws or environmental laws, (iii)
judicial or administrative action, (iv) action by adjacent landowners, (v)
administrative action, or (vi) significant adverse fact or condition relating
to such real property or its use that would, in each case, prevent, limit,
impede or render more costly the ownership, operation or maintenance of such
real property compared to the cost at the date hereof.
4.11 Intellectual Property.
(a) Except as set forth in the Third-Party Software
Agreements and as set forth in Section (i)(E) of Schedule 4.11(b), Seller has
not conveyed any interests in Software to any third party. Schedule 4.11(b) is
a complete list of agreements under which Seller has rights/obligations in
respect of Third-Party Software. Schedule 4.11(a) is a complete list of (i) all
trademarks, service marks and trade names owned or claimed by Seller, together
with all U.S., state and foreign registrations thereof and/or applications
therefor, and (ii) all U.S. and foreign copyright registrations owned or
claimed by Seller and/or applications therefor. Seller neither owns nor claims
interest in any patents or patent applications. The Third-Party Software
Agreements are all of the material agreements to which Seller is a party and in
which the subject matter thereof includes Intellectual Property.
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(b) All Software performs substantially as described in
System and User Documentation and is free from material defects, viruses, or
any other impediment to Purchaser's quiet enjoyment in the operation thereof.
(c) Except as set forth in Section (i)(E) of Schedule
4.11(b),
(i) Seller has developed all Intellectual
Property through its own efforts for its own account and, except as
set forth in the Third-Party Software Agreements, there is no contract
obligation, license, lien, encumbrance, or other claim concerning such
Intellectual Property whatsoever;
(ii) to Seller's Best Knowledge, Intellectual
Property neither infringes nor is being infringed by any third-party
proprietary interest, including, without limitation, any third-party
patent, copyright, trademark, or trade secret;
(iii) all of Seller's trade secrets, including
source code and system specifications, have been maintained in
confidence by Seller and the Shareholder and, to Seller's Best
Knowledge, except in connection with the performance of the
Third-Party Software Agreements, are not known to any third party;
(iv) all personnel who have contributed to or
participated in the conception and development of the Software have
either been employees of Seller or have been party to a work-for-hire
relationship with Seller that has accorded Seller full and original
ownership of all tangible and intangible property arising with respect
to the Software; and
(v) no agreements or arrangements are in effect
with respect to the development, marketing, distribution, licensing or
promotion of Intellectual Property by any third party.
(d) All Third-Party Software Agreements are freely
assignable to and assumable by Purchaser as set forth herein without the
requirement of obtaining any consent or approval, giving any prior or
subsequent notice, paying any further royalty or fee to any party thereto or to
any other third party, or performing any duty that has not already been fully
performed by Seller. Each Third-Party Software Agreement is in full force and
effect in accordance with its terms without modification or amendment and, to
Seller's Best Knowledge, without default by either party thereto, and, to
Seller's Best Knowledge, without dispute by any party as to any term or
condition thereof. To Seller's Best Knowledge, there are no facts or documents
rendering any Third-Party Software Agreement unenforceable by Seller or
otherwise invalid. There are no obligations, including payment of money, past
due by either party to any Third-Party Software Agreement. To Seller's Best
Knowledge, there are no disclosed or undisclosed breaches of warranty of
Seller, whether or not within a time period to cure, pertaining to any
Third-Party Software Agreement. To Seller's Best Knowledge, there is no
condition existing that has or will trigger a right to terminate any
Third-Party Software Agreement. Except as set forth in Sections (i)(C), (D),
(E), and (G) of Schedule 4.11(b), Seller has not conveyed rights to any third
party in CRM Systems Software source code, nor has Seller conveyed rights to
any third party to use CRM Systems Software in a service bureau environment.
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4.12 Suits, Actions and Claims. Except as set forth in Schedule
4.12, (a) there are no suits, actions, claims, inquiries or investigations by
any Person, or any legal, administrative or arbitration proceedings in which
Seller is engaged or which are pending or, to the Best Knowledge of Seller and
the Shareholder, threatened against or affecting Seller or any of its
properties, assets or business, or to which Seller is or might become a party,
or which question the validity or legality of the transactions contemplated
hereby, (b) no reasonable basis or reasonable grounds for any such suit,
action, claim, inquiry, investigation or proceeding exists, and (c) there is no
outstanding order, writ, injunction or decree of any Governmental Authority
against or affecting Seller or any of its properties, assets or business.
Without limiting the foregoing, neither Seller nor the Shareholder has any Best
Knowledge of any state of facts or the occurrence of any event forming the
basis of any present or potential claim against Seller.
4.13 Licenses and Permits; Compliance With Governmental
Requirements. Except as set forth in Schedule 4.13 hereto, Seller has all
material federal, state, local and foreign governmental licenses and permits
necessary to the conduct of the operations of Seller's business as currently
conducted, such licenses and permits are in full force and effect, no material
violations currently exist in respect of any thereof and no proceeding is
pending or, to the Best Knowledge of Seller and the Shareholder, threatened to
revoke or limit any thereof. Schedule 4.13 hereto contains a true, complete and
accurate list of (a) all such governmental licenses and permits, (b) all
consents, orders, decrees and other compliance agreements under which Seller is
operating or bound, copies of all of which have been furnished to the BICC
Parties, and (c) all material governmental licenses and permits applied for but
not yet received by Seller. Seller has not received and is not aware of any
reports of inspections under the United States Occupational Safety and Health
Act, or under any other applicable federal, state or local health and safety
laws and regulations relating to Seller, the Assets or the operation of
Seller's business. Seller has not received any notice that there are safety,
health, anti-competitive or discrimination claims that have been made or are
pending or, to the Best Knowledge of Seller and the Shareholder, that are
threatened relating to the business or employment practices of Seller. To the
Best Knowledge of Seller and the Shareholder, Seller has complied with all
Governmental Requirements applicable to its business and all Governmental
Requirements with respect to the distribution and sale of products and services
by it.
4.14 Authorization. Each of Seller and the Shareholder has full
legal right, power, and authority to enter into and deliver this Agreement and
to consummate the transactions set forth herein and to perform all the terms
and conditions hereof to be performed by them. The execution and delivery of
this Agreement by Seller and the Shareholder and the performance by each of
them of the transactions contemplated herein have been duly and validly
authorized by all requisite corporate action of Seller, and this Agreement has
been duly and validly executed and delivered by Seller and the Shareholder and
is the legal, valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms, except as limited by applicable
bankruptcy, moratorium, insolvency or other similar laws affecting generally
the rights of creditors or by principles of equity.
4.15 Records. The books, records and minutes kept by Seller with
respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements and correspondence have been kept properly
and contain records of all matters required to be included therein by any
Governmental Requirement, and, except as set forth on Schedule 4.15, such
books, records and minutes are true, accurate and complete.
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4.16 Environmental Protection Laws.
(a) Except as set forth in Schedule 4.16 hereto, to the
Best Knowledge of Seller and the Shareholder, Seller has at all times operated
in compliance with all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements and obligations of Environmental Laws and
related orders of any court or other Governmental Authority.
(b) Except as set forth in Schedule 4.16 hereto, there
are no existing, pending or, to the Best Knowledge of Seller and the
Shareholder, threatened actions, suits, claims, to the Best Knowledge of Seller
and the Shareholder, investigations, inquiries or proceedings by or before any
court or any other Governmental Authority directed against Seller or its Assets
which pertain or relate to (i) any remedial obligations under any applicable
Environmental Law, (ii) violations of any Environmental Law, (iii) personal
injury or property damage claims relating to the release of chemicals or Waste
Materials or (iv) response, removal or remedial costs under CERCLA or any
similar state law.
(c) Except as set forth in Schedule 4.16 hereto, all
notices, permits, licenses or similar authorizations required to be obtained or
filed by Seller under all applicable Environmental Laws in connection with its
current and previous operation or use of the Assets, any other assets or
properties currently or previously leased or owned by Seller or the current and
previous conduct of its business have been duly obtained or filed and are in
full force and effect.
(d) Neither Seller nor the Shareholder has received
notice that any permit, license or similar authorization is to be revoked or
suspended by any Governmental Authority.
(e) Seller does not own or operate any underground
storage tanks.
(f) To the Best Knowledge of Seller and the Shareholder,
no portion of the Assets or any other assets or properties currently or
previously leased or owned by Seller is part of a Superfund site under CERCLA
or any similar ranking or listing under any similar state law.
(g) To the Best Knowledge of Seller and the Shareholder,
all Waste Materials generated by Seller have been transported, stored, treated
and disposed of by carriers, storage, treatment and disposal facilities
authorized and maintaining valid permits under all applicable Environmental
Laws.
(h) To the Best Knowledge of Seller and the Shareholder,
no Person has disposed or released any Waste Materials on or under the Assets
or any other asset or property currently or previously leased or owned by
Seller and Seller has not disposed or released Waste Materials on or under the
Assets or any other asset or property currently or previously leased or owned
by Seller, except in compliance with all Environmental Laws.
(i) To the Best Knowledge of Seller and the Shareholder,
no facts or circumstances exist which could reasonably be expected to result in
any liability to any Person with respect to the current or past business and
operations of Seller, the Assets or any other assets or properties currently or
previously leased or owned by Seller in connection with (i) any release,
transportation or disposal of any Waste Materials, hazardous substance or solid
waste or (ii) action taken or omitted that was not in full compliance with or
was in violation of, any applicable Environmental Law.
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4.17 Accounts Receivable. All notes and accounts receivable of
Seller that are reflected on the Reference Balance Sheet or that have arisen
since the Balance Sheet Date ("Accounts Receivable") have arisen in the
ordinary course of business. Except as set forth on Schedule 4.17, all Accounts
Receivable either (a) have been collected or (b) to the Best Knowledge of
Seller and the Shareholder (without any duty to make any current inquiry), are
collectible on the respective due dates thereof, or, if no due date is stated
with respect thereto, within 90 days of their creation in the ordinary course
of business, in each case in the aggregate recorded amounts thereof, less the
applicable reserves with respect thereto reflected on the Reference Balance
Sheet. Except as contemplated by Section 10.1, Seller has not factored or
discounted or agreed to factor or discount any Account Receivable. The values
at which the Accounts Receivable are carried on the Reference Balance Sheet
reflect the accounts receivable valuation policy of Seller in accordance with
generally accepted accounting principles. Schedule 4.17 sets forth a true,
correct and complete list of all Accounts Receivable written off by Seller, in
whole or in part, as uncollectible during the two years preceding the date
hereof. Schedule 4.17 also sets forth a true, correct and complete aging of the
Accounts Receivable of Seller as of the most recent practicable date.
4.18 Brokers and Finders. Except as set forth in Schedule 4.18, no
broker or finder has acted for Seller or the Shareholder in connection with
this Agreement or the transactions contemplated by this Agreement and no broker
or finder is entitled to any brokerage or finder's fee or to any commission in
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of Seller or the Shareholder. All fees and commissions
related to the arrangement set forth in Schedule 4.18, or any other arrangement
between Seller, or the Shareholder and any broker or finder, shall be paid by
the Shareholder.
4.19 Deposits. Except as set forth on Schedule 4.19, Seller does
not now hold any deposits or prepayments by third parties with respect to any
of the Assets or the Business ("Deposits").
4.20 Work Orders. There are no outstanding work orders or contracts
relating to any portion of the Assets from or required by any policy of
insurance, fire department, sanitation department, health authority or other
Governmental Authority nor is there any matter under discussion with any such
parties or authorities relating to work orders or contracts.
4.21 Customer List. Schedule 4.21 sets forth a true, correct and
complete list of all customers of the Business to which Seller has sold or
provided products or services during the two years immediately preceding the
date hereof. This list provides an accurate statement of the gross revenues
received from each such customer by the Business during the twelve-month period
ended April 30, 1997. This list also indicates by special designation all
customers on the list with respect to which the Business has not sold or
provided products or services during the twelve-month period immediately
preceding April 30, 1997.
4.22 No Royalties. No royalty or similar item or amount is being
paid or is owing by Seller, nor is any such item accruing, with respect to the
operation, ownership or use of the Business or the Assets.
4.23 Bank Accounts. Schedule 4.23 sets forth a true and complete
list of all bank or financial accounts and safe deposit boxes of Seller and of
the credit and debit balances of such bank and financial accounts as of the
most recent practicable date. Except as contemplated by Section 10.1
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and as set forth in Schedule 4.23, since the date of the balances set forth on
such list, there have been no payments out of or drafts against any of the
accounts included therein other than routine payments and drafts in the
ordinary course of business, and the balances in such accounts as of the date
hereof are not materially different from those reflected in such list. Schedule
4.23 also lists all persons having signatory authority over or access to such
bank and financial accounts and safe deposit boxes.
4.24 Insurance. Schedule 4.24 hereto sets forth all existing
insurance policies held by Seller relating to the Business, Assets, employees
or agents of Seller. Each such policy is in full force and effect and is with
insurance carriers believed by Seller to be responsible. There is no dispute
with respect to such policies, and all claims arising from events or
circumstances occurring prior to the date hereof have been paid in full or
adequate reserves therefor are recorded in the Reference Balance Sheet. All
retroactive premium adjustments for any period ended on or before June 1, 1997,
under any worker's compensation policy or any other insurance policies of
Seller have been recorded in accordance with generally accepted accounting
principles and are reflected in the Reference Balance Sheet. Except for such
policies which are identified on Schedule 4.24, none of such policies will
terminate as a result of the transactions contemplated by this Agreement.
4.25 Employee Benefit Matters. As used in this Section 4.25,
"Seller" shall include Seller and any member of a controlled group or
affiliated service group as defined in Sections 414(b), (c), (m) and (o) of the
Code of which Seller is a member.
(a) List of all Benefit Plans and Compensation
Agreements. Schedule 4.25(a) includes a complete and accurate list of all
employee welfare benefit and employee pension benefit plans as defined in
Sections 3(1), 3(2) and 3(3) of ERISA and all other employee benefit agreements
or arrangements, including, but not limited to, deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans, stock
purchase plans, golden parachute agreements, severance pay plans, dependent
care plans, cafeteria plans, employee assistance programs, scholarship
programs, employment contracts and other similar plans, agreements and
arrangements that are currently in effect or were maintained within three years
of the Closing Date, or have been approved before this date but are not yet
effective, for the benefit of directors, officers, employees, or former
employees (or their beneficiaries) of Seller. Seller is not aware of any
commitment to create any new plan, agreement or arrangement or modify any now
existing. The Shareholder has delivered to Purchaser, as to each plan,
agreement or arrangement listed in Schedule 4.25(a), as applicable, a complete
and accurate copy of (i) each plan, agreement or arrangement listed, (ii) the
trust, group annuity contract or other document which provides the funding for
the plan, agreement or arrangement, (iii) the three most recent annual Form
5500, 990 and 1041 reports, (iv) the most recent actuarial report or valuation
statement, (v) the most current summary plan description, booklet, or other
descriptive written materials, and each summary of material modifications
prepared after the last summary plan description, (vi) the most recent IRS
determination letter and all rulings or determinations requested from the IRS
subsequent to the date of that exemption letter and (vii) all other
correspondence from the IRS or the Department of Labor received which relates
to one or more of the plans, agreements or arrangements. There are no pending
or, to the Best Knowledge of Seller and the Shareholder, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the plans disclosed on Schedule 4.25(a) or their related trusts.
(b) Representations Pertaining to all Employee Benefit
Plans. Every employee welfare benefit plan and every employee pension benefit
plan as defined in Sections 3(1), 3(2) and
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3(3) of ERISA which have been or are sponsored by, participated in by or
contributed to by Seller: (i) is in substantial compliance with the Code and
ERISA, including, but not limited to, all reporting and disclosure requirements
of Part 1 of Subtitle B of Title I of ERISA; (ii) has had the appropriate Form
5500 filed timely for each year of its existence; (iii) has not engaged in any
transaction described in Sections 406 or 407 of ERISA or Section 4975 of the
Code unless exempt under Section 408 of ERISA or Section 4975 of the Code, as
applicable; (iv) has at all times complied with the bonding requirements of
Section 412 of ERISA; (v) has no issue pending (other than the payment of
benefits in the normal course) nor any issue resolved adversely to Seller which
may subject Seller to the payment of a penalty, interest, tax or other amount
and (vi) can be unilaterally terminated or amended on no more than 90 days
notice [other than collectively bargained union plans], and (vii) all
contributions or other amounts payable by Seller as of the Closing Date with
respect to each employee welfare benefit plan and each employee pension benefit
plan, other than an employee pension benefit plan which is subject to Section
412 of the Code, have either been paid or accrued in the Reference Balance
Sheet, a copy of which has been furnished Purchaser. No notice has been
received by Seller of an increase or proposed increase in the cost of any
employee welfare benefit or employee pension benefit plan or other employee
benefit agreement or arrangement listed in Schedule 4.25(a).
(c) Additional Representations Pertaining to Certain
Employee Welfare Benefit Plans. All voluntary employee benefit associations
have been submitted to and approved as exempt from federal income tax under
Section 501(c)(9) of the Code by the IRS or the applicable submission period
will not have ended prior to the Closing. No plan, arrangement or agreement
with any one or more employees will cause Seller to have liability for
severance pay as a result of the Merger. Except as listed in Schedule 4.25(a),
Seller does not provide employee benefits, including without limitation, death,
post-retirement medical or health coverage (whether or not insured) or
contribute to or maintain any employee benefit plan which provides for benefit
coverage following termination of employment, nor has it made any
representations, agreements, covenants or commitments to provide that coverage,
except (i) as is required by Section 4980B(f) of the Code or other applicable
statute, (ii) death benefits or retirement benefits under any employee pension
benefit plan as defined in Section 3(2) of ERISA, (iii) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), or
(iv) deferred compensation benefits which have been accrued as liabilities on
the books of Seller and disclosed on its Financial Statements. All group health
plans maintained by Seller have been operated in compliance with Section
4980B(f) of the Code.
(d) Additional Representations Pertaining to Certain
Employee Pension Benefit Plans. All employee pension benefit plans as defined
in Section 3(2) of ERISA which are intended to qualify under Section 401(a) of
the Code have been submitted to and approved as qualifying under Section 401(a)
of the Code by the IRS or the applicable remedial amendment period will not
have ended prior to the Closing. No facts have occurred which if known by the
IRS could cause disqualification of those plans. All employee pension benefit
plans to which Section 412 of the Code is applicable have fully complied with
the funding requirements of that Section and there is no accumulated funding
deficiency as defined in Section 302(a)(2) of ERISA (whether or not waived) in
any one or more of those plans. Seller has paid all premiums (any interest,
charges and penalties for late payment, if any applicable) due the Pension
Benefit Guaranty Corporation (the "PBGC") with respect to each employee pension
benefit plan for which premiums are required. No facts are known by Seller
which will materially increase those premiums within three years of the Closing
Date. Except as set forth on Schedule 4.25(d), no employee pension benefit plan
maintained by Seller has been terminated under circumstances which would result
in liability to the PBGC. There has been
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no "reportable event" (as defined in Section 4043(b) of ERISA and the
regulations under that Section) with respect to any employee pension benefit
plan subject to Title IV of ERISA. Seller has not ceased operations at a
facility so as to become subject to the provisions of Section 4062(e) of ERISA,
withdrawn as a substantial employer so as to become subject to the provisions
of Section 4063 of ERISA or ceased making contributions on or before the date
of the Closing to any employee pension benefit plan subject to Section 4064(a)
of ERISA to which Seller made contributions at any time during the six years
prior to the date of Closing. Seller has not made a complete or partial
withdrawal from a multiemployer plan (as defined in Section 3(37) of ERISA) so
as to incur withdrawal liability as defined in Section 4201 of ERISA. The
aggregate withdrawal liability of Seller, computed as if a complete withdrawal
by Seller had occurred under each multiemployer pension plan as of the date
hereof, would not exceed $10,000.
(e) Except as disclosed in Section 4.25(e), the
transactions contemplated by this Agreement will not accelerate the time of
payment or vesting, or increase the amount, of compensation due any director,
officer or employee or former director, officer or employee (including any
beneficiary) from Seller.
4.26 Warranties and Product Liability.
(a) Except for (i) warranties implied by law and (ii)
warranties disclosed on Schedule 4.26 hereto, Seller has not given or made any
warranties in connection with the sale or rental of goods or services,
including, without limitation, warranties covering the customer's consequential
damages. To the Best Knowledge of Seller and the Shareholder, and except as set
forth in Schedule 4.26, there is no state of facts or occurrence of any event
forming the reasonable basis of any present claim against Seller with respect
to warranties relating to products manufactured, sold or distributed by Seller
or services performed by or on behalf of Seller that could reasonably be
expected to materially exceed the reserves therefor.
(b) To the Best Knowledge of Seller and the Shareholder,
there is no state of facts or any event forming the reasonable basis of any
present claim against Seller not fully covered by insurance, except for
deductibles and self-insurance retentions, for personal injury or property
damage alleged to be caused by products shipped or services rendered by or on
behalf of Seller.
4.27 Securities Laws Matters.
(a) Except as contemplated by Article 16 hereof, the
Shareholder recognizes and understands that the Stock Consideration to be
issued to the Shareholder pursuant to the Merger (the "securities") will not be
registered under the Securities Act, or under the securities laws of any state
(the "securities laws"). The securities are not being so registered in reliance
upon exemptions from the Securities Act and the securities laws which are
predicated, in part, on the representations, warranties and agreements of the
Shareholder contained herein.
(b) The Shareholder represents and warrants that (i)
Shareholder has business knowledge and experience, such experience being based
on actual participation therein, (ii) Shareholder is capable of evaluating the
merits and risks of an investment in the Stock Consideration and the
suitability thereof as an investment therefor, (iii) the Stock Consideration to
be acquired by the Shareholder in connection with the Merger will be acquired
solely for investment and not with a view toward resale or redistribution in
violation of the securities laws,
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<PAGE> 31
(iv) Shareholder's residence and domicile is in the State of Texas, (v) in
connection with the transactions contemplated hereby, no assurances have been
made concerning the future results of the BICC Parties or as to the value of
the Stock Consideration and (vi) Shareholder is an "accredited investor" within
the meaning of Regulation D promulgated by the SEC pursuant to the Securities
Act. The Shareholder understands that none of the BICC Parties is under any
obligation to file a registration statement or to take any other action under
the securities laws with respect to any such securities except as expressly set
forth in Article 16 hereof.
(c) The Shareholder has consulted with Shareholder's own
counsel in regard to the securities laws and is fully aware (i) of the
circumstances under which the Shareholder is required to hold the securities,
(ii) of the limitations on the transfer or disposition of the securities, (iii)
that the securities must be held indefinitely unless the transfer thereof is
registered under the securities laws or an exemption from registration is
available and (iv) that no exemption from registration is likely to become
available for at least one year from the date of acquisition of the securities.
The Shareholder has been advised by Shareholder's counsel as to the provisions
of Rules 144 and 145 as promulgated by the Commission under the Securities Act
and has been advised of the applicable limitations thereof. The Shareholder
acknowledges that the BICC Parties are relying upon the truth and accuracy of
the representations and warranties in this Section 4.27 by the Shareholder in
consummating the transactions contemplated by this Agreement without
registering the securities under the securities laws.
(d) The Shareholder has been furnished with (i) the definitive
proxy statement filed with the Commission in connection with the annual meeting
of stockholders of BICC held on February 20, 1997 and (ii) copies of BICC's
Registration Statement on Form 10, Annual Report on Form 10-K for the year
ended September 30, 1996, and Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1996 and March 31, 1997, filed with the Commission under the
Exchange Act. The Shareholder has been furnished with the complete financial
statements of BICC for the fiscal years ended September 30, 1994, 1995 and
1996, and the three and six months ended December 31, 1997 and March 31, 1997,
respectively. The Shareholder has been furnished with a summary description of
the terms of the BICC Stock and the BICC Parties have made available to the
Shareholder the opportunity to ask questions and receive answers concerning the
terms and conditions of the transactions contemplated by this Agreement and to
obtain any additional information which they possess or could reasonably
acquire for the purpose of verifying the accuracy of information furnished to
the Shareholder as set forth herein or for the purpose of considering the
transactions contemplated hereby. BICC has offered to make available to the
Shareholder upon request at any time all exhibits filed by BICC with the
Commission as part of any of the reports filed therewith.
(e) The Shareholder agrees that the certificates representing
his Stock Consideration to be acquired pursuant to the Merger will be imprinted
with the following legend, the terms of which are specifically agreed to:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. NEITHER
THE SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR
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OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
The Shareholder understands and agrees that appropriate stop transfer notations
will be placed in the records of BICC and with its transfer agent in respect of
the securities which are to be issued to the Shareholder in the Merger.
4.28 No Untrue Statements. The statements, representations and
warranties of Seller and the Shareholder set forth in this Agreement and the
Schedules and in all other documents and information furnished to the BICC
Parties and their representatives in connection herewith do not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements, representations and warranties made not
misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE BICC PARTIES. The BICC
Parties jointly and severally represent and warrant to the Shareholder as
follows:
5.1 Purchaser Incorporation. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted and to own, operate and lease the properties and assets
it now owns, operates or holds under lease except where the failure to be so
authorized, qualified or licensed would not have a Material Adverse Effect.
Complete and correct copies of the Certificate of Incorporation of Purchaser
and all amendments thereto, certified in each case by the Secretary of State of
Delaware, and of the Bylaws of Purchaser and all amendments thereto, certified
by the Secretary of Purchaser, heretofore have been delivered to Seller and the
Shareholder. The minute books of Purchaser previously made available to Seller
and the Shareholder are materially complete and accurately reflect, in all
material respects, all material action taken prior to the date of this
Agreement by its board of directors and shareholders, in their capacities as
such.
5.2 BICC Incorporation. BICC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted and to own, operate and lease the properties and assets
it now owns, operates or holds under lease except where the failure to be so
authorized, qualified or licensed would not have a Material Adverse Effect. The
minute books of BICC previously made available to Seller and the Shareholder
are materially complete and accurately reflect, in all material respects, all
material action taken prior to the date of this Agreement by its board of
directors and shareholders, in their capacities as such. The Certificate of
Incorporation and Bylaws of BICC, and all amendments thereto, have been filed
as exhibits to reports filed with the Commission.
5.3 Authorization. The BICC Parties have full legal right, power
and authority, corporate and otherwise, to enter into this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereof to be performed by them. The execution and delivery
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<PAGE> 33
of this Agreement and the performance by the BICC Parties of the transactions
contemplated herein have been duly authorized by all requisite corporate action
of the BICC Parties and is the legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms, except as
limited by applicable bankruptcy, moratorium, insolvency or similar laws
affecting generally the rights of creditors or by principles of equity.
5.4 Brokers and Finders. No broker or finder has acted for the
BICC Parties in connection with this Agreement or the transactions contemplated
by this Agreement and no broker or finder is entitled to any brokerage or
finder's fee or to any commission in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of the BICC
Parties.
5.5 Authorization for Stock Consideration. BICC has taken all
necessary action to permit it to issue the number of shares of Stock
Consideration required to be issued pursuant to the terms of this Agreement.
The shares of Stock Consideration issued pursuant to the terms of this
Agreement will, when issued, be validly issued, fully paid and nonassessable
and not subject to preemptive rights. The Stock Consideration issuable pursuant
to this Agreement will, when issued, be listed on the NASDAQ National Market.
5.6 SEC Documents. BICC has provided to Seller and the Shareholder
its Registration Statement on Form 10, Annual Report on Form 10-K for the year
ended September 30, 1996, its Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1996 and March 31, 1997, and its proxy statement with
respect to the Annual Meeting of Stockholders held on February 20, 1997 (such
documents collectively referred to herein as the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of BICC
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of BICC and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information for normal year-end adjustments). All
material agreements, contracts and other documents required to be filed as
exhibits to the SEC Documents have been so filed. The consolidated balance
sheet included in BICC's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 (the "Form 10-Q") reflects, as of the date thereof, all
liabilities, debts and obligations of any nature, kind or manner of BICC and
its subsidiaries, whether direct, accrued, absolute, contingent or otherwise,
and whether due or to become due that are required to be reflected on such
balance sheet under generally accepted accounting principles consistently
applied.
5.7 Events Since March 31, 1997. Since March 31, 1997, there has
not been any material adverse change in the condition (financial or otherwise)
or in the properties, assets, liabilities, business or prospects of the BICC
Parties, and there has been no event since such date that would require
disclosure in a Form 10-Q , Form 8-K or Form 10- K.
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5.8 Effect of Agreement. Except for violations, conflicts or other
matters that would not have a Material Adverse Effect, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not (a) violate any provision of the Certificate of
Incorporation or other charter documents or bylaws of the BICC Parties; (b) to
the Best Knowledge of the BICC Parties, result in any violation of any
applicable Governmental Requirement applicable to the BICC Parties; (c)
conflict with or result in any breach of, or default or loss of any right under
(or an event or circumstances that, with notice or the lapse of time, or both,
would result in a default), or the creation of an Encumbrance pursuant to, or
cause or permit the acceleration prior to maturity or "put" right with respect
to, any obligation under, any material contract, indenture, mortgage, deed of
trust, lease, loan agreement or other material agreement or instrument to which
any of the BICC Parties is a party or to which any of its assets or properties
are subject; (d) relieve any Person of any obligation (whether contractual or
otherwise) or enable any Person to accelerate or terminate any such obligation
or any right or benefit enjoyed by the BICC Parties; or (e) require notice to
or the consent, authorization, approval, clearance, waiver or order of any
Person. Except as set forth on Schedule 5.8 hereto, the execution, delivery and
performance of this Agreement by the BICC Parties will not result in the loss
of any material governmental license, franchise or permit possessed by the BICC
Parties.
5.9 Litigation. The BICC Parties are not currently subject to any
suits, actions, claims or investigations that would be required to be disclosed
in a Form 10-K, Form 8-K or Form 10-Q that have not been previously disclosed
therein.
5.10 No Implied Warranties. It is understood and agreed that Seller
and the Shareholder are not making and have not made, any representation or
warranty of any kind, express or implied, to the BICC Parties except for those
specifically provided in this Agreement. Seller and the Shareholder make no
representation or warranty to the BICC Parties regarding (a) any projections,
estimates or budgets heretofore delivered or made available to the BICC Parties
of future revenues, expenses or expenditures, future results of operations (or
any component thereof), future cash flows or future financial conditions (or
any component thereof) of Seller and the Shareholder, the Assets or the
Business or the future business operations of the BICC Parties.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS,
GUARANTEES, REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER. (a)
All statements of fact contained in this Agreement or in any written statement
(including financial statements), certificate, schedule or other document
delivered by or on behalf of Seller or the Shareholder pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed representations and warranties of Seller and the Shareholder hereunder.
All indemnifications, representations and warranties made by Seller and/or the
Shareholder hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Effective Time regardless of any
investigation at any time made by or on behalf of the BICC Parties (subject, in
all cases, to the limitations set forth in Article 11). The covenants and
agreements made by Seller and/or the Shareholder hereunder or pursuant hereto
or in connection with the transactions contemplated hereby shall continue until
all obligations with respect thereto shall have been performed or satisfied or
shall have been terminated in accordance with their terms.
(b) All statements of fact contained in this Agreement or
in any written statement (including financial statements), certificate,
schedule or other document delivered by or on behalf
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<PAGE> 35
of the BICC Parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and warranties
of the BICC Parties hereunder. All indemnifications, representations and
warranties made by the BICC Parties hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the
Effective Time (subject, in all cases, to the limitations set forth in Article
11). The covenants and agreements made by the BICC Parties hereunder or
pursuant hereto or in connection with the transactions contemplated hereby
shall continue until all obligations with respect thereto shall have been
performed or satisfied or shall have been terminated in accordance with their
terms.
7. TAX TREATMENT.
Seller, the Shareholder and the BICC Parties intend that the
transactions contemplated hereunder constitute a tax-free reorganization (a
"Reorganization") for federal income tax purposes under Sections 368(a)(1) and
368(a)(2)(D) of the Code, and agree to treat and report for federal income tax
purposes the transactions hereunder as a Reorganization. This Agreement shall
be construed in a manner to result in treatment of the transactions hereunder
as a Reorganization for federal income tax purposes. Each party hereto
recognizes and acknowledges that the treatment of the transactions described
herein as a Reorganization for federal income tax purposes shall result in the
Shareholder, and may result in Seller, recognizing taxable gain related to the
consideration received from the BICC Parties other than Stock Consideration as
provided in Sections 357, 361, 354 and 356 of the Code. Any taxable gain to
Seller shall be reported by Seller on its final return and shall not be a
liability assumed by the BICC Parties.
8. BICC CLOSING DOCUMENTS. The following documents shall be
received by the BICC Parties at Closing:
8.1 Opinion of Counsel. The BICC Parties will have received an
opinion from Cox & Smith Incorporated, counsel to Seller, dated the Closing
Date, in form and substance reasonably satisfactory to the BICC Parties,
covering the matters set forth in Schedule 8.1 and such other matters as the
BICC Parties shall reasonably request.
8.2 Employment Arrangements. Michael A. Harrelson, Sheila Bond,
Tim Daniels and Bryan Baxter shall each have entered into an employment
arrangement with Purchaser or BICC as contemplated by Article 12.
8.3 Stock Pledge and Escrow Agreement. The Shareholder shall have
executed and delivered a Stock Pledge and Escrow Agreement (the "Escrow
Agreement") in the form attached hereto as Schedule 8.3.
8.4 Resolutions. Purchaser shall have received a certified copy of
resolutions duly adopted by the Board of Directors and the Shareholder of
Seller authorizing and approving the execution and delivery of this Agreement
and performance by Seller of its obligations hereunder.
8.5 Intellectual Property Assignment. Seller shall have executed
and delivered to Purchaser at Closing the intellectual property assignment as
contemplated by Section 10.3.
9. SELLER AND THE SHAREHOLDER CLOSING DOCUMENTS. The following
documents shall be delivered to Seller and the Shareholder at Closing:
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9.1 Put Option. BICC shall have executed and delivered to
Shareholder a Put Option Agreement (the "Put Option") in the form attached
hereto as Schedule 9.1.
9.2 Opinion of Counsel. Seller and the Shareholder will have
received an opinion from Fulbright & Jaworski L.L.P., counsel to the BICC
Parties, dated the Closing Date, in form and substance reasonably satisfactory
to Seller and the Shareholder, covering the matters set forth in Schedule 9.2
and such other matters as Seller and the Shareholder shall reasonably request.
9.3 Employment Arrangements. Michael A. Harrelson, Sheila Bond,
Tim Daniels and Bryan Baxter shall each have entered into an employment
arrangement with BICC as contemplated by Article 12.
9.4 Resolutions. Seller and the Shareholder shall have
received a certified copy of resolutions duly adopted by the Board of Directors
of each of the BICC Parties authorizing and approving the execution and
delivery of this Agreement and performance by the BICC Parties of their
obligations hereunder.
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
10.1 Closing Distribution. At or prior to Closing, Seller shall
make a final cash distribution to the Shareholder in an amount equal to the
lesser of: (a) $930,000, (b) Net Income Before Income Taxes for the period from
January 1, 1997 until the Closing Date (prior to giving effect to the
distribution contemplated by this Section 10.1), as determined in accordance
with generally accepted accounting principles consistently applied, (c) the
amount of cash available in Seller's bank accounts on the Closing Date (prior
to giving effect to the distribution contemplated by this Section 10.1), or (d)
positive Working Capital as of the Closing Date (prior to giving effect to the
distribution contemplated by this Section 10.1) ("Working Capital" being
defined as current assets minus current liabilities according to generally
accepted accounting principles). Notwithstanding anything to the contrary
contained herein, at or prior to the Closing Date, upon receiving the prior
written consent of BICC, which consent shall not be unreasonably withheld,
Seller may finance a portion of Seller's Accounts Receivable with a loan from
the Shareholder secured by the Accounts Receivable in order to enable Seller to
make the Final Distribution (the "Final Distribution"), and the proceeds of
such financing shall be (y) used to determine both the amounts of cash
available and Working Capital as described above, and (z) eligible to be used
for the Final Distribution at or prior to Closing.
10.2 Intellectual Property Assignment. Although acknowledged by all
parties as also fully enabled by the Merger memorialized by this Agreement,
Seller shall also execute a separate assignment to Purchaser of all of Seller's
right, title and interest in and to Intellectual Property. This separate
assignment shall be set forth as Schedule 10.2 to this Agreement, and
recordation thereof shall be at the sole discretion of Purchaser.
10.3 Use of Name of Seller. Immediately upon the occurrence of the
Closing, the Shareholder shall cease using the name "Computer Resources
Management, Inc.", "CRM", "CRM Systems", and all derivations thereof. The
Shareholder covenants and agrees that after the Closing he will not, directly
or indirectly, use the name "Computer Resources Management, Inc.", "CRM", "CRM
Systems", or any derivation thereof in connection with any business enterprise.
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11. INDEMNITY BY THE SHAREHOLDER.
11.1 Indemnification by the Shareholder. The Shareholder agrees to
indemnify, defend and hold harmless the BICC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns from and
against and in respect of any and all Damages which may now or in the future be
paid, incurred or suffered by or asserted against such party (collectively,
"General Losses"), arising out of or resulting from or relating to any
misrepresentation, breach of warranty or breach of any covenant, commitment or
agreement made or undertaken by Seller or the Shareholder in this Agreement.
Any claim for indemnification under this Section 11.1 must be made within one
year after the Effective Time.
11.2 Environmental Indemnification. The Shareholder agrees to
indemnify, defend and hold harmless the BICC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns from and
against and in respect of any and all Environmental Liabilities which may now
or in the future be paid, incurred or suffered by or asserted against such
party, arising out of or resulting from or relating to or in connection with
(a) the acts or omissions of any Person prior to the Effective Time relating to
Seller, any business currently or previously conducted by Seller, the Assets,
the operations currently or previously conducted by Seller or any other assets
or properties currently or previously leased or owned by Seller, or (b) any
breach by Seller or the Shareholder of a representation or warranty contained
in Section 4.16 hereof (collectively, "Environmental Losses"). Any claim for
indemnification under this Section 11.2 must be made within one year after the
Effective Time.
11.3 Tax Indemnification. The Shareholder agrees to indemnify,
defend and hold harmless the BICC Parties and the Surviving Corporation and
each of their respective Associates, Affiliates, officers, directors,
employees, agents, consultants, representatives, shareholders and controlling
Persons and their respective successors and assigns from and against and in
respect of any and all Damages which may now or in the future be paid, incurred
or suffered by or asserted against such party arising out of or resulting from
or relating to any Taxes or Tax Returns of Seller for any period, or portion
thereof, up to and including the Effective Time (collectively, "Tax Losses").
Any claim for indemnification under this Section 11.3 must be made within one
year after the Effective Time.
11.4 Products Liability and Warranty Indemnification. The
Shareholder agrees to indemnify, defend and hold harmless the BICC Parties and
the Surviving Corporation and each of their respective Associates, Affiliates,
officers, directors, employees, agents, consultants, representatives,
shareholders and controlling Persons and their respective successors and
assigns from and against and in respect of any and all Damages which may now or
in the future be paid, incurred or suffered by or asserted against such party
arising out of or resulting from or relating to any products manufactured, sold
or distributed or services provided by or on behalf of Seller on or prior to
the Effective Time or with respect to any claims made pursuant to warranties to
third Persons in connection with products manufactured, sold or distributed or
services provided by or on behalf of Seller on or prior to the Effective Time
(collectively, "Product Losses"). Any claim for indemnification under this
Section 11.4 must be made within one year after the Effective Time.
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11.5 Subchapter S Earnings Distribution Indemnification. The
Shareholder agrees to indemnify, defend and hold harmless the BICC Parties and
the Surviving Corporation and each of their respective Associates, Affiliates,
officers, directors, employees, agents, consultants, representatives,
shareholders and controlling Persons and their respective successors and
assigns from and against and in respect of any and all amounts that are
determined at a later date to have been paid to the Shareholder in violation of
Section 10.1 of this Agreement, including amounts paid thereunder as a result
of inaccuracies of the items described in subsections (a) through (d) of
Section 10.1 (collectively, "Subchapter S Losses"). Any claim for
indemnification under this Section 11.5 must be made within one year after the
Effective Time.
11.6 Indemnification by the BICC Parties. The BICC Parties, jointly
and severally, agree to indemnify, defend and hold harmless the Shareholder and
his heirs, successors and assigns from and against and in respect of any and
all Damages which may now or in the future be paid, incurred or suffered by or
asserted against any such party, arising out of or resulting from or relating
to any misrepresentation, breach of warranty or breach of any covenant,
commitment or agreement made or undertaken by the BICC Parties in this
Agreement. Any claim for indemnification under this Section 11.6 must be made
within one year after the Effective Time.
11.7 Limitation on Indemnification; Basket.
(a) An Indemnitee shall not be entitled to assert any claim
for indemnification under this Article 11 unless and until such time as all
claims for Damages of the Indemnitee exceed $100,000 in the aggregate (the
"Basket"). Once all Damages of an Indemnitee exceed the Basket, the Indemnitee
shall, subject to the terms of this Article 11, be entitled to full
indemnification for all Damages in excess of the Basket. However, this Section
11.7(a) will not apply with respect to any claim based on (i) any claim for
indemnification under Section 11.5 hereof, or (ii) any claim for
indemnification based on a breach of a representation, warranty or covenant
contained in Section 4.18.
(b) The Holdback Shares are the sole and exclusive source from
which any and all potential claims for indemnification by the BICC Parties and
any other Indemnitee other than the Shareholder under this Article 11 shall be
satisfied, except (i) to the extent otherwise provided in Section 13.5 and
Article 14 below, (ii) with respect to claims for indemnification under Section
11.5 and 11.6 hereof, for which Damages shall be paid in cash by the
Shareholder (without regard to the Holdback Shares), and the BICC Parties, as
the case may be, and (iii) any claim for indemnification based on a breach of a
representation, warranty or covenant contained in Section 4.18 for which
Damages shall be paid in cash by the Shareholder (without regard to the
Holdback Shares). The indemnification obligations of the Shareholder pursuant
to Sections 11.1 through 11.4 above shall be satisfied through a reduction of
the Merger Consideration effected by cancellation or other disposition by BICC
of Holdback Shares pursuant to Section 11.8 of this Agreement. For purposes of
any indemnification claim under this Article 11, the Holdback Shares shall be
valued at $26.00 per share.
(c) Any indemnifiable claim with respect to any breach or
nonperformance by any party of a representation, warranty, covenant or
agreement shall be limited to the amount of actual damages sustained by the
indemnified party by reason of such breach or nonperformance. Notwithstanding
anything to the contrary elsewhere in this Agreement, no party or its
Affiliates shall in any event be liable to any other party or its Affiliates
for any consequential damages, including,
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but not limited to, loss of future revenue or income, cost of capital, or loss
of business reputation or opportunity. Each party further agrees that it shall
not seek punitive damages as to any matter relating to this Agreement or the
transactions contemplated by it.
(d) The sole and exclusive remedy of the parties hereto
for any claim resulting in a breach by any of the parties hereto of their
respective representations, warranties, covenants or agreements made hereby or
the failure by any party to perform their respective obligations under this
Agreement, except as otherwise provided in Section 13.5 and Article 14 below,
shall be a claim under this Article 11. The parties hereby waive any provision
of law to the extent that it would limit or restrict the agreements set forth
in this Article 11.
(e) The parties hereto agree to treat any indemnity payment
made pursuant to Sections 11.1 through 11.6 as an adjustment to the Merger
Consideration for tax purposes.
11.8 Holdback. The Holdback Shares (which shall include for
purposes of this Section 11.8 any distributions accrued or made thereon after
the date of this Agreement, the net proceeds of any sale of Holdback Shares and
any other securities or property which may be issued after the date hereof in
exchange for such shares in any merger or recapitalization or similar
transaction involving BICC) shall be deemed as of the Effective Time to be
deposited by the Shareholder with the Escrow Agent pursuant to the Escrow
Agreement, and certificates representing the Holdback Shares shall be held by
the Escrow Agent. The Shareholder and Purchaser shall deliver to the escrow
agent at the Closing the Escrow Agreement attached hereto as Schedule 8.4,
appropriate stock powers endorsed in blank and such other documentation as the
escrow agent may reasonably prescribe to carry out the purposes of this Section
11.8. So long as any Holdback Shares are held by the escrow agent hereunder,
BICC shall have, and the Shareholder by execution and/or approval of this
Agreement hereby grants, effective as of the Effective Time, a perfected, first
priority security interest in such Holdback Shares to secure payment of amounts
payable by the Shareholder in respect of claims under this Article 11;
provided, however, BICC hereby agrees to forebear from exercising, and hereby
waives, any of its rights to enforce the remedies afforded to a secured
creditor under Article 9 of the Texas Business and Commerce Code, and as the
same may be hereafter amended, with respect to the Holdback Shares, until such
time, if ever, as BICC would otherwise be entitled to receive the Holdback
Shares pursuant to the terms of the Escrow Agreement. In connection therewith,
the Shareholder shall execute and deliver such instruments as BICC or the
Escrow Agent may from time to time reasonably request for the purpose of
evidencing and perfecting such security interest.
11.9 Escrow; Prohibition on Transfer. At Closing, the Purchaser
shall deposit Holdback Shares with the Escrow Agent pursuant to the Escrow
Agreement. The Escrow Agreement shall be executed and delivered by the
Shareholder and the appropriate BICC Parties at Closing. Until such time as the
Holdback Shares shall have been delivered to the Shareholder pursuant to the
terms of the Escrow Agreement, the Shareholder covenants and agrees with the
BICC Parties that the Shareholder will not sell, transfer, pledge, assign,
hypothecate or otherwise dispose of, or enter into any contract, option or
other pledge agreement or understanding (either written or oral) with respect
to the sale, transfer, pledge, assignment, hypothecation or other disposition
of any Holdback Shares or any dividends or distributions that may be declared
or paid in respect thereof.
11.10 Procedure. All claims for indemnification or payment under
this Article 11 shall be asserted and resolved as follows:
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(a) An Indemnitee shall promptly give the Indemnitor
written notice of any matter which an Indemnitee has determined has given or
could give rise to a right of indemnification under this Agreement (an
"Indemnification Event"), stating the amount of the Loss, if known, and method
of computation thereof, all with reasonable particularity, and stating with
particularity the nature of such matter. Failure to provide such written notice
shall not affect the right of the Indemnitee to indemnification except to the
extent such failure shall have resulted in liability to the Indemnitor that
could have been actually avoided had such notice been provided within such
required time period.
(b) The obligations and liabilities of an Indemnitor
under this Article 11 with respect to Losses arising from claims of any third
party that are subject to the indemnification provided for in this Article 11
("Third- Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnitee shall receive notice of any
Third-Party Claim, the Indemnitee shall give the Indemnitor prompt notice of
such Third- Party Claim and the Indemnitor may, at its option, assume and
control the defense of such Third-Party Claim at the Indemnitor's expense and
through counsel of the Indemnitor's choice reasonably acceptable to Indemnitee.
Subject to the condition that written notice be delivered prior to the
expiration of one year after the Effective Time, failure to provide such
written notice shall not affect the right of the Indemnitee to indemnification
except to the extent such failure shall have resulted in liability to the
Indemnitor that could have been actually avoided had such notice been provided
within such required time period. In the event the Indemnitor assumes the
defense against any such Third-Party Claim as provided above, the Indemnitee
shall have the right to participate at its own expense in the defense of such
asserted liability, shall cooperate with the Indemnitor in such defense and
will attempt to make available on a reasonable basis to the Indemnitor all
witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably required by the Indemnitor.
In the event the Indemnitor does not elect to conduct the defense against any
such Third-Party Claim, the Indemnitor shall cooperate with the Indemnitee (and
be entitled to participate) in such defense and attempt to make available to it
on a reasonable basis all such witnesses, records, materials and information in
its possession or under its control relating thereto as is reasonably required
by the Indemnitee. The Indemnitor understands that if such Third-Party Claim
results in an obligation to indemnify hereunder, Damages shall include all
reasonable costs and expenses of such defense. Except for the settlement of a
Third-Party Claim that involves the payment of money only and for which the
Indemnitor has provided written objection to Indemnitee under Section 11.10(c),
no Third-Party Claim may be settled without the written consent of the
Indemnitee. Written notice of any proposed settlement of any such claim and the
material terms thereof shall be delivered by Indemnitee to Indemnitor at least
five Business Days prior to any settlement of any such claim.
(c) If a claim for indemnity is provided pursuant to this
Article 11 by an Indemnitee and the Indemnitor does not pay such claim or
object to such claim within 20 Business Days after written notice is received
by the Indemnitor, such claim shall be deemed agreed to by the Indemnitor. If
the Indemnitor shall object to such claim, a written notice of such objection
setting forth in reasonable detail the basis for such objection shall be
provided to the Indemnitee and such dispute shall be resolved in accordance
with Section 18.11 hereof. In addition, if the claim shall have been determined
to have been a valid claim, Damages shall include interest at the prime rate as
quoted from time to time by The Frost National Bank from the date the claim is
first made until fully paid.
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11.11 Payment.
(a) Payment of any amounts due pursuant to this Article
11 shall be made within 10 Business Days after final adjudication of such claim
and after written notice is sent by the Indemnitee.
11.12 Adjustment of Liability. The amount which an Indemnitee shall
be entitled to receive from an Indemnitor with respect to a Loss under this
Article 11 shall be net of any insurance recovery by the Indemnitee on account
of such Loss from an unaffiliated party. Any tax benefit actually realized by
an Indemnitee on account of a Loss that is fully indemnified by an Indemnitor
shall be paid to the Indemnitor when and if such benefit is actually realized
and then only to the extent such benefit is attributable to the indemnified
portion of the Loss. The benefit actually realized shall be based on the
Federal Tax Returns of the Indemnitee and any benefit shall not be considered
realized unless and until the Tax Return reflecting such benefit is filed. To
the extent such benefit is disallowed or reduced in connection with any audit,
the Indemnitor shall promptly refund the amount of the benefit so disallowed or
reduced.
11.13 Failure to Pay Indemnification. If and to the extent the
Indemnitee shall make written demand upon the Indemnitor for indemnification
pursuant to this Article 11 and the Indemnitor shall refuse or fail to pay in
full within 20 Business Days of such written demand the amounts demanded
pursuant hereto and in accordance herewith, then the Indemnitee shall proceed
in accordance with the arbitration provisions of Section 17.11 hereof;
provided, however, that in the case of indemnification for a Third-Party Claim,
such matter need not be resolved by arbitration until the underlying
Third-Party Claim is finally resolved.
11.14 Cooperation. The Indemnitor and the Indemnitee shall cooperate
with each other with regard to any indemnification obligation under this
Article 11 and each shall attempt to make available to the other on a
reasonable basis all personnel records, materials and information in its
possession or under its control as is reasonably requested by the other.
11.15 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. THE
INDEMNIFICATION PROVIDED IN THIS ARTICLE 11 SHALL BE APPLICABLE WHETHER OR NOT
THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE INDEMNITEE, OR THE
SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE INDEMNITEE, OR THE SOLE OR
CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE INDEMNITEE, IS ALLEGED OR
PROVEN.
11.16 Appointment of Successor Escrow Agent. In the event the Escrow
Agent resigns and is discharged from its duties or obligations under the Escrow
Agreement, BICC will designate a successor Escrow Agent prior to the expiration
of the ten-day period following the notice date of the Escrow Agent's
resignation, by giving written notice to the Escrow Agent and the Shareholder.
BICC may appoint a successor Escrow Agent without the consent of the
Shareholder so long as such successor is a bank with assets of at least $500
million, and may appoint any other successor Escrow Agent with the consent of
the Shareholder, which consent shall not be unreasonably withheld.
12. EMPLOYMENT AND CONSULTING ARRANGEMENTS. Each of Michael A.
Harrelson, Sheila Bond, Tim Daniels and Bryan Baxter, on the one hand, and
Purchaser on the other hand, shall enter into the employment agreements
attached hereto as Schedule 12.1 on or before the Closing Date whereby Michael
A. Harrelson, Sheila Bond, Tim Daniels and Bryan Baxter shall provide services
to Purchaser.
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13. NON-COMPETITION AGREEMENT.
13.1 Non-Competition. In consideration of the benefits of this
Agreement to the Shareholder and as a material inducement to the BICC Parties
to enter into this Agreement and pay the Merger Consideration, the Shareholder
hereby covenants and agrees that, commencing on the Closing Date and ending
three years following the termination of the Employment Agreement between BICC
and the Shareholder of even date herewith, regardless of how such termination
may be brought about, he shall not, and the Shareholder will cause his
Associates, Affiliates and representatives not to, directly or indirectly, as
proprietor, partner, stockholder, director, executive, officer, employee,
consultant, joint venturer, investor or in any other capacity, engage in, or
own, manage, operate or control, or participate in the ownership, management,
operation or control, of any entity which engages anywhere in the United States
or Canada in any business activity in which Seller or the BICC Parties or their
Affiliates participates or participated as of the Closing Date; provided,
however, the foregoing shall not prohibit the Shareholder, his Associates,
Affiliates and representatives from purchasing and holding as an investment not
more than 5% of any class of publicly traded securities of any entity which
conducts a business in competition with the business of the BICC Parties, so
long as the Shareholder, his Associates, Affiliates and representatives do not
participate in any way in the management, operation or control of such entity.
13.2 Judicial Reformation. The Shareholder acknowledges that, given
the nature of the BICC Parties' business, the covenants contained in Section
13.1 establish reasonable limitations as to time, geographic area and scope of
activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the BICC Parties'
business and to protect their legitimate business interests. If, however,
Section 13.1 is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only over the
longest period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court.
13.3 Customer Lists; Non-Solicitation. The Shareholder hereby
further covenants and agrees that he shall not, and the Shareholder will cause
his Associates, Affiliates and representatives not to, directly or indirectly,
(a) use or make known to any person or entity the names or addresses of any
clients or customers of Seller or the BICC Parties or any other information
pertaining to them, provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public; (ii) become or
becomes generally known to the public through no fault of the Shareholder, his
Associates, Affiliates and representatives, and (iii) is disclosed in
accordance with an order of a court of competent jurisdiction or applicable
law, (b) call on, solicit, or attempt to call on or solicit any clients or
customers of Seller or the BICC Parties, nor (c) solicit for employment,
recruit, hire or attempt to recruit or hire any employees of Seller or the BICC
Parties.
13.4 Covenants Independent. The covenants of the Shareholder
contained in Sections 13.1, 13.2 and 13.3 of this Agreement will be construed
as independent of any other provision in this Agreement, and the existence of
any claim or cause of action by the Shareholder against the BICC Parties will
not constitute a defense to the enforcement by the BICC Parties of said
provisions. The Shareholder understands that the provisions contained in
Sections 13.1, 13.2 and 13.3 are essential elements of the transactions
contemplated by this Agreement and, but for the agreement of the
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Shareholder to Sections 13.1, 13.2 and 13.3, the BICC Parties would not have
agreed to enter into this Agreement and the transactions contemplated herein.
The Shareholder has been advised to consult with counsel in order to be
informed in all respects concerning the reasonableness and propriety of
Sections 13.1, 13.2 and 13.3 with specific regard to the nature of the business
conducted by Seller and the BICC Parties and the Shareholder acknowledge that
Sections 13.1, 13.2 and 13.3 are reasonable in all respects.
13.5 Remedies. In the event of a breach or a threatened breach by
the Shareholder of any of the provisions contained in Sections 13.1, 13.2 or
13.3 of this Agreement, the Shareholder acknowledges that the BICC Parties will
suffer irreparable damage or injury not fully compensable by money damages, or
the exact amount of which may be impossible to obtain, and, therefore, will not
have an adequate remedy available at law. Accordingly, the BICC Parties shall
be entitled to obtain such injunctive relief or other equitable remedy, without
the necessity of posting bond therefor, from any court of competent
jurisdiction as may be necessary or appropriate to prevent or curtail any such
breach, threatened or actual. The foregoing shall be in addition to and without
prejudice to any other rights that the BICC Parties may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Shareholder
recognizes and acknowledges that he has and will have access to certain
confidential information of Seller that is included in the Assets (including,
but not limited to, lists of customers, software designs, system
specifications, trade secrets, Software source code, enhancements to the "CRM
Systems" software package to enable user access thereto via a remote network,
enhancements to the "CRM Systems" software package to bill wireless call
traffic, and costs and financial information) that after the consummation of
the transactions contemplated hereby will be valuable, special and unique
property of Purchaser. The Shareholder agrees that he will, and will cause his
Associates, Affiliates and representatives, to keep confidential and not
disclose to any other Person or use for his own benefit or for the benefit of
any other Person, and he will use his best efforts to prevent disclosure by any
other Person of, any such confidential information to any Person for any
purpose or reason whatsoever, except to authorized representatives of
Purchaser; provided, however, such limitation shall not apply to any
information which (i) is then generally known to the public; (ii) become or
becomes generally known to the public through no fault of the Shareholder, his
Associates, Affiliates and representatives, and (iii) is disclosed in
accordance with an order of a court of competent jurisdiction or applicable
law. Seller or the Shareholder may have entered into certain confidentiality
agreements with third parties regarding the possible sale of Seller or its
Business. Seller and/or the Shareholder has previously requested that all such
third parties return to Seller all confidential information provided to such
parties by or on behalf of Seller or the Shareholder or that such information
be destroyed. At the Closing, Seller shall assign all of its rights in and to
any such confidentiality agreements to Purchaser. In the event of a breach or a
threatened breach by the Shareholder of any of the provisions contained in this
Article 14 of this Agreement, the Shareholder acknowledges that the BICC
Parties will suffer irreparable damage or injury not fully compensable by money
damages, or the exact amount of which may be impossible to obtain, and,
therefore, will not have an adequate remedy available at law. Accordingly, the
BICC Parties shall be entitled to obtain such injunctive relief or other
equitable remedy, without the necessity of posting bond therefor, from any
court of competent jurisdiction as may be necessary or appropriate to prevent
or curtail any such breach, threatened or actual. The foregoing shall be in
addition to and without prejudice to any other rights that the BICC Parties may
have under this Agreement, at law or in equity, including, without limitation,
the right to sue for damages.
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15. NOTICES. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, given by
prepaid telex or telegram or by facsimile or other similar instantaneous
electronic transmission device or mailed first class, postage prepaid,
certified United States mail, return receipt requested, as follows:
(a) If to Purchaser or BICC, at:
Billing Information Concepts Corp.
7411 John Smith Drive, Suite 200
San Antonio, Texas 78229
Attention: Marshall Millard
Facsimile No.: (210) 949-7044
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro
Facsimile No.: (210) 270-7205
(b) If to Seller, at:
Computer Resources Management, Inc.
101 Sunflower
San Antonio, Texas 78213
Attention: Michael A. Harrelson
Facsimile No.: (210) 349-9453
With a copy to:
Cox & Smith Incorporated
112 East Pecan, Suite 2000
San Antonio, Texas 78205
Attention: Steven R. Jacobs
Facsimile No.: (210) 226-8395
(c) If to the Shareholder, at:
Computer Resources Management, Inc.
101 Sunflower
San Antonio, Texas 78213
Attention: Michael A. Harrelson
Facsimile No.: (210) 349-9453
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With a copy to:
Cox & Smith Incorporated
112 East Pecan, Suite 2000
San Antonio, Texas 78205
Attention: Steven R. Jacobs
Facsimile No.: (210) 226-8395
provided that any party may change its address for notice by giving to the
other party written notice of such change. Any notice given under this Article
15 shall be effective (x) when delivered, if delivered personally, (y) 24 hours
after sending, if sent by telex or telegram or by facsimile or other similar
instantaneous electronic transmission device, and (z) 48 hours after mailing,
if mailed.
16. REGISTRATION. BICC shall be obligated to the Shareholder as
follows:
16.1 Registration Rights. On August 5, 1997, or as soon thereafter
as is reasonably practicable, BICC will, if it is a registrant entitled to use
Form S-3 to register the Stock Consideration, use its best efforts to file a
registration statement on Form S-3 (or any successor to Form S-3) with the
Commission and such applications or other filings as required under applicable
state securities or blue sky laws sufficient to permit the public offering of
the Stock Consideration to be made on a continuous basis pursuant to Rule 415
under the Act, and shall use its best efforts to cause such registration
statement to be declared effective so that the Stock Consideration will be
registered for the offering on such Form; provided, however, that BICC shall
only be obligated to file one such registration statement on Form S-3 under
this Section 16.1. BICC shall not permit any securities other than the Stock
Consideration to be included in any registration statement filed pursuant to
this Article 16. Notwithstanding the foregoing, BICC shall not be obligated to
effect a registration pursuant to this Section 16.1: (a) in any particular
jurisdiction in which BICC would be required to execute a general consent to
service of process in effecting such registration, qualification or compliance
unless BICC is already subject to service in such jurisdiction and except as
may be required by the Securities Act; (b) if BICC gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within 90 days of such notice; (c) during the period starting with
the date 30 days prior to BICC's good faith estimated date of filing of, and
ending on the date six months immediately following the effective date of any
registration statement pertaining to securities of BICC, provided that BICC is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; (d) if BICC shall furnish to the
Shareholder a certificate signed by the President of BICC stating that in the
good faith judgment of the Board of Directors the filing of a registration
statement would require the disclosure of material information that BICC has a
bona fide business purpose for preserving as confidential and that is not then
otherwise required to be disclosed, then BICC's obligation to use its best
efforts to file a registration statement shall be deferred for a period not to
exceed 90 days from the receipt of the request to file such registration by the
Shareholder.
16.2 Registration Procedures and Expenses. If and whenever BICC is
required to include the Stock Consideration in a registration statement under
the Securities Act, as provided in Section 16.1 hereof, BICC shall, as
expeditiously as is reasonably practicable, do each of the following:
(a) prepare and file with the SEC a registration
statement with respect to the Stock Consideration and, subject to the
limitations under Section 16.1 hereof, use its best efforts to cause
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such registration statement to become effective and remain effective as
provided herein; provided that before filing any such registration statement or
prospectus or any amendments or supplements thereto (other than documents that
would be incorporated or deemed to be incorporated therein by reference and
that BICC is required by applicable securities laws or stock exchange
requirements to file) BICC shall furnish to the Shareholder copies of all such
documents proposed to be filed.
(b) cooperate with the Shareholder and any underwriter
who shall sell the Stock Consideration in connection with their review of BICC
made in connection with such registration;
(c) prepare and file with the SEC such amendments and
post-effective amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective until the earlier to occur of (i) the sale of
all of the Stock Consideration by the Shareholder and (ii) the first
anniversary of the Closing Date, and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all the
Stock Consideration covered by such registration statement for such period and
comply with the provisions of the Securities Act and the Exchange Act
applicable to it.
(d) furnish to the Shareholder such number of copies of
the registration statement and the prospectus forming a part of such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as the
Shareholder may reasonably request in order to facilitate the disposition of
the Stock Consideration; and
(e) notify the Shareholder at any time when a prospectus
relating to the Stock Consideration is required to be delivered under the
Securities Act, (i) of the happening of any event as a result of which the
prospectus forming a part of such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and (ii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
registration statement or of any order preventing or suspending the use of any
prospectus or the initiation of any proceedings for that purpose, (iii) of the
receipt by BICC of any notification with respect to the suspension of the
qualification or exemption from qualification of a registration statement or
the initiation or threatening of any proceeding for such purpose and (iv) at
the request of the Shareholder, prepare and furnish to the Shareholder a
reasonable number of copies of any supplement to or any amendment of such
prospectus that may be necessary so that, as thereafter delivered to the
purchasers of the Stock Consideration, such prospectus shall not include 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 therein not misleading
in light of the circumstances then existing.
(f) Use all reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification (or exemption from
qualification) of any of the Stock Consideration for sale in any jurisdiction,
at the earliest practicable moment.
(g) With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit
the sale of the Stock Consideration to the public without registration, at all
times, BICC agrees to use its best efforts to file with the Commission in a
timely manner all reports and other documents required of BICC under the
Securities Act and the Exchange Act.
40
<PAGE> 47
16.3 Agreement by the Shareholder. In the event that the
Shareholder participates, pursuant to this Article 16, in the offering of the
Stock Consideration, the Shareholder shall:
(a) furnish BICC all material information reasonably
requested by BICC concerning the Shareholder and the proposed method of sale or
other disposition of the Stock Consideration and such other information and
undertakings as shall be reasonably required in connection with the preparation
and filing of the registration statement covering the Stock Consideration in
order to ensure full compliance with the Securities Act and the rules and
regulations of the SEC thereunder;
(b) cooperate in good faith with BICC and its
underwriters, if any, in connection with such registration, including placing
the Stock Consideration in escrow or custody to facilitate the sale and
distribution thereof provided that such escrow or custody arrangement shall be
no more restrictive upon the Shareholder than upon any other holder of BICC
Stock for the benefit of whom such registration is undertaken; and
(c) make no further sales or other dispositions, or
offers therefor, of the Stock Consideration under such registration statement
if, during the effectiveness of such registration statement, an intervening
event should occur which, in the opinion of counsel to BICC, makes the
prospectus included in such registration statement no longer comply with the
Securities Act, so long as written notice containing the facts and legal
conclusions relied upon by BICC in this regard has been received by the
Shareholder from BICC, until such time as the Shareholder has received from
BICC copies of a new, amended or supplemented prospectus complying with the
Securities Act, which prospectus shall be delivered to the Shareholder by BICC
as soon as practicable after such notice.
16.4 Allocation of Expenses. If and whenever BICC is required by
the provisions of this Article 17 to use its best efforts to effect the
registration of the Stock Consideration under the Securities Act, BICC shall
pay the costs and expenses in connection therewith, other than the attorneys'
fees of the Shareholder; provided, however, that the Shareholder shall pay all
underwriting discounts, selling commissions and stock transfer taxes
attributable to the Stock Consideration under such registration statement.
16.5 Indemnification. In the event of any registration of any of
the Stock Consideration under the Securities Act pursuant to this Article 16,
the Shareholder shall indemnify and hold harmless BICC, each director of BICC,
each officer of BICC who shall sign such registration statement, each
underwriter and any person who controls BICC or such underwriter within the
meaning of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions or proceedings in respect thereof) including any of
the foregoing incurred in settlement of any litigation, commenced or
threatened, with respect to any untrue statement of any material fact in, or
omission of any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, if such statement or omission was made in reliance upon and
in conformity with written information furnished to BICC or its underwriter
through an instrument duly executed by the
41
<PAGE> 48
Shareholder specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus or amendment or supplement.
(a) BICC will indemnify the Shareholder, his legal
counsel and accountants and each person controlling the Shareholder within the
meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions or proceedings in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any such registration,
qualification or compliance, or arising out of or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, provided that BICC will
not be liable to indemnify the Shareholder or underwriter in any such case to
the extent that any such claim, loss, damage, liability or expense arises out
of or is based on any untrue statement or omission or alleged untrue statement
or omission, made in reliance upon and in conformity with written information
furnished to BICC by an instrument duly executed by or on behalf of the
Shareholder or underwriter and stated to be specifically for use therein.
(b) Each party entitled to indemnification under this
Section 16.5 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). Without limiting the generality of the foregoing,
the Indemnified Party may withhold its consent to any such counsel who also
acts as counsel to the Indemnifying Party (with respect to such claim or
otherwise) and the Indemnified Party reasonably believes that there exists a
conflict of interest between the Indemnified Party and the Indemnifying Party,
with respect to such claim or litigation. In such event, the Indemnifying Party
shall bear the expense of another counsel who shall represent the Indemnified
Party and any other persons or entities who have indemnification rights from
the Indemnifying Party hereunder, with respect to such claim or litigation, and
shall be selected as provided in the first sentence of this Section 16.5(b).
The Indemnified Party may participate in such defense at such party's expense
(except to the extent that the Indemnifying Party is required to pay the
expense of such counsel pursuant to this Section 16.5(b)), and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is prejudicial to the Indemnifying Party in
defending such claim or litigation. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation.
(c) If the indemnification provided for in this Section
16.5 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability,
42
<PAGE> 49
claim, damage or expense referred to therein, 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
which 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.
(d) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into a connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
17. GENERAL PROVISIONS.
17.1 Governing Law; Interpretation; Section Headings. This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of Texas without regard to conflict-of-laws rules as
applied in Texas. The section headings contained herein are for purposes of
convenience only and shall not be deemed to constitute a part of this Agreement
or to affect the meaning or interpretation of this Agreement in any way.
17.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of
this Agreement shall not be affected by any such modification or severance,
except that if any severance materially alters the intentions of the parties
hereto as expressed herein (a modification being permitted only if there is no
material alteration), then the parties hereto shall use commercially reasonable
efforts to agree to appropriate equitable amendments to this Agreement in light
of such severance, and if no such agreement can be reached within a reasonable
time, any party hereto may initiate arbitration to determine and effect such
appropriate equitable amendments.
17.3 Entire Agreement. This Agreement, the Schedules and the
documents and agreements referenced herein set forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any party hereto
which is not embodied or referenced in this Agreement, the Schedules or the
documents or agreements referenced herein, and no party hereto shall be bound
by or liable for any alleged representation, promise, inducement or statement
of intention not so set forth.
43
<PAGE> 50
17.4 Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
17.5 Assignment. This Agreement and the rights and obligations of
the parties hereto shall not be assigned or delegated by any party hereto
without the prior written consent of the other parties hereto.
17.6 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
17.7 Gender; Numbers. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and vice versa.
17.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
17.9 Telecopy Execution and Delivery. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or more
parties hereto by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party can be
seen, and such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all parties
hereto agree to execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
17.10 Expenses. Whether or not the transactions contemplated hereby
are consummated, each of the parties will pay all costs and expenses of its or
his performance of and compliance with this Agreement.
17.11 Arbitration. Except for the provisions of Articles 13 and 14
of this Agreement dealing with restrictive covenants and nondisclosure of
confidential information, with respect to which the BICC Parties expressly
reserve the right to petition a court directly for injunctive and other relief,
any controversy of any nature whatsoever, including but not limited to tort
claims or contract disputes, between the parties to this Agreement or their
respective heirs, executors, administrators, legal representatives, successors
and assigns, as applicable, arising out of or related to this Agreement,
including the implementation, applicability and interpretation thereof, shall,
upon the
44
<PAGE> 51
written request of one party served upon the other, be submitted to and settled
by arbitration in accordance with the provisions of the Federal Arbitration
Act, 9 U.S.C. Sections 1-15, as amended. The terms of the commercial
arbitration rules of the American Arbitration Association (the "AAA") shall
apply except to the extent they conflict with the provisions of this paragraph.
If the amount in controversy in the arbitration exceeds Two Hundred and Fifty
Thousand Dollars ($250,000), exclusive of interest, attorneys' fees and costs,
the arbitration shall be conducted by a panel of three independent arbitrators.
Otherwise, the arbitration shall be conducted by a single independent
arbitrator. The parties shall endeavor to select independent arbitrators by
mutual agreement. If such agreement cannot be reached within 30 calendar days
after a dispute has arisen which is to be decided by arbitration, the selection
of the arbitrator(s) shall be made in accordance with Rule 13 of the Rules as
presently in effect. If three arbitrators are selected, the arbitrators shall
elect a chairperson to preside at all meetings and hearings. If a dispute is to
be resolved by a sole arbitrator in accordance with the terms hereof, or if the
dispute is to be resolved by a panel of three arbitrators as provided
hereinabove, then each such arbitrator shall be a member of a state bar engaged
in the practice of law in the United States or a retired member of a state or
the federal judiciary in the United States. The award of the arbitrator(s)
shall require a majority of the arbitrators in the case of a panel of
arbitrators, shall be based on the evidence admitted and the substantive law of
the State of Texas and shall contain an award for each issue and counterclaim.
The award shall be made 30 days following the close of the final hearing and
the filing of any post hearing briefs authorized by the arbitrator(s). The
award of the arbitrator(s) shall be final and binding on the parties hereto.
Each party shall be entitled to inspect and obtain a copy of non-privileged
relevant documents in the possession or control of the other party. All such
discovery shall be in accordance with procedures approved by the arbitrator(s).
Unless otherwise provided in the award, each party shall bear its own costs of
discovery. Each party shall be entitled to take one deposition. Each party
shall be entitled to submit one set of interrogatories which require no more
than 30 answers. All discovery shall be expedited, consistent with the nature
and complexity of the claim or dispute and consistent with fairness and
justice. The arbitrator(s) shall have the power to compel any party to comply
with discovery requests of the other parties and to issue binding orders
relating to any discovery dispute which shall be enforceable in the same manner
as awards. The arbitrator(s) also shall have the power to impose sanctions for
abuse or frustration of the arbitration process, including without limitation,
the refusal to comply with orders of the arbitrator(s) relating to discovery
and compliance with subpoenas. Without limiting the scope of the parties'
obligation to arbitrate disputes pursuant to this Section 17.11, the
arbitrator(s) are not empowered to award damages including, without limitation,
punitive damages and multiple damages under applicable Texas statutes, in
excess of compensatory damages; provided that in no event shall consequential
damages be awarded. Each of BICC, Purchaser, Seller and the Shareholder hereby
irrevocably waives and releases any right to recover such damages in excess of
those damages authorized by this Section 17.11. The arbitrator(s) may require
the non-prevailing party to pay the prevailing party's attorneys' fees and
costs incurred in connection with the arbitration. It is further agreed that
any of the parties hereto may petition the United States District Court for the
Western District of Texas, San Antonio Division, for a judgment to be entered
upon any award entered through such arbitration proceedings.
[Signatures of following page.]
45
<PAGE> 52
IN WITNESS WHEREOF, the parties have executed this Plan of Merger and
Acquisition Agreement as of the date first above written.
PURCHASER:
CRM ACQUISITION CORP.
By:
------------------------------------
Kelly E. Simmons,
President
BICC:
BILLING INFORMATION CONCEPTS CORP.
By:
------------------------------------
Kelly E. Simmons,
Senior Vice President and
Chief Financial Officer
SELLER:
COMPUTER RESOURCES
MANAGEMENT, INC.
By:
------------------------------------
Michael A. Harrelson, President
SHAREHOLDER:
---------------------------------------
Michael A. Harrelson, Individually
46
<PAGE> 1
EXHIBIT 10.1
PUT OPTION AGREEMENT
This Put Option Agreement is entered into this 4th day of June, 1997,
to be effective as of the 1st day of June, 1997 ("Agreement") is between
Billing Information Concepts Corp., a Delaware corporation ("BICC"), and
Michael A. Harrelson ("Shareholder"). Capitalized terms used herein but not
defined herein have the meanings ascribed thereto in the Plan of Merger and
Acquisition Agreement, dated effective June 1, 1997 ("Merger Agreement"),
entered into by BICC, CRM Acquisition Corp., Shareholder and Computer Resources
Management, Inc. ("Seller").
WHEREAS, BICC, CRM Acquisition Corp., Seller and Shareholder have
entered into the Merger Agreement pursuant to which Seller is to be merged into
CRM Acquisition Corp. in exchange for, in part, 325,000 shares (the "Shares")
of common stock, $.01 par value, of BICC ("BICC Common Stock").
WHEREAS, as part of the consideration for entering into the Merger
Agreement, BICC agreed to grant certain rights to Shareholder pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, terms, and
conditions contained herein and in the Merger Agreement, the parties hereto
agree as follows:
1. BICC hereby grants to Shareholder an option to sell to BICC,
and BICC is obligated to purchase from Shareholder under such option (the "Put
Option"), any of the Shares in consideration of a cash payment of $26.00 per
share (the "Put Price"), in accordance with the terms of this Agreement. In the
event of a stock dividend or other distribution to the holders of BICC Common
Stock, stock split, recapitalization, combination, merger, consolidation or
other similar change in capitalization, the Put Price shall be appropriately
reduced or increased, as applicable, to reflect such event.
2. The Put Option shall be available for only a single exercise
during only one Put Option Period (as hereinafter defined).
3. In the event the Registration Statement is not declared
effective by the SEC on or before November 3, 1997, Shareholder may exercise
the Put Option, in his sole discretion, at any time between November 3, 1997,
and 5:00 p.m., C.S.T., November 13, 1997 (such period of time shall be referred
to as the "First Put Option Period"). In the event Shareholder does not
exercise the Put Option during the First Put Option Period, and in the event
the Registration Statement is not declared effective by the SEC on or before
January 5, 1998, Shareholder may exercise the Put Option, in his sole
discretion, at any time between January 5, 1998, and 5:00 p.m., C.S.T., January
15, 1998 (such period of time shall be referred to as the "Second Put Option
Period"). In the event Shareholder does not exercise the Put Option during the
First Put Option Period or the Second Put Option Period, and in the event the
Registration Statement is not declared effective by the SEC on or before March
3, 1998, Shareholder may exercise the Put Option, in his sole discretion, at
any time between March 3, 1998, and 5:00 p.m., C.S.T., March 13, 1998, at which
time the Put Option shall terminate.
<PAGE> 2
5. The Put Option may be exercised by Shareholder by delivery to
BICC at its principal place of business of written notification of such intent
to exercise such Put Option along with the certificate representing the Shares
to be sold under the Put Option. Payment shall be made by BICC by wire transfer
to an account designated by Shareholder within 5 business days of delivery of
such written notification and the certificate representing such shares to
BICC's transfer agent. Upon exercise of the Put Option, the obligation of BICC
to purchase the Shares shall be a binding and enforceable obligation of BICC.
6. Shareholder shall be responsible for obtaining releases of any
secured interest in the Shares held by any third parties prior to performance
by BICC pursuant to this Agreement and such performance is conditioned upon
Shareholder obtaining such releases from third parties in a manner satisfactory
to BICC or BICC's counsel.
5. This Agreement shall be construed in accordance with and
governed under the laws of the State of Texas without regard to the principles
of conflicts of laws.
[Signatures on following page.]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed on the date and year first above written.
-------------------------------------
Michael A. Harrelson "Shareholder"
BILLING INFORMATION CONCEPTS CORP.
By:
----------------------------------
Kelly E. Simmons
Senior Vice President and
Chief Financial Officer
-3-
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into this 4th
day of June, 1997, to be effective as of the 1st day of June, 1997, between
Michael A. Harrelson ("Employee"), a resident of San Antonio, Texas, and
Billing Information Concepts Corp., a Delaware corporation (the "Company"),
whose principal executive offices are located in San Antonio, Texas.
WHEREAS, the Company desires to employ Employee, and Employee desires
to be employed by the Company, on terms hereinafter set forth;
NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 Employment. During the term of this Agreement, the Company
agrees to employ Employee, and Employee accepts such employment, on the terms
and conditions set forth in this Agreement.
1.2 Extent of Service. During the term of this Agreement, Employee
shall devote his full-time business time, energy and skill to the affairs of
the Company and its affiliated companies, and Employee shall not be engaged in
any other business or consulting activities pursued for gain, profit or other
pecuniary advantage, without the prior written consent of the Company. The
foregoing shall not prevent Employee from making monetary investments in
businesses which do not involve any services on the part of Employee in the
operation or affairs of such businesses or devoting reasonable time to civic
and community activities.
1.3 Duties. Employee's duties hereunder shall include acting as a
Senior Vice President of the Company and as the President of Computer Resources
Management, Inc. In this capacity Employee will be responsible for performing
the duties of such offices as set forth in the bylaws of such companies and
such other duties as may be reasonably prescribed from time by Employee's
supervisors or the Board of Directors of the Company (the "Board"). Such duties
include, without limitation, the development of Proprietary Information
(defined in Article 5 hereof) for the Company. Employee shall also perform,
without additional compensation, such duties for the Company's affiliated
companies. Employee shall report directly to Parris H. Holmes, Jr. and Alan W.
Saltzman. Employee shall be based at the Company's San Antonio, Texas office,
provided that travel will be required as reasonably necessary to perform the
Employee's duties hereunder.
1.4 Access to and Use of Proprietary Information. Employee
recognizes and the Company agrees that, to assist Employee in the performance
of his duties hereunder, Employee will be provided access to and limited use of
proprietary and confidential information of the Company. Employee further
recognizes that, as a part of his employment with the Company, Employee will
benefit from and Employee's qualifications will be enhanced by additional
training, education and experience which will be provided to Employee by the
Company directly and/or as a result of work projects assigned by the Company in
which proprietary and confidential information of the Company is utilized by
Employee.
<PAGE> 2
ARTICLE 2
TERM OF EMPLOYMENT
Subject to earlier termination pursuant to Article 4 hereof, this
Agreement shall have a term commencing as of the execution date of this
Agreement and ending upon the expiration of 36 calendar months.
ARTICLE 3
COMPENSATION
3.1 Monthly Base Salary. As compensation for the services to be
rendered hereunder, the Company shall pay Employee a salary of (i) $16,667.67
per month for the first 12 calendar months of the term of this Agreement, (ii)
$20,833.33 per month for the second twelve calendar months of the term of this
Agreement and (iii) $25,000.00 per month for the third 12 calendar months of
the term of this Agreement. Such salary shall be payable in at least monthly
installments during the term of this Agreement.
3.2 Performance Bonus. As additional compensation for services
rendered under this Agreement, Employee shall also be eligible to receive a
discretionary performance bonus if, as and when declared by the Compensation
Committee of the Board or the Board in its discretion.
3.3 Stock Options. The Company and the Employee have entered into
a Non-Qualified Stock Option Agreement of even date herewith pursuant to which
the Company has granted to Employee non-qualified stock options to receive up
to 200,000 shares of Common Stock, $.01 par value, of the Company upon the
terms and conditions set forth in such agreement.
3.4 Benefits. Employee shall, in addition to the compensation
provided for herein, be entitled to the following additional benefits:
(a) Medical, Health and Disability Benefits. Employee
shall be entitled to receive all medical, health and disability
benefits that may, from time to time, be provided by the Company to
all employees of the Company as a group. To the extent permitted by
such plans, the Company shall waive, or cause its insurers to waive,
any applicable waiting periods under all such benefit plans and the
Company agrees that any pre-existing condition clause in any of the
Company's medical, health or disability insurance coverage shall not
be applicable to Employee.
(b) Pension Plans; Life Insurance. Employee shall be
entitled to participate in or receive benefits under, to the extent he
is eligible under the terms of such plans, such pension, life
insurance and other benefit plans, including the Company's Executive
Deferred Compensation Plan, that are available to senior management or
key employees on the same basis as such plans are available to other
employees of the Company in comparable positions with Employee. To the
extent permitted by such plans, the Company shall waive, or cause the
Company's insurers to waive, all waiting periods for such benefits.
(c) Other Benefits. Employee shall also be entitled to
receive any other benefits that may, from time to time, be provided by
the Company to all employees of Company as a group.
-2-
<PAGE> 3
(d) Vacation. Employee shall be entitled to an annual
vacation with pay as determined in accordance with the prevailing
practice and policy of the Company.
(e) Holidays. Employee shall be entitled to paid holidays
in accordance with the prevailing practice and policy of the Company.
(f) Reimbursement of Expenses. The Company shall
reimburse Employee for all expenses reasonably incurred by Employee in
conjunction with the rendering of services at the Company's request,
provided that such expenses are incurred in accordance with the
prevailing practice and policy of the Company. As a condition to such
reimbursement, Employee shall submit an itemized accounting of such
expenses in reasonable detail, including receipts where required under
federal income tax laws.
ARTICLE 4
TERMINATION
4.1 Termination With Notice. This Agreement may be terminated by
the Company or Employee, without cause, upon 30 days prior written notice
thereof given by one party to the other party. In the event of termination
effected by the Employee giving notice pursuant to this Section 4.1, the
Company shall pay Employee his monthly base salary (subject to standard
deductions) earned pro rata to the date of such termination and the Company
shall have no further obligations to Employee hereunder. In the event of
termination effected by the Company giving notice pursuant to this Section 4.1,
the Company shall pay Employee, within 15 days of such termination, a lump-sum
payment equal to his base salary under Section 3.1 hereof for the remaining
portion of his 36-month term of employment pursuant to this Agreement. Payment
by the Company in accordance with this Section shall constitute Employee's full
severance pay and the Company shall have no further obligation to Employee
arising out of such termination.
4.2 Termination For Cause. This Agreement may be terminated by the
Company for "Cause" (hereinafter defined) upon written notice thereof given by
the Company to Employee. In the event of termination pursuant to this Section
4.2, the Company shall pay Employee his monthly base salary (subject to
standard deductions) earned pro rata to the date of such termination and the
Company shall have no further obligations to Employee hereunder. The term
"Cause" shall mean the following, as determined by the Board in its sole
judgment: (i) Employee breaches any of the terms of this Agreement; (ii)
Employee is convicted of a felony or crime involving moral turpitude; (iii)
Employee fails, after at least one warning, to perform duties assigned under
this Agreement (other than a failure due to death or physical or mental
disability); (iv) Employee intentionally engages in conduct which is
demonstrably and materially injurious to the Company; (v) Employee commits
fraud or theft of personal or Company property from Company premises; (vi)
Employee falsifies Company documents or records; (vii) Employee engages in acts
of gross negligence or willful misconduct to endanger life or property on
Company premises; (viii) a determination by a court of law or governmental
agency (which, through lapse of time or otherwise, is not subject to appeal)
that Employee has engaged in sexual harassment; or (ix) Employee uses,
distributes, possesses or is under the influence of illegal drugs, alcohol or
any other intoxicant on Company premises.
-3-
<PAGE> 4
4.3 Termination Upon Death or Disability. In the event that
Employee dies, this Agreement shall terminate upon Employee's death. Likewise,
if Employee becomes unable to perform the essential functions of his duties
hereunder, with or without reasonable accommodation, on account of illness,
disability or other reason whatsoever, the Company may, upon notice to
Employee, terminate this Agreement. In the event of termination pursuant to
this Section 4.3, Employee (or his legal representatives) shall be entitled
only to his monthly base salary earned pro rata for services actually rendered
prior to the date of such termination; provided, however, Employee shall not be
entitled to his monthly base salary for any period with respect to which
Employee has received short-term or long-term disability benefits under
employee benefit plans maintained from time to time by the Company and the
Company shall provide a continuation of any benefits to be given to Employee
hereunder as required by law. Employee shall be deemed to be disabled if at any
time during the term hereof, Employee shall have been unable to perform the
duties of his employment hereunder due to physical or mental incapacity for a
period of 90 consecutive days.
4.4 Termination Following Change of Control. Notwithstanding
anything to the contrary contained herein, should Employee at any time within
12 months of the occurrence of a "change of control" (as defined below) cease
to be an employee of the Company (or its successor), by reason of (i)
termination by the Company (or its successor) other than for "cause" (following
a change of control, "cause" shall be limited to the conviction or a plea of
nolo contendere to the charge of a felony (which, through lapse of time or
otherwise, is not subject to appeal), or a material breach of fiduciary duty to
the Company through the misappropriation of the Company funds or property or
(ii) voluntary termination by Employee for "good reason upon change of control"
(as defined below), then (a) in the event of termination pursuant to Section
4.4(ii) above, the Company shall pay Employee, within 15 days of the effective
date of such termination, a lump-sum payment equal to (without discounting to
present value) one times his then effective annual base salary, or (b) in the
event of termination pursuant to Section 4.4(i) above, the Company shall pay
Employee, within 15 days of such termination, a lump-sum payment equal to his
base salary under Section 3.1 hereof for the remaining portion of his 36-month
term of employment pursuant to this Agreement.
As used in this Section, voluntary termination by the Employee for
"good reason upon change of control" shall mean (i) removal of the Employee
from the office the Employee holds on the date of this Agreement, (ii) a
material reduction in the Employee's authority or responsibility, (iii)
relocation of the Company's headquarters from its then current location, (iv) a
reduction in the Employee's compensation or (v) the Company otherwise commits a
breach of this Agreement.
As used in this Agreement, a "change of control" shall be deemed to
have occurred if (i)(a) any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined voting power of the Company's then
outstanding securities, or (ii) at any time during the 24-month period after a
tender offer, merger, consolidation, sale of assets or contested election, or
any combination of such transactions, at least a majority of the Company's
Board of Directors shall cease to consist of "continuing directors" (meaning
directors of the Company who either were directors at or prior to such
transaction or who subsequently became directors and whose election, or
nomination for election by the Company's stockholders, was approved by a vote
of at least two thirds of the directors then still in office who were directors
prior to such transaction), or (iii) the stockholders of the Company approve a
merger or consolidation that
-4-
<PAGE> 5
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 60% of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement of sale or disposition by
the Company of all or substantially all of the Company's assets.
The Company shall pay any attorney's fees incurred by the Employee in
reasonably seeking to enforce the terms of this Section.
4.5 Survival of Provisions. The covenants and provisions of
Articles 5, 6 and 7 hereof shall survive any termination of this Agreement and
continue for the periods indicated, regardless of how such termination may be
brought about.
4.6 Exclusivity of Termination Provisions. The termination
provisions of this Agreement regarding the parties' respective obligations in
the event the Employee's employment is terminated are intended to be exclusive
and in lieu of any other rights or remedies to which the Employee or the
Company may otherwise be entitled at law, in equity or otherwise. It is also
agreed that, although the personnel policies and fringe benefit programs of the
Company may be unilaterally modified from time to time, the termination
provisions of this Agreement are not subject to modification, whether orally,
impliedly or in writing, unless any such modification is mutually agreed upon
and signed by the parties.
ARTICLE 5
PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION
5.1 Duties. Employee understands and agrees that during the term
of this Agreement Employee's duties will include the conception and development
of valuable technology during the course and scope of employment, to be
collectively referred to in this Agreement as "Proprietary Information".
5.2 Ownership. Employee understands and agrees that Company shall
own all right, title and interest in and to all Proprietary Information created
within the scope of Employee's employment. In the case of works authored or
created by Employee, such works are considered a "work made for hire" under 17
United States Code Section 101. All information and technology, if any, created
by Employee prior to his employment with the Company, and in which Employee
claims ownership, is shown in Schedule 5.2 attached hereto, and shall not be
considered included in Proprietary Information.
5.3 Notice and Assistance. Employee shall give adequate written
notice to the Company as soon as practicable of all Proprietary Information
created by Employee during Employee's employment with the Company, assist the
Company in evaluating the Proprietary Information for patent, trade secret and
copyright protection and sign all documents and do all things necessary at the
expense of the Company to assist the Company in the protection, development,
marketing or transfer of such Proprietary Information.
-5-
<PAGE> 6
5.4 Assignment. Employee hereby assigns and agrees to assign all
of Employee's right, title and interest in and to Proprietary Information to
the Company or its nominee. At the request of the Company, whether during or
after the termination of Employee's employment, Employee shall timely execute
or join in executing all papers or documents required for the filing of patent
applications and copyright registrations in the United States of America and
such foreign countries as the Company may in its sole discretion select, and
shall assign all such patent applications and copyrights to the Company or its
nominee, and shall provide the Company or its agents or attorneys with all
reasonable assistance in the preparation and prosecution of patent applications
and copyright registrations, including drawings, specifications, and the like,
all at the expense of the Company, and shall do all that may be necessary to
establish, protect or maintain the rights of the Company or its nominee in the
inventions, patent applications, Letters Patent and copyrights in accordance
with the spirit of this Agreement.
5.5 Confidential Information. Employee agrees to keep confidential
(1) all Proprietary Information, and (2) all other information protected by the
Company as trade secrets during the term of this Agreement (including any
leaves of absence) and will neither use nor disclose the confidential
information without written authorization by the Company for ten years
thereafter. For the purposes of this Agreement, such confidential information
shall include information set forth in any application for Letters Patent
unless and until such information is ultimately published. The Company and
Employee mutually agree that the following types of information shall not be
protected by this Agreement:
(a) Information already in the public domain at the time
Employee received it;
(b) Information which, although created by Employee or
disclosed in confidence to Employee, is later disseminated by the
Company into the public domain;
(c) Information, which although created by Employee or
received in confidence by Employee, is subsequently disseminated into
public domain by a third party who has not breached any duty to any
other party in disseminating such information;
(d) Information created by Employee or given by the
Company in confidence to Employee which Employee is expressly
authorized in writing by the Company to use or disclose thereafter;
and
(e) Information which Employee is required to disclose in
accordance with an order of a court of competent jurisdiction or
applicable law.
Employee also understands and agrees that he will maintain in confidence all
information known to him by reason of his employment even if such information
is included in a redacted deposit of a work filed with an application for
copyright registration, if such deposit has been abridged in order to protect
the confidentiality of the information deposited with the Copyright Office. For
purposes of this Agreement, a trade secret "...may consist of any formula,
pattern, device or compilation of information which is used in one's business,
and which gives him an opportunity to obtain an advantage over competitors who
do not know or use it. It may be a formula for a chemical compound, a process
of manufacturing, trading or preserving materials, a pattern for machine or
other device, or a list of customers..." as commonly interpreted by the courts
of the State of Texas. Upon the termination of this Agreement, regardless of
how such termination may be brought about, Employee shall deliver to the
Company any and all documents, instruments, notes, papers or other
-6-
<PAGE> 7
expressions or embodiments of Proprietary Property or confidential information
which are in Employee's possession or control.
5.6 Publicity. During the term of this Agreement and for a period
of three years thereafter, Employee shall not, directly or indirectly,
originate or participate in the origination of any publicity, news release or
other public announcements, written or oral, whether to the public press or
otherwise, relating to this Agreement, to any amendment hereto, to Employee's
employment hereunder or to the Company, without the prior written approval of
the Company.
5.7 Fiduciary Relationship. Employee, by virtue of his high
position of trust and reliance on him by the Company, understands that Employee
enjoys a fiduciary relationship with the Company in carrying out his
obligations under this Article 5. Accordingly, Employee agrees to honor his
obligations under this Agreement by conducting himself with the degree of
fairness and trust toward the Company as required by a fiduciary.
ARTICLE 6
RESTRICTIVE COVENANTS
6.1 Non-Competition. In consideration of the benefits of this
Agreement, including Employee's access to and limited use of proprietary and
confidential information of the Company, as well as training, education and
experience provided to Employee by the Company directly and/or as a result of
work projects assigned by the Company with respect thereto, Employee hereby
covenants and agrees that during the term of this Agreement and for a period of
three years following termination of this Agreement, regardless of how such
termination may be brought about, Employee shall not, and the Employee will
cause his Associates, Affiliates and representatives not to, directly or
indirectly, as proprietor, partner, stockholder, director, executive, officer,
employee, consultant, joint venturer, investor or in any other capacity, engage
in, or own, manage, operate or control, or participate in the ownership,
management, operation or control, of any entity which engages anywhere in the
United States or Canada in any business activity in which the Company or its
subsidiaries participates during Employee's employment with the Company or its
subsidiaries; provided, however, the foregoing shall not prohibit Employee from
purchasing and holding as an investment not more than 5% of any class of
publicly traded securities of any entity which conducts a business in
competition with the business of the Company, so long as Employee does not
participate in any way in the management, operation or control of such entity.
The terms "Associates" and "Affiliates" as used in this Section 6.1 shall have
the meanings ascribed to them in the Plan of Merger and Acquisition Agreement
of even date herewith, by and among Billing Information Concepts Corp., CRM
Acquisition Corp., Computer Resources Management, Inc. and Michael A.
Harrelson.
6.2 Judicial Reformation. Employee acknowledges that, given the
nature of the Company's business, the covenants contained in Section 6.1
establish reasonable limitations as to time, geographic area and scope of
activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the Company's
business and to protect its legitimate business interests. If, however, Section
6.1 is determined by any court of competent jurisdiction to be unenforceable by
reason of its extending for too long a period of time or over too large a
geographic area or by reason of it being too extensive in any other respect or
for any other reason, it will be interpreted to extend only over the longest
period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or
-7-
<PAGE> 8
to the maximum extent in all other aspects as to which it may be enforceable,
all as determined by such court.
6.3 Customer Lists; Non-Solicitation. In consideration of the
benefits of this Agreement, including Employee's access to and limited use of
proprietary and confidential information of the Company, as well as training,
education and experience provided to Employee by the Company directly and/or as
a result of work projects assigned by the Company with respect thereto,
Employee hereby further covenants and agrees that following the termination of
this Agreement, regardless of how such termination may be brought about,
Employee shall not, directly or indirectly, (a) use or make known to any person
or entity the names or addresses of any clients or customers of the Company or
its subsidiaries or any other information pertaining to them, (b) call on,
solicit or attempt to call on or solicit any clients or customers of the
Company or its subsidiaries, nor (c) solicit for employment, recruit, hire or
attempt to recruit or hire any employees of the Company or its subsidiaries.
ARTICLE 7
ARBITRATION
Except for the provisions of Articles 5 and 6 of this Agreement
dealing with proprietary property, confidential information and restrictive
covenants, with respect to which the Company expressly reserves the right to
petition a court directly for injunctive and other relief, any claim, dispute
or controversy of any nature whatsoever, including but not limited to tort
claims or contract disputes, between the parties to this Agreement or their
respective heirs, executors, administrators, legal representatives, successors
and assigns, as applicable, arising out of or relating to your employment or
the termination of your employment with the Company and/or the terms and
conditions of this Agreement, including the implementation, applicability and
interpretation thereof, shall, upon the written request of one party served
upon the other, be submitted to and settled by arbitration in accordance with
the provisions of the Federal Arbitration Act, 9 U.S.C. Sections 1-15, as
amended. If the amount in controversy in the arbitration exceeds Two Hundred
Fifty Thousand Dollars ($250,000), exclusive of interest, attorneys' fees and
costs, the arbitration shall be conducted by a panel of three (3) independent
arbitrators. Otherwise, the arbitration shall be conducted by a single,
independent arbitrator. The parties shall endeavor to select independent
arbitrators by mutual agreement. If such agreement cannot be reached within
thirty (30) calendar days after a dispute has arisen which is to be decided by
arbitration, the selection of the arbitrator(s) shall be made in accordance
with Rule 13 of the Rules as presently in effect. If three (3) arbitrators are
selected, the arbitrators shall elect a chairperson to preside at all meetings
and hearings. If a dispute is to be resolved by a sole arbitrator in accordance
with the terms hereof, or if the dispute is to be resolved by a panel of three
(3) arbitrators as provided hereinabove, then each such arbitrator shall be a
member of a state bar engaged in the practice of law in the United States or a
retired member of a state or the federal judiciary in the United States. The
award of the arbitrator(s) shall require a majority of the arbitrators in the
case of a panel of arbitrators, shall be based on the evidence admitted and the
substantive law of the State of Texas and shall contain an award for each issue
and counterclaim. The award shall be made thirty (30) days following the close
of the final hearing and the filing of any post-hearing briefs authorized by
the arbitrator(s). The award of the arbitrator(s) shall be final and binding on
the parties hereto. Each party shall be entitled to inspect and obtain a copy
of non-privileged, relevant documents in the possession or control of the other
party. All such discovery shall be in accordance with procedures approved by
the arbitrator(s). Unless otherwise provided in the award, each party shall
bear its own costs of discovery. Each party shall
-8-
<PAGE> 9
be entitled to take one deposition. Each party shall be entitled to submit one
set of interrogatories which require no more than 30 answers. All discovery
shall be expedited, consistent with the nature and complexity of the claim or
dispute and consistent with fairness and justice. The arbitrator(s) shall have
the power to compel any party to comply with discovery requests of the other
parties and to issue binding orders relating to any discovery dispute which
shall be enforceable in the same manner as awards. The arbitrator(s) also shall
have the power to impose sanctions for abuse or frustration of the arbitration
process including, without limitation, the refusal to comply with orders of the
arbitrator(s) relating to discovery and compliance with subpoenas. Without
limiting the scope of the parties' obligation to arbitrate disputes pursuant to
this Section 7, the arbitrator(s) are not empowered to award damages including,
without limitation, punitive damages and multiple damages under applicable
Texas statutes, in excess of compensatory damages; provided that in no event
shall consequential damages be awarded. Each of BICC, Purchaser, Seller and the
Shareholder hereby irrevocably waives and releases any right to recover such
damages in excess of those damages authorized by this Section 7. The
arbitrator(s) may require the non-prevailing party to pay the prevailing
party's attorneys' fees and costs incurred in connection with the arbitration.
The terms of the commercial arbitration rules of the American Arbitration
Association (the "AAA") shall apply except to the extent they conflict with the
provisions of this paragraph. It is further agreed that any of the parties
hereto may petition the United States District Court for the Western District
of Texas, San Antonio Division, for a judgment to be entered upon any award
entered through such arbitration proceedings.
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by an
overnight delivery service with tracking procedures or by facsimile to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice: If to Employee, at the address set
forth below his name on the signature page hereof; and if to the Company, at
7411 John Smith Drive, Suite 200, San Antonio, Texas 78229, Attention:
President and Chief Executive Officer.
8.2 Equitable Relief. In the event of a breach or a threatened
breach by Employee of any of the provisions contained in Article 5 or 6 of this
Agreement, Employee acknowledges that the Company will suffer irreparable
injury not fully compensable by money damages and, therefore, will not have an
adequate remedy available at law. Accordingly, the Company shall be entitled to
obtain such injunctive relief or other equitable remedy from any court of
competent jurisdiction as may be necessary or appropriate to prevent or curtail
any such breach, threatened or actual. The foregoing shall be in addition to
and without prejudice to any other rights that the Company may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
8.3 Assignment. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. Employee's rights under this Agreement
are not assignable and any attempted assignment thereof shall be null and void.
-9-
<PAGE> 10
8.4 Governing Law; Venue. This Agreement shall be subject to and
governed by the laws of the State of Texas. Non-exclusive venue for any action
permitted hereunder shall be proper in San Antonio, Bexar County, Texas, and
Employee hereby consents to such venue.
8.5 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement between the parties and supersedes all other agreements
between the parties which may relate to the subject matter contained in this
Agreement. This Agreement may not be amended or modified except by an
agreement in writing which refers to this Agreement and is signed by both
parties.
8.6 Headings. The headings of sections and subsections of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision of this Agreement or of the Agreement itself.
8.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
8.8 Waiver. The waiver by any party of a breach of any provision
hereof shall not be deemed to constitute the waiver of any prior or subsequent
breach of the same provision or any other provisions hereof. Further, the
failure of any party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement unless such party expressly waives such
provision pursuant to a written instrument which refers to this Agreement and
is signed by such party.
[Signatures on following page.]
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BILLING INFORMATION CONCEPTS CORP.
By:
--------------------------------
Kelly E. Simmons
Senior Vice President and
Chief Financial Officer
EMPLOYEE:
-----------------------------------
Michael A. Harrelson
Address:
---------------------------
---------------------------
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<PAGE> 1
EXHIBIT 11.1
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1997, JUNE 30, 1997
------------------ -----------------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION:
Net loss applicable to common stock ....................................... $(12,622) $(2,554)
Shares:
Weighted average number of shares of common stock outstanding ............ 15,572 16,004
Weighted average common stock equivalents applicable to stock options
and warrants (b) ....................................................... 0 0
-------- -------
Weighted average shares used for computation ............................. 15,572 16,004
======== =======
Net loss per common share ................................................ $ (0.81) $ (0.16)
FULLY DILUTED EARNINGS PER SHARE CALCULATION:
Net loss applicable to common stock ....................................... $(12,622) $(2,554)
Shares:
Weighted average number of shares of common stock outstanding ............ 15,572 16,004
Weighted average common stock equivalents applicable to stock options
and warrants (b) ....................................................... 0 0
-------- -------
Weighted average shares used for computation ............................. 15,572 16,004
======== =======
Net loss per common share (a) ............................................ $ (0.81) $ (0.16)
</TABLE>
Note: Earnings per common share is presented above for the three and nine
months ended June 30, 1997 only as Billing Information Concepts Corp. had
no publicly held common shares outstanding prior to August 2, 1996.
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
(b) The options and warrants have an antidilutive effect in periods with
losses, and are therefore excluded from the
computation.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR BILLING
INFORMATION CONCEPTS CORP. AND SUBSIDIARIES AS OF AND FOR THE NINE MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 26,607
<SECURITIES> 0
<RECEIVABLES> 29,780
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 143,379
<PP&E> 20,276
<DEPRECIATION> 4,602
<TOTAL-ASSETS> 166,670
<CURRENT-LIABILITIES> 119,077
<BONDS> 6,563
0
0
<COMMON> 161
<OTHER-SE> 39,124
<TOTAL-LIABILITY-AND-EQUITY> 166,670
<SALES> 0
<TOTAL-REVENUES> 87,094
<CGS> 0
<TOTAL-COSTS> 54,790
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 374
<INCOME-PRETAX> 3,911
<INCOME-TAX> 6,465
<INCOME-CONTINUING> (2,554)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,554)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
