<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
--------------------
FEBRUARY 19, 1998
(Date of earliest event reported)
TYLER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-10485 75-2303920
(State or other jurisdiction of (Commission file number ) (I.R.S. employer identification no.)
incorporation or organization)
</TABLE>
2121 SAN JACINTO STREET, SUITE 3200
DALLAS, TEXAS 75201
(Address of principal executive offices)
214-754-7800
(Registrant's telephone number,
including area code)
================================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Resources Acquisition. Effective on February 19, 1998, Business
Resources Corporation, a Texas corporation ("Resources"), merged with and into
T1 Acquisition Corporation ("T1"), a Texas corporation and wholly owned
subsidiary of Tyler Corporation (the "Company"), pursuant to a Second Amended
and Restated Agreement and Plan of Merger (the "Resources Merger Agreement"),
dated as of December 29, 1997, and effective as of October 8, 1997, among the
Company, T1, Resources, and William D. Oates, the principal shareholder of
Resources. T1 is the surviving corporation and changed its name to Business
Resources Corporation ("New Resources") effective on February 19, 1998. The
shareholders of Resources received aggregate consideration of $15,250,000 in
cash and 10,000,000 shares of common stock, $.01 par value per share, of the
Company (the "Tyler Common Stock"). The Resources Merger Agreement was
approved and adopted by the requisite vote of the stockholders of the Company
at a special meeting duly called and held on February 19, 1998. Effective upon
the consummation of Resources Merger Agreement, Mr. Oates was elected to the
Board of Directors of the Company.
New Resources provides a wide range of information management
outsourcing services, primarily to county and local governments. New
Resources' current outsourcing services include records management,
micrographic reproduction, computerized indexing, and imaging of real property
records maintained by county clerks and recorders, the largest component of its
business, as well as information management outsourcing and professional
services required by other county and local government units and agencies. New
Resources also provides title plant update services to title companies in
Texas.
TSG Acquisition. Effective on February 19, 1998, The Software
Group, Inc., a Texas corporation ("TSG"), merged with and into T2 Acquisition
Corporation ("T2"), a Texas corporation and wholly owned subsidiary of the
Company, pursuant to an Amended and Restated Agreement and Plan of Merger (the
"TSG Merger Agreement"), dated as of December 29, 1997, and effective as of
October 8, 1997, among the Company, T2, TSG, and Brian B. Berry and Glenn A.
Smith, the principal shareholders of TSG. T2 is the surviving corporation and
changed its name to The Software Group, Inc. ("New TSG"), effective on February
19, 1998. The shareholders of TSG received aggregate consideration of
$12,000,017 in cash and 1,999,997 shares of Tyler Common Stock, including
adjustments for cash payments for fractional shares. The TSG Merger Agreement
was approved and adopted by the requisite vote of the stockholders of the
Company at a special meeting duly called and held on February 19, 1998.
Pursuant to the terms of the TSG Merger Agreement, the TSG Merger Agreement was
thereafter amended on February 19, 1998, but effective as of October 8, 1997,
by Amendment No. One thereto to change the form of the merger to a merger of
TSG with and into T2.
New TSG provides county governments with software systems and
services to serve their information technology and automation needs. New TSG
integrates its own products with computer equipment from hardware vendors,
third-party database management applications, and office automation software.
New TSG assists counties with all aspects of software and hardware selection,
network design and management, installation and training, and on-going support
and related services.
The Company financed the cash portion of the consideration in both
of the foregoing transactions under a senior credit facility in the amount of
$50,000,000 entered into on February 13, 1998, with NationsBank of Texas, N.A.
(the "Senior Credit Facility").
ITEM 5. OTHER EVENTS
Increase in Authorized Shares of Tyler Common Stock. On February
19, 1998, the stockholders of the Company, at a special meeting duly called and
held, approved by the requisite vote a Certificate of Amendment to the
Company's Restated Certificate of Incorporation. The Certificate of Amendment,
which was filed with the Secretary of State of the State of Delaware on
February 27, 1998, increases the number of authorized shares of Tyler Common
Stock from 50,000,000 shares to 100,000,000 shares.
2
<PAGE> 3
Interactive Acquisition. Effective on February 19, 1998,
Interactive Computer Design, Inc., a Texas corporation ("Interactive"), merged
with and into T3 Acquisition Corporation ("T3"), a Texas corporation and wholly
owned subsidiary of the Company, pursuant to an Agreement and Plan of Merger,
dated as of December 17, 1997, among the Company, T3, Interactive and Dustin R.
Womble, Steve Nieman, and Kent Hudson, the shareholders of Interactive. T3 is
the surviving corporation and changed its name to Interactive Computer Design,
Inc. ("New Interactive"), effective on February 19, 1998. Simultaneously, T3
purchased from the Interactive shareholders all of the outstanding capital
stock of a related company, Incode Systems, Inc. The shareholders of
Interactive received aggregate consideration of $1,250,000 in cash and 225,000
shares of Tyler Common Stock. The Company financed the cash portion of the
consideration under the Senior Credit Facility. New Interactive provides
integrated information management services, systems, and outsourcing to 225
cities throughout Texas, Oklahoma, and Missouri as well as certain additional
cities in contiguous states.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Financial statements of Resources and TSG will be filed not
later than 60 days after the date this initial report must be filed.
(b) Not applicable.
Pro forma financial information reflecting the acquisitions of
Resources and TSG will be filed not later than 60 days after the date this
initial report must be filed.
(c) Exhibits:
3.1 -- Certificate of Amendment to the Restated
Certificate of Incorporation.
10.1 -- Second Amended and Restated Agreement and Plan
of Merger, dated as of December 29, 1997, and
effective as of October 8, 1997, among the
Company, T1, Resources, and William D. Oates.
10.2 -- Amended and Restated Agreement and Plan of
Merger, dated as of December 29, 1997, and
effective as of October 8, 1997, among the
Company, T2, TSG, and Brian B. Berry and Glenn
A. Smith.
10.3 -- Amendment Number One, dated February 19, 1998,
and effective as of October 8, 1997, to the
Amendment and Restated Agreement and Plan of
Merger among the Company, T2, TSG, and Brian B.
Berry and Glenn A. Smith.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TYLER CORPORATION
Dated: March 4, 1998 By: /s/ JAMES E. RUSSELL
-------------------------------
James E. Russell
Vice President and Chief Financial Officer
(principal financial officer)
Dated: March 4, 1998 By: /s/ BRIAN K. MILLER
-------------------------------
Brian K. Miller
Vice President and Chief Accounting Officer
(principal accounting officer)
4
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 -- Certificate of Amendment to the Restated
Certificate of Incorporation.
10.1 -- Second Amended and Restated Agreement and Plan
of Merger, dated as of December 29, 1997, and
effective as of October 8, 1997, among the
Company, T1, Resources, and William D. Oates.
10.2 -- Amended and Restated Agreement and Plan of
Merger, dated as of December 29, 1997, and
effective as of October 8, 1997, among the
Company, T2, TSG, and Brian B. Berry and Glenn
A. Smith.
10.3 -- Amendment Number One, dated February 19, 1998,
and effective as of October 8, 1997, to the
Amendment and Restated Agreement and Plan of
Merger among the Company, T2, TSG, and Brian B.
Berry and Glenn A. Smith.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
TYLER CORPORATION
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware ("DGCL"), Tyler Corporation, a corporation
organized and existing under and by virtue of the DGCL ("Corporation"), does
hereby certify as follows:
1. The Board of Directors of the Corporation, at a meeting duly called
and held, adopted a resolution setting forth and declaring advisable the
following proposed amendment to the Restated Certificate of Incorporation of the
Corporation.
Article Fourth, Section 1, of the Restated Certificate of Incorporation
is hereby amended to read in its entirety as follows:
"FOURTH: Section 1. Capitalization. The Corporation is authorized to
issue One Hundred One Million (101,000,000) shares of capital stock.
One Hundred Million (100,000,000) of the authorized shares shall be
common stock, one cent ($0.01) par value each ("Common Stock"), and One
Million (1,000,000) of the authorized shares shall be preferred stock,
ten dollars ($10.00) par value each ("Preferred Stock").
"Each holder of shares of capital stock of the Corporation shall at
every meeting of the stockholders be entitled to one vote in person or
by proxy for each share of capital stock of the Corporation held by the
stockholder, unless otherwise specifically provided pursuant to this
Restated Certificate of Incorporation."
2. Pursuant to a resolution of the Board of Directors, the foregoing
amendment was presented to the stockholders of the Corporation at a special
meeting of the stockholders of the Corporation duly called and held for such
purpose, and the foregoing amendment was approved by the vote of a majority of
the shares of capital stock of the Corporation entitled to vote thereon in
accordance with the provisions of Section 242 of the DGCL.
3. Said amendment was duly adopted in accordance with the provisions of
Section 242 of the DGCL.
4. This Certificate of Amendment shall be effective upon the filing
thereof.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to its Restated Certificate of Incorporation to be executed on the
19th day of February, 1998.
TYLER CORPORATION
By: /s/ C.A. Rundell, Jr.
--------------------------------------
C.A. Rundell, Jr.
President and Chief Executive Officer
-2-
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
TYLER CORPORATION,
T1 ACQUISITION CORPORATION,
BUSINESS RESOURCES CORPORATION
AND
WILLIAM D. OATES
DATED AS OF
DECEMBER 29, 1997
AND EFFECTIVE AS OF
OCTOBER 8, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
THE MERGER
<TABLE>
<S> <C> <C>
1.1 The Merger.................................................. 1
1.2 Closing..................................................... 1
1.3 Effective Time.............................................. 2
1.4 Effects of the Merger....................................... 2
1.5 Articles of Incorporation; Bylaws........................... 2
1.6 Directors and Officers...................................... 2
1.7 Conversion of Securities; Exchange; Fractional Shares....... 2
1.8 Additional Consideration.................................... 5
1.9 Adjustments to Prevent Dilution............................. 5
1.10 Taking of Necessary Action; Further Action.................. 5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDER
2.1 Organization and Good Standing of Company................... 6
2.2 Organization and Good Standing of Company Subsidiaries...... 6
2.3 Other Investments........................................... 6
2.4 Foreign Qualification....................................... 6
2.5 Power and Authority to Conduct Business..................... 6
2.6 Authority to Consummate Merger.............................. 6
2.7 Binding Effect.............................................. 7
2.8 Compliance with Other Instruments........................... 7
2.9 Capitalization of Company................................... 8
2.10 Capitalization of the Company Subsidiaries.................. 9
2.11 Company Investments......................................... 9
2.12 Company Financial Statements................................ 9
2.13 Absence of Certain Changes.................................. 10
2.14 No Material Undisclosed Liabilities......................... 12
2.15 Tax Liabilities............................................. 12
2.16 Title to Properties......................................... 13
2.17 Condition of Tangible Assets................................ 15
2.18 Accounts Receivable......................................... 15
2.19 Inventory Good and Salable.................................. 16
2.20 Patents, Trademarks, and Copyrights......................... 16
2.21 Contracts................................................... 16
2.22 Litigation and Claims....................................... 18
2.23 Judgments, Decrees, and Orders in Restraint of Business..... 19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
2.24 No Violation of Any Instrument.............................. 19
2.25 Compliance With Laws........................................ 19
2.26 Compensation and Benefit Plans.............................. 19
2.27 Labor Relations............................................. 21
2.28 Adequate Insurance.......................................... 22
2.29 Contracts with Affiliates and Others........................ 22
2.30 Revenue Recognition......................................... 22
2.31 Certain Fees................................................ 22
2.32 Environmental Matters....................................... 22
2.33 Section 368 Representations................................. 23
2.34 Accuracy of Information Furnished........................... 25
2.35 Representations Limited..................................... 25
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TYLER
3.1 Organization and Good Standing of Tyler..................... 25
3.2 Foreign Qualification....................................... 25
3.3 Power and Authority to Conduct Business..................... 25
3.4 Authority to Consummate Merger.............................. 25
3.5 Binding Effect.............................................. 26
3.6 Compliance with Other Instruments........................... 26
3.7 Capitalization of Tyler..................................... 27
3.8 Commission Filings; Financial Statements.................... 27
3.9 Absence of Certain Changes.................................. 28
3.10 No Material Undisclosed Liabilities......................... 28
3.11 Litigation and Government Claims............................ 29
3.12 No Violation of Any Instrument.............................. 29
3.13 Certain Fees................................................ 29
3.14 No Interim Operations of Sub................................ 30
3.15 Accuracy of Information Furnished........................... 30
3.16 Company Contract Bids....................................... 30
ARTICLE 4
JOINT COVENANTS OF THE COMPANY, THE SHAREHOLDER AND TYLER
4.1 Access; Confidentiality..................................... 30
4.2 Notice of any Material Change............................... 31
4.3 Monthly Financial Statements................................ 31
4.4 Antitrust Notification...................................... 32
4.5 Tax Matters................................................. 32
4.6 Cooperation Pending Closing................................. 35
4.7 Non-competition Allocation.................................. 36
</TABLE>
ii
<PAGE> 4
ARTICLE 5
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
<TABLE>
<S> <C> <C>
5.1 Conduct of Business Prior to Closing Date................... 36
5.2 Employment Agreement........................................ 37
5.3 Noncompetition Agreements................................... 37
5.4 Agreement Not to Negotiate.................................. 37
5.5 Permitted Distributions of Cash and Condo................... 37
5.6 Waiver of Adverse Claims.................................... 38
5.7 Accuracy of Information Furnished........................... 38
5.8 Pre-Closing Bonuses......................................... 38
5.9 New Indebtedness............................................ 38
5.10 Stock Grants................................................ 38
5.11 Transfer of Headquarters Facilities......................... 38
ARTICLE 6
COVENANTS OF TYLER
6.1 Conduct Prior to Closing Date............................... 39
6.2 Proxy Statement............................................. 39
6.3 Meetings of Stockholders.................................... 39
6.4 Stock Exchange Listing...................................... 39
6.5 Guaranties of Company Obligations........................... 39
6.6 Other Tyler Obligations..................................... 40
6.7 Company Indemnification Obligations......................... 41
6.8 Agreements Regarding Stock Options.......................... 41
6.9 Release of Shareholder Guaranties........................... 41
6.10 Tyler Loan.................................................. 42
ARTICLE 7
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
7.1 HSR Act..................................................... 43
7.2 Absence of Litigation....................................... 43
7.3 The Software Group.......................................... 43
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SHAREHOLDER
8.1 Compliance.................................................. 43
8.2 Representations and Warranties.............................. 43
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
8.3 Opinion..................................................... 44
8.4 No Material Adverse Change.................................. 44
8.5 Tyler Stockholder Approval.................................. 44
8.6 Financing................................................... 44
8.7 Certificates................................................ 44
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLER
9.1 Compliance.................................................. 44
9.2 Representations and Warranties.............................. 44
9.3 Securities Law Compliance................................... 45
9.4 Opinions.................................................... 45
9.5 No Material Adverse Change.................................. 45
9.6 Consents to Transaction..................................... 45
9.7 Stockholder Approval........................................ 45
9.8 Financing................................................... 46
9.9 Noncompetition Agreements................................... 46
9.10 Certificates................................................ 46
9.11 Company Shareholder Approval................................ 46
9.12 No Dissenting Shareholders.................................. 46
ARTICLE 10
SECURITIES LAW REGISTRATION AND COMPLIANCE
10.1 Securities Law Compliance; Restrictions on Shares........... 46
10.2 Demand Registration......................................... 47
10.3 Piggyback Registration...................................... 48
10.4 Registration Procedures..................................... 49
10.5 Expenses.................................................... 52
10.6 Indemnification............................................. 52
10.7 No Transferability of Registration Rights................... 54
ARTICLE 11
INDEMNIFICATION AND REMEDIES
11.1 Indemnification by the Shareholder Based on Agreement....... 54
11.2 Indemnification by Tyler Based on Agreement................. 55
11.3 Customer Claims............................................. 55
11.4 Claims Limitations.......................................... 57
11.5 Maximum Liability........................................... 57
11.6 Equitable Remedies.......................................... 57
11.7 Remedies of the Surviving Corporation....................... 58
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
11.8 Right of Offset............................................. 58
11.9 Costs of Defense............................................ 59
ARTICLE 12
MISCELLANEOUS
12.1 Breach Discovered Prior to Closing.......................... 59
12.2 Termination................................................. 60
12.3 Expenses.................................................... 60
12.4 Disclosure Schedules........................................ 61
12.5 Entire Agreement............................................ 61
12.6 Survival.................................................... 61
12.7 Counterparts................................................ 61
12.8 Notices..................................................... 61
12.9 Successors and Assigns...................................... 63
12.10 Governing Law............................................... 63
12.11 Waiver and Other Action..................................... 63
12.12 Severability................................................ 63
12.13 Knowledge................................................... 63
EXHIBITS
Exhibit A Surviving Corporation Directors and Officers
Exhibit B Employment and Noncompetition Agreement
Exhibit C Form of Stock Transfer Agreement [Class B]
</TABLE>
v
<PAGE> 7
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS SECOND AMENDED AND RESTATED AGREEMENT, dated as of the 29th day of
December, 1997 and effective as of the 8th day of October, 1997, is entered into
by and among Tyler Corporation, a Delaware corporation ("Tyler"), T1 Acquisition
Corporation, a Texas corporation and wholly-owned subsidiary of Tyler ("Sub"),
Business Resources Corporation, a Texas corporation (the "Company"), and William
D. Oates, the principal shareholder of the Company (the "Shareholder").
WITNESSETH:
WHEREAS, subject to and in accordance with the terms and conditions of this
Agreement, the respective Boards of Directors of Tyler, Sub and the Company, and
Tyler as sole shareholder of Sub, have approved the merger of the Company with
and into Sub (the "Merger"), including the acquisition of the Headquarters
Facilities (defined herein), as a result of which the holders of all the issued
and outstanding shares of common stock, par value $0.01 per share, of the
Company (the "Company Common Stock") not owned directly or indirectly by the
Company will receive in the aggregate $15,250,000 in cash and 10,000,000 shares
of common stock, par value $0.01 per share, of Tyler ("Tyler Common Stock"), in
the manner and subject to the adjustments provided herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the Texas Business Corporation Act (the
"TBCA"), at the Effective Time (as defined in Section 1.3) the Company shall be
merged with and into Sub. As a result of the Merger, the separate corporate
existence of the Company shall cease and Sub shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") and
shall succeed to and assume all of the rights and obligations of the Company in
accordance with the TBCA.
1.2 Closing. The closing of the Merger and the transfer of the
Headquarters Facilities (the "Closing") shall take place at the offices of
Gardere & Wynne, L.L.P., 1601 Elm Street, Suite
<PAGE> 8
3000, Dallas, Texas 75201 as soon as practicable after the satisfaction or
waiver of the conditions set forth in Article V or at such other time and place
and on such other date as Tyler and the Company shall agree; provided, that the
closing conditions set forth in Article V shall have been satisfied or waived
at or prior to such time. The date on which the Closing occurs is herein
referred to as the "Closing Date."
1.3 Effective Time. On the Closing Date, or as soon as practicable
thereafter, the Company and Sub will cause Articles of Merger (the "Articles of
Merger") to be filed with the Secretary of State of the State of Texas as
provided in Article 5.04 of the TBCA. The Merger will become effective at the
time that the Articles of Merger have been filed with the Secretary of State of
the State of Texas or at such other time specified in the Articles of Merger as
the effective time (the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the TBCA.
1.5 Articles of Incorporation; Bylaws. The Articles of Incorporation (the
"Articles") and Bylaws (the "Bylaws") of Sub, as in effect immediately prior to
the Effective Time, shall be identical to the Company's Articles of
Incorporation and Bylaws and shall be the articles of incorporation and bylaws
of the Surviving Corporation and thereafter shall continue to be its articles of
incorporation and bylaws until amended as provided therein and under the TBCA.
1.6 Directors and Officers. The persons specified as directors on Exhibit
A hereto shall be the initial directors of the Surviving Corporation, each to
hold office in accordance with the Articles and Bylaws, and the persons
specified as officers on Exhibit A hereto shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified in accordance with the Articles and Bylaws.
1.7 Conversion of Securities; Exchange; Fractional Shares. Subject to the
terms and conditions of this Agreement, at the Effective Time, by virtue of the
Merger and the other transactions contemplated hereby, including the transfer of
the Headquarters Facilities as provided in Section 5.11, and without any action
on the part of the Company, Sub or Tyler:
(a) The holders of the Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than any shares of the
Company Common Stock to be canceled pursuant to Section 1.7(b), shall be
entitled to receive, subject to the provisions of this Section 1.7, without
interest, cash or shares of Tyler Common Stock as follows:
(i) The holder of Class A Common Stock, par value $0.01 per share,
of the Company ("Class A Common Stock") shall be entitled to receive (A)
$15,250,000 in cash, (B) 100 shares of Tyler Common Stock for each
outstanding share of Class A Common Stock outstanding at the Effective
Time, and (C) the Additional Merger Consideration, if any, that may
become payable after the Effective Time pursuant to Section 1.8; and
2
<PAGE> 9
(ii) The holders of Class B Common Stock, par value $0.01 per
share, of the Company ("Class B Common Stock") shall be entitled to
receive 100 shares of Tyler Common Stock for each outstanding share of
Class B Common Stock outstanding at the Effective Time.
The cash and shares of Tyler Common Stock to which holders of Company
Common Stock shall be so entitled to receive at the Effective Time are
collectively referred to herein as the "Consideration". No fractional
shares of Tyler Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made in accordance with the procedure set forth in Section
1.7(g) hereof.
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock held by Sub, Tyler or any
direct or indirect wholly-owned subsidiary of Tyler, or the Company
immediately prior to the Effective Time shall be canceled and extinguished
at the Effective Time without any conversion thereof and no payment shall
be made with respect thereto.
(c) Each share of common stock, par value $1.00 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall at the
Effective Time be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(d) At the Effective Time, each holder of an outstanding certificate
that prior thereto represented shares of Company Common Stock shall be
entitled to receive, upon surrender to the Surviving Corporation of such
certificate or certificates for cancellation and subject to any required
withholding of taxes, a certificate or certificates representing the
number of whole shares of Tyler Common Stock (of such denominations and
registered in such names as such holder may request) into which the shares
of Company Common Stock so surrendered shall have been converted. Each
holder of shares of Company Common Stock who would otherwise be entitled
to a fraction of a share of Tyler Common Stock shall, upon surrender to
the Surviving Corporation of the certificates representing shares of
Company Common Stock held by such holder, be paid an amount in cash in
accordance with the provisions of Section 1.7(g). Until so surrendered,
each outstanding certificate that prior to the Effective Time represented
shares of Company Common Stock shall be deemed from and after the
Effective Time to evidence the right to receive that amount of cash, if
any, and that number of full shares of Tyler Common Stock into which such
shares of Company Common Stock shall have been converted pursuant to this
Section 1.7, any dividends or distributions contemplated or permitted by
this Agreement and declared concurrently with or prior to Closing, but
which are unpaid as of Closing, and any cash in lieu of fractional shares
of Tyler Common Stock, subject to any of required withholding of taxes. No
interest shall be paid on the cash payable upon surrender of the
certificate or certificates evidencing shares of Company Common Stock.
Unless and until any such outstanding certificates representing shares of
Company Common Stock shall be surrendered, no dividends or other
distributions declared and payable to the holders of Tyler Common Stock on
or after the Effective Time shall be paid to the holders of such
outstanding certificates which prior to the Effective Time represented
shares of Company Common
3
<PAGE> 10
Stock; provided, however, that, upon surrender and exchange of such
outstanding certificates, there shall be paid to the record holders of the
certificates issued and exchanged therefor the amount, without interest
thereon, of dividends and other distributions, if any, that theretofore
were declared and became payable since the Effective Time with respect to
the number of full shares of Tyler Common Stock issued to such holders.
(e) The cash, if any, and shares of Tyler Common Stock into which the
shares of Company Common Stock shall have been converted pursuant to this
Section 1.7 shall be issued in full satisfaction of all rights pertaining
to such converted shares of Company Common Stock except for the payment of
any dividends or distributions contemplated or permitted by this Agreement
and declared concurrently with or prior to Closing, but which are unpaid as
of Closing.
(f) If any certificate for shares of Tyler Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall have paid to Tyler or the Surviving Corporation any transfer
or other taxes required by reason of the issuance of a certificate for
shares of Tyler Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction
of Tyler or its transfer agent that such tax has been paid or is not
payable.
(g) No fraction of a share of Tyler Common Stock shall be issued, but
in lieu thereof each holder of shares of Company Common Stock who would
otherwise be entitled to a fraction of a share of Tyler Common Stock shall,
upon surrender to the Surviving Corporation of the certificate or
certificates representing the shares of Company Common Stock held by such
holder, be paid an amount in cash equal to the value of such fraction of a
share of Tyler Common Stock based upon the closing price of Tyler Common
Stock on the New York Stock Exchange on the last trading day prior to the
Effective Time. No interest shall be paid on such amount. All shares of
Company Common Stock held by a record holder shall be aggregated for
purposes of computing the number of shares of Tyler Common Stock to be
issued pursuant to this Section 1.7.
(h) At the Closing, Tyler shall provide each holder of certificates
which prior to the Effective Time represented shares of Company Common
Stock a letter of transmittal and other documentation enabling such holder
to effect the exchange of stock certificates as contemplated by Article 1
of this Agreement.
(i) Neither Tyler, the Surviving Corporation, nor any other person
shall be liable to any former holder of shares of Company Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(j) In the event any certificate formerly representing shares of the
Company Common Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate
to be lost, stolen or destroyed and, if required by Tyler or the Surviving
Corporation, the posting by such person of a bond in customary amount as
indemnity against any claim that may be made against Tyler or the
4
<PAGE> 11
Surviving Corporation with respect to such certificate, the Surviving
Corporation shall deliver in exchange for such lost, stolen or destroyed
certificate the cash and shares of Tyler Common Stock that would be
deliverable pursuant to this Article 1 upon due surrender of the shares of
Company Common Stock represented by such lost, stolen or destroyed
certificate.
1.8 Additional Consideration. In addition to the Consideration payable to
the holders of Company Common Stock pursuant to Section 1.7(a), the holders of
Class A Common Stock of the Company shall be entitled to receive additional
merger consideration ("Additional Merger Consideration") in an aggregate amount
up to $4,500,000 if certain performance objectives set forth in a letter dated
October 8, 1997 from Tyler to the Shareholder and the Company are achieved not
later than December 31, 1999. In such event each holder of record of Class A
Common Stock of the Company immediately prior to the Effective Time shall
receive for each share so held Additional Merger Consideration equal to the
quotient of $4,500,000 (or such lesser amount as may be payable) divided by the
number of shares of Class A Common Stock of the Company issued and outstanding
immediately prior to the Effective Time.
1.9 Adjustments to Prevent Dilution. In the event that the Company changes
the number of shares of the Company Common Stock or securities convertible or
exchangeable into or exercisable for shares of the Company Common Stock, or
Tyler changes the number of shares of Tyler Common Stock or securities
convertible or exchangeable into or exercisable for shares of Tyler Common
Stock, issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split or combination), stock
dividend or distribution, recapitalization, subdivision, or other similar
transaction, the Consideration shall be correspondingly adjusted.
1.10 Taking of Necessary Action; Further Action. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger as promptly as possible. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company or Sub, such corporations shall direct their
respective officers and directors to take, and the Shareholder shall take, all
such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
The Company and the Shareholder jointly and severally represent and warrant
to Tyler and Sub as follows:
2.1 Organization and Good Standing of Company. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas.
5
<PAGE> 12
2.2 Organization and Good Standing of Company Subsidiaries. Section 2.2 of
the schedule delivered by the Company concurrently with the execution of this
Agreement (the "Company Disclosure Schedule") truly and correctly lists each
corporation in which either the Company or a Company Subsidiary is the record or
beneficial owner, directly or indirectly, of 50% or more of the capital stock
(each such corporation being referred to as a "Company Subsidiary"), the
jurisdiction of incorporation of each Company Subsidiary, the authorized number
of shares of capital stock of each Company Subsidiary, the number of outstanding
shares of capital stock of each Company Subsidiary and the number of shares
owned by the Company or a Company Subsidiary, and the jurisdictions in which the
Company and each Company Subsidiary are qualified or licensed to do business.
Each Company Subsidiary is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation.
2.3 Other Investments. Section 2.3 of the Company Disclosure Schedule
truly and correctly lists all corporations in which the Company or a Company
Subsidiary owns less than 50% of the capital stock and all partnerships, joint
ventures, and other entities in which the Company or a Company Subsidiary has an
equity, profit sharing, participation, or other interest (the "Company
Investments"), the form of organization of and the jurisdiction of incorporation
or organization of each Company Investment, the type and amount of the
investment, and the percentage interest owned by the Company or a Company
Subsidiary.
2.4 Foreign Qualification. The Company and each Company Subsidiary are
duly qualified or licensed to do business as foreign corporations and in good
standing in those jurisdictions set forth in Section 2.4 of the Company
Disclosure Schedule. The Company and the Company Subsidiaries are duly
qualified or licensed to do business as foreign corporations in every
jurisdiction where the failure so to qualify could have a material adverse
effect on the businesses, operations, assets or financial condition of the
Company and the Company Subsidiaries, taken as a whole. For purposes of this
Section 2.4, no material adverse effect shall be deemed to have occurred as a
result of non-payment of state or local franchise taxes not exceeding $75,000
in the aggregate.
2.5 Power and Authority to Conduct Business. The Company and the Company
Subsidiaries have the corporate power and authority, and possess all licenses
and permits required by governmental authorities, to own, lease, and operate
their properties and assets and to carry on its or their respective businesses
as currently being conducted, except where the failure to possess such license
or permit would not have a material adverse effect on the businesses,
operations, assets or financial condition of the Company and the Company
Subsidiaries, taken as a whole.
2.6 Authority to Consummate Merger. The Company has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and the other agreements or documents executed or required to be
executed by the Company in connection with this Agreement, and the execution,
delivery, and performance by the Company of this Agreement and the other
documents executed or required to be executed by the Company in connection with
this Agreement have been duly authorized by all necessary corporate action other
than approval by holders of the Class B Common Stock. The Shareholder has the
capacity and authority to execute,
6
<PAGE> 13
deliver and perform his obligations under this Agreement, and the other
agreements or documents executed or required to be executed by him in
connection herewith.
2.7 Binding Effect. This Agreement and the other agreements and documents
executed or required to be executed by the Company or the Shareholder in
connection with this Agreement have been or will have been duly executed and
delivered by the Company or the Shareholder, as appropriate, and are or will be,
when executed and delivered, the legal, valid, and binding obligations of the
Company or the Shareholder executing the same, enforceable in accordance with
their terms, except that:
(a) enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification under Section 10.6 may be limited by
considerations of public policy.
2.8 Compliance with Other Instruments. Except as disclosed in Section 2.8
of the Company Disclosure Schedule, neither the execution and delivery by the
Company or the Shareholder of this Agreement, or the other agreements or
documents executed or required to be executed by the Company or the Shareholder
in connection herewith, nor the consummation by the Company or the Shareholder
of the transactions contemplated hereby and thereby, will (i) conflict with the
articles of incorporation or bylaws of the Company or any Company Subsidiary,
(ii) assuming satisfaction of the requirements set forth in clause (iii) below,
violate any provision of law applicable to the Company or any of the Company
Subsidiaries; (iii) except for (A) requirements arising out of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and (B)
the filing of articles of merger in accordance with the TBCA, require any
consent, authorization, permit, license or approval of, or declaration,
registration or filing with or notice to, any person or governmental body or
authority, domestic or foreign, under any provision of law applicable to the
Company or any of the Company Subsidiaries; or (iv) require any consent,
approval or notice under, violate, breach, be in conflict with, or constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under, or permit the termination or the acceleration of
maturity of, or result in the imposition of any lien, claim, or encumbrance upon
any property or asset of the Company, any Company Subsidiary, or the
Shareholder, pursuant to any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, loan or lease agreement, or other agreement or
instrument (including with customers) listed or required to be listed in Section
2.21 of the Company Disclosure Schedule, or any judgment, order, injunction, or
decree by which the Company, any Company Subsidiary, or the Shareholder is
bound, to which any of them is a party, or to which any of their assets is
subject, where any such failure to obtain any consent, approval or notice, or
violation, breach, conflict or default would result in a material adverse effect
on the businesses,
7
<PAGE> 14
operations, assets or financial condition of the Company and the Company
Subsidiaries, taken as a whole.
2.9 Capitalization of Company.
(a) The authorized capital stock of the Company at December 29, 1997 is
100,000 shares of Company Common Stock, of which 87,650 shares consist of Class
A Common Stock and 12,350 shares consist of Class B Common Stock. All of the
authorized shares of Company Common Stock are issued and outstanding at December
29, 1997, have been duly authorized and are validly issued, fully paid and
nonassessable. There are and at the Closing will be no shares of the capital
stock of the Company held in its treasury or in the treasury of any Company
Subsidiary.
(b) At the Closing, Shareholder will be the lawful record and beneficial
owner of 87,650 shares of the Class A Common Stock, free and clear of all liens,
encumbrances, and claims of every kind, and the shares so owned by the
Shareholder will constitute 100% of the issued and outstanding shares of the
Class A Common Stock, which is the only class of Company Common Stock having
voting rights with respect to the election of directors and other regular
matters. The Shareholder has the right to vote or direct the vote of such shares
at his discretion on any matter submitted to a vote of the Company's
shareholders. Holders of the Class B Common Stock have no voting rights except
as may be required by law. Pursuant to the Texas Business Corporation Act,
holders of all classes of Company Common Stock, including the Class B Common
Stock, are or will be entitled to vote upon the Merger, with all holders of
Company Common Stock voting as a single class and all holders of Class A Common
Stock and Class B Common Stock each voting as separate classes. Each holder of
shares of Class A Common Stock and Class B Common Stock has voted or agreed to
vote such shares in favor of the Merger.
(c) There are no voting trusts, shareholder agreements, or other voting
arrangements among the shareholders of the Company, other than the agreements to
vote their shares in favor of the Merger described in the form of Stock Transfer
Agreement attached as Exhibit C.
(d) Except as described in Section 2.9 of the Company Disclosure Schedule,
there presently is no outstanding subscription, contract, convertible or
exchangeable security, option, warrant, call, or other right obligating the
Company, any Company Subsidiary, or the Shareholder to issue, sell, exchange, or
otherwise dispose of, or to purchase, redeem, or otherwise acquire, shares of,
or securities convertible into or exchangeable for, capital stock of the
Company; except as described in Section 2.9 of the Company Disclosure Schedule
or otherwise permitted by this Agreement, no such rights disclosed in Section
2.9 of the Company Disclosure Schedule will remain outstanding at the Closing.
No shareholder of the Company is entitled to any preemptive right.
2.10 Capitalization of the Company Subsidiaries. All of the outstanding
shares of capital stock of the Company Subsidiaries have been duly authorized
and validly issued and are fully paid and nonassessable and, except as described
in Section 2.10 of the Company Disclosure Schedule, the shares of capital stock
of the Company Subsidiaries indicated in Section 2.2 of the Company
8
<PAGE> 15
Disclosure Schedule as owned by the Company or a Company Subsidiary are owned
free and clear of all liens, encumbrances, and claims of every kind. The
Company owns of record and beneficially all of the issued and outstanding
shares of capital stock of each Company Subsidiary. Except as described in
Section 2.10 of the Company Disclosure Schedule, there presently is no
outstanding subscription, contract, convertible or exchangeable security,
option, warrant, call, or other right obligating the Company, any Company
Subsidiary, or the Shareholder to issue, sell, exchange, or otherwise dispose
of, or to purchase, redeem, or otherwise acquire, shares of, or securities
convertible into or exchangeable for, capital stock of any Company Subsidiary.
2.11 Company Investments. Except as described in Section 2.11 of the
Company Disclosure Schedule, the interests in the Company Investments owned by
the Company or a Company Subsidiary are owned free and clear of all liens,
encumbrances and claims other than those contained in the agreements evidencing
such Company Investments. Except as described in Section 2.11 of the Company
Disclosure Schedule, there presently is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call, or other right
obligating the Company or any Company Subsidiary to sell, exchange, or
otherwise dispose of, or to purchase, redeem, or otherwise acquire, any
interest in the Company Investments; no such rights disclosed in Section 2.11
of the Company Disclosure Schedule will remain outstanding at the Closing.
2.12 Company Financial Statements.
(a) The Company has delivered to Tyler true, correct, and complete copies
of the following financial statements of the Company (the "Company Financial
Statements"), which are attached to Section 2.12 of the Company Disclosure
Schedule:
(i) the audited consolidated balance sheets of the Company and the
Company Subsidiaries as of December 31, 1996, 1995 and 1994 and the related
audited consolidated statements of operations, stockholder's equity, and
cash flows for the years then ended, with notes thereto, prepared in
accordance with United States generally accepted accounting principles,
reported upon without exception or qualification by KPMG Peat Marwick LLP,
independent certified public accountants ("Peat Marwick"), and
(ii) the audited consolidated balance sheet of the Company and the
Company Subsidiaries as of July 31, 1997 (the "Company Balance Sheet"), and
the related audited consolidated statements of operations, stockholder's
equity, and cash flows for the seven months then ended, with notes thereto,
prepared in accordance with United States generally accepted accounting
principles, reported upon without exception or qualification by Peat
Marwick.
The Company Financial Statements present fairly, in all respects, the
consolidated financial position of the Company and the Company Subsidiaries as
of the dates thereof and the consolidated results of operations and cash flows
for the periods then ended, in conformity with generally accepted accounting
principles applied, except as may be set forth in the notes thereto, on a
consistent basis throughout such periods.
9
<PAGE> 16
(b) Since July 31, 1997, there has been no change in accounting principles
applicable to, or methods of accounting utilized by the Company, and the books
and records of Company and the Company Subsidiaries have been and are being
maintained in accordance with all applicable legal and accounting requirements
and what the shareholder believes in good faith to be good business practice,
reflect only valid transactions, are complete and correct in all material
respects, and accurately reflect in all material respects the basis for the
consolidated financial position and consolidated results of operations and cash
flows of the Company and the Company Subsidiaries set forth in the Company
Financial Statements.
2.13 Absence of Certain Changes. Since July 31, 1997 (or other date
indicated below), neither the Company nor any Company Subsidiary has (except as
may be contemplated by this Agreement or as may result from the transactions
contemplated by this Agreement):
(a) suffered any change in its businesses, results of operations,
working capital, assets, liabilities, or financial condition or the manner
of conducting its business other than changes that, individually or in the
aggregate, have not had a material adverse effect on the businesses,
operations, assets or condition (financial or otherwise) of the Company and
the Company Subsidiaries, taken as a whole;
(b) experienced a decline in the consolidated shareholder's equity of
the Company and the Company Subsidiaries from its consolidated
shareholder's equity shown on the Company Balance Sheet at July 31, 1997,
determined using the same accounting principles applied in the preparation
of the Company Financial Statements;
(c) except as disclosed in Section 2.13 of the Company Disclosure
Schedule, suffered any damage or destruction to or loss of its assets not
covered by insurance, or any loss of customers or suppliers, or terminated
or lost the services of any key employee (including any employee who had
agreed with the Company to maintain the confidentiality of proprietary or
technical information or know-how or to assign inventions, patents, or
copyrights) that has had, or in the good faith belief of the Shareholder is
likely to have, a material adverse effect on the businesses, operations,
assets, financial condition, or prospects of the Company and the Company
Subsidiaries, taken as a whole;
(d) acquired or disposed of any material asset, or incurred, assumed,
guaranteed, endorsed, paid, or discharged any material indebtedness,
liability, or obligation, or subjected or permitted to be subjected any
material amount of assets to any lien, claim, or encumbrance of any kind,
except in the ordinary course of business or pursuant to agreements in
force at the date of this Agreement;
(e) forgiven, compromised, canceled, released, waived, or permitted to
lapse any material rights or claims;
10
<PAGE> 17
(f) entered into or terminated any material agreement or commitment,
or agreed or made any changes in material leases or agreements, other than
renewals or extensions thereof and leases, agreements, and commitments
entered into, terminated, or modified in the ordinary course of business;
(g) increased its investment in any Company Investment or made new
Company Investments;
(h) written up, written down, or written off the book value of any
material amount of assets;
(i) declared, paid, or set aside for payment any dividend or
distribution with respect to its capital stock;
(j) redeemed, purchased, or otherwise acquired, or sold, granted, or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or
agreed to changes in the terms and conditions of any such rights;
(k) paid compensation, fees, bonuses or other payments to the
Shareholder or his family members or any of his affiliates or otherwise
paid or transferred any cash, property or assets to the Shareholder, his
family members or any of his affiliates, other than the base salary of
Shareholder, rent in accordance with the Lease (as defined in Section
5.11), and distributions permitted by this Agreement; or materially
increased the compensation of or paid any bonus to any other employee or
contributed to any employee benefit plan other than in accordance with
policies, practices or requirements established and in effect on December
31, 1996;
(l) Entered into any employment, compensation, or collective
bargaining agreement with any person or group or consulting agreement not
identified in Section 5.3 of the Company Disclosure Schedule, other than in
the ordinary course of business;
(m) Entered into, adopted, or materially amended any employee benefit
plan; or
(n) Entered into any other material commitment or transaction not
disclosed elsewhere herein or in the Company Disclosure Schedule, other
than in the ordinary course of business.
2.14 No Material Undisclosed Liabilities. To the knowledge of the Company
or the Shareholder, there is no liability or obligation of the Company and the
Company Subsidiaries of any nature, whether absolute, accrued, contingent, or
otherwise, other than:
(a) the liabilities and obligations that are fully reflected, accrued,
or reserved against on the Company Balance Sheet, for which the reserves
are appropriate and reasonable, or incurred in the ordinary course of
business and consistent with past practices since July 31, 1997;
11
<PAGE> 18
(b) the loss contingencies set forth in Section 2.14 of the Company
Disclosure Schedule;
(c) contractual liabilities or obligations of a nature not required to
be disclosed on a balance sheet prepared in accordance with generally
accepted accounting principles, but which, if material, are disclosed in
Section 2.14 of the Company Disclosure Schedule; and
(d) other liabilities and loss contingencies which are not material in
the aggregate to the business, operations, assets or condition (financial
or otherwise) of the Company and the Company Subsidiaries, taken as a
whole.
The Company and the Company Subsidiaries are not signatories to, and are
not in any manner a guarantor, endorser, assumptor or otherwise primarily or
secondarily liable for or responsible for the payment of, any notes payable
other than those set forth in Section 2.21 of the Company Disclosure Schedule.
2.15 Tax Liabilities. The Company and each Company Subsidiary have filed
all material federal, state, county, local, and foreign tax returns and reports
required to be filed by them, including those with respect to income, payroll,
property, withholding, social security, unemployment, franchise, excise, use and
sales taxes, and have either paid in full all taxes that have become due as
reflected on any such return or report and any interest and penalties with
respect thereto or, as of July 31, 1997, they have fully accrued on their books
or have established adequate reserves for all taxes payable but not yet due,
except that at July 31, 1997, the unrecorded contingent liability of the Company
and the Company Subsidiaries with respect to payroll, withholding, social
security, unemployment, franchise, property, sales, use and excise taxes did not
exceed $75,000 in the aggregate for all such taxes. The total of all payments in
1997 of taxes, interest and penalties of the Company and the Company
Subsidiaries for periods ended prior to January 1, 1997 have not exceeded the
accrued liability for such items shown on the Company Financial Statements as of
July 31, 1997 for periods ended December 31, 1996; neither the Company nor any
Company Subsidiary has, subsequent to December 31, 1996, accrued or set aside
any reserves on its books and records for any taxes, interest or penalties for
any period ended prior to January 1, 1997 nor has any of them made any payments
in 1997 of taxes, interest or penalties for periods ended prior to January 1,
1997 that were not reflected in the accrued liability therefor (including
deferred taxes) shown on the Company Financial Statements as of July 31, 1997
for periods ended December 31, 1996. There are no reserves (other than for
deferred taxes) reflected in the Company Financial Statements as of July 31,
1997 for periods ended December 31, 1996 for taxes, interest or penalties in
excess of those shown to be due on any tax returns that have been filed for any
periods then ended. Neither the Internal Revenue Service nor any other taxing
authority has audited or is in the process of auditing the tax returns and
reports of the Company and the Company Subsidiaries, and no claim for additional
taxes, interest, or penalties for any fiscal year is pending. The Company and
the Company Subsidiaries have delivered to Tyler true, complete and correct
copies of (i) all federal and state income or franchise tax returns for the
Company and the Company Subsidiaries for all periods ending on and after
December 31, 1994 and (ii) relevant portions of income and franchise tax
12
<PAGE> 19
examination reports, statements of deficiencies, closing or other agreements
received by, assessed against or agreed to by the Company or any of the Company
Subsidiaries, relating to such taxes, since December 31, 1994, if any. No
extension or waiver of any statute of limitations has been requested of or
granted by the Company or any Company Subsidiary with respect to any tax year,
and no extension or waiver of time within which to file any tax return has been
requested by or granted to the Company or any Company Subsidiary except with
respect to tax returns not yet filed but otherwise due. No unsatisfied
deficiency, delinquency, or default for any tax, assessment, or governmental
charge has been claimed or assessed, or to the knowledge of the Company and
Shareholder, proposed against the Company or any Company Subsidiary, nor has the
Company or any Company Subsidiary received notice of any such deficiency,
delinquency, or default, for any tax period. Neither the Company nor Shareholder
has any reason to believe that the Company or any Company Subsidiary has any
material contingent income tax liabilities other than those reflected on the
Company Balance Sheet and those arising in the ordinary course of business since
the date thereof, and those arising as a result of the transactions contemplated
hereby. The Company has qualified and elected to be taxed as a "small business
corporation" or "S corporation" under Section 1361, et seq., of the Code since
January 1, 1997.
2.16 Title to Properties.
(a) Section 2.16(a) of the Company Disclosure Schedule lists or depicts on
a map the location of the Headquarters Facilities (as defined in Section 5.11)
and each parcel of real property owned by the Company and the Company
Subsidiaries, summary descriptions of the real property and all improvements
located thereon, and the approximate acreage contained therein.
(b) Except as they have since been affected subsequent to July 31, 1997 by
transactions in the ordinary course of business and consistent with past
practices, and except for assets subject to financing leases required to be
capitalized under generally accepted accounting principles which are reflected
in the Company Balance Sheet or notes thereto, the Company and the Company
Subsidiaries have good and marketable title to the assets reflected in the
Company Balance Sheet or otherwise on their books and records as being owned as
of July 31, 1997, or purchased or otherwise acquired by any of them since July
31, 1997, and the Company has good and marketable title to or valid licenses to
use the assets described in Section 2.20 below and to the following assets
whether or not reflected in the Company Balance Sheet or on such books and
records:
(i) Title or abstract plants meeting the requirements of the Texas
Insurance Code for the Texas counties of Collin, Denton and Tarrant, and as
an integral part thereof the computer data files of and the magnetic tapes
containing information abstracted for title plant purposes from documents
maintained by county clerks or recorders or other governmental officials
and the microfilm of such documents created for title plant purposes;
(ii) The computer data files and magnetic tapes containing information
abstracted for purposes of preparing printed copies of indices provided as
a service to county clerks, recorders or other governmental officials from
documents maintained by such county
13
<PAGE> 20
clerks, recorders or other governmental officials (but not the printed
copies of such indices or the microfilm created as a service to such
officials);
(iii) The computer programs and applications software, in both object
code and source code form, and all documentation therefor (excluding
operating systems software leased by or licensed to the Company and the
Company Subsidiaries) utilized by the Company and the Company Subsidiaries
to provide on-line services to their title insurance company customers;
(iv) The computer programs and applications software, in both object
code and source code form, and all documentation therefor (excluding
operating systems software leased by or licensed to the Company and the
Company Subsidiaries) utilized by the Company and the Company Subsidiaries
for any other applications, including data entry, batch processing for
county customers, microcomputers installed at county offices, financial
applications and providing computer output microfilm; and
(v) The camera equipment installed at county offices which is
identified in Section 2.16(b) of the Company Disclosure Schedule.
(c) The assets identified in subsection (b) above and the assets described
in Section 2.20 below are owned by or licensed to the Company or the Company
Subsidiaries, and the Headquarters Facilities will be transferred by the
Shareholder to Sub, free and clear of any lien, claim or encumbrance except
those disclosed in the Company Balance Sheet or notes thereto or in Section
2.16(c) of the Company Disclosure Schedule and except for:
(i) Liens for taxes, assessments, or other governmental charges not
yet delinquent, or the validity of which are being contested in good faith
by appropriate proceedings listed in Section 2.16(c) of the Company
Disclosure Schedule;
(ii) Statutory liens incurred in the ordinary course of business that
are not yet delinquent, or the validity of which are being contested in
good faith by appropriate proceedings described in Section 2.16(c) of the
Company Disclosure Schedule;
(iii) The rights of customers of the Company or any Company Subsidiary
with respect to inventory or work in progress under purchase orders or
contracts entered into by the Company or a Company Subsidiary in the
ordinary course of business;
(iv) Liens, claims, or encumbrances consisting of leases of equipment
to customers entered into in the ordinary course of business;
(v) Liens, claims, or encumbrances described in real estate title
insurance binders or commitments, or abstracts of title to real estate,
furnished or to be furnished to
14
<PAGE> 21
Tyler in connection with the transactions contemplated hereby, unless
Tyler objects to the same in writing within five business days after
receipt of such title documents;
(vi) Restrictions and constraints set forth in the license agreements
described in Section 2.20 of the Company Disclosure Schedule; and
(vii) Other liens, claims, or encumbrances that, in the aggregate, do
not materially detract from the value of, or materially interfere with the
present use of, such assets.
(d) Except for those assets acquired since the date of the Company Balance
Sheet, all tangible properties and assets material to the present operations of
the Company and the Company Subsidiaries are reflected on the Company Balance
Sheet and notes thereto in the manner and to the extent required by generally
accepted accounting principles. Immediately after the Closing, the Company and
the Company Subsidiaries will own or lease or otherwise possess the rights to
use all assets necessary to the conduct of the business conducted by Company and
the Company Subsidiaries immediately before the Closing.
2.17 Condition of Tangible Assets. Except as set forth in Section 2.17 of
the Company Disclosure Schedule, the tangible assets of the Company and the
Company Subsidiaries which are material to the business, operations, assets or
financial condition of the Company and the Company Subsidiaries, taken as a
whole, are in good condition and repair and, in the good faith belief of the
Shareholder, are adequate for the uses to which they are being put in the
ordinary course of their respective businesses.
2.18 Accounts Receivable. To the knowledge of the Company and the
Shareholder, all accounts receivable reflected in the Company Balance Sheet or
arising since July 31, 1997 either have been collected or are enforceable and
collectible claims not subject to any valid defense, offset, or credit, except
to the extent of any reserves established for doubtful accounts in a manner
consistent with such practices in prior periods.
2.19 Inventory Good and Salable. To the knowledge of the Company and the
Shareholder, the inventories reflected in the Company Balance Sheet or acquired
after July 31, 1997 consist generally of items of a quantity and quality usable
and salable in the ordinary course of the business of the Company and the
Company Subsidiaries.
2.20 Patents, Trademarks, and Copyrights. Set forth in Section 2.20 of the
Company Disclosure Schedule is a true and correct description of:
(a) all material trademarks, trade names, service marks, patents,
copyrights, and applications therefor and all license, royalty, assignment,
and other similar agreements relating to the foregoing currently owned, in
whole or in part, by the Company or any Company Subsidiary;
15
<PAGE> 22
(b) all material agreements relating to technology, know-how, or
processes that the Company or any Company Subsidiary is licensed or
authorized to use by others or licenses or authorizes others to use; and
(c) all computer programs and applications software utilized by the
Company or the Company Subsidiaries and all license, royalty, assignment,
and other similar agreements relating to the foregoing.
Except to the extent set forth in Section 2.20 of the Company Disclosure
Schedule, the Company or a Company Subsidiary has, to the knowledge of the
Company and the Shareholder, the sole and exclusive right to use the patents,
trademarks, trade names, copyrights, service marks, technology, know-how, and
processes identified in such Section 2.20 without infringing or violating the
rights of any other person, and to the knowledge of the Company and the
Shareholder no consent of third parties will be required for the use thereof by
the Company upon consummation of the Merger and there are no past due or
delinquent license fees, rents, royalties, or other charges that the Company is
required or obligated to pay with respect to any of the foregoing. Except as
disclosed in Section 2.20 of the Company Disclosure Schedule, no claim has been
asserted by any person to the ownership of or right to use any such patent,
trademark, trade name, copyright, service mark, technology, know-how, or process
or challenging or questioning the validity or effectiveness of any such license
or agreement, and the Company knows of no valid basis for any such claim. To the
knowledge of the Company and the Shareholder, except as disclosed in Section
2.20 of the Company Disclosure Schedule, each of the foregoing is valid and
subsisting, has not been canceled, abandoned, or otherwise terminated, and, if
applicable, has been duly issued or filed.
2.21 Contracts. Set forth in Section 2.21 of the Company Disclosure
Schedule are complete and accurate lists of the following contracts and
commitments (including summaries of oral contracts) to which the Company or any
Company Subsidiary is a party or bound:
(a) Contracts with any labor union;
(b) Employee benefit plans or contracts;
(c) Employment or similar contracts, including confidentiality
agreements and agreements to assign inventions, patents and copyrights, and
consulting agreements (other than those entered into in the ordinary course
of business);
(d) Leases, whether as lessor or lessee, involving annual rental
payments in excess of $15,000, that are not terminable at will or upon
notice of 30 days or less by the Company or a Company Subsidiary;
(e) Loan agreements, mortgages, indentures, instruments of
indebtedness or commitments involving indebtedness for borrowed money or
money loaned to others in excess of $15,000, but excluding intercompany
items;
16
<PAGE> 23
(f) Guaranty or suretyship, performance bond, indemnification, or
contribution agreements involving obligations in excess of $15,000, but
excluding intercompany items;
(g) Contracts with customers or suppliers that involve aggregate
payments to or by the Company or any Company Subsidiary of more than
$15,000, and that are not terminable at will or upon notice of 30 days or
less by the Company or a Company Subsidiary;
(h) Distribution, marketing, dealership, sales, or agency agreements
material to the Company and the Company Subsidiaries, taken as a whole,
that are not terminable at will or upon notice of 30 days or less by the
Company or a Company Subsidiary;
(i) Joint venture, partnership, or other agreements evidencing an
ownership interest or a participation in or sharing of profits;
(j) Contracts containing noncompetition covenants, covenants to
register securities, or negative or restrictive financial covenants that
are not terminable at will or upon notice of 30 days or less by the Company
or a Company Subsidiary;
(k) Voting agreements relating to securities of the Company or the
Company Subsidiaries (whether or not any of those entities is a party
thereto);
(l) Insurance policies involving annual premium payments of more than
$1,500;
(m) Powers of attorney;
(n) Contracts between the Company or any Company Subsidiary and the
Shareholder, his spouse, or any affiliate or relative thereof; and
(o) Other contracts not made in the ordinary course of business or
that, in the reasonable judgment of the Shareholder, are material to the
businesses, operations, assets, or financial condition of the Company and
the Company Subsidiaries, taken as a whole.
Included in the list of customers specified in subsection (g) above, and so
identified, are all contracts and commitments, whether written or oral,
relating to the purchase, sale or lease of abstract or title plants by the
Company and the Company Subsidiaries in 1996 and 1997. No contract or
commitment listed in Section 2.21 of the Company Disclosure Schedule has been
amended or modified or the rights and obligations evidenced thereby otherwise
affected in a manner materially adverse to the Company or the Company
Subsidiaries, except by an instrument which is also included in such listing,
and each contract or commitment, as so amended, modified or affected, contains
all material provisions with respect to the subject matter thereof. The Company
and the Shareholder have furnished or made available to Tyler accurate and
complete copies of all of the contracts, commitments or instruments listed in
Section 2.21 of the Company Disclosure Schedule. Except as set forth in Section
2.21 of the Company Disclosure Schedule or with respect to contracts
17
<PAGE> 24
not material to the businesses, operations, assets or financial condition of the
Company and the Company Subsidiaries, taken as a whole, (i) to the knowledge of
the Company and the Shareholder, all such contracts are valid, binding,
subsisting, and enforceable in all material respects; (ii) to the knowledge of
the Company and the Shareholder and in their good faith belief the Merger will
not affect the continuance in full force and effect of such contracts; and (iii)
there is no material dispute among the parties to any such contract and no
material penalty has been incurred with respect thereto. Except as set forth in
Section 2.21 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary nor the Shareholder has received notice of any plan or
intention of any other party to any such contract or agreement to exercise any
right to cancel or terminate any such contract or agreement, and neither the
Company nor any Company Subsidiary nor the Shareholder knows of any fact that
would justify the exercise of such right. Neither the Company nor any Company
Subsidiary nor the Shareholder currently contemplates, or has any reason to
believe any other person or entity currently contemplates, any amendment or
change to any of the contracts or agreements referred to in Section 2.21 of the
Company Disclosure Schedule. Except as disclosed in Section 2.21 of the Company
Disclosure Schedule, none of the Company's or the Company Subsidiaries'
customers or suppliers, that during the year ended December 31, 1996 accounted
for as much as 2% of consolidated sales or purchases of the Company and the
Company Subsidiaries, has refused, or communicated that it will or may refuse,
to purchase or supply goods or services, as the case may be, or has communicated
that it will or may substantially reduce the amount of goods or services that it
is willing to purchase from, or sell to, the Company or any Company Subsidiary
after the date hereof.
2.22 Litigation and Claims. Neither the Company nor any Company Subsidiary
nor the Shareholder is a party to, and the businesses or assets of the Company
and the Company Subsidiaries are not the subject of or affected by, any pending
or to the knowledge of the Company or the Shareholder, threatened suit, claim,
action, or litigation with any party or any administrative, arbitration, or
other governmental proceeding, investigation, or inquiry, or any pending change
in any regulations, statutes or ordinances, which would, severally or in the
aggregate, have a material adverse effect on the businesses, results of
operations, assets, or the condition (financial or otherwise) of the Company and
the Company Subsidiaries, taken as a whole. To the knowledge of the Company or
the Shareholder, no suit, claim, action or demand is currently pending, has been
made or filed, or is or has been threatened or contemplated by any person or
entity, and there exists no judgment or order (whether or not the Company or a
Company Subsidiary is a party to any of the foregoing) regarding or affecting
the ownership, disclosure, copying, possession or utilization by the Company or
the Company Subsidiaries of the assets reflected in the books and records of the
Company or the Company Subsidiaries, or (whether or not so reflected) the
microfilm in the possession of the Company and the Company Subsidiaries of title
documents filed in any county clerk's or recorder's office with which they
conduct business, computer data files and magnetic tapes containing information
abstracted from such title documents, indices (other than copies of
grantor/grantee indices provided as a service to county clerks or recorders)
generated from such data files utilizing the computer systems of the Company and
the Company Subsidiaries, software programs used in their businesses, and the
computers and peripheral equipment and the other equipment and machines used in
their businesses.
18
<PAGE> 25
2.23 Judgments, Decrees, and Orders in Restraint of Business. Neither the
Company nor any Company Subsidiary is a party to or subject to any judgment,
order, or decree entered in any suit or proceeding brought by any governmental
agency or by any other person enjoining it in respect of any business practice
or the acquisition of any property or the conduct of its business.
2.24 No Violation of Any Instrument. Neither the Company nor any Company
Subsidiary is in violation of or default under nor, to the knowledge of the
Company or the Shareholder, has any event occurred that, with or without the
giving of notice, lapse of time or the occurrence of any other event, would
constitute a violation of or default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of a lien, claim, or
encumbrance upon any property or asset of the Company or any Company Subsidiary
pursuant to, the articles or certificate of incorporation or bylaws of the
Company or any Company Subsidiary or any note, bond, indenture, mortgage, deed
of trust, evidence of indebtedness, loan or lease agreement, or other agreement
or instrument (including with customers) listed or required to be listed in
Section 2.21 of the Company Disclosure Schedule, or any judgment, order,
injunction, or decree, to which it is a party, by which it is bound, or to which
any of its assets is subject, which would have a material adverse effect on the
businesses, operations, assets or financial condition of the Company and the
Company Subsidiaries, taken as a whole.
2.25 Compliance With Laws. The Company and the Company Subsidiaries are
substantially in compliance with all laws applicable to their businesses, where
failure so to comply would have a material adverse effect on the businesses,
operations, assets, prospects, or financial condition of the Company and the
Company Subsidiaries, taken as a whole.
2.26 Compensation and Benefit Plans.
(a) Section 2.26 of the Company Disclosure Schedule includes a complete and
accurate list of all pension, profit sharing, Section 401(k), thrift-savings,
simplified employee pension, excess benefit plan, deferred compensation,
incentive compensation, stock bonus, stock option, restricted stock, cash bonus,
employee stock ownership, severance pay, golden parachute, cafeteria, flexible
compensation, life insurance, medical, dental, disability, welfare, or vacation
plans or arrangements of any kind and any other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan (as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) in which employees
or former employees of the Company or any Company Subsidiary participate
(collectively, the "Benefit Plans").
(b) Neither the Company nor any Company Subsidiary participates currently
in or has ever participated in, or is required currently to or has ever been
required to contribute to or otherwise participate in, any "multi-employer
plan," as defined in Sections 3(37)(A) and 4001(a)(3) of ERISA and Section
414(f) of the Code. Neither the Company nor any Company Subsidiary participates
currently in or has ever participated in, or is required currently to or has
ever been required to contribute to or otherwise participate in, any plan,
program or arrangement subject to Title IV of ERISA.
19
<PAGE> 26
(c) No former employee of the Company or any Company Subsidiary is
entitled, and no current employee will be entitled after termination of
employment, to participate in any Employee Welfare Benefit Plan as defined in
ERISA, other than participation required to be permitted by the Company or any
Company Subsidiary under Section 4980B of the Code and Sections 601 to 609 of
ERISA.
(d) The Company and the Shareholder have delivered to Tyler true, correct
and complete copies of the Benefit Plans and each applicable summary plan
description and the most recent Form 5500s applicable to such Benefit Plans.
Section 2.26 of the Company Disclosure Schedule sets forth the costs
attributable to each Benefit Plan determined on an annual basis. Except as
reflected or reserved against on the Company Balance Sheet, there is no unfunded
liability with respect to any Benefit Plan. None of the assets of any of the
Company's or any Company Subsidiary's Benefit Plans are invested in any property
constituting employer real property or employer security within the meaning of
Section 407(d) of ERISA.
(e) Each Employee Pension Benefit Plan sponsored, maintained or contributed
to by the Company or any Company Subsidiary is qualified under Section 401(a) of
the Code; all related trusts are exempt from federal income tax under Section
501(a) of the Code; each such plan has received a determination letter from the
IRS stating that the plan is qualified under Section 401(a) of the Code and all
related trusts are exempt from federal income tax under Section 501(a) of the
Code (which determination letter includes all statutory and regulatory
provisions of the Tax reform Act of 1986 and subsequent legislation for which a
determination letter may be obtained); and to the knowledge of the Company,
nothing has occurred since the date of the last such determination which
resulted in, or is likely to result in, the revocation of such determination. A
copy of the latest determination letter applicable to any Employee Pension
Benefit Plan has been delivered to Tyler.
(f) Each of the Benefit Plans has been administered in material compliance
with its underlying documentation, the requirements of ERISA, the Code and all
other applicable laws. All returns required to be made under ERISA and the Code
with respect to the Benefit Plans have been timely filed and the Company or any
Company Subsidiary has made all contributions required under the terms of any
Benefit Plan (including, but in no way limited to, employer matching
contributions and non-elective contributions and the deposit of elective
deferrals as such terms are defined in the Code) for all periods through and
including the date hereof.
(g) To the knowledge of the Company, there are not now, nor have there ever
been, any transactions involving the Benefit Plans or any fiduciary or
administrator thereof which are prohibited under ERISA or the Code or for which
an individual, class or statutory exemption is not available.
(h) There are no pending or, to the knowledge of the Company, any
threatened claims by or on behalf of the Benefit Plans, the United States
Department of Labor, the Internal Revenue Service, or any current or former
employee of the Company or any Company Subsidiary
20
<PAGE> 27
or beneficiary of such current or former employee alleging a breach of any
fiduciary duties or a violation of applicable state or federal law which could
result in liability on the part of the Company, any Company Subsidiary or a
Benefit Plan under ERISA or any other law, nor, to the knowledge of the
Company, is there any basis for such a claim and neither the Company, any
Company Subsidiary nor, to the knowledge of the Company, any administrator or
fiduciary of any Benefit Plan (or agent of the foregoing) has engaged in any
transaction or acted or failed to act in any manner which would subject the
Company to any liability for a breach of fiduciary duty under ERISA. The
transactions contemplated by this Agreement (either alone or together with any
other event) will not (i) terminate or modify the provisions of any Benefit
Plan or (ii) trigger an event under any Benefit Plan or employer benefit
arrangement or law that will result in any payment (whether of severance pay or
otherwise) becoming due from the Company or a Company Subsidiary.
2.27 Labor Relations.
(a) To the knowledge of the Company or the Shareholder, the Company and the
Company Subsidiaries (i) are in substantial compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment (including occupational health and safety), nondiscrimination, and
wages and hours and (ii) are not engaged in any unfair labor practice, that in
any such case would have a material adverse effect on the businesses,
operations, assets or financial condition of the Company and the Company
Subsidiaries, taken as a whole.
(b) There is no unfair labor practice complaint against Company or any
Company Subsidiary pending or, to the knowledge of the Company or Shareholder,
threatened before the National Labor Relations Board.
(c) There is no strike, labor dispute, slowdown, stoppage, or other
material interference with or impairment by labor of the business of the Company
and the Company Subsidiaries actually pending or, to the knowledge of the
Company or the Shareholder, threatened or contemplated against or directly
affecting the Company or any Company Subsidiary.
(d) To the knowledge of the Company or the Shareholder, no question of
union representation exists respecting the employees of the Company or any
Company Subsidiary and no union organizing activities are taking place.
(e) Since July 31, 1997, no key employees of the Company or the Company
Subsidiaries have been terminated or have resigned their employment.
2.28 Adequate Insurance. The Company and the Company Subsidiaries maintain
insurance coverage that the Company and the Shareholder believe is reasonably
adequate to protect the assets and operations of the Company and the Company
Subsidiaries, taken as a whole, and is sufficient for material compliance with
all requirements of law and all agreements to which the Company or any Company
Subsidiary is a party. No notice of any termination or threatened
21
<PAGE> 28
termination of such policies has been received by the Company or any Company
Subsidiary and, to the knowledge of the Company or the Shareholder, such
policies are valid, binding, and enforceable.
2.29 Contracts with Affiliates and Others. No director or officer of the
Company or any Company Subsidiary, nor any person who is a spouse or descendant
of such director or officer, has any direct or indirect relationship with any
customer or supplier of, or other contracting party with, the Company or any
Company Subsidiary (other than as a director, officer, or shareholder of the
Company) that would be required to be disclosed in a proxy statement relating
to the election of directors filed under the Securities Exchange Act of 1934
(the "Exchange Act").
2.30 Revenue Recognition. The Company and the Company Subsidiaries have
not recognized and do not recognize revenues from customers in advance of
performing the services or furnishing the products for which the revenues were
or are received.
2.31 Certain Fees. Neither the Company nor any Company Subsidiary nor any
officer, director, or employee of the Company or any Company Subsidiary has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions, or finders' fees in connection with the transactions contemplated
hereby.
2.32 Environmental Matters. To the knowledge of the Company or the
Shareholder:
(a) The Company, the Company Subsidiaries, and their respective
property (whether real, personal, owned, leased, managed or operated)
(collectively, "Business Facilities") are in compliance with applicable
laws, rules, regulations, ordinances, orders or guidance documents now in
effect of any applicable governmental authority or any judicial or
administrative decision relating thereto that relate in any manner to
health, Materials of Environmental Concern, the environment, or a
community's right to know (collectively, "Environmental Laws");
(b) There are no Materials of Environmental Concern on any Business
Facility in any quantity or concentration exceeding any limitation or
standard established pursuant to Environmental Laws;
(c) There are no actual or threatened claims, demands, allegations,
actions, suits, investigations, notices, or proceedings against or relating
to the Company or any of its Company Subsidiaries or any of their Business
Facilities relating to or arising out of the use, presence, or handling of
Materials of Environmental Concern or compliance with Environmental Laws
(collectively, "Environmental Claims"), and there is no basis for any such
Environmental Claims; and
22
<PAGE> 29
(d) There are no events, conditions, circumstances, facts, activities,
practices, incidents or plans relating to or arising out of the operations
of the Company or any of the Company Subsidiaries which will prevent or
interfere with compliance with Environmental Laws by Tyler after the
Closing, or which may give rise to any common law or statutory liability
under Environmental Laws or form the basis of an Environmental Claim
against the Company, any of the Company Subsidiaries, or any of their
respective Business Facilities.
"Materials of Environmental Concern" means: (i) those substances included
within the statutory and/or regulatory definitions of "hazardous substance,"
"hazardous waste," "extremely hazardous substance," "regulated substance,"
"hazardous materials," or "toxic substances," under any Environmental Law; (ii)
any material, waste or substance which is or contains: (A) petroleum, oil or a
fraction or constituent thereof, (B) asbestos, (C) polychlorinated biphenyls,
(D) formaldehyde, (E) explosives, or (F) radioactive materials (including NORM);
(iii) solid wastes (as defined under the Resource Conservation and Recovery Act,
42 U.S.C. sec.6901 et seq., and its implementing regulations) that post imminent
and substantial endangerment to health or the environment; (iv) any material,
waste or substance designated classified or regulated as a "Class I" or "Class
II" waste under Title 30 of the Texas Administrative Code; and (v) such other
substances, materials, or wastes that are or become classified or regulated as
hazardous or toxic under any applicable federal, state or local law or
regulation. To the extent that the laws or regulations of any applicable state
or local jurisdiction establish a meaning for any term defined herein through
reference to federal Environmental Laws which is broader than the meaning under
such federal Environmental Laws, such broader meaning shall apply.
2.33 Section 368 Representations. (a) There is no present plan, intention
or arrangement by the Shareholder to sell, exchange, transfer or otherwise
dispose of, or reduce the risk of loss relating to any of, the shares of Tyler
Common Stock received by him pursuant to the Merger that would reduce the
Shareholder's holdings, or risks incident to the ownership, of Tyler Common
Stock to a number of shares having a total fair market value at the Effective
Time of less than fifty percent (50%) of the total fair market value of all of
the Company's capital stock outstanding immediately prior to the Effective
Time. For purposes of this Section 2.33, shares of the Company's capital stock
sold, redeemed or otherwise disposed of prior or subsequent to and as a part of
the overall transaction contemplated by the Merger will be considered to be
capital stock of the Company outstanding immediately prior to the Merger.
(b) Neither the Company, Tyler, any Company Subsidiary nor any Tyler
Subsidiary will assume any debts or obligations of the Shareholder as part of
the Merger, other than the assumption by Tyler Sub, as the Surviving Corporation
in the Merger, of debts of the Company that are guaranteed by Shareholder.
(c) There have not been any sales or redemptions of the Company's capital
stock in contemplation of the Merger. There have been no transactions in the
capital stock of the Company
23
<PAGE> 30
during the past twelve months other than the grants by Shareholder of shares of
Class B Common Stock described in Section 5.10.
(d) The liabilities of the Company assumed by Tyler as a part of the Merger
and the liabilities to which the transferred assets of the Company are subject
were incurred by the Company in the ordinary course of its business, other than
the funds borrowed to pay the bonuses to employees and make the distributions to
the Shareholder permitted pursuant to Sections 5.8 and 5.5 of this Agreement.
(e) The Company will pay the expenses incurred in connection with the
Merger by it and the Shareholder. Notwithstanding the foregoing, to the extent
any of the expenses relating to the Merger (or the "plan of reorganization"
within the meaning of the Department of Treasury Regulation Section 1.368-1(c)
with respect to the Merger) are funded directly or indirectly by a party other
than the party incurring such expense, such expenses will be within the
guidelines established in Revenue Ruling 73-54, 1973-1 C.B. 187.
(f) Other than dividends to the Shareholder for purposes of funding his
federal tax liabilities with respect to 1997 income of the Company, the Company
has not, and pursuant to this Agreement will not, distribute any assets (either
as a dividend or otherwise) constituting more than 10% of the fair market value
of all of its assets at any time either during the past twelve months or in
contemplation of the Merger.
(g) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(h) The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) None of the compensation to be received by the Shareholder under the
Employment Agreement (or any other employment, consulting or similar services
agreement, whether written or oral) will be separate consideration for, or
allocable to, any of his shares of Company Common Stock. None of the shares of
Tyler Common Stock to be received by the Shareholder will be separate
consideration for, or allocable, to the Employment Agreement (or any other
employment, consulting, or similar services agreement, whether written or oral).
2.34 Accuracy of Information Furnished. No representation or warranty by
the Company or the Shareholder in this Agreement (including the Company
Disclosure Schedule) or any other agreement or document executed or to be
executed by the Company or the Shareholder in connection herewith contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not false or misleading.
24
<PAGE> 31
2.35 Representations Limited. Notwithstanding anything herein to the
contrary, representations or warranties with respect to any Company Subsidiary
with respect to periods prior to the time such Company Subsidiary (or its assets
if acquired as substantially all of the assets of another person) was acquired
by the Company are made to the knowledge of the Company or the Shareholder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TYLER
Tyler and Sub jointly and severally represent and warrant to the Company
and the Shareholder as follows:
3.1 Organization and Good Standing of Tyler. Tyler is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas.
3.2 Foreign Qualification. Tyler is duly qualified or licensed to do
business as a foreign corporation and in good standing in those jurisdictions
set forth in Section 3.2 of the schedule delivered by Tyler concurrently with
the execution of this Agreement (the "Tyler Disclosure Schedule"). Tyler is duly
qualified or licensed to do business as a foreign corporation in every
jurisdiction where the failure so to qualify would have a material adverse
effect on the businesses, operations, assets, or financial condition of Tyler
and the Tyler Subsidiaries (as defined in Section 3.7), taken as a whole. For
purposes of this Section 3.2, no material adverse affect shall be deemed to have
occurred as a result of non-payment of state or local franchise taxes not
exceeding $75,000 in the aggregate.
3.3 Power and Authority to Conduct Business. Each of Tyler and Sub has the
corporate power and authority, and possess all licenses and permits, required by
governmental authorities to own, lease, and operate its properties and assets
and to carry on its business as currently being conducted, except where the
failure to possess such license or permit does not and would not have a material
adverse effect on the business, operations, assets or financial condition of
Tyler and the Tyler Subsidiaries, taken as a whole.
3.4 Authority to Consummate Merger. Each of Tyler and Sub has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the other agreements or documents executed or required
to be executed by it in connection with this Agreement and, subject to obtaining
approval of the stockholders of Tyler, the execution, delivery and performance
by each of Tyler and Sub of this Agreement and the other documents executed or
to be executed by it in connection with this Agreement have been duly authorized
by all necessary corporate action.
3.5 Binding Effect. This Agreement and the other documents executed or
required to be executed by Tyler or Sub in connection with this Agreement have
been or will have been duly
25
<PAGE> 32
executed and delivered by Tyler or Sub and are or will be, when executed and
delivered, the legal, valid, and binding obligations of Tyler or Sub executing
the same, enforceable in accordance with their terms except that:
(a) enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification under Section 10.6 may be limited by
considerations of public policy.
3.6 Compliance with Other Instruments. Subject to obtaining the approval
of the stockholders of Tyler and except as disclosed in Section 3.6 of the
Tyler Disclosure Schedule, neither the execution and delivery by Tyler or Sub
of this Agreement or the other agreements or documents executed or required to
be executed by Tyler or Sub in connection herewith, nor the consummation by
Tyler or Sub of the transactions contemplated hereby and thereby will (i)
conflict with the articles of incorporation or bylaws of Tyler or Sub, (ii)
assuming satisfaction of the requirements set forth in clause (iii) below,
violate any provision of law applicable to Tyler or any of the Tyler
Subsidiaries; (iii) except for (A) requirements arising out of the HSR Act, (B)
requirements of federal and state securities laws, and (C) the filing of
articles of merger in accordance with the TBCA, require any consent,
authorization, permit, license or approval of, or declaration, registration or
filing with or notice to, any person or governmental body or authority,
domestic or foreign, under any provision of law applicable to Tyler or any of
the Tyler Subsidiaries; or (iv) require any consent, approval or notice under,
violate, breach, be in conflict with, or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under,
or permit the termination or the acceleration of maturity of, or result in the
imposition of any lien, claim, or encumbrance upon any property or asset of
Tyler or any Tyler Subsidiary pursuant to any note, bond, indenture, mortgage,
deed of trust, evidence of indebtedness, loan or lease agreement, other
agreement or instrument or any judgment, order, injunction, or decree by which
Tyler or any Tyler Subsidiary is bound, to which any of them is a party, or to
which any of their assets is subject, except for those violations and breaches
that would not have a material adverse effect on the businesses, operations,
assets or financial condition of Tyler and the Tyler Subsidiaries, taken as a
whole.
3.7 Capitalization of Tyler.
(a) The authorized capital stock of Tyler consists of 50,000,000 shares of
Tyler Common Stock, and 1,000,000 shares of preferred stock, par value $10.00
per share ("Tyler Preferred Stock"), of which 22,007,921 shares of Tyler Common
Stock and no shares of Tyler Preferred Stock were issued and outstanding as of
September 30, 1997 and 1,301,356 shares of Common Stock were held in treasury.
All of the issued and outstanding shares of Tyler Common Stock have been duly
authorized and are validly issued and are fully paid and nonassessable. There
26
<PAGE> 33
are no shares of the capital stock of Tyler held in its treasury or in the
treasury of any corporation of which Tyler is the record or beneficial owner,
directly or indirectly, of 50% or more of the capital stock (each such
corporation being referred to as a "Tyler Subsidiary"). The shares of Tyler
Common Stock to be issued in the Merger, when issued and delivered, will be duly
authorized, validly issued, fully paid, and nonassessable.
(b) As of the date hereof, the authorized capital stock of Sub consists of
1,000 shares of common stock, par value $0.01 per share, all of which are
validly issued, fully paid and nonassessable and are owned by Tyler.
(c) Except as described in Section 3.7 of the Tyler Disclosure Schedule and
in the Tyler Financial Statements (as hereinafter defined), there is no
outstanding subscription, contract, convertible or exchangeable security,
option, warrant, call, or other right obligating Tyler or any Tyler Subsidiary
to issue, sell, exchange, or otherwise dispose of, or to purchase, redeem, or
otherwise acquire shares of, or securities convertible into or exchangeable for,
capital stock of Tyler.
3.8 Commission Filings; Financial Statements. Section 3.8 of the Tyler
Disclosure Schedule lists all reports, registration statements and other
filings, together with any amendments required to be made with respect thereto,
that Tyler has filed with the Securities and Exchange Commission (the
"Commission")under the Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act since October 1, 1995. All reports, registration
statements and other filings filed by Tyler with the Commission since October 1,
1995 through the date of this Agreement, together with any amendments thereto,
are sometimes collectively referred to as the "Tyler Commission Filings." Tyler
has heretofore provided the Company and the Shareholder true, correct and
complete copies of the Tyler Commission Filings. As of the respective dates of
their filing with the Commission, the Tyler Commission Filings complied in all
material respects with the Securities Act, the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
Each of the consolidated financial statements (including any related notes
or schedules) included in or incorporated by reference into the Tyler Commission
Filings ("Tyler Financial Statements") was, and each of the consolidated
financial statements to be included in the Proxy Statement (as defined in
Section 6.2) (except for those financial statements of the Company and the
Company Subsidiaries furnished by or on behalf of the Company or the Shareholder
to Tyler specifically for use therein) will be, prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be noted therein or in the notes or schedules thereto), and fairly
present or will fairly present, as the case may be, the consolidated financial
position of Tyler and its consolidated subsidiaries as of the dates thereof and
the results of operations, cash flows and changes in stockholders' equity for
the periods then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments). Since December 31, 1996,
there has been no change in accounting principles applicable to, or methods
27
<PAGE> 34
of accounting utilized by, Tyler and the books and records of Tyler and the
Tyler Subsidiaries have been and are being maintained in accordance with all
applicable legal and accounting requirements and good business practice,
reflect only valid transactions, are complete and correct in all material
respects, and accurately reflect in all material respects the basis for the
consolidated financial position and consolidated results of operations and cash
flows of Tyler and its consolidated subsidiaries set forth in the Tyler
Financial Statements.
3.9 Absence of Certain Changes. Since June 30, 1997, Tyler has not (except
as contemplated by this Agreement or as may result from the transactions
contemplated by this Agreement or as described in the Tyler Disclosure
Schedule):
(a) suffered any change in its business, results of operations,
working capital, assets, liabilities, or financial condition or the manner
of conducting its business other than changes that, individually or in the
aggregate, have not had a material adverse effect on the businesses,
operations, assets or financial condition of Tyler and the Tyler
Subsidiaries, taken as a whole;
(b) entered into any material commitment or transaction other than in
the ordinary course of business;
(c) written up, written down, or written off the book value of any
material amount of assets;
(d) declared, paid, or set aside for payment any dividend or
distribution with respect to the capital stock of Tyler; or
(e) redeemed, purchased, or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of the capital stock or
securities of Tyler or any rights to acquire such capital stock or
securities, other than normal or periodic purchases, sales and grants under
provisions of existing employee benefit plans and programs of Tyler.
3.10 No Material Undisclosed Liabilities. To the knowledge of Tyler, there
is no liability or obligation of Tyler and the Tyler Subsidiaries of any nature,
whether absolute, accrued, contingent, or otherwise, other than:
(a) the liabilities and obligations that are fully reflected, accrued,
or reserved against in the unaudited consolidated balance sheet of Tyler
and its consolidated subsidiaries as of June 30, 1997, for which the
reserves are appropriate and reasonable, or incurred in the ordinary course
of business and consistent with past practices since June 30, 1997;
(b) the loss contingencies set forth in Section 3.10 of the Tyler
Disclosure Schedule;
28
<PAGE> 35
(c) contractual liabilities or obligations of a nature not required to
be disclosed on a balance sheet prepared in accordance with generally
accepted accounting principles; and
(d) other liabilities and loss contingencies which are not material in
the aggregate to the business, operations, assets or financial condition of
Tyler and the Tyler Subsidiaries, taken as a whole.
3.11 Litigation and Government Claims. Except as described in Section 3.11
of the Tyler Disclosure Schedule, neither Tyler nor any Tyler Subsidiary is a
party to, and the business or assets of Tyler and the Tyler Subsidiaries are not
the subject of, any pending or, to the knowledge of Tyler, threatened suit,
claim, action, or litigation with any party, or any administrative, arbitration,
or other governmental proceeding, investigation, or inquiry, in which the amount
involved and not covered by insurance exceeds $250,000. In the opinion of Tyler
and its management, none of such pending or threatened matters would, severally
or in the aggregate, have a material adverse effect on the business, operations,
assets or financial condition of Tyler and the Tyler Subsidiaries, taken as a
whole.
3.12 No Violation of Any Instrument. Except as disclosed in Section 3.12
of the Tyler Disclosure Schedule, neither Tyler nor any Tyler Subsidiary is in
violation of or default under nor, to the knowledge of Tyler, has any event
occurred that, with the lapse of time or the giving of notice or both, would
constitute a violation of or default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of a lien, claim, or
encumbrance upon any property or asset of Tyler or any Tyler Subsidiary
pursuant to the articles or certificate of incorporation or bylaws of Tyler or
any Tyler Subsidiary or any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, loan or lease agreement, or other agreement or
instrument or any judgment, order, injunction, or decree to which it is a
party, by which it is bound, or to which any of its assets is subject, which
would have a material adverse effect on the business, operations, assets or
financial condition of Tyler and the Tyler Subsidiaries, taken as a whole.
3.13 Certain Fees. Neither Tyler nor any officer, director, or employee of
Tyler has employed any broker or finder or incurred any liability for any
brokerage fees, commissions, or finders' fees in connection with the
transactions contemplated hereby.
3.14 No Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
3.15 Accuracy of Information Furnished. No representation or warranty by
Tyler or Sub in this Agreement (including the Tyler Disclosure Schedule) or any
other agreement or document executed or to be executed by Tyler or Sub in
connection herewith contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not false or misleading.
29
<PAGE> 36
3.16 Company Contract Bids. Tyler acknowledges that, notwithstanding
Section 2.21, certain of the Company's contracts with governments or
governmental agencies may come up for bid in the ordinary course of business
(including Dallas County, Texas in late 1997) and that no guarantee can be made
that the Company will be the successful bidder for such contracts.
ARTICLE 4
JOINT COVENANTS OF THE COMPANY, THE SHAREHOLDER AND TYLER
4.1 Access; Confidentiality.
(a) During the period pending the Closing Date, the Company and the
Shareholder (with respect only to the properties to be leased by the Shareholder
to the Company after the Merger) shall afford to Tyler and its officers,
employees, accountants, counsel, and other authorized representatives, full
access to and the right to review and make copies of the Company's, the Company
Subsidiaries', the Company Investments' (to the extent practicable), and the
Shareholder's assets, properties, books, contracts, commitments, and records,
view their physical properties, and communicate with the key employees of the
Company and the Company Subsidiaries on a basis reasonably satisfactory to and
with the prior specific approval of the Shareholder, and will furnish and use
their reasonable best efforts to cause representatives to furnish promptly to
Tyler such additional financial and operating data and other documents and
information (certified if requested and reasonably susceptible to certification)
relating to the Company, the Company Subsidiaries', the Company Investments' (to
the extent practicable), and the Shareholder's businesses and properties as
Tyler or its duly authorized representatives may from time to time reasonably
request.
(b) During the period pending the Closing Date, Tyler shall afford to the
Company and the Shareholder and their accountants, counsel and other authorized
representatives the same rights of access to and inspection of the books,
records, properties, contracts and personnel of Tyler as those afforded to Tyler
and its representatives in Section 4.1(a) above.
(c) Notwithstanding any such investigation by Tyler, the Company, or the
Shareholder, or any information obtained pursuant thereto, it or he shall be
entitled to rely in full upon the accuracy of the representations and warranties
of the other party or parties contained in this Agreement and upon its or his
representations at Closing as to compliance with or performance of any covenants
made by it or him in this Agreement. Tyler, the Company, or the Shareholder
shall have no obligation to investigate any such matters and, if any such
matters are investigated, shall have no obligation to the other party or parties
with respect to information obtained thereby except as provided in Section 12.1
of this Agreement.
(d) The rights and obligations of the Shareholder, the Company and Tyler
pursuant to the Confidentiality Agreement (the "Confidentiality Agreement")
dated September 24, 1997 by and among the Shareholder, the Company and Tyler
will survive the execution and delivery of this Agreement, and all information
obtained by the Shareholder, the Company and Tyler or any
30
<PAGE> 37
of their respective Representatives (as defined in the Confidentiality
Agreement) pursuant hereto shall be deemed "Information" as that term is
defined in the Confidentiality Agreement, and shall be subject to the
provisions of the Confidentiality Agreement, except to the extent that Tyler is
advised by counsel that disclosure of any such Information, including the
existence of the Confidentiality Agreement, is required by law in connection
with the Merger.
4.2 Notice of any Material Change. Each of the Company and Tyler shall,
promptly after the first notice or occurrence or failure to occur thereof but
not later than the Closing Date, supplement or amend its Disclosure Schedule to
disclose the occurrence of any event or the existence of any state of facts that
would:
(a) make any of its representations and warranties in this Agreement
untrue in any material respect or constitute a material failure of such
party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder;
(b) make it necessary to amend the Proxy Statement in order to render
the statements therein not misleading or to comply with applicable law; or
(c) otherwise constitute a material adverse change in the respective
businesses, results of operations, working capital, assets, liabilities or
condition (financial or otherwise) of Tyler and the Tyler Subsidiaries,
taken as a whole, or the Company and the Company Subsidiaries, taken as a
whole. Subject to the provisions of Section 12.1 of this Agreement, no
supplement or amendment to any Disclosure Schedule shall have any effect
for the purpose of determining the satisfaction of or compliance with the
conditions to the obligations of the parties set forth elsewhere in this
Agreement.
4.3 Monthly Financial Statements. During the period pending the Closing
Date, each of Tyler and the Company shall furnish to the other its unaudited
consolidated balance sheet and related statements of operations, stockholders'
equity, and cash flows and any supporting schedules for the accounting periods
ending on or about the last day of each such month, promptly after they are
available, but not later than 30 days after the close of such accounting period.
4.4 Antitrust Notification. Within 10 days after the date hereof, Tyler
and the Shareholder shall each file with the Federal Trade Commission ("FTC")
and the Antitrust Division of the U.S. Department of Justice ("DOJ") the
Notification and Report Form required to be filed pursuant to the HSR Act, and
shall timely supply any supplemental information that may be reasonably
requested by the FTC or DOJ in connection therewith. The Company, the
Shareholder and Tyler shall furnish to each other such necessary information and
reasonable assistance as the other party may request in connection with the
preparation of its respective necessary submissions under the HSR Act. The
Company, the Shareholder and Tyler shall furnish to each other copies of all
correspondence, filings, or communications (or memoranda setting forth the
substance thereof), between them or their representatives and the FTC or DOJ.
31
<PAGE> 38
4.5 Tax Matters.
(a) The Shareholder and the Company shall prepare and timely file all tax
returns and amendments thereto required to be filed by the Company and the
Company Subsidiaries on or before the Closing Date and all federal income tax
returns of the Company and the Company Subsidiaries that are due to be filed
after the Closing Date and relate to the tax periods of the Company and the
Company Subsidiaries ending on or before the Closing Date. Tyler shall have a
reasonable opportunity to review all such tax returns and amendments thereto.
The Company and the Company Subsidiaries, with the consent of the Shareholder,
shall be entitled in their discretion at any time prior to the Closing Date to
revoke their elections under Section 1362(a) of the Code to be treated as S
corporations.
(b) Tyler or the Surviving Corporation, as appropriate, shall prepare and
file all tax returns other than federal income tax returns of the Company and
the Company Subsidiaries that are due to be filed after the Closing Date and
shall pay all taxes shown on such returns as due and owing.
(c) The Shareholder covenants and agrees that he will be fully responsible
for, and indemnifies and holds harmless Tyler, the Company and the Company
Subsidiaries from and against, any and all claims, demands, losses, obligations
and liabilities for income taxes of the Company and the Company Subsidiaries,
any penalties and interest with respect thereto, and any costs and expenses
(including reasonable attorneys' and accountants' fees) of Tyler, the Company or
a Company Subsidiary incurred as an incident thereto, relating to tax periods of
the Company and the Company Subsidiaries ending on or before the Closing Date.
Tyler agrees that the Shareholder shall have the sole right to contest, resolve
and defend, at his cost, against any assessment for additional income taxes,
notice of income tax deficiency or other adjustment of income taxes of the
Company or the Company Subsidiaries made or proposed by any taxing authority for
such periods. The Shareholder shall be entitled to retain such tax
representatives, subject to the consent of Tyler (which shall not be
unreasonably withheld), as he selects to represent him in resolving any such
income tax controversies or disputes for tax periods ending on or before the
Closing Date, and Tyler or the Company, as appropriate, shall execute and
deliver powers of attorney, limited to such tax periods, in favor of the
Shareholder or his tax representatives as necessary to effectuate the provisions
of this Section 4.5.
(d) Subject to Closing, and specifically reserving any rights or remedies
Tyler or the Surviving Corporation may have for breach of the representations
and warranties of the Shareholder contained in Article 2 of this Agreement,
Tyler covenants and agrees that either it or the Surviving Corporation, as
appropriate, will be fully responsible for, and Tyler indemnifies and holds
harmless the Shareholder from and against, any and all claims, demands, losses,
obligations and liabilities for income taxes of the Surviving Corporation and
the Company Subsidiaries, any penalties and interest with respect thereto, and
any costs and expenses (including reasonable attorneys' and accountants' fees)
of the Shareholder incurred as an incident thereto, relating to tax periods of
the Surviving Corporation and the Company Subsidiaries ending after the Closing
Date;
32
<PAGE> 39
such responsibility of and indemnity by Tyler shall include the amounts of
any and all tax consequences or liabilities attributable to any election by
Tyler or the Surviving Corporation after the Closing to change the tax
accounting methods utilized by the Company or the Company Subsidiaries
applicable to tax periods ending after the Closing Date. The Shareholder agrees
that Tyler or the Surviving Corporation, as appropriate, shall have the sole
right to contest, resolve and defend, at its cost, against any assessment for
additional income taxes, notice of income tax deficiency or other adjustments of
income taxes of the Surviving Corporation or the Company Subsidiaries made or
proposed by any taxing authority for tax periods ending after the Closing Date.
(e) All parties hereto agree if requested to reasonably cooperate with one
another and assist in the settlement, compromise, defense or other disposition
of any assessments for additional taxes, notices of deficiency, proposed
adjustments or other income tax disputes or controversies by or with taxing
authorities relating to the Company and the Company Subsidiaries. Tyler or the
Surviving Corporation, as appropriate, will provide to the Shareholder or his
tax representatives prompt written notification and copies of any communications
from or to any taxing authority received or made by either of them relating to
income tax liabilities of the Company or the Company Subsidiaries for any tax
periods ended on or before the Closing Date. The Shareholder or his tax
representatives will provide to Tyler prompt written notification and copies of
any communications from or to any taxing authority received or made by either of
them relating to income tax liabilities of the Company or the Company
Subsidiaries. Subsequent to any such notice, Tyler and the Shareholder shall
keep the other fully advised of the status and developments with respect to such
proposed or asserted income tax liability, and of the terms of any settlement or
other final resolution thereof. Failure by any party to notify any other party,
as provided herein, shall not relieve the party otherwise entitled to such
notice from its obligations contained in this Section 4.5 of this Agreement;
provided, however, that the party entitled to such notice may pursue other
remedies available to it at law or in equity for breach, if any, of the covenant
to notify contained herein.
(f) The Shareholder shall not, in any capacity, agree to any audit
adjustments by a taxing authority, or settle, compromise or otherwise agree to
a resolution of any dispute or controversy, with respect to the income tax
liability of the Company or the Company Subsidiaries if the effect of the
adjustment or the terms of the settlement increases the income tax liabilities
(including loss of carry forwards) of the Company and the Company Subsidiaries:
(i) for the taxable period commencing on January 1, 1997 and ending on
the Closing Date to an amount that, when added to the income taxes paid for
such period by Tyler or the Company in accordance with Section 4.5(b) above
(excluding the amount of any such income tax liability attributable to any
election by Tyler or the Company after the Closing to change tax accounting
methods utilized by the Company and the Company Subsidiaries applicable to
tax periods ending on or after January 1, 1997) exceeds the tax liability
(excluding deferred taxes) accrued on the books and records of the Company
and the Company Subsidiaries for the period commencing January 1, 1997 and
ending on the Closing Date; or
33
<PAGE> 40
(ii) for taxable periods commencing after the Closing Date (but
including the amount of any such income tax liability attributable to any
election by Tyler or the Company after the Closing to change tax accounting
methods utilized by the Company and the Company Subsidiaries applicable to
tax periods ending on or after January 1, 1997), unless the Shareholder or
his tax representatives shall have in advance thereof consulted with Tyler
and shall have agreed on mutually acceptable terms to pay to Tyler or the
Surviving Corporation, as appropriate, the additional income taxes (subject
to the limitation set forth in Subsection (i) above) that would be owed by
Tyler or the Company for all periods subsequent to December 31, 1996 as a
result of such settlement. In any event, the Shareholder shall pay to Tyler
or the Surviving Corporation, as appropriate, the amount of any increase in
income tax liabilities (including loss of carry forwards) of the Company
and the Company Subsidiaries for all tax periods ending on or after the
Closing Date (subject to the limitation set forth in subsection (i) above)
that results from a final administrative or judicial determination
adjusting the income tax liabilities of the Company and the Company
Subsidiaries for any period ending on or before the Closing Date, and such
payment or payments shall be made at the time Tyler or the Surviving
Corporation files an income tax return with a taxing authority covering a
tax period that is affected by such increase in income tax liability.
(g) Tyler or the Surviving Corporation, as appropriate, shall pay to the
Shareholder the amount of any reduction in income tax liabilities of the Company
and the Company Subsidiaries for all tax periods ending on or after the Closing
Date that result from a corresponding adverse adjustment by a taxing authority
to the tax liability of the Company and the Company Subsidiaries for tax periods
ended on or before the Closing Date. Any such payment or payments shall be made
at the time Tyler or the Company files an income tax return with the taxing
authority covering a tax period that is benefitted by such reduction.
(h) The Shareholder agrees promptly to pay over to Tyler or the Surviving
Corporation, as appropriate, at the time of receipt by the Shareholder, all
proceeds he receives from any refund of income taxes arising out of any carry
back to prior tax periods of the Company and the Company Subsidiaries of any net
operating loss of Sub for tax periods ending on or after the Closing Date,
including any benefits derived from such carry backs to otherwise reduce an
income tax liability for such prior periods. At the request of Tyler or Sub and
at their expense, the Shareholder shall promptly file all necessary documents or
prosecute all other necessary proceedings to claim and recover such refunds.
Tyler or Sub, as appropriate, at the time of the receipt thereof, agree to
timely pay over to Shareholder all proceeds received by either of them from any
refund of income taxes as a result of an adjustment to the income tax liability
of the Company or any Company Subsidiary for tax periods ending on or before the
Closing Date. At the request of Shareholder and at his expense, Tyler or Sub, as
appropriate, shall promptly file all necessary documents or prosecute all other
necessary proceedings to claim and recover such refunds.
(i) At the request of the Shareholder, Tyler or the Company, as
appropriate, shall submit for filing with the Internal Revenue Service a Request
for Prompt Assessment of Income Taxes pursuant to Section 6501(d) of the
Internal Revenue Code for all open tax periods through
34
<PAGE> 41
the Closing Date for which a federal income tax return or returns or amended
return or returns have been filed by the Company and the Company Subsidiaries.
(j) From and after the Closing Date, the Shareholder will not (a) extend
the statute of limitations; (b) make or change any elections affecting the
Company or the Company Subsidiaries; or (c) change a method of accounting, in
each instance with respect to tax liabilities of the Company Subsidiaries
relating to periods ending on or prior to the Closing Date, without the prior
written consent of Tyler (which consent shall not be unreasonably withheld).
(k) To the extent the provisions of this Section 4.5 and the provisions of
Article 11 of this Agreement are inconsistent or conflict, the provisions of
this Section 4.5 shall be determinative of the rights and obligations of the
parties hereto.
(l) Except as required by applicable law, the Shareholder, Tyler, the
Company and the Company Subsidiaries will not take or cause to be taken any
action which would prevent the transactions contemplated hereby from qualifying
as a reorganization under Section 368 of the Code.
4.6 Cooperation Pending Closing. Each of the parties hereto shall use its
reasonable best efforts to:
(a) proceed promptly to make or give the necessary applications,
notices, requests, and filings in an effort to obtain at the earliest
practicable date and, in any event, before the Closing Date, the approvals,
authorizations, and consents of third parties necessary to consummate the
transactions contemplated by this Agreement;
(b) cooperate with and keep the other informed in connection with this
Agreement; and
(c) take such actions as the other party may reasonably request to
consummate the transactions contemplated by this Agreement and use its
reasonable best efforts and diligently attempt to satisfy, to the extent
within its control, all conditions precedent to the obligations to close
this Agreement.
4.7 Non-competition Allocation. Each of the parties agree that $100,000 of
the cash portion of the Consideration to be received by Shareholder as the
holder of Class A Common Stock is in consideration of, and shall be allocated
to, the non-competition and non-solicitation covenants of the Shareholder in the
Employment Agreement (as defined herein).
ARTICLE 5
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
5.1 Conduct of Business Prior to Closing Date. During the period pending
the Closing Date (or other indicated date), the Company and the Shareholder:
35
<PAGE> 42
(a) shall, and shall cause each Company Subsidiary to, use its
reasonable best efforts to conduct the operations of the Company and the
Company Subsidiaries in the ordinary and usual course of business
consistent with past and current practices, and to maintain marketing
organizations intact and to preserve the goodwill of their employees,
representatives, suppliers, and customers;
(b) shall confer upon request of Tyler with one or more
representatives of Tyler to report material operational matters and the
general status of ongoing operations;
(c) shall notify Tyler of any emergency or other change in the normal
course of the Company's or the Company Subsidiaries' businesses and of any
governmental complaints, investigations, or hearings that are pending (or
that the same may be contemplated) if such emergency, complaint,
investigation, or hearing would be material to the Company's businesses or
properties and those of the Company Subsidiaries, taken as a whole;
(d) shall take no action that, and shall not fail to use reasonable
best efforts to take (without material cost) any action the failure to take
which, would cause or permit their representations and warranties contained
in this Agreement to be untrue in any material respect on the Closing Date;
and
(e) except as may be permitted or required by this Agreement, shall
not directly or indirectly do any of the following: (i) issue, sell,
pledge, dispose of or encumber, or permit any Company Subsidiary to issue,
sell, pledge, dispose of or encumber, (A) any capital stock of the Company
or any Company Subsidiary or (B) other than in the ordinary course of
business and consistent with past practice, any assets of the Company or
any Company Subsidiary; (ii) amend or propose to amend the respective
charters or bylaws of the Company or any Company Subsidiary; (iii) split,
combine or reclassify any outstanding capital stock, or, except as provided
in Section 5.5 hereof, declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to
its capital stock whether now or hereafter outstanding; (iv) redeem,
purchase or acquire or offer to acquire, or permit any of the Company
Subsidiaries to redeem, purchase or acquire or offer to acquire, any of the
Company's or any Company Subsidiary's capital stock; or (v) enter into any
contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 5.1(e).
5.2 Employment Agreement. At or before the Closing the Shareholder and the
Company shall execute and deliver an Employment and Noncompetition Agreement in
substantially the form of Exhibit A hereto, with such changes therein prior to
execution as may be mutually approved by Tyler and the Shareholder (the
"Employment Agreement"), and providing for the employment of the Shareholder by
the Surviving Corporation after the Closing, covenants by the Shareholder not to
compete with the Surviving Corporation, and compensation, all as provided
therein.
5.3 Noncompetition Agreements. The Company and the Shareholder agree to
use their reasonable best efforts to cause the employees and consultants of the
Company and the Company
36
<PAGE> 43
Subsidiaries identified in Section 5.3 of the Tyler Disclosure Schedule to
terminate their current employment and consulting agreements and, in the case
of the employees, to execute and deliver employment agreements with the Company
acceptable to Tyler (the "Noncompetition Agreements").
5.4 Agreement Not to Negotiate. Pending the Closing, and through the
period ending March 31, 1998 if this Agreement is terminated without closing by
the Company or the Shareholder, the Company and the Shareholder shall not,
either directly or indirectly through an agent, representative or other person,
solicit or authorize any person to solicit, or initiate or encourage, directly
or indirectly, any proposal for the acquisition of all or any material part of
the capital stock, assets, or business of the Company or any of the Company
Subsidiaries, or for the merger, consolidation, or other combination of the
Company or any of the Company Subsidiaries with any other person or entity, or
enter into any discussions or negotiations for any such proposal, or provide any
person with information or assistance in furtherance of any such proposal, and
shall promptly notify Tyler in writing of all proposals received with respect to
such matters.
5.5 Permitted Distributions of Cash and Condo. After June 30, 1997 and on
or before the Closing Date the Company shall be entitled to distribute to the
Shareholder aggregate cash dividends or other cash distributions not exceeding
$3,300,000. On or before the Closing Date, the Shareholder will cause the
Company or the appropriate Company Subsidiary to convey, transfer and assign to
the Shareholder or such other party as he determines, the record title to, and
all other rights of ownership of the Company or the Company Subsidiaries in Unit
900, Bridgeport Condominiums, 344 Padre Boulevard, South Padre Island, Texas
(the "Condo"), subject to any indebtedness incurred in connection with the
Condo, and shall obtain and provide to Tyler an absolute and unconditional
release, executed by the holders of any indebtedness, notes, mortgages, pledges,
security agreements or other similar obligations incurred in connection with the
Condo, releasing the Company and the Company Subsidiaries from any liability
with respect to any such obligations, whether as maker, endorser, surety,
obligor, guarantor or otherwise, or shall provide to Tyler the Shareholder's
agreement to indemnify Tyler, the Surviving Corporation and the Company
Subsidiaries against any such liability, which indemnification agreement shall
be reasonably acceptable to Tyler.
5.6 Waiver of Adverse Claims. The Shareholder releases, waives and
disclaims any ownership interest, right, title or other claim to any of the
assets, other than the Condo and the real property which is subject to the
Lease, which are or during the twelve months preceding the Closing Date have
been utilized by the Company or the Company Subsidiaries in the conduct of their
respective businesses.
5.7 Accuracy of Information Furnished. The information supplied by the
Shareholder to Tyler in writing expressly for inclusion in any documents
(including the Proxy Statement) filed with the Commission in connection with or
as a result of the transactions contemplated hereby, will, at the respective
times such documents are filed with the Commission, not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not false or misleading.
37
<PAGE> 44
5.8 Pre-Closing Bonuses. Prior to the Closing, the Company shall be
entitled to pay bonuses to employees of the Company for past services rendered
and to pay the consultant identified in Schedule 2.8 of the Company Disclosure
Schedule in connection with termination of his consulting arrangement, which
bonuses and payment shall not exceed an aggregate of $2,400,000.
5.9 New Indebtedness. The Company shall be entitled to incur additional
indebtedness to the extent necessary to make the cash distributions contemplated
by Section 5.5 or pay the bonuses contemplated by Section 5.8.
5.10 Stock Grants. Prior to the Closing, the Shareholder will transfer an
aggregate of 12,350 shares of the Class B Common Stock of the Company (the "Key
Employee Stock Grants") to key employees of the Company and the Company
Subsidiaries ("Key Employees") selected by the Shareholder, without any sales or
purchase price being paid therefor. The terms of the Key Employee Stock Grants
and any applicable restrictions on transfer of the shares so granted and
transferred shall be as set forth in the form of Stock Transfer Agreement
attached as Exhibit C hereto.
5.11 Transfer of Headquarters Facilities. Concurrently with the Closing,
the Shareholder shall transfer to Sub, by special warranty deed, good and
marketable title, free and clear of any lien, claim or encumbrance other than
those described in section 2.16(c) hereof, to all the real property facilities
and fixtures (the "Headquarters Facilities") leased by Government Records
Services, Inc. pursuant to that certain Lease Agreement dated July 1, 1995
between the Shareholder and Government Records Services, Inc. (the "Lease") and
as amended effective January 1, 1996. In connection therewith, Shareholder shall
obtain and provide to Tyler an absolute and unconditional release, executed by
First National Bank of Grapevine, of all mortgages, liens, deeds of trust or
other security interests in or to the Headquarters Facilities. The parties
acknowledge and agree that $5,500,000 of the cash portion of the Consideration
is allocable to the Headquarters Facilities for federal income tax purposes.
ARTICLE 6
COVENANTS OF TYLER
Tyler covenants and agrees with the Company and the Shareholder as follows:
6.1 Conduct Prior to Closing Date. Pending the Closing, Tyler shall:
(a) confer upon request of the Shareholder with one or more
representatives of the Shareholder to report material operational matters
and the general status of ongoing operations of Tyler and the Tyler
Subsidiaries; and
(b) take no action that, and shall not fail to use reasonable best
efforts to take (without material cost) any action the failure to take
which, would cause or permit its representations and warranties contained
in this Agreement to be untrue in any material respect at the Closing.
38
<PAGE> 45
6.2 Proxy Statement. As promptly as practicable after the execution of
this Agreement, Tyler shall prepare and file with the Commission a proxy
statement (the "Proxy Statement") pursuant to the Exchange Act. Subject to the
fiduciary obligations of the Board of Directors of Tyler under applicable law,
the Proxy Statement shall contain the recommendation of the Board of Directors
of Tyler that the stockholders of Tyler vote to approve the Merger and this
Agreement.
6.3 Meetings of Stockholders. Tyler shall promptly take all action
reasonably necessary in accordance with the Delaware General Corporation Law,
the rules of the NYSE and its articles of incorporation and bylaws to convene a
meeting of its stockholders to consider and vote upon the adoption and approval
of the Merger and this Agreement (the "Tyler Stockholders Meeting"). Subject to
its fiduciary obligations under applicable law and in accordance with the
provisions of this Agreement, the Board of Directors of Tyler (i) shall
recommend at such meeting that the stockholders of Tyler vote to adopt and
approve the Merger and this Agreement; (ii) shall use its reasonable efforts to
solicit from stockholders of Tyler proxies in favor of such adoption and
approval; and (iii) shall take all other action reasonably necessary to secure
a vote of its stockholders in favor of the adoption and approval of the Merger
and this Agreement.
6.4 Stock Exchange Listing. Tyler shall use its reasonable best efforts to
cause the shares of Tyler Common Stock to be issued upon consummation of the
Merger to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Closing Date.
6.5 Guaranties of Company Obligations.
(a) From and after the Closing, Tyler guarantees to the Shareholder,
respectively, and his heirs, successors and assigns, the full and prompt payment
by the Company of all amounts that become due and payable to them under or
pursuant to the terms of the Employment Agreement, to be entered into between
the Company and the Shareholder as provided in Section 5.2 of this Agreement,
and the timely performance by the Company of all of the terms, conditions,
covenants and agreements to be performed by the Company under or pursuant to the
terms of said Employment Agreement.
(b) Payments by Tyler pursuant to Subsection (a) shall be reduced by any
amounts that either Tyler, the Company or a Company Subsidiary may be entitled
to offset pursuant to the provisions of Section 11.8 of this Agreement and any
comparable provisions contained in the Employment Agreement. The obligation of
Tyler to make any payments or render performance under this guaranty shall be
coextensive with the obligation of the Company or the Company Subsidiary to make
payment or render performance under the Employment Agreement, and Tyler shall be
entitled to assert as a defense to or excuse for or delay in any payment or
performance by it the same defenses or excuses for payment or performance as
would be available to the Company or such Company Subsidiary. Subject to the
foregoing, the guaranty by Tyler contained herein is absolute and unconditional.
39
<PAGE> 46
(c) Tyler waives notice of acceptance of this agreement of guaranty, and
waives diligence or presentment on the part of the Shareholder in the
enforcement of any liability, obligation or duty guaranteed hereby.
(d) Tyler agrees that the validity of this agreement of guaranty shall not
in any way be terminated, affected or impaired by reason of any waiver of or
failure to enforce any of the rights or remedies of the Shareholder contained in
the Employment Agreement, or by reason of any extension of time or other
forbearance granted to the Company or a Company Subsidiary by the Shareholder.
(e) Tyler agrees that, at the option of the Shareholder, it may be joined
in any action or proceedings commenced against the Company or a Company
Subsidiary in connection with and based upon any provisions of the Employment
Agreement, and that recovery may be had against Tyler in such action or
proceedings, or in any independent action or proceedings against Tyler, without
requirement that the Shareholder or his successors or assigns, first assert,
prosecute, or exhaust any remedy or claim against the Company or the Company
Subsidiary.
(f) In the event of any bankruptcy, reorganization, winding up, or similar
proceedings with respect to the Company or a Company Subsidiary, no limitation
on its liability under the Employment Agreement which may now or hereafter be
imposed or permitted by any federal, state, or other statute, law regulation, or
judicial or administrative determination applicable to such proceedings, shall
in any way limit Tyler's obligations hereunder.
6.6 Other Tyler Obligations. At the Closing, if not theretofore
accomplished, Tyler will cause the Company to execute and deliver to the
Shareholder the Employment Agreement, against execution and delivery by the
Shareholder.
6.7 Company Indemnification Obligations.
(a) Tyler and Sub agree that all rights to indemnification existing in
favor of the present or former directors, officers, employees, fiduciaries and
agents of the Company or any Company Subsidiary (collectively, the "D&O
Indemnified Parties") as provided in the Company's or any Company Subsidiary's
Articles of Incorporation, Bylaws, or other organizational documents as in
effect as of the date hereof, shall survive the Merger and shall continue in
full force and effect for six years after the Effective Time (without
modification or amendment, except as required by applicable law), to the
fullest extent permitted by law, and shall be enforceable by the D&O
Indemnified Parties against the Surviving Corporation or applicable Company
Subsidiary; provided that in any event Tyler and the Surviving Corporation
shall pay and reimburse expenses in advance of the final disposition of any
action or proceeding to each D&O Indemnified Party to the fullest extent
permitted by law.
40
<PAGE> 47
(b) The provisions of this Section 6.7 shall survive the consummation of
the Merger and expressly are intended to benefit each of the D&O Indemnified
Parties. Each of the D&O Indemnified Parties shall be entitled to enforce the
covenants contained herein.
(c) If the Surviving Corporation, applicable Company Subsidiary, or any of
their respective successors or assigns (i) reorganizes, amalgamates or
consolidates with or merges into any other person and is not the resulting,
continuing or surviving corporation or entity of such reorganization,
amalgamation, consolidation or merger, or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any person or
persons, then, and in such case, proper provision will be made so that the
successors or assigns of the Surviving Corporation assume all of the obligations
of the Surviving Corporation set forth in this Section 6.7.
6.8 Agreements Regarding Stock Options. Effective on the Closing Date,
Tyler agrees to grant options, conditioned on the consummation of the
transactions contemplated hereby and Tyler stockholder approval of any required
increase in the number of shares of Tyler Common Stock which may be issued
pursuant to the Tyler Stock Option Plan, to purchase an aggregate of 400,000
shares of Tyler Common Stock to employees of the Company and the Company
Subsidiaries designated by the Shareholder. The selection by the Shareholder of
such employees and the number of option shares to be granted to each shall be
subject to the reasonable approval of Tyler. The exercise price of the options
shall be equal to the reported closing price of the Tyler Common Stock on the
New York Stock Exchange on the Closing Date. The options shall have a term of 10
years from the Closing Date and shall vest on each of the first five anniversary
dates at the rate of 20% of the original number of option shares granted. The
options shall be incentive stock options pursuant to the Tyler Stock Option
Plan, as amended, shall contain such other terms as are customary for options
granted under that plan, and shall be evidenced by option agreements
incorporating all of such terms.
6.9 Release of Shareholder Guaranties. At or prior to the Closing, Tyler
shall obtain and provide to the Shareholder an absolute and unconditional
release, executed by the holders of the indebtedness of the Company and the
Company Subsidiaries identified in Section 2.21 of the Company Disclosure
Schedule as guaranteed by the Shareholder and by the surety companies that
issued the performance bonds identified in such Section 2.21, from any liability
with respect to such indebtedness or performance bonds, whether as maker,
endorser, surety, obligor, guarantor or otherwise, or shall provide to the
Shareholder the agreement of Tyler to indemnify Shareholder against any such
liability, which indemnification agreement shall be reasonably acceptable to
Shareholder. If the Shareholder shall have personally guaranteed or become
obligated with respect to any indebtedness of the Company permitted by Section
5.9 to be incurred to fund cash bonuses and distributions, Tyler also shall
obtain and provide to the Shareholder an absolute and unconditional release from
any liability with respect to such indebtedness of the Company, executed by the
holders of such indebtedness.
41
<PAGE> 48
6.10 Tyler Loan. At the request of the Company, on or before December 30,
1997, Tyler will lend to the Company up to $5,700,000 for working capital
purposes, and advance the requisite funds to the Company for such purposes. In
such event, the Company will evidence such advances and indebtedness by
executing and delivering to Tyler a promissory note providing for quarterly
payments of accrued interest at an annual rate of 8.5% with principal to be paid
in a single installment at maturity, and other commercially reasonable terms.
Such note will mature on September 30, 1999 or, if earlier:
(i) 90 days after termination of this Agreement, if this Agreement is
rightfully terminated by Tyler because of the failure of a condition
precedent to its obligations set forth in Section 9.1, 9.2, 9.4, 9.9, 9.11
or 9.12;
(ii) 18 months after termination of this Agreement, if this Agreement
is rightfully terminated by the Company or Shareholder because of the
failure of a condition precedent to its obligations set forth in Section
8.1, 8.2, 8.3 or 8.5; and
(iii) one year after termination of this Agreement, if this Agreement
is rightfully terminated by Tyler, the Company or the Shareholder for any
other reason not specified in clauses (i) or (ii) above.
Loans by Tyler to the Company pursuant to this Section 6.10 shall be in
replacement of the indebtedness that the Company is permitted to incur and have
outstanding at the Closing, and which Tyler or Sub thereby would have assumed as
a result of the Merger. The borrowings the Company is permitted to incur
pursuant to Section 5.9 shall be reduced by the amount of its borrowings from
Tyler pursuant to this Section 6.10.
ARTICLE 7
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
Except as may be waived by both Tyler and the Shareholder, the obligations
of the Company, the Shareholder, Tyler and Sub to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each of the following conditions:
7.1 HSR Act. All filings required under the HSR Act shall have been made,
and all waiting periods, including any extension thereof, that may be applicable
to the transactions contemplated by this Agreement under the provisions of the
HSR Act shall have expired or been waived or otherwise terminated.
7.2 Absence of Litigation. No governmental agency or authority shall have
instituted, or threatened in writing to institute, any action or proceeding
seeking to delay, restrain, enjoin, or prohibit the consummation of the
transactions contemplated by this Agreement, and no order, judgment, or decree
by any court or governmental agency or authority shall be in effect that
enjoins,
42
<PAGE> 49
restrains, or prohibits the same or, in the reasonable judgment of Tyler,
otherwise would materially interfere with the operation of the assets and
business of Tyler and the Tyler Subsidiaries or the Company and the Company
Subsidiaries after the Closing Date.
7.3 The Software Group. Tyler or a subsidiary of Tyler shall have acquired
all or substantially all of the outstanding capital stock or assets of The
Software Group, Inc., a Texas corporation ("TSG"), pursuant to that certain
Agreement and Plan of Merger dated as of October 8, 1997 among Tyler, T2
Acquisition Corporation, TSG, Brian B. Berry, and Glenn A. Smith, as such
agreement may be amended and/or restated from time to time.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDER
Except as may be waived by the Company and the Shareholder, the obligations
of the Company and the Shareholder to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction on or before the Closing
Date of each of the following conditions:
8.1 Compliance. Tyler shall have, or shall have caused to be, satisfied or
complied with and performed in all material respects all terms, covenants, and
conditions of this Agreement to be complied with or performed by Tyler on or
before the Closing Date.
8.2 Representations and Warranties. All of the representations and
warranties made by Tyler in this Agreement, the Tyler Disclosure Schedule
(prior to supplementation or amendment thereto pursuant to Section 4.2 of this
Agreement), the Employment Agreement, and in all certificates and other
agreements delivered by Tyler to the Shareholder pursuant hereto or in
connection with the transactions contemplated hereby, shall have been true and
correct in all material respects as of the date hereof, and shall be true and
correct in all material respects at the Closing Date with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.3 Opinion. The Company and the Shareholder shall have received an
opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
counsel for Tyler, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, the Shareholder and their counsel, relating to the
matters set forth in the following Sections of this Agreement:
3.1; 3.4 (except the opinion shall contain no exception with respect
to shareholder approval); and 3.5 (except the opinion as to enforceability
may exclude the Employment Agreement and the Noncompetition Agreements).
8.4 No Material Adverse Change. There shall have occurred no material
adverse change in the businesses, properties, assets, liabilities, results of
operations or condition (financial or otherwise) of Tyler and the Tyler
Subsidiaries, taken as a whole.
43
<PAGE> 50
8.5 Tyler Stockholder Approval. The stockholders of Tyler shall have
approved the Merger and this Agreement on or before March 31, 1998.
8.6 Financing. On or before thirty days after the date hereof, Tyler shall
have obtained financing for the transactions contemplated hereby acceptable to
Tyler.
8.7 Certificates. The Company and the Shareholder shall have received a
certificate or certificates, executed on behalf of Tyler by the President or any
Vice President of Tyler, to the effect that the conditions contained in Sections
7.1 and 7.2 hereof with respect to matters therein relating to Tyler, and in
Sections 8.1, 8.2, 8.4, 8.5 and 8.6 hereof, have been satisfied.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLER
Except as may be waived by Tyler, the obligations of Tyler and Sub to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions:
9.1 Compliance. The Company and the Shareholder shall have, or shall have
caused to be, satisfied or complied with and performed in all material respects
all terms, covenants, and conditions of this Agreement to be complied with or
performed by any of them on or before the Closing Date.
9.2 Representations and Warranties. All of the representations and
warranties made by the Company and the Shareholder in this Agreement, the
Company Disclosure Schedule (prior to any supplementation or amendment pursuant
to Section 4.2 of this Agreement), and in all certificates and other documents
delivered by the Company and the Shareholder pursuant hereto or in connection
with the transactions contemplated hereby, shall have been true and correct in
all material respects as of the date hereof, and shall be true and correct in
all material respects at the Closing Date with the same force and effect as if
such representations and warranties had been made at and as of the Closing Date,
except for changes permitted or contemplated by this Agreement, and except to
the extent the Company or the Shareholder is unable to give such representation
or warranty due to any of the following: (a) loss of any title insurance
customer of Title Records Corporation, or (b) loss of Dallas County as a
customer due to the bidding process.
9.3 Securities Law Compliance. The issuance and delivery of shares of
Tyler Common Stock in the Merger shall have been registered or qualified under
the Securities Act and all applicable state securities laws or counsel for Tyler
shall be satisfied that an exemption from such registration or qualification is
available; no stop order suspending the effectiveness of any such registration
or qualification shall be in effect; and no proceeding for such purpose shall be
pending before any agency or authority having jurisdiction thereof.
44
<PAGE> 51
9.4 Opinions. Tyler shall have received the opinion of Gardere & Wynne,
L.L.P. ("Gardere & Wynne"), counsel for the Company and the Shareholder, dated
as of the Closing Date, in form and substance satisfactory to Tyler and its
counsel, relating to the matters set forth in the following Sections of this
Agreement:
2.1; 2.6; and 2.7 (except the opinion as to enforceability may exclude
the Employment Agreement and the Noncompetition Agreements).
9.5 No Material Adverse Change. There shall have occurred no material
adverse change in the businesses, properties, assets, liabilities, results of
operations, or condition (financial or otherwise), of the Company and the
Company Subsidiaries, taken as a whole. Tyler acknowledges and agrees that the
following shall not be deemed a material adverse effect: (a) loss of any title
insurance customer of Title Records Corporation, or (b) loss of Dallas County as
a customer due to the bidding process.
9.6 Consents to Transaction. Tyler and the Company shall have received all
consents or approvals, and made all applications, requests, notices, and filings
with, any person, governmental authority, or governmental agency required to be
obtained or made in connection with the consummation of the transactions
contemplated by this Agreement, excluding actions required under the HSR Act
(which are conditions precedent to closing under Section 7.1), but including the
consents of the lenders and third parties set forth in the Company Disclosure
Schedule and the Tyler Disclosure Schedule.
9.7 Stockholder Approval. The stockholders of Tyler shall have approved
the Merger and this Agreement on or before March 31, 1998.
9.8 Financing. On or before thirty days after the date hereof, Tyler shall
have obtained financing for the transactions contemplated hereby acceptable to
Tyler.
9.9 Noncompetition Agreements. Each of the Employees shall have duly
entered into Noncompetition Agreements with the Company acceptable to Tyler.
9.10 Certificates. Tyler shall have received a certificate or
certificates, executed on behalf of the Company by the President of the Company,
and by the Shareholder in his individual capacity, to the effect that the
conditions in Sections 7.1 and 7.2 hereof with respect to matters therein
relating to the Company, and Sections 9.1, 9.2, and 9.5 hereof, have been
satisfied.
9.11 Company Shareholder Approval. The shareholders of the Company shall
have approved the Merger and this Agreement on or before January 31, 1998.
9.12 No Dissenting Shareholders. No shareholder of the Company shall have
exercised his right to dissent from the Merger.
45
<PAGE> 52
ARTICLE 10
SECURITIES LAW REGISTRATION AND COMPLIANCE
10.1 Securities Law Compliance; Restrictions on Shares. The Shareholder
acknowledges receipt of the Tyler Commission Filings and the Tyler Disclosure
Schedule and the opportunity to ask questions of and receive answers from
representatives of the management of Tyler concerning the terms and conditions
of the transactions contemplated hereby and to obtain all additional information
that Tyler possesses or could acquire without unreasonable expense that is
necessary to verify the accuracy of information furnished to him, and
acknowledges and agrees:
(a) The shares of Tyler Common Stock to be received by him as a result
of the Merger have not been registered under the Securities Act or any
applicable state securities law;
(b) Except for transfers pursuant to the Key Employee Options, the
Shareholder is acquiring the shares so to be received in the Merger for
his own account and not with a view to the distribution or resale thereof
and will not sell, pledge, hypothecate, or otherwise transfer the shares
unless they are registered under the Securities Act and applicable state
securities laws unless, prior thereto, the Shareholder shall have
delivered to Tyler an opinion, in form and substance reasonably
satisfactory to Tyler, of counsel experienced and competent in federal
securities laws and acceptable to Tyler, to the effect that an exemption
from registration is available therefor;
(c) Except as otherwise provided in this Agreement, Tyler has no
obligation to register any sales or transfers of the shares so received by
the Shareholder;
(d) Except pursuant to the Key Employee Options, during the year after
the Merger, the Shareholder will not be able to sell, transfer, or
otherwise dispose of the shares so received unless, prior thereto, the
Shareholder shall have delivered to Tyler an opinion, in form and substance
reasonably satisfactory to Tyler, of counsel experienced and competent in
federal securities laws and acceptable to Tyler, to the effect that an
exemption from registration under the Securities Act and applicable state
securities laws is at the time available (unless registered as elsewhere
provided in this Agreement), and thereafter any sales, transfers, or other
dispositions may be limited by the provisions of Rule 144 under the
Securities Act (or by other rules then in effect);
(e) In view of the foregoing, each Shareholder understands that he is
at economic risk with respect to his investment in the shares so received
in the Merger;
(f) Tyler may place an appropriate legend on the certificate
representing the shares so to be received restricting their transfer, and
stop-transfer instructions will be given to the transfer agent for the
Tyler Common Stock with respect to such certificates; and
(g) To provide such information as may be requested by Tyler in order
for Tyler to determine if the Shareholder is an accredited purchaser under
Regulation D of the Commission or otherwise can be qualified as a purchaser
under Rule 506 of such Regulation D.
46
<PAGE> 53
10.2 Demand Registration.
(a) At any time after the Closing Date, the Shareholder may request Tyler
to register under the Securities Act, the shares of Tyler Common Stock received
in the Merger and held by the Shareholder ("Shares") for sale in accordance with
the intended methods of disposition described in the Shareholder's request for
registration; provided, however, that the number of Shares to be registered in
any such offering, whether registered on behalf of the Shareholder, Tyler or any
other selling shareholder, shall not be less than 3,000,000. Tyler is only
obligated to register Shares under this Section 10.2 on two occasions.
(b) Promptly following receipt of any notice under this Section 10.2, Tyler
shall file a registration statement under the Securities Act for the offering
and sale of the Shares specified in such notice from the Shareholder within 90
days of receipt of such notice; provided, however, that Tyler shall not be
required to maintain the effectiveness of any registration statement pursuant to
this Section 10.2 for a period in excess of the completion of the distribution
of such Shares as described in Section 10.4(g) hereof if such registration
statement relates to an underwritten public offering and, if not, a period not
in excess of the earlier of (i) two years after the effectiveness of such
registration statement, or (ii) such time as the Shareholder is free to sell his
Shares under Rule 144 under the Securities Act (or any successor rule then in
effect) without any volume restrictions. Tyler shall be obligated to register
Shares pursuant to this Section 10.2 on two occasions only; provided that no
request may be made more than six years after the date hereof; provided,
further, that a request shall be counted only when (i) all of the Shares
requested to be included in any such registration have been so included, (ii)
the corresponding registration statement has become effective under the
Securities Act, and (iii) the public offering has been consummated on the terms
and conditions specified therein or, if not consummated, such failure was not
attributable to an action taken, or a failure to take action, by Tyler in
connection with such registration. Notwithstanding anything to the contrary
contained herein, Tyler shall not be obligated to prepare and file any
registration statement pursuant to this Section 10.2, or prepare or file any
amendment or supplement thereto, and may suspend the Shareholder's rights to
make sales of Shares pursuant to an effective registration statement, at any
time when the Board of Directors of Tyler in good faith believes that the filing
thereof at the time requested, or the offering of securities pursuant thereto,
would not be in Tyler's best interests. The filing of a registration statement,
or any amendment or supplement thereto, by Tyler cannot be deferred, and the
Shareholder's rights to make sales pursuant to an effective registration
statement cannot be suspended, pursuant to the provisions of the immediately
preceding sentence for more than 180 days after the date of the receipt of
notice under this Section 10.2.
(c) If the Shareholder proposes to register Shares for sale in an
underwritten public offering, Tyler shall be entitled to select, in its sole
discretion, the managing underwriter or underwriters for the offering by the
Shareholder. Tyler shall be entitled to include in any registration statement
filed pursuant to this Section 10.2 for an offering specified by the
Shareholder, securities of Tyler entitled generally to vote in the election of
directors (or any securities convertible into or exchangeable for or exercisable
for the purchase of securities so entitled generally to vote in the election of
directors) (collectively, the "Voting Securities") to be sold by Tyler for its
own account.
47
<PAGE> 54
Subject to the provisions of this Agreement, Tyler agrees to use its reasonable
efforts to cause all the Shares for which the Shareholder has requested
registration to be registered as soon as practicable under the Securities Act
to the extent required to permit the sale by the Shareholder of such Shares;
provided, that if the managing underwriter or underwriters believe that the
inclusion of all shares requested to be included in the proposed underwritten
public offering (including the Shares) would adversely affect the marketing of
such shares, then Tyler may first include in such registration all securities
Tyler proposes to sell, and in such event the Shareholder shall accept a
reduction (including a total elimination) in the number of Shares to be
included in such registration, pro rata with the other holders of Tyler Common
Stock making requests for registration, on the basis of the number of shares of
Tyler Common Stock so requested to be included by the Shareholder and the other
selling shareholders. In the event of any such reduction (or elimination) of
the number of Shares to be included in such registration, the request made by
the Shareholder under Section 10.2 shall not be counted.
10.3 Piggyback Registration. If Tyler proposes (whether or not for its own
account) to register any of its securities under the Securities Act (other than
pursuant to Section 10.2) for sale (other than on Form S-8, Form S-4, or Form
S-3 with respect to sales of securities acquired by employees or former
employees of Tyler or its subsidiaries upon exercise of options granted by the
Shareholder of Tyler) Tyler shall give written notice to the Shareholder of its
intention to effect such a registration not later than 15 days prior to the
anticipated date of filing with the Commission of a registration statement,
which notice shall offer the Shareholder the opportunity to include in such
registration statement any of the Shares the Shareholder may request (a
"Piggyback Registration"). Tyler's obligation under this Section 10.3 shall be
limited to registrations as to which a registration statement is to be filed on
or before six years after the date hereof. Subject to the provisions of this
Agreement, Tyler will use its reasonable efforts to cause all the Shares for
which the Shareholder has requested registration to be registered as soon as
practicable under the Securities Act to the extent required to permit the sale
by the Shareholder of such Shares; provided, that if the registration relates to
an underwritten public offering and the managing underwriter or underwriters
believe that the inclusion of all shares requested to be included in the
proposed registration would adversely affect the marketing of such shares, Tyler
may first include in such registration all securities Tyler proposes to sell,
and the Shareholder shall accept a reduction (including a total elimination) in
the number of shares to be included in such registration, pro rata with the
other holders of Tyler Common Stock making requests for registration, on the
basis of the number of shares of Tyler Common Stock so requested to be included
by the Shareholder and the other selling shareholders. Nothing in this section
shall limit Tyler's ability to withdraw a registration statement it has filed
either before or after effectiveness.
10.4 Registration Procedures. If and whenever Tyler is required by the
provisions of Section 10.2 to use its best efforts to effect the registration of
any of the Shares under the Securities Act, Tyler will:
48
<PAGE> 55
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period
specified in Section 10.2(b);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in Section 10.2(b) and as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Shares covered by such registration
statement in accordance with the method of disposition set forth in such
registration statement for such period;
(c) furnish to the Shareholder and to any underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus and each document incorporated by
reference therein to the extent then required by the rules and regulations
of the Commission) as such persons may reasonably request in order to
facilitate the public sale or other disposition of the Shares covered by
such registration statement;
(d) use its best efforts to register or qualify the Shares covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as the Shareholder or any managing underwriter shall
reasonably request and to take all necessary action to keep such
registration or qualification effective as required by this Section 10.4 as
to a registration statement filed with the Commission; provided, that Tyler
shall not be required to qualify to transact business as a foreign
corporation in any jurisdiction in which it would not otherwise be required
to be so qualified or to take any action which would subject it to general
service of process in any such jurisdictions in which it is not then so
subject;
(e) immediately notify the Shareholder and any underwriter, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as result of which the
prospectus contained in 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 (in which case, Tyler shall promptly provide the Shareholder with
revised or supplemental prospectuses and if so requested by Tyler, the
Shareholder shall promptly take action to cease making any offers of the
Shares until receipt and distribution of such revised supplemental
prospectuses);
(f) furnish at the request of the Shareholder, (i) on the date that
the Shares are delivered to any underwriters for sale pursuant to such
registration statement, an opinion of counsel representing Tyler dated as
of such date for the purposes of such registration, addressed to the
underwriters and to the Shareholder, stating that such registration
statement has become effective under the Securities Act and that (A) to the
best knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the
49
<PAGE> 56
related prospectus, and each amendment or supplement thereof, comply as
to form in all material respects with the requirements of the Securities
Act and the applicable rules and regulations thereunder (except that such
counsel need express no opinion as to the financial statements or any
other financial or statistical data or any engineering report contained or
incorporated therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters or by the Shareholder or their
counsel, and (ii) on the effective date of the registration statement, the
date that Shares are delivered to any underwriters for sale pursuant to
such registration statement and on the effective date of each
post-effective amendment to the registration statement, a "comfort" letter
dated such date from the regular independent accountants retained by
Tyler, addressed to the underwriters, stating that they are independent
public accountants within the meaning of the Securities Act and that, in
the opinion of such accountants, the financial statements of Tyler
included or incorporated by reference in the registration statement or the
prospectus, or any amendment or supplement thereto, comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the published rules and regulations thereunder, and
such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business
days prior to the date of such letter) included in the registration
statement in respect of which such letter is being given as the
underwriters or the Shareholder may reasonable request;
(g) make available for inspection during normal business hours to the
Shareholder, any underwriter participating in any distribution pursuant
to such registration statement, and any attorney, accountant or other
agent retained by the Shareholder or underwriters, all financial and other
records, pertinent corporate documents and properties of Tyler and its
subsidiaries, and cause Tyler's officers, directors and employees to
supply all information reasonably requested by any such representative of
the Shareholder, underwriter, attorney, accountant or agent in connection
with such registration statement. For purposes of Section 10.2(b), the
period of distribution of Shares in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it; and
(h) use its best efforts to keep effective and maintain any
registration, qualification, approval or listing obtained to cover the
Shares as may be necessary for the Shareholder to dispose of such Shares
during the period of distribution and shall from time to time amend or
supplement any prospectus used in connection therewith to the extent
necessary in order to comply with applicable law; provided that,
notwithstanding the foregoing, Tyler shall not be required to file or to
keep effective and maintain any such registration, qualification, approval
or listing for such period that would require it to cause an audit of Tyler
to be performed other than as is required by the rules and regulations of
the Commission with respect to reports required to be filed under the
Exchange Act.
In connection with any registration hereunder, the Shareholder will furnish
promptly to Tyler in writing such information (together with such supplements as
may be necessary from time to time) with respect to itself and the proposed
distribution by it as shall be reasonably necessary in order to ensure
compliance with federal and applicable state securities laws. Such information
shall not, at the time the registration statement is filed or becomes effective,
contain any untrue statement of a
50
<PAGE> 57
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not false or
misleading.
In any registration relating to an underwritten public offering of Tyler
Common Stock or other Voting Securities, whether or not the Shareholder is
participating in such registered underwritten public offering, at the request of
the managing underwriter or underwriters, the Shareholder will agree not to
effect any sale or distribution, including any sale pursuant to Rule 144 (or any
successor provision) promulgated under the Securities Act of any Shares, and not
to effect any such sale or distribution of any other Tyler Common Stock or
Voting Securities (in each case, other than as part of such registration) for
such period of time as reasonably required by such managing underwriter or
underwriters ("Lockup Period"), but in no event shall the Shareholder be
required to agree to a Lockup Period longer than the Lockup Period to which any
other selling shareholder is subject.
In connection with any registration hereunder relating to an underwritten
public offering, Tyler agrees to enter into a written agreement with the
managing underwriter or underwriters, and condition the participation of any
other shareholder in such registration on such shareholder entering into such a
written agreement, in such form and containing such provisions as are customary
in the securities business for such an arrangement between underwriters and
companies of Tyler's size and investment stature, including, but not limited to,
indemnification and contribution provisions from the underwriters for the
benefit of Tyler and its controlling persons; provided that such agreement shall
not contain any such provisions applicable to Tyler that are inconsistent with
the provisions hereof; and further provided, that the time and place of the
closing under said agreement shall be as mutually agreed upon among Tyler, the
Shareholder and such managing underwriter or underwriters. The obligation of
Tyler set forth in the immediately preceding sentences shall apply on each
occasion of an underwritten public offering as may be contemplated by a request
for registration permitted by Section 10.2(a).
10.5 Expenses. In connection with any proposed registration of securities
by Tyler, whether or not effected or consummated, Tyler, the Shareholder, and
any other selling shareholders shall each pay their pro rata share of Tyler's
out of pocket expenses incurred in connection with a proposed registration under
either Section 10.2 or 10.3 in which Tyler is not selling any securities for its
own account, including, without limitation, all registration and filing fees,
printing expenses, and fees and disbursements of counsel and accountants for
Tyler. The Shareholder shall pay all of his expenses, including his attorney's
fees, and including the underwriting discount, selling commissions and all
expenses of the underwriters relating to his Shares incurred in connection with
each registration pursuant to Section 10.2 or 10.3.
10.6 Indemnification.
(a) In the event of a registration of any of the Shares under the
Securities Act pursuant to Section 10.2 or 10.3, Tyler shall indemnify and hold
harmless the Shareholder and each underwriter of Shares thereunder and each
person who controls the Shareholder or underwriter
51
<PAGE> 58
within the meaning of the Securities Act and the Exchange Act against any
losses, claims, damages or liabilities (including reasonable attorneys' fees),
joint or several, to which the Shareholder or underwriter or controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) or arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Shares were registered under the Securities Act pursuant to
Section 10.2 or 10.3, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such Shareholder, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Tyler will not be liable in any
such case if and to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information
furnished by the Shareholder, underwriter or controlling person for use in such
registration statement or prospectus; provided, further, that Tyler will not be
liable hereunder to any underwriter or any person who controls any underwriter
within the meaning of the Securities Act and the Exchange Act for any loss,
claim, damage or liability that arises out of, or is based upon, any untrue
statement or alleged untrue statement or any omission or alleged omission
contained in any preliminary prospectus that was corrected by any subsequent
prospectus, and the underwriter was required to deliver but failed to deliver
such prospectus as required by the Securities Act.
(b) In the event of a registration of any of the Shares under the
Securities Act pursuant to Section 10.2 or 10.3, the Shareholder shall indemnify
and hold harmless Tyler and each person who controls Tyler within the meaning of
the Securities Act and the Exchange Act, each officer of Tyler who signs the
registration statement, each director of Tyler, each underwriter and each person
who controls any underwriter within the meaning of the Securities Act and the
Exchange Act against all losses, claims, damages or liabilities, joint or
several, to which Tyler or such officer or director or underwriter or
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement under which such Shares were registered under the Securities Act
pursuant to Section 10.2 or 10.3, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein not misleading, and will reimburse Tyler and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Shareholder will be liable hereunder in any such case if and only to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission relating to the Shareholder made in reliance upon and in
conformity with information pertaining to the Shareholder, as such, furnished in
writing to Tyler by
52
<PAGE> 59
the Shareholder for use in such registration statement or prospectus
("Shareholder Information"); provided, further, that the Shareholder will not
be liable hereunder to any underwriter or any person who controls an
underwriter within the meaning of the Securities Act and the Exchange Act for
any loss, claim, damage or liability that arises out of, or is based upon, any
untrue statement or alleged untrue statement or any omission or alleged
omission in any Shareholder Information contained in any preliminary prospectus
that was corrected by any subsequent prospectus, and the underwriter was
required to deliver but failed to deliver such prospectus as required by the
Securities Act.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 10.6. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10.6 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that (i) if the indemnifying party has failed to assume the defense
and employ counsel or (ii) if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be reasonable defenses available
to it that are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, then the
indemnified party shall have the right to select a separate counsel and to
assume such legal defense and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) If the indemnification provided for in this Section 10.6 is unavailable
or insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities or actions in respect thereof, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as is
appropriate to reflect the relative fault of Tyler, on the one hand, and the
Shareholder, on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations, including the failure to give any
required notice. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by Tyler, on the one hand, or the Shareholder, on the
other, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such
53
<PAGE> 60
statement or omission. Tyler and the Shareholder agree that it would not be
just and equitable if contribution pursuant to this Section 10.6(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 10.6(d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities or actions in respect thereof
referred to above in this Section 10.6(d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty or
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
10.7 No Transferability of Registration Rights. Except with the prior
written consent of Tyler, the Shareholder's registration rights under Sections
10.2 and 10.3 shall not inure to the benefit of any person to whom any Shares
are transferred, other than the spouse or descendants of the Shareholder (his
"Relatives"), a trust solely for the benefit of the Shareholder or his
Relatives, or a partnership all of the equity interests in which are directly or
indirectly owned by the Shareholder or his Relatives.
ARTICLE 11
INDEMNIFICATION AND REMEDIES
11.1 Indemnification by the Shareholder Based on Agreement. The
Shareholder agrees to indemnify and hold harmless Tyler (and if the
transactions contemplated hereby are consummated, the Surviving Corporation),
from and against any and all claims, losses, obligations, damages, demands, and
liabilities (after giving effect to and reducing the same by (i) any net tax
benefits realized by Tyler or the Surviving Corporation as a result of such
event, and (ii) the net amount of any insurance proceeds received by Tyler or
the Surviving Corporation as a result of such event), including, without
limitation, costs and expenses of litigation (including reasonable attorneys'
and accountants' fees) (collectively, "Tyler Indemnified Losses"), based on,
relating to, or arising out of, or any allegation by any third party of, any
facts or circumstances that would constitute a breach by the Shareholder of any
representation, warranty, or covenant contained herein or in any agreement
executed pursuant hereto; but excluding from this covenant to indemnify any
claims or liabilities separately covered by Section 10.6 hereof or any Customer
Claims (hereinafter defined) to the extent and only while covered by the
provisions of Section 11.3 hereof.
11.2 Indemnification by Tyler Based on Agreement. Tyler (and if the
transactions contemplated hereby are consummated, the Surviving Corporation)
agrees to indemnify and hold harmless the Shareholder from and against any and
all claims, losses, expenses, obligations, demands and liabilities (after giving
effect to and reducing the same by (i) any net tax benefits realized by the
Shareholder as a result of such event, and (ii) the net amount of any insurance
proceeds received by the Shareholder as a result of such event), including,
without limitation, costs and expenses of litigation and including reasonable
attorneys' and accountants' fees (collectively, "Shareholder Indemnified
Losses"), based on, relating to, or arising out of, or any allegation by any
third party of, any facts or circumstances that would constitute a breach by
Tyler of any representation, warranty,
54
<PAGE> 61
or covenant contained herein or in any agreement executed pursuant hereto, but
excluding from this covenant to indemnify any claims or liabilities separately
covered by the provisions of Section 10.6 hereof.
11.3 Customer Claims. If any claim, demand, or cause of action of the type
referred to in Section 11.1 is asserted by a customer of the Company or a
Company Subsidiary ("Customer Claim"), the following provisions shall be
applicable until such time as the Customer Claim results in a filed and pending
lawsuit or other judicial proceeding (at which time the provisions of Section
11.1 shall be applicable):
(a) Tyler or the Surviving Corporation shall promptly notify the
Shareholder in writing that a Customer Claim has been made, describing the
nature of the Customer Claim to the extent then known.
(b) After receipt of Tyler's or the Surviving Corporation's written
notice, the parties hereto will fully cooperate with each other to
investigate the Customer Claim and determine whether the parties can agree
that the Customer Claim is an obligation or liability for which the
Shareholder is responsible. The investigation shall be conducted
expeditiously and with all reasonable due diligence, considering the
circumstances surrounding the Customer Claim.
(c) If, after an investigation, Tyler or the Surviving Corporation and
the Shareholder agree in writing that the Customer Claim is an obligation
or liability for which the Shareholder is responsible, the Shareholder and
Tyler or the Surviving Corporation agree to use their reasonable best
efforts to reach an agreement with the customer as to the terms and
conditions of settlement, compromise or satisfaction of the Customer Claim,
including, but not limited to, the amount that the Shareholder shall pay to
the customer for the damages, losses, costs or expenses incurred by it.
(d) If the provisions of this Section 11.3 are applicable, Tyler or
the Surviving Corporation shall conduct all communications and settlement
negotiations with the customer and shall convey to the customer any offers
of settlement or compromise by the Shareholder. Any amounts that the
Shareholder agrees so to pay in settlement of the Customer Claim shall be
paid by him to Tyler or the Surviving Corporation, as the case may be, in
trust for payment over to the customer. If Tyler or the Surviving
Corporation agrees to pay the customer an amount in excess of that offered
for settlement purposes by the Shareholder, the excess shall be paid by
Tyler or the Surviving Corporation, as the case may be, without any right
to indemnification therefor from the Shareholder. If the amounts so paid
and entrusted to Tyler or the Surviving Corporation are paid over to the
customer, the payment over shall be deemed to be a release by Tyler or the
Surviving Corporation of any further claim with respect to that Customer
Claim against the Shareholder and Tyler and the Surviving Corporation shall
indemnify and hold harmless the Shareholder from any further liability with
respect thereto.
55
<PAGE> 62
(e) In the absence of an agreement among the parties as to the
settlement of any Customer Claim not involving litigation, Tyler or the
Surviving Corporation may take such action with respect to the Customer
Claim as Tyler in its sole judgment may deem necessary or advisable under
the circumstances to settle, compromise or satisfy the Customer Claims
provided; however, neither Tyler nor the Surviving Corporation shall in any
such event be considered to have waived its right to pursue a judicial
action to determine its right against the Shareholder.
(f) An indemnified party shall give notice to the indemnifying party
or parties within 15 business days after actual receipt of service or
summons to appear in any action begun in respect of which indemnity may be
sought hereunder, or actual notice of assertion of a claim with respect to
which it seeks indemnification. Except as provided in Section 4.5, failure
so to notify the indemnifying party or parties shall cause the indemnified
party to lose its right to indemnification under this Article 11, but
failure so to notify the indemnifying party or parties shall not relieve
the indemnifying party or parties from any liability that they may have
other than on account of this Article 11. The indemnifying party or parties
may participate at their own expense and with their counsel in the defense
of such action.
Except as otherwise provided in Section 11.3(d), if the indemnifying party
or parties so elect within a reasonable time after receipt of such notice they
may assume the defense of such action with counsel chosen by the indemnifying
party or parties and approved by the indemnified party in such action, unless
the indemnified party reasonably objects to such assumption on the ground that
its counsel has advised it that there may be legal defenses available to it that
are different from or in addition to those available to the indemnifying party
or parties and counsel for the indemnifying party concurs in such advice, in
which case the indemnified party shall have the right to employ counsel approved
by the indemnifying party or parties. If the indemnifying party or parties
assume the defense of such action, the indemnifying party or parties shall not
be liable for fees and expenses of counsel for the indemnified party incurred
thereafter in connection with such action. In no event shall the indemnifying
party or parties be liable for the fees and expenses of more than one counsel
for the indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances unless, in the reasonable opinion of such
counsel, there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
indemnified parties.
11.4 Claims Limitations. Notwithstanding anything otherwise contained in
this Agreement, no party hereto shall assert any single claim or claims against
any other party hereto, including any right of offset by Tyler or Surviving
Corporation pursuant to Section 11.8 hereof, unless the single claim (after
giving effect to and reducing the same by (i) any net tax benefits realized by
the indemnified party as a result of such event, and (ii) the net amount of any
insurance proceeds received by the indemnified party as a result of such event)
exceeds the sum of $37,500, and the sum of all such single claims in the
aggregate exceeds $300,000; provided, that claims made by Tyler or Surviving
Corporation pursuant to Section 2.9 or 4.5 of this Agreement, or for breach of
the Employment Agreement or the Confidentiality Agreement shall not be subject
to the foregoing
56
<PAGE> 63
limitations; and provided further, that claims made by the Shareholder pursuant
to Section 3.7 or 4.5 of this Agreement, or for breach of the Employment
Agreement or the Confidentiality Agreement shall not be subject to the
foregoing limitations.
11.5 Maximum Liability. The maximum aggregate liability of the Shareholder
to Tyler or the Surviving Corporation for all claims made by Tyler or the
Company pursuant to this Agreement is $7,500,000; provided, that claims made by
Tyler or the Surviving Corporation pursuant to Sections 2.9 or 4.5 of this
Agreement, or for breach of the Employment Agreement or the Confidentiality
Agreement, shall not be subject to the foregoing limitation. The maximum
aggregate liability of Tyler or the Surviving Corporation to the Shareholder for
all claims made by the Shareholder pursuant to this Agreement is $7,500,000;
provided, that claims made by the Shareholder pursuant to Section 3.7 or 4.5 of
this Agreement, or for breach of the Employment Agreement or the Confidentiality
Agreement, shall not be subject to the foregoing limitation. Any claim based
upon facts and circumstances that would, if true, constitute a breach of any
representation, warranty or covenant contained in this Agreement shall be
subject to the limitations contained herein, notwithstanding the fact that such
claim is asserted by a cause of action or legal theory other than breach of
contract. When calculating the amount of liability in a claim for damages for
purposes of this Section 11.5 (whether such calculation is through agreement of
the parties, litigation or otherwise) and the claim relates to the breach of a
representation as to the income of the Company for any period or periods prior
to the Closing Date, all of the parties hereto agree that, in determining the
amount involved in the claim, the damages shall be actual damages incurred and
proven and such actual damages shall not be computed by using a multiplier or
capitalization rate.
11.6 Equitable Remedies. The parties hereto acknowledge that a refusal by
a party to consummate the transactions contemplated hereby will cause
irreparable harm to the other parties, for which there may be no adequate remedy
at law. A party not in default at the time of such refusal shall be entitled, in
addition to other remedies at law or in equity, to specific performance of this
Agreement by the party that refused to consummate the transactions contemplated
hereby.
11.7 Remedies of the Surviving Corporation. After the Closing, the
Surviving Corporation shall have the same rights and benefits under this
Agreement as does Tyler with respect to the representations, warranties and
covenants of the Shareholder contained herein, as fully as if such
representations, warranties and covenants had been made to the Surviving
Corporation in lieu or in place of Tyler. In any proceeding by the Surviving
Corporation to assert or prosecute any claims under, or to otherwise enforce,
this Agreement on behalf of itself or Tyler, the Shareholder agrees that he
shall not assert as a defense or bar to recovery by the Surviving Corporation,
and hereby waives any right to so assert such defense or bar such recovery, that
(a) prior to Closing, the Company shall have had knowledge of the circumstances
giving rise to the claim being pursued by it; (b) prior to Closing, the Company
engaged in conduct or took action that caused or brought about the circumstances
giving rise to its claim, or otherwise contributed thereto; (c) the Company is
estopped from asserting or recovering upon its claim by reason of having joined
in the representations, warranties and covenants made by the Shareholder in this
Agreement; or (d) the
57
<PAGE> 64
Shareholder has a right of contribution from the Surviving Corporation to the
extent that there is any recovery against him.
11.8 Right of Offset. In addition to all other remedies at law or in
equity, after the Closing Tyler and Surviving Corporation (which for purposes of
this Section 11.8 shall mean the Surviving Corporation and Government Record
Services, Inc.) shall have the right to credit and offset against any payment
otherwise due the Shareholder under this Agreement, the Employment Agreement or
any other agreement or document, amounts equal to liabilities and costs incurred
or damages suffered by Tyler or the Surviving Corporation, directly or
indirectly (including payments made pending or subject to a final resolution of
any dispute or controversy with a third party and whether or not agreed to by
the Shareholder if necessary, in the judgment of Tyler, to protect business
relationships or assets) based on, relating to or arising out of, or any
allegation by a third party of, any breach, or any facts or circumstances which
would constitute a breach, by the Shareholder of any representation, warranty,
or covenant contained in this Agreement, the Employment Agreement or any other
agreement or document between the Shareholder, Tyler and/or the Surviving
Corporation executed pursuant hereto or thereto, unless (with respect to a third
party claimant) the Shareholder shall have specifically affirmed that he will
indemnify and hold Tyler and the Surviving Corporation harmless from such
liabilities, costs and damages pursuant to applicable provisions of this Article
11 and shall have undertaken the defense of such claim in accordance with this
Article 11. Tyler will give the Shareholder 30 days prior written notice of the
Surviving Corporation's intention to offset against any payment otherwise due
hereunder or under the Employment Agreement or other agreement or document. If
Tyler or the Surviving Corporation offsets any payment so due and, after final
determination, Tyler or Surviving Corporation is required to restore payment,
such payment shall bear interest from the day of initial offset until payment
restoration at a rate per annum which shall from day to day be the higher of 12%
or the prime rate of interest from time to time published or announced by Texas
Commerce Bank National Association or any successor thereto.
11.9 Costs of Defense. If any claim for which an indemnified party seeks
indemnification under this Article 11 results in a judgment that no damages are
due the claimant on a basis for which the indemnifying party is responsible
hereunder, then, as between the indemnifying and indemnified parties, the
indemnified parties shall be liable for any damages awarded and the costs
(including attorneys' fees) of defending such claim.
ARTICLE 12
MISCELLANEOUS
12.1 Breach Discovered Prior to Closing.
(a) If, prior to the Time of Closing, Tyler has actual and certain
knowledge (as opposed to an opinion or belief) of any facts or circumstances
that it determines would constitute a failure to satisfy the conditions to the
obligations of Tyler to close this Agreement contained in Sections 9.1, 9.2 or
9.5 hereof, Tyler shall promptly give written notice to the Shareholder. If the
Shareholder fails to cure any such alleged defect within 15 days from the date
of notice, Tyler shall
58
<PAGE> 65
have the right either to (i) terminate this Agreement pursuant to Section 12.2
below, in which case Tyler, shall, if not then in default under this Agreement,
be entitled to recover from the Company and the Shareholder as liquidated
damages the actual legal, accounting and other out-of-pocket expenses incurred
by it in connection with the negotiation, preparation and execution of this
Agreement and the other agreements and instruments referred to herein, its
investigation and examination of the affairs of the Company and the Company
Subsidiaries, and other actions taken preparatory to consummating the
transactions contemplated hereby, or (ii) waive such defect as a condition to
closing this Agreement, in which case Tyler shall not be entitled to make any
claims against the Shareholder pursuant to this Agreement or to exercise any
other remedial rights with respect to such alleged defect.
(b) If, prior to the Time of Closing, the Shareholder has actual and
certain knowledge (as opposed to an opinion or belief) of any facts or
circumstances that the Shareholder determines would constitute a failure to
satisfy the conditions to the obligations of the Company and the Shareholder to
close this Agreement contained in Sections 8.1, 8.2 and 8.4 hereof, the Company
and the Shareholder shall promptly give written notice to Tyler. If Tyler fails
to cure any such alleged defect, the Company and the Shareholder shall have the
right either to (i) terminate this Agreement pursuant to Section 12.2 below, in
which case the Company and the Shareholder shall, if not then in default under
this Agreement, be entitled to recover from Tyler as liquidated damages the
actual legal, accounting and other out-of-pocket expenses incurred by them (but
not including such expenses incurred to appropriately document the corporate
records and transactions of the Company, the Company Subsidiaries and the
Shareholder) in connection with the negotiation, preparation and execution of
this Agreement and the other agreements and instruments referred to herein,
their investigation and examination of the affairs of Tyler, and other actions
taken preparatory to consummating the transactions contemplated hereby, or (ii)
waive such defect as a condition to closing this Agreement, in which case the
Shareholder shall not be entitled to make any claims against Tyler or the
Surviving Corporation pursuant to this Agreement or to exercise any other
remedial rights with respect to such alleged defect.
12.2 Termination. This Agreement and the transactions contemplated hereby
may be terminated at any time on or before the Closing Date:
(a) by mutual consent of Tyler and the Shareholder;
(b) by Tyler if there has been a material misrepresentation or breach
of warranty in the representations and warranties of the Company and the
Shareholder set forth herein or if there has been any material failure on
the part of the Company or the Shareholder to comply with their obligations
hereunder;
(c) by the Shareholder if there has been a material misrepresentation
or breach of warranty in the representations and warranties of Tyler set
forth herein or if there has been any material failure on the part of Tyler
to comply with its obligations hereunder;
59
<PAGE> 66
(d) by either Tyler or the Shareholder if the transactions
contemplated by this Agreement have not been consummated by March 31, 1998,
unless such failure of consummation is due to the failure of the
terminating party to perform or observe the covenants, agreements, and
conditions hereof to be performed or observed by it at or before the
Closing Date;
(e) by either Tyler or the Shareholder if the conditions precedent to
its or his obligations to close this Agreement have not been satisfied or
waived by it or him at or before the Closing Date; and
(f) by either the Shareholder or Tyler if the transactions
contemplated hereby violate any nonappealable final order, decree, or
judgment of any court or governmental body or agency having competent
jurisdiction.
12.3 Expenses. If the transactions contemplated by this Agreement are not
consummated, each party hereto shall pay its own expenses incurred in connection
with this Agreement and the transactions contemplated hereby, except as
otherwise provided in Section 12.1. Notwithstanding the foregoing, Tyler shall
pay the actual legal, accounting and other out-of-pocket expenses incurred by
the Company and Shareholder in connection with the negotiation, preparation and
execution of this Agreement and the other agreements and instruments referred to
herein, their investigation and examination of the affairs of the Tyler, and
other actions taken preparatory to consummating the transactions contemplated
hereby if this Agreement is terminated by Tyler for any reason other than
failure of a condition precedent to its obligations set forth in Section 9.1,
9.2, 9.4, 9.9, 9.11 or 9.12 or rightfully terminated by the Company or the
Shareholder for any other reason (i.e., other than the failure of a condition
precedent to Tyler's obligations set forth in Section 9.1, 9.2, 9.4, 9.9, 9.11
or 9.12).
12.4 Disclosure Schedules. The Company Disclosure Schedule and the Tyler
Disclosure Schedule are incorporated herein by reference.
12.5 Entire Agreement. This Agreement and the Exhibits and Disclosure
Schedules hereto, the Confidentiality Agreement and the other agreements and
documents contemplated hereby, contain the complete agreement among the parties
with respect to the transactions contemplated hereby and supersede all prior
agreements and understandings among the parties with respect to such
transactions, including without limitation that certain Agreement and Plan of
Merger dated as of October 8, 1997 among Tyler, Sub, the Company, and
Shareholder, as the same was or has heretofore been amended and restated.
Section and other headings, the table of contents and indexes to the Disclosure
Schedules are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement, the Employment Agreement, the Confidentiality Agreement, the
Noncompetition Agreements, the Company Disclosure Schedule, the Tyler Disclosure
Schedule or in any agreement, certificate or other document delivered pursuant
hereto or thereto. The obligations of any party under any agreement executed
pursuant to this Agreement shall not be affected by this Section.
60
<PAGE> 67
12.6 Survival. All representations and warranties (except those contained
in Sections 2.9 and 2.15) of Tyler, Sub, the Company or the Shareholder
contained herein, in the Tyler Disclosure Schedule, in the Company Disclosure
Schedule, or in any exhibit, certificate, document or instrument delivered
pursuant to this Agreement shall survive the Closing and shall continue in full
force and effect for two years after the date of Closing. All representations
and warranties of the Shareholder contained in Section 2.9(b) above shall
survive the Closing and shall continue in full force and effect after the
Closing without time limitation. All representations and warranties of the
Shareholder contained in Sections 2.9(a), (c) and (d) above shall survive the
Closing and shall continue in full force and effect after the Closing until
expiration, in accordance with the laws of Texas, of the applicable time period
in which claims may be judicially asserted for breach of a written contract. All
representations and warranties of the Shareholder contained in Section 2.15
above shall survive the Closing and shall continue in full force and effect
after the Closing until expiration, in accordance with applicable law, of the
applicable time periods in which the taxing authority having jurisdiction may
assert a claim for failure of or deficiency in the payment of taxes. The
representations and warranties of the Company shall not survive the Closing.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
12.8 Notices. All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram, or telecopy, addressed as
follows:
(i) If to the Company or the Shareholder;
William D. Oates
Business Resources Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-0211
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
1601 Elm Street
3000 Thanksgiving Tower
Dallas, Texas 75201-4761
Attention: John K. Sterling
Telecopy No.: (214) 999-4667
61
<PAGE> 68
(ii) If to Tyler:
Tyler Corporation
2121 San Jacinto Street
3200 San Jacinto Tower
Dallas, Texas 75201
Attention: Chairman of the Board
Telecopy No.: (214) 754-7821
with a copy (which shall not constitute notice) to:
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002-3004
Attention: Gene G. Lewis
Telecopy No.: (713) 223-3717
Each party may designate by notice in writing a new address to which any
notice, demand, request, or communication may thereafter be so given, served, or
sent. Each notice, demand, request, or communication that is mailed, delivered,
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger, or (with respect to a telecopy) the confirmation being deemed
conclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
12.9 Successors and Assigns. This Agreement and the rights, interests, and
obligations hereunder shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
12.10 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas (except the choice of law rules
thereof).
12.11 Waiver and Other Action. This Agreement may be amended, modified, or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification, or supplement is sought.
12.12 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance (except to the
extent such remaining provisions constitute obligations of another party to
this Agreement corresponding to the
62
<PAGE> 69
unenforceable provision); and in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable.
12.13 Knowledge. At any time there is a reference in a representation,
covenant or warranty of a party to this Agreement that is qualified by the
knowledge of such party, the terms "knowledge" or "knows" or "known", or
"belief" or "believes" shall mean (i) as to the Company and the Shareholder, the
knowledge or belief of the Shareholder or any of those certain individuals who
have executed or will execute Noncompetition Agreements pursuant to Section 5.3,
and (ii) as to Tyler, the knowledge or belief of its Chairman of the Board,
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Louis
A. Waters, or James E. Russell.
[The following page is the signature page]
63
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TYLER CORPORATION
By: /s/ C.A. RUNDELL, JR.
----------------------------------
C.A. Rundell, Jr., President and
Chief Executive Officer
T1 ACQUISITION CORPORATION
By: /s/ C.A. RUNDELL, JR.
----------------------------------
C.A. Rundell, Jr., President
BUSINESS RESOURCES CORPORATION
By: /s/ WILLIAM D. OATES
----------------------------------
William D. Oates, President
/s/ WILLIAM D. OATES
----------------------------------
William D. Oates, Individually
64
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
TYLER CORPORATION,
T2 ACQUISITION CORPORATION,
THE SOFTWARE GROUP, INC.
BRIAN B. BERRY
AND
GLENN A. SMITH
DATED AS OF DECEMBER 29, 1997
AND EFFECTIVE AS OF
OCTOBER 8, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <S> <C>
ARTICLE 1
THE MERGER
1.1 The Merger.................................................. 1
1.2 Closing..................................................... 1
1.3 Effective Time.............................................. 2
1.4 Effects of the Merger....................................... 2
1.5 Articles of Incorporation; Bylaws........................... 2
1.6 Directors and Officers...................................... 2
1.7 Conversion of Securities; Exchange; Fractional Shares....... 2
1.8 Adjustments to Prevent Dilution............................. 4
1.9 Taking of Necessary Action; Further Action.................. 5
ARTICLE 2
REPRESENTATIONS AND WARRANTS OF THE COMPANY
AND THE SHAREHOLDERS
2.1 Organization and Good Standing of Company................... 5
2.2 No Company Subsidiaries..................................... 5
2.3 No Other Investments........................................ 5
2.4 Foreign Qualification....................................... 5
2.5 Power and Authority to Conduct Business..................... 5
2.6 Authority to Consummate Merger.............................. 6
2.7 Binding Effect.............................................. 6
2.8 Compliance with Other Instruments........................... 6
2.9 Capitalization of Company................................... 7
2.10 [Intentionally Omitted]..................................... 7
2.11 [Intentionally Omitted]..................................... 7
2.12 Company Financial Statements................................ 7
2.13 Absence of Certain Changes.................................. 8
2.14 No Material Undisclosed Liabilities......................... 10
2.15 Tax Liabilities............................................. 10
2.16 Title to Properties......................................... 11
2.17 Condition of Tangible Assets................................ 13
2.18 Accounts Receivable......................................... 13
2.19 Inventories................................................. 13
2.20 Patents, Trademarks, and Copyrights......................... 13
2.21 Contracts................................................... 14
2.22 Litigation and Claims....................................... 15
2.23 Judgments, Decrees, and Orders in Restraint of Business..... 16
2.24 No Violation of Any Instrument.............................. 16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <S> <C>
2.25 Compliance With Laws........................................ 16
2.26 Compensation and Benefit Plans.............................. 16
2.27 Labor Relations............................................. 18
2.28 Adequate Insurance.......................................... 18
2.29 Contracts with Affiliates and Others........................ 19
2.30 Revenue Recognition......................................... 19
2.31 Certain Fees................................................ 19
2.32 Environmental Matters....................................... 19
2.33 Accuracy of Information Furnished........................... 20
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TYLER
3.1 Organization and Good Standing of Tyler..................... 20
3.2 Foreign Qualification....................................... 20
3.3 Power and Authority to Conduct Business..................... 21
3.4 Authority to Consummate Merger.............................. 21
3.5 Binding Effect.............................................. 21
3.6 Compliance with Other Instruments........................... 21
3.7 Capitalization of Tyler..................................... 22
3.8 Commission Filings; Financial Statements.................... 22
3.9 Absence of Certain Changes.................................. 23
3.10 No Material Undisclosed Liabilities......................... 24
3.11 Litigation and Government Claims............................ 24
3.12 No Violation of Any Instrument.............................. 24
3.13 Certain Fees................................................ 25
3.14 No Interim Operations of Sub................................ 25
3.15 Accuracy of Information Furnished........................... 25
ARTICLE 4
JOINT COVENANTS OF THE COMPANY, THE SHAREHOLDERS AND TYLER
4.1 Access; Confidentiality..................................... 25
4.2 Notice of any Material Change............................... 26
4.3 Monthly Financial Statements................................ 26
4.4 Antitrust Notification...................................... 26
4.5 Tax Matters................................................. 27
4.6 Cooperation Pending Closing................................. 30
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <S> <C>
ARTICLE 5
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 Conduct of Business Prior to Closing Date................... 30
5.2 Employment Agreement........................................ 31
5.3 Noncompetition Agreements................................... 31
5.4 Agreement Not to Negotiate.................................. 31
5.5 Accuracy of Information Furnished........................... 31
5.6 Regulation S-X Financial Statements......................... 32
5.7 Termination of Shareholders Agreement....................... 32
5.8 Pre-Closing Bonuses......................................... 32
5.9 Form of Merger.............................................. 32
ARTICLE 6
COVENANTS OF TYLER
6.1 Conduct Prior to Closing Date............................... 32
6.2 Proxy Statement............................................. 33
6.3 Meetings of Stockholders.................................... 33
6.4 Stock Exchange Listing...................................... 33
6.5 Guaranties of Company Obligations........................... 33
6.6 Other Tyler Obligations..................................... 34
6.7 Company Indemnification Obligations......................... 34
ARTICLE 7
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
7.1 HSR Act..................................................... 35
7.2 Absence of Litigation....................................... 35
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
AND THE SHAREHOLDERS
8.1 Compliance.................................................. 36
8.2 Representations and Warranties.............................. 36
8.3 Opinion..................................................... 36
8.4 No Material Adverse Change.................................. 36
8.5 Financing................................................... 36
8.6 Certificates................................................ 37
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <S> <C>
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLER
9.1 Compliance.................................................. 37
9.2 Representations and Warranties.............................. 37
9.3 Securities Law Compliance................................... 37
9.4 Opinions.................................................... 37
9.5 No Material Adverse Change.................................. 38
9.6 Consents to Transaction..................................... 38
9.7 Financing................................................... 38
9.8 Noncompetition Agreements................................... 38
9.9 Business Resources Corporation.............................. 38
9.10 Stockholder Approval........................................ 38
9.11 Certificates................................................ 38
ARTICLE 10
SECURITIES LAW REGISTRATION AND COMPLIANCE
10.1 Securities Law Compliance; Restrictions on Shares........... 38
10.2 Piggyback Registration...................................... 39
10.3 Registration Procedures..................................... 40
10.4 Expenses.................................................... 40
10.5 Indemnification............................................. 41
10.6 No Transferability of Registration Rights................... 43
ARTICLE 11
INDEMNIFICATION AND REMEDIES
11.1 Indemnification by the Shareholders Based on Agreement...... 43
11.2 Indemnification by Tyler Based on Agreement................. 43
11.3 Customer Claims............................................. 44
11.4 Claims Limitations.......................................... 45
11.5 Maximum Liability........................................... 46
11.6 Equitable Remedies.......................................... 46
11.7 Remedies of the Surviving Corporation....................... 46
11.8 Costs of Defense............................................ 46
ARTICLE 12
MISCELLANEOUS
12.1 Breach Discovered Prior to Closing.......................... 47
12.2 Termination................................................. 47
12.3 Expenses.................................................... 48
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <S> <C>
12.4 Disclosure Schedules........................................ 48
12.5 Entire Agreement............................................ 48
12.6 Survival.................................................... 49
12.7 Counterparts................................................ 49
12.8 Notices..................................................... 49
12.9 Successors and Assigns...................................... 50
12.10 Governing Law............................................... 50
12.11 Waiver and Other Action..................................... 50
12.12 Severability................................................ 51
12.13 Knowledge................................................... 51
ANNEX I Shareholders and Optionholders
EXHIBITS
Exhibit A Surviving Corporation Directors and Officers
Exhibit B Employment and Noncompetition Agreement (Shareholders)
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT, dated as of the ____ day of
December, 1997 and effective as of the 8th day of October, 1997, is entered
into by and among Tyler Corporation, a Delaware corporation ("Tyler"), T2
Acquisition Corporation, a Texas corporation and wholly-owned subsidiary of
Tyler ("Sub"), The Software Group, Inc., a Texas corporation, (the "Company"),
Brian B. Berry and Glenn Smith (each, a "Shareholder" and collectively, the
"Shareholders").
WITNESSETH:
WHEREAS, subject to and in accordance with the terms and conditions of this
Agreement, the respective Boards of Directors of Tyler, Sub and the Company, and
Tyler as sole shareholder of Sub, have approved the merger of Sub with and into
the Company (the "Merger"), whereby all the issued and outstanding shares of
common stock, without par value, of the Company (the "Company Common Stock") not
owned directly or indirectly by the Company will be converted into the right to
receive in the aggregate $12,000,000 in cash and 2,000,000 shares of common
stock, par value $0.01 per share, of Tyler ("Tyler Common Stock"), as provided
herein;
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the Texas Business Corporation Act (the
"TBCA"), at the Effective Time (as defined in Section 1.3) Sub shall be merged
with and into Company. As a result of the Merger, the separate corporate
existence of the Sub shall cease and Company shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") and
shall succeed to and assume all of the rights and obligations of the Company in
accordance with the TBCA.
1.2 Closing. The closing of the Merger (the "Closing") shall take place at
the offices of Gardere & Wynne, L.L.P., 1600 Elm Street, Suite 3000, Dallas,
Texas 75201 as soon as practicable after the satisfaction or waiver of the
conditions set forth in Article V or at such other time and place and on such
other date as Tyler and the Company shall agree; provided, that the closing
conditions
<PAGE> 8
set forth in Article V shall have been satisfied or waived at or prior to such
time. The date on which the Closing occurs is herein referred to as the "Closing
Date."
1.3 Effective Time. On the Closing Date, or as soon as practicable
thereafter, the Company and Sub will cause Articles of Merger (the "Articles of
Merger") to be filed with the Secretary of State of the State of Texas as
provided in Article 5.04 of the TBCA. The Merger will become effective at the
time that the Articles of Merger have been filed with the Secretary of State of
the State of Texas or at such other time specified in the Articles of Merger as
the effective time (the "Effective Time").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the TBCA.
1.5 Articles of Incorporation; Bylaws. The Articles of Incorporation (the
"Articles") and Bylaws (the "Bylaws") of the Company, as in effect immediately
prior to the Effective Time, shall be the articles of incorporation and bylaws
of the Surviving Corporation and thereafter shall continue to be its articles of
incorporation and bylaws until amended as provided therein and under the TBCA.
1.6 Directors and Officers. The persons specified as directors on Exhibit
A hereto shall be the initial directors of the Surviving Corporation, each to
hold office in accordance with the Articles and Bylaws, and the persons
specified as officers on Exhibit A hereto shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified in accordance with the Articles and Bylaws.
1.7 Conversion of Securities; Exchange; Fractional Shares. Subject to the
terms and conditions of this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Sub or their
Shareholder:
(a) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than any shares of the
Company Common Stock to be canceled pursuant to Section 1.7(b), shall be
converted, subject to the provisions of this Section 1.7, into the right to
receive, without interest, $5.7943 in cash and 0.965717 shares of Tyler
Common Stock (collectively, the "Merger Consideration"); provided that no
fractional shares of Tyler Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made in accordance with the procedure set
forth in Section 1.7(h) hereof.
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock held by Sub, Tyler or any
direct or indirect wholly-owned subsidiary of Tyler, or the Company
immediately prior to the Effective Time shall be canceled and extinguished
at the Effective Time without any conversion thereof and no payment shall
be made with respect thereto.
2
<PAGE> 9
(c) Each option outstanding at the Effective Time to purchase shares
of Company Common Stock (a "Stock Option") granted under (i) the 1988 Stock
Option Plan for Software Group, Inc., as amended (the "Company Stock Option
Plan"), or (ii) any other stock plan or agreement of the Company, which by
its terms is not extinguished in the Merger, shall be exercised prior to
the Closing and the holders of any such Stock Options agree to exercise
such Stock Options at or prior to the Closing.
(d) Each share of common stock, par value $1.00 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall at the
Effective Time be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(e) At the Effective Time, each holder of an outstanding certificate
that prior thereto represented shares of Company Common Stock shall be
entitled to receive, upon surrender to the Surviving Corporation of such
certificate or certificates for cancellation and subject to any required
withholding of taxes, a certificate or certificates representing the
number of whole shares of Tyler Common Stock (of such denominations and
registered in such names as such holder may request) into which the shares
of Company Common Stock so surrendered shall have been converted. Each
holder of shares of Company Common Stock who would otherwise be entitled
to a fraction of a share of Tyler Common Stock shall, upon surrender to
the Surviving Corporation of the certificates representing shares of
Company Common Stock held by such holder, be paid an amount in cash in
accordance with the provisions of Section 1.7(h). Until so surrendered,
each outstanding certificate that prior to the Effective Time represented
shares of Company Common Stock shall be deemed from and after the
Effective Time to evidence the right to receive that amount of cash and
that number of full shares of Tyler Common Stock into which such shares of
Company Common Stock shall have been converted pursuant to this Section
1.7, and any cash in lieu of fractional shares of Tyler Common Stock,
subject to any of required withholding of taxes. No interest shall be paid
on the cash payable upon surrender of the certificate or certificates
evidencing shares of Company Common Stock. Unless and until any such
outstanding certificates representing shares of Company Common Stock shall
be surrendered, no dividends or other distributions declared and payable
to the holders of Tyler Common Stock on or after the Effective Time shall
be paid to the holders of such outstanding certificates which prior to the
Effective Time represented shares of Company Common Stock; provided,
however, that, upon surrender and exchange of such outstanding
certificates, there shall be paid to the record holders of the
certificates issued and exchanged therefor the amount, without interest
thereon, of dividends and other distributions, if any, that theretofore
were declared and became payable since the Effective Time with respect to
the number of full shares of Tyler Common Stock issued to such holders.
(f) The cash and shares of Tyler Common Stock into which the shares of
Company Common Stock shall have been converted pursuant to this Section 1.7
shall be issued in full satisfaction of all rights pertaining to such
converted shares of Company Common Stock.
3
<PAGE> 10
(g) If any certificate for shares of Tyler Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall have paid to Tyler or the Surviving Corporation any transfer
or other taxes required by reason of the issuance of a certificate for
shares of Tyler Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction
of Tyler or its transfer agent that such tax has been paid or is not
payable.
(h) No fraction of a share of Tyler Common Stock shall be issued, but
in lieu thereof each holder of shares of Company Common Stock who would
otherwise be entitled to a fraction of a share of Tyler Common Stock shall,
upon surrender to the Surviving Corporation of the certificate or
certificates representing the shares of Company Common Stock held by such
holder, be paid an amount in cash equal to the value of such fraction of a
share of Tyler Common Stock based upon the closing price of one share of
Tyler Common Stock on the New York Stock Exchange, Inc. ("NYSE") on the
last trading day prior to the Effective Time. No interest shall be paid on
such amount. All shares of Company Common Stock held by a record holder
shall be aggregated for purposes of computing the number of shares of Tyler
Common Stock to be issued pursuant to this Section 1.7.
(i) At the Closing, Tyler shall provide each holder of certificates
which prior to the Effective Time represented shares of Company Common
Stock a letter of transmittal and other documentation enabling such holder
to effect the exchange of stock certificates as contemplated by Article 1
of this Agreement.
(j) Neither Tyler, the Surviving Corporation, nor any other person
shall be liable to any former holder of shares of Company Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(k) In the event any certificate formerly representing shares of the
Company Common Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate
to be lost, stolen or destroyed and, if required by Tyler or the Surviving
Corporation, the posting by such person of a bond in customary amount as
indemnity against any claim that may be made against Tyler or the Surviving
Corporation with respect to such certificate, the Surviving Corporation
shall deliver in exchange for such lost, stolen or destroyed certificate
the cash and shares of Tyler Common Stock that would be deliverable
pursuant to this Article 1 upon due surrender of the shares of Company
Common Stock represented by such lost, stolen or destroyed certificate.
1.8 Adjustments to Prevent Dilution. In the event that the Company changes
the number of shares of the Company Common Stock or securities convertible or
exchangeable into or exercisable for shares of the Company Common Stock, or
Tyler changes the number of shares of Tyler Common Stock or securities
convertible or exchangeable into or exercisable for shares of Tyler
4
<PAGE> 11
Common Stock, issued and outstanding prior to the Effective Time as a result of
a reclassification, stock split (including a reverse split or combination),
stock dividend or distribution, recapitalization, subdivision, or other similar
transaction, the Merger Consideration shall be correspondingly adjusted.
1.9 Taking of Necessary Action; Further Action. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate
in order to effectuate the Merger as promptly as possible. If at any time after
the Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company or Sub, such corporations shall direct their
respective officers and directors to take, and the Shareholders shall take, all
such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders jointly and severally represent and
warrant to Tyler and Sub as follows:
2.1 Organization and Good Standing of Company. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas.
2.2 No Company Subsidiaries. The Company is not, and has never been, the
record or beneficial owner, directly or indirectly, of 50% or more of the
capital stock of any corporation.
2.3 No Other Investments. The Company does not own, and has never owned,
any capital stock of any other corporation or any equity, profit sharing,
participation, or other interest of any type in any partnership, joint venture,
and other entity.
2.4 Foreign Qualification. The Company is duly qualified or licensed to do
business as a foreign corporation and in good standing in those jurisdictions
set forth in Section 2.4 of the schedule delivered by the Company concurrently
with the execution of this Agreement (the "Company Disclosure Schedule"). The
Company is duly qualified or licensed to do business as a foreign corporation in
every jurisdiction where the failure so to qualify could have a material adverse
effect on the businesses, operations, assets or financial condition of the
Company. For purposes of this Section 2.4, no material adverse effect shall be
deemed to have occurred as a result of non-payment of state or local franchise
taxes not exceeding $37,500 in the aggregate.
2.5 Power and Authority to Conduct Business. The Company has the corporate
power and authority, and possesses all licenses and permits required by
governmental authorities, to own, lease, and operate their properties and assets
and to carry on its business as currently being
5
<PAGE> 12
conducted, except where the failure to possess such license or permit would not
have a material adverse effect on the businesses, operations, assets or
financial condition of the Company.
2.6 Authority to Consummate Merger. The Company has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and the other agreements or documents executed or required to be
executed by the Company in connection with this Agreement, and the execution,
delivery, and performance by the Company of this Agreement and the other
documents executed or required to be executed by the Company in connection with
this Agreement have been duly authorized by all necessary corporate action. Each
Shareholder has the capacity and authority to execute, deliver and perform his
obligations under this Agreement, and the other agreements or documents executed
or required to be executed by him in connection herewith.
2.7 Binding Effect. This Agreement and the other agreements and documents
executed or required to be executed by the Company or the Shareholders in
connection with this Agreement have been or will have been duly executed and
delivered by the Company or the Shareholders, as appropriate, and are or will
be, when executed and delivered, the legal, valid, and binding obligations of
the Company or the Shareholders executing the same, enforceable in accordance
with their terms, except that:
(a) enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification under Section 10.5 may be limited by
considerations of public policy.
2.8 Compliance with Other Instruments. Except as disclosed in Section 2.8
of the Company Disclosure Schedule, neither the execution and delivery by the
Company or the Shareholders of this Agreement, or the other agreements or
documents executed or required to be executed by the Company or the Shareholders
in connection herewith, nor the consummation by the Company or the Shareholders
of the transactions contemplated hereby and thereby, will (i) conflict with the
articles of incorporation or bylaws of the Company; (ii) assuming satisfaction
of the requirements set forth in clause (iii) below, violate any provision of
law applicable to the Company; (iii) except for (A) requirements arising out of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and
(B) the filing of articles of merger in accordance with the TBCA, require any
consent, authorization, permit, license or approval of, or declaration,
registration or filing with or notice to, any person or governmental body or
authority, domestic or foreign, under any provision of law applicable to the
Company; or (iv) require any consent, approval or notice under, violate, breach,
be in conflict with, or constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination or the acceleration of maturity of, or result in the imposition of
any lien, claim, or encumbrance upon any property or asset
6
<PAGE> 13
of the Company or either Shareholder, pursuant to any note, bond, indenture,
mortgage, deed of trust, evidence of indebtedness, loan or lease agreement, or
other agreement or instrument (including with customers) listed or required to
be listed in Section 2.21 of the Company Disclosure Schedule, or any judgment,
order, injunction, or decree by which the Company or either Shareholder is
bound, to which any of them is a party, or to which any of their assets is
subject, where any such failure to obtain any consent, approval or notice, or
violation, breach, conflict or default would result in a material adverse effect
on the businesses, operations, assets or financial condition of the Company.
2.9 Capitalization of Company.
(a) The authorized capital stock of the Company is 5,000,000 shares of
Company Common Stock, of which 1,921,000 shares of Company Common Stock are
issued and outstanding at the date hereof and 150,000 shares are subject to
Stock Options. All of the issued and outstanding shares of Company Common Stock
have been duly authorized and are validly issued, fully paid and nonassessable.
There are and at the Closing will be no shares of the capital stock of the
Company held in its treasury or in the treasury.
(b) At the Closing, each Shareholder will be the lawful record and
beneficial owner of the shares of the Company Common Stock, set forth opposite
such Shareholder's name on Annex I, free and clear of all liens, encumbrances,
and claims of every kind, and the shares so owned by the Shareholders will
constitute 93% of the issued and outstanding shares of the Company capital
stock. Set forth on Annex I are the number of shares of Company Common Stock
outstanding and Company Common Stock subject to options. Each Shareholder has
the right to vote or direct the vote of his shares at his discretion on any
matter submitted to a vote of the Company shareholders.
(c) Except as disclosed in Section 2.9 of the Company Disclosure Schedule,
there are no voting trusts, shareholder agreements, or other voting arrangements
among the shareholders of the Company.
(d) Except as described in Section 2.9 of the Company Disclosure Schedule,
there presently is no outstanding subscription, contract, convertible or
exchangeable security, option, warrant, call, or other right obligating the
Company or any Shareholder to issue, sell, exchange, or otherwise dispose of, or
to purchase, redeem, or otherwise acquire, shares of, or securities convertible
into or exchangeable for, capital stock of the Company; no such rights disclosed
in Section 2.9 of the Company Disclosure Schedule will remain outstanding at the
Closing. No shareholder of the Company is entitled to any preemptive right.
2.10 [Intentionally Omitted].
2.11 [Intentionally Omitted].
2.12 Company Financial Statements.
7
<PAGE> 14
(a) The Company has delivered to Tyler true, correct, and complete copies
of the following financial statements of the Company (the "Company Financial
Statements"), which are attached to Section 2.12 of the Company Disclosure
Schedule:
(i) the audited balance sheets of the Company as of October 31, 1996,
1995 and 1994 and the related audited statements of operations,
stockholder's equity, and cash flows for the years then ended, with notes
thereto, prepared in accordance with United States generally accepted
accounting principles, except as disclosed in the notes thereto; and
(ii) the unaudited balance sheet of the Company as of August 31, 1997
(the "Company Balance Sheet"), and the related unaudited statements of
operations, stockholder's equity, and cash flows for the ten months then
ended, with notes thereto, prepared in accordance with United States
generally accepted accounting principles, except as disclosed in the notes
thereto.
The Company Financial Statements present fairly, in all material respects, the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended, in conformity with
generally accepted accounting principles applied, except as may be set forth in
the notes thereto, on a consistent basis throughout such periods.
(b) Since August 31, 1997, there has been no change in accounting
principles applicable to, or methods of accounting utilized by the Company, and
the books and records of Company have been and are being maintained in
accordance with all applicable legal and accounting requirements and what the
Shareholders believe in good faith to be good business practice, reflect only
valid transactions, are complete and correct in all material respects, and
accurately reflect in all material respects the basis for the financial position
and results of operations and cash flows of the Company set forth in the Company
Financial Statements.
2.13 Absence of Certain Changes. Since August 31, 1997 (or other date
indicated below), the Company has not (except as may be contemplated by this
Agreement or as may result from the transactions contemplated by this
Agreement):
(a) except as disclosed in Section 2.13 of the Company Disclosure
Schedule, suffered any change in its businesses, results of operations,
working capital, assets, liabilities, or financial condition or the manner
of conducting its business other than changes that, individually or in the
aggregate, have not had a material adverse effect on the businesses,
operations, assets or condition (financial or otherwise) of the Company;
(b) experienced a decline in the shareholder's equity of the Company
from its shareholder's equity shown on the Company Balance Sheet at August
31, 1997, determined using the same accounting principles applied in the
preparation of the Company Financial Statements (but without giving effect
to the payment of pre-closing bonuses, if any, pursuant to Section 5.8
hereof);
8
<PAGE> 15
(c) except as disclosed in Section 2.13 of the Company Disclosure
Schedule, suffered any damage or destruction to or loss of its assets not
covered by insurance, or any loss of customers or suppliers, or terminated
or lost the services of any key employee (including any employee who had
agreed with the Company to maintain the confidentiality of proprietary or
technical information or know-how or to assign inventions, patents, or
copyrights) that has had, or in the good faith belief of the Shareholders
is likely to have, a material adverse effect on the businesses, operations,
assets, financial condition, or prospects of the Company;
(d) acquired or disposed of any material asset, or incurred, assumed,
guaranteed, endorsed, paid, or discharged any material indebtedness,
liability, or obligation, or subjected or permitted to be subjected any
material amount of assets to any lien, claim, or encumbrance of any kind,
except in the ordinary course of business or pursuant to agreements in
force at the date of this Agreement;
(e) forgiven, compromised, canceled, released, waived, or permitted to
lapse any material rights or claims, except as disclosed in Section 2.13 of
the Company Disclosure Schedule;
(f) entered into or terminated any material agreement or commitment,
or agreed or made any changes in material leases or agreements, other than
renewals or extensions thereof and leases, agreements, and commitments
entered into, terminated, or modified in the ordinary course of business;
(g) written up, written down, or written off the book value of any
material amount of assets, except as disclosed in Section 2.13 of the
Company Disclosure Schedule;
(h) declared, paid, or set aside for payment any dividend or
distribution with respect to its capital stock;
(i) except as set forth in Section 2.13 of the Company Disclosure
Schedule, redeemed, purchased, or otherwise acquired, or sold, granted, or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or
agreed to changes in the terms and conditions of any such rights;
(j) except as set forth in Section 2.13 of the Company Disclosure
Schedule, paid compensation, fees, bonuses or other payments to any
Shareholder or his family members or any of his affiliates, other than the
base salary of each Shareholder; or materially increased the compensation
of or paid any bonus to any other employee or contributed to any employee
benefit plan other than in accordance with policies, practices or
requirements established and in effect on October 31, 1996;
9
<PAGE> 16
(k) Entered into any employment, compensation, or collective
bargaining agreement with any person or group or consulting agreement not
identified in Section 2.13 of the Company Disclosure Schedule, other than
in the ordinary course of business;
(l) Entered into, adopted, or materially amended any employee benefit
plan; or
(m) Entered into any other material commitment or transaction not
disclosed elsewhere herein or in the Company Disclosure Schedule, other
than in the ordinary course of business.
2.14 No Material Undisclosed Liabilities. To the knowledge of the Company
or the Shareholders, there is no liability or obligation of the Company of any
nature, whether absolute, accrued, contingent, or otherwise, other than:
(a) the liabilities and obligations that are fully reflected, accrued,
or reserved against on the Company Balance Sheet, for which the reserves
are appropriate and reasonable, or incurred in the ordinary course of
business and consistent with past practices since August 31, 1997;
(b) the loss contingencies set forth in Section 2.14 of the Company
Disclosure Schedule;
(c) contractual liabilities or obligations of a nature not required to
be disclosed on a balance sheet prepared in accordance with generally
accepted accounting principles, but which, if material, are disclosed in
Section 2.14 of the Company Disclosure Schedule; and
(d) other liabilities and loss contingencies which are not material in
the aggregate to the business, operations, assets or condition (financial
or otherwise) of the Company.
The Company is not a signatory to, and is not in any manner a guarantor,
endorser, assumptor or otherwise primary or secondarily liable for or
responsible for the payment of, any notes payable other than those set forth in
Section 2.21 of the Company Disclosure Schedule.
2.15 Tax Liabilities. The Company has filed all material federal, state,
county, local, and foreign tax returns and reports required to be filed by
them, including those with respect to income, payroll, property, withholding,
social security, unemployment, franchise, excise, use and sales taxes, and has
either paid in full all taxes that have become due as reflected on any such
return or report and any interest and penalties with respect thereto or, as of
August 31, 1997, it has fully accrued on its books or has established adequate
reserves for all taxes payable but not yet due, except that at August 31, 1997
the unrecorded contingent liability of the Company with respect to payroll,
withholding, social security, unemployment, franchise, property, sales, use and
excise taxes did not exceed $37,500 in the aggregate for all such taxes. The
total of all payments made in 1996 and in 1997 for taxes, interest and
penalties of the Company for periods ended prior to November 1, 1996 have not
exceeded the accrued liability for such items shown on the Company Financial
Statements
10
<PAGE> 17
as of August 31, 1997 for periods ended October 31, 1996; the
Company has not, subsequent to October 31, 1996, accrued or set aside any
reserves on its books and records for any taxes, interest or penalties for any
period ended prior to November 1, 1996 nor has the Company made any payments in
1996 or 1997 of taxes, interest or penalties for periods ended prior to
November 1, 1996 that were not reflected in the accrued liability therefor
(including deferred taxes) shown on the Company Financial Statements as of
August 31, 1997 for periods ended October 31, 1996. There are no reserves
(other than for deferred taxes) reflected in the Company Financial Statements
as of August 31, 1997 for periods ended October 31, 1996 for taxes, interest or
penalties in excess of those shown to be due on any tax returns that have been
filed for any periods then ended. Except as disclosed on Section 2.15 of the
Company Disclosure Schedule, neither the Internal Revenue Service nor any other
taxing authority has audited or is in the process of auditing the tax returns
and reports of the Company, and no claim for additional taxes, interest, or
penalties for any fiscal year is pending. The Company has delivered to Tyler
true, complete and correct copies of (i) all federal and state income or
franchise tax returns for the Company for all periods ending on and after
October 31, 1994 and (ii) relevant portions of income and franchise tax
examination reports, statements of deficiencies, closing or other agreements
received by, assessed against or agreed to by the Company, relating to such
taxes, since October 31, 1994, if any. No extension or waiver of any statute of
limitations has been requested of or granted by the Company with respect to any
tax year, and no extension or waiver of time within which to file any tax
return has been requested by or granted to the Company except with respect to
tax returns not yet filed but otherwise due. No unsatisfied deficiency,
delinquency, or default for any tax, assessment, or governmental charge has
been claimed or assessed, or to the knowledge of the Company or the
Shareholders, proposed against the Company, nor has the Company received notice
of any such deficiency, delinquency, or default, for any tax period. Neither
the Company nor either Shareholder has any reason to believe that the Company
has any material contingent income tax liabilities other than those reflected
on the Company Balance Sheet and those arising in the ordinary course of
business since the date thereof, and those arising as a result of the
transactions contemplated hereby. The Company has not filed a consent under
sec.341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
concerning collapsible corporations. The Company has not made any material
payments, is not obligated to make any material payments, and is not a party to
any agreement that under certain circumstances could obligate it to make any
material payments that will not be deductible under Code sec.280G. The Company
is not a party to any tax allocation or sharing agreement. The Company (i) has
not been a member of an affiliated group filing a consolidated federal income
tax return and (ii) does not have any liability for the taxes of any person
under Treasury Reg. sec.1.1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor, by contract, or otherwise.
2.16 Title to Properties.
(a) The Company owns no real property.
(b) Except as disclosed in Section 2.16(b) of the Company Disclosure
Schedule and except as they have since been affected subsequent to August 31,
1997 by transactions in the ordinary course of business and consistent with past
practices, and except for assets subject to
11
<PAGE> 18
financing leases required to be capitalized under generally accepted accounting
principles which are reflected in the Company Balance Sheet or notes thereto,
the Company has good and marketable title to the assets reflected in the
Company Balance Sheet or otherwise on their books and records as being owned as
of August 31, 1997, or purchased by it since August 31, 1997, and to the assets
described in Section 2.20 below and to the following assets whether or not
reflected in the Company Balance Sheet or on such books and records:
The computer programs and applications software, in both object code and
source code form, and all documentation therefor (excluding operating systems
software leased by or licensed to the Company) utilized by the Company in its
business.
(c) The assets identified in subsection (b) above and the assets described
in Section 2.20 below are owned by or licensed to the Company free and clear of
any lien, claim or encumbrance except those disclosed in the Company Balance
Sheet or notes thereto or in Section 2.16(c) of the Company Disclosure Schedule
and except for:
(i) Liens for taxes, assessments, or other governmental charges not
yet delinquent, or the validity of which are being contested in good faith
by appropriate proceedings listed in Section 2.16(c) of the Company
Disclosure Schedule;
(ii) Statutory liens incurred in the ordinary course of business that
are not yet delinquent, or the validity of which are being contested in
good faith by appropriate proceedings described in Section 2.16(c) of the
Company Disclosure Schedule;
(iii) The rights of customers of the Company with respect to inventory
or work in progress under purchase orders or contracts entered into by the
Company in the ordinary course of business;
(iv) Liens, claims, or encumbrances consisting of leases of equipment
to customers entered into in the ordinary course of business;
(v) Liens, claims, or encumbrances described in real estate title
insurance binders or commitments, or abstracts of title to real estate,
furnished or to be furnished to Tyler in connection with the transactions
contemplated hereby, unless Tyler objects to the same in writing within
five business days after receipt of such title documents;
(vi) Restrictions and constraints set forth in the license agreements
described in Section 2.20 of the Company Disclosure Schedule; and
(vii) Other liens, claims, or encumbrances that, in the aggregate, do
not materially detract from the value of, or materially interfere with the
present use of, such assets.
12
<PAGE> 19
(d) Except for those assets acquired since the date of the Company Balance
Sheet, all tangible properties and assets material to the present operations of
the Company are reflected on the Company Balance Sheet and notes thereto in the
manner and to the extent required by generally accepted accounting principles.
Immediately after the Closing, the Company will own or lease or otherwise
possess the rights to use all assets necessary to the conduct of the business
conducted by the Company immediately before the Closing.
2.17 Condition of Tangible Assets. Except as set forth in Section 2.17 of
the Company Disclosure Schedule, the tangible assets of the Company which are
material to the business, operations, assets or financial condition of the
Company, are in good condition and repair and, in the good faith belief of each
Shareholder, are adequate for the uses to which they are being put in the
ordinary course of their respective businesses.
2.18 Accounts Receivable. To the knowledge of the Company or the
Shareholders, all accounts receivable reflected in the Company Balance Sheet or
arising since August 31, 1997 either have been collected or are enforceable and
collectible claims not subject to any valid defense, offset, or credit, except
to the extent of any reserves established for doubtful accounts in a manner
consistent with such practices in prior periods and except as set forth in
Section 2.18 of the Company Disclosure Schedule.
2.19 Inventories. The Company has no inventories.
2.20 Patents, Trademarks, and Copyrights. Set forth in Section 2.20 of the
Company Disclosure Schedule is a true and correct description of:
(a) all material trademarks, trade names, service marks, patents,
copyrights, and applications therefor and all license, royalty, assignment,
and other similar agreements relating to the foregoing currently owned, in
whole or in part, by the Company;
(b) all material agreements relating to technology, know-how, or
processes that the Company is licensed or authorized to use by others or
licenses or authorizes others to use; and
(c) all material trademarks, trade names, service marks, patents,
copyrights, and applications therefor and other similar and intangible
intellectual property and all license, royalty, assignment, and other
similar agreements relating to the foregoing and all material agreements
relating to technology, know-how, or processes used in connection with the
business of the Company.
Except to the extent set forth in Section 2.20 of the Company Disclosure
Schedule, the Company has, to the knowledge of the Company and each Shareholder,
the sole and exclusive right to use the patents, trademarks, trade names,
copyrights, service marks, technology, know-how, and processes identified in
such Section 2.20 without infringing or violating the rights of any other
person, and to the knowledge of the Company and each Shareholder no consent of
third parties will be required for
13
<PAGE> 20
the use thereof by the Company upon consummation of the Merger and there are no
past due or delinquent license fees, rents, royalties, or other charges that
the Company is required or obligated to pay with respect to any of the
foregoing. Except as disclosed in Section 2.20 of the Company Disclosure
Schedule, no claim has been asserted by any person to the ownership of or right
to use any such patent, trademark, trade name, copyright, service mark,
technology, know-how, or process or challenging or questioning the validity or
effectiveness of any such license or agreement, and the Company knows of no
valid basis for any such claim. To the knowledge of the Company and each
Shareholder, except as disclosed in Section 2.20 of the Company Disclosure
Schedule, each of the foregoing is valid and subsisting, has not been canceled,
abandoned, or otherwise terminated, and, if applicable, has been duly issued or
filed.
2.21 Contracts. Set forth in Section 2.21 of the Company Disclosure
Schedule are complete and accurate lists of the following contracts and
commitments (including summaries of oral contracts) to which the Company is a
party or bound:
(a) Contracts with any labor union;
(b) Employee benefit plans or contracts;
(c) Employment or similar contracts, including confidentiality
agreements and agreements to assign inventions, patents and copyrights, and
consulting agreements (other than those entered into in the ordinary course
of business);
(d) Leases, whether as lessor or lessee, involving annual rental
payments in excess of $7,500, that are not terminable at will or upon
notice of 30 days or less by the Company;
(e) Loan agreements, mortgages, indentures, instruments of
indebtedness or commitments involving indebtedness for borrowed money or
money loaned to others in excess of $7,500, but excluding intercompany
items;
(f) Guaranty or suretyship, performance bond, indemnification, or
contribution agreements involving obligations in excess of $7,500, but
excluding intercompany items;
(g) Contracts with customers or suppliers that involve aggregate
payments to or by the Company of more than $15,000, and that are not
terminable at will or upon notice of 90 days or less by the Company;
(h) Distribution, marketing, dealership, sales, or agency agreements
material to the Company that are not terminable at will or upon notice of
30 days or less by the Company;
(i) Joint venture, partnership, or other agreements evidencing an
ownership interest or a participation in or sharing of profits;
14
<PAGE> 21
(j) Contracts containing noncompetition covenants, covenants to
register securities, or negative or restrictive financial covenants that
are not terminable at will or upon notice of 30 days or less by the
Company;
(k) Voting agreements relating to securities of the Company (whether
or not the Company is a party thereto;
(l) Insurance policies involving annual premium payments of more than
$750;
(m) Powers of attorney; and
(n) Contracts between the Company and any of the Shareholders, their
spouses or any affiliates or relatives thereof; and
(o) Other contracts not made in the ordinary course of business or
that, in the reasonable judgment of the Shareholders, are material to the
businesses, operations, assets, or financial condition of the Company.
No contract or commitment listed in Section 2.21 of the Company Disclosure
Schedule has been amended or modified or the rights and obligations evidenced
thereby otherwise affected in a manner materially adverse to the Company, except
by an instrument which is also included in such listing, and each contract or
commitment, as so amended, modified or affected, contains all material
provisions with respect to the subject matter thereof. The Company and the
Shareholders have furnished or made available to Tyler accurate and complete
copies of all of the contracts, commitments or instruments listed in Section
2.21 of the Company Disclosure Schedule. Except as set forth in Section 2.21 of
the Company Disclosure Schedule or with respect to contracts not material to the
businesses, operations, assets or financial condition of the Company, (i) to the
knowledge of the Company and the Shareholders, all such contracts are valid,
binding, subsisting, and enforceable in all material respects; (ii) to the
knowledge of the Company and the Shareholders and in their good faith belief the
Merger will not affect the continuance in full force and effect of such
contracts; and (iii) there is no material dispute among the parties to any such
contract and no material penalty has been incurred with respect thereto. Neither
the Company nor any Shareholder has received notice of any plan or intention of
any other party to any such contract or agreement to exercise any right to
cancel or terminate any such contract or agreement, and neither the Company nor
any Shareholder knows of any fact that would justify the exercise of such right.
Neither the Company nor any Shareholder currently contemplates, person or entity
currently contemplates, any amendment or change to any of the contracts or
agreements referred to in Section 2.21 of the Company Disclosure Schedule.
Except as disclosed in Section 2.21 of the Company Disclosure Schedule, none of
the Company's customers or suppliers, that during the fiscal year ended October
31, 1996 accounted for as much as 2% of consolidated sales or purchases of the
Company, has refused, or communicated that it will or may refuse, to purchase or
supply goods or services, as the case may be, or has communicated that it will
or may substantially reduce
15
<PAGE> 22
the amount of goods or services that it is willing to purchase from, or sell
to, the Company after the date hereof.
2.22 Litigation and Claims. Except as described in Section 2.22 of the
Company Disclosure Schedule, neither the Company nor any Shareholder is a party
to, and the businesses or assets of the Company are not the subject of or
affected by, any pending or to the knowledge of the Company or any Shareholder,
threatened suit, claim, action, or litigation with any party or any
administrative, arbitration, or other governmental proceeding, investigation, or
inquiry, or any pending change in any regulations, statutes or ordinances, which
would, severally or in the aggregate, have a material adverse effect on the
businesses, results of operations, assets, or the condition (financial or
otherwise) of the Company. Except as described in Section 2.22 of the Company
Disclosure Schedule, to the knowledge of the Company or any Shareholder, no
suit, claim, action or demand is currently pending, has been made or filed, or
is or has been threatened or contemplated by any person or entity, and there
exists no judgment or order (whether or not the Company is a party to any of the
foregoing) regarding or affecting the ownership, disclosure, copying, possession
or utilization by the Company of the assets reflected in the books and records
of the Company.
2.23 Judgments, Decrees, and Orders in Restraint of Business. The Company
is not a party to or subject to any judgment, order, or decree entered in any
suit or proceeding brought by any governmental agency or by any other person
enjoining it in respect of any business practice or the acquisition of any
property or the conduct of its business.
2.24 No Violation of Any Instrument. Except as disclosed in Section 2.24
of the Company Disclosure Schedule, the Company is not in violation of or
default under nor, to the knowledge of the Company or any Shareholder, has any
event occurred that, with or without the giving of notice, lapse of time or the
occurrence of any other event, would constitute a violation of or default
under, or permit the termination or the acceleration of maturity of, or result
in the imposition of a lien, claim, or encumbrance upon any property or asset
of the Company pursuant to, the articles or certificate of incorporation or
bylaws of the Company or any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, loan or lease agreement, or other agreement or
instrument (including with customers) listed or required to be listed in
Section 2.21 of the Company Disclosure Schedule, or any judgment, order,
injunction, or decree, to which it is a party, by which it is bound, or to
which any of its assets is subject, which would have a material adverse effect
on the businesses, operations, assets or financial condition of the Company.
2.25 Compliance With Laws. The Company is substantially in compliance with
all laws applicable to their businesses, where failure so to comply would have a
material adverse effect on the businesses, operations, assets, prospects, or
financial condition of the Company.
2.26 Compensation and Benefit Plans.
(a) Section 2.26 of the Company Disclosure Schedule includes a complete and
accurate list of all pension, profit sharing, Section 401(k), thrift-savings,
simplified employee
16
<PAGE> 23
pension, excess benefit plan, deferred compensation, incentive compensation,
stock bonus, stock option, restricted stock, cash bonus, employee stock
ownership, severance pay, golden parachute, cafeteria, flexible compensation,
life insurance, medical, dental, disability, welfare, or vacation plans or
arrangements of any kind and any other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan (as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended "ERISA") in which employees
or former employees of the Company participate (collectively, the "Benefit
Plans").
(b) The Company does not participate currently in and has never
participated in, and is not required currently to and has never been required to
contribute to or otherwise participate in, any "multi-employer plan," as defined
in Sections 3(37)(A) and 4001(a)(3) of ERISA and Section 414(f) of the Code. The
Company does not participate currently in and has never participated in, and is
not required currently to and has never been required to contribute to or
otherwise participate in, any plan, program or arrangement subject to Title IV
of ERISA.
(c) No former employee of the Company is entitled, and no current employee
will be entitled after termination of employment, to participate in any Employee
Welfare Benefit Plan as defined in ERISA, other than participation required to
be permitted by the Company under Section 4980B of the Code and Sections 601 to
609 of ERISA.
(d) The Company and the Shareholders have delivered to Tyler true, correct
and complete copies of the Benefit Plans and each applicable summary plan
description and the most recent Form 5500s applicable to such Benefit Plans.
Section 2.26 of the Company Disclosure Schedule sets forth the costs
attributable to each Benefit Plan determined on an annual basis. Except as
reflected or reserved against on the Company Balance Sheet, there is no unfunded
liability with respect to any Benefit Plan. None of the assets of the Company's
Benefit Plans are invested in any property constituting employer real property
or employer security within the meaning of Section 407(d) of ERISA.
(e) Each Employee Pension Benefit Plan sponsored, maintained or contributed
to by the Company is qualified under Section 401(a) of the Code; all related
trusts are exempt from federal income tax under Section 501(a) of the Code; each
such plan has received a determination letter from the IRS stating that the plan
is qualified under Section 401(a) of the Code and all related trusts are exempt
from federal income tax under Section 501(a) of the Code (which determination
letter includes all statutory and regulatory provisions of the Tax Reform Act of
1986 and subsequent legislation for which a determination letter may be
obtained); and to the knowledge of the Company, nothing has occurred since the
date of the last such determination which resulted in, or is likely to result
in, the revocation of such determination. A copy of the latest determination
letter applicable to any Employee Pension Benefit Plan has been delivered to
Tyler.
(f) Each of the Benefit Plans has been administered in material compliance
with its underlying documentation, the requirements of ERISA, the Code and all
other applicable laws. All returns required to be made under ERISA and the Code
with respect to the Benefit Plans have
17
<PAGE> 24
been timely filed and the Company has made all contributions required under the
terms of any Benefit Plan (including, but in no way limited to, employer
matching contributions and non-elective contributions and the deposit of
elective deferrals as such terms are defined in the Code) for all periods
through and including the date hereof.
(g) To the knowledge of the Company, there are not now, nor have there ever
been, any transactions involving the Benefit Plans or any fiduciary or
administrator thereof which are prohibited under ERISA or the Code or for which
an individual, class or statutory exemption is not available.
(h) There are no pending or, to the knowledge of the Company, any
threatened claims by or on behalf of the Benefit Plans, the United States
Department of Labor, the Internal Revenue Service, or any current or former
employee of the Company or beneficiary of such current or former employee
alleging a breach of any fiduciary duties or a violation of applicable state or
federal law which could result in liability on the part of the Company, or a
Benefit Plan under ERISA or any other law, nor, to the knowledge of the Company,
is there any basis for such a claim and neither the Company, nor, to the
knowledge of the Company, any administrator or fiduciary of any Benefit Plan (or
agent of the foregoing) has engaged in any transaction or acted or failed to act
in any manner which would subject the Company to any liability for a breach of
fiduciary duty under ERISA. The transactions contemplated by this Agreement
(either alone or together with any other event) will not (i) terminate or modify
the provisions of any Benefit Plan or (ii) trigger an event under any Benefit
Plan or employer benefit arrangement or law that will result in any payment
(whether of severance pay or otherwise) becoming due from the Company.
2.27 Labor Relations.
(a) To the knowledge of the Company or the Shareholders, the Company (i) is
in substantial compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment (including occupational
health and safety), nondiscrimination, and wages and hours and (ii) are not
engaged in any unfair labor practice, that in any such case would have a
material adverse effect on the businesses, operations, assets or financial
condition of the Company.
(b) Except as disclosed in Section 2.27 of the Company Disclosure Schedule,
there is no unfair labor practice complaint against Company pending or, to the
knowledge of the Company or any Shareholder, threatened before the National
Labor Relations Board.
(c) There is no strike, labor dispute, slowdown, stoppage, or other
material interference with or impairment by labor of the business of the Company
actually pending or, to the knowledge of the Company or any Shareholder,
threatened or contemplated against or directly affecting the Company.
18
<PAGE> 25
(d) To the knowledge of the Company or the Shareholders, no question of
union representation exists respecting the employees of the Company and no union
organizing activities are taking place.
(e) Since August 31, 1997, no key employees of the Company have been
terminated or have resigned their employment.
2.28 Adequate Insurance. The Company maintains insurance coverage that the
Company and the Shareholders believe is reasonably adequate to protect the
assets and operations of the Company, and is sufficient for material compliance
with all requirements of law and all agreements to which the Company is a party.
No notice of any termination or threatened termination of such policies has been
received by the Company and, to the knowledge of the Company or the
Shareholders, such policies are valid, binding, and enforceable.
2.29 Contracts with Affiliates and Others. Except as set forth in Section
2.29 of the Company Disclosure Schedule, no director or officer of the Company,
nor any person who is a spouse or descendant of such director or officer, has
any direct or indirect relationship with any customer or supplier of, or other
contracting party with, the Company (other than as a director, officer, or
shareholder of the Company) that would be required to be disclosed in a proxy
statement relating to the election of directors filed under the Securities
Exchange Act of 1934 (the "Exchange Act").
2.30 Revenue Recognition. The Company has not recognized and does not
recognize revenues from customers in advance of performing the services or
furnishing the products for which the revenues were or are received.
2.31 Certain Fees. Except as disclosed in Section 2.31 of the Company
Disclosure Schedule, neither the Company nor any officer, director, or employee
of the Company has employed any broker or finder or incurred any liability for
any brokerage fees, commissions, or finders' fees in connection with the
transactions contemplated hereby. Tyler recognizes and acknowledges that,
subject to the Company's satisfaction of the representation and warranty in
Section 2.13(b) hereof, the fees shown in Section 2.31 of the Company Disclosure
Schedule shall be paid by the Company at Closing.
2.32 Environmental Matters. To the knowledge of the Company or the
Shareholders:
The Company and its property (whether real, personal, owned, leased,
managed or operated) (collectively, "Business Facilities") are in compliance
with applicable laws, rules, regulations, ordinances, orders or guidance
documents now in effect of any applicable governmental authority or any judicial
or administrative decision relating thereto that relate in any manner to health,
Materials of Environmental Concern, the environment, or a community's right to
know (collectively, "Environmental Laws"). There are no Materials of
Environmental Concern on any Business Facility in any quantity or concentration
exceeding any limitation or standard established pursuant to
19
<PAGE> 26
Environmental Laws. There are no actual or threatened claims, demands,
allegations, actions, suits, investigations, notices, or proceedings against or
relating to the Company or any of its Business Facilities relating to or
arising out of the use, presence, or handling of Materials of Environmental
Concern or compliance with Environmental Laws (collectively, "Environmental
Claims"), and there is no basis for any such Environmental Claims. There are no
events, conditions, circumstances, facts, activities, practices, incidents or
plans relating to or arising out of the operations of the Company which will
prevent or interfere with compliance with Environmental Laws by Tyler after the
Closing, or which may give rise to any common law or statutory liability under
Environmental Laws or form the basis of an Environmental Claim against the
Company, or any of their respective Business Facilities.
"Materials of Environmental Concern" means: (i) those substances included
within the statutory and/or regulatory definitions of "hazardous substance,"
"hazardous waste," "extremely hazardous substance," "regulated substance,"
"hazardous materials," or "toxic substances," under any Environmental Law; (ii)
any material, waste or substance which is or contains: (A) petroleum, oil or a
fraction or constituent thereof, (B) asbestos, (C) polychlorinated biphenyls,
(D) formaldehyde, (E) explosives, or (F) radioactive materials (including NORM);
(iii) solid wastes (as defined under the Resource Conservation and Recovery Act,
42 U.S.C. sec.6901 et seq., and its implementing regulations) that post imminent
and substantial endangerment to health or the environment; (iv) any material,
waste or substance designated classified or regulated as a "Class I" or "Class
II" waste under Title 30 of the Texas Administrative Code; and (v) such other
substances, materials, or wastes that are or become classified or regulated as
hazardous or toxic under any applicable federal, state or local law or
regulation. To the extent that the laws or regulations of any applicable state
or local jurisdiction establish a meaning for any term defined herein through
reference to federal Environmental Laws which is broader than the meaning under
such federal Environmental Laws, such broader meaning shall apply.
2.33 Accuracy of Information Furnished. No representation or warranty by
the Company or the Shareholders in this Agreement (including the Company
Disclosure Schedule) or any other agreement or document executed or to be
executed by the Company or the Shareholders in connection herewith contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not false or misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TYLER
Tyler and Sub jointly and severally represent and warrant to the Company
and the Shareholders as follows:
20
<PAGE> 27
3.1 Organization and Good Standing of Tyler. Tyler is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas.
3.2 Foreign Qualification. Tyler is duly qualified or licensed to do
business as a foreign corporation and in good standing in those jurisdictions
set forth in Section 3.2 of the schedule delivered by Tyler concurrently with
the execution of this Agreement (the "Tyler Disclosure Schedule"). Tyler is duly
qualified or licensed to do business as a foreign corporation in every
jurisdiction where the failure so to qualify would have a material adverse
effect on the businesses, operations, assets, or financial condition of Tyler
and the Tyler Subsidiaries (as defined in Section 3.7), taken as a whole. For
purposes of this Section 3.2, no material adverse affect shall be deemed to have
occurred as a result of non-payment of state or local franchise taxes not
exceeding $37,500 in the aggregate.
3.3 Power and Authority to Conduct Business. Each of Tyler and Sub has the
corporate power and authority, and possess all licenses and permits, required by
governmental authorities to own, lease, and operate its properties and assets
and to carry on its business as currently being conducted, except where the
failure to possess such license or permit does not and would not have a material
adverse effect on the business, operations, assets or financial condition of
Tyler and the Tyler Subsidiaries, taken as a whole.
3.4 Authority to Consummate Merger. Each of Tyler and Sub has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the other agreements or documents executed or required
to be executed by it in connection with this Agreement and, subject to obtaining
the approval of the stockholders of Tyler, the execution, delivery and
performance by each of Tyler and Sub of this Agreement and the other documents
executed or to be executed by it in connection with this Agreement have been
duly authorized by all necessary corporate action.
3.5 Binding Effect. This Agreement and the other documents executed or
required to be executed by Tyler or Sub in connection with this Agreement have
been or will have been duly executed and delivered by Tyler or Sub and are or
will be, when executed and delivered, the legal, valid, and binding obligations
of Tyler or Sub executing the same, enforceable in accordance with their terms
except that:
(a) enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification under Section 10.5 may be limited by
considerations of public policy.
21
<PAGE> 28
3.6 Compliance with Other Instruments. Subject to obtaining the approval
of the stockholders of Tyler and except as disclosed in Section 3.6 of the
Tyler Disclosure Schedule, neither the execution and delivery by Tyler or Sub
of this Agreement or the other agreements or documents executed or required to
be executed by Tyler or Sub in connection herewith, nor the consummation by
Tyler or Sub of the transactions contemplated hereby and thereby will (i)
conflict with the articles of incorporation or bylaws of Tyler or Sub, (ii)
assuming satisfaction of the requirements set forth in clause (iii) below,
violate any provision of law applicable to Tyler or any of the Tyler
Subsidiaries; (iii) except for (A) requirements arising out of the HSR Act, (B)
requirements of federal and state securities laws, and (C) the filing of
articles of merger in accordance with the TBCA, require any consent,
authorization, permit, license or approval of, or declaration, registration or
filing with or notice to, any person or governmental body or authority,
domestic or foreign, under any provision of law applicable to Tyler or any of
the Tyler Subsidiaries; or (iv) require any consent, approval or notice under,
violate, breach, be in conflict with, or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under,
or permit the termination or the acceleration of maturity of, or result in the
imposition of any lien, claim, or encumbrance upon any property or asset of
Tyler or any Tyler Subsidiary pursuant to any note, bond, indenture, mortgage,
deed of trust, evidence of indebtedness, loan or lease agreement, other
agreement or instrument or any judgment, order, injunction, or decree by which
Tyler or any Tyler Subsidiary is bound, to which any of them is a party, or to
which any of their assets is subject, except for those violations and breaches
that would not have a material adverse effect on the businesses, operations,
assets or financial condition of Tyler and the Tyler Subsidiaries, taken as a
whole.
3.7 Capitalization of Tyler
(a) The authorized capital stock of Tyler consists of 50,000,000 shares of
Tyler Common Stock, and 1,000,000 shares of preferred stock, par value $10.00
per share ("Tyler Preferred Stock"), of which 22,007,921 shares of Tyler Common
Stock and no shares of Tyler Preferred Stock were issued and outstanding as of
September 30, 1997 and 1,301,356 shares of Common Stock were held in treasury.
All of the issued and outstanding shares of Tyler Common Stock have been duly
authorized and are validly issued and are fully paid and nonassessable. There
are no shares of the capital stock of Tyler held in its treasury or in the
treasury of any corporation of which Tyler is the record or beneficial owner,
directly or indirectly, of 50% or more of the capital stock (each such
corporation being referred to as a "Tyler Subsidiary"). The shares of Tyler
Common Stock to be issued in the Merger, when issued and delivered, will be duly
authorized, validly issued, fully paid, and nonassessable.
(b) As of the date hereof, the authorized capital stock of Sub consists of
1,000 shares of common stock, par value $0.01 per share, all of which are
validly issued, fully paid and nonassessable and are owned by Tyler.
(c) Except as described in Section 3.7 of the Tyler Disclosure Schedule and
in the Tyler Financial Statements (as hereinafter defined), there is no
outstanding subscription, contract, convertible or exchangeable security,
option, warrant, call, or other right obligating Tyler or any
22
<PAGE> 29
Tyler Subsidiary to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem, or otherwise acquire shares of, or securities convertible
into or exchangeable for, capital stock of Tyler.
3.8 Commission Filings; Financial Statements. Section 3.8 of the Tyler
Disclosure Schedule lists all reports, registration statements and other
filings, together with any amendments required to be made with respect thereto,
that Tyler has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act since October 1, 1995. All reports, registration
statements and other filings filed by Tyler with the Commission since October 1,
1995 through the date of this Agreement, together with any amendments thereto,
are sometimes collectively referred to as the "Tyler Commission Filings." Tyler
has heretofore provided the Company and the Shareholders true, correct and
complete copies of the Tyler Commission Filings. As of the respective dates of
their filing with the Commission, the Tyler Commission Filings complied in all
material respects with the Securities Act, the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
Each of the consolidated financial statements (including any related notes
or schedules) included in or incorporated by reference into the Tyler
Commission Filings ("Tyler Financial Statements") was, and each of the
consolidated financial statements to be included in the Proxy Statement (as
defined in Section 6.2) (except for those financial statements of the Company
furnished by or on behalf of the Company or the Shareholder to Tyler
specifically for use therein) will be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
noted therein or in the notes or schedules thereto), and fairly present or will
fairly present, as the case may be, the consolidated financial position of
Tyler and its consolidated subsidiaries as of the dates thereof and the results
of operations, cash flows and changes in stockholders' equity for the periods
then ended (subject, in the case of the unaudited interim financial statements,
to normal year-end audit adjustments). Since December 31, 1996, there has been
no change in accounting principles applicable to, or methods of accounting
utilized by, Tyler and the books and records of Tyler and the Tyler
Subsidiaries have been and are being maintained in accordance with all
applicable legal and accounting requirements and good business practice,
reflect only valid transactions, are complete and correct in all material
respects, and accurately reflect in all material respects the basis for the
consolidated financial position and consolidated results of operations and cash
flows of Tyler and its consolidated subsidiaries set forth in the Tyler
Financial Statements.
3.9 Absence of Certain Changes. Since June 30, 1997, Tyler has not (except
as contemplated by this Agreement or as may result from the transactions
contemplated by this Agreement or as described in the Tyler Disclosure
Schedule):
(a) suffered any change in its business, results of operations,
working capital, assets, liabilities, or financial condition or the manner
of conducting its business other than changes
23
<PAGE> 30
that, individually or in the aggregate, have not had a material adverse
effect on the businesses, operations, assets or financial condition of
Tyler and the Tyler Subsidiaries, taken as a whole;
(b) entered into any material commitment or transaction other than in
the ordinary course of business;
(c) written up, written down, or written off the book value of any
material amount of assets;
(d) declared, paid, or set aside for payment any dividend or
distribution with respect to the capital stock of Tyler; or
(e) redeemed, purchased, or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of the capital stock or
securities of Tyler or any rights to acquire such capital stock or
securities, other than normal or periodic purchases, sales and grants under
provisions of existing employee benefit plans and programs of Tyler.
3.10 No Material Undisclosed Liabilities. To the knowledge of Tyler, there
is no liability or obligation of Tyler and the Tyler Subsidiaries of any nature,
whether absolute, accrued, contingent, or otherwise, other than:
(a) the liabilities and obligations that are fully reflected, accrued,
or reserved against in the unaudited consolidated balance sheet of Tyler
and its consolidated subsidiaries as of June 30, 1997, for which the
reserves are appropriate and reasonable, or incurred in the ordinary course
of business and consistent with past practices since June 30, 1997;
(b) the loss contingencies set forth in Section 3.10 of the Tyler
Disclosure Schedule;
3.11 Litigation and Government Claims. Except as described in Section 3.11
of the Tyler Disclosure Schedule, neither Tyler nor any Tyler Subsidiary is a
party to, and the business or assets of Tyler and the Tyler Subsidiaries are not
the subject of, any pending or, to the knowledge of Tyler, threatened suit,
claim, action, or litigation with any party, or any administrative, arbitration,
or other governmental proceeding, investigation, or inquiry, in which the amount
involved and not covered by insurance exceeds $250,000. In the opinion of Tyler
and its management, none of such pending or threatened matters would, severally
or in the aggregate, have a material adverse effect on the
24
<PAGE> 31
business, operations, assets or financial condition of Tyler and the Tyler
Subsidiaries, taken as a whole.
3.12 No Violation of Any Instrument. Except as disclosed in Section 3.12
of the Tyler Disclosure Schedule, neither Tyler nor any Tyler Subsidiary is in
violation of or default under nor, to the knowledge of Tyler, has any event
occurred that, with the lapse of time or the giving of notice or both, would
constitute a violation of or default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of a lien, claim, or
encumbrance upon any property or asset of Tyler or any Tyler Subsidiary pursuant
to the articles or certificate of incorporation or bylaws of Tyler or any Tyler
Subsidiary or any note, bond, indenture, mortgage, deed of trust, evidence of
indebtedness, loan or lease agreement, or other agreement or instrument or any
judgment, order, injunction, or decree to which it is a party, by which it is
bound, or to which any of its assets is subject, which would have a material
adverse effect on the business, operations, assets or financial condition of
Tyler and the Tyler Subsidiaries, taken as a whole.
3.13 Certain Fees. Neither Tyler nor any officer, director, or employee of
Tyler has has employed any broker or finder or incurred any liability for any
brokerage fees, commissions, or finders' fees in connection with the
transactions contemplated hereby.
3.14 No Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
3.15 Accuracy of Information Furnished. No representation or warranty by
Tyler or Sub in this Agreement (including the Tyler Disclosure Schedule) or any
other agreement or document executed or to be executed by Tyler or Sub in
connection herewith contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not false or misleading.
ARTICLE 4
JOINT COVENANTS OF THE COMPANY, THE SHAREHOLDERS AND TYLER
4.1 Access; Confidentiality.
(a) During the period pending the Closing Date, the Company shall afford to
Tyler and its officers, employees, accountants, counsel, and other authorized
representatives, full access to and the right to review and make copies of the
Company's assets, properties, books, contracts, commitments, and records, view
their physical properties, and communicate with the key employees of the Company
on a basis reasonably satisfactory to the Company, and will furnish and cause
representatives to furnish promptly to Tyler such additional financial and
operating data and other documents and information (certified if requested and
reasonably susceptible to certification)
25
<PAGE> 32
relating to the Company's businesses and properties as Tyler or its duly
authorized representatives may from time to time reasonably request.
(b) During the period pending the Closing Date, Tyler shall afford to the
Company and the Shareholders and their accountants, counsel and other authorized
representatives the same rights of access to and inspection of the books,
records, properties, contracts and personnel of Tyler as those afforded to Tyler
and its representatives in Section 4.1(a) above.
(c) Notwithstanding any such investigation by Tyler, the Company, or the
Shareholders, or any information obtained pursuant thereto, it or he shall be
entitled to rely in full upon the accuracy of the representations and warranties
of the other party or parties contained in this Agreement and upon its or his
representations at Closing as to compliance with or performance of any covenants
made by it or him in this Agreement. Tyler, the Company, or the Shareholders
shall have no obligation to investigate any such matters and, if any such
matters are investigated, shall have no obligation to the other party or parties
with respect to information obtained thereby except as provided in Section 12.1
of this Agreement.
(d) The rights and obligations of the Shareholders, the Company and Tyler
pursuant to the Confidentiality Agreement (the "Confidentiality Agreement")
dated September 17, 1997 by and among the Shareholders, the Company and Tyler
will survive the execution and delivery of this Agreement, and all information
obtained by the Shareholders, the Company and Tyler or any of their respective
Representatives (as defined in the Confidentiality Agreement) pursuant hereto
shall be deemed "Information" as that term is defined in the Confidentiality
Agreement, and shall be subject to the provisions of the Confidentiality
Agreement, except to the extent that Tyler is advised by counsel that disclosure
of any such Information, including the existence of the Confidentiality
Agreement, is required by law in connection with the Merger.
4.2 Notice of any Material Change. Each of the Company and Tyler shall,
promptly after the first notice or occurrence or failure to occur thereof but
not later than the Closing Date, supplement or amend its Disclosure Schedule to
disclose the occurrence of any event or the existence of any state of facts that
would:
(a) make any of its representations and warranties in this Agreement
untrue in any material respect or constitute a material failure of such
party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder;
(b) make it necessary to amend the Proxy Statement in order to render
the statements therein not misleading or to comply with applicable law; or
(c) otherwise constitute a material adverse change in the respective
businesses, results of operations, working capital, assets, liabilities or
condition (financial or otherwise) of Tyler and the Tyler Subsidiaries,
taken as a whole, or the Company. Subject to the provisions of Section 12.1
of this Agreement, no supplement or amendment to any Disclosure Schedule
shall have any
26
<PAGE> 33
effect for the purpose of determining the satisfaction of or compliance
with the conditions to the obligations of the parties set forth elsewhere
in this Agreement.
4.3 Monthly Financial Statements. During the period pending the Closing
Date, each of Tyler and the Company shall furnish to the other its unaudited
consolidated balance sheet and related statements of operations, stockholders'
equity, and cash flows and any supporting schedules for the accounting periods
ending on or about the last day of each such month, promptly after they are
available, but not later than 30 days after the close of such accounting period.
4.4 Antitrust Notification. Within 10 days after the date hereof, Tyler
and the Company shall each file with the Federal Trade Commission ("FTC") and
the Antitrust Division of the U.S. Department of Justice ("DOJ") any
Notification and Report Form required to be filed pursuant to the HSR Act, and
shall timely supply any supplemental information that may be reasonably
requested by the FTC or DOJ in connection therewith. The Company and Tyler shall
furnish to each other such necessary information and reasons under the HSR Act.
The Company and Tyler shall furnish to each other copies of all correspondence,
filings, or communications (or memoranda setting forth the substance thereof),
between them or their representatives and the FTC or DOJ.
4.5 Tax Matters.
(a) Each Shareholder and the Company shall prepare and timely file all tax
returns and amendments thereto required to be filed by the Company on or before
the Closing Date. Tyler shall have a reasonable opportunity to review all such
tax returns of the Company and amendments thereto.
(b) Tyler or the Surviving Corporation, as appropriate, shall prepare and
file all tax returns of the Company that are due to be filed after the Closing
Date and relate to tax periods of the Company ending on or before the Closing
Date and shall pay all income taxes shown on such returns as due and owing. The
Shareholders shall reimburse Tyler for taxes of the Company with respect to such
periods within fifteen (15) days after payment by Tyler or the Company of such
taxes to the extent such taxes are not reflected in the reserve for tax
liability (other than any reserve for deferred taxes established to reflect
timing differences between book and tax income) shown on the face of the Company
Balance Sheet at Closing.
(c) Each Shareholder covenants and agrees that he will be fully responsible
for, and indemnifies and holds harmless Tyler and the Company from and against,
any and all claims, demands, losses, obligations and liabilities for income
taxes of the Company, any penalties and interest with respect thereto, and any
costs and expenses (including reasonable attorneys' and accountants' fees) of
Tyler or the Company incurred as an incident thereto, relating to tax periods of
the Company ending on or before the Closing Date. Tyler agrees that each
Shareholder shall have the sole right to contest, resolve and defend, at his
cost, against any
27
<PAGE> 34
assessment for additional income taxes, notices of income deficiency or other
adjustment of income taxes of the Company made or proposed by any taxing
authority for such periods. Each Shareholder shall be entitled to retain such
tax representatives, subject to the consent of Tyler (which shall not be
unreasonably withheld), as he selects to represent him in resolving any such
income tax controversies or disputes for tax periods ending on or before the
Closing Date, and Tyler or the Company, as appropriate, shall execute and
deliver powers of attorney, limited to such tax periods, in favor of each
Shareholder or his tax representatives as necessary to effectuate the
provisions of this Section 4.5.
(d) Subject to Closing, and specifically reserving any rights or remedies
Tyler or the Surviving Corporation may have for breach of the representations
and warranties of Shareholders contained in Article 2 of this Agreement, Tyler
covenants and agrees that either it or the Surviving Corporation, as
appropriate, will be fully responsible for, and Tyler indemnifies and holds
harmless each Shareholder from and against, any and all claims, demands, losses,
obligations and liabilities for income taxes of the Surviving Corporation, any
penalties and interest with respect thereto, and any costs and expenses
(including reasonable attorneys' and accountants' fees) of each Shareholder
incurred as an incident thereto, relating to tax periods of the Surviving
Corporation ending after the Closing Date; such responsibility of and indemnity
by Tyler shall include the amounts of any and all tax consequences or
liabilities attributable to any election by Tyler or the Surviving Corporation
after the Closing to change the tax accounting methods utilized by the Company
applicable to tax periods ending after the Closing Date. Each Shareholder agrees
that Tyler or the Surviving Corporation, as appropriate, shall have the sole
right to contest, resolve and defend, at its cost, against any assessment for
additional income taxes, notice of income tax deficiency or other adjustments of
income taxes of the Surviving Corporation made or proposed by any taxing
authority for tax periods ending after the Closing Date.
(e) All parties hereto agree if requested to reasonably cooperate with one
another and assist in the settlement, compromise, defense or other disposition
of any assessments for additional taxes, notices of deficiency, proposed
adjustments or other income tax disputes or controversies by or with taxing
authorities relating to the Company. Tyler or the Surviving Corporation, as
appropriate, will provide to each Shareholder or his tax representatives prompt
written notification and copies of any communications from or to any taxing
authority received or made by either of them relating to income tax liabilities
of the Company for any tax periods ended on or before the Closing Date. Each
Shareholder or his tax representatives will provide to Tyler prompt written
notification and copies of any communications from or to any taxing authority
received or made by either of them relating to income tax liabilities of the
Company. Subsequent to any such notice, Tyler and each Shareholder shall keep
the other fully advised of the status and developments with respect to such
proposed or asserted income tax liability, and of the terms of any settlement or
other final resolution thereof. Failure by any party to notify any other party,
as provided herein, shall not relieve the party otherwise entitled to such
notice from its obligations contained in this Section 4.5 of this Agreement;
provided, however, that the party entitled to such notice may pursue other
remedies available to it at law or in equity for breach, if any, of the covenant
to notify contained herein.
28
<PAGE> 35
(f) No Shareholder shall, in any capacity, agree to any audit adjustments
by a taxing authority, or settle, compromise or otherwise agree to a resolution
of any dispute or controversy, with respect to the income tax liability of the
Company if the effect of the adjustment or the terms of the settlement increases
the income tax liabilities (including loss of carry forwards) of the Company:
(i) for the taxable period commencing on November 1, 1996 and ending
on the Closing Date to an amount that, when added to the income taxes paid
for such period by Tyler or the Company in accordance with Section 4.5(b)
above (excluding the amount of any such income tax liability attributable
to any election by Tyler or the Company after the Closing to change tax
accounting methods utilized by the Company applicable to tax periods ending
on or after November 1, 1996) exceeds the tax liability (excluding deferred
taxes) accrued on the books and records of the Company for the period
commencing November 1, 1996 and ending on the Closing Date; or
(ii) for taxable periods commencing after the Closing Date (but
including the amount of any such income tax liability attributable to any
election by Tyler or the Company after the Closing to change tax
accounting methods utilized by the Company applicable to tax periods
ending on or after November 1, 1996), unless the Shareholder or his tax
representatives shall have in advance thereof consulted with Tyler and
shall have agreed on mutually acceptable terms to pay to Tyler or the
Surviving Corporation, as appropriate, the additional income taxes
(subject to the limitation set forth in Subsection (i) above) that would
be owed by Tyler or the Company for all periods subsequent to October 31,
1996 as a result of such settlement. In any event, each Shareholder shall
pay to Tyler or the Surviving Corporation, as appropriate, the amount of
any increase in income tax liabilities (including loss of carry forwards)
of the Company for all tax periods ending on or after the Closing Date
(subject to the limitation set forth in subsection (i) above) that results
from a final administrative or judicial determination adjusting the income
tax liabilities of the Company for any period ending on or before the
Closing Date, and such payment or payments shall be made at the time Tyler
or the Surviving Corporation files an income tax return with a taxing
authority covering a tax period that is affected by such increase in
income tax liability.
(g) Each Shareholder agrees that, all proceeds received from any refund of
taxes arising out of any carry back to prior tax periods of any net operating
loss of the Company for tax periods ending on or after the Closing Date,
including any benefits derived from such carry backs to otherwise reduce an
income tax liability for such prior periods, shall belong to Tyler or the
Company. At the request of Tyler or the Company and at their expense, each
Shareholder shall promptly file any and all necessary documents or prosecute all
other necessary proceedings to claim and recover such refunds.
(h) At the request of any Shareholder, Tyler or the Company, as
appropriate, shall submit for filing with the Internal Revenue Service a Request
for Prompt Assessment of Income Taxes pursuant to Section 6501(d)
of the Internal Revenue Code for all open tax periods through
29
<PAGE> 36
the Closing Date for which a federal income tax return or returns or amended
return or returns have been filed by the Company.
(i) From and after the Closing Date, no Shareholder will (a) extend the
statute of limitations; (b) make or change any elections affecting the Company;
(c) change a method of accounting, in each instance with respect to tax
liabilities of the Company relating to periods ending on or prior to the Closing
Date, without the prior written consent of Tyler (which consent shall not be
unreasonably withheld).
(j) To the extent the provisions of this Section 4.5 and the provisions of
Article 11 of this Agreement are inconsistent or conflict, the provisions of
this Section 4.5 shall be determinative of the rights and obligations of the
parties hereto.
(k) All tax sharing agreements or similar agreements with respect to or
involving the Company shall be terminated as of the Closing Date and, after the
Closing Date and the Company shall not be bound thereby or have any liability
thereunder.
4.6 Cooperation Pending Closing. Each of the parties hereto shall use its
reasonable best efforts to:
(a) proceed promptly to make or give the necessary applications,
notices, requests, and filings in an effort to obtain at the earliest
practicable date and, in any event, before the Closing Date, the approvals,
authorizations, and consents of third parties necessary to consummate the
transactions contemplated by this Agreement;
(b) cooperate with and keep the other informed in connection with this
Agreement; and
(c) take such actions as the other party may reasonably request to
consummate the transactions contemplated by this Agreement and use its
reasonable best efforts and diligently attempt to satisfy, to the extent
within its control, all conditions precedent to the obligations to close
this Agreement.
ARTICLE 5
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 Conduct of Business Prior to Closing Date. During the period pending
the Closing Date (or other indicated date), the Company and the Shareholders.
(a) shall use its reasonable best efforts to conduct the operations of
the Company in the ordinary and usual course of business consistent with
past and current practices, and to
30
<PAGE> 37
maintain marketing organizations intact and to preserve the goodwill of
their employees, representatives, suppliers, and customers;
(b) shall confer upon request of Tyler with one or more
representatives of Tyler to report material operational matters and the
general status of ongoing operations;
(c) shall notify Tyler of any emergency or other change in the normal
course of the Company's businesses and of any governmental complaints,
investigations, or hearings that are pending (or that the same may be
contemplated) if such emergency, complaint, investigation, or hearing would
be material to the Company's businesses or properties;
(d) shall take no action that, and shall not fail to use reasonable
best efforts to take (without material cost) any action the failure to take
which, would cause or permit their representations and warranties contained
in this Agreement to be untrue in any material respect on the Closing Date;
and
(e) except as may be permitted or required by this Agreement, shall
not directly or indirectly do any of the following: (i) issue, sell,
pledge, dispose of or encumber, (A) any capital stock of the Company or (B)
other than in the ordinary course of business and consistent with past
practice, any assets of the Company; (ii) amend or propose to amend the
respective charters or bylaws of the Company; (iii) split, combine or
reclassify any outstanding capital stock, or, except as provided in Section
5.6 hereof, declare, set aside or pay any dividend or distribution payable
in cash, stock, property or otherwise with respect to its capital stock
whether now or hereafter outstanding; (iv) redeem, purchase or acquire or
offer to acquire any of the Company's capital stock; or (v) enter into any
contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 5.1(e).
5.2 Employment Agreement. At or before the Closing each of the
Shareholders and the Company shall execute and deliver an Employment and
Noncompetition Agreement in substantially the form of Exhibit B hereto, with
such changes therein prior to execution as may be mutually approved by Tyler and
each Shareholder (the "Employment Agreements"), and providing for the employment
of the Shareholders by the Surviving Corporation after the Closing, covenants by
the Shareholders not to compete with the Surviving Corporation, and
compensation, all as provided therein.
5.3 Noncompetition Agreements. Each Shareholder agrees to use his best
efforts to cause the key management and other employees of the Company
identified by Tyler in Section 5.3 of the Tyler Disclosure Schedule (the
"Employees") to execute and deliver employment, confidentiality and
noncompetition agreements with the Company in a form acceptable to Tyler (the
"Noncompetition Agreements").
5.4 Agreement Not to Negotiate. Pending the Closing, and through the
period ending March 31, 1998 if this Agreement is terminated without closing by
the Company or the Shareholders
31
<PAGE> 38
the Company and the Shareholders shall not, either directly or indirectly
through an agent, representative or other person, solicit or authorize any
person to solicit, or initiate or encourage, directly or indirectly, any
proposal for the acquisition of all or any material part of the capital stock,
assets, or business of the Company, or for the merger, consolidation, or other
combination of the Company with any other person or entity, or enter into any
discussions or negotiations for any such proposal, or provide any person with
information or assistance in furtherance of any such proposal, and shall
promptly notify Tyler in writing of all proposals received with respect to such
matters.
5.5 Accuracy of Information Furnished. The information supplied by each
Shareholder to Tyler in writing expressly for inclusion in any documents
(including the Proxy Statement) filed with the Commission in connection with or
as a result of the transactions contemplated hereby, will, at the respective
times such documents are filed with the Commission, not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not false or misleading.
5.6 Regulation S-X Financial Statements. Not later than October 10, 1997,
the Company shall cause to be prepared and shall deliver to Tyler audited
balance sheets of the Company as of October 31, 1996, 1995 and 1994 and the
related audited statements of operations, stockholder's equity, and cash flows
for the years then ended, with notes thereto, prepared in accordance with
United States generally accepted accounting principles and Regulation S-X
("Regulation S-X") promulgated by the Securities and Exchange Commission,
reported upon without exception or qualification by Bland Garvey Taylor Eads &
Medlock; and the unaudited balance sheet of the Company as of August 31, 1997,
and the related unaudited statements of operations, stockholder's equity, and
cash flows for the ten months then ended, with notes thereto, prepared in
accordance with United States generally accepted accounting principles and
Regulation S-X, reviewed by Bland Garvey Taylor Eads & Medlock.
5.7 Termination of Shareholders Agreement. The Shareholders agree to cause
that certain Shareholders Agreement among Glenn A. Smith, Brian B. Berry, Joane
Cogan and the Company to be terminated at or before the Closing. The
Shareholders hereby consent to, and waive any transfer restrictions under the
Shareholders Agreement that would limit, the transfer of all the outstanding
capital stock of the Company to Tyler pursuant to the Merger.
5.8 Pre-Closing Bonuses. Prior to the Closing, the Company shall be
entitled to pay bonuses to employees of the Company for past services rendered,
which bonuses shall not exceed an aggregate of $200,000.
5.9 Form of Merger. The Company, the Shareholders and Tyler may, pursuant
to written amendment to this Agreement, change the form of the Merger to a
merger of the Company with and into Sub, provided such a revised form of Merger
would qualify as a reorganization under Section 386 of the Code.
32
<PAGE> 39
ARTICLE 6
COVENANTS OF TYLER
Tyler covenants and agrees with the Company and the Shareholders as
follows:
6.1 Conduct Prior to Closing Date. Pending the Closing, Tyler shall:
(a) confer upon request of the Shareholders with one or more
representatives of the Shareholders to report material operational matters
and the general status of ongoing operations of Tyler and the Tyler
Subsidiaries; and
(b) take no action that, and shall not fail to use reasonable best
efforts to take (without material cost) any action the failure to take
which, would cause or permit its representations and warranties contained
in this Agreement to be untrue in any material respect at the Closing.
6.2 Proxy Statement. As promptly as practicable after the execution of
this Agreement, Tyler shall prepare and file with the Commission a proxy
statement (the "Proxy Statement") pursuant to the Exchange Act. Subject to the
fiduciary obligations of the Board of Directors of Tyler under applicable law,
the Proxy Statement shall contain the recommendation of the Board of Directors
of Tyler that the stockholders of Tyler vote to approve the Merger and this
Agreement. Except to the extent required by law (and in any such case only after
three business days' prior notice to the Shareholders), Tyler shall not include
in the Proxy Statement or otherwise make public the amount of compensation
payable to any Shareholder.
6.3 Meetings of Stockholders. Tyler shall promptly take all action
reasonably necessary in accordance with the Delaware General Corporation Law,
the rules of the NYSE and its articles of incorporation and bylaws to convene a
meeting of its stockholders to consider and vote upon the adoption and approval
of the Merger and this Agreement (the "Tyler Stockholders Meeting"). Subject to
its fiduciary obligations under applicable law and in accordance with the
provisions of this Agreement, the Board of Directors of Tyler (i) shall
recommend at such meeting that the stockholders of Tyler vote to adopt and
approve the Merger and this Agreement; (ii) shall use its reasonable efforts to
solicit from stockholders of Tyler proxies in favor of such adoption and
approval; and (iii) shall take all other action reasonably necessary to secure a
vote of its stockholders in favor of the adoption and approval of the Merger and
this Agreement.
6.4 Stock Exchange Listing. Tyler shall use its reasonable best efforts to
cause the shares of Tyler Common Stock to be issued upon consummation of the
Merger to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Closing Date.
6.5 Guaranties of Company Obligations.
(a) From and after the Closing, Tyler guarantees to each Shareholder,
respectively, and his heirs, successors and assigns, the full and prompt payment
by the Company of
33
<PAGE> 40
all amounts that become due and payable to them under or pursuant to the terms
of any Employment Agreement, to be entered into between the Company and the
Shareholder as provided in Section 5.2 of this Agreement, and the timely
performance by the Company of all of the terms, conditions, covenants and
agreements to be performed by the Company under or pursuant to the terms of
said Employment Agreement.
(b) The obligation of Tyler to make any payments or render performance
under this guaranty shall be coextensive with the obligation of the Company to
make payment or render performance under any Employment Agreement, and Tyler
shall be entitled to assert as a defense to or excuse for or delay in any
payment or performance by it the same defenses or excuses for payment or
performance as would be available to the Company. Subject to the foregoing, the
guaranty by Tyler contained herein is absolute and unconditional.
(c) Tyler waives notice of acceptance of this agreement of guaranty, and
waives diligence or presentment on the part of any Shareholder in the
enforcement of any liability, obligation or duty guaranteed hereby.
(d) Tyler agrees that the validity of this agreement of guaranty shall not
in any way be terminated, affected or impaired by reason of any waiver of or
failure to enforce any of the rights or remedies of any Shareholder contained in
any Employment Agreement, or by reason of any extension of time or other
forbearance granted to the Company by any Shareholder.
(e) Tyler agrees that, at the option of any Shareholder, it may be joined
in any action or proceedings commenced against the Company in connection with
and based upon any provisions of the Employment Agreement, and that recovery may
be had against Tyler in such action or proceedings, or in any independent action
or proceedings against Tyler, without requirement that any Shareholder or his
successors or assigns, first assert, prosecute, or exhaust any remedy or claim
against the Company.
(f) In the event of any bankruptcy, reorganization, winding up, or similar
proceedings with respect to the Company, no limitation on its liability under
the Employment Agreement which may now or hereafter be imposed or permitted by
any federal, state, or other statute, law regulation, or judicial or
administrative determination applicable to such proceedings, shall in any way
limit Tyler's obligations hereunder.
6.6 Other Tyler Obligations. At the Closing, if not theretofore
accomplished, Tyler will cause the Company to execute and deliver to the
Shareholders the Employment Agreements, against execution and delivery by the
Shareholders.
6.7 Company Indemnification Obligations. (a) Tyler and Sub agree that all
rights to indemnification existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company (collectively, the
"D&O Indemnified Parties") as provided in the Company's Articles of
Incorporation, Bylaws, or other organizational documents as in effect as of
34
<PAGE> 41
the date hereof, shall survive the Merger and shall continue in full force and
effect for six years after the Effective Time (without modification or
amendment, except as required by applicable law), to the fullest extent
permitted by law, and shall be enforceable by the D&O Indemnified Parties
against the Surviving Corporation; provided that in any event Tyler and the
Surviving Corporation shall pay and reimburse expenses in advance of the final
disposition of any action or proceeding to each D&O Indemnified Party to the
fullest extent permitted by law.
(b) The provisions of this Section 6.7 shall survive the consummation of
the Merger and expressly are intended to benefit each of the D&O Indemnified
Parties. Each of the D&O Indemnified Parties shall be entitled to enforce the
covenants contained herein.
(c) If the Surviving Corporation, or any of its successors or assigns (i)
reorganizes, amalgamates or consolidates with or merges into any other person
and is not the resulting, continuing or surviving corporation or entity of such
reorganization, amalgamation, consolidation or merger, or (ii) liquidates,
dissolves or transfers all or substantially all of its properties and assets to
any person or persons, then, and in such case, proper provision will be made so
that the successors or assigns of the Surviving Corporation assume all of the
obligations of the Surviving Corporation set forth in this Section 6.7.
6.8 Agreements Regarding Stock Options. Effective on the Closing Date,
Tyler agrees to grant options, conditioned on the consummation of the
transactions contemplated hereby and Tyler stockholder approval of any required
increase in the number of shares of Tyler Common Stock which may be issued
pursuant to the Tyler Stock Option Plan, to purchase an aggregate of 200,000
shares of Tyler Common Stock to employees of the Company designated by the
Shareholders. The selection by the Shareholders of such employees and the number
of option shares to be granted to each shall be subject to the reasonable
approval of Tyler. The exercise price of the options shall be equal to the
reported closing price of the Tyler Common Stock on the New York Stock Exchange
on the Closing Date. The options shall have a term of 10 years from the Closing
Date and shall vest on each of the first five anniversary dates at the rate of
20% of the original number of option shares granted. The options shall be
incentive stock options pursuant to the Tyler Stock Option Plan, as amended,
shall contain such other terms as are customary for options granted under that
plan, and shall be evidenced by option agreements incorporating all of such
terms.
6.9 Release of Shareholder Guaranties. At or prior to the Closing, Tyler
shall obtain and provide to the Shareholders an absolute and unconditional
release, executed by the holders of the indebtedness of the Company identified
in Section 2.21 of the Company Disclosure Schedule as guaranteed by the
Shareholders and by the surety companies that issued the performance bonds
identified in such Section 2.21, from any liability with respect to such
indebtedness or performance bonds whether as maker, endorser, surety, obligor,
guarantor or otherwise, or shall provide to the Shareholders the agreement of
Tyler to indemnify the Shareholders against any such liability, which
indemnification agreement shall be reasonably acceptable to the Shareholders.
35
<PAGE> 42
ARTICLE 7
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
Except as may be waived by both Tyler and the Shareholders, the obligations
of the Company, the Shareholders, Tyler and Sub to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each of the following conditions:
7.1 HSR Act. All filings required under the HSR Act shall have been made,
and all waiting periods, including any extension thereof, that may be applicable
to the transactions contemplated by this Agreement under the provisions of the
HSR Act shall have expired or been waived or otherwise terminated.
7.2 Absence of Litigation. No governmental agency or authority shall have
instituted, or threatened in writing to institute, any action or proceeding
seeking to delay, restrain, enjoin, or prohibit the consummation of the
transactions contemplated by this Agreement, and no order, judgment, or decree
by any court or governmental agency or authority shall be in effect that
enjoins, restrains, or prohibits the same or, in the reasonable judgment of
Tyler, otherwise would materially interfere with the operation of the assets and
business of Tyler and the Tyler Subsidiaries or the Company after the Closing
Date.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
Except as may be waived by the Company and the Shareholders, the
obligations of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on or before
the Closing Date of each of the following conditions:
8.1 Compliance. Tyler shall have, or shall have caused to be, satisfied or
complied with and performed in all material respects all terms, covenants, and
conditions of this Agreement to be complied with or performed by Tyler on or
before the Closing Date.
8.2 Representations and Warranties. All of the representations and
warranties made by Tyler in this Agreement, the Tyler Disclosure Schedule (prior
to supplementation or amendment thereto pursuant to Section 4.2 of this
Agreement), the Employment Agreements, and in all certificates and other
agreements delivered by Tyler to the Shareholders pursuant hereto or in
connection with the transactions contemplated hereby, shall have been true and
correct in all material respects as of the date hereof, and shall be true and
correct in all material respects at the Closing Date with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
36
<PAGE> 43
8.3 Opinion. The Company and the Shareholders shall have received an
opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
counsel for Tyler, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, the Shareholders and their counsel, relating to the
matters set forth in the following Sections Of this Agreement:
3.1;
3.4; and
3.5 (except the opinion as to enforceability may exclude the
Employment Agreements and the Noncompetition Agreements).
8.4 No Material Adverse Change. There shall have occurred no material
adverse change in the businesses, properties, assets, liabilities, results of
operations or condition (financial or otherwise) of Tyler and the Tyler
Subsidiaries, taken as a whole.
8.5 Financing. On or before thirty days after the date hereof Tyler shall
have obtained financing for the transactions contemplated hereby acceptable to
Tyler.
8.6 Certificates. The Company and the Shareholders shall have received a
certificate or certificates, executed on behalf of Tyler by the President or any
Vice President of Tyler, to the effect that the conditions contained in Sections
7.1 and 7.2 hereof with respect to matters therein relating to Tyler, and in
Sections 8.1, 8.2, and 8.4 hereof, have been satisfied.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLER
Except as may be waived by Tyler, the obligations of Tyler and Sub to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions:
9.1 Compliance. The Company and each Shareholder shall have, or shall have
caused to be, satisfied or complied with and performed in all material respects
all terms, covenants, and conditions of this Agreement to be complied with or
performed by any of them on or before the Closing Date.
9.2 Representations and Warranties. All of the representations and
warranties made by the Company and the Shareholders in this Agreement, the
Company Disclosure Schedule (prior to any supplementation or amendment pursuant
to Section 4.2 of this Agreement), and in all certificates and other documents
delivered by the Company and the Shareholders pursuant hereto or in connection
with the transactions contemplated hereby, shall have been true and correct in
all material respects as of the date hereof, and shall be true and correct in
all material respects at the Closing Date with the same force and effect as if
such representations and warranties had been made at and as of the Closing Date,
except for changes permitted or contemplated by this Agreement.
37
<PAGE> 44
9.3 Securities Law Compliance. The issuance and delivery of shares of
Tyler Common Stock in the Merger shall have been registered or qualified under
the Securities Act and all applicable state securities laws or counsel for
Tyler shall be satisfied that an exemption from such registration or
qualification is available; no stop order suspending the effectiveness of any
such registration or qualification shall be in effect; and no proceeding for
such purpose shall be pending before any agency or authority having
jurisdiction thereof.
9.4 Opinions. Tyler shall have received the opinion of Andrews & Barth,
counsel for the Company and the Shareholder, dated as of the Closing Date, in
form and substance satisfactory to Tyler and its counsel, relating to the
matters set forth in the following Sections of this Agreement:
2.1;
2.6; and
2.7 (except the opinion as to enforceability may exclude the
Employment Agreements and the Noncompetition Agreements).
9.5 No Material Adverse Change. There shall have occurred no material
adverse change in the businesses, properties, assets, liabilities, results of
operations, or condition (financial or otherwise), of the Company.
9.6 Consents to Transaction. Tyler and the Company shall have received all
consents or approvals, and made all applications, requests, notices, and filings
with, any person, governmental authority, or governmental agency required to be
obtained or made in connection with the consummation of the transactions
contemplated by this Agreement, excluding actions required under the HSR Act
(which are conditions precedent to closing under Section 7.1), but including the
consents of the lenders and third parties set forth in the Company Disclosure
Schedule and the Tyler Disclosure Schedule.
9.7 Financing. On or before thirty days after the date hereof, Tyler shall
have obtained financing for the transactions contemplated hereby acceptable to
Tyler.
9.8 Noncompetition Agreements. Each of the Employees shall have duly
entered into Noncompetition Agreements with the Company acceptable to Tyler.
9.9 Business Resources Corporation. Tyler or a subsidiary of Tyler shall
have acquired all or substantially all of the outstanding capital stock or
assets of Business Resources Corporation ("BRC") pursuant to that certain
Agreement and Plan of Merger dated of even date herewith among Tyler, T1
Acquisition Corporation, BRC, and William D. Oates (the "BRC Merger Agreement").
9.10 Stockholder Approval. The stockholders of Tyler shall have approved
the Merger and this Agreement.
38
<PAGE> 45
9.11 Certificates. Tyler shall have received a certificate or
certificates, executed on behalf of the Company by the President of the Company,
and by each Shareholder in his individual capacity, to the effect that the
conditions in Sections 7.1 and 7.2 hereof with respect to matters therein
relating to the Company, and Sections 9.1, 9.2, and 9.5 hereof, have been
satisfied.
ARTICLE 10
SECURITIES LAW REGISTRATION AND COMPLIANCE
10.1 Securities Law Compliance; Restrictions on Shares. Each Shareholder
and each other holder of Stock Options or Company Common Stock acknowledges
receipt of the Tyler Commission Filing, this Agreement and the Tyler Disclosure
Schedule and the opportunity to ask questions of and receive answers from
representatives of the management of Tyler concerning the terms and conditions
of the transactions contemplated hereby and to obtain all additional information
that Tyler possesses or could acquire without unreasonable expense that is
necessary to verify the accuracy of information furnished to him, and
acknowledges and agrees:
(a) The shares of Tyler Common Stock to be received by him as a result
of the Merger have not been registered under the Securities Act or any
applicable state securities law;
(b) He is acquiring the shares so to be received in the Merger for his
own account and not with a view to the distribution or resale thereof and
will not sell, pledge, hypothecate, or otherwise transfer the shares unless
they are registered under the Securities Act and applicable state
securities laws unless, prior thereto, he shall have delivered to Tyler an
opinion, in form and substance reasonably satisfactory to Tyler, of counsel
experienced and competent in federal securities laws and acceptable to
Tyler, to the effect that an exemption from registration is available
therefor;
(c) Except as otherwise provided in this Agreement, Tyler has no
obligation to register any sales or transfers of the shares so received by
him;
(d) During the year after the Merger, he will not be able to sell,
transfer, or otherwise dispose of the shares so received unless, prior
thereto, the Shareholder shall have delivered to Tyler an opinion, in form
and substance reasonably satisfactory to Tyler, of counsel experienced and
competent in federal securities laws and acceptable to Tyler, to the effect
that an exemption from registration under the Securities Act and applicable
state securities laws is at the time available (unless registered as
elsewhere provided in this Agreement), and thereafter any sales, transfers,
or other dispositions may be limited by the provisions of Rule 144 under
the Securities Act (or by other rules then in effect);
(e) In view of the foregoing, he understands that he is at economic
risk with respect to his investment in the shares so received in the
Merger;
39
<PAGE> 46
(f) Tyler may place an appropriate legend on the certificate
representing the shares so to be received restricting their transfer, and
stop-transfer instructions will be given to the transfer agent for the
Tyler Common Stock with respect to such certificates; and
(g) To provide such information as may be requested by Tyler in order
for Tyler to determine if he is an accredited purchaser under Regulation D
of the Commission or otherwise can be qualified as a purchaser under Rule
506 of such Regulation D.
10.2 Piggyback Registration. If within one year after the Closing Date
Tyler proposes (whether or not for its own account) to register any of its
securities under the Securities Act for sale in a firm commitment underwritten
public offering, Tyler shall give written notice to the Shareholders of its
intention to effect such a registration not later than 15 days prior to the
anticipated date of filing with the Commission of a registration statement,
which notice shall offer each Shareholder the opportunity to include in such
registration statement any of the shares of Tyler Common Stock received in the
Merger and held by such Shareholder ("Shares") that such Shareholder may request
(a "Piggyback Registration"). Tyler's obligation under this Section 10.2 shall
be limited to registrations as to which a registration statement is to be filed
on or before one year after the date hereof. Subject to the provisions of this
Agreement, Tyler will use its reasonable efforts to cause all the Shares for
which the Shareholders have requested registration to be registered under the
Securities Act to the extent required to permit the sale by the Shareholders of
such Shares; provided, that if the registration relates to an underwritten
public offering and the managing underwriter or underwriters believe that the
inclusion of all shares requested to be included in the proposed registration
would adversely affect the marketing of such shares, Tyler may first include in
such registration all securities Tyler proposes to sell, and the Shareholders
shall accept a reduction (including a total elimination) in the number of shares
to be included in such registration, pro rata with the other holders of Tyler
Common Stock making requests for registration, on the basis of the number of
shares of Tyler Common Stock so requested to be included by the Shareholders and
the other selling shareholders. Nothing in this section shall limit Tyler's
ability to withdraw a registration statement it has filed either before or after
effectiveness.
10.3 Registration Procedures.
(a) In connection with any registration hereunder, each Shareholder will
furnish promptly to Tyler in writing such information (together with such
supplements as may be necessary from time to time) with respect to itself and
the proposed distribution by it as shall be reasonably necessary in order to
ensure compliance with federal and applicable state securities laws. Such
information shall not, at the time the registration statement is filed or
becomes effective, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not false or misleading.
(b) In any registration relating to an underwritten public offering of
Tyler Common Stock or other securities of Tyler entitled generally to vote in
the election of directors (or any securities convertible into or exchangeable
for or exercisable for the purchase of securities so entitled generally to vote
in the election of directors) (collectively, the "Voting Securities"), whether
or not a
40
<PAGE> 47
Shareholder is participating in such registered underwritten public offering,
at the request of the managing underwriter or underwriters, each Shareholder
will agree not to effect any sale or distribution, including any sale pursuant
to Rule 144 (or any successor provision) promulgated under the Securities Act
of any Shares, and not to effect any such sale or distribution of any other
Tyler Common Stock or Voting Securities (in each case, other than as part of
such registration) for such period of time as reasonably required by such
managing underwriter or underwriters ("Lockup Period"), but in no event shall
the Shareholder be required to agree to a Lockup Period longer than the Lockup
Period to which any other selling shareholder is subject.
10.4 Expenses. In connection with any proposed registration of securities
by Tyler, whether or not effected or consummated, Tyler, each Shareholder, and
any other selling shareholders shall each pay their pro rata share of Tyler's
out of pocket expenses incurred in connection with a proposed registration under
Section 10.2 in which Tyler is not selling any securities for its own account,
including, without limitation, all registration and filing fees, printing
expenses, and fees and disbursements of counsel and accountants for Tyler. Each
Shareholder shall pay all of his expenses, including his attorney's fees, and
including the underwriting discount, selling commissions and all expenses of the
underwriters relating to his Shares incurred in connection with each
registration pursuant to Section 10.2.
10.5 Indemnification.
(a) In the event of a registration of any of the Shares under the
Securities Act pursuant to Section 10.2, Tyler shall indemnify and hold harmless
each Shareholder and each underwriter of Shares thereunder and each person who
controls the Shareholder or underwriter within the meaning of the Securities Act
and the Exchange Act against any losses, claims, damages or liabilities
(including reasonable attorneys' fees), joint or several, to which the
Shareholder or underwriter or controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) or arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Shares were registered
under the Securities Act pursuant to Section 10.2, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such Shareholder,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Tyler will not be
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by the Shareholder, underwriter or controlling person for
use in such registration statement or prospectus; provided, further, that Tyler
will not be liable hereunder to any underwriter or any person who controls any
underwriter within the meaning of the Securities Act and the Exchange Act for
any loss, claim, damage or liability that arises out of, or is based upon, any
untrue statement or alleged untrue statement or any omission or alleged omission
contained in any preliminary prospectus that was
41
<PAGE> 48
corrected by any subsequent prospectus, and the underwriter was required to
deliver but failed to deliver such prospectus as required by the Securities
Act.
(b) In the event of a registration of any of the Shares under the
Securities Act pursuant to Section 10.2, the Shareholder shall indemnify and
hold harmless Tyler and each person who controls Tyler within the meaning of
the Securities Act and the Exchange Act, each officer of Tyler who signs the
registration statement, each director of Tyler, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act
and the Exchange Act against all losses, claims, damages or liabilities, joint
or several, to which Tyler or such officer or director or underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Shares were registered under the Securities Act
pursuant to Section 10.2, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein not misleading, and will reimburse Tyler and
each such officer, director, underwriter and controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Shareholder will be liable hereunder in any such case if and
only to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission relating to the Shareholder made in reliance upon and in
conformity with information pertaining to the Shareholder, as such, furnished
in writing to Tyler by the Shareholder for use in such registration statement
or prospectus ("Shareholder Information"); provided, further, that the
Shareholder will not be liable hereunder to any underwriter or any person who
controls an underwriter within the meaning of the Securities Act and the
Exchange Act for any loss, claim, damage or liability that arises out of, or is
based upon, any untrue statement or alleged untrue statement or any omission or
alleged omission in any Shareholder Information contained in any preliminary
prospectus that was corrected by any subsequent prospectus, and the underwriter
was required to deliver but failed to deliver such prospectus as required by
the Securities Act.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 10.5. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10.5 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that (i) if the indemnifying
42
<PAGE> 49
party has failed to assume the defense and employ counsel or (ii) if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it that are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, then the indemnified party shall have the
right to select a separate counsel and to assume such legal defense and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) If the indemnification provided for in this Section 10.5 is unavailable
or insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities or actions in respect thereof, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
is appropriate to reflect the relative fault of Tyler, on the one hand, and the
Shareholder, on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations, including the failure to give any
required notice. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by Tyler, on the one hand, or the Shareholder, on the
other, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Tyler and the
Shareholder agree that it would not be just and equitable if contribution
pursuant to this Section 10.5(d) were determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 10.5(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or actions in respect thereof referred to above in this Section
10.5(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. No person guilty or fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
10.6 No Transferability of Registration Rights. Except with the prior
written consent of Tyler, the Shareholders' registration rights under Section
10.2 shall not inure to the benefit of any person to whom any Shares are
transferred, other than a spouse or descendant of a Shareholder ("Relative"), a
trust solely for the benefit of a Shareholder or Relative, or a partnership all
of the equity interests in which are directly or indirectly owned by a
Shareholder or Relative.
ARTICLE 11
INDEMNIFICATION AND REMEDIES
11.1 Indemnification by the Shareholders Based on Agreement. Each
Shareholder agrees jointly and severally to indemnify and hold harmless Tyler
(and if the transactions contemplated
43
<PAGE> 50
hereby are consummated, the Surviving Corporation), from and against any and
all claims, losses, obligations, damages, demands, and liabilities (after
giving effect to and reducing the same by (i) any net tax benefits realized by
Tyler or the Surviving Corporation as a result of such event, and (ii) the net
amount of any insurance proceeds received by Tyler or the Surviving Corporation
as a result of such event), including, without limitation, costs and expenses
of litigation (including reasonable attorneys' and accountants' fees)
(collectively, "Tyler Indemnified Losses"), based on, relating to, or arising
out of, or any allegation by any third party of, any facts or circumstances
that would constitute a breach by the Shareholders of any representation,
warranty, or covenant contained herein or in any agreement executed pursuant
hereto, but excluding from this covenant to indemnify any claims or liabilities
separately covered by Section 10.5 hereof or any Customer Claims (hereinafter
defined) to the extent and only while covered by the provisions of Section 11.3
hereof.
11.2 Indemnification by Tyler Based on Agreement. Tyler (and if the
transactions contemplated hereby are consummated, the Surviving Corporation)
agrees to indemnify and hold harmless the Shareholders from and against any and
all claims, losses, expenses, obligations, demands and liabilities (after giving
effect to and reducing the same by (i) any net tax benefits realized by the
Shareholders as a result of such event, and (ii) the net amount of any insurance
proceeds received by the Shareholders as a result of such event), including,
without limitation, costs and expenses of litigation and including reasonable
attorneys' and accountants' fees (collectively, "Shareholder Indemnified
Losses"), based on, relating to, or arising out of, or any allegation by any
third party of, any facts or circumstances that would constitute a breach by
Tyler of any representation, warranty, or covenant contained herein or in any
agreement executed pursuant hereto, but excluding from this covenant to
indemnify any claims or liabilities separately covered by the provisions of
Section 10.5 hereof.
11.3 Customer Claims. If any claim, demand, or cause of action of the type
referred to in Section 11.1 is asserted by a customer of the Company ("Customer
Claim"), the following provisions shall be applicable until such time as the
Customer Claim results in a filed and pending lawsuit or other judicial
proceeding (at which time the provisions of Section 11.1 shall be applicable):
(a) Tyler or the Surviving Corporation shall promptly notify the
Shareholders in writing that a Customer Claim has been made, describing the
nature of the Customer Claim to the extent then known.
(b) After receipt of Tyler's or the Surviving Corporation's written
notice, the parties hereto will fully cooperate with each other to
investigate the Customer Claim and determine whether the parties can agree
that the Customer Claim is an obligation or liability for which the
Shareholders are responsible. The investigation shall be conducted
expeditiously and with all reasonable due diligence, considering the
circumstances surrounding the Customer Claim.
(c) If, after an investigation, Tyler or the Surviving Corporation and
the Shareholders agree in writing that the Customer Claim is an obligation
or liability for which the Shareholders are responsible, the Shareholders
and Tyler or the Surviving Corporation agree to use their reasonable best
efforts to reach an agreement with the customer as to the terms and
conditions
44
<PAGE> 51
of settlement, compromise or satisfaction of the Customer Claim,
including, but not limited to, the amount that the Shareholders shall pay
to the customer for the damages, losses, costs or expenses incurred by it.
(d) If the provisions of this Section 11.3 are applicable, Tyler or
the Surviving Corporation shall conduct all communications and settlement
negotiations with the customer and shall convey to the customer any offers
of settlement or compromise by the Shareholders. Any amounts that the
Shareholders agree so to pay in settlement of the Customer Claim shall be
paid by them to Tyler or the Surviving Corporation, as the case may be, in
trust for payment over to the customer. If Tyler or the Surviving
Corporation agrees to pay the customer an amount in excess of that offered
for settlement purposes by the Shareholders, the excess shall be paid by
Tyler or the Surviving Corporation, as the case may be, without any right
to indemnification therefor from the Shareholders. If the amounts so paid
and entrusted to Tyler or the Surviving Corporation are paid over to the
customer, the payment over shall be deemed to be a release by Tyler or the
Surviving Corporation of any further claim with respect to that Customer
Claim against the Shareholders and Tyler and the Surviving Corporation
shall indemnify and hold harmless the Shareholders from any further
liability with respect thereto.
(e) In the absence of an agreement among the parties as to the
settlement of any Customer Claim not involving litigation, Tyler or the
Surviving Corporation may take such action with respect to the Customer
Claim as Tyler in its sole judgment may deem necessary or advisable under
the circumstances to settle, compromise or satisfy the Customer Claims
provided; however, neither Tyler nor the Surviving Corporation shall in any
such event be considered to have waived its right to pursue a judicial
action to determine its right against the Shareholders.
(f) An indemnified party shall give notice to the indemnifying party
or parties within 15 business days after actual receipt of service or
summons to appear in any action begun in respect of which indemnity may be
sought hereunder, or actual notice of assertion of a claim with respect to
which it seeks indemnification. Except as provided in Section 4.5, failure
so to notify the indemnifying party or parties shall cause the indemnified
party to lose its right to indemnification under this Article 11, but
failure so to notify the indemnifying party or parties shall not relieve
the indemnifying party or parties from any liability that they may have
other than on account of this Article 11. The indemnifying party or parties
may participate at their own expense and with their counsel in the defense
of such action.
Except as otherwise provided in Section 11.3(d), if the indemnifying party
or parties so elect within a reasonable time after receipt of such notice they
may assume the defense of such action with counsel chosen by the indemnifying
party or parties and approved by the indemnified party in such action, unless
the indemnified party reasonably objects to such assumption on the ground that
its counsel has advised it that there may be legal defenses available to it that
are different from or in addition to those available to the indemnifying party
or parties and counsel for the indemnifying party concurs in such advice, in
which case the indemnified party shall have the right to employ counsel approved
by the indemnifying party or parties. If the indemnifying party or parties
assume the defense of such action, the indemnifying party or parties shall not
be liable for
45
<PAGE> 52
fees and expenses of counsel for the indemnified party incurred thereafter in
connection with such action. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel for the
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances unless, in the reasonable opinion of such counsel,
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more indemnified parties.
11.4 Claims Limitations. Notwithstanding anything otherwise contained in
this Agreement, no party hereto shall assert any single claim or claims against
any other party hereto, unless the single claim (after giving effect to and
reducing the same by (i) any net tax benefits realized by the indemnified party
as a result of such event, and (ii) the net amount of any insurance proceeds
received by the indemnified party as a result of such event) exceeds the sum of
$18,750, and the sum of all such single claims in the aggregate exceeds
$150,000; provided, that claims made by Tyler or the Surviving Corporation
pursuant to Section 2.9 or 4.5 of this Agreement, or for breach of the
Employment Agreement or the Confidentiality Agreement shall not be subject to
the foregoing limitations; and provided further, that claims made by the
Shareholders pursuant to Section 3.7 or 4.5 of this Agreement, or for breach of
the Employment Agreement or the Confidentiality Agreement shall not be subject
to the foregoing limitations.
11.5 Maximum Liability. The maximum aggregate liability of the
Shareholders to Tyler or the Surviving Corporation for all claims made by Tyler
or the Company pursuant to this Agreement is $3,000,000; provided, that claims
made by Tyler or the Surviving Corporation pursuant to Sections 2.9 or 4.5 of
this Agreement, or for breach of the Employment Agreement or the Confidentiality
Agreement, shall not be subject to the foregoing limitation. The maximum
aggregate liability of Tyler or the Surviving Corporation to the Shareholders
for all claims made by the Shareholders pursuant to this Agreement is
$3,000,000; provided, that claims made by the Shareholders pursuant to Section
3.7 or 4.5 of this Agreement, or for breach of the Employment Agreement or the
Confidentiality Agreement, shall not be subject to the foregoing limitation. Any
claim based upon facts and circumstances that would, if true, constitute a
breach of any representation, warranty or covenant contained in this Agreement
shall be subject to the limitations contained herein, notwithstanding the fact
that such claim is asserted by a cause of action or legal theory other than
breach of contract. When calculating the amount of liability in a claim for
damages for purposes of this Section 11.5 (whether such calculation is through
agreement of the parties, litigation or otherwise) and the claim relates to the
breach of a representation as to the income of the Company for any period or
periods prior to the Closing Date, all of the parties hereto agree that, in
determining the amount involved in the claim, the damages shall be actual
damages incurred and proven and such actual damages shall not be computed by
using a multiplier or capitalization rate.
11.6 Equitable Remedies. The parties hereto acknowledge that a refusal by
a party to consummate the transactions contemplated hereby will cause
irreparable harm to the other parties, for which there may be no adequate remedy
at law. A party not in default at the time of such refusal shall be entitled, in
addition to other remedies at law or in equity, to specific performance of this
Agreement by the party that refused to consummate the transactions contemplated
hereby.
46
<PAGE> 53
11.7 Remedies of the Surviving Corporation. After the Closing, the
Surviving Corporation shall have the same rights and benefits under this
Agreement as does Tyler with respect to the representations, warranties and
covenants of the Shareholders contained herein, as fully as if such
representations, warranties and covenants had been made to the Surviving
Corporation in lieu or in place of Tyler or Sub. In any proceeding by the
Surviving Corporation to assert or prosecute any claims under, or to otherwise
enforce, this Agreement on behalf of itself or Tyler, each Shareholder agrees
that he shall not assert as a defense or bar to recovery by the Surviving
Corporation, and hereby waives any right to so assert such defense or bar such
recovery, that (a) prior to Closing, the Company shall have had knowledge of the
circumstances giving rise to the claim being pursued by it; (b) prior to
Closing, the Company engaged in conduct or took action that caused or brought
about the circumstances giving rise to its claim, or otherwise contributed
thereto; (c) the Company is estopped from asserting or recovering upon its claim
by reason of having joined in the representations, warranties and covenants made
by the Shareholders in this Agreement; or (d) the Shareholder has a right of
contribution from the Surviving Corporation to the extent that there is any
recovery against him.
11.8 Costs of Defense. If any claim for which an indemnified party seeks
indemnification under this Article 11 results in a judgment that no damages are
due the claimant on a basis for which the indemnifying party is responsible
hereunder, then, as between the indemnifying and indemnified parties, the
indemnified parties shall be liable for any damages awarded and the costs
(including attorneys' fees) of defending such claim.
ARTICLE 12
MISCELLANEOUS
12.1 Breach Discovered Prior to Closing.
(a) If, prior to the Time of Closing, Tyler has actual and certain
knowledge (as opposed to an opinion or belief) of any facts or circumstances
that it determines would constitute a failure to satisfy the conditions to the
obligations of Tyler to close this Agreement contained in Sections 9.1, 9.2 or
9.5 hereof, Tyler shall promptly give written notice to the Shareholders. If the
Shareholders fail to cure any such alleged defect within 15 days from the date
of notice, Tyler shall have the right either to (i) terminate this Agreement
pursuant to Section 12.2 below, in which case Tyler, shall, if not then in
default under this Agreement, be entitled to recover from the Company and the
Shareholders as liquidated damages the actual legal, accounting and other
out-of-pocket expenses incurred by it in connection with the negotiation,
preparation and execution of this Agreement and the other agreements and
instruments referred to herein, its investigation and examination of the affairs
of the Company, and other actions taken preparatory to consummating the
transactions contemplated hereby, or (ii) waive such defect as a condition to
closing this Agreement, in which case Tyler shall not be entitled to make any
claims against the Shareholders pursuant to this Agreement or to exercise any
other remedial rights with respect to such alleged defect.
47
<PAGE> 54
(b) If, prior to the Time of Closing, the Shareholders have actual and
certain knowledge (as opposed to an opinion or belief) of any facts or
circumstances that the Shareholders determine would constitute a failure to
satisfy the conditions to the obligations of the Company and the Shareholders to
close this Agreement contained in Sections 8.1, 8.2 and 8.4 hereof, the Company
and the Shareholders shall promptly give written notice to Tyler. If Tyler fails
to cure any such alleged defect, the Company and the Shareholders shall have the
right either to (i) terminate this Agreement pursuant to Section 12.2 below, in
which case the Company and the Shareholders shall, if not then in default under
this Agreement, be entitled to recover from Tyler as liquidated damages the
actual legal, accounting and other out-of-pocket expenses incurred by them (but
not including such expenses incurred to appropriately document the corporate
records and transactions of the Company and the Shareholders) in connection with
the negotiation, preparation and execution of this Agreement and the other
agreements and instruments referred to herein, their investigation and
examination of the affairs of Tyler, and other actions taken preparatory to
consummating the transactions contemplated hereby, or (ii) waive such defect as
a condition to closing this Agreement, in which case the Shareholders shall not
be entitled to make any claims against Tyler or the Surviving Corporation
pursuant to this Agreement or to exercise any other remedial rights with respect
to such alleged defect.
12.2 Termination. This Agreement and the transactions contemplated hereby
may be terminated at any time on or before the Closing Date:
(a) by mutual consent of Tyler and the Shareholders;
(b) by Tyler if there has been a material misrepresentation or breach
of warranty in the representations and warranties of the Company and the
Shareholders set forth herein or if there has been any material failure on
the part of the Company or the Shareholders to comply with their
obligations hereunder;
(c) by the Shareholders if there has been a material misrepresentation
or breach of warranty in the representations and warranties of Tyler set
forth herein or if there has been any material failure on the part of Tyler
to comply with its obligations hereunder;
(d) by either Tyler or the Shareholders if the transactions
contemplated by this Agreement have not been consummated by March 31, 1998,
unless such failure of consummation is due to the failure of the
terminating party to perform or observe the covenants, agreements, and
conditions hereof to be performed or observed by it at or before the
Closing Date;
(e) by either Tyler or the Shareholders if the conditions precedent to
its or their obligations to close this Agreement have not been satisfied or
waived by it or them at or before the Closing Date; and
(f) by either the Shareholders or Tyler if the transactions
contemplated hereby violate any non-appealable final order, decree, or
judgment of any court or governmental body or agency having competent
jurisdiction.
48
<PAGE> 55
12.3 Expenses. If the transactions contemplated by this Agreement are not
consummated, each party hereto shall pay its own expenses incurred in connection
with this Agreement and the transactions contemplated hereby, except as
otherwise provided in Section 12.1; provided, however, that if the transactions
contemplated hereby are not consummated because of the failure of either of the
conditions in Section 9.7 or 9.9 to be satisfied, Tyler shall reimburse the
Shareholders for their reasonable out-of-pocket expenses incurred in connection
with this Agreement and the transactions contemplated hereby, not to exceed
$30,000.
12.4 Disclosure Schedules. The Company Disclosure Schedule and the Tyler
Disclosure Schedule are incorporated herein by reference.
12.5 Entire Agreement. This Agreement and the Exhibits and Disclosure
Schedules hereto, the Confidentiality Agreement and the other agreements and
documents contemplated hereby, contain the complete agreement among the parties
with respect to the transactions contemplated hereby and supersede all prior
agreements and understandings among the parties with respect to such
transactions. Section and other headings, the table of contents and indexes to
the Disclosure Schedules are for reference purposes only and shall not affect
the interpretation or construction of this Agreement. The parties hereto have
not made any representation or warranty except as expressly set forth in this
Agreement, the Employment Agreement, the Confidentiality Agreement, and the
Noncompetition Agreements, the Company Disclosure Schedule, the Tyler Disclosure
Schedule or in any agreement, certificate or other document delivered pursuant
hereto or thereto. The obligations of any party under any agreement executed
pursuant to this Agreement shall not be affected by this Section.
12.6 Survival. All representations and warranties (except those contained
in Sections 2.9 and 2.15) of Tyler, Sub, the Company or the Shareholders
contained herein, in the Tyler Disclosure Schedule, in the Company Disclosure
Schedule, or in any exhibit, certificate, document or instrument delivered
pursuant to this Agreement shall survive the Closing and shall continue in full
force and effect for two years after the date of Closing. All representations
and warranties of the Shareholders contained in Section 2.9(b) above shall
survive the Closing and shall continue in full force and effect after the
Closing without time limitation. All representations and warranties of the
Shareholders contained in Sections 2.9(a), (c) and (d) above shall survive the
Closing and shall continue in full force and effect after the Closing until
expiration, in accordance with the laws of Texas, of the applicable time period
in which claims may be judicially asserted for breach of a written contract. All
representations and warranties of the Shareholders contained in Section 2.15
above shall survive the Closing and shall continue in full force and effect
after the Closing until expiration, in accordance with applicable law, of the
applicable time periods in which the taxing authority having jurisdiction may
assert a claim for failure of or deficiency in the payment of taxes. The
representations and warranties of the Company shall not survive the Closing.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
49
<PAGE> 56
12.8 Notices. All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram, or telecopy, addressed as
follows:
(i) If to the Company or the Shareholders:
The Software Group, Inc.
Jupiter North Technology Park
1120 Jupiter Road, Suite 100
Plano, Texas 75074
Telecopy No.: (972) 516-2284
with a copy (which shall not constitute notice) to:
Andrews & Barth
8235 Douglas, Suite 1120
Dallas, Texas 75225
Attention: John C. Andrews, III
Telecopy No.: (214) 691-3070
(ii) If to Tyler:
Tyler Corporation
2121 San Jacinto Street
3200 San Jacinto Tower
Dallas, Texas 75201
Attention: Chairman of the Board
Telecopy No.: (214) 754-7821
with a copy (which shall not constitute notice) to:
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002-3004
Attention: Gene G. Lewis
Telecopy No.: (713) 223-3717
Each party may designate by notice in writing a new address to which any
notice, demand, request, or communication may thereafter be so given, served, or
sent. Each notice, demand, request, or communication that is mailed, delivered,
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger, or (with
50
<PAGE> 57
respect to a telecopy) the confirmation being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
12.9 Successors and Assigns. This Agreement and the rights, interests, and
obligations hereunder shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
12.10 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas (except the choice of law rules
thereof).
12.11 Waiver and Other Action. This Agreement may be amended, modified, or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification, or supplement is sought.
12.12 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance (except to the
extent such remaining provisions constitute obligations of another party to
this Agreement corresponding to the unenforceable provision); and in lieu of
such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
12.13 Knowledge. At any time there is a reference in a representation,
covenant or warranty of a party to this Agreement that is qualified by the
knowledge of such party, the terms "knowledge" or "knows" or "known", or
"belief" or "believes" shall mean (i) as to the Company and the Shareholders,
the knowledge or belief of any Shareholder, and (ii) as to Tyler, the knowledge
or belief of its Chairman of the Board, Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, Louis A. Waters, or James E. Russell.
[The following page is the signature page.]
51
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TYLER CORPORATION
By: /s/ C.A. RUNDELL, JR.
----------------------------------
C. A. Rundell, Jr., President and
Chief Executive Officer
T2 ACQUISITION CORPORATION
By: /s/ C.A. RUNDELL, JR.
----------------------------------
C.A. Rundell, Jr., President
THE SOFTWARE GROUP, INC.
By: /s/ GLENN A. SMITH
----------------------------------
Glenn A. Smith, President
/s/ BRIAN B. BERRY
----------------------------------
Brian B. Berry, Individually
/s/ GLENN A. SMITH
----------------------------------
Glenn A. Smith, Individually
52
<PAGE> 59
The undersigned execute this Agreement solely to indicate their agreement
to Sections 1.7(c) and 10.1 hereof:
/s/ JOANE COGAN
------------------------------------
Joane Cogan
/s/ RICK HOFF
------------------------------------
Rick Hoff
/s/ DAVID LANDGREN
------------------------------------
David Landgren
53
<PAGE> 60
ANNEX I
<TABLE>
<CAPTION>
SHAREHOLDERS SHARES
------------ -------
<S> <C>
Brian B. Berry.............................................. 824,025
Joane Cogan................................................. 136,475
Glenn A. Smith.............................................. 960,500
</TABLE>
<TABLE>
<CAPTION>
SHARES
SUBJECT TO
OPTIONHOLDERS OPTIONS
------------- ----------
<S> <C>
Rick Hoff................................................... 75,000
David Landgren.............................................. 75,000
</TABLE>
54
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
TYLER CORPORATION,
T2 ACQUISITION CORPORATION,
THE SOFTWARE GROUP, INC.
BRIAN B. BERRY
AND
GLENN A. SMITH
THIS AMENDMENT NUMBER ONE, dated February 19, 1998 and effective as of
the 8th day of October 1997 (this "Amendment"), amends the AMENDED AND RESTATED
AGREEMENT dated as of the 29th day of December, 1997 and effective as of the 8th
day of October, 1997 (the "Agreement") that was entered into by and among Tyler
Corporation, a Delaware corporation ("Tyler'), T2 Acquisition Corporation, a
Texas corporation and wholly-owned subsidiary of Tyler ("Sub"), The Software
Group, Inc., a Texas corporation, (the "Company"), Brian B. Berry and Glenn
Smith (each referred to as a "Shareholder" and collectively as the
"Shareholders").
WITNESSETH:
WHEREAS, the Agreement provides for the merger of Sub into the Company,
with the Company surviving;
WHEREAS, the Agreement provides that the Company, Tyler, and the
Shareholders may, pursuant to a written amendment to the Agreement, change the
form of the merger to a merger of the Company with and into Sub with the Sub
surviving, provided such a revised form of merger would qualify as a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, the parties to the Agreement desire to amend the Agreement to
change the form of the merger transaction to a merger of the Company with and
into Sub with Sub surviving in a transaction intended to constitute a
reorganization under Section 368(a) of the Code;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree, warrant and covenant as follows:
1. Subject to and in accordance with the terms and conditions of the
Agreement as revised by THIS AMENDMENT and in accordance with the Texas Business
Corporation Act (the "TBCA"), at the Effective Time (as defined in Section 1.3
of the Agreement) the Company
<PAGE> 2
shall be merged with and into Sub, with Sub surviving (the "Merger") . As a
result of the Merger, (i) the separate corporate existence of the Company shall
cease and (ii) Sub shall continue as the surviving corporation (sometimes
referred to herein as the "Surviving Corporation") and shall succeed to and
assume all of the rights and obligations of the Company in accordance with the
TBCA.
2. The Articles of Incorporation and Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
and bylaws of the Surviving Corporation and thereafter shall continue to be its
articles of incorporation and bylaws until amended as provided therein and under
the TBCA.
3. As of July 25, 1997, the date when Tyler commenced formal or
informal negotiations with the Company (the "Merger Commencement Date"), the
Company had outstanding 1,921,000 shares of common stock, its only class of
outstanding stock (the "Company Common Stock") owned as follows: (i) Glenn
Smith, 960,500 shares; (ii) Brian Berry, 824,025 shares; and (iii) Joane Cogan
("Cogan"), 136,475 shares. As of the Merger Commencement Date, Rick Hoff
("Hoff") and David Landgren ("Landgren") each owned options exercisable into
75,000 shares of Company Common Stock.
4. Other than (i) the 75,000 shares of Company Common Stock acquired by
each of Hoff and Landgren pursuant to the exercise of their stock options on
February 17, 1998 and (ii) the Company's redemption during January 1997 of
89,818 shares of the Company Common Stock owned by the Company's employee stock
option plan ("ESOP"), there have not been any sales or redemptions or other
transactions in the capital stock of the Company during the fourteen months
prior to the date of this Amendment.
5. The parties agree that the Agreement shall be deemed to be further
amended solely to the extent necessary to make the Agreement consistent with the
changed form of the Merger from a merger of Sub with and into the Company to a
merger of the Company with and into Sub.
6. Except as required by law, the Shareholders, the Company, Tyler,
Sub, Cogan, Hoff and Landgren will not take or omit to take any action that
would prevent the transactions contemplated hereby from qualifying as a
reorganization under Section 368 of the Code. To the extent permitted under
applicable tax laws, the Merger shall be reported as a reorganization within the
meaning of Section 368(a) of the Code in all federal, state and local tax
returns after the Effective Time.
7. Each Shareholder and each of Cogan, Hoff and Landgren represents
that he or she has no present plan, intention or arrangement to sell, exchange,
transfer or otherwise dispose of, or reduce the risk of loss ("Sale") relating
to, any of the shares of Tyler Common Stock to be received by him or her
pursuant to the Merger.
2
<PAGE> 3
8. During the two-year period commencing immediately after the
Effective Date, each Shareholder and each of Cogan, Hoff and Landgren agrees to
provide Tyler with written notification at least five days prior to the proposed
date of any Sale of Tyler Common Stock by him or her, specifying the number of
shares that he or she proposes to transfer in the Sale.
9. Each share of Tyler Common Stock issued in the Merger shall bear a
legend on the face of the stock certificates which evidence such shares
substantially as follows:
This Certificate is transferable only upon compliance with and is
subject to the restrictions on transfer set forth in (i) that
certain Amended and Restated Agreement and Plan of Merger dated
February 19, 1998 among Tyler Corporation, T2 Acquisition
Corporation, The Software Group, Inc., Brian B. Berry and Glenn A.
Smith (the "Amended and Restated Agreement") and (ii) that certain
First Amendment to the Amended and Restated Agreement dated
February 19, 1998.
10. This Amendment may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
THE SOFTWARE GROUP, INC TYLER CORPORATION
By: /s/ Glenn A. Smith By: /s/ Brian K. Miller
------------------------------ --------------------------------
Glenn A. Smith, President Brian K. Miller, Vice President
T2 ACQUISITION CORPORATION
By: /s/ Brian K. Miller
--------------------------------
Brian K. Miller, Vice President
3
<PAGE> 4
THE SOFTWARE GROUP, INC. SHAREHOLDERS
/s/ Joane Cogan /s/ Glenn A. Smith
- --------------------------------- --------------------------------
Joane Cogan, Individually Glenn A. Smith, Individually
/s/ Rick Hoff /s/ Brian B. Berry
- --------------------------------- --------------------------------
Rick Hoff, Individually Brian B. Berry, Individually
/s/ David Landgren
- ---------------------------------
David Landgren, Individually
4
