<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 10, 1997
(October 2, 1997)
--------------------
PMT SERVICES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 0-24420 62-1215125
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
3841 GREEN HILLS VILLAGE DRIVE
NASHVILLE, TENNESSEE 37215
(Address of principal executive offices) (Zip Code)
(615) 254-1539
(Registrant's telephone number, including area code)
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 2, 1997, PMT Services, Inc., a Tennessee corporation (the
"Company"), completed a business combination in which the Company acquired all
of the issued and outstanding capital stock of Bancard, Inc. ("Bancard").
Total consideration paid was 3,870,968 shares of the Company's Common Stock,
$.01 par value per share (the "Consideration"). The amount of Consideration paid
was determined through arm's length negotiations.
ITEM 5. OTHER EVENTS
(a) Unaudited results of operations for the one month ended
August 31, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Financial Statements of BANCARD INC. as of and for the year
ended July 31, 1997.
(2) Financial Statement Schedule: Schedule II - Reserve for
Merchant Losses.
(b) Pro forma financial information. The required supplemental
financial statements, giving retroactive effect to the merger for
the three years ended July 31, 1997 will be filed concurrent with
the Company's Form 10-K no later than October 29, 1997.
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated October 2, 1997, between
the Company, PMT BCI Acquisition Corporation, Bancard and
each of Jay W. Hearst, Anthony Sdao, Scott J. Bahneman, Jack
W. Hearst, Gillian G. Hearst and Stephen M. Hearst.
23.1 Consent of Price Waterhouse LLP
<PAGE>
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
PMT SERVICES, INC.
BY: /s/ CLAY M. WHITSON
---------------------------------
Clay M. Whitson
Chief Financial Officer
DATE: October 10, 1997
<PAGE>
Item 5(a)
PMT Services, Inc.
Unaudited Financial Highlights
(in thousands, except per share data)
One Month Ended
August 31, 1997
---------------
Revenues $27,085
Net income $ 1,542
Net income per share $ 0.04
Weighted average shares outstanding 42,932
On October 2, 1997, PMT Services, Inc. completed a business combination in which
the Company issued 3,870,968 shares of its common stock to acquire all of the
issued and outstanding capital stock of Bancard, Inc. The transaction will be
accounted for as a pooling of interests. The financial statements of PMT
Services, Inc. will be restated to give retroactive effect to the merger. The
results of Bancard, Inc. for the one month ended August 31, 1997 are not
included in the PMT Services, Inc. results above as the effective date of the
combination was subsequent to August 31, 1997. The unaudited operating results
of Bancard Inc. for the one month ended August 31, 1997 are presented for
informational purposes only.
Bancard, Inc.
Unaudited Financial Highlights
(in thousands, except per share data)
One Month Ended
August 31, 1997
---------------
Revenues $ 4,250
Net income $ 493
Bancard, Inc. was an S corporation during the one month ended August 31, 1997
and accordingly, recognized no income tax expense during the period.
<PAGE>
BANCARD, INC.
FINANCIAL STATEMENTS
JULY 31, 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Bancard, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of changes in shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of Bancard, Inc. at July 31, 1997,
and the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Nashville, TN
September 26, 1997
<PAGE>
BANCARD, INC.
BALANCE SHEET
JULY 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents............................ $ 203,128
Accounts receivable................................... 1,065,392
Notes receivable...................................... 444,356
Inventory............................................. 98,419
Other current assets.................................. 32,784
----------
Total current assets............................... 1,844,079
Property and equipment, net........................... 224,103
----------
Total assets....................................... $2,068,182
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 492,188
Accrued liabilities.................................... 664,262
Deferred revenues...................................... 56,620
-----------
Total current liabilities............................. 1,213,70
Long-term debt......................................... 1,673,644
Shareholders' equity:
Common stock, no par value, authorized: 50,000 shares;
issued: 11,200 shares............................... 197,087
Accumulated earnings (deficit).......................... (1,015,619)
-----------
(818,532)
-----------
Commitments and contingencies (Notes 7 and 10)
Total liabilities and shareholders' equity............ $ 2,068,182
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
BANCARD, INC.
STATEMENT OF INCOME
YEAR ENDED JULY 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Revenues............................................... $40,827,022
Cost of revenues....................................... 31,666,249
-----------
Gross margin.......................................... 9,160,773
Selling, general and administrative expenses........... 5,287,564
Depreciation and amortization expense.................. 134,084
Provision for merchant losses and bad debts............ 147,279
-----------
Total operating expenses.............................. 5,568,927
Income from operations................................. 3,591,846
Interest expense, net.................................. (206,822)
Other expenses, net.................................... (729,326)
-----------
Net income............................................ $ 2,655,698
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BANCARD, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
COMMON EARNINGS TREASURY SHAREHOLDERS'
STOCK (DEFICIT) STOCK EQUITY
--------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Balance at July 31, 1996......... $277,489 $ 2,047,176 ($2,081,152) $ 243,513
Cancellation of treasury stock.. (80,402) (2,000,750) 2,081,152 --
Distributions to shareholders... (3,717,743) (3,717,743)
Net income for the year......... 2,655,698 2,655,698
-------- ------------ ----------- ----------
Balance at July 31, 1997......... $197,087 ($1,015,619) -- ($818,532)
======== ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BANKCARD, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED JULY 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Reconciliation of net income to net cash provided by
operating activities:
Net income............................................ $ 2,655,698
Adjustments:
Depreciation and amortization...................... 134,084
Loss on disposal of property and equipment......... 39,706
Provision for merchant losses and bad debts........ 147,279
Changes in assets and liabilities:.................
Accounts and notes receivable................... (571,144)
Inventory....................................... 416,423
Other assets.................................... (6,728)
Accounts payable................................ 204,496
Accrued liabilities............................. (148,959)
Deferred revenues............................... 56,620
-----------
Net cash provided by operating activities.. 2,927,475
-----------
Cash flows from investing activities:
Purchase of property and equipment.................... (100,801)
-----------
Cash flows from financing activities:
Payments on long-term debt............................ (775,000)
Distributions to Shareholders......................... (2,044,099)
-----------
Net cash used by financing activities...... (2,819,099)
-----------
Net increase in cash and cash equivalents................. 7,575
Cash and cash equivalents at beginning of year............ 195,553
-----------
Cash and cash equivalents at end of year.................. $ 203,128
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest................................... 204,238
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITY:
The Company sold its office building in December 1996, to an entity owned by
shareholders of the Company. The buyer assumed the note payable of $846,972 and
issued the Company a promissory note in the amount of $420,184.
The Company issued notes payable to its majority shareholder in the amount of
$1,673,644 related to a distribution of accumulated earnings.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
BANCARD, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Operations
Bancard, Inc. (the "Company") markets and services electronic credit card
authorization and payment systems to merchants. The Company provides these
services to merchants pursuant to contracts between the Company and various
processing banks. Generally, the Company's agreements with the processing banks
contain certain aspects of both marketing and service.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue and cost recognition
Revenues derived from the electronic processing of transactions (merchant
discount rate and related fees) on the credit card authorization equipment are
recognized at the time the merchants' transactions are processed. Related
commission expense and processing charges are also recognized at that time.
Revenues related to the direct sale of credit card authorization equipment
are recognized when the equipment is shipped. Installation fees related to both
the direct sale and the marketing of this equipment are recognized when
installation is completed. Fees received in advance of shipment or installation
are not recognized as revenue until earned. Revenues related to annual fees
charged to merchants are initially deferred and recognized straight-line over
the applicable year.
Cost of revenues includes interchange fees paid to the credit card-issuing
bank and fees paid to the network service provider, VISA and MasterCard and the
processing bank. These costs are recognized at the time the merchants'
transactions are processed and the related revenue is recorded.
6
<PAGE>
BANCARD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company recognizes as revenue in its statement of income the full
discount rate and fees collected from the merchant. The various costs incurred
by the Company, including amounts paid to the card-issuing bank, the processor
and network service provider, are reflected as costs of revenues. In accordance
with the Company's contracts with its processing banks, all of the funds
collection and most of the disbursement function is performed on behalf of the
Company by the processing bank. At month end, the processing bank collects the
total discount rate and fees from the merchants and disburses to each of the
service providers their fees. Disbursements for the interchange fee paid to the
card-issuing bank are made monthly. Shortly after month end, the processing bank
disburses to the Company the remainder of the funds collected from the merchant
which represents a significant portion of the Company's gross margin.
Cash equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Financial instruments
The Company has various financial instruments, including cash, time
deposits, receivables, accounts payable, and accrued liabilities. Cash, time
deposits, receivables, accounts payable and accrued liabilities are settled
within a year and are not subject to market rate fluctuations. The carrying
value of these financial instruments approximates their fair market values.
Notes payable with a carrying amount of $1,673,644 had a market value of
$1,606,668 at July 31, 1997 using discounted flow analyses, based on the prime
rate.
Accounts receivable
Accounts receivable primarily comprise amounts due from processing banks
which represent the discount rate and fees earned, after related interchange
fees and other processing costs, on transactions processed during the month
ending on the balance sheet date. Such balances are received from processing
banks approximately 20 days following the end of each month.
Inventory
Inventory of credit card authorization equipment is stated at the lower of
cost or market, with cost being determined by specific identification.
7
<PAGE>
BANCARD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Property and equipment
Property and equipment are recorded at cost. Depreciation is computed on
straight-line and accelerated methods over the estimated useful lives of the
assets ranging from 3 to 10 years.
Leases
The Company provides certain customers with credit card terminals for a
monthly rental fee (operating lease) which is recognized as revenue when earned.
Reserve for chargebacks and merchant fraud
Disputes between a cardholder and a merchant periodically arise as a result
of cardholder dissatisfaction with merchandise quality or merchant services and
the disputes may not be resolved in the merchant's favor. In these cases, the
transaction is "charged back" to the merchant and the purchase price is refunded
by the merchant. If the merchant is unable to grant a refund, the Company or,
under limited circumstances, the Company and the processing bank, must bear the
credit risk for the full amount of the transaction. The Company evaluates
its risk and estimates its potential loss for chargebacks based on historical
experience. A provision for these estimated losses is provided in the same
period as the related revenues.
Income taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code for federal and state income tax purposes. Under
these provisions, the Company does not pay corporate income tax on its income as
the taxable income or loss is included in the personal income tax returns of the
shareholders.
NOTE 2 - BUSINESS COMBINATION:
On August 28, 1996 an independent service organization (HMH, Inc.) owned by
the majority shareholder of the Company was merged into the Company in a
transaction accounted for as a transfer of an entity under common control. The
assets and liabilities of HMH, Inc. were recorded by the Company at their
historical basis and the results of operations of the Company in fiscal 1997
include HMH, Inc. for the full fiscal year as the majority owner of the Company
exercises control over both entities.
8
<PAGE>
BANCARD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 3 - PROPERTY AND EQUIPMENT:
Office equipment................................. $ 439,467
Credit card terminals held for lease............. 129,875
Automobiles...................................... 64,594
----------
633,936
Less: accumulated depreciation................ (409,833)
----------
$ 224,103
==========
NOTE 4 - ACCRUED LIABILITIES:
Compensation and payroll taxes................... $ 409,326
Reserve for merchant losses...................... 238,000
Other............................................ 16,936
----------
$ 664,262
==========
NOTE 5 - LONG-TERM DEBT:
Note payable to shareholder, due July 26, 1999,
interest payable monthly at 5.80%............. $1,473,644
Note payable to shareholder, due July 26, 1999,
interest payable monthly at 5.80%............. 200,000
----------
$1,673,644
==========
NOTE 6 - RETIREMENT PLAN:
The Company maintains a 401(k) savings plan which allows employees to
contribute a portion of their earnings into the plan. The Company's matching
contributions are discretionary. During fiscal 1997, the Company contributed
$5,247 for the benefit of the participants.
9
<PAGE>
BANCARD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7 - LEASES:
The Company leases office space from an entity owned by the Company's
shareholders, accounted for as an operating lease. Rent expense was $16,000
during fiscal 1997. Future minimum payments under this lease, including payments
for maintenance expenses, are:
YEAR ENDING
JULY 31
------------
1998 $ 93,000
1999 155,000
2000 208,000
2001 256,000
2002 161,000
Thereafter --
NOTE 8 - OTHER EXPENSES - NET:
During fiscal 1997, the Company recognized expenses totaling $689,621
related to settlement of litigation with a former officer and shareholder. Net
losses of $39,705 on disposals of property and equipment comprise the
remainder of the balance.
NOTE 9 - SUBSEQUENT EVENT:
The shareholders of the Company entered into an agreement subsequent to
July 31, 1997 to exchange all of the shares of Bancard, Inc. for shares of PMT
Services, Inc. The transaction will be accounted for as a pooling of interests.
NOTE 10 - CONTINGENCIES:
The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. Management believes the resolution of
these matters will not have a significant impact on the Company's financial
position or results of operations.
10
<PAGE>
SCHEDULE II
BANCARD, INC.
RESERVE FOR MERCHANT LOSSES
BALANCE AT BALANCE AT
BEGINNING END OF
OF PERIOD ADDITIONS(1) DEDUCTIONS(2) PERIOD
----------- ------------ ------------- ----------
Fiscal Year 1997 $221,400 $163,879 $147,279 $238,000
______________________
(1) Additions represent amounts charged to expense during the respective
periods.
(2) Deductions represent actual chargebacks incurred by the Company during the
respective periods, net of amounts recovered.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
PMT SERVICES, INC.,
PMT BCI ACQUISITION CORPORATION,
BANCARD, INC., A COLORADO CORPORATION
AND
JAY W. HEARST, ANTHONY SDAO, SCOTT J. BAHNEMAN,
JACK W. HEARST, GILLIAN G. HEARST AND STEPHEN M. HEARST
AS SHAREHOLDERS OF BANCARD, INC.
Dated: October 2, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS.............................................................................. 1
ARTICLE 1............................................................................. 1
1.1 The Merger................................................................... 1
1.2 The Closing.................................................................. 1
1.3 Effective Time............................................................... 2
ARTICLE 2............................................................................. 2
2.1 Articles of Incorporation.................................................... 2
2.2 Bylaws....................................................................... 2
2.3 Directors.................................................................... 2
2.4 Officers..................................................................... 2
ARTICLE 3............................................................................. 3
3.1 Conversion of Shares......................................................... 3
3.2 Fractional Shares............................................................ 3
3.3 Exchange of Certificates..................................................... 3
3.4 Stock Splits, Etc.of PMT Common Stock........................................ 4
3.5 Conversion of Merger Sub Stock............................................... 4
3.6 Outstanding Options or Warrants.............................................. 4
ARTICLE 4............................................................................. 4
4.1 Existence; Good Standing; Corporate Authority; Compliance With Law........... 5
4.2 Authorization, Validity and Effect of Agreements............................. 5
4.3 Capitalization............................................................... 5
4.4 Prior Sales of Securities.................................................... 6
4.5 Subsidiaries................................................................. 6
4.6 Other Interests.............................................................. 6
4.7 No Violation................................................................. 6
4.8 Financial Statements......................................................... 6
4.9 Contracts.................................................................... 7
4.10 No Material Adverse Changes.................................................. 7
4.11 Tax Matters.................................................................. 7
4.12 Employees and Fringe Benefit Plans........................................... 8
4.13 Assets; Leaseholds........................................................... 10
4.14 Lawfully Operating........................................................... 11
4.15 No Subleases or Licenses..................................................... 11
4.16 Power of Attorney............................................................ 12
4.17 Cash Flow of Merchant Accounts............................................... 12
4.18 No Litigation................................................................ 12
4.19 Corporate Records............................................................ 12
4.20 No Defaults.................................................................. 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4.21 Inventory......................................................................... 12
4.22 Hazardous Substances.............................................................. 12
4.23 Labor Matters..................................................................... 15
4.24 Pooling of Interests.............................................................. 15
4.25 No Brokers........................................................................ 15
4.26 PMT Stock Ownership............................................................... 15
4.27 Investment........................................................................ 15
4.28 Full Disclosure................................................................... 16
4.29 Tax Certificate................................................................... 16
4.30 Definition........................................................................ 16
ARTICLE 5............................................................................... 16
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law................ 16
5.2 Authorization, Validity and Effect of Agreements.................................. 17
5.3 Capitalization.................................................................... 17
5.4 Prior Sales of Securities......................................................... 17
5.5 Subsidiaries...................................................................... 18
5.6 Other Interests................................................................... 18
5.7 No Violation...................................................................... 18
5.8 SEC Documents..................................................................... 18
5.9 No Litigation..................................................................... 19
5.10 Taxes............................................................................. 19
5.11 Absence of Certain Changes........................................................ 19
5.12 No Brokers........................................................................ 19
5.13 Bancard Stock Ownership........................................................... 20
5.14 PMT Common Stock.................................................................. 20
5.15 Pooling of Interests.............................................................. 20
5.16 Full Disclosure................................................................... 20
5.17 Tax Certificate................................................................... 20
5.18 Materiality....................................................................... 20
ARTICLE 6............................................................................... 21
6.1 Covenants of PMT and Bancard...................................................... 21
6.2 Blackout Period................................................................... 24
6.3 Covenants of and Bancard Shareholders............................................. 24
ARTICLE 7............................................................................... 29
7.1 Conditions to Each Party's Obligation to Effect the Merger........................ 29
7.2 Conditions to Obligation of Bancard and the Bancard
Shareholders to Effect the Merger................................................. 30
7.3 Conditions to Obligation of PMT and Merger Sub to Effect the Merger............... 31
ARTICLE 8............................................................................... 33
8.1 Termination by Mutual Consent..................................................... 33
8.2 Termination by Either PMT or Bancard.............................................. 33
8.3 Termination by Bancard............................................................ 33
8.4 Termination by PMT................................................................ 33
8.5 Effect of Termination and Abandonment............................................. 34
8.6 Extension; Waiver................................................................. 34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 9............................................................................. 34
(a) Indemnification by Bancard Shareholders..................................... 34
(b) Bancard Shareholders' Liability............................................. 34
(c) Indemnification by PMT...................................................... 35
(d) Conditions of Indemnification Pursuant to Sections 9(a) and 9(c)............ 35
(e) Release by the Bancard Shareholders......................................... 36
(f) Survival.................................................................... 37
(g) Reduction for Insurance..................................................... 37
(h) Limitation.................................................................. 37
ARTICLE 10............................................................................ 39
10.1 Survival of Representations and Warranties.................................. 39
10.2 Notices..................................................................... 39
10.3 Assignment, Binding Effect; Benefit......................................... 39
10.4 Entire Agreement............................................................ 39
10.5 Amendment................................................................... 40
10.6 Governing Law............................................................... 40
10.7 Counterparts................................................................ 40
10.8 Headings.................................................................... 40
10.9 Interpretation.............................................................. 40
10.10 Waivers..................................................................... 40
10.11 Incorporation of Exhibits................................................... 41
10.12 Severability................................................................ 41
10.13 Expenses.................................................................... 41
10.14 Enforcement of Agreement.................................................... 41
10.15 Press Releases.............................................................. 41
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), is executed as of the
2nd day of October, 1997, by and among PMT Services, Inc., a Tennessee
corporation ("PMT"), PMT BCI Acquisition Corporation, a newly formed Tennessee
corporation and wholly owned subsidiary of PMT ("Merger Sub"), Bancard, Inc., a
Colorado corporation ("Bancard"), and each of Jay Hearst, Anthony Sdao and Scott
J. Bahneman (collectively referred to hereafter as the "Controlling Bancard
Shareholders") and Jack W. Hearst, Gillian G. Hearst and Stephen M. Hearst as
the shareholders of Bancard (the Controlling Bancard Shareholders and Jack W.
Hearst, Gillian G. Hearst and Stephen M. Hearst are collectively referred to
hereafter as the "Bancard Shareholders").
RECITALS
A. The Boards of Directors of PMT and Bancard each have determined that a
business combination between PMT and Bancard is in the best interests of their
respective companies and shareholders and presents an opportunity for their
respective companies to enhance the service provided to consumers and achieve
long-term strategic and financial benefits, and, accordingly, have agreed to
effect the merger provided for herein upon the terms and subject to the
conditions set forth herein.
B. For federal income tax purposes, it is intended that the merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368(a)(1)(A) and (a)(2)(E)of the Internal Revenue Code of 1986, as
amended (the "Code"), and for financial accounting purposes shall be accounted
for as a "pooling of interests."
C. PMT, Merger Sub and Bancard desire to make certain representations,
warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into Bancard in accordance with this Agreement and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). Bancard shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall be a wholly owned subsidiary of PMT. The
Merger shall have the effects specified in Section 7-111-106 of the Colorado
<PAGE>
Business Corporation Act ("CBCA") and Section 48-21-109 of the Tennessee
Business Corporation Act ("TBCA").
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) via facsimile, on
the first business day immediately following the day on which the last to be
fulfilled or waived of the conditions set forth in Article 7 shall be fulfilled
or waived in accordance herewith or (b) at such other time, date or place as PMT
and Bancard may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.3 Effective Time. If all the conditions to the Merger set forth in
Article 7 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 8, the parties
hereto shall cause Articles of Merger meeting the requirements of Section 7-111-
105 of the CBCA to be properly executed and filed with the Colorado Secretary of
State in accordance with such Section on the Closing Date and Articles of Merger
meeting the requirements of Section 48-21-107 of the TBCA to be properly
executed and filed with the Tennessee Secretary of State in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Articles of Merger with and as accepted by the Tennessee and
Colorado Secretary of State or at such later time which the parties hereto shall
have agreed upon and designated in such filing as the effective time of the
Merger (the "Effective Time").
ARTICLE 2
ARTICLES OF INCORPORATION AND BYLAWS
AND OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of Bancard
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
2.2 Bylaws. The Bylaws of Bancard in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
2.3 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
2.4 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
2
<PAGE>
ARTICLE 3
CONVERSION OF BANCARD STOCK
3.1 Conversion of Shares. At the Effective Time, each of the
Outstanding Bancard Shares (as defined below) shall be converted into the number
of shares of Common Stock, $.01 par value per share, of PMT (the "PMT Common
Stock") determined by dividing the Aggregate Issuable PMT Shares by the
Outstanding Bancard Shares. For purposes of this section, the capitalized terms
shall have the definitions set forth:
(a) "Aggregate Issuable PMT Shares" shall mean the PMT Base Shares
multiplied by a fraction, the numerator of which is the Outstanding Bancard
Shares and the denominator of which is the sum of Outstanding Bancard Shares and
the Dissenting Bancard Shares.
(b) "PMT Base Shares" shall mean 3,870,968 shares of PMT Common Stock.
(c) "Outstanding Bancard Shares" shall mean all of the issued shares
of Common Stock, no par value per share, of Bancard ("Bancard Common Stock")
issued and outstanding immediately prior to the Effective Time (including any
shares which may have been issued upon exercise of currently outstanding options
or warrants) less Dissenting Bancard Shares.
(d) "Dissenting Bancard Shares" shall mean outstanding shares of
Bancard Common Stock, the holders of which have perfected their rights to
dissent to the Merger under the CBCA.
3.2 Fractional Shares. In lieu of the issuance of fractional shares of
PMT Common Stock, each shareholder of Bancard, upon surrender of a certificate
which immediately prior to the Effective Time represented Outstanding Bancard
Shares, shall be entitled to receive a cash payment (without interest) equal to
the fair market value on the Closing Date of any fraction of a share of PMT
Common Stock to which such holder would be entitled but for this provision.
3.3 Exchange of Certificates. After the Effective Time, each holder of an
outstanding certificate or certificates theretofore representing Outstanding
Bancard Shares (other than Dissenting Bancard Shares as to which dissenters
rights have not been withdrawn or otherwise forfeited under the CBCA) upon
surrender thereof, together with a completed letter of transmittal, to Waller
Lansden Dortch & Davis, PLLC (the "Exchange Agent"), as exchange agent for PMT,
shall be entitled to receive in exchange therefor any payment due in lieu of
fractional shares and a certificate or certificates representing the number of
whole shares of PMT Common Stock into which such holders' Outstanding Bancard
Shares were converted in a manner reasonably satisfactory to Bancard. Until so
surrendered, each outstanding certificate representing Outstanding Bancard
Shares shall be deemed for all
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purposes to represent the number of whole shares of PMT Common Stock into which
the Outstanding Bancard Shares theretofore represented shall have been
converted. PMT may, at its option, refuse to pay any dividend or other
distribution, if any, payable to the holders of shares of PMT Common Stock to
the holders of certificates representing Outstanding Bancard Shares until such
certificates are surrendered for exchange, provided, however, that, subject to
the rights of PMT under its charter, upon surrender and exchange of such Bancard
certificates there shall be paid to the record holders of the PMT stock
certificate or certificates issued in exchange therefor the amount, without
interest, of dividends and other distributions, if any, which have become
payable with respect to the number of whole shares of PMT Common Stock into
which the Outstanding Bancard Shares theretofore represented thereby shall have
been converted and which have not previously been paid. Under the terms of its
credit agreements, PMT has agreed not to pay any cash dividends.
3.4 Stock Splits, Etc. of PMT Common Stock. In the event PMT changes the
number of shares of PMT Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization,
reorganization or any other transaction in which any security of PMT or any
other entity or cash is issued or paid in respect of the outstanding shares of
PMT Common Stock and the record date therefor is after the date of this
Agreement and prior to the Effective Time, the conversion ratio, as well as the
dollar amount set forth in Section 3.1, shall be proportionately adjusted.
3.5 Conversion of Merger Sub Stock. At and as of the Effective Time, each
share of common stock, $.01 par value per share, of Merger Sub shall be
converted into one share of Bancard Common Stock.
3.6 Outstanding Options or Warrants. Immediately prior to the Closing,
all outstanding options or warrants to purchase Bancard Common Stock will be
exercised to the extent exercisable and cancelled to the extent not exercisable.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BANCARD
AND THE CONTROLLING BANCARD SHAREHOLDERS
Except as set forth in the disclosure schedule, which will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 4 (thereby containing each schedule referenced herein) and
delivered to PMT prior to the execution hereof and attached hereto as Exhibit A
(the "Bancard Disclosure Schedule"), Bancard and each of the Controlling
Bancard Shareholders represents and warrants to PMT as of the date of this
Agreement as follows:
4.1 Existence; Good Standing; Corporate Authority; Compliance With Law.
Bancard is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Colorado. Bancard is duly licensed or
qualified to do
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business as a foreign corporation and is in good standing under the laws of any
other state of the United States in which the character of the properties owned
or leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of Bancard (a "Bancard Material Adverse Effect"). Bancard
has all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Bancard is not in
violation of any order of any court, governmental authority or arbitration board
or tribunal, or any law, ordinance, governmental rule or regulation to which
Bancard or any of its properties or assets is subject, where such violation
would have a Bancard Material Adverse Effect. Bancard has obtained all licenses,
permits and other authorizations and has taken all actions required by
applicable law or governmental regulations in connection with its business as
now conducted, except where the failure to obtain any such item or take any such
action would not have a Bancard Material Adverse Effect.
4.2 Authorization, Validity and Effect of Agreements. Bancard has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. The consummation by
Bancard of the transactions contemplated hereby has been duly authorized by all
requisite corporate action, including the required approvals by the Board of
Directors of Bancard and the holders of the outstanding shares of Bancard Common
Stock. This Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of Bancard,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
4.3 Capitalization. The authorized capital stock of Bancard consists of
50,000 shares of Bancard Common Stock. As of the date hereof, there are issued
and outstanding 11,200 shares of Bancard Common Stock, which shares were held by
the individuals and in the amounts set forth opposite their respective names on
Annex A hereto. Bancard has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the shareholders of Bancard on any matter. All issued and outstanding shares of
Bancard Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. There are no options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Bancard to issue, transfer or sell any shares of
capital stock of Bancard.
4.4 Prior Sales of Securities. All offers and sales of Bancard Common Stock
prior to the date hereof were at all relevant times exempt from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and
were duly registered or the subject of an available exemption from the
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registration requirements of the applicable state securities or Blue Sky laws,
or the relevant statutes of limitations have expired, or civil liability
therefor has been eliminated by an offer to rescind.
4.5 Subsidiaries. Bancard has no subsidiaries.
4.6 Other Interests. Except as set forth in the Bancard Disclosure
Schedule, Bancard does not own directly or indirectly any interest or investment
in any corporation, partnership, joint venture, business, trust or other entity.
4.7 No Violation. After approval by requisite shareholder vote, neither the
execution and delivery by Bancard of this Agreement nor the consummation by
Bancard of the transactions contemplated hereby in accordance with the terms
hereof, will: (i) conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of Bancard; (ii) conflict with, result in a
breach of any provision of or the modification or termination of, constitute a
default under, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the assets of Bancard pursuant to
any material commitment, lease, contract, or other material agreement or
instrument to which Bancard is a party; or (iii) violate any order, arbitration
award, judgment, writ, injunction, decree, statute, rule or regulation
applicable to Bancard, the violation of which would have a Bancard Material
Adverse Effect.
4.8 Financial Statements. Bancard has delivered its unaudited financial
statements for the year ended December 31, 1996 and for the seven-month period
ended July 31, 1997, and will deliver promptly unaudited interim financial
statements for each month and quarter subsequent thereto if prepared prior to
the Closing Date. Each of the balance sheets provided to PMT (including any
related notes and schedules) fairly presents in all materials respects the
financial position of Bancard as of its date and each of the statements of
income, retained earnings and cash flows provided to PMT (including any related
notes and schedules) fairly presents in all material respects the results of
operations, retained earnings or cash flows of Bancard for the periods set forth
therein (subject, in the case of unaudited statements, to the omission of
footnotes and to normal year end audit adjustments which would not be material
in amount or effect) in each case in accordance with sound accounting principles
consistently applied during the periods involved, except as may be noted
therein. Such financial statements have been prepared from the books and records
of Bancard which accurately and fairly reflect in all material respects the
transactions and dispositions of the assets of Bancard. As of July 31, 1997, or
any subsequent date for which a balance sheet is provided, to the knowledge of
Bancard, Bancard did not have material liabilities, contingent or otherwise,
whether due or to become due, other than as indicated on the balance sheet of
such date or the notes thereto except for those incurred in the ordinary course
of business since the date of such balance sheet. Bancard has adequately funded
all accrued employee benefit costs and such funding (to the date thereof) is
reflected in the most recent balance sheet provided to PMT.
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4.9 Contracts. Section 4.9 of the Bancard Disclosure Schedule lists all material
contracts and other agreements to which Bancard is a party. With respect to each
contract listed in Section 4.9 of the Bancard Disclosure Schedule: (i) the
agreement is legal, valid, binding, enforceable and in full force and effect
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity; (ii) the
agreement will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity; (iii) neither Bancard, nor to Bancard's knowledge, any
other party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default, or permit termination,
modification or acceleration under the agreement; and (iv) no party has
repudiated any provision of the agreement in writing.
4.10 No Material Adverse Changes. To the knowledge of Bancard, since July 31,
1997, there has not been (i) any material adverse change in the financial
condition, results of operations, business, prospects, assets or liabilities
(contingent or otherwise, whether due or to become due, known or unknown), of
Bancard, except for changes in the ordinary course of business consistent with
historical experience resulting from the seasonal nature of Bancard's business:
(ii) any extraordinary dividend declared or paid or distribution made on the
capital stock of Bancard, or any capital stock thereof redeemed or repurchased;
(iii) any incurrence of long term debt in excess of $50,000; (iv) any salary,
bonus or compensation increases to any officers, employees or agents of Bancard,
other than customary increases; (v) any pending or threatened labor disputes or
other labor problems against or potentially affecting Bancard; or (vi) any other
transaction entered into by Bancard, except in the ordinary course of business
and consistent with past practice.
4.11 Tax Matters. Except as set forth in the Bancard Disclosure Schedule,
Bancard has duly paid all Taxes and other charges (whether or not shown on any
Tax return) due or claimed to be due from it by federal, foreign, state or local
taxing authorities; and true and correct copies of all Tax reports and returns
relating to such Taxes and other charges for the fiscal years from 1995 through
1996 have been heretofore delivered to PMT. The reserves for Taxes contained in
the financial statements and carried on the books of Bancard (other than any
reserve for deferred taxes established to reflect timing differences between
book and tax income) are adequate to cover all Tax liabilities as of the date of
this Agreement. Since July 31, 1997, Bancard has not incurred any Tax
liabilities other than in the ordinary course of business; there are no Tax
liens (other than liens for current Taxes not yet due) upon any properties or
assets of Bancard (whether real, personal or mixed, tangible or intangible),
and, except as reflected in the financial statements, there are no pending or
threatened questions or examinations relating to, or claims asserted for, Taxes
or assessments against Bancard. Bancard has not granted or been requested to
grant any extension of the limitation period applicable to any claim for Taxes
or assessments with respect to Taxes. Bancard is not a party to any Tax
allocation or
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sharing agreement. If Bancard has ever been a member of an affiliated group
within the meaning of Section 1504 of the Code filing a consolidated federal
income tax return (an "Affiliated Group"), each such Affiliated Group has filed
all Tax returns that it was required to file for each taxable period during
which Bancard was a member of the Affiliated Group, and has paid all taxes owed
by the Affiliated Group (whether or not shown on the Tax return) for each
taxable period during which Bancard was a member of the Affiliated Group.
Bancard has no liability for the Taxes of any Affiliated Group under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law).
Bancard has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor or shareholder. For purposes of this Agreement, "Tax(es)"
means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A of the Code, customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or addition minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
4.12 Employees and Fringe Benefit Plans.
(a) The Bancard Disclosure Schedule sets forth the names, ages and
titles of all members of the Board of Directors and officers of Bancard and all
employees of Bancard earning in excess of $50,000 per annum, and the annual rate
of compensation (including bonuses) being paid to each such member of the Board
of Directors, officer and employee as of the most recent practicable date.
(b) The Bancard Disclosure Schedule lists each employment, bonus,
deferred compensation, pension, stock option, stock appreciation right, profit-
sharing or retirement plan, arrangement or practice, each medical, vacation,
retiree medical, severance pay plan, and each other agreement or fringe benefit
plan, arrangement or practice, of Bancard, whether legally binding or not, which
affects one or more of its employees, including all "employee benefit plans" as
defined by Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (collectively, the "Plans"). All Plans which are subject
to Title IV of ERISA or the minimum funding standards of Section 412 of the Code
shall be referred to as the "Pension Plans."
(c) For each Plan which is an "employee benefit plan" under Section
3(3) of ERISA, Bancard has delivered to the Buyer correct and complete copies of
the plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance contracts and funding
agreements which implement each such Plan.
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(d) Bancard does not have any commitment, whether formal or informal
and whether legally binding or not, (i) to create any additional such Plan; (ii)
to modify or change any such Plan; or (iii) to maintain for any period of time
any such Plan. The Bancard Disclosure Schedule contains an accurate and
complete description of the funding policies (and commitments, if any) of
Bancard with respect to each such existing Plan.
(e) Bancard has no unfunded past service liability in respect of any
of its Plans; the actually computed value of vested benefits under any Pension
Plan of Bancard (determined in accordance with methods and assumptions utilized
by the Pension Benefit Guaranty Corporation ("PBGC") applicable to a plan
terminating on the date of determination) does not exceed the fair market value
of the fund assets relating to such Pension Plan; neither Bancard nor any Plan
nor any trustee, administrator, fiduciary or sponsor of any Plan has engaged in
any prohibited transactions as defined in Section 406 of ERISA or Section 4975
of the Code for which there is no statutory exemption in Section 408 of ERISA or
Section 4975 of the Code; all filings, reports and descriptions as to such Plans
(including Form 5500 Annual Reports, Summary Plan Descriptions, PBCG-1's and
Summary Annual Reports) required to have been made or distributed to
participants, the Internal Revenue Service, the United States Department of
Labor and other governmental agencies have been made in a timely manner or will
be made on or prior to the Closing Date; there is no material litigation,
disputed claim, governmental proceeding or investigation pending or threatened
with respect to any of such Plans, the related trusts, or any fiduciary,
trustee, administrator or sponsor of such Plans; such Plans have been
established, maintained and administered in all material respects in accordance
with their governing documents and applicable provisions of ERISA and the Code
and Treasury Regulations promulgated thereunder; there has been no "Reportable
Event" as defined in Section 4043 of ERISA with respect to any Pension Plan that
has not been waived by the PBGC; and each Pension Plan and each Plan which is
intended to be a qualified plan under Section 401(a) of the Code has received,
within the last three years, a favorable determination letter from the Internal
Revenue Service.
(f) Bancard has complied in all material respects with all applicable
federal, state and local laws, rules and regulations relating to employees'
employment and/or employment relationships, including, without limitation, wage
related laws, anti-discrimination laws, employee safety laws and COBRA (defined
herein to mean the requirements of Code Section 4980B, Proposed Treasury
Regulation Section 1.162-26 and Part 6 of Subtitle B of Title I of ERISA).
(g) The consummation of the transactions contemplated by this
Agreement will not (i) result in the payment or series of payments by Bancard to
any employee or other person of an "excess parachute payment" within the meaning
of Section 280G of the Code, (ii) entitle any employee or former employee of
Bancard to severance pay, unemployment compensation or any other payment, and
(iii) accelerate the time of payment or vesting of any stock option, stock
appreciation
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right, deferred compensation or other employee benefits under any Plan
(including vacation and sick pay).
(h) None of the Plans which are "welfare benefit plans," within the
meaning of Section 3(1) of ERISA, provide for continuing benefits or coverage
after termination or retirement from employment, except for COBRA rights under a
"group health plan" as defined in Code Section 4980B(g) and ERISA Section 607.
(i) Neither Bancard nor any "affiliate" of Bancard (as defined in
ERISA) has ever participated in or withdrawn from a multi-employer plan as
defined in Section 4001 (a)(3) of Title IV of ERISA, and Bancard has not
incurred and does not owe any liability as a result of any partial or complete
withdrawal by any employer from such a multi-employer plan as described under
Sections 4201,4203, or 4205 of ERISA.
(j) No Pension Plan has been completely or partially terminated, nor
has any plan been instituted by the PBGC to terminate any such Pension Plan;
Bancard has not incurred, and does not presently owe, any liability to the PBGC
or the Internal Revenue Service with respect to any Pension Plan including, but
not by way of limitation, any liability for PBGC premiums or excise taxes under
Code Section 4971.
4.13 Assets; Leaseholds.
(a) Bancard owns the assets reflected on the July 31, 1997 balance
sheet (including any patents, copyrights, trade names, service marks and other
names and marks used in connection with its business), with good and marketable
title, free and clear of any and all known claims, liens, mortgages, options,
charges, conditional sale or title retention agreements, security interests,
restrictions, easements, or encumbrances whatsoever and to Bancard's knowledge
free and clear of any rights or privileges capable of becoming claims, liens,
mortgages, options, charges, security interests, restrictions, easements or
encumbrances, except (i) for certain of the assets which are encumbered by liens
that Bancard has the means to remove prior to the Effective Time, (ii) as shown
on the title insurance policies previously furnished to PMT, (iii) real property
taxes not yet due and payable, (iv) utility easements for utilities serving the
Property, (v) minor imperfections of title which do not materially affect the
value and use of such assets, (vi) for inchoate materialmen's, mechanic's,
workmen's, repairman's, employee's or other like liens arising in the ordinary
course of business; (ii) claims or liens for taxes, assessments, or charges due
and payable and subject to interest or penalty, materialmen's, mechanic's,
workmen's, repairman's, employee's or other like liens that have arisen in the
ordinary course of business if the validity or amount thereof is being contested
in good faith by appropriate and lawful proceedings, so long as levy and
execution thereon have been stayed and continue to be stayed and they will not,
in the aggregate have a Bancard Material Adverse Effect, and (viii) assets
financed pursuant to securitization transactions or credit agreements.
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(b) Bancard owns good and marketable leasehold title to the premises
leased by Bancard, free and clear of any and all claims, liens, mortgages,
options, charges, conditional sale or title retention agreements, security
interests, restrictions, easements, or encumbrances whatsoever and free and
clear of any rights or privileges capable of becoming claims, liens, mortgages,
options, charges, security interests, restrictions, easements or encumbrances,
except to the extent expressly set forth in the leases. Following the Merger,
Bancard will continue to have all its rights under such leases for the premises
now leased by Bancard, free and clear of any claims, liens, mortgages, options,
charges, security interests, restrictions, easements, rights, privileges and
encumbrances, except to the extent expressly set forth in the leases, and the
Merger will not result in any increase in rents or charges under any lease.
4.14 Lawfully Operating. To the best knowledge of Bancard, Bancard has been
and currently is conducting and each of the premises leased or owned have been
and now are being used and operated, in compliance in all material respects with
all statutes, regulations, bylaws, orders, covenants, restrictions or plans of
federal, state, regional, county or municipal authorities, agencies or boards
applicable to the same.
4.15 No Subleases or Licenses. There are no subleases or licenses to use
all or any portion of the premises leased by Bancard, except as set forth in the
leases. The leases are valid, binding and enforceable in accordance with the
terms of each, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity,
and, to the knowledge of Bancard, are in good standing. Bancard is not in
default in payment of rent, or in the performance of any of its material
obligations under the leases and, to the best of Bancard's knowledge, no ground
lessor to any such landlord or lessors is in default of any ground lease. To the
best knowledge of Bancard, the landlords or lessors under the leases are not in
breach of any of their obligations under the leases and no ground lessor to any
such landlord or lessor is in default of any ground lease. No state of facts
exists which, after notice or lapse of time or both, would result in a breach or
default under the leases by Bancard. The copies of the leases which Bancard has
delivered to PMT are true, correct and complete copies of the leases and Bancard
has delivered to PMT all amendments, modifications, letter agreements and
instruments of whatever form which relate to such leases (except correspondence
sent or received in the ordinary course of business, including percentage rent
reports, which do not alter the terms of the leases).
4.16 Power of Attorney. There are no outstanding powers of attorney
executed on behalf of Bancard.
4.17 Cash Flow of Merchant Accounts. Attached hereto as Schedule 4.17 is
Bancard's most recent Visa/Mastercard Settlement Report (the "Settlement
Report") issued by First Tennessee Bank National Association, First U.S.A., Inc.
and National Data Corporation. Since the date of the Settlement Report, there
has not
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been any material adverse change in the cash flow of the merchant accounts with
respect to which Bancard receives residual payments from Bancard's processing
banks (the "Merchant Accounts") taken as a whole.
4.18 No Litigation. Except as set forth in the Bancard Disclosure Schedule,
there are currently no pending, and to the best knowledge of the directors and
executive officers of Bancard, no threatened, lawsuits or administrative
proceedings or investigations against Bancard or to which its assets are
subject, which, if adversely determined, could have a Bancard Material Adverse
Effect. Bancard is not subject to any currently existing order, writ,
injunction, or decree relating to its operations.
4.19 Corporate Records. True and correct copies of the Articles of
Incorporation and bylaws of Bancard have been delivered to PMT. The corporate
minute books of Bancard submitted to PMT for review correctly reflect all
material corporate action taken at all the meetings (or by written consent in
lieu thereof) of its directors and shareholders and correctly record all
resolutions thereof.
4.20 No Defaults. Bancard has in all material respects performed all
material obligations to be performed by it under all material contracts,
agreements, and commitments to which it is a party, and there is not under any
such contracts, agreements, or commitments any existing default or event of
default or event which with notice or lapse of time or both would constitute a
default, which default would have a Bancard Material Adverse Effect.
4.21 Inventory. The aggregate fair market value of the inventory of Bancard
is less than $100,000.
4.22 Hazardous Substances. For purposes of this Agreement, the following
terms shall have the following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. (S)(S) 9601 et seq.;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any Environmental Law (for purposes of (i) and (ii) below, "Claims") or any
permit issued under any such Environmental Law, including without limitation:
(i) any and all Claims by governmental or regulatory authorities for
investigation, oversight, enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law; and
(ii) any and all Claims by any third party seeking damages, response,
costs, contribution, indemnification, cost recovery, compensation or
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injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment;
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment, relating to
the environment, health, or safety of hazardous, toxic or dangerous materials,
substances or wastes, including without limitation CERCLA; the Toxic Substances
Control Act, as amended, 15 U.S.C. (S)(S) 2601 et seq.; the Clean Air Act, as
amended, 42 U.S.C. (S)(S)7401 et seq.; the Federal Water Pollution Control Act,
as amended, 33 U.S.C. (S)(S)1251 et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act, as amended, 7 U.S.C. (S)(S)136, et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. (S)(S)1801 et seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S)(S)6901 et
seq.; the Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f et seq.; the Clean
Water Act, as amended, 33 U.S.C. (S)(S) 1251, et seq.; and any similar state or
local law;
"Hazardous Materials" shall mean those materials listed in Section 101(14)
of CERCLA, as hereinafter defined, and any other substance defined as toxic or
hazardous under any federal, state or local law, rules, regulation, ordinance
code or policy, including, but not limited to:
(i) any petroleum or petroleum products, flammable explosives,
radioactive materials, asbestos, asbestos products, urea formaldehyde foam
insulation, polychlorinated biphenyls, including transformers or other equipment
that contain dielectric fluid containing detectable levels of polychlorinated
biphenyls, and radon gas;
(ii) any hazardous, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) any current Environmental Law or
currently listed as such pursuant to any Environmental Law; and
(iii) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Improperly" means done in any manner that poses a threat to human health,
safety or the environment;
"Bancard Property" shall mean (i) any real property and improvements
presently owned, leased, used, operated or occupied by Bancard, and (ii) any
other real property and improvements at any previous time owned, leased, used,
operated or occupied by Bancard, but only as to the time owned, leased, used,
operated or occupied by Bancard;
"Release" means disposing, depositing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the
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like, into or upon any land or water or air, or otherwise entering into the
environment.
To the best knowledge of the directors and executive officers of Bancard:
(a) Hazardous Materials have not at any time been illegally or
Improperly generated, used, treated or stored on, or transported to or from, any
Bancard Property;
(b) No asbestos containing materials or other Hazardous Materials have
been installed in or affixed to structures on any Bancard Property;
(c) Hazardous Materials have not at any time been disposed of or
otherwise Released on any Bancard Property;
(d) Bancard is currently, and has at all times in the past been, in
compliance with all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws with respect to any Bancard
Property;
(e) There are no past, pending or, to the knowledge of the directors
and executive officers of Bancard, threatened Environmental Claims against
Bancard or any Bancard Property;
(f) There are no facts or circumstances, conditions or occurrences on
any Bancard Property or otherwise that could reasonably be anticipated by
Bancard:
(i) to form the basis of an Environmental Claim against Bancard
or any Bancard Property; or
(ii) to cause such Bancard Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Bancard
Property under any Environmental Law; and
(g) There are not now, nor have there been at any time, any
aboveground or underground storage tanks located on the Bancard Property.
4.23 Labor Matters. Bancard is not a party to any collective bargaining
agreement and has not been the subject of any union activity or labor dispute,
and there has not been any strike of any kind called or, to the knowledge of
Bancard, threatened to be called against Bancard. To the best knowledge of
Bancard, Bancard has not violated any applicable federal or state law or
regulation relating to labor or labor practices. Bancard has no liability to
any of its employees, agents, or consultants in connection with grievances by,
or the termination of, such employees, agents, or consultants.
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4.24 Pooling of Interests. The representations, warranties and covenants of
Bancard and the Bancard Shareholders set forth in the draft letter of even date
herewith from Bancard and the Bancard Shareholders to Price Waterhouse, LLP are
true and correct in all material respects and will be true and correct in all
material respects as of the Closing Date (except as such matters may be subject
to the control of PMT or its affiliates). Bancard and the Bancard Shareholders
shall execute such letter at the Closing.
4.25 No Brokers. Bancard has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
Bancard or PMT to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby. Bancard
is not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
4.26 PMT Stock Ownership. Bancard does not own any shares of PMT Common
Stock or other securities convertible into PMT Common Stock.
4.27 Investment. Each Bancard Shareholder (a) understands that the
shares of PMT Common Stock have not been, and will not be, except as
contemplated herein, registered under the 1933 Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (b) is
acquiring the shares of PMT Common Stock solely for his own account for
investment purposes, and not with a view to the distribution thereof, (c) is a
sophisticated investor with knowledge and experience in business and financial
matters, (d) has received certain information concerning PMT and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the shares of PMT Common Stock, (e) is
able to bear the economic risk and lack of liquidity inherent in holding the
shares of PMT Common Stock, and (f) is an Accredited Investor (as such term is
defined under Rule 501(a) promulgated under the 1933 Act).
4.28 Full Disclosure. To the knowledge of Bancard, all of the information
provided by Bancard and its representatives herein or in the Bancard Disclosure
Schedule is true, correct, and complete in all material respects and no
representation, warranty, or statement made by Bancard in or pursuant to this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make such
representation, warranty, or statement not misleading to PMT. None of the
executive officers of Bancard has withheld from PMT or its representatives
disclosure of any event, condition, or fact that such officer knows, could
materially adversely affect the financial condition, results of operations,
business, prospects, assets, or liabilities of
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Bancard, other than business conditions affecting the credit card services
business generally.
4.29 Tax Certificate. The representations and warranties of Bancard and
the Bancard Shareholders set forth in the tax certificates of even date herewith
delivered to PMT are true and correct in all material respects and will be true
and correct in all material respects as of the Closing Date.
4.30 Definition. For purposes of this Article 4, "material" means an
amount in excess of $250,000, either individually or in the aggregate. A
Bancard Material Adverse Effect shall mean any adverse effect, whether
individually or in the aggregate, on the business, results of operation, or
financial condition of Bancard in excess of $250,000. Any reference herein to
Bancard's knowledge shall refer to the knowledge of any officer or director of
Bancard without independent investigation.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PMT AND MERGER SUB
Except as set forth in the disclosure schedule, which will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 5 (thereby containing each schedule referenced herein) and
delivered to Bancard at or prior to the execution hereof and attached hereto as
Exhibit B (the "PMT Disclosure Schedule"), PMT and Merger Sub represent and
warrant to Bancard and the Bancard Shareholders as of the date of this Agreement
as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law.
Each of PMT and Merger Sub is a corporation duly incorporated and validly
existing under the laws of the state of its incorporation. PMT is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the business, results of
operations or financial condition of PMT (a "PMT Material Adverse Effect"). PMT
has all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Neither PMT, Merger Sub
nor any of their properties or assets is in violation of any order of any court,
governmental authority or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which PMT or Merger Sub is subject, where
such violation would have a PMT Material Adverse Effect. PMT has all licenses,
permits and other authorizations and has taken all actions required by
applicable law or governmental regulations in connection with its business as
now conducted, except where the failure to obtain any such item or to take any
such action would not have a PMT Material Adverse Effect.
5.2 Authorization, Validity and Effect of Agreements. Each of PMT and
Merger Sub has the requisite corporate power and authority to execute and
deliver
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this Agreement and all agreements and documents contemplated hereby. The
consummation by PMT and Merger Sub of the transactions contemplated hereby has
been duly authorized by all requisite corporate action. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of PMT and Merger Sub, enforceable in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
5.3 Capitalization. The authorized capital stock of PMT consists of
100,000,000 shares of PMT Common Stock and 10,000,000 shares of preferred stock,
$.01 par value (the "PMT Preferred Stock"). As of September 29, 1997, there
were 41,749,589 shares of PMT Common Stock issued and outstanding, and no shares
of PMT Preferred Stock issued and outstanding. PMT has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the shareholders of PMT on any matter. All issued and
outstanding shares of PMT Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Other than as provided
for in the PMT Disclosure Schedule, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments other than letters of intent which obligate PMT to issue, transfer
or sell any shares of capital stock of PMT.
5.4 Prior Sales of Securities. All offers and sales of PMT Common Stock
prior to the date hereof were at all relevant times exempt from the registration
requirements of the 1933 Act, and were duly registered or the subject of an
available exemption from the registration requirements of the applicable state
securities or Blue Sky laws, or the relevant statutes of limitations have
expired, or civil liability therefor has been eliminated by an offer to rescind.
5.5 Subsidiaries. PMT has no subsidiaries except as listed on Schedule 5.5
of the PMT Disclosure Schedule. Merger Sub has been formed to effect the
transactions contemplated by this Agreement. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, $.01 par value. Each of the
outstanding shares of capital stock of Merger Sub is duly authorized, validly
issued, fully paid and nonassessable, and is owned by PMT free and clear of all
liens, pledges, security interests, claims or other encumbrances. Merger Sub has
not engaged in any activities other than in connection with the transactions
contemplated by this Agreement.
5.6 Other Interests. Neither PMT nor Merger Sub owns directly or indirectly
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity, except as described in
Schedule 5.5.
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5.7 No Violation. Neither the execution and delivery by PMT and Merger
Sub of this Agreement, nor the consummation by PMT and Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the Charter or Bylaws
of PMT or Merger Sub; (ii) conflict with, result in a breach of any provision of
or the modification or termination of, constitute a default under, or result in
the creation or imposition of any lien, security interest, charge, or
encumbrance upon any of the assets of PMT or Merger Sub pursuant to any material
commitment, lease, contract, or other material agreement or instrument to which
PMT or Merger Sub is a party; or (iii) violate any order, arbitration award,
judgment, writ, injunction, decree, statute, rule, or regulation applicable to
PMT or Merger Sub.
5.8 SEC Documents. Prior to the date hereof, PMT has delivered to
Bancard copies of all of PMT's Annual Reports on Forms 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as filed with the Securities and
Exchange Commission ("SEC") since October 26, 1996, and its proxy statement
dated November 18, 1996 (the "PMT Reports"). The PMT Reports (i) were prepared
in all material respects in accordance with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the rules and
regulations promulgated thereunder, and (ii) as of their respective dates, did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets included in or incorporated
by reference into the PMT Reports (including the related notes and schedules)
fairly presents the consolidated financial position of PMT as of its date and
each of the consolidated statements of income, retained earnings and cash flows
included in or incorporated by reference into the PMT Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows of PMT for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect) in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein. These representations shall be deemed to be made
with respect to PMT Reports filed subsequent to the date hereof at the time of
their filing. PMT has made all filings required to be filed by PMT under the
1934 Act. Such financial statements have been prepared from the books and
records of PMT which accurately and fairly reflect in all material respects the
transactions and dispositions of the assets of PMT. As of April 30, 1997 or any
subsequent date for which a balance sheet is provided, PMT did not have material
liabilities, contingent or otherwise, whether due or to become due, known or
unknown, other than as indicated on the balance sheet of such date or the notes
thereto except for those incurred in the ordinary course of business since the
date of such balance sheet. PMT has adequately funded all accrued employee
benefit costs and such funding (to the date thereof) is reflected in the most
recent balance sheet provided to Bancard.
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5.9 No Litigation. Except as set forth in the PMT Disclosure Schedule,
there are currently no pending and to the best knowledge of the directors and
executive officers of PMT, no threatened lawsuits or administrative proceedings
or investigations against PMT or to which its assets are subject, which, if
adversely determined, could have PMT Material Adverse Effect. PMT is not subject
to any currently existing order, writ, injunction, or decree relating to its
operations.
5.10 Taxes. The provisions for taxes shown on the PMT financial
statements for the year ended July 31, 1996 are adequate to cover the liability
of PMT for all taxes (including employer income tax withholding, social security
and unemployment taxes) to the date thereof and no extraordinary liability for
Taxes has been incurred or threatened since such date.
5.11 Absence of Certain Changes. Since April 30, 1997, there has not
been any material adverse change in the financial condition, results of
operations, business, prospects, assets or liabilities (contingent or otherwise,
whether due or to become due, known or unknown), of PMT, except for changes in
the ordinary course of business consistent with historical experience resulting
from the seasonal nature of PMT's business.
5.12 No Brokers. PMT has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Bancard, the Bancard Shareholders, Merger Sub, or PMT to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. PMT is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
5.13 Bancard Stock Ownership. Neither PMT nor Merger Sub owns any
shares of capital stock of Bancard or other securities convertible into capital
stock of Bancard.
5.14 PMT Common Stock. The issuance and delivery by PMT of shares of
PMT Common Stock in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary corporate action on the part of PMT.
The shares of PMT Common Stock to be issued in connection with the Merger and
this Agreement, when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and shall be free and clear of any liens
and encumbrances other than the restrictions described in this Agreement.
5.15 Pooling of Interests. The representations, warranties and
covenants of PMT, set forth in the draft letter of even date herewith from PMT
to Price Waterhouse LLP, are true and correct in all material respects and will
be true and correct in all material respects as of the Closing Date (except as
such matters may
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be subject to the control of Bancard, Bancard's affiliates, or the Bancard
Shareholders. PMT shall execute such letter at the Closing.
5.16 Full Disclosure. To the knowledge of PMT, all of the information
provided by PMT and its representatives herein or in the PMT Disclosure Schedule
are true, correct and complete in all material respects and no representation,
warranty, or statement made by PMT in or pursuant to this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make such representation, warranty, or
statement not misleading to Bancard. None of the executive officers of PMT has
withheld from Bancard or its representatives disclosure of any event, condition,
or fact that such officer knows could materially adversely affect the financial
condition, results of operations, business, prospects, assets, or liabilities of
PMT, other than business conditions affecting the credit card services business
generally.
5.17 Tax Certificate. The representations and warranties of PMT set forth
in the tax certificate of even date herewith delivered to Bancard and the
Bancard Shareholders are true and correct in all material respects and will be
true and correct in all material respects as of the Closing Date.
5.18 Definition. For purposes of this Article 5, "material" means an
amount in excess of $250,000, either individually or in the aggregate. A PMT
Material Adverse Effect shall mean any adverse effect, whether individually or
in the aggregate, on the business, results of operation, or financial condition
of PMT in excess of $250,000. Any reference herein to PMT's knowledge shall
refer to the knowledge of any executive officer or diretor of PMT without
independent investigation.
ARTICLE 6
COVENANTS
6.1 Covenants of PMT and Bancard. During the period from the date
hereof and continuing until the Effective Time (or such later date as expressly
contemplated or permitted hereby, or to the extent that the other parties shall
otherwise consent in writing), each of PMT and Bancard covenants with the other
that, insofar as the obligations relate to it:
(a) Each of PMT and Bancard shall carry on their respective businesses
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and shall use all reasonable efforts to preserve intact
their present business organizations, maintain their rights and franchises and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their good will and ongoing
businesses shall not be impaired in any material respect at the Effective Time.
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(b) From the date hereof to the Effective Time, each of Bancard and
PMT shall allow all designated officers, attorneys, accountants and other
representatives of the other access at all reasonable times during regular
business hours to the records and files, correspondence, audits and properties,
as well as to all information relating to commitments, contracts, titles and
financial position, or otherwise pertaining to the business and affairs, of
Bancard and PMT.
(c) Except as and to the extent required by law, PMT and Bancard
hereby agree not to disclose or use, and each shall cause its representatives
not to disclose or use, any confidential information with respect to the other
party hereto furnished, or to be furnished, by such other party or their
representatives in connection herewith at any time or in any manner other than
in connection with its evaluation of the Merger. Except as required by law, and
as set forth in this subparagraph (c), neither Bancard nor its representatives
shall make any public statements regarding the Merger or this Agreement without
the prior approval of PMT. After reasonable prior notice to Bancard, PMT may
make such statements, disclosures and filings as it is advised by its counsel
are necessary or appropriate for a public company. In the event the Merger is
not effective for any reason, the confidentiality letter agreement between PMT
and Bancard shall remain in full force and effect.
(d) PMT and Bancard shall cooperate and promptly prepare and PMT
shall, at PMT's expense, file with the SEC, as soon as practicable after the
Closing Date (but in no event prior to December 15, 1997, a Registration
Statement on Form S-3 (the "Registration Statement") under the 1933 Act, with
respect to the resale of up to 25% of the PMT Common Stock issuable in the
Merger (the "Registrable Shares), allocable to each Bancard Shareholder to the
extent requested by each such Bancard Shareholder, provided that if the Bancard
Shareholders request in excess of the 25% limitation, each Bancard Shareholder
shall be allocated at least 25% of his PMT Common Stock, with any remaining
Registrable Shares being allocated, to the extent requested, pro rata based upon
each requesting Bancard Shareholder's total ownership of PMT Common Stock. PMT
and, to the extent information is required to be provided by the Bancard
Shareholders, the Controlling Bancard Shareholders will cause the Registration
Statement to comply as to form in all material respects with the applicable
provisions of the 1933 Act, and the rules and regulations thereunder. PMT shall
use its best efforts, and the Controlling Bancard Shareholders will cooperate
with PMT, to have the Registration Statement declared effective by the SEC by
December 31, 1997, or as promptly as practicable thereafter. PMT agrees to use
its best efforts to keep the Registration Statement effective until the first
anniversary of the Effective Time, and to promptly file amendments to the
Registration Statement or promptly file such reports and/or statements required
by the 1934 Act to the extent necessary so that such Registration Statement,
including the 1934 Act reports and/or statements incorporated therein, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. PMT
shall use its best efforts to obtain prior to the effective date of the
Registration Statement, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement. PMT agrees that the Registration Statement and each amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of circumstances
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under which they were made, not misleading; provided, however, that the
foregoing shall not apply to the extent that any such untrue statement of a
material fact or omission to state a material fact was made by PMT in reliance
upon and in conformity with information concerning the Bancard Shareholders
furnished to PMT by the Controlling Bancard Shareholders for use in the
Registration Statement. Each of the Controlling Bancard Shareholders agrees that
the information provided by it for inclusion in the Registration Statement and
each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No amendment or supplement to the Registration Statement will be
made by PMT without the approval of the other party. PMT will advise Bancard and
each of the holders of the PMT Common Stock issuable in the Merger, promptly
after it receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, the issuance
of any stop order, the suspension of the qualification of the PMT Common Stock
issued in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Registration Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.
(e) PMT agrees to use its best efforts to avoid any event that makes
PMT ineligible to use Form S-3 in accordance with this Agreement.
(f) At the time the Registration Statement filed in accordance with
the provisions of Section 6.1(d) becomes effective, and at the effective date of
any post-effective amendment thereto, PMT will, at its own expense, furnish to
the holders of the PMT Common Stock included in such Registration Statement an
opinion of PMT's counsel to the effect that the Registration Statement and the
prospectus contained therein, and each amendment or supplement thereto, as of
their respective effective or issue dates, comply as to form in all material
respects with the requirements of the 1933 Act and the rules and regulations
thereunder. Such counsel shall also state that no facts have come to the
attention of such counsel that cause them to believe that such Registration
Statement, the prospectus contained therein, or any amendment or supplement
thereto, as of their respective effective or issue dates, contains any untrue
statement of any material fact or omits to state any material fact necessary to
make the statements therein not misleading (except that no statement need be
made with respect to any financial statements, notes thereto or other financial
or statistical data
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or other expertized material contained therein). If for any reason PMT's counsel
is unable to make such statement, PMT shall so notify the Bancard Shareholders
and shall use its best efforts to remove expeditiously all impediments to the
rendering of such opinion.
(g) PMT shall promptly notify the participating holders of the PMT
Common Stock of the occurrence of any event as a result of which any current
prospectus included in the Registration Statement filed pursuant to this Section
6.1(d) includes any misstatement of a material fact or omits to state any
material fact to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and shall promptly
file amendments to the Registration Statement or promptly file such reports
and/or statements required by the 1934 Act to the extent necessary so that such
registration statement, including the 1934 Act reports and/or statements
incorporated therein, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of circumstances under which they were made,
not misleading.
(h) PMT's obligations under Section 6.1(d) with respect to each holder
of PMT Common Stock are expressly conditioned upon such holder's furnishing to
PMT in writing such information concerning such holder and the terms of such
holder's proposed offering as PMT shall reasonably request for inclusion in the
Registration Statement. In the case of each registration effected pursuant to
this Agreement, PMT shall indemnify each holder thereof (and each underwriter
for such holder and each person, if any, who controls such underwriter within
the meaning of the 1933 Act) from any loss, claim, damage or liability arising
out of or based upon any untrue statement of a material fact contained in such
Registration Statement or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except for any such statement or omission based on information furnished in
writing by such holder of PMT Common Stock expressly for use in connection with
such Registration Statement; and such holder shall indemnify PMT (and each of
its officers and directors who has signed such registration statement, each
director, each person, if any, who controls PMT within the meaning of the 1933
Act, each underwriter for PMT and each person, if any, who controls such
underwriter within the meaning of the 1933 Act) and each other such holder
against any loss, claim, damage or liability arising from any such statement or
omission which was made in reliance upon information furnished in writing to PMT
by such holder of PMT Common Stock expressly for use in connection with such
Registration Statement.
(i) PMT shall furnish to each holder of PMT Common Stock such number
of copies of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) in conformity with the requirements of the
1933 Act, and such other documents, as such holder of PMT Common Stock may
reasonably request in order to effect the offering and sale of the PMT Common
Stock
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to be offered and sold, but only while PMT shall be required under the
provisions hereof to cause the Registration Statement to remain current.
6.2 Blackout Period. PMT shall be entitled on only one occasion to
(i) postpone the filing or effectiveness of the Registration Statement
contemplated under Section 6.1(d) hereof; or (ii) if effective, elect that the
Registration Statement not be useable and require the Bancard Shareholders to
suspend sales pursuant to the prospectus contained therein, for a reasonable
period of time, but not in excess of 60 days (a "Blackout Period"), if PMT
determines in good faith that the registration and distribution of the shares of
PMT Common Stock (or the use of the registration statement or related
prospectus) would interfere with any pending material acquisition, material
corporation reorganization or any other premature disclosure thereof. PMT shall
promptly give the Bancard Shareholders written notice of such termination,
containing a general statement of the reasons for such postponement or
restriction of use and an approximation of the anticipated delay.
6.3 Covenants of Bancard and Bancard Shareholders. Bancard and Bancard
Shareholders covenant and agree that between the date hereof and continuing
until the Effective Time (or such later date as expressly contemplated or
permitted hereby, or to the extent that PMT shall otherwise consent in writing):
(a) Prior to the Effective Time, Bancard agrees (a) that it shall, and
shall direct and use its best efforts to cause its directors, officers,
employees, shareholders, advisors, accountants and attorneys (the
"Representatives"), including such Representatives of any of Bancard's
affiliated entities or persons, not to, initiate, solicit or encourage, directly
or indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its shareholders)
with respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of Bancard (any such proposal or offer being hereinafter
referred to as a "Acquisition Proposal") or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
(b)that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing and will take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken in
this Section 6.2(a).
(b) Bancard will make all normal and customary repairs, and
replacements, to its facilities, will not dispose of any material assets (other
than inventory in the ordinary course of business) other than at fair market
value and with the prior written consent of PMT, and without limiting the
generality of the foregoing or the covenants set forth in 6.1(a), Bancard will
not, without the prior
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written consent of PMT which consent shall not be unreasonably withheld with
respect to the matters set forth in (ix):
(i) change its Articles of Incorporation or bylaws or merge and
consolidate with or into any entity or obligate itself to do so;
(ii) other than a dividend in customary amounts payable prior to
Closing, declare, set aside or pay any cash dividend or other
distribution on or in respect of shares of its capital stock, or
any redemption, retirement or purchase with respect to its
capital stock or issue any additional shares of its capital
stock. Bancard may pay reasonable fees and expenses related to
the transaction contemplated herein in accordance with a schedule
of estimated fees and expenses approved by PMT;
(iii) other than normal payments on loans for borrowed money,
discharge or satisfy any lien, charge, encumbrance or
indebtedness outside the ordinary course of business, except
those required to be discharged or satisfied;
(iv) authorize, guarantee or incur indebtedness aggregating in excess
of $50,000 except in the ordinary course of business;
(v) make any capital expenditures or capital additions or
betterments, or commitments therefor, aggregating in excess of
$50,000;
(vi) loan funds to any person except in the ordinary course of
business;
(vii) institute, settle or agree to settle any litigation, action or
proceeding before any court or governmental body except in the
ordinary course of business;
(viii) mortgage, pledge or subject to any other encumbrance any of
its property or assets, tangible or intangible, except in the
ordinary course of business;
(ix) other than ordinary and customary raises for employees authorize
any compensation increases of any kind whatsoever for any
employee, provided Bancard shall pay owing or accrued deferred
compensation;
(x) enter into any material contract including leases and real estate
agreements; or
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(xi) enter into any transaction outside the ordinary course of
business.
(c) Prior to the Effective Time and thereafter, the Bancard
Shareholders shall not engage in any transactions involving short sales, margin
purchases and trading in puts or calls with respect to the securities of PMT.
(d) Without the prior written consent of PMT, Bancard shall not take
any action which would cause or tend to cause the conditions upon the
obligations of the parties hereto to effect the transactions contemplated hereby
not to be fulfilled; including without limitation, taking, causing to be taken,
or permitting or suffering to be taken or to exist any action, condition or
thing which would cause the representations and warranties made by Bancard
herein not to be true, correct and accurate as of the Closing Date.
(e) Bancard shall not take any action that will result, directly or
indirectly, in a material adverse change in the value of the Merchant Accounts
taken as a whole since July 31, 1997.
(f) Bancard prior to the Closing Date, shall have delivered its
unaudited financial statements for the year ended December 31, 1996 and for the
seven-month period ended July 31, 1997, in each case in accordance with sound
accounting principles consistently applied during the periods involved, except
as may be noted therein. Bancard shall promptly provide to PMT monthly and
quarterly financial statements of Bancard.
(g) Bancard, prior to the Closing Date, shall have arranged for the
cancellation or exercise of the outstanding options or warrants to purchase
Bancard Common Stock.
(h) Prior to the Effective Time and thereafter, Bancard and the
Bancard Shareholders shall not (i) knowingly take any action, or knowingly fail
to take any action, that would jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes; (ii) knowingly take any action,
or knowingly fail to take any action, that would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a)(1)(A) and
(a)(2)(E) of the Code; or (iii) enter into any contract, agreement, commitment
or arrangement with respect to either of the foregoing.
(i) From and after the date hereof and until the Effective Time,
Bancard shall not incur liabilities to the shareholders of Bancard in excess of
the unpaid principal of $1,673,644.00, plus accrued and unpaid interest thereon.
(j) The Bancard Shareholders covenant and agree that, with the
cooperation of PMT, they shall cause to be prepared and filed all necessary
federal and state income tax returns including, but not limited to, Form 1120S
tax return for Bancard for the period from January 1, 1997 to Closing utilizing
the same tax
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principles and procedures as applied for prior tax years of Bancard. The Bancard
Shareholders will make available any drafts of such returns to PMT for its
review and comment so as to permit timely filing of the returns.
6.4 Covenants of PMT. PMT covenants and agrees that between the date
hereof and continuing until the Effective Time (except as expressly contemplated
or permitted hereby, or to the extent that Bancard shall otherwise consent in
writing):
(a) PMT shall promptly prepare and submit to the Nasdaq National
Market ("NASDAQ") a listing application covering the shares of PMT Common Stock
issuable in the Merger, and shall use its best efforts to obtain, prior to the
Effective Time, approval for the listing of such PMT Common Stock, subject to
official notice of issuance.
(b) PMT shall promptly send the Bancard Shareholders copies of all
filings with the SEC.
(c) Without the prior written consent of Bancard, PMT shall not take
any action which would cause or tend to cause the conditions upon the
obligations of the parties hereto to effect the transactions contemplated hereby
not to be fulfilled including, without limitation, taking, causing to be taken,
or permitting or suffering to be taken or to exist any action, condition or
thing which would cause the representations and warranties made by PMT herein
not to be true, correct and accurate as of the Closing Date.
(d) Prior to the Effective Time and thereafter, PMT shall not (i)
knowingly take any action, or knowingly fail to take any action, that would
jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes; (ii) knowingly take any action, or knowingly fail to take
any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a)(1)(A) and (a)(2)(E) of the
Code; or (iii) enter into any contract, agreement, commitment or arrangement
with respect to either of the foregoing.
(e) To the extent PMT elects, for whatever reason or no reason, not to
retain any Bancard employees, for one year following the Closing Date, PMT will
not oppose such person's claim for unemployment benefits, and PMT shall complete
all appropriate questionnaires or claim forms required by state or other
governmental officials in this regard.
(f) PMT agrees that after the Effective Time, it will indemnify any
person who has rights to indemnification from Bancard to the same extent and on
the same conditions as such person is entitled to indemnification pursuant to
Bancard's Articles of Incorporation or Bylaws as in effect on the date of this
Agreement.
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(g) PMT shall report post-Merger combined results of Bancard and PMT
no later than 60 days after the end of PMT's first fiscal quarter ending after
the date hereof including at least 30 days of post-merger combined results
following the Effective Time if the requirement for publication of 30 days post-
Merger combined results shall not have been satisfied in some other manner by
such time in compliance with applicable rules.
(h) PMT shall cause Bancard to satisfy the liability to Jay W. Hearst
as referenced in Section 6.3(i) within five days of the Closing date.
(i) With a view to making the benefit of certain rules and regulations
promulgated by the SEC available to the Bancard Shareholders with respect to its
PMT Common Stock received in the Merger, PMT agrees as follows:
(i) to at all times make and keep public information
available, as those terms are understood and defined in Rule 144 promulgated
under the 1933 Act;
(ii) PMT agrees to use its best efforts to file with the SEC
in a timely manner all reports and other documents required of PMT under the
1933 Act and the 1934 Act;
(iii) to furnish to the Bancard Shareholders, upon request, a
written statement as to PMT's compliance with the reporting requirements under
the 1934 Act as required of PMT to qualify sales of securities under Rule 144
promulgated under the 1933 Act, a copy of the most recent annual or quarterly
report of PMT and such other reports and documents of PMT and other information
reasonably available to PMT as the Bancard Shareholders may reasonably request
in availing itself of the benefits of any rule or regulation of the SEC allowing
the Bancard Shareholders to sell any such PMT Common Stock without registration;
and
(iv) to facilitate the exchange of any legended, restricted
share certificates of PMT Common Stock for unlegended certificates of the same
in connection with any permitted transfer of such shares by the Bancard
Shareholders pursuant to an available exemption from the registration
requirements of federal and state securities law.
(j) PMT acknowledges that the Bancard Shareholders have agreed to
prepare and file all necessary federal and state income tax returns for Bancard
for the period from January 1, 1997 through Closing. PMT hereby covenants and
agrees to provide the Bancard Shareholders, prior officers, and directors of
Bancard and their accountants, with access to the Bancard corporate records so
as to facilitate the timely filing of such federal and state income tax returns
including, but not limited to, Form 1120S. Furthermore, PMT shall, after
appropriate review, cause a duly-authorized officer of Bancard to sign such
returns so as to facilitate the timely filing thereof.
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ARTICLE 7
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) No action or proceeding shall have been instituted before a court
or other governmental body by any governmental agency or public authority to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain an amount of damages or other material relief in connection with the
execution of this Agreement or the related agreements or the consummation of the
Merger; and no governmental agency shall have given notice to any party hereto
to the effect that consummation of the transactions contemplated by this
Agreement would constitute a violation of any law or that it intends to commence
proceedings to restrain consummation of the Merger.
(b) The PMT Common Stock to be issued in the Merger shall have been
listed on the NASDAQ, and all necessary state securities law permits or
approvals shall have been obtained.
(c) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other regulatory
body required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a material
adverse effect on the business of PMT and Bancard, taken as a whole, following
the Effective Time.
(d) PMT shall have received from Bancard copies of all resolutions
adopted by the Board of Directors and shareholders of Bancard in connection with
this Agreement and the transactions contemplated hereby. Bancard shall have
received from PMT and Merger Sub copies of all resolutions adopted by the Board
of Directors of each respective company and the shareholders of Merger Sub in
connection with this Agreement and the transactions contemplated hereby.
(e) PMT, Bancard and the Bancard Controlling Shareholders shall have
executed written agreements concerning: (i) employment of Jay W. Hearst, Anthony
Sdao, Scott J. Bahneman and Jack W. Hearst , and (ii) employee options for non-
Bancard Shareholders.
7.2 Conditions to Obligation of Bancard and the Bancard Shareholders to
Effect the Merger. The obligation of Bancard to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
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(a) PMT shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of PMT and Merger Sub contained in this Agreement
and in any document delivered in connection herewith shall be true and correct
as of the Closing Date, and Bancard shall have received a certificate of the
President or an Executive Officer of PMT, dated the Closing Date, certifying to
such effect.
(b) From the date of this Agreement through the Effective Time, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of PMT, that would have or would be reasonably
likely to have a PMT Material Adverse Effect other, than any such change that
affects both Bancard and PMT in a substantially similar manner.
(c) Bancard shall have received a written opinion, dated as of the
Closing Date, from the legal counsel of PMT, in form and substance satisfactory
to it, as to certain matters agreed upon by legal counsel of PMT and Bancard.
(d) Prior to Closing, Bancard shall not have notified PMT in writing
that Bancard's review of PMT's business, operations, and the matters disclosed
in the PMT Disclosure Schedule has revealed matters (described in reasonable
detail) which in Bancard's reasonable business judgment would adversely affect
the business or operations of PMT.
(e) Bancard shall have obtained all consents or waivers required to
consummate the transactions as provided in the Bancard Disclosure Schedule.
(f) Bancard shall have received the tax certificate referenced in
Section 5.17 hereof.
7.3 Conditions to Obligation of PMT and Merger Sub to Effect the Merger.
The obligations of PMT and Merger Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) Bancard shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of Bancard contained in this Agreement and in any
document delivered in connection herewith shall be true and correct as of the
Closing Date, and PMT shall have received a certificate of the President of
Bancard, dated the Closing Date, certifying to such effect.
(b) PMT shall be satisfied that the Merger will qualify for accounting
by PMT as a pooling of interests under generally accepted accounting principles
and under applicable rules and regulations of the SEC. In connection therewith,
PMT shall have received, on or before the Closing Date, a letter from Price
Waterhouse LLP (or any other accountants of PMT's choosing) dated as of the
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Closing Date to the effect that the transactions contemplated by this Agreement
may be treated by PMT as a "pooling of interests" for accounting purposes.
(c) [Intentionally omitted.]
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of Bancard that would have or would be
reasonably likely to have a Bancard Material Adverse Effect, other than any such
change that affects both Bancard and PMT in a substantially similar manner.
(e) PMT shall have received evidence of (i) the resignation of each
director of Bancard effective as of the Closing Date and (ii) termination of
shareholder agreements and the like including any existing employment or
compensation arrangements.
(f) PMT shall have received a written opinion, dated as of the Closing
Date, from the legal counsel of Bancard, in form and substance satisfactory to
it, as to certain matters agreed upon by legal counsel of PMT and Bancard.
(g) Prior to Closing, PMT shall not have notified Bancard in writing
that PMT's review of Bancard's business, operations, and the matters disclosed
in the Bancard Disclosure Schedule has revealed matters (described in reasonable
detail) which in PMT's reasonable business judgment would adversely affect the
business or operations of Bancard.
(h) [Intentionally omitted.]
(i) In order to ensure that following the consummation of the Merger
Jay W. Hearst, Anthony Sdao, Scott J. Bahneman and Jack W. Hearst, Gillian G.
Hearst and Stephen M. Hearst shall not engage in certain activities as specified
in the noncompetition agreements, Jay W. Hearst, Anthony Sdao, Scott J. Bahneman
and Jack W. Hearst, Gillian G. Hearst and Stephen M. Hearst shall have executed
individual noncompetition agreements, in form and substance satisfactory to PMT
and Jay W. Hearst, Anthony Sdao, Scott J. Bahneman and Jack W. Hearst, Gillian
G. Hearst and Stephen M. Hearst.
(j) The liabilities to the Shareholders of Bancard as of the Closing
Date shall not exceed the unpaid principal of $1,673,644 plus accrued but unpaid
interest thereon.
(k) Bancard shall have obtained all consents or waivers required to
consummate the transactions as provided in the Bancard Disclosure Schedule.
(l) The Dissenting Bancard Shares shall not exceed 10% of the total
number of outstanding shares of Bancard Common Stock.
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(m) PMT shall have received the tax certificate referenced in Section
4.29 hereof.
ARTICLE 8
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval of this Agreement by the shareholders of Bancard, by the mutual
consent of PMT and Bancard.
8.2 Termination by Either PMT or Bancard. This Agreement may be terminated
and the Merger may be abandoned by action of the Board of Directors of either
PMT or Bancard if (a) the Merger shall not have been consummated on or by
October 2, 1997, or (b) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
clause (b) shall have used all reasonable efforts to remove such injunction,
order or decree.
8.3 Termination by Bancard. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the shareholders of Bancard, by action of the Board of
Directors of Bancard, if (a) there has been a breach by PMT or Merger Sub of any
representation or warranty contained in this Agreement which would have or would
be reasonably likely to have a PMT Material Adverse Effect, or (b) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of PMT, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by Bancard to
PMT.
8.4 Termination by PMT. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, by action of the Board of
Directors of PMT, if (a) there has been a breach by Bancard of any
representation or warranty contained in this Agreement which would have or would
be reasonably likely to have a Bancard Material Adverse Effect, (b) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of Bancard, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by PMT to
Bancard, or (c) the Merger will not qualify for accounting by PMT as a pooling
of interests under generally accepted accounting principles and under applicable
rules and regulations of the SEC.
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8.5 Effect of Termination and Abandonment. Upon termination of this
Agreement pursuant to this Article, this Agreement shall be void and of no other
effect, and there shall be no liability by reason of this Agreement or the
termination thereof on the part of any party hereto, or on the part of the
respective directors, officers, employees, agents or shareholders of any of
them.
8.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 9
INDEMNIFICATION
(a) Indemnification by Bancard Shareholders. Subject to the
provisions of Sections 9(b) hereof, the Bancard Shareholders shall jointly and
severally indemnify, save and hold PMT (including Bancard following the Merger)
and its affiliates, successors and permitted assigns (the "PMT Indemnitees"),
harmless against and from, and will reimburse the PMT Indemnitees on demand for,
any liability, demands, claims, actions or causes of action, assessments,
losses, fines, penalties, costs, damages and expenses, including reasonable
attorneys' fees, disbursements and expenses (collectively, "Damages"), sustained
or incurred by any of the PMT Indemnitees at any time after the Closing Date as
a result of, arising out of or by virtue of, (i) any misrepresentation, breach
of any warranty or representation, or nonfulfillment of any agreement or
covenant on the part of Bancard or the Bancard Shareholders, whether contained
in this Agreement or any Exhibit or Schedule hereto or thereto or any
certificate furnished or to be furnished by Bancard or any Bancard Shareholder
to PMT pursuant hereto or in any closing document delivered by Bancard or the
Bancard Shareholders to PMT in connection herewith or, (ii) any final
resolution, by settlement, adjudication, arbitration or otherwise, of any
litigation or other adversarial proceeding pending or threatened against Bancard
on the Closing Date as indicated in the Bancard Disclosure Schedule.
(b) Bancard Shareholders' Liability. In no event shall the obligation
of the Bancard Shareholders to indemnify PMT Indemnitees pursuant to Section
9(a) hereof exceed the amounts listed opposite each such Bancard Shareholder's
name on Annex B hereto (which is incorporated herein for all purposes).
Notwithstanding anything to the contrary contained herein, Jack W. Hearst,
Gillian G. Hearst and Stephen M. Hearst shall not be liable under this Article 9
for any breach of any representation or warranty or non-fulfillment of any
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covenant or material agreement referred to in Article 9(a) hereof except for
their own breach of any covenant set forth in Sections 6.3(c), 6.3(h) and 6.3(j)
hereof and the release of Bancard Shareholders set forth in Section 9(e) hereof.
(c) Indemnification by PMT. Upon the terms and subject to the
conditions set forth in Section 9(d) hereof and this Section 9(c), PMT agrees to
indemnify, save and hold the Bancard Shareholders and their heirs, successors
and permitted assigns (the "Shareholder Indemnitees") harmless against and from,
and will reimburse the Shareholder Indemnitees on demand for, any Damages
sustained or incurred by any of the Bancard Shareholder Indemnitees at any time
after the Closing Date as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation, or non-fulfillment
of any agreement or covenant on the part of PMT, whether contained in this
Agreement or any Exhibit or Schedule hereto or thereto, or any written statement
or certificate furnished or to be furnished to the Bancard Shareholders pursuant
hereto or in any closing document delivered by PMT to Bancard or the Bancard
Shareholders in connection herewith.
(d) Conditions of Indemnification Pursuant to Sections 9(a) and 9(c).
(i) Promptly following the receipt by a PMT Indemnitee or a Shareholder
Indemnitee (as defined in Section 9(c) hereof) as the case may be, of written
notice of a demand, claim, action, assessment or proceeding made or brought by a
third party, including a governmental agency (a "Third Party Claim"), the PMT
Indemnitee or Shareholder Indemnitee receiving such notice of the Third Party
Claim (A) shall promptly notify the Bancard Shareholders or PMT, as the case may
be, of its existence, setting forth the facts and circumstances of which such
PMT Indemnitee or Shareholder Indemnitee has received notice, and (B) if the PMT
Indemnitee or Shareholder Indemnitee giving such notice is a person entitled to
indemnification under this Section 9 (an "Indemnified Party"), such Indemnified
Party shall specify in such notice the basis hereunder upon which the
Indemnified Party's claim for indemnification is asserted.
(ii) The Indemnified Party shall, upon reasonable notice by the Bancard
Shareholders or PMT, as the case may be, tender the defense of a Third Party
Claim to the Bancard Shareholders or PMT, as the case may be (the "Indemnifying
Party"). If the Indemnifying Party accepts responsibility for the defense of a
Third Party Claim, then the Indemnifying Party shall have the exclusive right to
contest, defend and litigate the Third Party Claim and shall have the exclusive
right, in its discretion exercised in good faith and upon the advice of counsel,
to settle any such matter, either before or after the initiation of litigation,
at such time and upon such terms as it deems fair and reasonable, provided that
at least ten days prior to any such settlement, it shall give written notice of
its intention to settle to the Indemnified Party. The Indemnified Party shall
have the right to be represented by counsel at its own expense in any defense
conducted by the Indemnifying Party.
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(iii) If, in accordance with the foregoing provisions of this Section
9(d), an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if the Indemnifying Party shall fail to accept the defense of a
Third Party Claim that has been tendered in accordance with this Section 9(d),
the Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided at least ten days prior to any such settlement, written
notice of its intention to settle is given to the Indemnifying Party. If,
pursuant to this Section 9(d) the Indemnified Party so defends or settles a
Third Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by the
Indemnifying Party for the reasonable attorneys' fees and other expenses of
defending the Third Party Claim that is incurred from time to time, immediately
following the presentation to the Indemnifying Party of itemized bills for said
attorneys' fees and other expenses. No failure by the Indemnifying Party to
acknowledge in writing its indemnification obligations under this Section 9
shall relieve it of such obligations to the extent they exist.
(iv) Notwithstanding the foregoing, in connection with any settlement
negotiated by the Indemnifying Party, no Indemnified Party shall be required to
(A) enter into any settlement (I) that does not include the delivery by the
claimant or plaintiff to the Indemnified Party of a release from all liability
in respect of such claim or litigation, or (II) if the Indemnified Party shall,
in writing to the Indemnifying Party within the ten day period prior to such
proposed settlement, disapprove of such settlement proposal (which settlement
proposal will not be unreasonably disapproved) and desire to have the
Indemnifying Party tender the defense of such matter back to the Indemnified
Party, or (B) consent to the entry of any judgment that does not include a full
dismissal of the litigation or proceeding against the Indemnified Party with
prejudice; provided, however, that should the Indemnified Party disapprove of a
settlement proposal pursuant to Clause (II) above, the Indemnified Party shall
thereafter have all of the responsibility for defending, contesting and settling
such Third Party Claim but shall not be entitled to indemnification by the
Indemnifying Party to the extent that, upon final resolution of such Third Party
Claim, the Indemnifying Party's liability to the Indemnified Party but for this
proviso exceeds what the Indemnifying Party's liability to the Indemnified Party
would have been if the Indemnifying Party were permitted to settle such Third
Party Claim in the absence of the Indemnified Party exercising its right under
Clause (II) above.
(e) Release by the Bancard Shareholders. Effective upon the Closing,
the Bancard Shareholders hereby release and discharge PMT and its subsidiaries
and each of its officers and directors from, and agree and covenant that in no
event will the Bancard Shareholders commence any litigation or other legal or
administrative proceeding against, PMT, its Subsidiaries or any of their
officers or
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directors, whether in law or equity, relating to any and all claims and demands,
known and unknown, suspected and unsuspected, disclosed and undisclosed, for
damages, suspected or consequential, past, present and future, arising out of or
in any way connected with their ownership of the Bancard Common Stock prior to
the Effective Time, other than claims or demands arising out of or in any way
connected with this Agreement and the agreements and other documents
contemplated hereby and the transaction contemplated hereby and thereby;
provided, however, that nothing contained herein shall relieve any obligations
of PMT to indemnify the Bancard Shareholders pursuant to Section 9 hereof.
(f) Survival. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing Date
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that all representations and warranties,
and the agreements of the Bancard Shareholders and PMT to indemnify each other
set forth in this Section 9, shall survive and continue for, and all claims with
respect thereto shall be made prior to the end of, 12 months from the Closing
Date, except for any indemnification claim which shall be pending as of the end
of the applicable period referred to above, in which event such indemnities
shall, as and to the extent asserted, survive with respect to such claim until
the final disposition thereof.
(g) Reduction for Insurance. The gross amount for which an
Indemnifying Party is liable for on behalf of an Indemnified Party pursuant to
this Article 9 (the "Indemnifiable Loss") shall be reduced (including, without
limitation, retroactively) by any insurance proceeds actually recovered by or on
behalf of such Indemnified Party specially as a result of, and in compensation
for, the subject matter of an indemnification claim by such Indemnified Party.
If the Indemnified Party shall have received or shall have been paid on its
behalf an indemnity payment in respect of such Indemnifiable Loss and shall
subsequently receive insurance proceeds specially as a result of, and in
compensation for, the subject matter of an indemnification claim by such
Indemnified Party in respect of such Indemnifiable Loss, then the Indemnified
Party shall pay to the Indemnifying Party such insurance proceeds or, if such
insurance proceeds are greater than the indemnity payment, only the amount of
such indemnity payment.
(h) Limitation. Notwithstanding the foregoing, no Indemnifying Party
shall have any obligation to indemnify an Indemnified Party for any claim or
related series of claims involving, in the aggregate, with respect to the first
$250,000 of total liabilities, unless the total aggregate liabilities exceed
such amount, in which case the indemnification obligation of the Indemnifying
Party will include all such liabilities, including the first $250,000 of total
liabilities.
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ARTICLE 10
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations and
warranties of the parties as set forth in this Agreement or in any exhibit,
schedule or certificate delivered pursuant to this Agreement shall survive until
the first anniversary of the Closing Date.
10.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing and delivered by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to Bancard or the Controlling
If to PMT or Merger Sub: Shareholders:
Gregory S. Daily Jay W. Hearst
President 2845 Wilderness Place
PMT Services, Inc. Boulder, Colorado 80301
3841 Green Hills Village Drive
Nashville, Tennessee 37215
With a copy to: With a copy to:
Howard W. Herndon, Esq. Neil Goff, Esq.
Waller Lansden Dortch & Davis, Otten, Johnson, Robinson, Neff &
A Professional Limited Liability Company Ragonetti, P.C.
511 Union Street, Suite 2100 950 Seventeenth Street, Suite 1600
Nashville, Tennessee 37219-1760 Denver, Colorado 80202
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3 Assignment, Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs and assigns.
10.4 Entire Agreement. This Agreement, the Exhibits, the Bancard
Disclosure Schedule, the PMT Disclosure Schedule, the confidentiality letter and
any documents delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof and
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supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
10.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
shareholders of Bancard and PMT, but after any such shareholder approval, no
amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.6 Governing Law. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the laws of the United
States and those of the State of Tennessee applicable to contracts made and to
be performed wholly within such state.
10.7 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered via
facsimile or otherwise shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
10.8 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
10.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11 Incorporation of Exhibits. The Bancard Disclosure Schedule, the
PMT Disclosure Schedule, and the Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
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10.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.13 Expenses. Each party to this Agreement shall bear its own
expenses in connection with the Merger and the transactions contemplated hereby.
10.14 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.15 Press Releases. All press releases issued by PMT or Bancard with
respect to these transactions shall be in form reasonably approved by PMT and
Bancard.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf as of the day and year first written
above.
PMT SERVICES, INC.
ATTEST:
By: By:
----------------------- -----------------------
Gregory S. Daily
President
PMT BCI ACQUISITION
CORPORATION
ATTEST:
By: By:
----------------------- -----------------------
Gregory S. Daily
President
BANCARD, INC.
ATTEST:
By: By:
----------------------- -----------------------
-----------------------
President
BANCARD CONTROLLING
SHAREHOLDERS:
---------------------------
Jay W. Hearst
---------------------------
Anthony Sdao
---------------------------
Scott J. Bahneman
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The undersigned, who are Bancard Shareholders, hereby enter into this
Agreement only with respect to the benefits conferred upon the Bancard
Shareholders hereunder and the covenants set forth in Sections 6.3(c), 6.3(h)
and 6.3(j) hereof (the "Shareholder Covenants") and the provisions of Article 9
which relate to indemnification for a breach of the Shareholder Covenants, and
the release by the Bancard Shareholders set forth in Section 9(e).
---------------------------
Jack W. Hearst
---------------------------
Gillian G. Hearst
---------------------------
Stephen M. Hearst
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 333-00164,
333-16757, 333-19157, 333-24783, 333-26075 and 333-27403) and the Registration
Statements on Form S-8 (Nos. 33-88974, 33-88976, 33-97000 and 333-33021) of PMT
Services, Inc. of our report appearing on page 1 of this Form 8-K. We also
consent to the application of such report to the Financial Statement Schedule
for the year ended July 31, 1997 which appears on page 1 of Item 7(a)(2) of this
Form 8-K when such schedule is read in conjunction with the financial statements
referred to in our report. The audit referred to in such report also included
this schedule.
PRICE WATERHOUSE LLP
Nashville, Tennessee
October 10, 1997
