AGREEMENT AND PLAN OF REORGANIZATION
by and between
TPN, INC.
and
PRE-PAID LEGAL SERVICES, INC.
Dated as of September 23, 1998
TABLE OF CONTENTS
1. THE MERGER
1.1 The Merger
1.2 Effect of the Merger
1.3 Governing Instruments, Directors and Officers of the Surviving
Corporation
1.4 Effect on Securities
1.5 Payment of the Merger Consideration
1.6 Exchange of Certificates; Distributions With Respect to
Unexchanged Shares
1.7 Fractional Acquiror Common Stock
1.8 Effective Time of the Merger
1.9 Taking of Further Action
1.10 Escrow
2. REPRESENTATIONS AND WARRANTIES OF TARGET
2.1 Organization, Power and Qualification
2.2 Subsidiaries
2.3 Authority; Power; Binding Effect
2.4 No Violation; Consents
2.5 Ownership of Target's Capital Stock
2.6 Transactions with Certain Persons
2.7 Financial Statements
2.8 Receivables
2.9 Inventory
2.10 Absence of Undisclosed Liabilities; List of Accounts Payable
2.11 Contracts and Commitments
2.12 Marketing Agreement With Primestar
2.13 Title to Assets
2.14 Condition and Location of Assets
2.15 Intellectual Property
2.16 Software
2.17 Real Property
2.18 Insurance
2.19 Conduct of Target Since the Interim Balance Sheet Date
2.20 Personnel Information
2.21 Employee Benefits
2.22 Severance Arrangements
2.23 Litigation; Decrees
2.24 Compliance With Law; Permits
2.25 Environmental Matters
2.26 Tax Matters
2.27 Commissions or Finders Fees
2.28 Certain Business Practices and Regulations; Potential
Conflicts of Interest
2.29 Year 2000 Problem
2.30 Disclosure
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR
3.1 Organization
3.2 Authority; Power; Binding Effect
3.3 Acquiror Common Stock
3.4 No Violation; Consents
3.5 Commission Documents and Other Reports
3.6 Commissions or Finders Fees
3.7 Disclosure
4. OTHER COVENANTS AND AGREEMENTS
4.1 General
4.2 Shareholders Agreement
4.3 Full Access to Information
4.4 Conduct of Business
4.5 Notification
4.6 Approvals; Filings
4.7 Confidentiality
4.8 Publicity
4.9 Acquisition Proposals
4.10 Tax-Free Reorganization
4.11 Pooling of Interests
4.12 Stock Exchange Listing
4.13 Marketing Services Agreements and Non-Competition Agreements
4.14 Certain Payments to Target Employees
4.15 Third Party Fees and Expenses of Target
4.16 Termination of Other Agreements Affecting Target Common Stock
4.17 Termination of Employment Agreements
5. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
5.1 Tax-Free Reorganization
5.2 Pooling of Interests
5.3 Governmental and Third Party Consents and Approvals
5.4 No Adverse Proceedings
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR
6.1 Representations and Warranties
6.2 Performance by Target
6.3 Absence of Material Adverse Changes
6.4 Certificate
6.5 Closing Documents
6.6 Execution of Shareholders Agreement by all Shareholders
6.7 Termination of Certain Agreements
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TARGET
7.1 Representations and Warranties
7.2 Performance by Acquiror
7.3 Absence of Material Adverse Changes
7.4 Certificate
7.5 Execution of Shareholders Agreement by Acquiror
7.6 Closing Documents
8. CLOSING
8.1 Closing Date
8.2 Documents to be Delivered by Target and Shareholders
8.3 Documents to be Delivered by Acquiror
8.4 Mutual Deliveries
8.5 Concurrent Conditions
9. INDEMNIFICATION BY TARGET; ESCROW FUND
9.1 Survival; Right to Indemnification Not Affected by
Investigation
9.2 Escrow Fund
9.3 Damages
9.4 Time Limitations
9.5 Limitations on Amount
9.6 Third-Party Claim Procedures
10. INDEMNIFICATION BY ACQUIROR
11. REMEDIES EXCLUSIVE
12. TERMINATION
12.1 Termination Events
12.2 Effect of Termination
13. MISCELLANEOUS PROVISIONS
13.1 Specific Performance
13.2 Intentionally Omitted
13.3 Notices
13.4 Waiver
13.5 Entire Agreement and Amendment
13.6 Intentionally Omitted
13.7 Further Assurances
13.8 Governing Law
13.9 Severability
13.10 Execution in Counterparts
13.11 Assignments, Successors and No Third Party Rights
13.12 Certain Interpretive Matters and Definitions
13.13 Jurisdiction and Venue
13.14 Dispute Resolution
13.15 Payment of Expenses
14. DEFINITIONS
14.1 Definitions
14.2 Other Definitions.
EXHIBITS
Exhibit 1.5 - Payment of Merger Consideration
Exhibit 1.10 - Escrow Agreement
Exhibit 4.2 - Shareholders Agreement
Exhibit 8.2(b) - Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
Exhibit 8.3(c) - Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Corporation
SCHEDULES
Schedule 2.1 - Foreign Qualification
Schedule 2.4 - No Violation; Consents
Schedule 2.5 - Ownership of Target's Capital Stock
Schedule 2.6 - Transactions with Certain Persons
Schedule 2.7(A) - Audited Financial Statements
Schedule 2.7(B) - Interim Financial Statements
Schedule 2.10 - Absence of Undisclosed Liabilities; List of
Target's Accounts Payable
Schedule 2.11 - Target's Contracts and Commitments
Schedule 2.12 - Primestar Contract Matters
Schedule 2.15 - Intellectual Property
Schedule 2.17 - Real Property Leases
Schedule 2.18 - Insurance Policies
Schedule 2.19 - Conduct of Target Since Interim Balance Sheet Date
Schedule 2.20 - Personnel Information
Schedule 2.21 - Employee Benefit Plans
Schedule 2.22 - Severance Arrangements
Schedule 2.23 - Litigation
Schedule 2.24 - Compliance with Laws; Permits
Schedule 2.26 - Taxes
Schedule 2.28 - Certain Business Practices and Regulations;
Potential Conflicts of Interest
Schedule 4.13 - Marketing Services Agreements and Non-Competition
Agreements
Schedule 9.1 - Other Documents Disclosed
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
September 23, 1998, is entered into by and between Pre-Paid Legal Services,
Inc., an Oklahoma corporation ("Acquiror"), and TPN, Inc., a Texas corporation
("Target"). Acquiror and Target are referred to collectively herein as the
"Parties" and individually as a "Party."
RECITALS
A. The board of directors of each of Acquiror and Target has determined
that it is in the best interests of Acquiror and Target, and their respective
shareholders, to approve the acquisition of Target by Acquiror by means of the
merger of Target with and into Acquiror upon the terms and subject to the
conditions set forth in this Agreement (the "Merger").
B. For federal income tax purposes, it is intended that the Merger
qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and that this Agreement constitute a
plan of reorganization for purposes of Section 368(a).
C. The Parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and to prescribe various
conditions to the Merger.
D. Terms capitalized but not otherwise defined herein have the meanings
ascribed to them in Section 14.
TERMS AND CONDITIONS
In consideration of the foregoing recitals and the mutual covenants,
representations and warranties contained in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. THE MERGER.
1.1 The Merger. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, Target shall be merged with and into Acquiror
in accordance with the provisions of this Agreement.
1.2 Effect of the Merger. Upon the effectiveness of the Merger, the
separate existence of Target shall cease and Acquiror, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Oklahoma. The Merger shall
have the effects specified in this Agreement and the TBCA and the OGCA.
1.3 Governing Instruments, Directors and Officers of the Surviving
Corporation.
(a) The certificate of incorporation of Acquiror, as in
effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until duly
amended in accordance with its terms and applicable law.
(b) The by-laws of Acquiror, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving
Corporation until duly amended in accordance with their terms and
applicable law.
(c) The directors and officers of Acquiror at the Effective
Time shall be the directors and officers, respectively, of the
Surviving Corporation from the Effective Time until their respective
successors have been duly elected or appointed in accordance with the
certificate of incorporation and by-laws of the Surviving Corporation
and applicable law.
1.4 Effect on Securities.
(a) Acquiror Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof,
each share of Acquiror Common Stock and all other securities of
Acquiror outstanding immediately prior to the Effective Time shall
remain outstanding and continue unaffected by the Merger, and each
certificate or other instrument evidencing ownership of any such shares
or other securities shall continue to evidence ownership of the same
number of shares or other securities of the Surviving Corporation.
(b) Target Securities.
(i) Target Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any
holder thereof, each share of Target Common Stock that is
issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive 344.94404 shares
of validly issued, fully paid and nonassessable Acquiror
Common Stock (for a total of 893,750 shares of Acquiror Common
Stock, subject to the provisions hereof relating to delivery
of cash in lieu of fractional shares). Each share of Target
Common Stock, when so converted, shall automatically be
canceled and retired, shall cease to exist and shall no longer
be outstanding; and the holder of any certificate representing
any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of Acquiror
Common Stock to be issued in exchange therefor (along with any
cash in lieu of fractional shares of Acquiror Common Stock as
provided in Section 1.7).
(ii) Target Treasury Stock. At the Effective Time, by
virtue of the Merger, any and all shares of Target Common
Stock that are issued and held as treasury stock shall be
canceled and retired and shall cease to exist, and no shares
of Acquiror Common Stock or other consideration shall be paid
or payable in exchange therefor.
(iii) Target 1996 Warrants. At the Effective Time, as
provided in the Shareholders Agreement (to which each holder
of Target 1996 Warrants is a party) and by virtue of the
Merger, each Target 1996 Warrant that is issued and
outstanding immediately prior to the Effective Time shall be
converted into the right to receive 127.5 shares of validly
issued, fully paid and nonassessable Acquiror Common Stock
(for an aggregate of 106,250 shares of Acquiror Common Stock
for all Target 1996 Warrants, subject to the provisions hereof
relating to delivery of cash in lieu of fractional shares).
Such number of shares of Acquiror Common Stock has been
independently determined by the holders of the Target 1996
Warrants and Target to represent the fair value of the Target
1996 Warrants. Such conversion shall represent the full and
final disposition of the Target 1996 Warrants, and each Target
1996 Warrant, when so converted, shall automatically be
canceled and retired, shall cease to exist and shall no longer
be outstanding; and the holder of any agreement representing
any Target 1996 Warrant shall cease to have any rights with
respect thereto, except the right to receive the shares of
Acquiror Common Stock to be issued in exchange therefor (along
with any cash in lieu of fractional shares of Acquiror Common
Stock as provided in Section 1.7).
(iv) No Other Securities. At the Effective Time, the
provisions of any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of
the capital stock of the Target or any Subsidiary of Target
shall become null and void, and Target shall take all
necessary actions to ensure that, following the Effective
Time, no holder of rights or any participant in any plan,
program or arrangement shall have any right thereunder to
acquire any equity securities of Target, Acquiror or any
direct or indirect Subsidiary thereof.
1.5 Payment of the Merger Consideration. Certificates representing the
Acquiror Common Stock constituting the Merger Consideration shall be delivered
by Acquiror to the Shareholders at the Closing in the amounts set forth in
Exhibit 1.5 (against surrender by the Shareholders of certificates representing
Target Common Stock and agreements evidencing Target 1996 Warrants) or as
otherwise provided in Section 1.6 below. The Acquiror Common Stock issued in
connection with this Agreement will be "restricted securities" under the
Securities Act and Rule 144 promulgated thereunder and may only be sold or
otherwise transferred by the holder thereof pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act. Certificates representing the
Acquiror Common Stock shall bear a legend indicating such restrictions.
1.6 Exchange of Certificates; Distributions With Respect to Unexchanged
Shares. Target shall use reasonable efforts to cause the Shareholders to deliver
for cancellation at the Closing all certificates representing Target Common
Stock and agreements evidencing Target 1996 Warrants outstanding as of the
Closing. To the extent any such certificates or agreements are not delivered for
cancellation at the Closing, Acquiror shall provide written notice to any
non-surrendering Shareholder of the effectiveness of the Merger and instructions
for surrendering certificates representing such Shareholder's shares of Target
Common Stock or agreements evidencing such Shareholder's Target 1996 Warrants.
Until surrendered as provided in this Agreement, each certificate representing
Target Common Stock or agreement representing Target 1996 Warrants shall be
deemed at any time after the Effective Time to represent solely the right to
receive upon such surrender the Merger Consideration as provided by this
Agreement and the OGCA. No dividends or other distributions will be paid by
Acquiror to the holder of any unsurrendered certificate representing Target
Common Stock or agreement representing Target 1996 Warrants until such
certificate or agreement has been duly surrendered. Subject to the effect, if
any, of applicable escheat and other laws, following surrender of any
certificate representing Target Common Stock or agreement representing Target
1996 Warrants, Acquiror shall cause to be delivered to the Person entitled
thereto, without interest, the amount of dividends or other distributions
theretofore paid with respect to the Acquiror Common Stock so withheld as of any
date subsequent to the Effective Time and prior to such date of delivery.
1.7 Fractional Acquiror Common Stock. No certificates or scrip
representing fractional Acquiror Common Stock shall be issued in the Merger, and
no holder of any fractional share interest shall be entitled to vote, to receive
any dividends or other distributions paid or declared on Acquiror Common Stock,
or to exercise any other rights as a shareholder of Acquiror with respect to
such fractional share interest. Each holder who would otherwise be entitled to
receive a fractional share of Acquiror Common Stock in exchange for Target
Common Stock and Target 1996 Warrants hereunder shall be entitled to receive in
lieu of such fractional share interest an amount in cash equal to the amount of
the fractional share interest multiplied by the Market Price.
1.8 Effective Time of the Merger. The Merger shall become effective
immediately when the certificates of merger ("Certificates of Merger") in
accordance with the TBCA and the OGCA are accepted for filing by the respective
Secretaries of State of Texas and Oklahoma or at such time thereafter as is
provided in the Certificates of Merger (the "Effective Time"). The Certificates
of Merger shall be filed, and the Effective Time shall occur, on the Closing
Date immediately after the Closing.
1.9 Taking of Further Action. If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
either of Acquiror or Target, the officers and directors of the Surviving
Corporation are fully authorized, in the name of the Surviving Corporation or
otherwise to take, and shall take, all such lawful and necessary action.
1.10 Escrow. Certificates representing 125,000 shares of the Acquiror
Common Stock deliverable to the Shareholders under this Agreement (the "Escrow
Fund") shall be delivered at the Closing to and held by the Escrow Agent in
escrow for the periods and in accordance with the other terms, conditions and
procedures set forth in the Escrow Agreement attached hereto as Exhibit 1.10
(the "Escrow Agreement").
2. REPRESENTATIONS AND WARRANTIES OF TARGET. As a material inducement to
Acquiror to enter into this Agreement and consummate the transactions
contemplated herein, Target represents and warrants to Acquiror, as of the date
of this Agreement and as of the Closing Date (as if made on such date), as
follows:
2.1 Organization, Power and Qualification. Target is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas. Target has all requisite corporate power and authority to own, lease
and operate its Assets and to carry on its business or businesses as presently
conducted. Target has delivered to Acquiror complete and correct copies of the
Organizational Documents of Target, as currently in effect. Set forth in
Schedule 2.1 is a listing of each jurisdiction in which Target is qualified to
do business as a foreign corporation. Target is duly qualified as a foreign
corporation and is in good standing to do business in every jurisdiction in
which such qualification is necessary because of the nature of the Assets owned,
leased or operated by it or the nature of the businesses conducted by it.
2.2 Subsidiaries. Target has no Subsidiaries. Target has no interest,
direct or indirect, and, has no commitment to purchase any interest, direct or
indirect, in any corporation or in any partnership, joint venture or other
business enterprise or entity. The business carried on by Target has not been
conducted through any other direct or indirect Subsidiary or Affiliate of any
Shareholder.
2.3 Authority; Power; Binding Effect. The execution, delivery and
performance of this Agreement by Target have been authorized by all necessary
action on the part of Target and Shareholders and no other proceedings
(corporate or other) on the part of Target are necessary to authorize the
execution, delivery and performance of this Agreement. Target has the requisite
right, power, authority and capacity to execute and deliver this Agreement and
to carry out the transactions contemplated hereby and to take any and all other
actions required to be taken by it pursuant to this Agreement. This Agreement
has been duly executed and delivered by Target and, assuming the due execution
and delivery of this Agreement by Acquiror, constitutes the legal, valid and
binding obligation of Target enforceable against Target in accordance with its
terms and conditions.
2.4 No Violation; Consents. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, by
Target will, directly or indirectly, with or without notice or the passage of
time, except as contemplated by this Agreement or as set forth in Schedule 2.4:
(a) violate or conflict with any provision of the Organizational Documents of
Target; (b) violate any provision of any law of any Governmental Entity
applicable to Target; (c) conflict with, violate or result in a breach of or
constitute (with due notice or lapse of time) a default under any contract,
lease, loan agreement, mortgage, security agreement, indenture, or other
agreement or instrument to which Target is a party or by which Target is bound
or to which any of its Assets is subject; (d) result in the imposition of any
Encumbrance on Target or any of its Assets; or (e) require any authorization,
consent, approval or other action by or notice to or filing with any Person or
Governmental Entity.
2.5 Ownership of Target's Capital Stock. To Target's Knowledge,
Shareholders are the lawful record and beneficial owners of all of Target's
issued and outstanding capital stock comprised solely of 2,591 shares of common
stock, par value $.10 per share (referred to herein as the "Target Common
Stock"), free and clear of any Encumbrances except as set forth on Schedule 2.5,
and all of such shares have been duly authorized and are validly issued, fully
paid and nonassessable. Schedule 2.5 sets forth the number of shares of Target
Common Stock and Target 1996 Warrants owned of record and beneficially by each
of the Shareholders. Within thirty (30) days prior to the date hereof, no
Shareholder has sold, assigned, transferred, conveyed or otherwise effected any
disposition of any shares of Target Common Stock and no Shareholder shall effect
any such disposition between the date hereof and the Closing Date. Except as set
forth in Schedule 2.5, there are no options, warrants, calls, conversion or
other rights, or any agreements or commitments of any nature which obligate the
Target to issue any additional shares of capital stock or any securities
convertible into or exchangeable for any such shares of capital stock and no
authorization therefor has been given.
2.6 Transactions with Certain Persons. Except as set forth in Schedule
2.6: (i) Target does not owe any amount to, or have any contract with or
commitment to, Shareholders, or any of Target's or Shareholders' directors,
officers, employees, consultants or Affiliates (other than compensation for
current services not yet due and payable and reimbursement of expenses arising
in the Ordinary Course of Business), and none of such persons owes any amount to
Target; and (ii) no part of the Assets of Shareholders or any direct or indirect
Affiliate of Shareholders is used by Target.
2.7 Financial Statements. True and complete copies of the balance
sheets of Target, as of December 31, 1995, 1996 and 1997, and the related
statements of operations and cash flows for each of the years in the three year
period ended December 31, 1997, together with the notes thereto and the audit
reports thereon of Ernst & Young LLP (1995 and 1996) and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
(1997) (collectively, the "Audited Financial Statements"), are attached hereto
as Schedule 2.7(A). The unaudited interim balance sheet of Target (the "Interim
Balance Sheet") as of August 31, 1998 (the "Interim Balance Sheet Date") and the
related statements of operations and cash flows for the eight months ended
August 31, 1998 (collectively, the "Interim Financial Statements") are attached
hereto as Schedule 2.7(B). The Audited Financial Statements and the Interim
Financial Statements (collectively, the "Financial Statements") (including any
related schedules and/or notes thereto) have been prepared in accordance with
GAAP that were, except as otherwise stated therein, consistently followed
throughout the periods involved (except that the Interim Financial Statements do
not include all of the notes thereto which might be required by GAAP and are
subject to non-material changes resulting from audit and customary year-end
adjustments) and show all material liabilities, required to be shown in
accordance with such principles. The Financial Statements fairly present the
financial condition of Target as of their respective dates and fairly present
the results of operations and cash flows of Target for the periods indicated
(subject, in the case of the Interim Financial Statements, to non-material
changes resulting from audit and customary year-end adjustments).
2.8 Receivables. All receivables (including, without limitation,
accounts receivable, loans receivable and advances) of Target which are
reflected on the Interim Balance Sheet or arising since the date thereof: (a)
represent valid and genuine obligations; (b) have arisen solely out of bona fide
transactions in the Ordinary Course of Business; and (c) are not subject to any
valid defenses, set-offs or counterclaims.
2.9 Inventory. All Inventory reflected on the Interim Balance Sheet, or
acquired since the date thereof: (a) was acquired and has been maintained in the
Ordinary Course of Business; (b) is of good and merchantable quality; (c) is
valued at the lower of cost or market on a first in, first out basis; and (d) is
not subject to any write-down or write-off. Except for items of Inventory in
transit from the vendor thereof and items of Inventory which are off-site for
repair or preparation for sale in the Ordinary Course of Business, all Inventory
is located at the Leased Real Property.
2.10 Absence of Undisclosed Liabilities; List of Accounts Payable.
(a) Except as set forth in Schedule 2.10, Target has no
Liabilities except:
(i) those Liabilities reflected or reserved against
on the face of the Interim Balance Sheet (excluding the notes
thereto) and not heretofore paid or discharged in the Ordinary
Course of Business;
(ii) Liabilities arising in the Ordinary Course of
Business under any agreement, contract, commitment, lease or
plan specifically set forth in Schedule 2.11 (or not required
to be disclosed under Section 2.11 because of the term or
amount involved); and
(iii) current Liabilities incurred in the Ordinary
Course of Business since the Interim Balance Sheet Date.
(b) Schedule 2.10 sets forth a complete and accurate list of
Target's accounts payable, including the name, vendor identification,
and, to Target's Knowledge, the amount owed to each Person as of the
date of the Interim Financial Statements other than amounts payable to
Personnel of Target in the Ordinary Course of Business, and an
aggregate amount of accounts payable as of September 22, 1998.
2.11 Contracts and Commitments.
(a) Except as set forth in Schedule 2.11, Target is not a
party to (or otherwise bound by) any written or oral:
(i) agreement, contract or commitment for the future
purchase of, or payment for, supplies or products, or for the
performance of services by a third-party involving payments in
excess of $5,000, excluding purchase orders in the Ordinary
Course of Business;
(ii) agreement, contract or commitment to sell or
supply products or to perform services involving payments in
excess of $5,000;
(iii) agreement, contract or commitment for any
capital expenditure or leasehold improvement in excess of
$5,000;
(iv) agreement, contract, or commitment for the sale
or disposition of any Assets involving payments in excess of
$5,000;
(v) lease under which Target is either lessor or
lessee involving payments in excess of $5,000;
(vi) any other agreement, contract or commitment
involving payments in excess of $5,000 (other than contracts
with vendors relating solely to the supply of customary
equipment, products or services in connection with Target's
national convention to be held in the Dallas, Texas area in
September 1998);
(vii) note, debenture, bond, letter of credit
agreement, loan agreement or other contract or commitment for
the borrowing or lending of money or agreement or arrangement
for a line of credit or guarantee, pledge or undertaking of
the indebtedness of any other Person;
(viii) distribution, representative or sales agency
agreement, contract or commitment;
(ix) agreement, contract or commitment for any
charitable or political contribution;
(x) agreement, contract or commitment limiting or
restraining Target or any successor thereto from engaging or
competing in any manner or in any business, nor, to Target's
Knowledge, is any employee of Target subject to any such
agreement, contract or commitment;
(xi) agreement, contract or commitment for a joint
venture or other arrangement that has or is expected to
involve a sharing of profits or expenses with other Persons;
(xii) agreement of indemnification;
(xiii) license or other agreements which relate in
whole or in part to any software, patent, trademark, trade
name, service ▇▇▇▇ or copyright or to any ideas, technical
assistance or other know-how (other than nonexclusive software
licenses granted to Target in connection with the use of
commercially available pre-packaged software); or
(xiv) agreement, contract or commitment not made in
the Ordinary Course of Business.
(b) Each of the agreements, contracts, commitments, leases,
plans and other instruments, documents and undertakings set forth in
Schedule 2.11 (or not required to be listed thereon because of the
terms thereof), is enforceable in accordance with its terms. Except as
set forth in Schedule 2.11, Target is, and, to Target's Knowledge, all
other parties thereto are, in compliance with the provisions thereof
and, to Target's Knowledge, no event has occurred which with or without
the giving of notice or lapse of time, or both, would constitute a
default thereunder. Target has delivered to Acquiror true, correct and
complete copies of each of the written, and a correct and complete
summary of each of the oral, agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings set
forth in Schedule 2.11.
2.12 Marketing Agreement With Primestar. Without limiting Section 2.11
above as it may relate to the Primestar Contract, set forth in Schedule 2.12 are
true and correct summaries for the periods indicated of (i) number of
subscribers Target believes with reasonable basis in fact that it has procured
under the Primestar Contract and (ii) the number of subscribers for which
Primestar has paid Target under the Primestar Contract. Target has not been
notified by Primestar of any failure by Target to satisfy any of the
"benchmarks" described in Section 3.09 of the Primestar Contract or any failure
to meet or exceed any "churn rate" requirements in the Primestar Contract.
2.13 Title to Assets. Target has and, following the Closing, the
Surviving Corporation will have, good and marketable title to, or a valid
leasehold interest in, the Assets, free and clear of all Encumbrances excepting
only (i) the Liabilities expressly reflected or reserved against on the face of
the Interim Balance Sheet (rather than any notes thereto) and (ii) Permitted
Encumbrances.
2.14 Condition and Location of Assets. The Assets of Target are in good
operating condition and repair, subject to normal wear and maintenance, are
adequate and usable in the Ordinary Course of Business and, to Target's
Knowledge, materially conform to all applicable Laws and Permits relating to
their construction, use and operation. No Person other than Target owns any
equipment or other tangible assets or properties situated on the premises of
Target which is necessary to the operation of the business of Target, except for
items leased pursuant to contracts set forth in Schedule 2.11 and any other
items set forth in Schedule 2.14. All of the tangible Assets of Target are
located on the Leased Real Property.
2.15 Intellectual Property. Schedule 2.15 contains a complete and
accurate list of all of the Intellectual Property. Except as set forth in
Schedule 2.15: (i) Target owns royalty free the entire right, title and interest
in and to the Intellectual Property (including, without limitation, the right to
use and license the same); and (ii) there are no pending or, to the Knowledge of
Target, threatened actions of any nature affecting the Intellectual Property.
Schedule 2.15 lists all notices or claims received by Target which claim
infringement, interference with, misappropriation or violation of any
Intellectual Property rights of third parties. Target has delivered to Acquiror
true, correct and complete copies of all agreements, contracts, licenses,
commitments, leases and other documents evidencing, representing or covering the
Intellectual Property and the Software (as defined below) and the maintenance
and support thereof.
2.16 Software. Target has delivered to Acquiror complete and correct
copies of all material user and technical documentation related to the computer
software of Target included in the Intellectual Property (the "Software"). The
Software contains all current revisions of such Software, is properly licensed
in favor of Target, is assignable by Target to the Surviving Corporation and
performs in accordance with the documentation and other written materials
provided in connection therewith.
2.17 Real Property.
(a) No Owned Real Property. Target owns no legal or beneficial
interest in any real estate or real property, other than any leasehold
interest pursuant to Real Property Leases and any amendments thereto
identified in Schedule 2.17, true and correct copies of which have been
provided to Acquiror.
(b) Leased Real Property. With respect to the Leased Real
Property:
(i) Each Real Property Lease is, and at Closing shall
be, in full force and effect and has not been assigned or
further modified, supplemented or amended; neither Target nor
the landlord or sublandlord under any Real Property Lease is
in default under any of the Real Property Leases; and no
circumstances or state of facts presently exists which, with
the giving of notice or passage of time, or both, would permit
the landlord or sublandlord under any Real Property Lease to
terminate any Real Property Lease;
(ii) After the Closing, the Surviving Corporation
shall receive and enjoy all right, title and interest of
Target in and to all Real Property Leases and Leased Real
Property;
(iii) Other than Target, no Person will be leasing,
using or occupying the leased premises covered by the Real
Property Leases or any part thereof as of the Closing Date;
(iv) The Leased Real Property is not subject to any
sublease or grant by Target to any Person of any right to the
use, occupancy or enjoyment of the property or any portion
thereof, whether such right currently exists or may arise in
the future;
(vi) All rents and other amounts payable by Target
with respect to the Leased Real Property currently due have
been paid, and at Closing shall have been paid; and
(vii) To Target's Knowledge, the Leased Real Property
and the present uses thereof comply with all Laws of all
Governmental Entities having jurisdiction over the Leased Real
Property and all restrictive covenants affecting the Leased
Real Property, and Target has received no notices, oral or
written, from any Governmental Entity, and has no reason to
believe, that the Leased Real Property or any improvements
erected or situated thereon, or the uses conducted thereon or
therein, violate any Laws of any Governmental Entity having
jurisdiction over the Leased Real Property or any restrictive
covenants affecting the Leased Real Property.
2.18 Insurance.
(a) Schedule 2.18 sets forth a list identifying the insurer
and policy number of each material insurance policy (including policies
providing property, casualty, liability, title, life, business
interruption and workers' compensation coverage and bond and surety
arrangements) with respect to which Target is a party, a named insured,
or otherwise the beneficiary of coverage and contains a true and
accurate copy of each such policy.
(b) With respect to each such insurance policy: (i) the policy
is legal, valid, binding, enforceable, and in full force and effect in
all material respects; (ii) neither Target nor, to Target's Knowledge,
any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no
event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iii) no party to
the policy has repudiated any material provision thereof.
Target has no self-insurance arrangements.
2.19 Conduct of Target Since the Interim Balance Sheet Date. Except as
set forth in Schedule 2.19, since the Interim Balance Sheet Date, Target has
conducted its business only in the Ordinary Course of Business and has not,
except in the Ordinary Course of Business:
(a) incurred any Liabilities or assumed, guaranteed, endorsed
or otherwise become responsible for the Liabilities of any Person, or
discharged or satisfied any Encumbrance, or paid any Liability, or
failed to pay or discharge when due any Liabilities of which the
failure to pay or discharge has caused or will cause any material
damage or risk of material loss to Target or any of its Assets;
(b) sold, encumbered, assigned or transferred any Assets, or
made any contract or agreement for any of the foregoing;
(c) created, incurred, assumed or guaranteed any indebtedness
for borrowed money, or mortgaged, pledged or subjected any of its
Assets to any Encumbrance, except for Permitted Encumbrances;
(d) made or suffered any amendment or termination prior to the
stated expiration of any material agreement, contract, commitment,
lease or plan to which it is a party or by which it is bound, or
canceled, modified or waived any substantial debt or claim held by it
or waived any right of material value;
(e) declared, set aside, paid or made any dividend or other
distribution with respect to capital stock of Target or any other
security of Target or made any agreement for any of the foregoing;
(f) received notice or had Knowledge of any actual or
threatened labor trouble, or other occurrence, event or condition of
any similar character which has had or might have a material adverse
effect on its business, operations, Assets, prospects or condition
(financial or otherwise);
(g) made any agreement, contract or commitment, including an
agreement to purchase or lease Assets, which includes an aggregate
payment or commitment on the part of either party of more than $5,000;
(h) increased the salaries or other compensation of any
Personnel or made any increase in, or any addition to, other benefits
to which any of its Personnel may be entitled by formula or otherwise
or as may be required under employment or severance agreements in
effect on the date of this Agreement;
(i) except as set forth in clause (h) above, instituted,
granted or modified in any respect any (A) bonus, incentive
compensation, service award, severance or other like benefit granted,
made or accrued, contingently or otherwise, for or to the credit of any
Personnel of Target, (B) employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by
Target for any Personnel of Target, or (C) new written employment
agreement with any Personnel engaged in the business of Target to which
Target is a party which cannot be terminated at will;
(j) made any advance (excluding advances for ordinary and
necessary business expenses) or loan to any of its Personnel;
(k) extended credit in the sale of Inventory, services,
collection of receivables or otherwise;
(l) amended the Organizational Documents of Target; or
(m) suffered any material adverse change in its business,
operations, Assets, prospects or condition (financial or otherwise).
2.20 Personnel Information.
(a) Except as set forth in Schedule 2.20, Target is not a
party to, does not have any obligation with respect to, and is not
bound by any employment or consulting agreement or any collective
bargaining agreement or other labor or employment agreement, or any
incentive compensation, change in control, severance, personal or sick
days or paid time off, contract, policy, plan or arrangement with
respect to any Personnel or director of Target or other Person (the
"Employee Arrangements").
(b) Schedule 2.20 contains a complete and accurate list of all
individuals employed by Target, including name, date of hire, job title
and rate of hourly pay or salary. Schedule 2.20 also contains a
complete and accurate list of all individuals, if any, to whom offers
of employment have been made but not yet accepted, including
anticipated date of hire and a description of material compensation
arrangements offered to such individual (other than Employee Benefit
Plans set forth in Schedule 2.21).
(c) Target has no plans or arrangements contemplating or
requiring Target to provide to any retired employee or director of
Target, or their dependents, any benefits in the future, including,
without limitation, pension benefit, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, or other
benefits.
(d) Target has not agreed to recognize any union, employee
organization, or other collective bargaining unit nor has any union or
other collective bargaining unit been certified as representing any of
Target's employees; there has been no organizational effort made or, to
the Knowledge of Target, threatened by or on behalf of any labor union
or other employee organization with respect to employees of Target
within the preceding three (3) years; and there is no labor strike,
slowdown, work stoppage or lockout actually pending or, to the
Knowledge of Target, threatened against or affecting Target.
(e) Except as listed or set forth in Schedule 2.20, Target,
with respect to its Personnel: (i) has no written personnel policy
applicable to any Personnel, (ii) is in material compliance with all
applicable Laws regarding employment and employment practices,
including, without limitation ERISA and those laws relating to terms
and conditions of employment, wages and hours, occupational safety and
health and workers' compensation and is not engaged in any unfair labor
practices, (iii) has no unfair labor practice charges pending or, to
the Knowledge of Target, threatened against it in or before the
National Labor Relations Board, (iv) has no grievances pending or, to
the Knowledge of Target, threatened against it, (v) has no charges or
complaints pending or, to the Knowledge of Target, threatened before
the Equal Employment Opportunity Commission or any state or local
agency responsible for the prevention of unlawful employment practices,
and (vi) has no private agreement restricting Target from relocating,
closing or terminating any of its facilities.
2.21 Employee Benefits.
(a) Attached hereto and made a part hereof are Schedules,
identified below, which list all employee benefit plans within the
three-year period before the date of this Agreement, (i) which are or
had been maintained or administered by Target or any ERISA Affiliate,
(ii) to which Target or any ERISA Affiliate contributes or contributed,
or is or was legally obligated to contribute, or (iii) under which
Target or any ERISA Affiliate has or had any liability with respect to
its current or former Personnel:
(i) Schedule 2.21 contains a list of each "employee
welfare benefit plan" (as defined in ERISA Section 3)
(collectively, the "Welfare Plans");
(ii) Schedule 2.21 contains a list of each "employee
pension benefit plan" (as defined in ERISA Section 3)
(collectively, the "Pension Plans");
(iii) Schedule 2.21 contains a list of each employee
benefit plan, program, arrangement, agreement, policy or
commitment, whether insured or uninsured, funded or unfunded,
that is not a Welfare Plan or Pension Plan, relating to
deferred compensation, bonus or compensation in addition to
regular pay or wages, stock-related compensation, severance,
unemployment, flexible benefits, disability, vacation,
sickness, leave of absence, fringe benefits, employee awards,
educational assistance or reimbursement, employee discounts,
excess benefits, rabbi, secular or vesting trust, child or
dependent care, long-term and nursing home care, and profit
sharing (collectively, the "Employee Plans").
Solely for purposes of this Section 2.21, "ERISA Affiliate" means any
Person which together with Target would be treated as a single employer
under Code Section 414. Schedule 2.21 sets forth the names of each such
ERISA Affiliate. Solely for purposes of this Section 2.21, the Employee
Plans, Welfare Plans and Pension Plans are collectively referred to as
"Employee Benefit Plans."
(b) Except as set forth in Schedule 2.21: (i) each Pension
Plan is qualified under Code Section 401, and any trust maintained
pursuant thereto is exempt from federal income taxation under Code
Section 501; (ii) the Welfare Plans and Employee Plans, and all trust
agreements, custodial agreements, insurance or annuity contracts
thereunder, have been maintained, in all material respects, in
accordance with their terms and applicable Law; (iii) Target has
complied with respect to each Employee Benefit Plan, in all material
respects, with the reporting, notice and disclosure requirements of
ERISA; (iv) no plan fiduciary, "party in interest" or "disqualified
person" has engaged in a "prohibited transaction" within the meaning of
ERISA Section 406 or Code Section 4975 which has or will result in any
penalty or Tax under ERISA Section 502(i) or Code Sections 4975 and
4976 to Target or any ERISA Affiliate, or any director, officer or
employee of Target or any ERISA Affiliate; (v) all of the Employee
Benefit Plans comply currently both as to form (to the extent required
by Code Section 401(b)) and operation, in all material respects, with
their terms and with the provisions of ERISA and the Code, and all
other applicable laws, rules and regulations; and (vi) a favorable
determination as to the qualification under Code Section 401(a) has
been made by the Internal Revenue Service with respect to each Pension
Plan, and to the Knowledge of Target, nothing has occurred since the
date of such determination that would adversely affect such
qualification. Neither Target nor any ERISA Affiliate has during the
preceding six (6) years made or had an obligation to make contributions
to any benefit plan set forth in ERISA Sections 4001(a)(3), 4062, 4063
or 4064.
(c) With respect to each Pension Plan, the funding method used
in connection with such Pension Plan has at all times satisfied and
will as of the Closing Date satisfy any and all requirements under
ERISA or the Code. Except as set forth in Schedule 2.21, there is as of
the date hereof no "accumulated funding deficiency" (as defined in
ERISA Section 302(a)(2) and Code Section 412(a)), whether or not
waived, which exists with respect to any plan year of any Pension Plan.
(d) All contributions required to have been made under any
Employee Benefit Plans or any Law (without regard to any waivers
granted under Code Section 412) to any trusts established thereunder or
in connection therewith have been made by the due date thereof
(including any valid extensions).
(e) With respect to each Employee Benefit Plan, a complete and
correct copy of each of the following documents (if applicable) has
been made available to Company: (i) the most recent plan and related
trust documents, agency agreements, custodial agreements, insurance or
annuity contracts, and any other funding instruments, and all
amendments thereto; (ii) the most recent summary plan description, and
all related summaries of material modifications; (iii) the most recent
Form 5500 (including schedules); (iv) the most recent IRS determination
letter and any IRS Private Letter Ruling applicable to such Employee
Benefit Plan; (v) the most recent actuarial reports (including reports
prepared for purposes of Financial Accounting Standards Board report
nos. 87, 106 and 112); and (vi) all minutes of the governing body or
committee of Target and each ERISA Affiliate relating to each such
plan; (vii) filings with, or reports to, the PBGC; (viii) each advisory
opinion, private exemption or other letter from the United States
Department of Labor or PBGC applicable to such Employee Benefit Plan;
and (ix) all information relating to the termination, merger or
curtailment of any Employee Benefit Plan of Target occurring in any of
the five (5) calendar years preceding the date of this Agreement.
(f) Except as set forth in Schedule 2.21, there are no pending
or, to the Knowledge of Target or its ERISA Affiliates, threatened
actions, lawsuits, claims for benefits (except in the ordinary course
of administration), proceedings, investigations, audits, or
arbitrations, as of the date of this Agreement and as of the Closing
Date, involving any Employee Benefit Plan or its assets, plan sponsor,
plan administrator or fiduciaries with respect to the operation of such
plan.
(g) Target and each ERISA Affiliate have complied with the
requirements of COBRA and the rules and regulations thereunder. Target
has furnished to Acquiror a list of: (i) all individuals who have
elected or who are eligible to elect COBRA continuation coverage under
any of the Welfare Benefit Plans, and (ii) the dates of each qualifying
event and COBRA continuation coverage periods for each such individual.
(h) Neither Target nor any ERISA Affiliate has any leased
employees within the meaning of Code Section 414(n) nor any employees
within the meaning of the regulations under Code Section 414(o). Except
as set forth in Schedule 2.21, none of the employees of Target or any
ERISA Affiliate is a member of, nor is any Employee Benefit Plan
maintained in connection with, any voluntary employees' beneficiary
association within the meaning of Code Section 501(c)(9) which is
maintained, sponsored or contributed to by Target or any ERISA
Affiliate.
(i) No condition, fact, or circumstance exists, or will exist
at Closing, which would prevent Target or any ERISA Affiliate from
amending or terminating any Employee Benefit Plan with respect to any
current, former or retired Personnel or independent contractor of
Target or any ERISA Affiliate except under the terms of a collective
bargaining agreement set forth in Schedule 2.21.
(j) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will: (i)
result in any payment becoming due to any Personnel (current, former or
retired) of Target; (ii) increase any benefits under any Employee
Benefit Plan or any arrangement set forth in Section 2.21; or (iii)
result in the acceleration of the time of payment or vesting of any
such benefits.
2.22 Severance Arrangements. Without limiting Section 2.21 above,
except as set forth in Schedule 2.22, Target has not entered into any severance
or similar arrangement in respect of any present or former Personnel that shall
result in any obligation (absolute or contingent) of Target, Acquiror or the
Surviving Corporation to make any payment to any present or former Personnel
following termination of employment, including the termination of employment
effected by the transactions contemplated by this Agreement. The consummation of
the transactions contemplated by this Agreement will not trigger any severance
or similar arrangement of Target payable by Acquiror or the Surviving
Corporation after the Closing.
2.23 Litigation; Decrees. To Target's Knowledge, there are no judicial
or administrative actions, proceedings or investigations pending or threatened
that question the validity of this Agreement or any action taken or to be taken
by Target or the Shareholders in connection with this Agreement. Except as set
forth in Schedule 2.23: (i) there are no lawsuits, claims, administrative or
other Proceedings or investigations pending or, to Target's Knowledge,
threatened by, against or affecting Target or any of its Assets; and (ii) there
are no judgments, orders or decrees of any Governmental Entity binding on Target
or any of its Assets.
2.24 Compliance With Law; Permits. To Target's Knowledge, except as set
forth in Schedule 2.24, Target has materially complied with each Law of any
Governmental Entity to which Target or its business, operations or Assets is
subject (including, without limitation, any federal, state or local Laws,
relating to network marketing, business opportunities, franchising, lottery,
pyramid schemes or similar laws) and is not currently in violation, or alleged
by any Governmental Entity to have violated, of any of the foregoing. Target
owns, holds, possesses or lawfully uses in the operation of its business all
Permits which are required for it to conduct its business as now conducted or
for the ownership and use of the Assets, in material compliance with all Laws.
Target holds no permits.
2.25 Environmental Matters.
(a) Target has complied and is in compliance, each case in all
material respects, with all Environmental Laws applicable to the
ownership, use and/or operation of Target's Assets or business;
(b) (i) Target has obtained and currently maintains all
Environmental Permits required by applicable Environmental Laws for
Target's business and operations, and Target is in compliance in all
material respects with such Environmental Permits, (ii) there are no
judicial or administrative actions, proceedings or investigations
pending or, to Target's Knowledge, threatened, to revoke or materially
modify the terms of any such Environmental Permits, and (iii) Target
has not been notified by any Governmental Entity or Person that Target
does not have all Environmental Permits required for the current use or
operation of any of the Assets or Target's business;
(c) There are no judicial or administrative actions,
proceedings, inquiries or investigations pending or, to Target's
Knowledge, threatened, against Target alleging the violation of any
Environmental Law or the terms of any Environmental Permit;
(d) To Target's Knowledge, Target is not subject to any
Environmental Costs and Liabilities as respects any violation of any
applicable Environmental Law concerning the generation, storage,
treatment, disposal or release of Hazardous Materials, and, to Target's
Knowledge, no facts or circumstances exist which could subject Target
to any Environmental Costs and Liabilities concerning the generation,
storage, treatment, disposal or Releases of Hazardous Materials;
(e) To Target's Knowledge, there are no Hazardous Materials
present in violation of any applicable Environmental Law at, on, in or
under the Leased Real Property or any geologically or hydrologically
adjoining property; and
(f) Target has provided for Acquiror's review true and
complete copies of all Environmental Permits issued to Target, and any
and all written reports, studies, analyses, surveys, assessments, tests
and sampling results in Target's possession or under Target's control
pertaining to Hazardous Materials at, in, on or under the Leased Real
Property, or concerning the Leased Real Property's compliance with
Environmental Laws, or the compliance by Target or any other person or
entity for whose conduct Target is or may be held responsible with
Environmental Laws.
2.26 Tax Matters.
(a) Target has filed all Income Tax Returns that it was
required to file. All such Income Tax Returns were correct and complete
in all material respects. All Income Taxes owed by Target (whether or
not shown on any Income Tax Return) have been paid. Target currently is
not the beneficiary of any extension of time within which to file any
Income Tax Return.
(b) There is no material dispute or claim concerning any
Income Tax liability of Target either (i) claimed or raised by any
authority in writing or (ii) as to which any of the Shareholders and
the directors and officers of Target has Knowledge based upon personal
contact with any agent of such authority.
(c) Schedule 2.26 contains a complete and accurate list of all
federal, state, local, and foreign Income Tax Returns filed with
respect to Target, indicates those Income Tax Returns that have been
audited, and indicates those Income Tax Returns that currently are the
subject of audit. Target has delivered to the Company correct and
complete copies of all federal Income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by Target.
Target has not waived any statute of limitations in respect of Income
Taxes or agreed to any extension of time with respect to an Income Tax
assessment or deficiency.
(d) Target has not filed a consent under Code Section 341(f)
concerning collapsible corporations. Target has not made any material
payments, is not obligated to make any material payments, and is not a
party to any agreement that under certain circumstances could obligate
it to make any material payments that will not be deductible under Code
Section 280G. Target has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Target is
not a party to any tax allocation or sharing agreement. Target (i) has
not been a member of an Affiliated Group filing a consolidated federal
Income Tax Return (other than a group the common parent of which was
the Target) or (ii) has any liability for the taxes of any Person
(other than Target) under Reg. '1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract
or otherwise.
(e) Any unpaid Income Taxes of the Target (i) did not, as of
the Interim Balance Sheet Date, exceed any reserve for Income Tax
liability (rather than a reserve for deferred taxes established to
reflect timing differences between book and tax income) set forth in
the face of the Interim Balance Sheet (rather than in any notes
thereto) and (ii) will not exceed any such reserve as adjusted for
operations and transactions through the Closing Date in accordance with
the past custom and practice of the Target in filing its Income Tax
Returns.
(f) The amount and expiration dates of any net operating
losses, net capital losses, unused investment or other credit allocable
to Target set forth in Target's Financial Statements and notes thereto
for the year ended December 31, 1997 are true and accurate as of such
date.
(g) Target has not since its incorporation been qualified as
an S corporation within the meaning of Code Section 1361(a)(1) (and any
predecessor provision) and under any comparable state or local Law
under which Target may be eligible for analogous treatment; and neither
Target nor the Shareholders has taken or caused or permitted to be
taken any action for the purpose of electing S corporation treatment.
2.27 Commissions or Finders Fees. Neither Target nor any Person acting
on behalf of Target has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
Person.
2.28 Certain Business Practices and Regulations; Potential Conflicts
of Interest.
(a) To Target's Knowledge, neither Target, nor any Personnel
or any other Person acting on behalf of Target has made any unlawful
payment which might subject Target to any damage or penalty in any
civil, criminal or governmental litigation or proceeding which could
have a material adverse effect on Target's business, operations Assets,
prospects or condition (financial or otherwise).
(b) Except as set forth in Schedule 2.28, no officer or
director of Target nor, to Target's knowledge, any other Shareholder or
employee of Target or any Person controlled by any of the foregoing (i)
owns, directly or indirectly, any interest in, or is a director,
officer, employee, consultant or agent of, any Person which is a
competitor, lessor, lessee or customer of, or supplier of goods or
services to, the business of Target, (ii) has any cause of action or
other suit, action or claim whatsoever against, or owes any amount to
Target, or (iii) is a party to any contract or agreement or
participates in any arrangement, written or oral, pursuant to which
Target provides services of any nature to any such Person, otherwise
than in his capacity as an employee of Target. Except for transactions
in the Ordinary Course of Business and except as set forth in Schedule
2.28, there are no transactions presently pending or planned, or
initiated since the Interim Balance Sheet Date, between Target and any
officer or director of Target or, to Target's knowledge, any other
Shareholder or employee of Target or any Person controlled by any of
the foregoing, including any contract, agreement or other arrangement
(x) providing for the furnishing of services by Target, (y) providing
for the rental of real or personal property of Target, or (z) otherwise
requiring payments from Target (other than for services as officers or
directors of Target) to any such Person.
(c) Neither Target nor any of the Shareholders, or to Target's
Knowledge, directors, officers or employees of Target has engaged in
any business practice (i) which may be considered dishonest or
unethical or (ii) not in compliance with industry custom and standards,
in connection with any of the operations of Target.
2.29 Year 2000 Problem. Target has reviewed the areas within its
business and operations which could be adversely affected by, and has developed
or is developing a program to address on a timely basis, the "Year 2000 Problem"
(that is, the risk that computer applications used by Target may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date on or after December 31, 1999), and has, to the extent
possible, made related inquiry of material suppliers and vendors.
2.30 Disclosure. With respect to this Agreement, the Schedules and
Exhibits to this Agreement and the other agreements contemplated by this
Agreement, to the Knowledge of Target, Target has not made any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR. As a material inducement to
Target to enter into this Agreement and consummate the transactions contemplated
herein, Acquiror represents and warrants to Target, as of the date of this
Agreement and as of the Closing Date (as if made on such date), as follows:
3.1 Organization. Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and has
the requisite corporate power and authority to own, lease and operate its Assets
and to carry on its business as presently conducted.
3.2 Authority; Power; Binding Effect. The execution, delivery and
performance of this Agreement and the agreements, instruments and documents
contemplated hereby (collectively, the "Other Agreements") by Acquiror has been
authorized by all necessary corporate action on the part of Acquiror and no
other proceedings (corporate or other) on the part of Acquiror are necessary to
authorize the execution, delivery and performance of this Agreement and the
Other Agreements. Acquiror has the requisite power and authority to execute and
deliver this Agreement and the Other Agreements, to consummate the transactions
contemplated hereby and thereby and to take any and all other actions required
to be taken by it pursuant to the provisions of this Agreement and the Other
Agreements. This Agreement and the Other Agreements have been duly executed and
delivered by Acquiror and, assuming the due execution and delivery of this
Agreement by Target, or the other applicable parties to the Other Agreements,
this Agreement and the Other Agreements constitute the legal, valid and binding
obligation of Acquiror enforceable against it in accordance with its terms and
conditions.
3.3 Acquiror Common Stock. The Acquiror Common Stock to be delivered in
connection with the Merger as provided in this Agreement has been duly
authorized by Acquiror and, when delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, free and clear
of any Encumbrances (other than the restrictions on transfer contemplated by
this Agreement), and no shareholder of Acquiror will have any preemptive right
of subscription or purchase in respect thereof.
3.4 No Violation; Consents. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated herein by
Acquiror will, directly or indirectly, with or without notice or the passage of
time, except as contemplated by this Agreement: (a) violate or conflict with any
provision of the Organizational Documents of Acquiror; (b) violate any provision
of any Law of any Governmental Entity applicable to Acquiror; (c) conflict with,
violate or result in a breach of or constitute (with due notice or lapse of
time) a default under any contract, lease, loan agreement, mortgage, security
agreement, indenture, or other agreement or instrument to which Acquiror is a
party or by which Acquiror is bound or to which any of its Assets is subject;
(d) result in the imposition of any Encumbrance on Acquiror or any of its
Assets; or (e) require any authorization, consent, approval or other action by
or notice to or filing with any Person or Governmental Entity.
3.5 Commission Documents and Other Reports. Acquiror has filed all
periodic reports required to be filed by it with the Commission (the "Acquiror
Commission Documents"). As of their respective dates, the Acquiror Commission
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, and none of the Acquiror Commission Documents contained any untrue
statement of a material fact or omitted to state any 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. Since the date of the
last filed Acquiror Commission Document, Acquiror has not suffered a material
adverse change in its condition (financial or otherwise). The consolidated
financial statements of Acquiror included in the Acquiror Commission Documents
complied as to form in all material respects with the applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with GAAP (except, in the case of
the unaudited statements, as permitted by the regulations of the Commission)
consistently applied throughout the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated financial
position, results of operations and cash flows of Acquiror and its consolidated
subsidiaries as of the dates or for the periods indicated therein, subject, in
the case of the unaudited statements, to normal non-material changes resulting
form audit, customary year-end adjustments and the absence of footnote
disclosure.
3.6 Commissions or Finders Fees. Neither Acquiror nor any Person acting
on behalf of Acquiror has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
Person.
3.7 Disclosure. With respect to this Agreement, the Schedules and
Exhibits to this Agreement and the other agreements contemplated by this
Agreement, to the Knowledge of Acquiror, Acquiror has not made any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading.
4. OTHER COVENANTS AND AGREEMENTS.
4.1 General. Each of the Parties will use all reasonable commercial
efforts in good faith to take all action and to do all things necessary, proper
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Sections 5, 6 and 7), and no Party shall take
any action which is inconsistent with its obligations under this Agreement.
4.2 Shareholders Agreement. Target shall use all reasonable commercial
efforts to cause each of the Shareholders to execute and deliver (prior to or
contemporaneously with the execution and delivery hereof by Target) the
Shareholders Agreement in the form attached hereto as Exhibit 4.2 (the
"Shareholders Agreement").
4.3 Full Access to Information. Target will permit representatives of
Acquiror to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of Target, to all premises,
properties, personnel, books, records (including tax records), contracts and
documents of or pertaining to Target.
4.4 Conduct of Business. Except as consented to by Acquiror in writing,
between the date hereof and the Closing Date, Target will:
(a) conduct the business of the Target only in the Ordinary
Course of Business;
(b) use reasonable commercial efforts to preserve intact the
current business organization of Target, keep available the services of
the Personnel of Target, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and
others having business relationships with Target;
(c) confer with Acquiror concerning operational matters of a
material nature (including, without limitation, any purchase orders in
excess of $10,000);
(d) otherwise report periodically to Acquiror concerning the
status of the business, operations and finances of Target; and
(e) not take or omit to take any action that is inconsistent
with any representation or warranty of Target in Section 2 or that
would cause any such representation or warranty to be untrue or
incorrect if such representation or warranty were made immediately
following the taking of or failure to take such action.
4.5 Notification. Between the date hereof and the Closing Date:
(i) Each Party will promptly notify the other Party in writing
if it becomes aware of any fact or condition that causes or constitutes
a Breach of any of its representations and warranties as of the date of
this Agreement, or if it becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach
of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such
fact or condition. Should any such fact or condition require any change
in any of the Schedules if the Schedules were dated prior to the date
of the occurrence or discovery of any such fact or condition, such
Party will promptly deliver to the other Party a supplement to its
Schedules specifying such change; and
(ii) Each Party will promptly notify the other Party of the
occurrence of any Breach by it of any covenant in this Section 4, or of
the occurrence of any event that may make the satisfaction of the
conditions in Sections 5, 6 or 7 impossible or unlikely.
4.6 Approvals; Filings. As promptly as practicable after the execution
of this Agreement, each Party shall use its reasonable best efforts to obtain,
and to cooperate with the other Parties in obtaining, all authorizations,
consents, orders and approvals of any Governmental Entity or other Person that
may be or become necessary in connection with the consummation of the
transactions contemplated by this Agreement, and to take all reasonable actions
to avoid the entry of any order or decree by any Governmental Entity prohibiting
the consummation of the transactions contemplated hereby. However, the foregoing
notwithstanding, this Agreement shall not require Acquiror, Target or any of
their Affiliates to dispose of or make any change in any portion of its business
or to incur any other burden to obtain the authorization, consent or approval of
any Governmental Entity.
4.7 Confidentiality. Prior to Closing, Acquiror and Target shall keep
confidential, and shall use reasonable efforts to cause their respective
shareholders, directors, officers, employees and representatives to keep
confidential all information obtained by it with respect to the other and their
respective Affiliates in connection with this Agreement and the negotiations
preceding this Agreement, and shall use, and shall cause its respective
shareholders, directors, officers, employees and representatives to use, such
information solely in connection with the transactions contemplated by this
Agreement. If the transactions contemplated hereby are not consummated, each
shall return to the other, without retaining a copy thereof, any schedules,
documents or other written information obtained from the other in connection
with this Agreement and the transactions contemplated hereby. Notwithstanding
the foregoing, no party shall be required to keep confidential or return any
information which (a) is known or available through other lawful sources not
bound by a confidentiality agreement with the disclosing party, (b) is or
becomes publicly known through no fault of the receiving party or its agents,
(c) is required to be disclosed pursuant to an order or request of a judicial
authority or Governmental Entity (provided the disclosing party is given
reasonable prior notice) or (d) is developed by the receiving party
independently of the disclosure by the disclosing party.
4.8 Publicity. Prior to the Closing, no Party hereto will issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of the other Party, which consent will not be unreasonably
withheld; provided, however, that nothing herein will prohibit any Party from
issuing or causing publication of any such press release or public announcement
to the extent that such Party determines such action to be required by Law or
the rules of any national stock exchange applicable to it or its Affiliates, in
which event the Party making such determination will, if practicable in the
circumstances, use reasonable efforts to allow the other Party reasonable time
to comment on such release or announcement in advance of its issuance. The
foregoing notwithstanding, the Parties shall cooperate in the issuance of one or
more joint press releases or other communications (including communications to
distributors and marketing associates of Target and Acquiror) in form and
content satisfactory to Target and Acquiror concerning the execution and
delivery of this Agreement and the transactions contemplated hereby.
4.9 Acquisition Proposals. Unless and until this Agreement shall be
terminated in accordance with Section 12, Target shall not and shall not
authorize or permit any director or Personnel of, or any investment banker,
attorney, accountant or other representative retained by Target to, directly or
indirectly, solicit, initiate or encourage submission of (including by way of
furnishing information) any proposal or offer from any Person which constitutes,
or may reasonably be expected to lead to, any Acquisition Proposal, entertain
any discussions or negotiations with respect to an Acquisition Proposal, or
enter into any agreement or commitment providing for or relating to an
Acquisition Proposal. With respect to Acquisition Proposals received after the
date of this Agreement, Target shall promptly notify Acquiror upon receipt of
any Acquisition Proposal or any request for information relating to Target in
connection with an Acquisition Proposal or for access to the directors,
Personnel, assets, books or records of Target.
4.10 Tax-Free Reorganization. It is intended that the Merger be treated
as a reorganization within the meaning of Section 368(a) of the Code. Subject to
the terms and conditions hereof, the Parties shall use their reasonable best
efforts to cause the merger to be treated as a reorganization within the meaning
of Section 368(a) of the Code and to obtain the opinion ▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, (or such other firm as is reasonably acceptable to
Target and Acquiror) to the effect that (i) the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, (ii) each of Acquiror and Target will be a party to such
reorganization within the meaning of Section 368(b) of the Code, and (iii) no
gain or loss (except with respect to cash received in lieu of fractional
shares), will be recognized by the Shareholders as a result of the Merger with
respect to the shares of Target Common Stock converted into shares of Acquiror
Common Stock. Such opinion may be based upon representations of the Parties.
4.11 Pooling of Interests. It is intended that the Merger be accounted
for as a pooling of interests, and, subject to the terms and conditions hereof,
the parties shall each use reasonable commercial efforts to cause the Merger to
be accounted for as a pooling of interests in accordance with GAAP and in
accordance with all rules, regulations and policies of the Commission and to
cause their respective independent accounting firms to deliver letters in form
reasonably acceptable to Acquiror to the effect that the Merger may be accounted
for as a pooling of interests.
4.12 Stock Exchange Listing. Within ninety (90) days following the
Closing Date, Acquiror shall cause the shares of Acquiror Common Stock to be
issued in the Merger to be approved for listing on the American Stock Exchange
(or such other principal national securities exchange on which the Acquiror
Common Stock is then listed).
4.13 Marketing Services Agreements and Non-Competition Agreements.
Acquiror and each of ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ shall enter into Marketing
Services Agreements in the forms attached to Schedule 4.13 (the "Marketing
Services Agreements") and Non-Competition Agreements in the forms attached to
Schedule 4.13 (the "Non-Competition Agreements").
4.14 Certain Payments to Target Employees. Acquiror agrees to make
following the Closing the payments to certain current key employees of Target in
an aggregate amount of $849,000 (the "Target Employee Payments"). The Target
Employee Payments to be made to any particular employee may be conditioned upon
continued service by the employee following the Closing and receipt by Acquiror
from the employee, in form satisfactory to Acquiror, of a written waiver of any
rights to any additional bonus, severance or other payments of compensation from
Acquiror (excluding normal salary). Except with respect to the stated amount of
the Target Employee Payments and any severance amounts payable under the
employment agreement of ▇▇▇▇▇ ▇▇▇▇▇, Acquiror shall have no liability or
obligation to any Target Personnel with respect to any accrued or unaccrued
bonus, deferred compensation, severance or other compensation amounts (excluding
normal salary). From the Interim Balance Sheet Date through the Closing Date,
Target shall not have made any payments of any accrued or unaccrued bonus,
deferred compensation, severance or other compensation amounts (excluding normal
salary), or if so made, the aggregate amount of the Target Employee Payments to
be made by Acquiror shall be reduced on a dollar for dollar basis by the amount
of such payment made by Target.
4.15 Third Party Fees and Expenses of Target. All fees, expenses,
charges or disbursements to attorneys, accountants or other third parties
incurred or to be incurred by Target and its Shareholders for services rendered
in connection with the negotiation of, preparation for and Closing of this
Agreement and the Merger and related matters shall not exceed $135,000 in the
aggregate; provided, however, that Target shall not pay any fees and expenses of
any accountants or other third parties retained by the Shareholders that were
incurred in connection with the determination of the valuation of the Target
1996 Warrants.
4.16 Termination of Other Agreements Affecting Target Common Stock.
Target shall use reasonable commercial efforts to cause the termination and
cancellation of the Shareholders' Agreement dated July 26, 1996, the Voting
Agreement dated as of February 13, 1995, the Stock Purchase Agreements dated on
or about February 8, 1995 (providing for certain preemptive rights to acquire
additional shares of TPN Common Stock) and all other agreements to which Target
is a party that affect the voting, disposition or ownership of Target Common
Stock effective as of the Closing, so that such agreements shall be of no
further force or effect after the Closing.
4.17 Termination of Employment Agreements. Target shall use reasonable
commercial efforts to cause the termination and cancellation of the Employment
and Noncompetition Agreement dated July 25, 1996 with ▇▇▇▇ ▇▇▇▇▇ and the
Employment and Noncompetition Agreement dated as of June 25, 1996 with ▇▇▇▇
▇▇▇▇▇ effective as of the Closing, so that such agreements shall be of no
further force or effect after the Closing.
5. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective
obligations of each Party under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to Closing,
of all of the following conditions, any one or more of which may be waived in
whole or in part at the option of Acquiror or Target:
5.1 Tax-Free Reorganization. The tax opinion described in Section 4.10
shall have been delivered to the Parties and the Shareholders as of the Closing
Date.
5.2 Pooling of Interests. The Merger shall qualify as a pooling of
interests for financial reporting purposes, in accordance with GAAP consistently
applied and in accordance with all rules, regulations, and policies of the
Commission and the pooling letters described in Section 4.11 shall have been
delivered or confirmed as of the Closing Date.
5.3 Governmental and Third Party Consents and Approvals. All consents,
approvals, waivers permits and authorizations required to be obtained prior to
the Effective Time from, any Governmental Entity or other Person (including,
without limitation, those set forth in Schedules 2.4) in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained (as the case
may be).
5.4 No Adverse Proceedings. No temporary restraining order, preliminary
or permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any Governmental Entity and remain in effect, and no
proceedings seeking the issuance of such an order or injunction, or seeking
relief against Acquiror or Target if the Merger is consummated, shall be pending
or threatened which, in the good faith judgment Target's or Acquiror's
respective Board of Directors (acting upon the written opinion of their
respective outside counsel), has a reasonable probability of resulting in such
order, injunction or relief and any such relief would have a material adverse
effect on such Party.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR. The obligations of Acquiror
under this Agreement to consummate the transactions contemplated hereby will be
subject to the satisfaction, at or prior to Closing, of all of the following
conditions (any one or more of which may be waived in whole or in part at the
option of Acquiror):
6.1 Representations and Warranties. The representations and warranties
of Target made in this Agreement or in any Exhibit, Schedule or document
delivered pursuant hereto must have been true and correct in all material
respects as of the date hereof and must be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date.
6.2 Performance by Target. All of the covenants and obligations that
Target is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been duly performed and complied with in all
material respects.
6.3 Absence of Material Adverse Changes. From the date of this
Agreement until the Closing, there must not have occurred any material adverse
change in the business operations, Assets, prospects or condition (financial or
otherwise) of Target.
6.4 Certificate. Acquiror shall have received a certificate, dated as
of the Closing Date, executed on behalf of Target by its chief executive officer
and its chief financial officer, certifying that each of the conditions
specified in Sections 6.1, 6.2 and 6.3 have been satisfied and that, except as
set forth on a schedule to such certificate, all third party or governmental
consents, approvals, waivers, permits and authorizations referred to in Section
5.3 required to obtained by Target have been obtained and are in full force and
effect as of the Closing.
6.5 Closing Documents. Target or the Shareholders must have
delivered to Acquiror all of the documents set forth in Sections 8.2 and 8.4.
6.6 Execution of Shareholders Agreement by all Shareholders. Each of
the Shareholders must have executed and delivered the Shareholders Agreement,
and no Shareholder shall be in Breach of any representation, warranty or
covenant contained therein.
6.7 Termination of Certain Agreements. Each of the agreements described
in Sections 4.16 and 4.17 shall have been terminated and of no further force or
effect as of the Closing.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TARGET. The obligation of Target under
this Agreement to consummate the transactions contemplated hereby is subject to
the satisfaction, at or prior to the Closing, of each the following conditions
(any of which may be waived in whole or in part at the option of Target):
7.1 Representations and Warranties. All representations and warranties
of Acquiror made in this Agreement or in any Exhibit, Schedule or document
delivered pursuant hereto must have been true and correct in all material
respects as of the date hereof and must be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date.
7.2 Performance by Acquiror. All of the covenants, agreements and
obligations that Acquiror is required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been duly performed and
complied with in all material respects.
7.3 Absence of Material Adverse Changes. From the date of this
Agreement until the Closing, there must not have occurred any material adverse
change in the business operations, assets, prospects or condition (financial or
otherwise) of Acquiror.
7.4 Certificate. Target must have received a certificate, dated as of
the Closing Date, by a duly authorized officer of Acquiror, certifying that the
conditions specified in Sections 7.1, 7.2 and 7.3 have been satisfied.
7.5 Execution of Shareholders Agreement by Acquiror. Acquiror must have
executed, delivered and entered into the Shareholders Agreement with each
Shareholder that has executed and delivered the Shareholders Agreement.
7.6 Closing Documents. Acquiror must have delivered to Target
or the Shareholders all of the documents set forth in Sections 8.3 and 8.4.
8. CLOSING.
8.1 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Target, or at such
other location as the Parties shall agree, commencing at 1:00 p.m. local time on
September 23, 1998, or as soon thereafter as all of the conditions precedent set
forth herein have been satisfied or waived or on such date as the Parties shall
agree (the "Closing Date").
8.2 Documents to be Delivered by Target and Shareholders. At the
Closing, Target and Shareholders will deliver to Acquiror the following:
(a) Officers' Certificate. A certificate, dated the Closing
Date, executed on behalf of Target in the form set forth in Section 6.4.
(b) Opinion. A written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.,
counsel to Target, addressed to Acquiror, dated the Closing Date, in
form and substance as set forth in Exhibit 8.2(b).
(c) Good Standing Certificates. Governmental certificates
showing that Target is duly incorporated, validly existing and in good
standing in the state of its incorporation certified as of a date not
more than ten (10) days before the Closing Date.
(d) Evidence of Governmental and Third-Party Consents and
Approvals. Evidence in form reasonably satisfactory to Acquiror of the
receipt of each of the governmental and third-party consents, approvals
and waivers set forth in Section 6.3.
(e) Lien Searches. Lien searches for federal and state tax
liens, judgment liens, and other liens dated no earlier than ten (10)
days prior to Closing Date and showing the absence of any Encumbrances
(other than Permitted Encumbrances).
(f) Target Stock Certificates and Warrant Agreements.
Certificates evidencing outstanding shares of Target Common Stock and
agreements evidencing Target 1996 Warrants surrendered as contemplated
by Sections 1.5 and 1.6.
(g) Other Documents. Such additional certificates,
instruments, documents, information and materials as Acquiror may
reasonably request.
8.3 Documents to be Delivered by Acquiror. At the Closing, Acquiror
will deliver to Target or the Shareholders the following:
(a) Merger Consideration. Certificates representing the
Acquiror Common Stock constituting the Merger Consideration and checks
in payment of cash in lieu of fractional shares shall be delivered to
the Shareholders in the amounts and manner as set forth in Section 1.5,
of which shares 125,000 of the shares deliverable to the Shareholders
shall be delivered to the Escrow Agent pursuant to the Escrow
Agreement.
(b) Officer's Certificate. A certificate, dated the Closing
Date, executed on behalf of Acquiror in the form set forth in Section
7.4.
(c) Opinion. Written opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, addressed to the Shareholders, dated the
Closing Date, in form and substance as set forth in Exhibit 8.3(c).
(d) Tax-Free Reorganization. The tax opinion described in
Section 4.10.
(e) Pooling of Interests. The pooling letters described in
Section 4.11.
(f) Certificates of Merger. The Certificates of Merger, or
copies thereof, in form suitable for filing as contemplated by Section
1.8.
(g) Good Standing Certificates. Governmental certificate
showing that Acquiror is duly organized, validly existing and in good
standing in the state of its incorporation as of a date not more than
ten (10) days before the Closing Date.
(h) Other Documents. Such additional certificates,
instruments, documents, information and materials as Target may
reasonably request.
8.4 Mutual Deliveries. At the Closing, each of Acquiror, Target and the
Shareholders, as applicable, shall execute and deliver or cause to be executed
and delivered:
(a) The Marketing Services Agreements;
(b) The Non-Competition Agreements;
(c) The Escrow Agreement; and
(d) The Shareholders Agreement (to the extent not previously
executed and delivered by any Shareholder).
8.5 Concurrent Conditions. The performance or tender of performance at
Closing of all matters applicable to a Party under this Agreement shall be
deemed concurrent conditions and no Party shall be required at Closing to
perform, or tender performance of, the obligations of such Party hereunder
unless, coincident therewith, each other Party from whom performance is required
under this Agreement performs or tenders performance of its obligations
hereunder.
9. INDEMNIFICATION BY TARGET; ESCROW FUND.
9.1 Survival; Right to Indemnification Not Affected by Investigation.
All representations, warranties, covenants and obligations in this Agreement,
any Schedules attached hereto pursuant to Section 2 or otherwise, the
certificates delivered pursuant to Sections 6.4 and 7.4 and any other
certificate or agreement delivered pursuant to this Agreement will survive the
Closing to the extent provided in Section 9.4 below. The right to
indemnification based on Breach of the representations, warranties, covenants
and obligations of a Party in this Agreement will not be affected by any
investigation conducted by the other Party; provided however, notwithstanding
anything herein to the contrary, a Party shall not be liable for any damages
arising from a Breach which the other Party, or any of their respective
officers, counsel or other representatives, had actual Knowledge was incorrect
or false prior to the Closing Date. For purposes hereof, Acquiror shall be
deemed to have actual Knowledge of the facts set forth in the Schedules hereto,
including, without limitation, Schedule 9.1 attached hereto, and the content of
the documents described in the Schedules hereto to the extent that true and
complete copies thereof have been provided the Acquiror. In addition,
notwithstanding anything herein to the contrary, it is understood and
acknowledged that no claims for Damages may be made as a result of an adverse
change after the Closing to the business conducted by Target that results from
the consummation of the transactions contemplated herein (but provided such
adverse change is not the result of the Breach of any specific representation,
warranty or covenant of Target herein) or the actions or inactions of Acquiror
following the Closing, including, without limitation, any changes in accounting
policies or changes to the business formerly conducted by Target (but provided
that the foregoing shall not apply to actions or inactions of Acquiror in
resolving following the Closing any Specific Indemnity Matters or any
Third-Party Claims arising under the General Indemnity Matters).
9.2 Escrow Fund. Pursuant to the terms of the Escrow Agreement, an
Escrow Fund consisting of 125,000 shares of Acquiror Common Stock to be issued
as part of the Merger Consideration shall be established and made available to
indemnify and compensate Acquiror for any Damages (as defined in Section 9.3
below) incurred by Acquiror. Target and Acquiror each acknowledge that any such
Damages represent contingencies that, if known and/or fully resolved as of the
Closing Date, would have led to negotiated reduction in the Merger
Consideration. Of the shares of Acquiror Common Stock forming the Escrow Fund,
50,000 shares shall be subject to payment of Damages incurred by Acquiror in
connection with the matters set forth in Section 9.3(a) below (collectively, the
"General Indemnity Matters"), and 75,000 shares shall be subject to payment of
Damages incurred by Acquiror in connection with the matters set forth in Section
9.3(b) below (collectively, the "Specific Indemnity Matters"). The portion of
the Escrow Fund allocated for payment of Damages in connection with General
Indemnity Matters shall not be available for payment of Damages in connection
with Specific Indemnity Matters, and the portion of the Escrow Fund allocated
for payment of Damages in connection with Specific Indemnity Matters shall not
be available for payment of Damages in Connection with General Indemnity
Matters. If the Closing occurs, the Escrow Fund shall be the exclusive remedy of
Acquiror with respect to this Agreement and all or any aspect of the
transactions contemplated herein (provided that it is understood and
acknowledged that the rights and remedies of the respective parties to the
Shareholders Agreement, the Marketing Services Agreements and the
Non-Competition Agreements shall be independent of this Agreement and the
remedies set forth herein). However, nothing in this Section 9 shall limit the
liability of (i) Target in connection with any Breach of any representation,
warranty or covenant in this Agreement or the Schedules hereto if the Closing
does not occur or (ii) of any Shareholder in connection with any Breach by such
Shareholder of the Shareholders Agreement or any other agreement entered in to
by such Shareholder in connection with the Merger.
9.3 Damages.
(a) Damages means the amount of any loss, liability,
obligation, debt, claim, damage or expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or
not involving a Third-Party Claim, incurred by Acquiror or its
directors, officers, employees, agents, advisors, stockholders,
controlling persons, and Affiliates arising, directly or indirectly,
from and in connection with:
(i) any Breach of any representation or warranty made
by Target in this Agreement, the Schedules or any other
certificate or document delivered by Target pursuant to this
Agreement; and
(ii) any Breach by Target of any covenant or
obligation of Target in this Agreement.
(b) Damages also means the amount of any loss, liability,
obligation, debt, claim, damage or expense (including costs of
investigation and defense and reasonable attorneys' fees) incurred by
Acquiror or its directors, officers, employees, agents, advisors,
stockholders, controlling persons, and Affiliates after the Closing
Date arising from the defense, compromise, settlement or disposition
(including any judgement of a court of competent jurisdiction or award
of an arbitrator) of each of the proceedings, claims, actions,
threatened claims and disputes identified in Schedule 2.23 or any
update or supplement thereto.
(c) The amount of any Damages in connection with any General
Indemnity Matter or Specific Indemnity Matter involving a Third-Party
Claim shall be reduced by the amount of any judgment or settlement
payment or other payment, if any, actually received by Acquiror from a
third party in connection with the resolution or settlement of the
applicable disputed matter.
9.4 Time Limitations.
(a) Any claims for payment of Damages from the Escrow Fund must be asserted
by written notice from Acquiror to the Shareholders' Representative (i)
in the case of claims relating to General Indemnity Matters that are
able to be established in connection with the audit of Acquiror's
consolidated financial statements, not later than the date of issuance
of the first independent audit report on the consolidated financial
statements of Acquiror containing combined operations of Target and
Acquiror following the Closing Date, or (ii) in the case of claims
relating to General Indemnity Matters that are not able to be
established in connection with the audit of Acquiror's consolidated
financial statements, not later than the first anniversary of the
Closing Date.
(b) Claims for payment of Damages from the Escrow Fund with respect to
Specific Indemnity Matters may be asserted by Acquiror by written
notice to Shareholders' Representative from time to time until all such
matters have been settled or resolved and the amount of Damages
determined, but in any event not later than the third anniversary of
the Closing Date.
9.5 Limitations on Amount. Acquiror will not be entitled to the payment
of any Damages from the Escrow Fund unless and until the amount of Damages
exceeds $100,000, and then Acquiror will only be entitled to payment of any
Damages in excess of $100,000. However, the limitations f this Section 9.5 will
not apply to any Breach, whether knowing or unknowing or intentional or
unintentional, of Target's covenants set forth in Section 4.14 and 4.15 relating
to limitations on certain Target employee payments and third party expenses.
9.6 Third-Party Claim Procedures. In the event of a Third-Party Claim
involving Damages under Section 9.3, and for so long as any portion of the
Escrow Fund shall remain in place for the payment of Damages in connection with
General Indemnity Matters or Specific Indemnity Matters, as applicable, the
following terms and conditions shall apply:
(a) Within 20 days (or such earlier time as might be required to avoid
prejudicing the Shareholders' position) after receipt of notice of commencement
of any action evidenced by service of process or other legal pleading, Acquiror
shall give the Shareholders' Representative written notice thereof together with
a copy of such claim, process or other legal pleading, and the Shareholders'
Representative shall have the right to undertake the defense thereof by
representatives of its own choosing (subject to approval of such representatives
by Acquiror which consent shall not be unreasonably withheld) and at its own
expense; provided that Acquiror may participate in the defense with counsel of
its own choice, the fees and expenses of which counsel shall be paid by
Acquiror. If the named parties to any such action (including any impleaded
parties) include both any of the Shareholders and Acquiror, and Acquiror has
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the
Shareholders and that joint representation would be inappropriate under
applicable standards of professional conduct, then if Acquiror informs the
Shareholders' Representative in writing that it elects to employ separate
counsel, the fees and expenses of such counsel shall be at the expense of the
Shareholders' Representative (through means of the Escrow Fund), and the
Shareholders' Representative shall not have the right to assume the defense of
such action on behalf of Acquiror (it being understood, however, that
Shareholders' Representative shall not, in connection with any one such action
or separate but substantially similar related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for Acquiror, which firm shall be designated in writing by Acquiror and it
further being understood and agreed that Acquiror may not settle any such action
without the prior written consent of the Shareholders' Representative, which
consent shall not be unreasonably withheld).
(b) In the event that the Shareholders' Representative, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, Acquiror will (upon further notice
to the Shareholders' Representative) have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of Shareholders (through means of the Escrow Fund with all costs and expenses of
Acquiror being Damages to the extent provided in Section 9.3), subject to the
right of the Shareholders' Representative to assume the defense of such claims
at any time prior to settlement, compromise or final determination thereof.
(c) Notwithstanding the foregoing, the Shareholders' Representative
shall not settle any claim without the consent of Acquiror unless such
settlement involves only the payment of money and the claimant provides to
Acquiror a release from all liability in respect of such claim. If the
settlement of the claim involves more than the payment of money, the
Shareholders' Representative shall not settle the claim without the prior
written consent of Acquiror.
(d) In the event the Shareholders Representative assumes the defense of
any Third-Party Claim, it shall be conclusively established that such
Third-Party Claim is subject to indemnity from the Escrow Fund for Damages as
provided in Section 9, and Shareholders' Representative shall submit all costs
and expenses incurred in connection therewith to Acquiror on a monthly basis for
reimbursement, and Acquiror shall make such reimbursement to the extent of the
then remaining Escrow Fund, payable in cash (which amounts shall be considered
as Damages), and Shareholder's Representative and Acquiror shall cooperate in
providing joint written instructions to the Escrow Agent to such effect.
(e) The failure of Acquiror to give timely notice to Shareholders'
Representative as provided in Section 9.6(a) above will not relieve the
Shareholders of any liability (through means of the Escrow Fund) for Damages,
except to the extent that the Shareholders' Representative demonstrates that the
Shareholders' Representative's defense of such action is prejudiced by
Acquiror's failure to give such timely notice.
(f) Acquiror and Shareholders' Representative will each cooperate with
all reasonable requests of the other.
10. INDEMNIFICATION BY ACQUIROR. If the Closing occurs, Acquiror will indemnify
and will pay to the Shareholders (on a pro rata basis in accordance with the
number of shares of Target Common Stock owned by each as of the Closing) the
amount of any loss, liability, obligation, debt, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys' fees),
whether or not involving a Third-Party Claim, arising, directly or indirectly,
from and in connection with (a) any Breach of any representation or warranty
made by Acquiror in this Agreement or any Schedule or update to a schedule
delivered by Acquiror or in any certificate delivered by Acquiror pursuant to
this Agreement, or (b) any Breach by Acquiror of any covenant or obligation of
Acquiror in this Agreement. Acquiror will have no liability (for indemnification
or otherwise) with respect to any representation or warranty made, or covenant
or obligation to be performed and complied with, unless on or before the first
anniversary of the Closing Date, the Shareholders notify Acquiror of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by the Shareholders.
11. REMEDIES EXCLUSIVE. Except as otherwise provided in Section 13.1 relating to
specific performance, if the Closing occurs, the remedies provided for in
Sections 9 and 10 above shall be the exclusive remedies of the Parties and the
Shareholders with respect to this Agreement and all or any aspect of the
transactions contemplated herein (provided that it is understood and
acknowledged that the rights and remedies of the respective parties to the
Shareholders Agreement, the Marketing Services Agreements and the
Non-Competition Agreements shall be independent of this Agreement and the
remedies set forth herein). If the Closing does not occur, nothing contained in
Sections 9 or 10 shall limit any remedies that any Party may have against the
other, at law or in equity, in connection with any Breach by a Party of any
representation, warranty or covenant contained in this Agreement, the Schedules
or any other certificate or document delivered pursuant to this Agreement.
12. TERMINATION.
12.1 Termination Events. This Agreement may, by written notices,
be terminated:
(a) at any time prior to Closing by the mutual written consent
of Acquiror and Target;
(b) by either Acquiror or Target if the Closing shall not have
occurred on or before October 22, 1998 or such later date as Acquiror
and the Target may agree upon;
(c) by either Acquiror or Target if there shall have been
entered a final, nonappealable order or injunction of any Governmental
Entity restraining or prohibiting the consummation of the transactions
contemplated hereby;
(d) by either Acquiror or Target if, prior to the Closing
Date, any other Party is in material Breach of any representation,
warranty, covenant or agreement herein contained and such Breach shall
not be cured within fifteen (15) days of the date of notice of default
served by the Party claiming such material default; provided that such
terminating Party shall not also be in material Breach of this
Agreement at the time notice of termination is delivered; or
(e) (i) by Acquiror if any of the conditions in Sections 5 or
6 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of Acquiror to comply with its obligations under this
Agreement) and Acquiror has not waived such condition or before the
Closing Date; or (ii) by Target, if any of the conditions in Sections 5
or 7 has not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than through the
failure of Target to comply with its obligations under this Agreement)
and Target has not waived such condition on or before the Closing Date.
12.2 Effect of Termination. If this Agreement is terminated by either
Target or Acquiror pursuant to the provisions of Section 12.1, the Merger shall
not be consummated and there shall be no further obligation on the part of any
Party hereto or its respective Affiliates, members, directors, officers or
shareholders, except pursuant to the provisions of Sections 4.7, 4.8, 13.1,
13.2, 13.8, 13.13, 13.14 and 13.15 (which shall survive and continue pursuant to
their terms); provided however, that a termination of this Agreement shall not
relieve any Party hereto from any liability for Damages incurred as a result of
a Breach by such Party of its representations, warranties, covenants, agreements
or other obligations hereunder occurring prior to such termination. Except as a
result of any such Breach, no Party hereto, or its respective Affiliates,
members, directors, officers or shareholders, shall have any liability to the
other Parties as a result of the termination of this Agreement or the failure to
complete the transactions contemplated hereby for any reason whatsoever.
13. MISCELLANEOUS PROVISIONS.
13.1 Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are Breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
Breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof, in addition to any other remedy
to which they may be entitled, at law or in equity. If any action is brought by
a Party to specifically enforce this Agreement, the Breaching Party shall waive
any defense that there is an adequate remedy at law.
13.2 Intentionally Omitted.
13.3 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered or certified mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a Party may designate by notice to the other Parties):
(a) Acquiror: Pre-Paid Legal Services, Inc.
▇▇▇ ▇. ▇▇▇▇
▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile 580/436-7412
Attention: ▇▇▇▇▇ ▇▇▇▇
With a Copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: 405/239-6651
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) Target: TPN, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 972/860-0480
Attention: ▇▇▇▇ ▇▇▇▇▇
With a Copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: 214/953-6187
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
13.4 Waiver. The rights and remedies of the Parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
Party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Parties; (b) no waiver that may be
given by a Party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one Party will be deemed to be a
waiver of any obligation of such Party or of the right of the Party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
13.5 Entire Agreement and Amendment. This Agreement supersedes all
prior agreements between the Parties with respect to its subject matter
(including, without limitation, the Summary of Proposed Terms between Acquiror
and Target dated August 31, 1998) and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the Parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the Party
to be charged with the amendment.
13.6 Intentionally Omitted.
13.7 Further Assurances. The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as any other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to herein.
13.8 Governing Law. This Agreement, including without limitation, the
interpretation, construction and validity hereof, shall be governed by the laws
of the State of Oklahoma, without regard to its conflict of laws principles.
13.9 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.10 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, each of which will be deemed an original copy of the
Agreement and all of which, when taken together will be deemed to constitute one
and the same agreement.
13.11 Assignments, Successors and No Third Party Rights. No Party may
assign any of its rights or obligations under this Agreement without the prior
consent of the other Party. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the Parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the Parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement, except as set
forth immediately below with respect to third party beneficiary rights of the
Shareholders. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the Parties to this Agreement and their
successors and assigns; provided, however, that the Shareholders shall be deemed
to be third party beneficiaries to the rights of Target under this Agreement and
with respect to any provision hereunder for the Shareholders' benefit
(including, without limitation, Section 10).
13.12 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references
to Sections or Schedules are to Sections or Schedules of or to this
Agreement, (ii) each term defined in this Agreement has the meaning
assigned to it, (iii) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP,
(iv) "or" is disjunctive but not necessarily exclusive, and (v) words
in the singular include the plural and vice versa. All references to
"$" or dollar amounts will be to lawful currency of the United States
of America.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the Parties hereto by reason of the extent
to which any such Party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
(c) Any reference to any Law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context
requires otherwise.
(d) The word "including" means "including, without
limitation," and does not limit the preceding words or terms.
(e) All words used in this Agreement will be construed to be
of such gender or number as the circumstances require.
13.13 Jurisdiction and Venue. The Parties intend that all disputes
concerning this Agreement shall be resolved by arbitration as provided below,
unless arbitration shall be held by a court of competent jurisdiction to be
unenforceable. In such event, the Parties agree that any suit, action or
proceeding with respect to this Agreement may be brought in (i) the Oklahoma
state courts of competent jurisdiction in Oklahoma County, Oklahoma or in the
United States District Court in which the City of Oklahoma City is located or
(ii) the Texas state courts of competent jurisdiction in Dallas County, Texas or
in the United States District Court in which the City of Dallas is located. ALL
PARTIES HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER
HAVE TO THE PERSONAL JURISDICTION OR VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT AND
HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.14 Dispute Resolution. Except as otherwise provided in this Section
13.14, in the event of any dispute, controversy or claim arising out of or
relating to this Agreement or the Breach thereof, the Parties shall meet
promptly (through representatives with authority to resolve the dispute). If the
Parties cannot resolve the dispute within 30 days, the Parties shall arbitrate
the dispute in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, by a sole arbitrator, but the arbitration proceeding
may not revoke or revise any provision of this Agreement. All arbitrators
selected shall be independent third parties and shall have knowledge and
experience in the matters addressed by the claim. Except as set forth in this
Section 13.14, arbitration shall be the sole and exclusive remedy between the
Parties with respect to any dispute, protest, controversy or claim arising out
of or relating to this Agreement, provided, the arbitrator shall not have the
power or authority to award consequential, incidental or punitive damages.
Unless all the Parties to an arbitration otherwise consent in writing, the
location of the arbitration hearings and the place of entry of the award shall
be in Kansas City, Missouri. The Parties consent to jurisdiction of, and agree
that venue will lie in, any of the state and federal courts set forth in Section
13.13. The arbitration award shall be final and binding and shall not be
reviewable in any court on any grounds except corruption, fraud or undue means
of a Party or for evident partiality or corruption of the arbitrator. The
Parties intend to eliminate all other court review of the award and the
arbitration proceedings. Except for a proceeding to enforce or confirm an award
or a proceeding brought by all Parties to the dispute to vacate or modify an
award, the initiation of any suit relating to a dispute that is arbitrable under
this Agreement shall constitute a material Breach of this Agreement. However,
the Parties hereby acknowledge that Breach of this Agreement may give rise to
irreparable injury to the Parties, inadequately compensable in monetary damages
alone, and notwithstanding anything to the contrary stated herein, the Parties
shall be permitted to seek and obtain specific performance as provided in
Section 13.1.
13.15 Payment of Expenses. Each Party hereto shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and the
transactions contemplated hereby, whether or not the Closing occurs. The
foregoing shall not limit or affect the covenant of Target set forth in Section
4.15 relating to certain limitations on third party expenses.
14. DEFINITIONS.
14.1 Definitions. Capitalized terms used in this Agreement and not
defined elsewhere in this Agreement shall have the meanings ascribed to them in
this Section 14.1 (such meanings applicable to both the singular and plural
forms of the terms defined) as follows:
"Acquiror Common Stock" means shares of common stock, par value $.01
per share, of Acquiror.
"Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, a merger, consolidation or other business combination
involving Target, the acquisition of a majority of the equity securities of
Target, or the acquisition of all or a substantial portion of the Assets of
Target, excluding the transactions provided for in this Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Assets" means assets, rights, properties and goodwill of any kind or
type, tangible and intangible, wheresoever located.
"Breach" means a "Breach" of a representation, warranty, covenant,
obligation or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (i) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation or other provision, or
(ii) any claim by a third party which claim if true would result in a Breach of
a representation, warranty, covenant, obligation, or other provision.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, and the regulations promulgated thereunder.
"COBRA" means the Consolidated Omnibus Reconciliation Budget Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law, and the regulations promulgated thereunder.
"Commission" means the United States Securities and Exchange
Commission, and any successor thereto.
"Encumbrance" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, mortgage, easement, servitude, right of way, encroachment,
receipt of income, or exercise of any other attribute of ownership.
"Environmental Claim" means any accusation, allegation, notice of
violation, action, claim, Lien, demand, abatement or other order or directive
(conditional or otherwise) by any Governmental Entity or any other Person
(including any employee or former employee of any contractor or subcontractor of
Target) for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment (including natural
resources), nuisance, pollution, contamination, trespass or other adverse
effects on the environment, or for fines, penalties or restrictions resulting
from or based upon (i) the existence, or the continuation of the existence, of a
Release (including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Hazardous Material, odor or
audible noise in, into or onto the environment (including, without limitation,
the air, soil, surface water or ground water) at, in, by, from or related to the
Real Property or any activities or operations thereof; (ii) the transportation,
storage, treatment or disposal of Hazardous Materials in connection with the
Real Property; or (iii) the violation, or alleged violation, of any
Environmental Laws or Environmental Permits relating to environmental matters
connected with the Real Property.
"Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including fees, disbursements and expenses of legal counsel,
experts, engineers and consultants and the costs of investigation and
feasibility studies, remedial or removal actions and cleanup activities) arising
from or under any Environmental Law or Environmental Claim or any order or
agreement now in effect with any Governmental Entity or other Person.
"Environmental Law" means any applicable federal, state, local or
foreign law (including common law), statute, code, ordinance, rule, regulation
or other requirement relating to the environment, natural resources or public
and employee health and safety including, but not limited to, CERCLA, the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act,
the Federal Insecticide, Fungicide, and Rodenticide Act, the Oil Pollution Act
of 1990, the Federal Safe Drinking Water Act, and the Occupational Safety and
Health Act, as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes.
"Environmental Permit" means any permit, approval, authorization,
license, variance, registration or permission required under any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Escrow Agent" means the Person named as escrow agent under the Escrow
Agreement.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Entity" means any domestic or foreign court, government
or governmental or regulatory agency, authority, entity or instrumentality.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder.
"Hazardous Materials" means any substance, material or waste which is
regulated by any Governmental Entity in connection with its protection of the
environment, public or employee health, wildlife or natural resources,
including, without limitation, any material, substance or waste which is defined
as a "hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous substance," "restricted hazardous waste," "contaminant," "toxic waste"
or "toxic substance" under any provision of any Environmental Law, which
includes, but is not limited to, petroleum, petroleum products (including crude
oil and any fraction thereof), asbestos, asbestos-containing materials, urea
formaldehyde and polychlorinated biphenyls.
"Hazardous Substance" means any hazardous substance, hazardous waste,
contaminant or pollutant as defined under applicable Environmental Laws.
"Income Tax" means any federal, state, local or foreign income Tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendments thereof.
"Intellectual Property" means all domestic or foreign letters patent
(including any reissue or re-examination thereof), patent applications
(including any continuation, division, renewal or substitute thereof), patent
licenses, inventions, software licenses, know-how licenses, trade names,
trademark registrations and applications, service ▇▇▇▇ registrations and
applications, common law trademarks and service marks, copyrights, copyright
registrations and applications, trade secrets, technical knowledge, know-how or
other confidential proprietary information capable of being set forth in
Schedule 2.15 which is owned or used by Target.
"Inventory" means all products held for resale in the Ordinary Course
of Business.
"IRS" means the United States Internal Revenue Service.
"Knowledge" means an individual will be deemed to have "Knowledge,"
whether or not such term is capitalized herein, of a particular fact or other
matter if such individual is actually aware of such fact or other matter after
conducting a reasonable investigation. A person (other than an individual) will
be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has served, as a director, executive officer,
partner, executor or trustee of such person (or in any similar capacity) has, at
any time prior to Closing, had Knowledge of such fact or other matter.
"Laws" means all foreign, federal, state, county and local statutes,
laws (including common law), ordinances, regulations, rules, resolutions,
orders, codes, determinations, writs, injunctions, awards (including, without
limitation, awards of any arbitrator), judgments and decrees applicable to the
specified Person or to the businesses or assets and properties thereof
(including, without limitation, Laws relating to securities registration and
regulation, the sale, leasing, ownership or management of real property,
employment practices, terms and conditions, and wages and hours, building
standards land use and zoning, safety, health and fire prevention, and
environmental protection, including Environmental Laws).
"Leased Real Property" means all of Target's rights and incidents of
interests with respect to all real property leased or used by Target, if any,
including all structures, fixtures and improvements located thereon.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principal of common law, regulation, statute or
treaty.
"Liabilities" means any direct or indirect, or matured or unmatured,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, whether absolute, fixed, contingent or
otherwise, known or unknown, asserted or unasserted, ▇▇▇▇▇▇ or inchoate,
liquidated or unliquidated, secured or unsecured.
"Market Price" means the average of the per share closing sales prices
of the Acquiror Common Stock on the principal national securities exchange on
which the Acquiror Common Stock is then listed (as reported by the American
Stock Exchange) over the ten trading days immediately preceding the Closing
Date.
"Merger Consideration" means the shares of Acquiror Common Stock and
any cash in lieu of fractional shares that Shareholders shall have a right to
receive upon conversion of the Target Common Stock and the Target 1996 Warrants
as provided in Section 1.4 hereof.
"OGCA" means the Oklahoma General Corporation Act, as amended, or any
successor law or regulations promulgated thereunder.
"Ordinary Course of Business" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Organizational Documents" means the articles or certificate of
incorporation and the bylaws of a corporation and any amendment to any of the
foregoing.
"PBGC" means the Pension Benefit Guaranty Association.
"Permits" means all assignable franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate the properties and
assets and to carry on the business of any specified Person as it is now being
conducted.
"Permitted Encumbrances" means only those Encumbrances which do not and
will not materially interfere with the use of, impair, or reduce the value of
any Assets or Leased Real Property.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, trust or any other entity,
association or organization including a Governmental Entity.
"Primestar" means Primestar partners, L.P., a Delaware limited
partnership.
"Primestar Contract" means that certain Marketing Agreement dated as of
July 1, 1997 by and between Target and Primestar and all exhibits attached
thereto, including that certain Sales Agency and Marketing Agreement attached as
Exhibit A thereto.
"Personnel" means the officers and employees of Target.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, suit (whether civil, criminal, administrative,
investigative or informal), commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Real Property Lease" means any agreement, contract, commitment or
lease pursuant to which Target has a leasehold interest in any Leased Real
Property.
"Recitals" means the portion of this Agreement preceding Section 1.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the indoor or outdoor environment or into or
out of any property.
"Remedial Action" means all actions, including, without limitation, any
capital expenditures, required or voluntarily taken to (i) clean up remove,
treat, or in any other way address any Hazardous Material or other substance;
(ii) prevent the Release or threat of Release, or minimize the further Release,
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; (iii)
perform pre-remedial studies and investigations or post-remedial monitoring and
care; or (iv) bring facilities on the Real Property and the facilities located
and operations conducted thereon into compliance with all Environmental Laws and
Environmental Permits.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and the regulations promulgated thereunder.
"Shareholders" means the holders of Target Common Stock.
"Shareholders' Representative" has the meaning ascribed to it in the
Shareholders Agreement.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Target Common Stock" means shares of common stock, par value $.10 per
share, of Target.
"Target 1996 Warrants" means those certain Common Stock Purchase
Warrants issued by Target dated on or about July 26, 1996 providing the right to
purchase Target Common Stock at an exercise price of $8,400.03 per share.
"Tax" and any derivatives thereof, means and includes any and all
federal, state, county, local, and foreign income (including gross, adjusted
gross and supplemental net income), payroll, Medicare, withholding, unemployment
insurance, social security, sales, use, service, service use, leasing, leasing
use, excise, recording, franchise, gross receipts, value added, alternative or
add-on minimum, estimated, occupation, real and personal property, stamp,
transfer, workers' compensation, severance, windfall profits, and environmental
(including taxes under Code Section 59(A)) and any other tax, charge, fee, levy
or assessment of the same or of a similar nature, including any and all
interest, penalties and additions thereto, whether disputed or not.
"Tax Return" means and includes any and all returns, forms,
declarations, reports, claims for refund and information returns and statements
relating to Taxes and any amendments thereto, and including any schedules or
attachments thereto.
"TBCA" means the Texas Business Corporation Act, as amended, or any
successor law, or regulations promulgated thereunder.
"Third-Party Claim" means any claim, action or proceeding made or
brought by any Person who or which is not a party to this Agreement or an
Affiliate of a party to this Agreement.
14.2 Other Definitions. Each of the following terms is defined
in the Section set forth opposite such term.
"Acquiror" Recitals
"Acquiror Commission Documents" Section 3.5
"Agreement" Recitals
"Audited Financial Statements" Section 2.7
"Certificates of Merger" Section 1.8
"Closing" Section 8.1
"Closing Date" Section 8.1
"Damages" Section 9.3
"Target" Recitals
"Effective Time" Section 1.8
"Employee Arrangements" Section 2.20(a)
"Employee Benefit Plans" Section 2.21(a)
"Employee Plans" Section 2.21(a)(iii)
"ERISA Affiliate" Section 2.21(a)
"Escrow Agreement" Section 1.10
"Escrow Fund" Section 1.10
"Financial Statements" Section 2.7
"General Indemnity Matters" Section 9.2
"Interim Balance Sheet" Section 2.7
"Interim Balance Sheet Date" Section 2.7
"Interim Financial Statements" Section 2.7
"Marketing Services Agreements" Section 4.13
"Merger" Recitals
"Non-Competition Agreements" Section 5.13
"Other Agreements" Section 3.2
"Party or Parties" Recitals
"Pension Plan(s)" Section 2.21(a)(ii)
"Shareholders Agreement" Section 4.2
"Software" Section 2.16
"Specific Indemnity Matters" Section 9.2
"Surviving Corporation" Section 1.2
"Target Employee Payments" Section 4.14
"Welfare Plan(s)" Section 2.21(a)(i)
"Year 2000 Problem" Section 2.29
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
"ACQUIROR"
PRE-PAID LEGAL SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
"TARGET"
TPN, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer